Mine will be a bit different from the rest because I have been filtering for stocks with options for a while now (although there's both in there), and some of the criteria is different, but it'll give you a good starting point. Incidentally, you had a strategy that I've put on the back burner for looking into, but it seemed it was going rather well. How is that coming along for you? I thought your journal/postings on it were very informative. AOB BOOM BSM BTUI CDE CERS CKCM CMCO CMT CRUS CTHR CUTR DCAI DPTR ELOS ENER FORD GES GMXR HANS IIG IRIS JMDT KNDL LIFC LMS LUFK MCHX NDAQ NFLX NGAS NGPS NTRI PETS RATE REDF RGEN RNOW RTSX SNHY STV SWN TIE TRGL VDSI VIVO VPHM - The New Guy
oops sorry, my bad . In this case I think you are doing ok. As spydertrader said, you can choose to use a 5% or a 2% stop. It depends on your personality. I just prefer a quick death edit: I'm talking about the entry day stop.
Spydertrader said you can choose a 5% or 2% trailing stop after the first day? I only remember reading about a 5% trailing stop after the first day. The only 2% stop I remember is the Ross Rule where you use a 2% hard stop based on entry price on the day of entry ONLY. If you hold past the entry day, you switch to the 5% trailing stop.
After reading your post, I took a look at several 30 minute charts and compared the shorter term intraday channels with daily chart channels It seems like a common scenario would be to desire a breakout above a narrow intraday channel but with room to run before hitting the top of the larger flat or upward sloping daily channel. I was wondering if that is what you typically look for? After reviewing my own trades, by far the most important change I could make to become profitable, was to use channels. Behind the use of channels to improve results was the possible elimination of the FRV rule. After reviewing my trades and going over the different scenarios, I am finding that what intuitively felt wrong is playing out the way I would expect. Specifically, use of the 1st day FRV rule appears to be less profitable than eliminating it. (In my LIMITED experience of trying to trade this method for a few months.) But take a look at the attachments I posted a few pages back if you are wondering where I am getting this idea. First, here is why I say intuitively it does not feel right. Stock goes up on strong volume = bullish Stock falls back a little on low volume = BULLISH (normal healthy pullback) (vs. stock falls back on increasing volume = bearish which would support the FRV rule incorrectly if price remained positive for the day IMO) So we see this all the time. A stock in dry up opens strong of good volume, then falls back a bit on low volume. To me, this is normal. This is more typical of a stock that is going to have a 20 percent run in 3-8 days. It will rarely just go straight up nonstop with no price or VOLUME pullbacks. This bullish pullback on low volume causes the FRV rule to go into effect. (strong volume as stock goes up, low as it pulls back or just sits there). However we are really after 3-8 day 20% moves here (where we capture approx half of that move). Since we are all also looking at 30 minute charts why are we not recognizing and holding instead of selling stocks that PULL BACK on LOWER VOLUME. (There is a nice paper posted here on the stop offset method. To me it makes more sense to discard the FRV rule and either use a blanket stop loss or something like the stop offset that actually considers the individuality of the stock. ) Search Grob109 on ET and you will find the following post on the first page in response to the time frame he trades. âHow many stocks at most will you trade in your portfolio for: daytrading: N/A swing trading: N/A Position trading: 6 capital streams, 2 stocks per stream, limit 100K shares/stock, price range 10 to 50 dollars/share. Hold is for 1/2 natural cycle., cycle is 12 to 16 days. Long only. Thanks.â I think that anyone who reads the original journal and finally makes it to spydertraders amazing trade log, is surprised at all the day trades and 1-2 day trades for a method that seems to focus on stocks with a history of 4-8 day moves (yet Jack himself is talking about 12-16 day cycles) Keep in mind that I am no authority. I opened a $2200 account to experiment with 60 days ago and now have an account balance of 2201. After evaluating my poor trades, I am ready to question a few rules before I continue. I hope that no one takes offense; I am only hoping to become profitable. So far I plan on. Immediately using Channels to eliminate stocks at the TOP of daily channels. (ideally 5-10 daily bars) For downward sloping channels, I have to see a break out above top channel at time of signal. I am currently not going to use the FRV rule, but will follow closely the FRV scenario VS. my actual. Take Rossâs suggestion to monitor 30 intraday charts. Ideally, I think I am looking for breakouts above narrow (small percent moves) intraday channels that are 4-5% below the upper longer term daily channels. (realizing that sometimes no legitimate channel is available). Clym (the one dollar man)
I think the docs and analysis posted by Clym are great and likewise the thoughts on the channels. I thought I'd add a few thoughts. I first noticed and started monitoring this thread justd a few months after Spydertrader started it (about this time last year). I did nothing with it until just a few months ago when I noticed from his trading spreadsheet that he had essentially doubled his money over the course of 1 year. That was amazing to me - to find a strategy that was very well documented and followed where someone doubled their money! My goal in implementing the strategy was to resist my extremely strong temptation to try to improve (or mess with) the strategy very much since I'd be thrilled to double my money. That being said there are 2 reasons I like channels. First, if you know you are buying in at the bottom of an uptrending channel you can set a logical stop (somewhat just below the lower line) rather than picking 2% or 5% or some other arbitrary number. My very limited experience shows that things that break down from an established trendline may do it for one bar (to shake people out) but otherwise if it's broken the original rationale for the trade was wrong and you are better off getting out. Therefore, I believe that they allow you to set fairly tight and logical stops. Second, they allow you to see whether there is any sort of resistance that should come into play and at what level, helping me solve my exit dilemna (when to get out). For instance, if the top of the trend line projecting out to the end of the day or the next day is at a 7% profit my current thinking is that you are better of setting a profit stop at 7% then trying to squeeze out 10% since there is a good chance it will bounce off the upper trend line before you get to 10%. So, what I'm trying to do is using this method in the following manner: (1) use the Hershey approach to find stocks that have a logical reason for moving up and then (2) enter the trade if the stock is close enough to the lower channel that a logical loss stop just below the channel isn't that large (preferably < 2% or so) and the logical profit stop (upper channel) is at least 7% to 10% or more. I try to look at 30 minute, 60 minute and daily channels to find some consistancy but I believe that a 30 minute channel (since that is what we have been using for other indicators) will work fine if you can see a logical channel that is at least a few days old. I also would like to point out that I chose NOT to take a BOOM trade just a few weeks ago because of where it was in the channel and it went on to have a huge gain, blowing out of the upper part of the channel, so it may be that some of the best gains will defy this rule and by constraining myself I will limit the biggest gains which may defeat the strategy. (It just occured to me to look at Spydertraders 10 or 20 best trades from last year to see if that is the case. I will do that). Like some of you I do also question the FRV rule. In this case I am leaning toward following the rule (for now). I have found by real trading (NTRI and KNDL and PETS just in the last few weeks) that if a stock goes up 1% or 2% and does not reach FRV I'm better off taking the smaller gain rather than hoping it continues to go up since in the trades I've been don't seem to show much consistany on day 2 if FRV isn't met. This goes back to my original comment that I don't want to mess w/ a strategy that generated a great 1 year return unless I have proof that I am improving the results. Anyway, great thoughts and thanks to everyone for participating. Mike
Clym/Mike I'm following your discussions re. the use of channels with interest. My question is, how do you draw the channel? Every time I've tried to draw channels and compare my work to someone elses, they are different. Doug
Jack has posted in numerous places. Are these posts in Spyder's first journal or elsewhere? TIA, Doug
Don't remember where I got this, but it should give you a pretty good start.... ho ho ho! - The New Guy ARgh, i'm not sure if the file was too big, but it won't let me post it, i'll try again.