Thank you for all the positive thoughts and well wishes in comments.
_______________
Mentoring: The Key to Developing as a Trader
5 days ago
Wednesday, May 04, 2011
As simple as you make it!
When I saw this, I immediately thought of trading. Well, I immediately thought "that is very true", and then I thought about how it applied to trading. It can be as complicated or as simple as you want to make it. Just like happiness!
Thank you for all the positive thoughts and well wishes in comments.
_______________
Thank you for all the positive thoughts and well wishes in comments.
_______________
Subscribe to:
Post Comments (Atom)
45 comments:
Thoughts and prayers are with you X.
Love it.
-AT
Would a kind soul give me feedback on my trade today?
SGI, 10 minute chart, fibonacci lines on the ORL and ORH.
It looked to be a classic trade and I entered on a break of the 7th bar.
Because I am new to trading the X way, I sold half at the ORH as a way to lock in some gains.
Price moves above ORH for three bars and then falls back down through the ORH and the 5 EMA. This scares me, so I sell my 2nd half for a total of about 1R gain.
Fast forward three hours and the price has rallied far beyond the FE.
Should I kick myself for not being patient? Or were my concerns (break below the ORH and 5 EMA) good enough reasons to get out of the position?
Any advice would be greatly appreciated.
Jay, What is your method for exiting stocks? Did you stick to that or did you change it along the way?
X or Tom C,
When debating on what setups you want to use, do you focus on the ones that are low in risk or ones that have the greatest potential to move?
I find that sometimes these two aren't necessarily the same, so I am curious on your thoughts regarding your setups.
Flow,
I did change my plan during the trade. My original plan was to sell half at the ORH and the 2nd half at the FE. So I executed half my plan correctly. But I exited early on the second half, as the price was dropping as I described.
It is better stick to one's plan and either be successful or get stopped out? Or is it better to be a bit reactive and try to "save" a trade at the risk of missing out on a big gain? I probably need to answer that for myself, but I would be interested in knowing what others do.
Jay,
What I meant is do you have a plan for exiting stocks?
For example if you always sell your stock if it fails to hold the ORH then its a good trade. But if you sometimes sell your stock when it fails the ORH and sometimes you hold the stock against you then you are going to have a lot of inconsistency. Find what works for you, forward test it and stick with it.
I would look at how the candles form at the ORH to know if its a hold or just a quick trade. If the stock decides to break below the ORH and then make a new high then it will give you a good candle setup and you can enter into a second trade.
Jay:
Nice trade! It was a nice clean setup, and I wish I got on board that one.
As Flow already mentioned, everyone has a different plan, and as long as you stuck to your game plan, that's what's important. Also realize that the Trader-X style is also somewhat discretionary, so there's a bit of art involved.
Given your Fib levels, I would have likely managed the trade similar to what you did. Maybe I would have waited until after the $20 price failed, and it broke down below the OR before selling out of everything at once. I'm assuming you had a 30 minute OR?
From my perspective -- if I saw the SGI setup unfold, I would have used a 5 min chart, had my Fib levels calculated from the opening 15 minute high to the prior day low, which means I would have managed the trade differently.
Compared to what you saw, I wouldn't have dealt with the OR high, and my Fib extension (FE) target would have been just under $20. Because whole numbers also have a tendency of being good support/resistance levels, I would have exited the entire trade at the FE.
SGI - 10 minute chart: (Fibs = 30 min OR)
http://imgur.com/JXdua.png
SGI - 5 minute chart: (Fibs = 15 min current high to prior day low)
http://imgur.com/mofCb.png
In some future trade with a similar setup, I can certainly bet that your 10 min chart and Fib level setup will end up having a much better outcome vs how I would have managed the trade above.
No right or wrong way, just wanted to share my personal perspective. That's what makes the markets what it is and so interesting!
Hi all,
trying to figure out what am i doing wrong here...
CAG, (date 4/5) 5 minute time frame, stock was gapping up retraced, 7th bar was a hummer. i entered at the break of this bar high. stock went up to the previous day high and went down.
is this only bad luck - a stock that didnt behave as excpected or am i missing something here.
would appreciate your opinion.
Thanks
Flow,
I guess I am too new to this type of trading to have decided what my exit plan is. I know from my attempts at swing trading that I am risk averse and impatient, so I usually take small profits and never get large profits.
So perhaps it would best fit my personality to state my exit plan is:
- sell half at ORH
- sell 2nd half at FE or break below ORH
The problem is that if I end up with most of my "winning trades" only a 1R gain, then I need to have a 50% success rate just to break even.
