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Monday, February 26, 2007

Monday's charts

I took a few trades today that in retrospect I might have passed on...but they worked. Here is some brief analysis...take a look at the charts and answer the three questions on your own.

I entered MRK on a break of the sixth bar hammer. Price was at support from the opening range (OR) high, and a rising 5MA. I did not like the somewhat bearish upper-tail on the fourth bar. But MRK rallied and hit the Fibonacci extension (and reversed exactly at that point).



NVS gapped down and proceeded to rally to the retracement zone of the previous day's high to the OR low. It reversed at that point and fell back to the morning low. Price broke the OR low and the tenth bar left a long upper tail at that resistance and closed weak. I entered on a break of the tenth bar low and covered at the Fibonacci extension of the previous day's high to the OR low.



BL mentioned NVEC in "Comments". I did not trade it, but it is a good chart to study. The entry would have been a break of the third bar high; the third bar was a hammer at support from a rising 5MA. The "negative" was that the entry was below the OR high*. However, the trade would have worked as NVEC exploded into the afternoon. There was also an opportunity for a "beyond the Fibonacci extension" entry on the thirteenth bar.




I like what Victoria is doing with her double chart method - take a look at her FRPT trade today.

*as with any entry below/above a previous high/low (in the case of my charts, the opening range (OR) high/low), you need to watch for resistance/support as price approaches those levels. If it stalls, you want to exit. If it breaks through, the odds are good you will have a move to the corresponding Fibonacci extension.

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22 comments:

John said...

Hello Everyone,

Any thoughts IGLD 30'? I am wondering why some stocks (typically the ones I trade), just don't seem to make it.

Fortunately, I did not trade IGLD today since I was already in another trade, but it is a good example of what I am referring to.

The 3rd bar was an inside hammer above the O.R. high. The 4th bar narrowed even more and ended "hammer-like". It too was above the O.R. high and NRM. It could have been a little closer the the 5MA, but I know darn well I would have traded a break above that 4th bar if I'd been able to. I then would have been stopped out on the 6th bar with the price never even coming close to the fib extension.

I seem to get caught in these traps quite often and was hoping you guys might be able to help me avoid it in the future.

So the big question is: What did I miss in IGLD? The only things that jump out at me are the long upper tails on bars 1 & 2.

Thanks for any thoughts,
John

Charles said...

FWIW, looking at IGLD I see 2 really wide range bars. I would not have taken a trade because I would be worried that IGLD shot its load. Especially on the 2nd bar. Also, the upper and lower tails represent indecision. And, there is an upper tail on the 3rd bar hammer. And, it seemed far away from the 5MA.

Prospectus said...

@X: I have a question about your position sizing. A pretty standard position risk is 1% of your account equity. For a trade, I might buy a break of a signal candle high, and place my stop below the signal candle low, take that spread and divide into my $ risked (1% of equity) to get a position size. A successful "X" trade might net about 3 times that risk in profit. I know you risk a simple $ per trade rather than all this fancy equity % stuff. :) For my 60% win rate, this is what I have to do.

My question: since your ratio of winners to losers is so high, do you risk more of a share of your trading equity on each trade? With a 90% win rate, it might not be too bad to risk a higher number (5%?) of your account per trade. Do you have any thoughts on this?


@john: My $0.02--IGLD's average volume is only 160k shares. Since it's relatively illiquid, you will see more volatility and less order in the candle patterns, as you saw today. Buying and selling pressure are less damped in a low volume stock. Technically, the trade components were there, though it was far from the 5-ema like you pointed out. As X says, was there a better setup out there to trade? X sorts by volume and goes down the list, and there were at least three better setups today that he posted.

I used to get frustrated with myself about the exact same thing--I was picking setups that didn't work, while X posted consistent successes day after day! Eventually, after a lot of study and review, I started to internalize the key things that X looks for on a chart--a close above the OR high, 5-ema support, white space in the gap, and a hundred other things. If you consistently work at it, study ALL (and I mean ALL) of the charts on X's blog from today back as far as you can in the archives, and read his commentary, and stay with it, you'll start to get it. It takes practice and time. Focus your efforts on study first rather than going out and trying to pick 'em like X too soon :)

Brian Diesel said...

Trader-X,
I am trying to replicate your fibs on my E-Signal chart, but can not figure out what exactly you are doing. Can you please explain a little more. Are those Fib extensions? If so, how are you measuring them and what are the measurements you are using? Thank you VERY MUCH!!!

Ray said...

Brain, click Welcome at the top of the page, and How I Trade on that page.

They are 38.2, 50.0, 61.8 and 1.382.

Any relation to Vin?

Brian Diesel said...

Thank you!

"Any relation to Vin?" lol, fortunately no.

Trader-X said...

prospectus, I actually don't look at my % of equity risked, only the dollar amount I can lose. I just care about what I can lose on that trade...that is why I use the same fixed dollar amount. If I was holding overnight where more risk was concerned, I would of course approach this differently. But barring anything really crazy happening and the stock being halted (knock on wood as it has not happened yet), my risk intraday is pretty limited.

