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Sunday, August 21, 2011

Comments worth highlighting

I didn't have a lot of time to post last week, and this week will probably be the same. But, I'll try to put up some more charts this week. In the meantime, Ken made a few good comments over the last few posts that I thought were worth sharing.

"How do you look at so many different timeframes? I am not trying to be confrontational, but I think your success would go up if you picked one and focused on it. I honestly don't think you can be successful looking at 2, 5, 10, 15, 30, etc. You might get lucky now and then, but I think consistent success is impossible.

I see a lot of you guys posting here, but you aren't really following the Trader-X methods. There is a high number of trades and a lack of real focus on what a good setup is, and when you execute you need to have the ability to monitor your positions and adjust accordingly. Thus, fewer and better trades. If you get down to analyzing a setup and studying the price action and bars like you should, you can't have a watchlist of 200 stocks and trade 5 timeframes. It just doesn't work that way.

Again, I am not trying to be confrontational, but I see you guys doing the same thing over and over and hoping for a different outcome that won't happen. Focus, discipline...it pays off. I have not had an unprofitable week since 2010. I have an unprofitable day every now and then, but never an unprofitable week.

Good luck."


And, on being asked about his trading:

"Grove, I really only trade about three setups. I only look at the 5-minute timeframe, and use a 5EMA. I don't trade exactly like X, but I use the same principles. I focus more on plotting Fib lines over bigger moves which may or may not happen at the opening range. I am looking for a failure through the retracement zone or a nice bounce off of the top of it, with solid support form the 5EMA. I like the 5EMA to be right under price lifting it (or vice versa for a short). I probably put more emphasis on the 5EMA than most readers or X himself.

I have been making solid profits consistently for almost five years, and dabbled in trading for about ten before that but not as a full-time venture.

For me it is about discipline to only take good setups and about focus to only look at a small, defined watchlist and monitor what I am doing closely. And I don't trade a lot, though it is relative. On average I probably make 3 round-trip trades a day. Hope that helps."


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19 comments:

Jim said...

Ken,

Excellent comments. A couple of additional questions for clarification. Are your Fib lines always over current intra-day price action or do you sometimes include prior day or days price action? Are you working with a pre-defined watchlist or do you build a new WL based on each day's opening price action (e.g., gaps)? Thanks.

Klaorman said...

8/19/11 trades

I overthunk it today on some good trades.

IAG 4th 5m bar
This was a doji hammer at the 5ema and 38 fib. I was aware of the long tail on the 2nd bar. After getting in, the stock made good headway towards the ORH, but then it dropped quickly and formed a shooting star-ish bar. After the low of that bar was breached, the critical moment came. With multiple thoughts flying through my head (“that’s a bearish bar; what if my stop gets hit?”; “2nd bar’s long tail wasn’t good; why’d I take the trade?”; “I suck”; “I have to actively manage my positions”; “I’ve seen set and forget work before, but maybe not THIS time”) and my usual jittery self, I sold. When it kept going down for a few more pennies, I was relieved and thought that I had made the right move. However, I soon threw up my hands in disgust as the stock bounced from the 38 fib and hit halfway between the ORH and the FE. I had done it again, not leaving well enough alone. I would’ve partialed at the ORH with set and forget, and the rest would’ve been sold around there too at EOD.

I have to stick with one trade management method and be consistent. I keep jumping from “set and forget” to “close under 5ema” to “candle watching” to “move stops under swing lows” to “I’m nervous, I think I’ll get out here” and I seem to have the uncanny knack to choose the wrong method at the wrong time. Chasing success indeed. I think set and forget is the key; I just have to really do it.

How would some of you have managed this trade?


8/19/11 missed trades

ANN 5th 2m bar
This was a hammer at the 5ema and 38 fib, with its tail touching right at the point where the 5ema crossed the 38 fib. However, the entry would’ve been right over whole number 22, which somehow I thought would be difficult to break, especially with the previous offsetting bar. I also thought, “Why should I play with the big boys in the stock?” I passed on it; the trade would’ve stopped out.

ANV 5th 5m bar
This was a hammer at the 5ema and 38 fib, looking similar to ANN above. I missed it because I was in IAG at the time. The stock hit the ORH before falling.

