great new pattern

Privateer & Praetorian: I appologize if this reply gets a bit long-winded.

I guess I have “canned” expectations on what a trading plan looks like, and missed your set-up and trigger descriptions. I re-read this thread and there are some very precise set-up and entry descriptions. And even some exit rules

I have no experience with the software you mention – so that is a bit of a “black box” to me.

I cut and pasted a bunch of snippets from this thread to create something that is more familiar to my eye. I took the liberty of adding some of my own criteria to the set-up. So below is a DRAFT of what I would have in mind. Other filters have been mentioned, by Privateer (PTR) that can be added like price > $10, 3 Month avg volume > 100k

The Praetorian Strategy:

Market Psychology:
(PTR 3/09) The volume / price burst signals new interest and probably a change in opinion on the side of investors , which might last longer than a day or 2 - it might also be only a brief short-squeeze.

(PTR 3/14)…….the larger daily range stands for the final, aggressive battle between bulls & bears , after a longer period of declining stock price. If the bulls win at the end of the day, it prepares the path for further increase of the stock's price within the next couple of days. The significant increase in volume signals new interest in the stock.

Buy Set-up (Long Trades Only):
1) Market must be in a downtrend. For convenience I will say that the 10,20,30 ema’s must be in proper order (ie; 30ema > 20ema > 10ema).
2) Volume must increase over 250% of the 3-month avg. volume.
3) Daily range must expand at to least 125% of the 14 period ATR.


Trigger for Buys (Long Trades Only)
The trade will remain open after set-up signal is given for a maximum of 4 days. (This allows further selling and a little consolidation)
1) Enter on a buy-stop placed ½ ATR above previous day’s close, OR
2) Enter on a buy stop placed 1 tick above previous day’s high, which ever comes first.
3) Re-entry is possible if stopped out. This pattern can be susceptible to bear flag formations that pull us into the trade before the resumption of a another leg down. In this case trail the trade down for a maximum of 4 days and enter using the same trigger rules #1 or #2

Stops and Exits: (The average hold time for this strategy is 1 to 5 days.)
1) Initial disaster stop is 1 tick below the previous day’s low, OR
2) ½ ATR below previous day’s close, which ever is higher.
3) Exits: chose your favorite -- add it here

Position Sizing:
Using a percent risk, of total equity, model, size is determined by the formula:
# of shares = (Equity * tolerable risk) / (entry – stop)


Well that is a start for what my idiosyncratic approach would be – any comments???

I think that with a bit of fine tuning somebody could test this in Metastock or TradeStation – neither of which do i have access to or know how to do.

regards/greg

 

Greg, you don't have to apologize for the length of your post.

Your trading plan :
with exception of the ATR calculations I can follow you.
Not that I don't know what ATR means and how it's calculated.
I use a somewhat similar approach with MetaStock to determine position-size in relation to ST volatility of the underlying, total account size and risk/reward.

But, for entry,exit and Stop-loss calculations, I use only TP.
To give you an idea how this looks like , I post hereunder a text version for QQQ's S&R Levels in order of price level as of yesterday for today :
Important levels to look for when trading QQQ today would be :
DS ( Directional swing level ), BP1 ( Breakpoint to upside ) BP2 ( breakpoint to downside ), TC1 and TC2
( Trading channel boundaries ), the Stops for profit taking and stop-loss,
LT and ST probability levels, DEMA's as some key support / resistance levels.
All other levels are for information purposes or for trailing stops / entries on longer time frames.