So, to answer your question yes if I were to look at the percentage of my equity allocated to the trade, it would vary and could be higher than 1%, 5%, 10% in some cases. It is a factor of the amount from my entry to my stop, the dollar amount I am willing to lose, and of course the volume of the stock.

Terry said...

Hey X, are you taking advantages of all the shorts off the break of the OR low. Nice today!

Trader-X said...

posted by Tom C:

X is out today...I have a few good shorts, but have been plagued by technical problems so I have not taken advantage of today as well as I should have.

I actually have a nice short in QQQ that is very similar to X's NVS trade yesterday. I held through the Fibonacci extension and closed for an .80 gain.

I will try to put up a post later, technology willing. You guys can comment on any outstanding trades you had.

Barry said...

I took .50 out of the Q's. Wild day, X is probably kicking himself.

Also your blogger is messing up again - I have been trying to post this comment for an hour.

Anonymous said...

So you trade the indexes too?

D.J. Florida said...

Good trading Tom C. I caught AAPL and RIMM, similar...

Ronaldo said...

gs

Trader-X said...

posted by Tom C:

anon, no I don't trade indexes. QQQ is just another stock to me. If it gaps and catches my eye, it goes on the watchlist.

Gary said...

Had three trades today all big winners --bigger than what I thought possible-all three came from my core charts I watch everyday.

AKAM RIMM and FMCN ( this one I was stalking all day long and finally it paid off) Today was one of those days I doubled down my risk cause it was a sea of red--it was mainly a cause of success breeding success. Traded all off 15' candles.

First trade was AKAM with my regular $100 risk with 1130 candle--I actually waited till it cleared the previous two candles to downside slippage got me in at 53.75

By the time the RIMM trade materialized at 1145 candle break I doubled down--AKAM trade was almost 1 R up at the point. I waited for break of 143 (round figure)--it was close to opening range low too--I was pretty sure with such momentum it would clear the OR. Right after I entered it started dropping good. But AKAM started coming back up--I was like Arrghhhhhhhh so I put my stop at break even on AKAM but it just couldnt finish it--then I had to go back and check what happened on 3' chart--it was only 20k shares or so and down bars had over 100k. After it went down again I moved my stop to 53.68 I know its micromanaging but I wanted to get some profits if it didnt materialize--now I was thinking if I had taken original trade at break of 53.94 at 53.68 it would gimme me about 2R arrghhh again ( one part was thinking to take partial profits but all I saw was gloom)

Finally FMCN. I waited all day for this one--I knew it shouldve been hit right at open but it made its way back up so I was thinking possible long but then it stalled while markets kept on going down. I just shorted the damn thing at 83( was having hard time closing above it) and put stop at .40 (1/2%) above it and waited and waited and waited. RIMM and AKAM were wonderful by this time and I was beginning to think that if I get taken out of FMCN I would have to go long on it if market rallied. What do they say about a pot not boiling while u watch it or something something--I lowered my stops on both RIMM and AKAM and walked away from my computer to eat and I come back and I can't beleive it FMCN is doing wonderful so I put a buy to cover at OR low + spread and get filled in at 78.15

Sorry for the long post but I ve day traded for over 1 1/2 years and this was my best day so far. I was prepared for it in the morning and disciplined, didnt chicken out and rewards were huge. Covered half AKAM at $50(round figure)and other half at break of 15' 50.39

Covered half RIMM at 140 (round figure) half at 138.50 (break of previous 15') I generally trail my stops with 15'+ spread

All in all $400 risk(100Akam+200Rimm+100FMCN)
AKAM= $900
RIMM=$1500
FMCN=$2400
total=$4800
I ve have never even until this day ever made $1500 in a day let alone 5k.

I still missed a trade in KYPH which i was stalking but didnt take since it was far from OR low. All in all a very frustrating day but very profitable--in ealier times I would not have been in my most profitable trade--Normally I get out too soon but today I let my winners run but there was blood in streets so I wasnt worried even though in morning time I was impatient as I wasnt finding set ups and market was down big. My journal entry reads ALL RULES FOLLOWED :) BEST DAY EVER FOR A LONG TIME-first time ever a stock I traded featured on UGLY"S blog-thought I'd share this with you guys

Its taken me a long time to build the confidence to let winners run. again sorry for the long post

Spence said...

Great job gary. I caught RIMM too.

Tom C. said...

Good job Gary.

Jamie said...

Nice work Gary, Congrats!

Charles said...

Great post Gary. Congrats on a great day! But don't get cocky and give it all back tomorrow!!!

bl said...

I for one was overwhelmed with all the early red...I didn't know what to do. I thought about shorting the q's or fxi at the open but couln't get a handle on it. Thinking about it later I realized I could have shorted fxi and also ProShares: qid sds dxd mzz with good 30min charts to boot and good profits...it's double the inverse.

Gary said...

Thanks all you guys--Charles one good practise to have is limit your maximum per day--mine is $250--and I am fairly disciplined about that--easier to bounce back from %250 than say a 1000 or more. $250 gives me about 3 trades to be wrong and at that rate I d have to be wrong in about 50 trades to give it all back in 20 straight days or more.

Trader-X said...

Great day Gary!