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Thursday, July 14, 2011

Fighting boredom

I have seen a lot of discussion in comments about fighting boredom. That is one of the reasons I refined my strategies/methodology to trade in the first few hours of the session.

Most of the time, I am done for the day by 11:30EST, and many days I am done by 10:30EST. I also have the added benefit of focusing on higher-probability trades - if you are a long-time reader of this blog, you will know I often state that, all things equal, setups that occur earlier in the trading session have a higher probability of success than setups that occur later in the trading session. It makes sense as you often hear traders "giving back gains" as they trade later in the day.

Just something to think about!



Juan said...

Sage advice, I just always feel like I am missing opportunities. Will I ever learn?

la grande poussée said...

I have learned over the years that excitement in trading begins before 10am
or - nothing seems interesting. Also the end of the day - sometimes yields a set-up about 15 minutes before the close.

timo4sho said...

I would like to know whether any one of you guys has experience finding good quality setups in the last 2 hours of the trading day?

i find it extremely hard to find reliable trades with good risk-to-reward ratios.

I am very interested in your opinion/experience regarding this.

Adam Evans said...

What time do you usually get up to start trading?

Anonymous said...

understandable on ur shut down time- but surely you are leaving huge amounts of money on the table not trailing winners or taking afternoon setups

Benny said...


This might sound basic, but:

It seems like you follow the current trend of the stock more often then not. Do you still take counter-trend trades, or reversal type trades like you used to?

i.e. A stock gaps up and you look for a short and/or a stock that gaps down that looks well extended for a reversal?

Chips and Salsa said...


Revenge Trade on UNH. Not recommended, but I am doing it out of pure spite and rage. You know, like a professional trader should always trade.




UNH, 15m, 5ema, Fibs OR, entry above bar 12, target is FE.

Bars 10, 11, and 12 are all very bullish hammers.

Chips and Salsa said...


That went well.

Trader-X said...

Juan, you will ALWAYS miss opportunities. You pick one setup over another, you focus on specific timeframes, you have a watchlist of 30-40 stocks, you only trade certain markets/exchanges, et cetera.

Adjust your outlook and instead of thinking "I am missing opportunities" think "I am going to maximize the opportunities before me, and eliminate the low-probability, bad setups and focus on the high-probability, solid setups."

Trader-X said...

timo4sho, see my response to Juan.

Trader-X said...

Adam, my morning starts at 5:45AM CST. But since I do most of my review and study after the night before, I don't do much trading-related until the market opens.

Trader-X said...

Benny, I go where the setups are...I don't look at the current trend of the market...I don't even know what the indexes are doing unless I catch it on the nightly news. Having said that, obviously if there is a strong up day the majority of the setups are going to be long, and vice versa. So as an outsider looking in you would say most of the trading is with the trend. However, there are often times good setups going the opposite direction of the overall market, and I will take those as I see them.

Trader-X said...

Anon said "understandable on ur shut down time- but surely you are leaving huge amounts of money on the table not trailing winners or taking afternoon setups".

No, I don't think I do. I've learned to maximize my opportunities and my revenues over the past 20 years, and I think I am in my sweet spot. Going outside of that zone will yield more losers, and giving back money that I made.

Klaorman said...

7/14 trades

PGR 5th 10m bar short
This shooting star-like bar was green, but it was at the 5ema and 38 fib. I took profits after the sharp move down past the ORL, when the stock looked bouncy. It chopped for the rest of the day, almost hitting the FE at EOD.

Missed trades

CBOU 5th 15m bar short
I watched 2 other shooting stars fail to trigger on the 10m and then failed to see this shooting star at the 5ema and 50 fib on the 15m. When my original alert fired on the 10m setup, I thought I would’ve been chasing it and didn’t get in. The stock was choppy also, bouncing at the ORL, but it made it to the FE.

SCEI 8th 10m bar
I saw this hammer at the 8ema and 50 fib after it had triggered. Did I worry about a few pennies? Yep; I saw it at 1.68, when the setup bar was 1.61 by 1.65. That seemed late to me. The stock chopped like the other two, coming back to 1.62 after almost hitting the 1.76 high, but it later blasted off and hit the 162 extension.

Times of Your Life said...

