Average Daily Volume and Price Ranges PM I typically trade anything between $10 and $100. I've made certain exceptions before though. Google is a bit too volatile for me. Some traders claim it's no different than a stock in a $30 - $40 range, but I always seem to get stopped out of it faster than stocks under $100 (using %s and not $ stops). 200,000 ADV should be more than adequate if: you're not making rapid executions, you're not trading all or most of your capital/BP in one trade. I don't trade anything below 50,000 ADV, but I'm almost always 100,000 or higher.
A General Description of How/What I Trade & the Cup of Christ PM I buy morning breakouts long (not gaps; I base a lot of trade decisions on % gains, but never from yesterday's close, only from the open), cover gap reversals in the lower range of weekly support and resistance (triple check your news sources before entering trades on 'technical' gap reversal setups) and short ETFs on down days. I watch a lot of volume bars and price candles, and run a lot of screens with a dozen different screening tools. It always seems to come down to controlling risk though, in the end. Find the right stops, and keep a keen eye on your profits. I use trailing stops to lock profits, but I usually seem to exit a reversing winner quicker than the trailing stops knock me out of it. It's almost like a sixth sense when a move has ended, but I guess lots of volume and stalling prices help too. As far as a holy grail, trust me you'll never find one if you don't look. I've been searching for years, I haven't found it, but I have found more $$$ than I thought possible (think 2001/2002's mentality). The original SOES bandits never would have found theirs if they hadn't been looking. Come to think of it, maybe that's a big part of the problem with traders like ******. Maybe its just that they're not hungry anymore? Not willing to find a new edge, even as the old one goes away, perhaps?
Growing the Account and Personal Finance PM As far as my trading goes and where I'm at, it keeps evolving. I try to live off of about 1/4 of what I gross. So my target for the first week of each month is making more than I'll spend for the whole month. Everything else is bank and taxes. The faster you can grow a Margin account, the faster you can grow it even faster than before. Choppy markets like this one suck, but I've covered my Mortgage, for the whole month, after just the open of the first day of the month before. It just makes everything else the rest of the month that much easier...
More to Come. Feel free to offer other insightful quotes. Newbs, PLEASE feel free to ask questions. Post em here or PM, I'll answer either, but posting here will get you more in-depth quality answers. And to the other comedians on ET... Please don't start the Shit Pie throwing contests... Just eat them by yourself in the corner...
This thread of yours is a great idea, I'll be sure to keep it close to me as long as it's helpful. A few questions, you don't seem to like technicals, how do you know what the market is telling you? How do you analyze volume? What about candlesticks? Where does your edge come from?
Thanks for the support. I've been wanting to start a thread like it for a while now, I just kept putting it off. As far as not using technicals goes, I just don't like using lagging indicators to make buying and selling decisions for intra-day trading. Swing positions and investments are different, but to me, making decisions based solely on old data is simply not efficient enough. Most of what I do in the morning is about finding breakouts, and those stocks tend to do things that most technical analysis can't explain. News, changes in fundamentals, or sector related occurrences often help to explain highly volatile swings. There is nothing wrong with trading purely based on technicals, I'm just not very successful at it. How do I know what the market is telling me? Good question. First, the indices help show market direction. When multiple indices are trading in unison that is a good indicator of what individual stocks are likely to do, but checking an individual stock's related sector is still important too. News and an assortment of other variables come into play as well. Mostly like I try to explain in my posts regarding "forming a matrix" around trades. How do I analyze volume? Well, if you're referring to the volume numbers on a Level II screen, I look at how much liquidity there is at the time the stock is on my screen and what it has been doing so far for the day. High volume (above its average daily volume) early in the trading day with little resistance almost always points to some kind of corresponding news, like merger rumors, earnings reports, pre-earnings hints, new technologies being unveiled by XYZ, CEO leaving the company, SEC investigations, etc, etc. Volume by itself says little, but it does help to point you in the direction you should be looking. Price and Volume? Are usually the only technical indicators I look at. I've posted on the subject numerous times, I'm pretty sure I put a few in this thread too. Basically, KISS (Keep It Simple Stupid) really helps to cut down on confusion, and a bit of research into candle and volume patterns will do wonders for your trading, even if you use MAs or Bollingers etc. Where does my edge come from? Two words. RISK. MANAGEMENT. I've posted numerous things on this subject before. Tomorrow I'll check what I've already posted in this thread and maybe I'll try to dig up some more. Basically risk management is the name of the game. I'd be willing to bet that with proper risk management, even a monkey could net positive returns (see Jim Cramer). I never double down either. Sure It'll work every time, and I'm not being sarcastic here, It really will work every single time, right up until the time where you blow an entire account (see Numerous Funds that doubled down on Enron and the like). Buy low, sell high is for adventure seekers. Trying to buy the bottoms and selling at the very tip of tops can kill an account when you're wrong. You can be right, and still lose money. Buying too early, or selling too early will drive a man crazy. Conversely, waiting too long and buying tops or selling bottoms is equally bad. Using market orders is not the end of the world. Using stops for a beginner is a must (I still use them). Trading is a numbers game (I know I've said that before) getting the numbers right and understanding exactly why you're in a trade, why it is you're buying, and why it is you're selling is key. I have a philosophy. "I trade what moves best, and what moves best is always changing." Basically, don't be afraid to branch out. I know a lot of beginner books tell you to specialize, but trust me, no stock regularly has significant volatility and easily predictable moves. I screen stocks before (most) every trade. A lot of the time I'm trading stocks I'm not readily familiar with, and sometimes stocks I've never heard of. Just remember to do your homework, and the faster you get at research (with breakouts anyway) the better. Good luck. Keep 'em coming.
