I have been doing a lot of thinking over the past a few days. There is no secret that the best of the best traders are still making serious money in this climate. I did some survey at my firm and it seems best performing traders are those who either trade a basket of stocks that don't follow the futures closely, or traders who trade very thin stocks that move. I know for a fact that the number two trader at my firm is doing a shotgun approach with 20-40 positions a day, stocks that are literally unheard of. Stocks that are truly traded with supply and demand information, stocks that don't follow ANYTHING. I also know that he doesn't really trade news, everything he does is daily chart. The key to his success is mass diversity and micro management (pyramiding in and out). My main style is a top->down approach, and when futures/index turn choppy, I struggle. I would love to find some daily chart set-up's on thin stocks, look through previous day's tape for support and resistance points, and have those ready as a second option. What are the BEST set-up's on daily charts? My idea would be something that fall through support and I get ready to put up a bullet as soon as I see the offer. If the stock is not a popular day trader stock, then it usually doesn't play games, specialist usually show real sizes (I can check previous day's tape for confirmation). I would only be playing it if it has a size open print, etc . . . Before the market opens I would already know the key support/resistance points for the stock, and I won't have to worry about the futures when I trade stocks like those. I think you get my idea, I am looking for DAILY CHART SET-UPS, HIGH PERCENTAGE ONES . . . Any contribution will be greatly appreciated and I will be sure to put it on my journal as I experiment . . . Essentially, it is what our top trader does, except I don't spread myself too thinly and look for high percentage shots via tape . . . instead of taking a dozen positions off the open . . . Basically, I would have a long list and a short list each day, and I would follow the tape on them, all day . . . The question is how can I build a quality list . . . I just need a few ideas a day, QUALITY OVER QUANTITY . . .
You might want to trade off of S/R lines that you draw on the chart the day before or set alerts in your software. S/R's like key moving averages, previous highs/lows, Pivot Points, Fibonacci levels, etc.. when the stock approaches the S/R line you confirm buy or sell pressure with your indicators like volume,Time/Sales, Level Two,RSI, etc..... and either go with a break or fade the S/R upon guidance from your indicators. This is basically how I trade but on shorter time frames.
Also, I'd look to find candidates using a program like bigeasyinvestor that lets you do scanning for stocks near moving averages, overbought/oversold, in downtrends/uptrends, gaps, moving average crossovers etc..
Hey hitma, i dont know if this will help but what i mainly look at is the action at 3:45 pm and thourgh the close, i look at candlestick patterns and from there i pick out hig percentage plays, and then play the intraday in that direction. for example today i am looking at aol for a short. this thing had a big seller in it today, it violated some support and it looks like it might go down to fill teh gap at 36 so my play would be to short aol, maybe from the open or wait throught he wiggle area. on top of that i would also porbably look for market confirmation on it as well, that is play with the markets trend. you probably already know this, but that is the way i look at some of this stuff. yeah it would probably be for a swing trade but i guess it gives you an edge for the next day when you have high probability that the trade will go in this direction, that way youre not completely off guard and going against the flow. Of course anything could happen, and i guess thats when you would use your tape reading to go with the trade, so if you see some big offers stepping up, chances are the seller still not done and the stock is most liekly to confirm the technicals on it and that is to fill the gap at 36. Yes it is on a stock that everyone trades but if you think about it, me and many other traders are looking at the same chart, and given the current market condiitons and the chart pattern on aol, many are thinking to short this and cover it at 34-36 so chances are they might add fuel to the fire. This is my strategy and basically i just look at the candlestick patterns. I guess what it comes down to is who had the upper hand at the end of the day the bulls or bears, and based on that i plan my strategy for the next day. so for thursday i would be mainly playing the short side on majority of the stocks, altohough the mkt is short term oversold and any weird good news oculd spark a small rally, like csco did, but will it last, porbably not, and i guess thats where i look at the weekly charts to determine how to play these swings, and it looks like we might go lower here. ok enough of this, that is my opininon, whetehre its right or wrong only the mkt will tell, its all about the probabilities, the greater the edge the greater the probablility the trade will work. hoe this helps.
hitman, love your posts. I am not sure it is a good idea to change strategy though. We are in a tough environment and that might be tempting. But usually, changing strategy is not a good idea imo. A top down approach suffers now because the market is at crossroads and uncertain. Wednesday's action was typical. A little surprise GDP number turned futures positive. The trend was down before and the day before, but several wishful thinkers decided the numbers would spark a rally. The probable outcome was sellers would use the 'surprise' to sell at better prices than they thought they would ANYWAY. Then we know what happened. Sectors and stocks followed the early positive beat and got smashed in the fierce selling after. The point, however, this is not the norm for the market : usually top down does work and futures aren't that schyzophrenic. It's always good to find other ways though and there are many ways to make money in the market. I trade futures now because I found it too much work to prepare and scan stocks while they usually follow the futures [or go against it]. By going to the futures themselves I save a lot of work and can focus better, and at least, if the futures change dramatically, well, I can go the other direction very quickly [was tough to do that with stocks sometimes, at least profitably]. But it's personal, you seem to do well with it. neo
Hitman, I would tend to agree with what tntneo has said. Just like lovers gravitate toward eachother for incomprehensible reasons, the development of a trader's trading style is an ambiguous , evolutionary process. What has happened is that you have grown as a trader following your top down approach, and it currently isn't working often enough... so you seek answers in other styles. I am a firm believer that you should stick with and grow with what you have used to date (since, by implication, you must be psychologically comfortable with it as a result of trading it day in and day out). Moreover, in your introductory post, you made it clear that you recognise when the futures markets become choppy and your stye becomes ineffective. Regard this (important) ability to recognise when your style is NOT working to simply stay in cash. When the futures start behaving in an amenable way, that will be your cue to start trading again. By knowing when your style is not working, you should simply take a back seat in cash and conserve your capital for when your style is working. Granted, it may be monotonous and somewhat boring to literally go hours (or sometimes even days) without one trade ... but such discipline will make you a big winner in the long run.
If the futs are causing you trouble, I recommend staying away from liquid stocks that trade with the futs. Some stocks that are thinner, have a trader in them that HAS to finish a position by close. If there's no one to take the other side, that stock moves, and fast. The futs dont matter. I check the futs maybe only once every 20 mins lately. I just feel that for what I'm doing, they don't matter. However, if you are trading jnpr, that's all that matters.
Hitman, The style that you have described is almost EXACTLY my approach to trading.... All of my set-ups with the exception of one are keyed off of daily charts, 90% of which are closed intraday. It is no secret that the big boys can not pile into a stock without leaving tracks, my patterns spot this accumalation/distribution and then give me an oppurtunity to ride their backs, whether it be for 5 mins or 5 hours, and in some rare cases 5days...... I wouldn't mind at all discussing some of my patterns that I use, if you want email me..... Also there are some great authors out there, with excellent set-ups....Cooper, Raschke, Connors, and Farley to name a few..... PEACE and good trading, COMMISSO