The Trendline -SPY- Daytrader

Discussion in 'Journals' started by Trend Fader, Jun 11, 2003.

  1. Throughout the years I have been making a living swing trading.. now its time to give daytrading an honest try.

    I decided to post this journal because this is where I struggle most and any help would be welcome. I want to document my progress and I know many traders here at Elite are in the same shoes. I enjoy reading others commentary and insight which only can benefit my trading.


    I am using Esignal and IB Broker. I will be looking at the 10 min chart only. My strategy is to simply play trendline breaks throughout the day. No indicators, no moving averages.. nothing except for price and volume.

    The reason I chose the 10 min bars is because I dont want to trade too frequently (less is better).. and the 10 min bars are not noisy where I would be headfaked all day long.

    I will be trading the SPY only because it allows me to properly scale out for profit.. I am not big enough to scale out of futures (yet). I will be basing my charts off the SPY, ES and $SPX. SPY chart is a bit too noisy though.

    I think for support resistance and trendline the $SPX is the cleanest.. but the ES updates tick by tick instantly.. whereas and the $SPX can take many seconds to update the chart.


    Simple trendline break. Trend line is defined by connecting highs or lows of atleast 3 bars for the duration of atleast about 6 bars ( one hour) .. the more the better.

    When breaking the trendline market must make higher higher or lower lower from the previous bar.

    Avoid trendline breaks that offer poor risk to reward... meaning market should not be be too far extendef from pivot high/low as it attempts to break the trendline.

    Place market order when entering immediately as the trendline is broken.



    Place stop above or below breakout bar.. or 2 bar high/low if not enough room is given. Deciding between whether to use a 1 or 2 bar stop loss is a bit discretionary but its common sense. If stop is still very tight allow for .5 to 1 point under/over the 2 bar high/low. The point is to try to avoid getting stopped out because stop was too tight.. as opposed to controlling your loss.


    Here is what I believe seperates the winners from the losers. Taking and protecting profits is where I place all of my emphasis on. I will start trading with 300 share SPY positions. This allows me to scale out 3 times in 100 share increments.

    Here is where discretion is applied. As soon as I am in a profit of atleast 1 point or greater on ES chart.. or .10 on SPY chart... I will exit first increment of SPY.

    When my profit is greater than my initial risk.. I will exit my 2nd lot. And the third lot will be trailed discretionally.

    As soon as I have a profit and unload my first lot I will reduce my intial stop loss slightly above break even.. and After I unload my 2nd lot... the stop becomes breakeven on the remainder.

    In order to make it simple.. I do not use limit orders for anything.. just market orders.... but this type of trading (market orders only) can be dangerous for those that can not deal with taking losses.

  2. Could you post a five minute chart with a trendline? I am interested to see it, as it differs from how I draw my tendlines.

    Good luck - I look forward to following your progress.

    Oh, and if you are a successful swingtrader, why get into dt? The challenge?
  3. I simply do not believe in moving averages or indicators to make trading decisions... because I believe they are all lagging and all just a derevitive of price and volume.

    I would rather be soley focusing on price and volume.

    The only time I ever used indicators was to screen the market for swing trade setups.. but once I got the stocks.. the decisions were based on a price chart with nothing more than price and volume.

    I plan on updating this journal every day after 4pm. I will post a chart showing the setup and how I handled the trade. I cant post the trades and charts in realtime.. because it distracts me and is time consuming. I would rather be focusing on my trading and charts.. as opposed to the journal during the trading day.


  4. Yes of course.. I will show many examples.. and post charts.

    I usually go back as far as I can on my 10 min chart.. and map out all of the key support and resistance, trendlines before the trading day... Its very basic.. I am pretty sure most non system traders do this..

    My personality requires me to always be active with the market.. and I feel my chart reading ability gives me a nice edge. I got into daytrading because swing trading is so easy for me already... I just do most of the work after hours and baby sit my positions during the market hour. This leaves me with a lot of spare time. Daytrading will fill this void.

    The biggest problem with swing trading is that it is often prone to uncontrollable equity swings.. due to overnight risk and slippage. I am looking to add daytrading as a means of smoothing out my equity curve. The challenge is also forthcoming.


  5. I edited the first post.. I use a 10 min chart not a 5 min chart to determine the trendlines... I use the 5 min chart usually to determine levels to trail my profits.

    Sorry for the confusion.. the first post has been edited.

  6. I will be interested to see how it goes for you. I started trading futures a month ago basically using the same kind of method. For the most part I am trading trendline continuations and trendline breaks using price and volume. I played around with some indicators but found I would usually be in the good trades before the indicator said anything anyway. I have had a little trouble coming up with a good risk and trade management technique for stops and trailing stops. I realize I am at somewhat of a disadvantage right now though because I am trading 1 contract at a time which takes away from the ability to scale out and take profits but also at the same time allow for getting those larger winners. It is one of those things where it sucks to take a 2 point winner when the trade goes 7 points, but at the same time seeing a 2 point winners stopping you out for 1/2 a point winner. That happened twice today. Since we will be trading in a similar fashion hopefully we can share some ideas down the road.

  7. I would be trading futures in a heart beat if the contracts were a fraction of the size. lol

    The SPY will do for the time benig. Its very liquid and the spread is minimal.

    Scaling for profit is imperative. If I couldnt scale my edge would be ruined. Since I am discretionary.. I always like to have more options available than just taking the entire profit at once.

  8. Downtickboy.

    Please feel free to post some trades that you have done.. along with a chart.. so we can learn your setup and perhaps offer trader commentary.

  9. fan27


    Hey Trend Fader,

    I used to scale out of positions until I read "Trade your way to Financial Freedom" by Van K. Tharp. He discourages this method and I decided to crunch the numbers myself. I couldn't come up with any realistic combination of wins and losses in which it was financially better to scale out. I now use a 2 bar trailing stop for SPY on the 1 minute chart and it seems to work OK.
  10. So, if you are long and it breaks the lowest low of the previous two bars, you exit? And vice versa for short?

    Thanks for any clarification!
    #10     Jun 11, 2003