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Saturday, March 14, 2009

Morning Routine

What can $5 do? Read about "Good Karma" and RJ.

vp3434 (I assume that is not his real name!) asked this question in "Comments":

"Now that you trade 10m charts, I'm wondering how you do things logistically. For a trade like ENER today, did you run your gap scans at 9:40, start scanning the results at 9:41, spot the ENER trade sometime before 10:00am, and then get your order ready as 10:01 rolls around? My TradeIdeas scan this morning came up with 60 gap downs and 149 gap ups so I was hoping you could talk about the timetable over which you scan and how many charts you scan. Thanks!"

My charting software is RealTick. For my watchlist, I use their Gap Up and Gap Down preset lists (the RealTick data and lists are real-time). There are other sources for Gaps, and if you look under "WELCOME AND LINKS TO KEY POSTS" at the top of the page, you will find several discussions.

Trade-Ideas is a great tool - I have not looked at it in several years, but have thought about evaluating it again (Trade-Ideas people - send me an email!). The pre-market ticker on CNBC is a good source as well. Yahoo! has a screener, though I assume it is based on delayed data (can you pay to upgrade to real-time?). Readers can list what they use and make suggestions in "Comments".

Back to my routine - the RealTick Gap lists are in real-time (as noted above), and at 9:35 I pull the data from NYSE Gap Up, NYSE Gap Down, NASDAQ Gap Up, and NASDAQ Gap Down and combine them into one list. That list is sorted by volume, so I am always looking at the most active stocks on a real-time basis. I scroll through the list and remove any stocks I don't want (for example, I [usually] remove issues trading over $100, issues that I don't like to trade based on experience, gaps that just don't appeal to me when I look at the charts). I complete this exercise by 9:45 at the latest.

From that point forward, I am scrolling through the list looking for potential setups. By the time the third 10-minute bar completes, I am comfortable and relatively familiar with the list and have several probable setups noted. I have Fibonacci lines plotted on charts where applicable (some I plot, some I "eyeball"). I keep a spreadsheet open where I make quick notes that I can refer back to on a continuous basis (my memory isn't as good as it once was!).

Though my watchlist may contain 100 or more candidates, I usually focus on the top 20-40 based on volume (which, as I noted earlier, is continuously updating). I may go deeper into the list depending on time, setups, open positions, et cetera.

In summary-
9:35 - start building watchlist
9:45 - watchlist complete
9:46 - scrolling through watchlist looking for setups, plotting lines on charts, and making notes


Below is the ENER trade vp3434 referred to in his comment. Price gapped up and printed a strong first bar. The second and third bars narrowed and rolled over, with the third bar forming a textbook hammer on support at the halfway point between the morning's high and the 50% retracement.

The fourth bar exploded and hit the FE target, where I closed the position. Price continued to rally and probably came close to hitting the FE from the previous day's low to the OR high (for those of you still trading the classic setups).



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13 comments:

hypr said...

The finviz http://www.finviz.com/ screen can also find gaps. I am unsure as to how delayed it is in the morning but you can give it try.

Also it may be better to sort your watch list by relative volume vs regular volume. Here are some links on it:

http://highchartpatterns.blogspot.com/2006/07/importance-of-volume.html

http://www.highchartpatterns.com/howtouseourservices.htm (read Section IV: Volume and Tools of the Trade)

Todd said...

I have heard good things about finviz, but never tried it myself. I think they have real-time data for a price, but I don't know if it applies to screens? Is anyone else using it?

DEM said...

Hi,

ENER was a great setup. Congrates to all those who took it. It was in my watch list but i completely missed it because i was focused on two other setups HIG and LNC.

Just a suggestion on managing ur watchlist: Look for only gap ups. You can find short and long entries on gap ups only. The larger the watchlist the less focus you will be. I think a bad trade starts a long way before you make an entry. It starts by having a very long watchlist. For me i try to keep mine to max 30 stocks. I feel so relaxed with a shorter list. A long list just makes me nervous and i start to look all around searching for a setup.

