This may sound weird, but what kind of analysis, stock picks, routine do you position traders go through to trade? I heard many position traders trade the "in play" stocks each day that have some sort of news that will likely to make the stock trend. What kind of analysis do you guys do, or when do you jump in the trade? I'm all new to this as i first started how to scalp but would like to be a position trader.
It's helps to have a way of identifying tops & bottoms based on price behavior within the time-frame you're operating in to establish when a trend is reversing or continuing. Focus more on the price bars instead of the "news".
It will take you some time of really watching price action to get a sense of how patterns unfold, using charts combined with the tape. Don't be afraid to cut down your 20k a day vol substantially and just watch. Your firm will not like it, but it's your money and labor and you have to keep it all in balance to get in the right mindset. This is just an outline, but I'd suggest reading the encyclopedia of chart patterns book. Then, begin working on recognizing when breakout patterns appear and coincide with when the futures set up for a pop. Always risk a certain percentage of your account on every trade (without varying) and only take setups that have the potential to run 2 to 3 times the amount you risk. This is just to get you started in the routine of using your head to plan risk, rather than jumping in and out like the monkeys chasing market shorts at your firm. Over time, try to develop a feel for a few stocks that move at least a point a day. They have to move smoothly, not be stuck in a boring range on the long term charts, and regularly generate interest from large players. The sweet spot is when you either develop a style that constantly catches in play stocks for quick, powerful moves (gaps in the morning, news stocks off the open, stocks in in-play sectors at key points in the larger economy), or learn to understand the price action of a handful of stocks on both the chart and the tape that you can play them every day, in and out, over and over.
For long term position trading ( I may hold a stock for years ) I ignore the news. I do not watch TV or read financial magazines or newspapers. I use one of the long term trend following methods described on elitetrader.com. Basically I buy what goes up and sell what goes down. I have a list of stocks that backtest well and I only trade from that list.
Thank you for your input, I use to play the MACD histogram divergences but I was "pushed" into focus on the tape (my first stlye of trading was "taught" to scalp) and the openbook that whenever size comes in my face, I get really shaky. Or when the stock moves a couple of cents, I'd take it right away as with the scalpers' mindset, that couple of cents is quite an achievement. I have to get my personality straightened out for trend plays but I'd imagine that shouldn't be a problem once I start believe it will work, and once I see profit. I'll go where the money takes me lol. On the otherhand, there is a guy in my firm that does not have openbook, and I'd imagine that would help me a lot as when size pops in my face, I don't get too nervous. As you can see, it's hard to change what you have been doing, but I think this is a change that NEEDS to happen sooner or later. (especially when NYSE rolls out the hybrid on the Oct. 6th) What I have been doing is looking at common chart formations: double top, double bottom, head and shoulders, etc... but I am still brand new to position trading as when to get in for entry and when to get stopped out. I also heard candlestick patterns are good too (hammer, doji star, hangman), etc... Dogballon, can you describe your style?
hey thanks for pitching in, I am mainly focused on intraday position trading. But yes, sometimes size get sin my face but when I really think about it, if that size is in the openbook, it's probably the last that he has so it will just be a short term drawdown.
I like to look for techical break outs using different time frames. As long as I wait patiently for the set up, I have a high probability of going in the money.
being market neutral is one good way to position trade. if i had 30K to trade. i would put 15K in long positions that looked strong and 15K in short positions that looked weak. for my long term trading i like to look at the daily chart, strictly looking at technicals and patterns. the chart tells the story.
so many breakouts juke me out. i have a filter that makes sure volume is abnormal, so it confirms that hte breakout is real.