"Nice rationale X. I took a similar sub-par setup with ERTS. It didn't quite make it to the extension, but I closed it at a profit. Would you rate this the same as NWS, or worse/better?"
Here is Ken't ERTS chart, and my response to his question:
"Ken, ERTS was very similar to NWS. The biggest difference I see was the size of the gap - NWS was a bigger gap, and outside the previous day's range. ERTS was a little smaller and inside the previous day's range. So, I might give it a C+ whereas I gave NWS a B-.
On the bright side, you made money and price never stopped you out (I am assuming your stop was the low of the hammer bar (fifth bar)). It reached the initial target of the opening range high (ORH), so the setup in a sense still worked."
Throughout the years, I have harped on watching the opening range high/low for resistance as price is moving back in that direction after a pullback. I haven't mentioned it lately, but ERTS provides an opportunity to revisit why it is important. Ken exited with a profit because he paid attention to that level, and while everyone wants their setup to move to the Fibonacci extension (or beyond), sometimes price stalls out...especially when the setup is somewhat "inferior" to begin with (ie, a setup that receives a grade of "C" vs. an "A"!).
The ability to pay close attention after you enter a trade (ie, monitor your positions) is one reason I try to focus on taking fewer high-quality setups versus more mediocre setups; the end result is a higher win rate and the ability to make money even when a setup doesn't reach the target.
On another note, I have read a lot of comments lately about people having too many options to choose from, or too many stocks on their watchlist. This can be easily remedied - sort your watchlist by current volume and focus on the top 10 or 20 at the most. By focusing on fewer stocks, you will be less overwhelmed and (hopefully) be able to make better quality decisions.
I hope everyone is geared up for another crazy week - be safe!
_______________
32 comments:
8/12/11 trades
KERX 3rd 5m bar
This was a hammer at the 5ema and was the exact width of the RZ. This was the fastest that I’ve taken a retracement trade on the 5m, and KERX went equally fast to the ORH. Unfortunately, numbers came out at 9:55am and knocked the stock for a loop. I tried to hold on, but at b/e I bailed and then wondered why I didn’t partial at the ORH. (The gain was only .04 at the time, that’s why.) It dropped under the setup bar, but it missed my original stop by a penny. It then crept up all day without me, eventually hitting the 300 extension at EOD on the highest volume bar.
Lessons to take away: Set and forget; ignore the market, even after bad numbers come out.
CLWR 9th 10m bar
This was a green bar at the 5ema and 50 fib. The stock made it to the ORH, where I partialed, but the rest stopped out. I did get out a little early when it based near b/e and then dropped. I probably should’ve sold all at the ORH because the stock had already moved from 1.60 to 2.01, a large percentage. But then if CLWR had turned out to be a runner, then I’d have had to pull out “set and forget” again.
DSW 5th 15m bar short
This was a shooting star-ish at the 5ema and 38 fib. I saw the 4th bar shooting star-ish at the 8ema, but wasn’t sure I wanted to give a large stop. The 5th bar was much better. I did see that DSW was basing at S2, but I thought it would be a nice breakdown under it. However, DWS couldn’t break through S2; eventually the trade stopped out.
ST 8th 15m bar
This was a hammer at the 5ema, 38 fib, and R2. It looked really good to me, so I put on a bit more size. Unfortunately, I got stopped out. Can anyone see any warning signs in this setup? The 4th bar’s upper tail wasn’t too long. Yeah, OK, the 5th and 7th bars were shooting star-ish. I’ve answered my own question! But the hammer at 3 points of confluence overrode the negatives for me. However, I do realize that even the best A+ setups can still fail.
Lesson to take away: Don’t go bonkers (add too much size; I didn’t really do that this time, but I’m just noting this for the future) when a setup looks great.
8/12/11 missed trades
GME 6th 10m bar short
This was a hanging man at the 8ema and straddling the 38 fib. I made excuses for not taking the trade, such as the fact that the stock wasn’t a gapper (which hadn’t stopped me before) and the fact that it was still basing on the daily chart. It dropped past the ORL to halfway between the ORL and the FE before bouncing.
KFRC 7th 10m bar short
This was a hanging man at the 5ema and not quite at the 38 fib. Again, this was not a gapper and it was basing on the daily, plus it didn’t have much volume at the time. This trade would’ve stopped out quickly.
ANW 8th 15m bar
This was a red hammer-like at the 8ema, 50 fib, and R1. However, I had seen the hammer-like 2 bars before and had set an alert over that. When it hit, I then saw that I had missed this lower entry bar. The stock hit the ORH, but then it couldn’t go farther.