@.@ this post is correct...
i made like 30 dollars this morning
and keep trading and lost 105 at the end...

um...will you guys hold on to SWC?
SWC 10 min, entered at the 5th bar

is it normal to have that kind of pullback in 9 - 10th bar?
it is very sharp and hard i think
will you get out of that kind of pullback or just stick to the stop?

Grove Under said...

I love the first 1-1.5 hours when most of the volatility takes place, especially during these summer sessions.

And at least it's earnings season right now, which might provide some extra movement for certain stocks or sectors based on news.

But since I'm still on the learning curve, I just can't pull myself away from watching the markets after the first couple hours...which has tempted me into making trades during the chop-zone...which then has lead me to revenge trades on more than one occasion.

In those situations, I get cut by a million paper cuts, giving away profits or going deeper into a loss. I need learn once and for all to stop that, or to set proper expectations that I can only get scalps.

* * * * *
I saw the SWC trade, except on the 5 min chart, 8th bar. But your 10 min version looks cleaner. Too bad I wasn't around this morning, I would have taken it if I saw it.

I would have unloaded half at the FE, and then the other half near the 2.0 FE (17.12ish).

Reason? On the daily charts, 5/17 and 5/23 had lows around 17.16. And on the 5 min chart, the descending triangle-ish pattern broke down below 17.36 around 10:40, which might have been yet another place to add back onto the short position.

Another target could have been the FE calculated from the PDH to ORL, which was around 16.92. In fact, that's where it closed for the day.

The initial risk was < $.10, which made for quite a good risk/reward. It was 1:5 on the extended target, which closed out by 11:00AM. Wish I was able to find one of these every day!

Grove Under said...

CBOU was a nice clean setup on the 15 min, and I love how it failed just under the whole number. I looked for it, but too bad my scans didn't pick that one up.

SCEI was one of those trades that had some buzz on Twitter. Low priced stock, and had a nice daily chart formation ready to explode. Love to see those factors in combo with a good setup. I'm a bit cautious about low priced stocks, but if the risk/reward is there, I'll take it.

Question on Lightspeed:
I saw you mention it yesterday. Do you use it, and happy with the performance and reliability?

I know order entry is super fast, but I'm more interested in reliability. TradeStation went down for 30 minutes yesterday. Very disappointed about their backup system.

t-money said...

Hi everyone,

Just got back from a long vacation back home to montana and been going through all of the great commentary over the last couple of weeks.

Today (7/14), I traded AKAM below the 5th bar on the 5 minute chart(7/14. I was wondering if anyone else caught this and what they thought of the setup? I ended up taking profits at the 100% extension at around $29.54. I was unsure of the setup at the time because of the 4th bar green hammer, but I took it anyway.

joshua said...

grove, i can honestly say i have never had a problem with lightspeed. the only problem i get is a loss to the executor once in a while, but i discovered my modem was going bad. now that i have changed that, the problem has not occurred.

joshua said...


I'm surprised to hear you are up so early; And doing review the night before? Are you talking about reviewing your trades from that day or actually trying to find ideas for the next morning? I thought gap trading like what we do here, didn't require much "research". Just see what stocks are gapping up/down after the open, watch the charts and wait for your setup. Are you looking for what is gapping pre market?

And great point about fighting boredom by only trading 10ish to noon-ish. I tried 10-2 using 15min charts but I think 10am is too early to use for the 15. So, I am thinking about possibly trading the 5min after 10 am until 11:30 or so, then switch to the 15. On the 5, everything comes very quickly, and you need to be scrolling and making decisions much quicker.

And referencing your watch list of 30-40 stocks, are you whittling down your list before the market opens, or as the charts develop you are seeing what is "nice" and deleting the bad. My scans usually bring up 50-100 stocks per gap side (up vs down) and then I sort them by VOl% change, but it is still alot of stocks. I have added filters for min volume, min avg range, etc...

Klaorman said...

7/15 trades

Today was a very disappointing day for me. I traded my P&L and not my trades by jumping out early, before my stops got hit. I do this a lot, usually at the worst possible time, meaning right when a stock is about to bounce.

EP 6th 5m bar
My trade off this hammer at the 5ema and 38 fib was looking good until the market turned and the stock quickly stopped out. This seemed to damage me for the rest of the day.

AXAS 6th 5m bar
This red hammer’s body was at the 5ema and 50 fib, though its tail dropped well below the 62 fib. I got in, but due to my loss in EP and the market not looking good, I couldn’t follow my plan and got out early. By the EOD, the stock almost reached the ORH.