Grove,
I had a 15 min OR to set up the fib levels. Is it a mistake to use that with 10 minute bars? I actually look at both 5 min and 10 min charts of the same stock. I think it is me wanting extra confirmation before I enter a trade.
Thank you both for the feedback. And good luck to everyone!
Jay,
I like to have a game plan for how I will exit a trade before I enter into trades. There are only so many scenarios that can happen to make me want to stick with or exit a stock and I have internalized all of them.
I find that having a strategy to exit stocks is just as important as strategies for entering them.
Also to me it looks like your total risk was 20c and you made
70c. That's a nice 3:1 risk/reward so I'm not sure what 1R means.
Had a great trade in DPZ today. It gapped up and pulled back. The pullback was deep in the RZ, so I almost passed. But I kept it on my list and it rallied nicely. I entered on a break of the 11:50EST bar. Price had support from a rising 5EMA, and had rallied out of the RZ. Almost a 3% gain when it hit the FE, but the entry was later in the day than X trades. Do you guys trade this late, or would you have passed?
David
5-minute chart, by the way, on DPZ. Fibs over the first 3 bars low to high.
Stark:
I assume you mean CAG on May 4? If so, it looks like the 7th bar was a red hammmer, which usually means higher risk. But the 8th bar was also a green hammer, which helped to offset the risk a bit, although you would get in at a slightly higher level.
If you calculated the Fib levels based on the 15 minute high and low opening range, then do this -- calculate the halfway point between the OR high and the FE. You'll see that CAG did something relatively common, which is stall right at the halfway point to the FE.
CAG also had a relatively big opening range compared to the action in the prior week, so it could be argued that much of the energy to go higher was already shot after the first 20 minutes. But that's one of those things you never know for certain until the markets have closed.
I'd say if you got out of the trade with a scratch or a small profit, you did well.
Jay:
Nothing wrong at all to use various timeframes to confirm your trades, and whatever opening range period to calculate your fib levels. I tend to use 5 and 15 min charts, since 5 and 10 are a bit close together.
And as Trader-X wrote about the other week, I may adjust how the Fib levels are calculated based on how the markets are forming. So if you use 15 min opening high low range on the 10 minute charts and it works for you, then I'd say stay with it!
David,
I took the same trade and covered at the fib ext as well. I always keep some of the stronger gap ups on my list especially with the market gapping down. There was a good hammer on the 10th 5 min bar but I didnt like the flat moving avg.
SU, 30 min
Traditional Trader X FE
break of the 7th bar low
exit at 41.20
Again, I know most here aren't trading futures, but as you're discussing using more than one time frame for analysis, I'll offer today's ES charts as a good example of how using two timeframes (in my case a 5min and a 15min) can provide some extra confirmation.
Jay, as the guys here have said, as long as that's your plan, and you're consistent in executing it, there's nothing wrong with doing that.
-AT
Yesterday (May 5), I found it tough to find very many clean setups. But I traded MET, which had a setup somewhat similar to DPZ (bullish ascending triangle) mentioned earlier. It wasn't as clean of a setup nor as profitable, but it still made some $'s.
*****
MET - Success
Went long at on break of 25th bar (11:40 AM) on 5 min chart.
CHART AT TIME OF SETUP:
http://imgur.com/HwJG3.png
Fibs prior day high, opening range (OR) 15 min low. Standard Trader-X MAs.
RATIONALE:
Gap down stock, but bounced back and consolidated into the retracement zone (RZ). Formed a bullish ascending triangle supported by rising 5 ma, and bought on breakout of resistance and on increased activity.
CONCERNS:
Entry bar was not a lower risk green hammer, or even solid green bar. It was green, but had an upper wick (more bearish).
But I recalled past Trader-X posts where he said if the upper wick of a bar is broken, it could be bullish based on overall setup.
Also, the resistance level was not as clean and defined as I would have preferred.
TARGET:
Target was the 50% Fib retracement level, which was also supported by the $x.50 price level resistance (although not as strong as the $x.00), as well as the declining 100 ma.
Instead of getting out once price hit $45.50, I was hoping it would decisively break through the heavy resistance, so that I can move my stop loss up to $45.49 and let it ride to the moon (or at least to the high of the day).
Hope faded very quickly, and when I realized $45.50 will likely fail (it hung around there for maybe 10 seconds), my market sell order got me out at $45.43. My pause cost me about $.06 in profits. In this case, I felt the tradeoff was worth it.
