Discussion in 'Journals' started by Hello, Jan 29, 2010.
I am following you. Good job! Please keep up!
New trader here.
Good luck in the new year! Ask me whatever you want....
Now that i have given a solid example of how to step in front of size, I will tell you how to trade a stock when size is breaking.
The first thing people should know about size bids/offers is that it works as follows.... First thing, size bids/offers tend to come in fractional increments, what i mean by this is that big levels tend to come in at...
The following levels.... Size tends to step in at round dollar amounts. For the most part you will see size bids/offers come in perfect fractions. So you will see 25k shares offered at 22.25 or 22.50 or 22.75, or THE BIGGEST PLACE you will see it is at even dollar increments.
Depending on what the stock is doing, Size on Level 2 can be the biggest indicator of whether or not i want to go long or short. This is huge in "reading the tape."
There is 2 totally different ways to trade size on L2. I have already shown everyone how to step infront of size, this tends to work best if a stock is going down/up and keeps going down/up and you jump in front of them, following the trend. (i.e. make sure you short in front of size if the market is going down, and collapsing, and all of a sudden someone posts some size.)
The other way to trade around size is as follows,..... I made a living solely doing this on Ford when I started trading. Look for Levels which have tons of size on a Level and as it detiriorates/when it is going to break, hit the level for whatever number of shares you want to take, often times when the level breaks the stock will snap and go up/down a bunch of ticks instantly as all the people who jumped in front of the level are now being stopped out. This is a lesson in basic tape reading 101, hope you guys appreciate it.
The first three rules I have defined in this thread are the only definitive rules I have in my trading, beyond this it is discretionary, on monday i will try to show trades in real time.
I do not take it as rude, but I already know the answer, by the time I have built a shitty PNL killing position, I can not exactly set a stop, I cant use a stopout on 10k shares, my problem is finding things i THINK should be right, and having enough convniction to waste an entire month's profit proving whether or not i actually am right, as opposed to just following the system.
This is why im going to start from scratch on this thread, since I have no fear anyways, it will be nice to take things out of my own hands and just set stops on trades, as opposed to building monster positions, which can cost me a months profits, and i logistically cant set stops on it......
There are 3 good ways to avoid taking too much risk:
1. Put on position limits at your broker, and instruct them never to increase them intraday no matter what you say. This is also good for avoiding fat-finger blowups.
2. Hire a trading assistant (or use a wife/gf) and give them authority/orders to stop you exceeding a certain level of risk, and to force you to exit positions and shut down the screens if your loss goes beyond a certain amount. Most wives/gfs are particularly good for this as they are inherently risk averse and hate the idea of all that shopping money going up in smoke.
3. Spend several years suffering the consequences of poor discipline, losing hundreds of thousands of dollars on mistakes, slowly learning from your errors and gradually building up iron willpower when it comes to controlling losses. This is the best long-run approach but it's very expensive until you achieve it. (Another way to achieve this is in different but related fields e.g. poker. I played for a couple of years and overcame "tilt" eventually, this was useful for my trading discipline as the emotions of tilting after monetary loss are the same).
Nice to hear something about reading the tape around here. Tons of posts about fibs, tea leaves, moon phases, and other hocus pocus. Not many useful insights about the tape, thanks. Looking forward to the rest of the thread. Your last point sounds very much like a simple technique TalonTrading described in his thread:
**as for the daytrade idea... get a level 2 and pull up an active stock on the open (lots of trading / volume / news). wait for the level 2 to repeat at a specific price a lot (you need to watch for several weeks to figure out what that means)... maybe even better if there's a lot of size showing on the bid at that level... and when the selling pressure pushes through that buyer, get short. quickly. you need to be the first one to hit the first bid under that buyer. if it doesn't go down right away get out immediately. if does go down, ride it until it turns back up. simple right? yes and no.
Can I ask, do you keep a tally of how much your errors cost you? I found that useful for improving discipline, once you realise the true cost of not doing so.
Also, with the techniques you are talking about, if you were perfectly disciplined, what kind of earning power do you think you would have? You might want to consider hiring a disciplined trader with lower earnings, to do your execution for you.
Last year my errors cost me some where in the 200k range, that is why i started this journal, I can definately put a number on it...... Thx for the question........ Cheers mate!
With the original technique oif sitting around waitng to snap size, max was 60k, as the thread alludes to.... My estimate is that I can easily make 300k, if i had a way to screen for this, i would,...., but this is just confidence in my own ability.
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