QTWW 6th 10m bar
This red hammer was at the 8ema and the RZ. Again, due to my loss in EP and the market not looking good, I jumped out early. The stock almost reached the FE.

Missed trades

I still can’t get my head around whether I should chase good setups or not. I seem to miss out on a lot when the risk increases on a chase and I hesitate. Perhaps the solution is to flip through my charts faster so that I won’t be late! But then when I’m already in trades I slow down on the chart flipping.

OAS 6th 5m bar
I think I saw this one late, at around 30.30 when the setup bar was 30.02 by 30.18. It kept creeping up and eventually hit the FE.

FRO 4th 10m bar short
This green shooting star was at the 5ema, but its body cradled the 62 fib and its tail created the HOD, so it looked very doubtful. However, it did manage to hit the FE. Would any of you have taken this one?

CRK 7th 10m bar
This hammer was at the 5ema and 38 fib, but I saw it a bit late, at 29.74 when the bar was 29.50 by 29.62. That almost doubled my risk, but I should’ve chased it since it almost hit the 162 extension. Would any of you have chased this?

SWN 2nd 30m bar
I watched this stock keep going up all morning before I realized that it had a fill-the-tail setup on the 30m. With fibs drawn from PDL to ORH, its advance stopped right at the FE. It rested nicely before coming back to break the FE later.

Klaorman said...

Grove Under,

Yes, I saw the SCEI buzz on Twitter. If you had taken it, would you have held it to the afternoon explosion? After it almost hit the ORH, I would’ve had a hard time watching it fall back almost to the setup bar’s low and would’ve probably jumped out when 1.70 broke down.

I’ve been with Lightspeed for almost 3 years now. They had problems early on with the platform slowing down drastically during the open and close and during Fed announcements, but they’ve fixed those problems and have been rock solid for at least a year and a half. I heard about Tradestation going down on Twitter; at other times I hear about Think or Swim problems.

Ron said...

I don't mean this in a negative way, but I don't see how you guys can listen to and follow others while you are trading. If you have your own system, why do you want to muddy it up by hearing outside influences? To me that would mark disaster for my P&L. It takes everything I can muster to focus on MY strategy, much less try to process news or setups or "hot" stocks from elsewhere. You guys should take a week and cut all that stuff off and see if your P&L improves. I bet it does. Of course, this is predicated on having your own system that you have confidence in.


PS - I do listen to talk radio, which to me is acceptable because it is not introducing market related info that will take my focus off my strategies.

Grove Under said...

Very good point about minimizing distractions when trading, so that was one of my biggest fears when opening up the Twitter steam for reducing "boredom" but more importantly, to find ways to continue learning. You really have to have the discipline to know when to turn it on and off.

I'm tracking the source of all of my trades to make sure I can't fool myself into thinking this will or won't hurt my bottom line. At least P&L's don't lie, and so far, so good...for now. Sample size is low, and I haven't taken too many trades sourced only from Twitter.

I am primarily using Twitter as another source for creating my watchlist, but not for trade signals. There are many folks on Twitter who share their daily charts of stocks ready to take off every night, and a good percentage do get juiced the next day. Possibly in part because so many people are looking at the same setups.

So it's not very difficult to enter symbols onto a watchlist the night prior, and to watch for updates on the various stock symbols on the stream during the trading day. For me, it's not much different than watching a real time stock screener for unusual activity.

However, similar to what you mentioned, you have to be very careful to filter out any buy/sell signals that are Tweeted, and to enter only when you have a signal that matches your strategy. Otherwise, it's gambling.

I'm amazed how much the Internet and social media has accelerated the flow of information, especially since the last time I was actively involved in the markets nearly 10 years ago. Interesting times!

Grove Under said...

Joshua & Klaorman:
Thanks much for the feedback on Lightspeed. Took a closer look at their website, and their platform seems very compelling. And didn't realize how good their commission structure is.

Grove Under said...

I'm not used to trading low priced stocks, so I'm not sure what I would have done on SCEI yesterday (7/14) in real time. But looking at the 10m, I'd have to imagine I would have scratched or lost a bit on the 1st trade.

The green hammer at 13:40 on the 5min chart is the only place where I "might" have re-entered, since it's right above the FE (if Fibs drawn over opening 15 min).