ARMH 5th 5m bar
This was a big-bodied hammer at the 5ema and straddling the RZ. Again, I was in IAG at the time. The stock hit the 162 extension before falling, breaking its lows, and eventually filling its gap. Timberrrr!

SLW 3rd 15m bar
This was a fill the tail, ascending triangle setup at R2. I love ascending triangles! However, I looked at the daily and found what looked like resistance at the recent highs about .15 higher. As the setup triggered, I agonized over whether to buy or not. I couldn’t do it, and then watched in utter frustration as the stock hit the FE (fibs drawn over PDL/ORH) and then dropped quickly from there, like magic once again. There were some “huge” .25 and .30 drops along the way, but “set and forget, eyes on the prize” would’ve taken care of that.

Would some of you have entered this trade?

BKS 4th 15m bar short
This and the 3rd bar were shooting stars at the 8ema and under S1, though S2 was close by. I totally missed this one, seeing it during the stock’s big drop several bars later. It eventually hit around the 362 extension.

ADSK 5th 15m bar short
This was a big-bodied shooting star at the 8ema and 38 fib. I don’t remember how I missed this one. The stock hit the 162 extension.

Joe said...

Great comments but will probably fall on deaf ears.

Ken said...

Hah! Quite surprised to see my words on the Trader-X blog!

Jim, I have gone multi-day in the past, but now my Fib lines are usually confined to current day's action (that doesn't mean you can't get good setups spanning multiple days - you can. I just personally focus on current day).

My watchlist is based on gaps and new every day. Sometimes I throw in a name or two that I hear on CNBC, but 90% are just pure gap plays.

Chips and Salsa said...

Grove,

Thanks for taking the time to provide the links, man. I actually had read these in the past, and they helped me get my start. But I would probably do well to revisit them as a healthy reminder. Have a great day today.



Klaorman,

SLW was on my list, and I was disappointed I didn't take it. I was trading some other set-ups, including CIG, 5m, which didn't pan out. Next time!

stef said...

Very nice blog
any opinion about AMR CORP for long position?
Thanks in advance

Chips and Salsa said...

8/22/11

NEM, 5m, 5ema, Fibs OR, entry above bar 4, exit at $63 for net 3R.

IAG, 5m, 5ema, Fibs OR, entry above bar 5, exit at $20.50 for net 3R.

Gold miners across the board on fire today. If there were five of me, I could have caught them all, hahaha.

Grove Under said...

It was 4 months ago to this day (8/22) when this Trader-X article was posted (4/22), based on a great comment from Michael B. I had just started trading a few weeks prior.

There were also some other great comments under that post, including those from Ken and Flowtastical. Very similar to the current topic regarding discipline = profitability. That post, in particular, provided some critical building blocks for where I am today.

I took the advice from Flowtastical regarding journals, blogs, and focusing on strengths, and wrote about it on my blog here.

And now that I have enough trading data to evaluate from my trading journal, I'm beginning to understand which setups work best for me and shared it here.

Now it's time to start focusing -- just do what works best for me (my strengths) and cut out all the other crap.

I realize that I've just barely started my journey, but I believe I'm off to a good start -- instituting a process that will only encourage me to continuously learn, execute, analyze, and refine.

It's interesting to see how even Trader-X has evolved his trading style through the years. Everyone evolves. Who knows what my trading style will become in a few months or few years as I learn more about myself.

But building upon a process of continuous learning in addition to maintaining strict discipline is the way I've chosen to take this journey.

bl said...

C&S,
Nice NEM trade.
Mkt gaps up reverses GLD GDX SLV continues on Bear rally reversal.
BusyStock.com WL of 14 faded for the most part from SINA to SODA. HPQ from CNN premkt did well. You could take any stock for the most part and short the gap up: AA to LVS to X(weekly options) and the big names AAPL GOOG AMZN NFLX.

Klaorman said...

8/22/11 trades

I found very few setups today. I would’ve taken Chips and Salsa’s IAG trade, but it gapped so little that I didn’t see it.

CSIQ 8th 30m bar short
This was a green shooting star at the 8ema and 38 fib. I shorted it in “don’t care” mode, checking in occasionally. I covered at EOD after it started to bounce from near the ORL.


