Need help daytrading QQQQ

Discussion in 'Strategy Development' started by unet1604, Jun 8, 2006.

  1. unet1604

    unet1604

    I would be grateful for any ideas.
    I presently buy once a day if QQQQ goes over yesterday's high and sell with a .10 profit, but feel there are better strategies than this. My stop loss is .20
     
  2. jho

    jho

    You shouldn't be risking .20 to gain .10 ... it should be the other way around.
     
  3. unet1604

    unet1604

    I see...the reward should be greater than the risk.

    I have also tried buying at .10 below yesterday's high once it has been hit and then selling for a .20 profit
     
  4. Exactly. Well said jho.

    A lot of people try overcomplicate things because to a beginner the Markets tend to seem extremely complicated. In reality it all becomes much easier when we incorporate common sense into our trading strategies. A wise man told me that, no matter what you trade, the secret to success in the market is simply good risk management. Cut losses short, wait out the winners.

    Is 0.20 an ideal stop loss? No, not if your target movement, or the probable movement, is 0.10. If the target were say 0.5, then 0.2 could be acceptable, however it depends on many different variables when it comes to where a stop should be placed. A stop at 0.4 would easily allow for a higher winning trade percentage than a stop at 0.1. Keep in mind though that a single loss at 0.4 would equal the same $$$ amount of four losses at 0.1. However, extra commissions and fees must also be accounted for with the use of tighter stops, as there will likely be a greater number of executed trades in a shorter or similar time frame. Also keep in mind that larger targets and wider stops often equate to significantly longer trade times.

    Risk management is more than just a necessary consideration in trading, it should be incorporated into the very basis of any good trading strategy.
     
  5. unet1604

    unet1604

    Thank you for your replies. I will save them all and review them from time to time. I have also been looking into the Average True Range and maybe using that with a trailing stop loss.
     
  6. jho

    jho

    Good post I agree.

    You need to be thinking in probabilities. Here is an example:

    20 trades
    70% Wins (14), 30% losses (6).

    14 x .10 = 1.40
    6 x .20 = 1.20

    After slippage and commissions it's a net loser. I know there are a million other factors but it's just an example. You need to risk less.

    Why not short the QQQQ when it goes below yesterdays low? Here is a pic of the last 10 days on the QQQQ (1 hour chart). Green arrows you buy, red arrows you short.


    Good luck! Maybe someone else can chime in with some helpful strategies. I don't trade the QQQQ.
     
  7. view this while reading my next post.
     
  8. I played paintbrush with a chart (for the first time in a while) to help you (unet1604 and any other beginner/inexperienced traders) understand chart pattern entries. Note: most of my exits (from long or short) are gut feeling or trailing stop based, so I won't really try to explain them here.

    I don't trade the first portion of the open, which means the first 5-15 minutes, and these candles are 10min charts. So being an experienced trader, I'm looking at different screens than these, but I recommend newbies look at longer candles for longer periods of time. Be sure you know where the move is going before you try to follow. Don't try to short the very tips of tops, or buy the very bottoms. Be patient. Be humble. Take your time. Don't overtrade.

    1. Note the Gap open here. Gaps up then falls. First clue this may be a shorting day. I'm in fairly early on this action, but in keeping with my advice of using longer bars and longer time-frame day trades for beginners, I'll be using these specific charts as I would have you do so. First 3 candles = lower lows, lower highs. Prepare for short setups. The entry basis for circle 1 is in the latter half of the circle. The second time of the day you've seen lower lows and highs. Commence shorting somewhere near the bottom right corner of circle 1. Bank. (Note: check out the volume bar at the bottom, see anything significant that occurred in volume's relation to price?)

    2. Here is where overtrading will most likely come for beginners. You got in fairly early on a decent move. $$$. If you're looking to give some of it back, trading around this time after a move like you were just in is definitely one way to do it. In circle 2 you'll find chart patterns supporting a theory that an uptrend or reversal is in motion, but you'll also find patterns that say a new downtrend is starting. You may never hit a stop in this area, then again you're not hitting any targets either. Even though it is gradually an upward movement, it's not going anywhere fast, let's look somewhere else, or simply go do whatever else it is you do. Second guessing, some extra un-needed trades, throw in a bit of boredom, and there goes 1/4 of your morning profits. You should have been up somewhere around 0.9% after that mid-morning move. Don't throw it away because of boredom.