* * * * *
Trades on 7/15:

ATI - 5m, Fibs over opening 15m
Beyond the FE setup. Bought above green 11:20 bar. Went to lunch, came back, and it was $2 higher. Sold at $65.50, but closed at the highs. I want a lunch trade like this every day.

PXP - 5m, Fibs over 15m OR
Beyond the ORH setup. Bought above green bar at 14:00. Sold at the FE.

* * * * *
Missed these - had some problems with my platform today, ugh.

SWN - 5m, Fibs over 15m OR
Beyond the ORH setup. 12th bar green hammer was a nice setup. Had an ascending triangle look.

RRC - 5m, Fibs over 15m OR
Offsetting bar-like setup. 12th bar was green, and also bounced off the .38 retracement.

NBR - 5m, Fibs over 15m OR
1) 4th bar - Pullback, higher risk
2) 12th bar - ORH setup, wow, great risk/reward.
3) 11:20 bar - Tight consolidation breakout, < .10 stop. Love these setups.

BBG - 5m, Fibs over 15m OR
10:35 bar - Beyond ORH setup. Tight consolidation, supported by rising 5ma. Enter 1/2 early (small stop), other 1/2 after break.

CRK - 15m, Fibs over 15m OR
5th bar - Pullback to RZ. Nice clean 15m setup.

bl said...

BusyStock.com is a good source for Prmkt or AH WL ideas

Klaorman said...

Grove Under,

Nice trades and great looks at possible trades. Some questions and comments:

Did you see ATI $2 higher at around 13:05? If so, how did you handle the $1 drop? To me there was no way to determine whether the run was done or whether the stock was just resting. I would have likely gotten out after it dropped from 65.

Your SWN setup was exactly where I noted the 30m fill-the-tail setup.

I was also watching RRC for a setup, but I didn’t see one. I’m still mostly looking for the classic Trader-X setup, so once RRC broke the ORH and pulled back I paid less attention to it.

I remember seeing NBR, but later in the day. I like tight consolidations too, but I worry that a normal wiggle might stop me out easily, so I hesitate on those. I guess you don’t worry about that, which is great.

I noted CRK also, on the 10m, but I did see the setup on the 15m too.

joshua said...

grove, too bad you didn't have a longer lunch break. you could have gotten another 1.50, lol.

klaorman, i think one of trader x's classic setups is when the stock breaks opening range high, then pulls back to that area for support. also, i appreciate your "missed trades" section. it shows day in and day out, this style works.

Grove Under said...

"Tom C." has some examples in the archives. And I've been finding some good opportunities toward the end of the day.

One setup example is listed in this comment below under "mistake." It's more of a consolidation breakout, but pretty straight forward.

Other later day setups I take are relatively sharp pullbacks to a Fib level aligned with a moving average or VWAP.

My favorites are the contra reversal / gap fade (e.g. stock gaps down, but I go long later in the day). I have some examples in the comments of the 5/21 and 5/23 posts.

The later day setups are out there, and if you wait for certain key factors to all line up, they are usually pretty reliable with good risk/reward.

Thanks for the link to the busystock.com, it looks similar to finviz.com. But I haven't really used either of them so it'll be taking a closer look.

I'm sorry I didn't acknowledge the stocks you also commented on. I did read your comments prior to my post, but it was an oversight on my part (it was late and I was tired).

Yes, I saw ATI just as it broke below $65, and yes, the first thought was to get out. But I'm trying to let my winners run, and thought this would be a good test of my ability to change and adapt.

Here were a few observations as the pullback was taking place:
* The stock was strong, and it was due for a healthy pullback.
* The high on 6/29 of $65.52 was like a magnet that needed to be tested. Too many people looking at it, and as evidence, just look at the volume the rest of the day once that level was broken.
* The upward trendline was decisively broken at 13:25, below 64.60. I thought about closing out here...
* But I saw that the swing low prior to the high was $64 at 12:40. This was the critical level in the pullback. If it held here, it was nearly certain to go back up and test $65.50.

One "mistake" I made was not to add on with a 2nd lot around 14:30-14:35 when there was a nice green bar. The price broke out of the 30 minute upward sloping consolidation after the $64 level held.

Another "mistake" I made was to not watch the price action closely at $65.50. Once it was clear .50 would hold, off it went to the next level, eventually over $0.75 higher.

* * * * *
It's amazing how much room for optimization I see after the fact for many of my trades. My goal is to maximize each trade to its fullest potential.