Missed trades

PANL 8th 5m bar
This was a red hammer at the 5ema, 38 fib, and R2. I didn’t notice that the stock was right above R2 at the time, though; I was just worried about its .08 to .12 spread. Old habits die hard; I couldn’t overcome this spread. This was the play of the day, as the stock hit the FE easily, settled there for 2 hours, and then took off to hit the 300 extension near EOD. After hours, I noticed on the 30m that it had a fill the tail setup (1st arrow) and a beyond the FE hammer (2nd arrow) that coincided nicely with the sharply rising 5ema. As on another recently missed trade, for a measly .10 spread, I passed up at least $1.30 if I had sold at the FE (after partialing at the ORH). And if I was really sharp, I would not have partialed because of the fill the tail setup (I should add there), and I would’ve gotten back in on the FE hammer.

Lessons to take away: I have to learn to deal with the spread on good setups instead of automatically shying away. I have to open my eyes to recognize that this setup was better than good because the bar was on top of R2. I have to create new habits to kill the old habits.

Grove Under said...

8/22/2011
On my first day of following my focused and refined trading plan, I had ZERO trades.

I felt like Simon Cowell, rejecting everything left and right.

I also passed up some interesting trades. Many have already been written about in the comments here. But here are 3 charts of interest on NEM, PANL, and GG with my comments.

"I'm Simon Cowell, and the fish that got away"

loanme5 said...

Ken,
Outstanding comment. I must admit I have been slowing done on reading the comments because so many people have recently started using this amazing blog as a forum for posting all of their ridiculous trades. But it seems worth it when solid gems like your comment appear, and I feel less alone. Thanks X. You are right about the comments.

Joe said...

loanme5, I will be a bit more politically correct than you. It would be nice if people would post trades that somewhat follow the X methods, and leave everything else off the blog. I think the intent of ramping up comments was to provide feedback to one another, but that is hard to do when people post non-X charts, or charts that clearly were not good setups. If there is something that you think is an X setup and should have worked but didn't, and you are asking for input, odds are not many will see it and give feedback because there is a lot of clutter. Likewise, I like seeing good X trades that worked, but I'm not going to wade through scores of trades that may or may not be X related.

I'm not knocking anyone, and some of you guys work hard and give a lot of insight. I'm just saying we should make comments here related to X methods, and save everything else for some other forum.

Joe

Grove Under said...

When I made the decision to focus on only two of the classic Trader-X setups this week (Pullback to RZ, and Beyond the FE/OR), I didn't think I would see very many setups, especially during the final dog days of summer.

Whether it's just the markets this week, or perhaps I've missed them all long, there were several today (8/23).

Here are a couple that were interesting, hope you got 'em!

TIN - sell below 6th 5min bar - hit target

Pullback to RZ setup. Saw large upper wick on the 5th bar as a flag, so I passed (in hindsight, it was actually a bearish sign). If you simply trailed a stop over the bar of the prior high, you would have exited with nearly $3.

OCR - buy above 11:30 narrow 5min hammer bar - hit target

Beyond the opening range high setup. A bit choppy, but it easily reached the FE, and the 161.8% FE. Drawing a trendline under the swing lows also helped to time entry of the trade.


Many other "Beyond the FE" type setups out there today. Only took one trade today, GSK "Beyond the FE" setup around 10:40 for a loss. In hindsight, should have passed -- operator error!

Chips and Salsa said...

8/23/11

MDRX, 15m, 5ema, Fibs OR, entry above bar 7 (NR7), exited near FE, over 3R profit.

Times of Your Life said...

hahhahah but i guess all the good and bad trades in the comment work...
it is all base on price action, so you just need to tell yourself if this setup you are willing to take or not
extra review

t-money said...

Chips and Salsa,

I was wondering how you come up with your candidates to watch? I noticed the last few days that some of your trades had not even gapped over the previous day high, which is usually a red flag to me.

I would think that adjusting the parameters to include stocks inside the previous days high/low, would result in way to many candidates for me to watch.

Chips and Salsa said...

t-money,

Check out my comments (#5 and #11) posted here:

http://traderx.blogspot.com/2011/06/cog-060811.html

Anonymous said...

Hi Ken,
Thanks for your inspiring comment.
Can you please be more detail on how do you find your stocks (if with scanner, what are the filters you use..)?
Thanks again,
Hagay