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Tuesday, January 06, 2009

X Trading

I mentioned at the end of 2008 that I was taking January to simplify my trading even more than it is...namely reducing the number of setups I scan for and trade to a small handful. 2008 was my most profitable year, but I think I can beat it in 2009 with more intense focus - while at the same time freeing up some time to pursue other personal objectives.

Instead of disappearing in January, I will make a few posts. I am not planning to spell out exactly what I am doing, but by sharing some thoughts it might spark creative thinking in you as you evaluate your own trading.

I am posting the charts below because they are setups that will be key to my 2009 trading. Ignore the timeframes and the specific symbols and look at the patterns - they happen every day, but people tend to miss them because they are chasing other setups or they are already in trades that are substandard (ie, trades that are not good setups...but you feel the urge to be in a trade - any trade - and you give into it).



tl said...

Thanks for sharing the thoughts. After reviewing my own charts, I have a question on drawing Fib. lines (again...)

1. Let's say a stock gaps up. The open is below PDH but ORH (1st 15-min bar) is above PDH. Would you draw Fib. lines from PDL to ORH or PDL to PDH?

2. Does it make a difference if the stock doesn't gap up? ie. the open is at or below previous day's close.

Thanks a lot~


john said...

Feel naked w/o volume.

Trader-X said...

tl - there is no set answer. For me as of now, I would do PDL to PDH if I was trading Futures.

With stocks, I find PDL to ORH works best. But everyone has to study and decide for themselves.

The truth is, you can find setups either way...like anything else it is just picking a way and sticking with it. One of the things I am doing in January is analyzing which way yields the most and highest quality setups...I suggest everyone do the same.

2.) I don't trade stocks that don't gap.

Trader-X said...

john - I have never gotten any benefit from looking at volume. If you do, more power to you! But it just clutters up my charts.

Closet Daytrader said...

1) Will you be revealing the answer (entry) later on? Because,

2) I'm no expert and I want to learn... Since,

3) I'm puzzled to pin-point an entry on Chart 1 & 2, and,

4) Wouldn't that gigantic in Chart 3 at 1400 hrs Stop me out, and shouldn't that be a concern?

5) On Chart 5, my guess on the entry would be a break off of the low of 7th bar? But I would still get stopped out by 1330hrs

6) As for the final chart, I do see a Bull-Flag formed in the first hour, but with the Previous Day High looming on top, it would be discouraging to me.

Once again, and as always, thank you for all the education that you are providing! Happy New Year to you and your family.

Anonymous said...

thanks X!

not be too OT, but watched The Family Stone last night - liked it better the second time


anarco said...

I was thinking that certain candlestick patterns (groups of 3 to 5 bars) at the beginning of the trading session seem to set good entry opportunities regardless of the previous action. And I wanted to ask you if you find that to be true.
The first 4 bars in your NAV chart seem to be a good example. Does it really matter, in the NAV case, that the stock gapped down? Would the 4th bar be a good Long entry also on gap up? (I would think that even more so on a gap up.)
Thank you!

hypr said...

I will give it a try..

MUR: Long at the break of 3rd bar
BHP: Long at the Break of 4th bar
Principle: The bars never closed below the 50% mark of the initial range. So an opening range breakout must be more likely to succeed.

ICE: Short at the break of the 9th bar
Principle: A pullback to the previous days low. Also a .382 fib retrace. (is the famous bread and butter setup back?!)

RMBS: Long at the break of the 3rd bar
Principle: A pullback to the previous days high

NAV: Long at the break of the 4th bar
Principle: opened up at the 50% range of the previous days and found support there.
1.) an open around the 50% level
2.) a move to the previous day's high and a pullback or chop around that level
3.) a move to the Fibonacci extension (FE), and a pullback from that level
See the great post at http://traderx.blogspot.com/2008/11/15-minute-charts-and-repeatable-pattern.html

ilan said...

Can you give explications about your charts.
Your blog is very well...

Anonymous said...

Good analysis Hypr!

Trader-X said...

hypr, it is time for you to take over the blog. I will email the login and password.

: )

"The bars never closed below the 50% mark of the initial range. So an opening range breakout must be more likely to succeed."

That is very key...keep an eye on 40-50 minutes into the trading day, those are the best setups (highest probability).

Anonymous said...