    3. Fresh new trading day. A quick gap down is followed by a nice solid upward trend. If you're experienced with the open (if you're still reading this, you're probably not) you got in around the third candle. Decent move. If you're not, you waited till candle 4 or 5. You found a solid trend, higher highs (excluding gap and open) and higher lows, give it a go. Damn, got stopped out? Yes, but don't fret, myself and many others bought too. This is what stops are for. No one wins all the time.

    4. Don't get bent after the last trade went against you, stick it out, but don't trade for revenge. Experience is already shorting this before it is hitting lower lows, you should wait for it to get close, and you should be in by at least the last bar in circle 4. Side Note: if you're using trailing stops, there are several points on the chart where you're hitting them. Don't fret or worry. Wait for one candle (two 5 or a 10) or a few minutes of T&S. If you don't see a solid reversal, jump back in. Don't worry about fees, if you're trading small size with p/share pricing, a dollar or three for a stop is better than losing an extra ten without it.

    5. A similar example of Circle 3, I'm probably long, but like I said before, beginner = patience.

    6. The higher highs and higher lows (excl. open) looked nice, but after a reversal and 20-30 minutes of lower highs and eventually lower lows, get over the last trade and go short. Some trailing stops may be hit, follow Circle 4's advice and jump back in after identifying a continuance. Nothing too fast and no big sexy moves here, just clearly defined reversal points all day.

    7. I like Circle 7. Eventually it'll be a good day, but first the market will play with your patience and conviction. I (experience) found a nice move after the open, but you (doing what you should as a beginner) waited until the move was puttering on fumes to go long. Stops hit fairly quickly. We then find a choppy trend which will eventually turn into...

    8. Lower Highs. After the morning move, lower lows are still a ways out. Identifying a trend doesn't have to involve both higher highs and higher lows or vice versa. I (experience) have found two solid trends, you found one. Don't wait too long. 8 could have easily turned back choppy at noon, and if you're waiting too long you're missing the significant moves and hitting several stops along the way. In this instance you've found (at least) a 1.1% move.

    9. Don't stay in the market too close to the end of the day. Those extra pennies aren't worth the small price movement. If your day-trading, be out by at least 10 minutes before close.

    10. Based on what has occurred the past four days, today will start as a short based on a week long trend. Experience is short at the first sign of the open retracement. Beginners follow later, as this is safer anyway, after spotting lower highs and low.

    11. You've hit a trailing stop loss order (or at least with a retracement like this you should have) The new reversal turned back down quick, this is why after hitting trailing stops you watch T&S. Ticking down, down, down, further down the spiral it goes. Don't wait for the next candle here, it's worth risking another stop for a super-quick move like this. Don't be scared of stops, know and respect they're purpose, but keep following the trends when they're moving quickly.

    12. & 13. I'm shorting again somewhere in here, but I'll probably get stopped out past circle 13. At this point in the day, I've captured big moves at least twice already. Here is another good example of circle 2, check out the choppiness of the uptrend, green-red, red-green. Nothing clearly defined at the time, even though it is a trend, it's choppin along. You could follow that uptrend till close, but you'll be hitting several trailing stop loss points along the way. Your choice, but I was probably out for the rest of the day after the stops following 13.
     
  9. unet1604

    unet1604

    Thank you 2manywhiners for your in-depth reply and graph. I have never shorted a stock before, but now see how you can benefit from going short and long on a stock even multiple times in a short period. I need to get over feeling bad when I hit a stop and realize it is a necessary tool to protect my investment $.
     
  10. Please don't take offense, but it sounds like your experience is very limited. Two of the main reasons traders trade the QQQ and ETFs is for diversification and shorting w/o uptick rules. Even in the last month you haven't shorted? I've been short over 60% of the time. Following in the same direction as the overall markets' trend is a significant key to higher winning trade percentages, which means more winners, fewer losers, and more $$$.
     
    #10     Jun 9, 2006