MOBI 10th 15m bar
Even though this stock wasn’t an up gapper, it rose over 50% in the morning. The setup bar was a hammer-like at the 5ema and about halfway between the 38 fib and the ORH. I liked that this bar and the 2 previous bars had topped out near whole number 6, and that they had higher lows, forming an ascending triangle. Plus, the 3 red bars during the pullback were essentially hammers. However, since I was down some from earlier trades, regretting that I was shaken out of KERX, and wondering why the “great” ST and DSW setups weren’t working, I felt gun shy and couldn’t pull the trigger. The stock hit the ORH, good for .50.
Lesson to take away: When the setup is calling to me, I have to take it, no matter where my P&L is. Trade the trade, not the P&L.
REGN 7th 30m bar or 14th 15m bar
REGN was on my watchlist, but since I was busy with my other trades, I didn’t watch it closely. After its spike up, I noticed that it had based at whole number 54 and had a green bar supported by the rising 5ema right before the breakout. It looked even better on the 15m, with 3 green bars rising from R2, a hammer-like as the setup bar, and all 3 bars supported by the 8ema. I initially drew fibs over the ORL/ORH; the spike broke the FE easily. But when I drew them over PDL/ORH, the spike just made it past the FE and quickly came back down. Magic!
Lesson to take away: Keep watching for setups, but that’s hard to do when I’m busy with trades.
1000x agree...
Klaorman,
About your ST trade where you asked for warning signs. The first bar is is not a wide ranging bar, nor is the gap particularly large, and it has a long upper wick. But the second bar filled in the tail and the third bar was a nice hammer. So that chart looks like a fill in the tail trade to me. Also of interest, the price never closed below the high of the third bar.
However, the trade you took also looked good to me. You noted the 5th and 7th bars were shooting star like and suggest that is bad. Why? They were part of the pull back, so why should it be a negative if they show weakness? Maybe I am not being discerning enough, but small red bars in the pullback do not scare me. Wide ranging red bars do. And your trigger bar looks to be on top of the RZ and on the 50 cent level. I would take that trade if I saw it.
klaorman, i love that ST trade. what you call shooting stars i would classify as narrow range bars,possibly NR7s or NR5s? The volume on the up move was increasing, and the volume on the retracement was decreasing, exactly what i would want to see. the only place i could see a problem, and it would not have stopped me from taking the trade, is the topping formation. for me, i like to see rounded tops leading to a retracement. it seems more orderly for me. here, the stock shot straight up and collapsed slowly as opposed to making a few narrow topping bars near the highs. sort of an example of the rounded top i like http://i.imgur.com/YLK90.jpg
I'm going to pile on, and also agree that the Klaorman's ST 15 min trade setup on 8/12 looked good. I would have taken it, and based on the 15 min chart, would have exited early and stopped out at least $.20 loss or more.
However, looking at the 5 min chart, the parabolic/overextended rise towards the end of the move up to $34 was somewhat of a warning. And on the daily charts, the 20ema was at $34.
Based on all the charts I have gone through recently, I'm a bit hesitant now of certain "break-pullback-test" type setups.
On a 5 min chart, if you draw the Fibs over the opening 35 min range, then you'll see that it broke beyond the FE 2.0, and then pulled back to test the FE 1.68 (AND the pivot level, AND the vwap, AND the 15m 5ma). Support looked pretty good.
But I have found that some variations of those break / pullback / test setups have been a bit more suspect, and usually look to bail out quick if it doesn't work, or just wait to see if a reversal/contra setup develops.
In this case, the 12:00 red hammer bar on 5 min chart was the reversal bar I would have exited the long (if trading the 5 min chart), and/or shorted for a contra move (1st target, ORH at $33).
Finally finished updating my Tradervue trading journal last week, updating over 1,000 actual trades over the past 4 months.
SHORT SUMMARY
Just what you would expect:
* Only take A and B grade setups
* Don't revenge trade
* R = .003 * my portfolio value
* Gross profits of A & B trades = 228R
* Gross loss of C, D, F = -243R (even more if net of commissions)
* Theoretical 4 month gross return of taking only A & B trades = 68.4% (risking only .3% per trade)
Bottom line, yes, there is huge upside potential in day trading. I'm a believer. And I'm the biggest obstacle.
For those interested, here's the very long winded and detailed version of my trading journal analysis with more insights.
8/15/11
NE, 2m, 5ema/8ema, Fibs OR, entry above bar 15, exit 1/2 at FE, holding 1/2 to $33 if it makes it.
Such a bullish day across the markets and my watchlist, I found very few uncooperative plays. TEF, SWKS, and IR are others I'm currently playing.
