First things first
Before you read this post, read this one:
Looking ahead to 2009
And read this one:
Chasing Success, again
My revisions should not be confused with what I wrote about in "Chasing Success" - they are a natural progression of my trading based on the same strategies I have used for over ten years, but refined and simplified to help my trading fit with other goals in my life.
Also, there are years worth of charts on this blog. I am changing my style to be simpler and faster, but that does not mean the previous setups are no longer valid. They still work...and most work very well. But in my desire to be out of the market after the first 2-3 hours every day, I don't have time to wait for moves to unfold. The charts in the past use the previous day's action as a framework for entries and exits; now I will be using intraday action only.
It all comes down to what you are comfortable with - many people will not like the fast moves I focus on now. I was not comfortable with the fast moves for years. Do what is best for you, but regardless of what that is you can learn from all the charts...yesterday's, today's, and tomorrow's.
1.) I am using 10-minute charts. My focus for the past year or two has been 5-minute and 15-minute charts, with 15-minute charts being the predominate timeframe for the majority of my career. So I split the difference! Actually, I looked at 1,000s of charts and - to me - the 10-minute charts offer the most potential with the least risk.
2.) I don't enter a trade in the first 30-minutes (well, 99% of the time). That means the earliest I enter a trade is after the third 10-minute bar for the morning completes.
3.) I plot Fibonacci lines over the first 30-minutes high/low.
4.) My Fibonacci lines are comprised of the following - the high, the low, the 1.382% extensions (above/below the high/low...what I refer to as the "Fibonacci Extensions" (FE for short)), the 50% retracement (and visually I know the areas above and below the 50% retracement comprise what I call the "Retracement Zone" (or RZ for short)), and the half-way points between the 50% retracement and the high/low, and the high/low and the Fibonacci Extensions (FE).
5.) Other indicators - I pay special attention to the high and low of the first 30-minutes, which (of course) is plotted in my Fibonacci lines. And I plot standard Pivot Lines on the chart (actually, they are automatically plotted by my software). I use Pivot Lines primarily to gauge the health of the gap (more on this later).
6.) As always, I use candlestick charts; I rely heavily on candle patterns.
There are no other indicators - no moving averages, no volume, et cetera.
What I trade
I am looking for a quick move off the first 30-minute's range. As I said earlier, I can enter on the fourth 10-minute bar but most of my entries occur on the fifth, sixth, seventh, and eighth bars. There are several patterns, but my favorites are:
> the "top out" where price cannot break above the opening range (OR) high (short setup).
> the "deep pullback" - a move down and pullback to the half-way point between the 50% retracement and the OR high (short setup).
> the "push through" where price moves up, consolidates, and pushes through the OR high (long setup).
> the "re-take" where price falls through the OR low, moves back up, and forms a setup above that line (long setup).
> the perfect pullback - a move up, pullback to support and continuation up to new highs (long setup).
This is NOT an all-inclusive list, as there are variations of some of these setups as well as others like the "u"...and one setup where I break my "don't enter a trade in the first 30-minutes" rule. But the five I listed above comprise 80% of my trades AS OF TODAY.
Next week I will post some trades and give examples of the setups. If you want to have fun, look back at the charts I posted over the past five weeks and see if your can figure out what chart goes with what setup.
Have a good weekend, and don't forget to check out "Five Rules For Life"...Dr. Brett made a submission that I referenced in my links on the right!
I'll leave you with Darth Vader driving a race car.
Heavy selling in many stocks owned by funds
7 hours ago