If newbies are invited I'll be happy to give my contribute You seem to pay a lot of attention to the global direction of the market. I'm still wondering to what extent this has influence on a stock; depends on the stock, I guess. Anyway, what I noticed is that you didn't mention indicators like TRIN. Do you think it's useless? Also, how about looking at options to get some feeling about where the stock is going? Thanks
First of all ... I would like to thank 2many for bringing all this into one thread. A whole thread about your previous posts, talk about a massive ego Alright kidding aside, me and 2many were talking about starting a Q&A for beginning traders. I have been busy with my job (the one that pays me everyday) so I've been putting this off ... must be his way of saying get your ass in gear jho. Ok one thing I noticed is that you can read from books and posts about all the rules of trading but until you're actually trading you don't TRULY understand and learn from it. For example, everyone knows when a trade goes against you, you should cut your loss at your predetermined point. End of story, no more. But guess what, you won't truly understand until you get burnt bad by not cutting a loss. In my first two weeks of trading I was burned twice for not cutting a loss, it took away all my profits. Since then (about a month after) I have cut every loss where I intended to. More to come later ... hopefully we can keep this thread civil.
You know how much I like to stroke my own ego... jho has had some very insightful posts of his own, not to mention PMs, and I'm sure he'll start posting some of them when he gets some time. jho is still a bit green in his trading career (sorry for letting the cat out of the bag buddy), and in our numerous conversations he has pointed out many interesting things that I never would have seen, and posed questions I simply assumed young traders and newbs would have already known... Your welcome, and thanks to any and all for posting their own (or more of mine, of course...) useful insight. from www.investopedia.com TRIN - Short for TRaders INdex. A technical analysis indicator calculated by taking the advances-to-declines spread and dividing that by the volume of advances to declines. * If the value of this is less than 1, then it is considered to be a very bullish indicator Arms Index TRIN - A short-term technical analysis breadth indicator calculated as the following: * A ratio of 1 means the market is in balance; above 1 indicates that more volume is moving into declining stocks; and below 1 indicates that more volume is moving into advancing stocks. This indicator was developed by Richard Arms. Relative Strength Index RSI - A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI = 100 - 100 / 1 + RS RS = Average of x days' up closes / Average of x days' down closes As you can see from the chart below, the RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued. * A trader using RSI should be aware that large surges and drops in the price of an asset will affect the RSI by creating false buy or sell signals. The RSI is best used as a valuable complement to other stock-picking tools. Index - A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is essentially an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value. For example, knowing that a stock exchange is at, say, 5,000 doesn't tell you much. However, knowing that the index has risen 30% over the last year to 5,000 gives a much better demonstration of performance. * The Standard & Poor's 500 is one of the world's best known indexes, and is the most commonly used benchmark for the stock market. Technically, you can't actually invest in an index. Rather, you invest in a security such as an index fund or exchange-traded fund that attempts to track an index as closely as possible. When a specific stock's corresponding index, like Wal-Mart (WMT) or Microsoft (MSFT) and the Dow Jones Industrial Average (DJI), is moving up then it is more likely that the related stocks in the index will also move in a similar direction. For example, volatile Oil prices can affect the Dow because the index consists of 30 stocks that are (mostly) dependent on Oil and transportation. So while MSFT and XOM may be up for the day when Oil prices move higher; WMT, KO, BA, MCD, T, HD (I swear I didn't look any of these prices up, but I'd be willing to bet they're all down today) could all easily pull the DJI down because of those individual stocks relation to the price fluctuations of Oil. Actually, now that I think about it, the Dow was probably not a great example... Another path you can take, is looking at an individual stock's corresponding ETF (Exchange Traded Fund). For example, if you were to do some research for Pfizer (PFE), you could cross-reference its market performance with a Healthcare Sector ETF like XLV (XLV). So if you're doing End-Of-Day research on PFE, you'd notice that PFE was down more than 3%, while it's corresponding sector ETF XLV was down 2.4%. Looking at the chart above (if the code works), you can see the correlation between the two. When we start digging a little deeper, we can see that Johnson & Johnson (JNJ) was down over 2.8%, and Merck (MRK) was down over 3.2%. Both of these stocks are of course related to XLV and PFE, as they're both in the Healthcare Sector ETF. Any light bulbs flickering yet? I don't trade options, and I don't pay them any mind either. As far as TRIN and RSI, I like them... However, when I'm buying breakouts or breakdowns, these indicators can also be deceiving as well. Technicals and options aren't tools of the devil (I don't think...?), but staying narrow minded and ignoring the reasons why things are moving like they are just isn't my bag baby. Good questions, keep inquiring.
Haha a bit green? Maybe an understatement. I will be the first to admit that fact. But hey, I didn't join ET to make people believe I was some market wizard. I'm here to learn as much as possible, and occasionally add a sarcastic smart ass comment. For me it isn't about the quick cash, I'm in it for the long haul, this will be my career. Hopefully we can get some newer traders asking questions in this thread, it would also be great if some other experienced traders shared their opinions.