Still learning and still improving my ability to execute what I read on the charts. I understand that this learning process will never end if I want to be consistently profitable.

Klaorman said...

Grove Under,

Oh, I wasn’t fishing for an acknowledgement; I was just noting that you essentially saw what I saw. More traders seeing the same setups reinforces that we’re all doing the right thing; then again, once in a while we may all see the same bad setup and do the wrong thing (like BRCD, I suppose)!

Thanks for your excellent analysis of the ATI pullback; the lowest I would’ve held it would’ve probably been 64.80. One thing I try to tell myself during pullbacks is that I could always sell at, say, the 64.80, and then if and when price comes back to the highs, I could rebuy on the breakout. But then most of the time I pass on the rebuy and then agonize when the breakout works.

Re: late day setups. I did trade one of these on Friday: ALJ had a 3 hour consolidation; I took the breakout at 12.48 and sold near EOD at 12.67.


Yes, thank you, that’s the purpose of the missed trades section. However, I don’t remember if I’ve ever shown a missed trade that failed, which is just as instructive as the ones that worked. I have seen missed trades that failed, but due to laziness since most of my comments are long or shame (!) that I would even consider such a bad setup, I don’t include them. I’ll try to include them from now on.

Klaorman said...

7/18 trades

BAP 5th 15m bar
This was a green bar against the 8ema and 50 fib. It moved well at first, but then it almost stopped out. I sold at EOD for a small profit.

BVN 5th 15m bar
This red hammer was at the 5ema and 50 fib. It moved a bit at first but then stopped out later. Looking at it afterwards, yes, the setup bar was red, but I also saw that the 3rd bar’s drop was kind of steep.

Missed trades

TZOO 4th 10m bar
This hammer was against the 5ema but under the 50 fib, plus the 3rd bar’s drop was kind of steep. I also didn’t like the spread and the width of the bar. However, I would’ve been perfectly fine taking this trade in my IRA since I’m more relaxed trading in there, but I forgot to consider that. The stock hit the ORH but then pulled back over $2 before resuming and hitting the 162 extension. I likely would’ve gotten out under 81.50 or higher and then struggled with rebuying the breakout later.

SCEI 4th 10m bar
This stock just keeps on running! I missed its doji hammer at the 50 fib and 5ema because, to be honest, I had already taken the stock’s morning breakout over 2.34 and then sold it at 2.32 as the market was breaking lows, so I wasn’t paying too much attention to it. It hit the FE before dropping.

CDTI 18th 15m bar
This stock spiked up midday on news, so I drew fibs from the lows of the initial spike to the highs. A nice hammer formed at the 8ema and 50 fib, but I missed seeing it in time. I saw the hammer later as the stock was on its way down, but I didn’t try it. It kept going down and would’ve stopped out. I remember a few weeks ago that I wrote about a couple of late day spikers that provided a Trader-X setup that worked, but I haven’t seen any similar setup since then until now.

Grove Under said...

Just wanted to make sure I gave you proper acknowledgement, and totally agree with you how the good setups usually seem to align on multiple timeframes.

But I guess you can't help it if a fund enters a big order at the "wrong" time that messes up a perfect setup!

* * * * *
Today (7/18), I got into CHKP at around 13:30 on the consolidation breakout for a $1+ gain in around 20 minutes.

But instead of holding on and riding it through the first pullback, I got out at the FE and then stopped following it. It ended up going $1.50 higher after my exit.

In hindsight, it reminds me a lot of the ATI trade yesterday, although on a shorter timeframe.

I'll have to figure out why I didn't hold all the way to the close, or got back in around 15:00 on the offsetting bars (5 min), especially given the increased volume and activity.

But I might have gotten rattled when I adjusted my stop loss order incorrectly halfway in the trade, which then got me out of the trade for a few seconds.

Have to learn to roll with the mental punches better.

Fred said...

Took QCOM today, 5-minute chart. I think it was a perfect setup on a break of the 5th bar, which was rising off the 8EMA and bouncing off the 50%, not to mention offsetting bars. It didn't make it to the extension, but I took .40 out of it and was anticipating a possible reversal as resistance was at a whole number ($57), and it was the halfway point between the high and extension. The doji 10:15 bar confirmed, and I took profits. In retrospect it would have been a great short.

Thanks for pointing me in the right direction. I am consistently finding good setups and winners, or not trading.