X is going to be off on vacation for the rest of June (and early July). He asked that I make a post a few times a week to facilitate anyone who wanted to make comments or discuss trades/setups.
Here is a photo of the Oregon Coast:
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The Most Important Lesson in Trading Psychology
18 hours ago
8 comments:
7/1/11
SPRD, 10m, 5ema, Fibs OR, entry above bar 3, exit at $17.50 for 4R.
Very bullish week. Happy Independence Day!
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Trader x, you say you review hundreds of charts and I was wondering if you organize the charts in a spreadsheet or database format or do you just review and discard, then continue to review new ones as days pass. Do you go back and review setups from weeks or years ago? Apart from this website that serves this function, I was wondering if you use something else that is more efficient to review a collection of charts, assuming you keep charts.
Jay:
Under the previous post, you wrote a comment about AGO on 6/29 and how you entered early before the break. I also saw that after the fact, and it sure looked like a battle between the buyers and sellers.
I definitely believe it's good to enter early on certain setups, as long as you have clear strategy and the risk/reward is in your favor (like your AGO trade).
Here's one example how:
In addition to moving averages, I've seen trendlines, support/resistance, or chart patterns (i.e. ascending triangle) create opportunities to enter early with a good risk/reward.
So one way of getting in early is to scale in -- as an example, buy 1/2 (or maybe 1/4) of your usual size, and once the price break confirmation takes place, go in with the other lot.
If you're wrong, your loss is smaller, but if you're right, you got a bit of an edge, especially if you get a bad fill on the price break with your 2nd lot.
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Chips and Salsa:
After the fact on 7/1, I also saw that SPRD setup, except on the 5 min. It wasn't as clean on the 5 min, but I certainly would have taken it, nice trade!
Here's a random tip that seems to be working for me -- scaling out of trades.
This might help those who have problems holding on and letting a stock ride for the big move.
I'm scaling out of 1/2 of my position based on the first profit target, assuming it's at least 1R. Usually, I'll get out at the FE based on the 5 min chart. Other times, I might get out at the opening range high/low, or halfway to the FE. It all depends on the specific risk/reward setup.
If I hit my first target, then I'll adjust my stop up if appropriate, and then let the 2nd half ride. Many times, my 2nd profit target is the FE on the 15 min chart. But if the stock is really hot, I'll just let it ride until the price action tells me otherwise.
For me, there's something psychologically freeing that lets me give the 1/2nd half a lot of breathing room, knowing that even if I get stopped out, I have at least locked some profits or at worst, a break even trade even after commissions.
On the downside, I might be leaving money on the table, especially if the price reverses at the 1st FE and never goes back.
I'll be tracking this strategy to see if I'll more than make up for it from those monster moves that take place < 5% of the time.
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Also, there was a discussion a few weeks ago about what to do with your stop loss -- leave them at the original level, trail them up, etc.
On the 15 min charts, it seems like not touching the stop order for 4 bars is best. I see many examples of stocks going sideways after the entry, and it'll either work, or not, after 4 bars (1 hour).
This could also be described somewhat as a time stop, although I say just raise the stop to the break of the prior bar after waiting 4 bars. This concept also seems to work on the 5 min charts (wait at least 20 minutes before moving stop order).
After I made this "discovery", I then saw that Trader Mike wrote on his blog about this same observation years ago.
However, there are some exceptions (aren't there always?). Here's one -- there are times when your setup bar will take place right at a critical trendline. So if your trade goes sideways or against you soon after your entry, it could accelerate against you quickly if the trendline is broken.
In those instances, it's good to exit on the break of the prior bar once the current bar closes outside the trendline, and not wait until 4 bars have passed.
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Any comments appreciated regarding these examples. Am I fooling myself, or are these fundamentally solid strategies?
um....does anyone of you will consider time too?
like if you see a setup, than you enter your trade
some stock will move in your favor right away and some of them is very slow, like go against you first than go to your favor than go against you again
and this happen for a long time...
will you guys consider the time it takes for your setup to hit your target before you get out?
Grove:
Thanks for the scaling in idea. I will try that.
I traded BEXP on the 10 min chart today (7/5/11). It did not gap up, but it ran up nicely and then pulled back to the 38% retrace from the ORH (30 min high). It formed a nice green hammer on top of the 38% line. I entered on a break of the 6th bar. I got stopped out on the 8th bar.
I have had a lot of trades like this one lately. Everything looks good to me, but it quickly stops me out. Can anyone see any danger signs to this trade?
Cheers,
-Jay
Jay:
Regarding your BEXP trade, it wasn't a gap open (i.e. open above the prior day's high/low), so it's not as likely to run. News driven / in-play type stocks have a better chance of really taking off since it has a lot of attention.
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Moving Your Stop Loss:
Continuing on the "when to move your stop" conversation, here's an example of a trade I took yesterday (July 6th).
MDT - 5m, entry on 8th bar.
Due to the shallow pullback, this was a higher risk "sell beyond the opening range low" type of setup.
http://imgur.com/bpH3Y.png
Because I left the stop in the original location for the first 4 bars (including the entry bar), I barely stayed alive in the trade to walk away with a profit.
This may not be the best example, but it's surprising to see how many times this "rule" works. Not perfect, but works more often than not.
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Question:
How many of you use Twitter/StockTwits for your trading? If so, how do you use it?
I've started very recently, and although I thought it would be noisy and distracting, I've actually found value from it.
I now consider it another dynamic source for my watch list as well as confirmation of potential setups. So assuming you follow interesting people and keep their recommendations and motives (i.e. chat room pumps) in proper perspective, it has been surprisingly good for me.
Here's an example:
DANG - 5m, buy above 8th bar, and buy above 24th (11:25) bar.
http://imgur.com/Eghcp.png
The setup was the classic but somewhat messy pullback to the retracement zone variety, and I was somewhat hesitant about pulling the trigger. The 2nd trade later was a nice 15 min green hammer resting on the ORH.
The Twitter/StockTwits tweets said it gap opened higher which confirmed a bullish pattern on the daily charts, and they were going nuts pumping it. Add to that the Chinese stocks getting short squeezed big time over the past few days. So there was "juice" in this stock. Unfortunately, my 2nd lots for both trades didn't result in a parabolic rise to the moon.
MOBI was another trade today (July 6th) sourced from Twitter. Because it was being pumped early, I waited to see a familiar pattern, and got something acceptable on the 4th 15min bar. The 5 min charts also showed good consolidation between the ORH and FE.
I got out near the high of the parabolic move up around lunchtime only because I accidently adjusted my stop loss order incorrectly. Yes, a mistake that got me out near the high, and locked in a nearly 10% profit before it retraced down fast.
As long as this new source of information doesn't distract me from my core objectives, I'm finding it interesting, and surprising profitable for now.
Jay,
BEXP hit 30Jun resistance, double top fade, mirrored XLE OIH etf's, not a gap stock-3 green bars can be a sign of exhaustion.
6Jul premkt WL: OVTI RIMM WLT VHC
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