STOP MANAGEMENT:
Initial stop was below the 25th bar, at $45.04, but moved it up to breakeven when profits were equal to stop amount (i.e. when profits hit 1R).
FINAL CHART SUMMARY:
http://imgur.com/O7lkn.png
As always, appreciate any comments or constructive feedback.
Attitude Trader:
Appreciate seeing what you're doing with the ES. The ES has always appeared to be more "noisy" to me, like the forex. But you're helping me to see them from a different perspective.
And I'm a bit late, but loved the Steve Vai video you posted on your blog. I've always thought he was amazing, but after hearing how honest, focused and articulate he is, I have even more respect for him.
Hi Grove, I don't think DPZ and MET were similar at all. DPZ was a gap up with a strong initial move in a bullish direction. MET was a gap down with a strong negative move. I would not have been looking for a long entry in MET at all. At best, you had the potential for what X calls a u-turn setup, but I only take those long on gap ups so the bias is at least with me. In my mind, DPZ is the classic because you have the gap, and the initial bar confirms the direction. To answer David's question, it was a little later in the day than I prefer, but I think it was worth the risk.
I believe the picture Trader-X posted is spot-on with regards to finding happiness.
Whether it's getting better at playing the guitar, golf, chess, staying on a diet, or any other challenge in life, it seems as though the steps to take are very clear.
However, here's a question to all:
To become truly GREAT in a certain field, is it because of a talent you're born with?
For example, I will never play golf as well as Tiger Woods (or any other pro athlete), no matter how much I love golf and practice every day with the best coaches. Nor will I ever play guitar like Steve Vai. They require certain eye/hand coordination that is a physical gift, and I believe you're born with that.
What about trading? Are we all born wired in a way that predetermines our outcome?
@Grove
I'm glad the ES charts are giving you something to think about.
And I was already a fan of Vai, but I felt the same way about him after actually hearing him speak too.
Now to your question. You may have opened a can of worms here, but you asked for it!
I want to start by saying that I'm not trying to contradict or argue with your belief(s), but...
As Steve Vai said, if there's something you really want, it's going to come out [of you]. If what you truly want is to be a great golfer, then you can and will develop the necessary mental/motor skills. I don't think you necessarily want to be exactly like Tiger. Would you settle for Nicklaus? Player? Snead? Hogan? And what would have happened if all of them had been the kind of people who said, "I'll never be as good as _______?"
Or let's turn it around and ask, what if Tiger had said, "I'll never be as good as ______," and decided not to even try.
That mental talk is not only a complete waste of time, but if you've been following Flowtastical's comments, he might say that you are literally creating the experience of "never being able to play golf as well as _______."
And did you really listen to what Vai was saying? Do you think he went around saying "I'll never be as good as Joe Satriani (his mentor)?" Do you think he went around saying "I'll never be able to move my fingers in a way that will allow me to play this song the way I want to?" No. He states in the video, "see yourself playing the song perfectly." Visualize it over and over again. Then practice. He also says that you should work on your strengths. And your strengths are already there as a natural part of what it is you truly want to do.
If you're born with anything, it's the desire to do a certain thing. When you spend your time and mental energy working toward that thing you really desire, then you will succeed, unless you stop yourself.
Here's where Vai says (and this is at the top of that post), "The level of achievement we have in anything, is a reflection of how well we were able to focus on it. Because the only thing that's holding you back, is the way you're thinking." He doesn't say anything about being "born with it."
It's that mental attitude that we've been trained to have that says, "I'll never be _______," or "I have to be born with it," that is the real killer. Not only that, but I think it's a lot easier to say "I'll never be," and just wallow in it, than it is to focus your mind on what you want and go for it.
Again, these are not criticisms directed at you, just my two cents about things in general.
I do think, however, that you are actually on the road to discovering these things for yourself, otherwise you wouldn't be here at the same time that these kinds of discussions are occurring, and you wouldn't be asking the kinds of questions that you are. ;)
-AT
Michael:
Good point that from the context of the gap open, MET was a huge difference compared to DPZ. That's something I didn't consider with much weight until you pointed it out.
I recall how Trader-X doesn't look at the direction of the overall market when looking for trades. And in a similar context, I was only comparing the bullish triangle pattern which formed over a 30-45 minute period, which was very similar between the two stocks.
Unlike Trader-X, I admit that I peek at the overall market which then gives me a bias to focus on screening for long or short setups. I'd like to remain neutral, but I just can't help it. This morning, the Dow was up 150+, so I was looking primarly for long setups. Maybe I should just let the quality of the setups make the decision for me.