To borrow a phrase I read a few posts back, today is like shooting fish in a barrel. I like days like this where the trend is strong and clearly defined in most stocks. It makes the set-ups plentiful and easy to spot.
By the way, I apologize for not responding to some questions several posts back that I just discovered this weekend. I'll answer asap.
Mother Of Pearl...
Of course, it's only right that my bias be corrected by the all-knowing markets. As soon as I post, the first hour's trend reverses.
Remaining 1/2 of NE poorly managed on my part. Will exit on a close below $31.96. Otherwise, I'm still holding out for $33, against my better judgment.
Which FE extension are you using as a target 23.8 or 38.2? Thanks!
8/15/11
BP, 15m, 5ema, Fibs OR, entry above bar 12, exit 1/2 at 3R, exit 1/2 below ORH, net 2R.
Would have done much better today had I simply managed more diligently. I played too loosely with trailing stops, failing to tighten some at all.
http://youtu.be/RjRMFvOPGpk?t=27s
I sometimes think that a premkt WL is easier to deal without having to work with a long WL that I can get lost in. Per BusyStocks(most up/dn) and Seeking Alpha(news):IDCC EL CBOU LXK HMY RAH VMW BHP NOV GOOG RIG SYY BAC . I noticed alot of oil stocks up premkt(m/a activity...XLE a good sub.
Thanks for all the analysis on ST! I guess it just comes down to the fact that good setups can still fail, as I had noted above.
Jay,
I was reaching for a reason that I shouldn’t have taken the trade; all I could come up with were the shooting stars. I didn’t see the fill the tail trade at all; that would’ve been nice.
joshua,
Yes, I like rounded top formations also, but ST had a compelling hammer at 4 points of confluence (I had mentioned 3, but Jay also noted the .50 level, which I didn’t notice at the time).
Grove Under,
It’s interesting that you would’ve exited early. I have gotten out early a few times because I had noticed rounding formations against my positions, but generally it seems to me that if I tinker with my stops, then they just get hit and the stocks keep going to their targets. I’ve been trying to take a set and forget approach to my trades, but I haven’t been too successful; I still watch ticks too closely (“tickitis”), and usually when I take a stop it’s a full stop.
Klaorman, not that you want something else to monitor, but if you use standard pivot lines (PP, S1, S2, R1, R2) then the hammer formed exactly under R2, meaning it literally formed under overhead resistance. My package automatically calculates these levels, but you can find the formulas if you just Google it. They aren't proprietary to any one package.
Also, it looks like it formed just below the (or on) the 38.2%. I like to see a bounce off that level, and while it was a nice hammer, it would have meant more to me had that tail bounced off the 38.2% line.
t-money,
For the faster charts, I try to highlight the stocks on my watchlist that appear to be setting up in anticipation of a play, sometimes before the trigger bar has even shown up yet, just based on how the stock is behaving around the Fibs.
I look for orderly higher highs and lower lows, followed by lower highs and lower lows on all, or most, of the candles when the stock starts to pull back (for longs). Doesn't always set up a trade, but it helps narrow my focus, especially when playing the faster time-frames. I try to avoid jarring, erratic candles, over-sized candles, and candles that break the orderly flow of price when I can. It's not always ideal when I take a trade, but I try to thin the herd, like X talks about.
I decided to give 2m charts another chance, but I only take it if the charts give me enough confidence to go for it. Otherwise, I'll gladly back off and trade any other time frame. 30m time-frames are fine by me. Whatever time-frame makes me money at the end of the day, I'm open to it.
I still don't find as many clearly defined charts on faster time-frames, so I tend to trade the slower charts more often. I have a preference for the cleanest, most orderly set-ups, and I'm better at finding them on slower charts. But that's probably more about my 200-stock watchlist and less about the faster timeframes. And of course, I'm not saying that 1m or 2m charts don't offer the cleanest set-ups. I'm just not always the best at finding them soon enough versus slower charts.
The one thing that might fall into the category of "time routine" would be something I learned from other posters here a while back. That is, I look at 2m and 5m set-ups within the first 30 minutes or so, since a 30m chart doesn't really offer as much information. After an hour from the open of the market, I will then begin to switch my focus to slower time-frames, like 15m and 30m.
t-money (continued)
I usually don't have up more than 2 or 3 time-frames at once. And something else that I learned from a great trader here is the concept of looking for a set-up on, say the 15m chart, and then drilling down to that same stock on, say the 5m, to see if I can find a smaller candle that will offer a higher R-multiple for the same move to the target.
