RAMOUTAR, OK. I see so if your analysis shows that the trade is going stronger than you expected (volume etc..) then you take some profits but also increase the target. By the way, do you trade NQ/ES?
Correct, Chinook. One of the primary indicators is volume. If the stock is showing higher than average volume, and momentum analysis shows that it's "institutionally sponsored" volume (and other indicators confirm) then I will adjust target and scale out. I like the NQ and ES, however, I spend more time with stocks than I do futures.
RAMOUTAR SAYS: Youâre not putting caps on the gains, the cap is there already. Support and resistance is what throws obstacles in a price move. Yes, stocks will rip through many of these zones with ease and very little difficulty and thatâs where traders get seduced and sucked into the idea that it will continue to rip. They succumb to the ârubber bandâ effect. Overextended stocks very often âsnap backâ very hard, and it when it happens the victim is usually too stunned to react. Bernard Baruch saidâ¦âGive me the 80% in the middle every time, leave the top & bottom 10% to the next guy.â I posted a play by play that I did on QCOM 2 weeks ago, http://www.elitetrader.com/vb/showt...=5&pagenumber=3 I was questioned and criticized by some, âJai, why are you creating your own roadblocks? Just let it run!â and so on. I saw QCOM penetrating the resistance band on a 3 year downtrend. I also knew that there were a lot of angry people who owned the stock higher from 1,2 & 3 years ago. This no doubt was on their radar screen, and they anticipated getting out for breakeven. Once a stock heads into these zones, the stock is no longer trading on technicals and momentum, itâs now trading on âemotionsâ. The principles and effects of support and resistance are the same, regardless of timeframe. My targets are usually concrete, they become flexible only when Iâm doing a âScaling Swing Tradeâ. If there is continuation, I can trade them again, âtheyâre not going privateâ. This is no means a disrespect to you, but I am going to respectfully disagree with you at this time concerning this statement... I am not afraid to ask for help, and I'm by no means in the upper echelon(sp?) of traders... But this statement goes against everything I've learned in trading. Maybe you can give me more insight. Again, I mean no disrespect - I come to EliteTrader to learn...... My problem is in the part where you say the cap is already there, how can you 100% of the time know where that cap is? Where is the top 10%? I thought picking tops was a fruitless battle? You have a certain probability of being right, but always? As far as I'm concerned stocks trade on emotion pretty much all the time..... Today for instance, from what I could tell people clapped their hands and bought stocks towards midday today because Saddam's sons were killed? If that isn't trading on emotion - what is? What does Saddam's dead sons have to do with all the buying today after it was annouced through the newswires if it isn't emotion? As far as overextended - Stocks can stay overextended for extended periods of time. Yes, these stocks snap back eventually, but that snap back doesn't stun me - I've got my trailing stop in place... The snapback wouldn't surprise me at all... I've been trading long enough to know that anything can and will happen when it concerns the markets.... Let me use this example - The chinese internet stocks.. At what point did SOHU become overextended.. It has basically went from 1 straight to 40 or whatever it is now? Why do I want to put a cap on a stock like this that obviously wants to run? Do I think this stock will snap back hard eventually - Of course.... The question is when? What would be wrong with trailing your stop and letting it run till it does? Is this stock in it's last 10% of gains - how does one know for sure? Livermore said, "fear your losses, hope for your gains" - of course this guy went broke 3 or 4 times, but doesn't that statement make sense? I'd really like to hear other traders thoughts here, maybe I am just missing something or not getting it..... Now this might just be that a lot of people here are daytraders where as I am not comfortable with it - I don't trade this way.... Maybe daytraders handle this situation differently than a position/swing/longer term trader like myself would or should... I'm interested in hearing your thoughts... Like I said, I'm learning - I'm sure I will always have something to learn no matter how succesful I ever am at trading....