DEM

Mike said...

It is amazing how fast things happen and how you have to be focused. That takes time and experience.

Great site, just found it. Sorry to hear about your friend RJ.

Trader-X said...

DEM - great comments. I traded LNC as well.

You and I are doing the same thing with regards to the watchlist - trying to keep it contained to a manageable number that is not intimidating. I do it by focusing on the top few dozen by volume, you do it by looking at only gap ups.

I have never thought of that - you are of course correct that you can find long and short opportunities in gap ups. My biggest concern is on a day when the futures are down - do you ever have trouble finding 20-30 candidates?

Thanks for the great input.

Trader-X said...

Thanks for the info hypr, and the positive feedback Mike.

DEM said...

Hi X,

On the day when pre market looks to be on the downside ... i run a screen to find stocks that are up by 3% or more from the open, and trading volume above 200,000. I limit my price to between 5 and 150.

I like this screen for several reasons. It gives me the following:

1. Gap ups (potential long and short setups)
2. Gap downs but moving up (long and short setups)

I use tradeideas. My main focus is to limit the number of stocks in my scan. I hate to see 100 stocks. I have said it before i just start getting nervous and all over the place with a large list. I am still learning but i see this as a big step to being successful. Limit the size of my watchlist.

Thanks
DEM

Benny said...

Hey X,

Is there anytime during your 9:35 market routine and when the market closes that you can take a say a small 7 min break away from scrolling through your list of 20-40 constantly, and more importantly taking eye breaks from the computer?

Also, does RealTick have a grid mode where you can throw in like 8 charts onto 1 chart tab so you can view them all simultaneously? Similar to how FINVIZ puts many smaller charts onto 1 screen at a time.

Trader-X said...

Benny - the bulk of my focus, analysis, and chart watching takes place in the first 120 minutes...so it is not as bad as it sounds.

You can have multiple charts open in RealTick...I just don't do it. I have grown accustomed to doing it a certain way (you can't teach an old dog new tricks...).

vp3434 said...

X,

I have a few more questions... sorry, I know I've been asking a lot lately.

You've said that you enter longs upon the break of a previous bar's high and you set the stop at the low of the entry bar. What happens if the first tick of the entry bar is a break of the previous bar's high? Where do you set the stop?

Also, do you set the limit price for the entry as one tick above the previous bar's high? Do you set the stop at the exact low of the entry bar or one tick below the low? And do you set the trigger for the stop order to be the bid, ask, or last price hitting the stop price? Thanks!

Trader-X said...

vp - no problem with questions!

But, I don't understand your first one. It is probably just me, but I have read it a few times and am confused.

The entry is a break of the trigger bar's (previous bar's) high. I place my order to execute a tick (or penny) above the high of the trigger bar.

My stop is the opposite extreme of the trigger bar. The order is a tick (or penny) below that extreme. So if I am long, it would be a penny below the low of the trigger bar. If I am short, it would be a penny above the high of the trigger bar.

Since I am in high volume, liquid stocks I tend to use market (or stop market) rather than limit orders. I am not recommending that - it is just something I do after years of trading. I occasionally get a terrible fill, but 90% of the time it is good.

If that didn't answer your question, leave another comment. I am off the computer for the rest of the day, so I will check in before the open.

Enjoy the rest of your weekend everyone.

DEM said...

Hi X,

Do you still take setups at the ORH? i have been struggling with this lately. I see some really good valid setup on the ORH but the reward/risk is less than 1. Do u usually take a trade if the R/R is less than 1 but your confidence in the trade is high that price will reach the FE and above?

Thanks again
DEM

vp3434 said...

X,

That answered my question. For some reason I was under the impression that the entry price was one tick above the high of the trigger bar and that the stop price was the low of the bar right after the trigger bar. Cleared up now, though. Thanks!