However, most of the time, as the day progresses, it is less and less likely that I will take many trades on the 2m and 5m. Unless the set-up is just irresistible, I am content to stick with 15m, etc. The reasons being that lunchtime creates a lot of chop, and afternoon trades have a lower probability of working out, at least in my experience. These reasons make it more likely to get stopped out of a tighter stop on a 5m than a wider stop on a 15m or 30m. Just my opinion though.
Of course, I have a buddy who exclusively trades 5m charts all day long. And he's fine with it. But even he agrees with me that lunch and the afternoon is not as easy as the morning. X has said the same thing numerous times, of course. So, I try to keep the odds in my favor by honoring the slower charts the later it is beyond that first hour or two.
My trades today on the 2m showed me that I have to be okay with getting whipsawed out of profits if I'm going to resist trailing my stop in the hopes of a bigger move in my favor. It didn't pan out today. Other days, it works great. That's the trade-off, and I'm still tinkering with it.
The Chairman, MaoXian said more than once that how you set your stops is a very personal thing, and no one can tell you how to do that. It's all up to the individual trader, and everyone is different. I highlight this because the same goes for time-frames. A trader's comfort-level and how many time-frames a person monitors and trades is very personal. And it can change with time and experience. No two traders are alike.
X has told us repeatedly, "Make it your own." This brings me comfort to know that it's okay to do it however I end up doing it. I could forsake every other timeframe except 30m charts, and it would be just fine. As long as I'm making money, it's all good.
And one last thing that I admit with some embarrassment. But if I wake up late and miss the first hour, or if I'm feeling lethargic or preoccupied, I can usually trade a 30m chart just fine. But 2m/5m is out of the question, lol.
Chips and Salsa,
Awesome stuff, and thanks for the response. Can you explain a little bit how you manage a watchlist of 200 stocks and still trade 5 minute charts? I have trouble doing that with 30 stocks and would love to be able to look at more charts.
Or are you filtering using volume like Trader X does?
8/15/11 trades
CATY 4th 5m bar
This was a wide-body hammer at the 5ema and straddling the 38 fib. The stock hit the ORH, but I held out for the FE and didn’t partial. It hung around the ORH for a while, but then it couldn’t advance, so I got stopped out breakeven (where I had moved my stop). I followed “set and forget” and didn’t worry too much about the trade. My original stop wasn’t hit, however, but the stock didn’t do much for the rest of the day.
KERX 6th 5m bar
This was a NR hammer at the 5ema and straddling the 50 fib. The stock couldn’t break whole number 4, so I cut it at breakeven. It never did hit my original stop though, and by EOD it got back to 4.
HERO 3rd 15m bar
This offsetting bar almost topped out at the 1st bar’s high. I waited for whole number 4 to break and got in. The 20dema was 4.13, which just happened to be the FE (fibs over PDL/ORH), so I thought I’d get at least that. The stock wasn’t a hero today, though, so I got out under 4. My original stop would’ve been hit exactly.
VALV 6th 10m bar
This was a hammer at the 5ema; its tail almost touched the 38 fib. I got in over whole number 2, but the stock couldn’t push, so I got out under 2. My original stop would’ve been hit. Later, VALV formed a doji hammer on the 15m chart at the 8ema and 38 fib. I saw this a few pennies late though, so I didn’t take it, though it would’ve been very reasonable to still take it. I also didn’t want to try again and risk losing again on the same stock. This time it blasted through 2 and almost hit the FE.
Lesson to take away: Don’t be afraid of taking a 2nd trade in a stock if the setup is good; the stock doesn’t know I took the 1st trade, and it isn’t out to get me. (Yes it is! No it isn’t!)
GNOM 8th 15m bar
This was a hammer at the 5ema and 38 fib, right when they crossed each other. The last 3 bars were also basing at a whole number, just like MOBI had done yesterday. I didn’t take MOBI, so I had to take GNOM. I saw that the 200dma was 10.40, a penny over the ORH, so I thought that was a good target and set my limit sell there. GNOM was doing well, so I went to get breakfast. When I came back, my target was hit. I implemented set and forget for once! However, the stock did hit the 200dema at 10.67 before falling back. I did have a well-thought-out target, though, so I’m OK with that.
During the run to 10.67, there was a hammer on the 10m right where the 5ema crossed the ORH, but I missed it. The 200dema was too strong, however, preventing the stock from reaching the FE.
GTIV 8th 15m bar
This was an inside hammer at the 5ema and above the 38 fib. I set a partial sell at the ORH, which later got hit after I forgot about it, and then sold the rest a few pennies higher at EOD. Very nice!
