Poor word choice... I meant I'm consistently green in the pre-mkt to open. The downside is that there is very little scalability and opportunities are quite rare... but it's the best edge I have. Perhaps only edge when it comes to discretionary trading. Sell-side trading in more illiquid markets, making spreads, is quite "easier" and there's less risk. What I would give to work on a esoteric derivatives sales and trading desk.
after having taken a brief look at what you shown us as your tool to trade for profitability.... you are doomed for certainty, if that is only tool you used to trade with.... any half baked trader will tell you to stop trading real time for the time being.... if that is the only tool and chart you have to trade live with.... get your money out of there and back into your own saving for the time being.... what kind of trading company is that.... to have provide such limited avenues to trade live for its clients.... even in backward countries like india, thailand and indonesia.... the brokerage houses provide at least half a dozen or more tools for their clientele to trade everyday.... what is your chief trader name there, pls? if you give us all the details, many on here might take pity on you and help you out.... and show you some small way.... how to trade profitably.... but then the major hurdle is you, yours and yuurself.... how much are you willing to apply yourself.... and what kind of substances are you made out of.... stop live trading right now and save your dollars for better trade after you accumulate some personal tools to trade profitably.... K?
i just found some world traders who are able to pick tops and bottoms every trading day.... just look at the pix attached and salivate.... but don't be a fool.... there is no one on earth who can consistently pick tops and bottoms like this renown guru.... using ameritrade a notable brokerage as an advertising avenue.... to entice new potential traders.... lol study hard and practise even harder testing real market.... do not spend too much time backtesting.... which might enable you to be overconfident.... three cheers
A question for some of the tape readers that have replied in this thread. I'll Start with an example to help understand my question. Let's say a stock in play(earnings etc.) opens below a key level(52 wk high/support etc. and You have reasonable gap down. As it opens and prints the opening price and immediately you have sellers come in and offer that opening price or below it. Is there a trade here. I've been seeing this in some of the stocks that I have been watching off of the open. I have been waiting till some initial momentum is in place and then entering on the pullbacks. I'm looking for inside bars or pauses with decreasing volume to enter in anticipation of the next push. This has been working relatively well this past week. BUT, sometimes that explosive move happens right off of the open and there is no way to enter on any pullbacks as there is a climax before any pullbac occurs. So anybody have any input to this type of scenario and how to trade this type of action? I've attached a screenshot of PEP on Thursday. I played it after the first ten minutes and the inside bar was taken out, but It seems to me that there was some good opportunity if the above scenario had played out in PEP
When a stock has earnings, especially such a large cap as Pepsi, it's usually difficult to trade because the order flow will be all over the place... institutions such as pension funds/mutual funds have to make decisions... their capital dwarfs HF, day traders, momentum trades, etc. Some institutions investing on value will buy, others will dump. Small cap stocks tend to trend better then the bigger ones. You can short bounces of shitty companies like Radioshack or whatnot (never hold them overnight as shitty companies can be bought out). It's all about learning the personalities of certain stocks. WMT, TGT, PEP, KO are fades when down/up a lot... Commodity stocks, small/mid caps, are more conducive for momentum and riding trends. Another note about big caps, you have better risk reward fading/going against the trend when their down 5% to 10% around the open. Don't trade on momentum on conservative stocks such as Pepsi. For example, if PEP was down around 5% on the open, let some holders puke it for the first 30 minutes. Around 10:00am look for entries to fade the stock and get long. Never ever apply this strategy to Nasdaq, small cap or even mid cap stocks. These stocks can open down 15% and finish down 25 or worse. Big caps with lower P/Es on the other hand are fine. My recommendation for earnings plays would be trade sister stocks. The only stock that historically trades with PEP is KO. KO already had earnings so this would be a hypothetical example... I would basically use PEP as a leading indicator for KO (same industry/business)... If PEP is down 5% around the open then I would expect KO to be down perhaps 2.5%. I would shadow KO with PEP... If PEP rallies buy KO... The market is dominated by algos that trade sectors and that's why the market is so correlated. It's tough being a stock picker in any stock above 5B in mkt cap. I don't know if you can hold positions overnight but there may be a good pair trade in Long PEP/ Short KO. These stocks are historically correlated and I would beat on a divergence. Since the both had earnings I would give about a two-week period for they emotions to die down... Don't go against momentum on the daily charts. I'm seriously considering doing a pairs trade mid/end August, again when momentum/emotions fade. If you're really into trading off price action then watch AIG. That stock trades off patterns like crazy. It's a day traders stock. If you decide to trade it be careful about placing stop orders at obvious price targets as traders will run the stock to trigger orders. But yea, AIG is a price action name. Never hold it over night. Go to shortsqueeze.com and check the short interest %. Never hold short names with a large short interest % overnight because the shares may be called one random morning If you want to trade on momentum then trade commodity stocks... steel and coal may be the best. Oil stocks are difficult because there's too many diff sectors (drillers, refiners, oil, gas, rigs, etc.). XOM, COP, etc big caps are impossible to trade imo. If you're going to trade gold then I like the small caps. Gold stocks are okay if their ADRs (Australian, Canadian) but for other commodities make sure their American and not ADRs... MT ()ADR) is a whore... X (choppy) is tough... AKS/STLD are my babies. Never fade commodity names. Don't chase but buy pullpacks, short bounces... don't look at % up/down for the day. These are not reversion to the mean personalities.