RAMOUTAR SAYS: Youâre not putting caps on the gains, the cap is there already. Support and resistance is what throws obstacles in a price move. Yes, stocks will rip through many of these zones with ease and very little difficulty and thatâs where traders get seduced and sucked into the idea that it will continue to rip. They succumb to the ârubber bandâ effect. Overextended stocks very often âsnap backâ very hard, and it when it happens the victim is usually too stunned to react. Bernard Baruch saidâ¦âGive me the 80% in the middle every time, leave the top & bottom 10% to the next guy.â I posted a play by play that I did on QCOM 2 weeks ago, http://www.elitetrader.com/vb/showt...=5&pagenumber=3 I was questioned and criticized by some, âJai, why are you creating your own roadblocks? Just let it run!â and so on. I saw QCOM penetrating the resistance band on a 3 year downtrend. I also knew that there were a lot of angry people who owned the stock higher from 1,2 & 3 years ago. This no doubt was on their radar screen, and they anticipated getting out for breakeven. Once a stock heads into these zones, the stock is no longer trading on technicals and momentum, itâs now trading on âemotionsâ. The principles and effects of support and resistance are the same, regardless of timeframe. My targets are usually concrete, they become flexible only when Iâm doing a âScaling Swing Tradeâ. If there is continuation, I can trade them again, âtheyâre not going privateâ. This is no means a disrespect to you, but I am going to respectfully disagree with you at this time concerning this statement... I am not afraid to ask for help, and I'm by no means in the upper echelon(sp?) of traders... But this statement goes against everything I've learned in trading. Maybe you can give me more insight. Again, I mean no disrespect - I come to EliteTrader to learn...... My problem is in the part where you say the cap is already there, how can you 100% of the time know where that cap is? Where is the top 10%? I thought picking tops was a fruitless battle? You have a certain probability of being right, but always? As far as I'm concerned stocks trade on emotion pretty much all the time..... Today for instance, from what I could tell people clapped their hands and bought stocks towards midday today because Saddam's sons were killed? If that isn't trading on emotion - what is? What does Saddam's dead sons have to do with all the buying today after it was annouced through the newswires if it isn't emotion? As far as overextended - Stocks can stay overextended for extended periods of time. Yes, these stocks snap back eventually, but that snap back doesn't stun me - I've got my trailing stop in place... The snapback wouldn't surprise me at all... I've been trading long enough to know that anything can and will happen when it concerns the markets.... Let me use this example - The chinese internet stocks.. At what point did SOHU become overextended.. It has basically went from 1 straight to 40 or whatever it is now? Why do I want to put a cap on a stock like this that obviously wants to run? Do I think this stock will snap back hard eventually - Of course.... The question is when? What would be wrong with trailing your stop and letting it run till it does? Is this stock in it's last 10% of gains - how does one know for sure? Livermore said, "fear your losses, hope for your gains" - of course this guy went broke 3 or 4 times, but doesn't that statement make sense? I'd really like to hear other traders thoughts here, maybe I am just missing something or not getting it..... Now this might just be that a lot of people here are daytraders where as I am not comfortable with it - I don't trade this way.... Maybe daytraders handle this situation differently than a position/swing/longer term trader like myself would or should... I'm interested in hearing your thoughts... Like I said, I'm learning - I'm sure I will always have something to learn no matter how succesful I ever am at trading....
bltrading: This post addresses the questions in your previous post here. I attached a PDF on SOHU. No disrespect taken. I appreciate someone who debates a point with class. Youâre getting this reply now, since this is my downtime. When I refer to âcapsâ, Iâm talking specifically about support and resistance zones. There are many people hanging out in these zones: 1.Novice investors â who own / short stock at higher / lower prices and canât wait for it to comeback to breakeven. 2.Institutional â facilitating customer orders, using these zones at arbitrage opportunities, fading novices, etc, etc. 3.Technicians â who use the self-fulfilling prophecy element of TA to enter and close positions. There is so much more happening at these zones. However, the bottom line is I see these areas as âturbulenceâ. Itâs a smooth ride thatâs interrupted by uncertainty. Price action does not become âturbulentâ or stop because of coincidence, it happens because of uncertainty. With that said, I see these zones as âcapsâ. Will the caps remain solid? Will the price action punch through? I don't know, nor do I know what member of the Iraqi regime will be killed next and when. Until I know the answers to those questions, I will take profits before the stock is driven by uncertainty, and daytrade the uncertainty. I choose to take the path of least âresistance and supportâ. I often put a âcapâ or set my target just before these areas are hit when Iâm swinging the position or scale out of the position (reduce my exposure and lock in profits) and then drop down to the smallest time frame of daytrading and continue to trade the stock intraday using the 5 or 15 min to trade the uncertainty. The tops and bottoms are created by people who believe the stock canât go any higher / lower, and by people who are waiting for a stock to come back to breakeven. There are anxious, desperate, angry, fearful, and greedy people at each of these areas. This is the emotional element Iâm talking about. I take it a step further by assessing whether or not the emotion is novice or institutional. If itâs institutional I maintain or increase my exposure by scaling in at these zones, if novice I reduce or close my exposure. All you need to do is look at the left of any chart, and youâll see exactly what I mean. I attached an annotated daily of SOHU. I used some basic technical analysis to show you where the âcapsâ are. I apply TA and MA to every timeframe. TA is the course and MA is the fuel. TA will tell me where we could go, and MA tells me if and how fast we can make it there. Youâll be way ahead of the marketâs majority if you keep feeding the gray matter, putting your emotions in check, and maintain your humility, as youâve displayed here.
you almost certainly have access to Excel, so test your strategies! it not only forces you to codify them it helps weed out the worthless ones for "free". if you don't like Excel, try http://www.wealth-lab.com i would never ever ever try a "system" that wasn't well-enough defined to test.
but that's just it. that's exactly WHY you choose a firm target ahead of time. doing that eliminates the need to pick a top. by letting it run, it is YOU who are attempting to pick the top! i don't care, and i won't put myself in a position to care. if i had longed it, i would have been out with a profit and been looking at something else instead of sitting around worrying whether or not it had topped or was overextended. picking turning points is, imo, a losing game.