120.5 Year High
72.1 Fib Month Proj3
71.8 200 DEMA
69.9 Fib Month Proj2
69.7 Quarter High
67.6 Fib Month Proj1
63.6 100 DEMA
60.5 Month High
57.8 60 DEMA
56.2 Fib 2Weeks Proj3
56.1 50 DEMA
55.7 Fib Week Proj3
55.2 Fib 2Weeks Proj2
54.7 Fib Week Proj2
54.1 Fib 2Weeks Proj1
53.7 Fib Week Proj1
53.4 Fib Month Retr1
51.2 Fib Month Retr2
50.7 2Weeks High
50.4 Week High
49.8 20 DEMA
48.9 Fib Month Retr3
48.5 TC1
47.8 STUpperProb2
47.7 13 DEMA
47.3 Fib 2Weeks Retr1
47.1 Fib Week Retr1
47.1 STUpperProb1
47.0 LTUpperProb2
46.7 10 DEMA
46.4 LTUpperProb1
46.3 Fib 2Weeks Retr2
46.1 Fib Week Retr2
46.0 TC2
45.9 Second Upper Stop
45.2 Fib 2Weeks Retr3
45.1 Fib Week Retr3
45.0 First Upper Stop
44.7 Previous High
44.7 BP1
44.5 Previous Close
43.4 DS
42.8 Previous Open
42.6 LTLowerProb1
42.4 BP2
42.1 Previous Low
42.1 LTLowerProb2
42.1 First Lower Stop
42.0 STLowerProb1
41.8 Week Low
41.8 2Weeks Low
41.8 Month Low
41.8 Quarter Low
41.8 Year Low
41.4 STLowerProb2
40.9 Second Lower Stop

I know, it looks a bit theoretical at a first glance and in .txt version. But once you get used to the TP interface, it's very helpful. I draw only the most important levels on a chart when following the trade:
BP1, BP2, DS, TC1 & TC2, nearest Stops, Moving Averages ( DEMA's )and probability boundaries.

Good luck &

 

Wow, That's WAY,WAY too granular for me. I just like to do it by eye. I just look for 3+ down days with the last one having the most volume. But i'll get long if i see another higher volume day. I use rather large positions on the nyse ones (1500-5k), but that's mainly b/c i know when im right or wrong immediately. BAsic plan is to wait for specialist to block, or be agressively buying on teh first day that it's green. I wait 1 hr, and then if it makes a new high I enter. I usually either scale out, or just sell the first pop, when i see the specialist taking profits on his. Most likely if he's long and he thinks the sellers have left, he'll move it 3-5 pts and start selling. Once he starts selling, you should as well. On the nasdaq, I just scale in and out.
As for my trades today, MRX offered a great long scalp. Otherwise I really got spanked around today on otwo. I think I lost 3500 on that today. I will give otwo another try tomorrow though. I like the larger volume bar today. I also got smacked around on nxtl. I was having a great day, but nxtl put me in the red for the day. It's amazing how fast you can loose a real ton of money.

 

Hi praetorian

well, one wouldn't need to have all the levels displayed on a chart - only the few important ones for the day. They are re-calculated every day after the close.
TP's interface displays all levels in different coulours and the important ones are in displayed in separate fields, so you can focus an them while trading intraday.

Losses : Maybe you should trade smaller lotsizes ? ;-)

 

Ok, sorry, but I was megga buisy trading this week, and doing charts. There's lotsa volatility, and I wanna capture it all. Thurs was my best day ever, and I guess I'll go over a few of those trades that fit this pattern. Then I'll switch to friday's trades (I lost on fri).

DLTR: I faded the opening gap on dltr both premarket, and in the first few mins, as it faded. I built about a 3500 share position, and I booted those out for a quick 1/2 avg. I then reversed short when dltr lost 19.5 (as you can see that that is the congestion) I used 20 as a stop, and forgot about it. I closed the position at the close of trading (since I was not stopped out). It also turned out to be just about the low.

OTWO: You can see that is the ideal of this pattern. I was looking for the dead cat bounce. I had lost a few k on wed, trying to call a bottom. But I like how it bounced off the low of monday, so I took a really large (16k) position in it at 1 21/32 avg. I sold most at 15/16 since I saw a bounch of mm's lining up there to sell under 2. (I still have 4k left)

GEMS: Same pattern as OTWO, the the drop is less extreme. I caught 5/32 on 5k, so im not going to post the details. I just felt that it was topping out, so I sold for the quick gain.

DIGE: I liked how it moved above the low of the previous day(which was also a reversal day)(the day before that being the huge volume "capitualtion day" that the pattern looks for). I took 700 at 20. I stopped out when it made a low of the day for about a point loss. (Look at friday's trading. That's why you HAVE TO HONOR YOUR STOPS!)Loosing 5 pts is a travesty.