Do you (and anyone else out there) look at the overall market direction for trade selection, and if so, have you found it to make a difference on overall performance?
Thanks for the valuable feedback.
Attitude Trader:
Love your feedback, I really appreciate it and it gives me another perspective to consider.
Like Flowtastical has mentioned about focusing on your strengths, it was really reinforcing to hear Steve say he doesn't focus working on his weaknesses, only his strengths. So for those who already have a special gift or a talent, they can easily focus on those strengths and run with it.
But what about people who may be a bit delusional about their strengths?
I always think back to the early in the season episodes of American Idol, where you have people who truly love singing, truly believe they are incredible singers, and believe it is their calling in life. In reality, they are far from it and will likely never be great. Although seeing those passionate people makes for entertaining TV.
Then again, William Hung who so famously said "I did my best and have no regrets" did catch a nice wave for a while.
At least with trading, it's simple. It's all about the bottom line -- you either make money or you don't. No matter how much I love trading, ability to consistently profit will be the ultimate decision maker. That doesn't lie.
Time will tell whether I have enough determination and discipline to develop the trading strengths I have to be consistenly profitable, or not.
In the meantime, I like your perspective of focusing on the postive, that's so very important. Thanks again.
Hi Grove. I don't pay attention to the overall market direction. But, don't confuse that with not looking at the price action of the stock you are trading, and what it has been doing prior to you deciding to enter. That is what I learned from this site years ago. X used to go into a lot of detail about how he took fewer trades so he could really analyze each one, and I have found it is critical to know what is happening in the context of a trade you are about to make. There is a big difference between entering a pullback after a gap up and strong move, as opposed to entering a pullback after a move up following a weak open and weakness after the open (the later is has a lot of resistance it has to get through, no matter how nice the setup may look).
Generally speaking, I go long on strong issues and go short on weak issues (I am looking to buy on a good signal if a stock gaps up and is strong, and short on a good signal if the stock gaps down and is weak). I don't go contra much.
FLR is a good example today. I made almost $2 entering on a break of the 8th bar (5-minute).
FLR was a good trade Michael, I took that one too. I also took SAPE off a break of the 3rd bar. A bit riskier, but still a high probability and a very quick 2%+.
Michael,
I also traded FLR after the 3rd bar (green hammer)on the 15 minute chart. The stock formed a hammer at the 50% retracement of the opening range. I bailed after it could not hold the ORH. I was curious as to where you exited this stock and why?
t-money, I exited on a break of the 24th bar's low (5-minute chart, time-wise that is the 11:25EST bar). Reason was it was a high tail print, and I figured price was going to fall back through the high of the morning** ($71.80 was that high mark). Had price found support at the high (as X says, resistance is now support), I would have seriously considered re-entering with a target of the fibonacci extension. It didn't, though.
**I was sketchy about an extended move past the high because the retrace was a little deeper than I like (to the 50% verses the 38.2%), there was a bit of an upper tail on that first bar, and the first bar's move was a little extended leading me to believe it may have run out of steam for a later move.
Hope that helps.
Michael,
Thanks for the analysis of your exit. Great trade!
Michael:
Thanks for your explanation of trade selection vs overall market direction. Makes total sense -- if you're going to be extremely selective with trades, mind as well make sure everything lines up as much as possible before getting on board the trade.
Also, great trade and explanation on FLR! I had one of those days when I was just one step behind on everything, and only saw FLR after the setup took place. And if I recall, I thought it was also trading with relatively wide spreads, and that also scared me off. Had many of those scenarios today.
t-money:
I usually watch the 15 min, and I totally missed the 3rd bar FLR 15 min setup you took until you pointed it out. Nice setup and trade!
Although it shouldn't bother me, I have a psychological barrier to bigger $0.70 stops that I need to overcome. Just gotta remember, smaller # of shares...
I want to thank the Trader-X and the community for all the great posts, discussions and feedback.
This week, I only took 5 trades and had 100% winners (although 2 were "burger trades", < $10 net profit).
Didn't risk much per trade (~0.5% per trade), but still made a bit over 2.25% on my overall portfolio. Doesn't seem like much, but this is around 370% annualized. I can live with that.
Now comes the really hard part -- getting even more selective and refined with trade selection, as well as maintaining the discipline to follow the rules and not go gonzo.
Thanks again and have a great weekend.