Thanks for the reply. I'll look at trading sister stocks to earnings as it seems that this may be a viable option here. your answer to my question? Seems like you said its hard to trade order flow in stocks with earnings? Then when do you trade the order flow? It seems to me that the action in PEP was pretty clear... big institutions would have to be puking out some stock on the open given that it fell close to 2 dollars off of the open with very small pullbacks.
Glad you're looking at in-play stocks. Personally I think PEP is a very tough intraday stock to trade. The daily charts look brutal but the stock only lost 4% next this week. You have little edge trying to ride momentum, whether it's $2 on a $67 stock or not. Stock also closed above 10am price and $1 from the low. I don't want to be like a trading coach evaluating a chart in hindsight but do you see how it tried to bounce around 10am? It rallied for a measly 50 cents but it was a good risk-reward trade and you would've broke even if you had a stop near the low of the day. At 11:15 it tried to make a new low but didn't... if it had made a new low I would've considered fading it for about an hour (this is called fading after three-pushes). The fade could turn out to be a bear flat but you would've had little risk... momentum is dead during around lunchtime. My prediction for this stock is that it will make a bear flag on the dailys. Depending on what happens the overall mkt (PEP is very much correlated to the S&P 500) this stock will likely go sideways and make new lows (break Thursday), unless ofcourse volatility surges with this debt nonsense. At the moment the stock is on the shit list, but I would only short bounces... do not short when it makes new lows!!! It's all about evaluating risk-reward. Strong list: http://barchart.com/stocks/high.php?_dts1=volume (a lot to choose from... a lot of consumer names) Shit list: http://barchart.com/stocks/low.php?_dts1=volume (not many... do not short stocks below $15 dollars or with low mkt caps... and I would stay away from HGSI) Again, you need volume to trade strong/weak list. Out of curiosity how much would you plan on making on a low beta $67 stock? 50 cents, a point, more? What would be your stop-loss? 25 cents, 50 cents, etc?
It really depends on the earnings and the significance of the level. Did the company's earnings shock to the downside? Was it a slight miss? How bad is the guidance? I feel that to have edge off the open, you need to know more about the company. When there are so many companies out there, it is tough, unless the numbers are clearly going to cause people to bail from positions. If the level is a major level on the daily chart, it can absolutely cause some bigger players to bail out. However, if it is just one bad quarter, and the larger players are holding for a longer term thesis, you may not get the panic you expect, and in fact the dip can be aggressively bought. I've seen, time and time again, aggressive selling off the open as weaker hands bail, and shorts attack, only to have the price quickly reverse and squeeze the hell out of everyone. I personally feel if you are going to get involved off the open, you need to have some type of edge in the company's fundamentals. You almost always have people on the wrong side of the trade, you'll enter, get a snap against you, stop out, and then the trade works. Price can jig around violently off the open. I tend to ONLY enter trades in the first few minutes if I see some sort of price stability in the level 2. Perhaps a huge offer / bid, or refreshers holding the price. Never, short lows or buy highs, don't chase, wait for the pull-in, or for the consolidation. I feel trading off the open requires risk that is simply too much for new traders. It takes conviction. --------------- Take a look at NCR on July 22. It closed above 20, a significant level. The gap was immediately sold into. Once the morning profit takers finished, and the gap fillers lost momentum, those buying the news took over, and the stock trended higher all day long. It is nothing but chance. NCR could have easily blasted higher from the open. There is no way of knowing. If NCR would have traded above 20.50 off the open, it probably would have squeezed all the gap fillers and began the trend higher, as those looking to buy the NCR news would now have to chase the price to get better fills. However, even larger players may be looking to take profits at 21, as that is their price target from the buys down at 18. You never know for sure. This is why I stress the importance of box reading. It is the only way to gauge the strength and power behind price movement. If you see very little resistance at 20.50, it tells you no one is looking to sell here, the stock is