RMBS: I've been catching lots of .3-.6 swings in it for the last 2 days. You have to love em decimals (NOT)

CWP: Now this is also another ideal pattern that i've been talking about. You can see the large move down on heavy volume. REally early on I saw some large blocks at just over 20. I bought a few thou at 20.5 with a stop at the low of the day. I ended up just selling them at about 21.2 when the market started to melt in the afternoon. Had I not exited, I would be stopped out now. I also felt that from reading the specialist that he was selling the blocks he bought at 20.2 for a point profit, but there was probably a large seller at like 21.5 and he wasn't trying to get greedy. That's just from specialist reading though. As long as the rsi doesn't rise too much on this one, It will be a good scalper (long) soon again.

DVSA: Same pattern. Im sure you're getting the point by now as to what I look for. I caught 5/8 on 1k in this one. Unfortunately, the thing that really limits profits is liquidity. Im afraid to normally take more than a k on these types. As a result, my exit is normally timed by when i see a bid that is large enough, rather than any stop loss.

SITE: I liked how it gapped up from the same pattern. Unfortunately, I took a loss of 5/32 on 2500. It didn't hit my stop loss, but I just felt some mm's leaning on it. I decided not to risk it, but rather to take a small loss and find something more attractive.

NC: It lost support at 65. Im still short 300. That's all cyber had to borrow. Good luck finding more to short.

INTU: I made a few 1/2 pt scalps in that both long and short on 500-1k shares.

ADRX: There's something that has to be said about knife catching. Im quite ballsy. When I saw the volume picking up on the downside, I picked up a small long position, and started averaging. I took a few hundred (I said small) for a 1.5 pt avg. ride. I could have had more. But you can't be greedy on these. I really recommend that only the most experienced play these. If I hadn't been nimble, I would have lost money after the bounce ended. It was too oversold to have shorted, but that definately looked like teh better play.

I made about 20 other trades, most ended up being about a scratch overall. But I think that these are the ones that you want to look at. They really characterize my style lately. I think that for newbies, especially, these are good. If anyone has any questions, please post. This took much longer than expected, so I'm going to take a break before I do friday's trades (if at all).

 

I think i found a new one... APW. Though you could call me biased cause I got anihilated today trying to average down before giving up and just shorting. Im long 2100 now at 7.2. I want my $ back from this one. It took 10k from me today.

 

I finally got long today at 5.3 and made .5 on it. I will probably buy 5-10k tomorrow of it. I think this one has bottomed. Im going to wait til the first 30 mins though to see if there is indeed buy interest. the book value is like 16 anyway. (not that you should use those metrics to trade by)

 

Thanks for pointing out APW, Praetorian2. I bought 4k at 5.3 today, got out at 5.9. I as well will be following APW from the open. I agree, I think it has bottomed.

 

I have several questions regarding the strategy posted on this thread:

1. What criteria is used for entry? After you have found a stock that capitulates with high volume, do you then look for a high volume bar intraday, or do you wait for the stock to trade above a previous bar's/day's high?

2. Why wouldn't this same reversal pattern work with any high volume day, whether it is a narrow range day, red bar or a green bar (closing price above openning price).

3. It seems that in many of the stocks mentioned in this thread, there were actually two high volume down days. When finding a stock that has blown off with a high volume day, how do you know that there may not be another high volume down day, or even a third down day when you are entering for a reversal.

4. What method is used to determine the size of trade blocks being offered/pursued by a NYSE specialist? Are you just following a level 2 screen, or are you following additional sources.

Thanks for this thread....it has been very informative.

 

Lots of q's... I wait til it makes a new high over the first 30 min bar. I keep my stop at the low of that bar, or other strong support point. My share size is mainly a result of liquidity. I have no problems with taking 10k+. TO deal with a possible 3rd (4th) day down, I use stops, and use them religiously. As for block size, I don't need definitive blocks per se, I just want volume.
For friday, these are the plays that are liquid enough to look at.
APW
TWTC
WAT
PKI
IMNX
ABI
(unfortunately, I have about 25 others, but I can't post them here cause they average under 500k a day, but a bit of searching will probably find half or so)