Hey Michael,
What is a "high tail print"? I took the same trade in FLR and exited at the OR high because of the things you mentioned. Just never heard the term. Anyone take ONXX? I didnt trade it but saw it in my review....
I also traded FLR but ended up with a small loss.
I entered on a break of ORH on the 15 min chart, at 11:15pm, with a target of $73 (FE) in mind. It went up to 72.34 (hi) then the next candle reversed and stopped me out.
Would anyone have entered the trade i did? if not, why not?
Thanks in advance for sharing your views,
joycie
El Toro, pretty sure he means the candle had a long upper tail, which could be bearish.
D
D,
Yeah, I thought thats what he meant but looking at the 5 min chart the 11th and 14th bars are the same as the 24th where he exited. That led me to believe the term "high tail print" was something else that he saw.
Grove,
Thanks alot for your tip.
I'm loving this site and the comments, I don't think I've ever learned so much. In my quest to be patient I waited until today to pull the trigger and traded MRO. 5-minute chart, bought it on a break of the 10:40 bar, sold at the fibonacci extension. I think this was a classic setup. Any feedback?
Thank you so much Trader-X and others who contribute.
I traded ROSE today. Entered on the 12th bar (5 min), and exited when it reversed right after hitting $48 (18th bar). Turned out i exited too early. It rallied another $1.5 and more to the up side.
Joycie
MRO was nice Howard. I watched it unfold, but didn't pull the trigger. There were no red flags, imo, it was a great setup. Still going!
Thanks Taylor. Yeah I'm kicking myself because it has rallied up to $52 after my exit. I should have held onto half to sell at that level.
Joycie,
I also picked up some ROSE. I waited until the next bar after you, bar 13 on the 5 min. Wanted to take the 7th bar but the risk was too big. Exited at the fib ext drawn over mornings OR. Didnt see much else out there today.
Was wondering what people thoughts were on NUAN today entry 11th bar on 5min. I thought it was a solid setup but it ended up not working out. Wondering if anyone can see what I'm missing.
MS
MS,
I was watching NUAN as well today. I stayed away for the following reasons: One being the 6th bar on the 5 min, shooting star candle which can signal the end of a uptrend. I kept watching and noticed the nice hammer on the 50% pullback from morning low to high on bar 11 but passed due to the downsloped 5ema. I personally like to see the 5ema rising when I enter. Hope this helps some....
joycie:
A bit late to reply, but regarding your FLR trade on 5/6 at around 11:15 (15 min chart) - I didn't see that trade, but if I did, I might have taken it. I usually like breakouts above the OR high on a good setup.
However, there were some warning signs:
1) The 1st bar had a big upper wick (nearly half the bar) on the 15 min chart. That's usually bearish, although if the high of the bar is broken (like it did in this case), it could be considered not as bearish.
2) The breakout occurred right into a whole number level at $72. I keep a really close eye on the price action around whole numbers, since a fakeout breakout potential increases when there's a run on stops.
Therefore, once resistance at $72 is broken, it becomes good support (i.e. good stop loss level).
So you had an opportunity to get out with some profit (I believe your trade was over $0.50 in the money at the peak). This is one of those discretionary (i.e. art) decisions of when you move your stops up.
3) Prior to your trade, there were about 2 potentially good trades on the 5 min chart. A weak warning, but something to consider that many short term traders getting on board might be looking to bail out at around the prior high of the day.
Just my humble opinion FWIW.
MS,
NUAN was a big mover today. What I saw was that the 11th bar, although forming a beautiful hammer, was resting below both the 5 EMA and 8 EMA.
Of equal importance, in my humble opinion, is the width of the opening range. As folks here always mention, this topic can be subjective.
But if you take the width of the opening range from $20.71 to $22.93, that's about 10% of the stock's opening price.
There are certainly exceptions that can continue higher (like X's GLNG [~8% OR] and KND [~6% OR] trades), but I have found that usually, a stock that has covered that much ground in the morning has become vertically challenged after a pullback and will tend to drift sideways for the remainder of the session, which this stock did.
I came across this concept only very recently thanks to all the good folks here pointing it out to me.
Something else I have found upon further observation is that opening ranges of 1% to 4% of the stock's price have much greater potential to move higher than set-ups with much wider opening ranges. As the opening range grows larger than 4%, the odds of a meaningful follow thru seem to become worse.
Again, this is just an observation of my own. But it is pretty amazing how many times I have seen it happen over the last several weeks, and I review about 100+ stocks per day. There are exceptions of course, but this seems to be true more often than not.
Post a Comment