going higher. The chart does not tell you anything about resistance. There could have been huge size at 20.50, and NCR may have blasted right through, putting no consolidation on the chart. You could look at volume bars, but that tells you little about what actually took place. ---------------------------- On the 2 min in PEP, you start with a red candle, and unless the box shows something, you have no tells as to where the thing can bounce. If you wait just a while longer, the price bounce from 66.11 to 66.49, which is great. It found resistance as the half dollar, typical of in-play stocks. You can immediately enter as it fails at the 66.50 level, with a stop above 66.50. Your next entry is consolidation at 66, with a stop above consolidation. If you had shorted the open, lets say you got filled at 66.30 on the first red candle. What if it broke 66.50? Where is your stop. Are you risking to the open price? In my opinion, you need to know where buyers / sellers exist in order to day trade. Guys who trade opens using nothing but hope and probability are nothing but gamblers in my opinion. Guys who trade the open with good fundamental knowledge of the company and proper analysis of the earnings are the winners, and they are also often the ones with the most money, they're the guys I want to join, so I wait to see they're move. People do it, but it's not my game. I wait for the chaos to settle down unless something in the level 2 tells me its safe to enter. I was able to trade SWKS the other day because the level 2 gave me a cushion. However, even an edgeless proprietary day trader can make a good decision. It is often not too difficult to predict whether the circumstances involved will create a gap n go situation, or a gap fill. ACN gapped up one day because it was being added to an index, not any actual news related to the business. You immediately expect some profit taking on the gap. It happened. In SWKS the other day, they beat earnings, and the stock had been sold for some time. You break the downtrend, and you know shorts will cover and legit buyers will chase price to get filled before it takes off. Classic gap n go scenario. -------------------- The real crazy game begins when the stock gaps down 10% or more. Then, due to the new rules, shorts can't attack the bid. It adds a whole new level of analysis. I was very successful when the change first happened, but now things are changing, I haven't been doing well in the +10% gap downs. However, I've noticed that stocks that gap down like 6-7% are often sold hard off the open. I think a lot more shorts pound the bids in order to get filled before the 10% mark. I've seen these things gap at 7%, trade to 10%, and find support, for that reason alone lol. Then the question becomes, are there enough buyers to pay all the shorts waiting on the offers. Lately, I've seen selling dry up at the 10% mark, buyers gain temporary control. Shorts sellers get filled on the offer. Later, volume comes back in and drives the stock price down, putting all the shorts in the money. I am very weary of all this. I don't like the new rule one bit. I get the feeling / speculate the big shorts are working in tandem with stock holders. Perhaps the same people shorting, have stock to sell in order to later force price in their direction. I don't know, I'm probably dead wrong, but I have my eye on these bastards. I suppose those looking to sell could easily anticipate a price bounce once the bids can not be hit. They wait for price to bounce, and bids to follow, so that they can slam them again in the afternoon. They create a fake "all-clear" signal. This could only be the case where there are less players selling, and there are less shares to sell. If there are a grip of shares looking to get dumped by many players, they are going to have to chase price, eventually causing price capitulation, and buyers get stopped out. Eventually price gets so low, so fast that NO ONE wants those prices.
Some good advice ksmetana... especially not to short lows, buy highs and to wait for pull-backs or bounces. Regarding the % down/up trades I really think it matters with the stock. If PEP were to open down 7%, regardless of the subjective "fundamentals" of just a single quarter, I think it would take massive balls to short it to 10%. A stock like Radioshack on the other hand would probably easily reach 10% because it's higher beta, less liquid (especially pre-mkt), smaller mkt cap, etc. The main thing I disagree with is trying to interpret buying/selling by viewing the Level II. There's so many ECNs and big institutions use algos to trade their positions piece by piece that it's really irrelevant. You can see a fake bid/offer for a second. I never trust the Level II... it's not the 1990s lol.