40-50 minutes into trading - does that mean you don't enter a trade before then?

Thanks for the great blog.

Anonymous said...

thanks for your comments, hypr ...and X :)

can one of you explain why ICE would not be a short on a break of the 3rd bar low (for essentially the same reasons that MUR was a 3rd bar break long and BHP was a 4th bar break long)?

thanks much

Anonymous said...

the daily BHP chart is a H&S breakout - the open gapped above the next line - less overhead Resistance


hypr said...

Anon: ICE is easy =). There is no NRIB [narrow range inside bar]. That is probably the concept I think you are missing. Remember the stop is usually placed at the opposite end of the entry candle. The larger the candle the larger the stop. Sometimes a hammer or a doji even though it is not completely an inside bar can be considered one. It is cheating ;). Remember trading is an art form not a science. If you go through the blog you will see the focus of NRIBs as an entry technique. Start at page 1 lol.

Lately X has started to use offsetting bars / engulfing patterns as an entry technique. Was the 4th bar a valid one? You be the judge. If you did find it valid the entry would have been on the break of the 4th bar low which never happened.

Here are some examples of offsetting bars:

http://traderx.blogspot.com/2008/10/few-quick-thoughts-on-futures-es-vs-nq.html (the nq chart)

Hope this helps and that I haven't insulted you by totally breaking it down to the very X basics if you knew them already.

Anonymous said...


thanks for your detailed response. i take your point.

is it fair to say a 3rd bar break ICE short is a pass for purely risk management reasons and that the setup is not otherwise sub par?

Trader-X said...

"40-50 minutes into trading - does that mean you don't enter a trade before then?"

An entry you make prior to the completion of the first 30-minutes is a higher-risk entry and more likely to reverse. I am not saying you can't take it, you just need to know it is higher risk going in...

Also, I am not going to respond to anymore Anonymous comments...just make up a name. It is a pet peeve of mine.

Trader-X said...

hypr has made excellent analysis, and it is worth everyone's time to read it.

As I said in my posts, I am trying to simplify my trading...these charts may not be representative of what you have seen in the past (ie, something new). With ICE, what I traded was a break of the 10th bar low (missed the 9th). Experiment with plotting Fibs off the opening range of the morning and you will see price pulled back to the 1/2-way point between the 50% retracement and the morning high.

Also, I am not going to respond to anymore Anonymous comments...just make up a name. It is a pet peeve of mine.

Lin said...

Trader-X, thank you for putting so much time and effort into a great resource.

Q about your recent comment. I find that big moves happen in the first 30-minutes, but you advocate waiting. Don't you miss many?

Trader-X said...


Absolutely some big moves happen in the first 30-minutes. But it is all a matter of risk tolerance and style. If your's involves taking more trades and getting stopped out more often (but hopefully catching big winners), more power to you. As a personal matter, I am not comfortable with that. I take less trades that are "higher-quality"...they may yield lower profits, but I win a higher % of the time and that is what I am most comfortable with.

Please note I AM NOT trying to get people to change from what works for them...to the contrary, I always say you should find what works for you and not try to copy me exactly. I just post what I do here, and why I do it...to the best of my ability.

: )

hokkaido said...

hi X,

i'm the formerly anonymous ICE 3rd bar short inquirer.

don't mean to beat a dead chart, just trying to see better, in terms of your basic principles, what makes a setup high quality.

other than lack of a NRIB type trigger bar providing a lower risk entry (thanks, hypr), is there anything else i should be seeing in the ICE chart that makes a 3rd bar short lower probability than the MUR and BHP longs were?

thanks for any insights.

Trader-X said...


Hi. If you read my comments above you will see I didn't trade off the third bar...to me, there was no setup. MUR and BHP both provided a narrow-range, hammer type candle as an entry. They also had very shallow pullbacks (well above the 50% and 38.2% retracments).

With ICE, you had a very wide-range first bar (which itself lends to more backing and filling before a continuation of the move), and the third and fourth bars were strong solid greens that closed in the top half of their ranges (don't be fooled because they left an upper tail). Those factors combined - no candle signal, very wide-range first bar, second and third bars strong green - as well as a deeper pullback from the lows (the intra-bar move actually exceeded 50%) - didn't even have me considering a short.

Hope that helps.

hokkaido said...


thanks very much.