VVUS 10th 30m bar
I had missed an earlier entry on the 9th 15m bar, which would’ve done well. This 30m bar was a hammer at the ORH, offsetting the previous red hammer. However, I learned from another trader that I had just bought right at R3, which my platform doesn’t plot. I hoped that R3 didn’t matter, since my setup was so “great.” No such luck, as VVUS dropped straight down to take out my stop by .02, and then ripped back up to hit new highs. Oh well!
Lesson to take away: Calculate R3/S3 before I get into trades.
8/15/11 missed trades
ZAGG 3rd 2m bar
Yep, 2m chart. I started looking at 2m charts a few days ago, the same day when Chips and Salsa talked about taking CSCO and AOL (I saw those also, but too late). It’s as if I don’t have enough candidates to look at, but I just wanted to check out the 2m chart. I missed this doji hammer at the 5ema and 38 fib (fibs over PDL/ORH) by about .10 or .15. The stock hit the ORH handily and made it to halfway between the ORH and the FE.
OMX 2nd 10m bar
I didn’t see this fill-the-tail setup until after the peak. The stock hit over the FE and R2 nicely.
MDAS 3rd 15m bar
I think I saw this fill-the-tail setup too late. The stock hit the FE before falling back.
EXAS 2nd 30m bar
I alerted this fill-the-tail setup, but when it hit, I hesitated because the tail seemed a bit long. The trade would’ve worked anyway, hitting the FE exactly near EOD.
OCLR 8th 15m bar
I completely missed this red hammer at the 5ema and 38 fib. It hit the 162 extension.
anyone got any good trades today?
took some but all got stop out, must have something i didn't see
t-money,
It's only possible for me to scroll through 200 stocks when I'm looking at 15m and 30m charts. I've tried scrolling through 200 stocks looking at 2m, 5m, and 10m charts, but by the time I get through the entire list and return to the highlighted candidates I like best, they've usually already left without me. It's just not worth the stress.
For the faster timeframes, I'll usually scroll down through the first 50, or 100 at the very most, depending on the timeframe. But even 100 is very time-consuming and has cost me great set-ups in the past. So, X's point to limit the list to whatever is manageable is great advice. The faster the timeframe, the fewer candidates I look at.
Since I try to trade the entire range of 2m to 30m, I leave this longer 200 stock list in place for when I use these longer timeframes. It serves me best on days when there aren't many obvious opportunities out there on the 15m or 30m.
I do rank by raw volume, as I feel more confident in knowing there's going to be less slippage and better fills than on a low-volume stock. And hopefully the higher volume stocks are more likely to be attracting other traders. But occasionally I have taken low-volume stocks if the set-up was compelling.
I used to rank by relative volume on Finviz, but I couldn't get thinkorswim's script to provide me with accurate intraday data this way, so I switched to raw volume. A fix for this has either been released or will be released in the future by the thinkscript team, but I'm fine with what I'm using now and don't plan on changing it.
timo4sho,
Sorry, man. I haven't forgotten about you. To avoid automated spamming by posting my email address here, let me set up a new email address tonight and then post it. Last time I posted my email address on a blog, I was blasted by auto-spamming programs, and I learned my lesson to never do that again.
Trader X,
I was watching GILD today (8/16) on the 5 minute chart and was wondering if this was a setup that you would have considered?
It did not have a gap, but did shoot up over yesterday's high right away in the morning. I was looking to enter on either the 5th or 6th bar, but didn't consider either strong enough to take.
The stock took off immediately after those bars without me. Is this a good candidate, or not convincing enough even though it worked out?
Thanks
Chips and Salsa, that is insane. I scroll through 20 max. If you can do what you do and be profitable, my hat's off to you.
t-money, I traded GILD today. I trade based on X's textbook setup, of which GILD was perfect as it bounced off the retracement zone and had support from the 5EMA. But, I don't trade gaps exclusively. I scan for stocks that move up or down in the first few bars, and then pullback to the rz. GILD had a nice move up in the first two bars, and a perfect pullback and reversal.
Mike
Roger,
In all honesty, it wears on me at times. I have a 200 stock list for longs and a 200 stock list for shorts. That's 400 total, and there's no way I can get to them all on faster timeframes. I still review them, end of day, for learning purposes. But I can't trade every single one, definitely not.
Talking it out with t-money has been therapeutic for me, and kind of makes me take a step back and reconsider my approach.
I still miss significant set-ups because it's like trying to catch rain drops in a raging storm. There are so many to pick from on trending days, it's often information overload. I don't know if I'd recommend it to anybody. Even to myself.
In fact, after tweaking my scan parameters a bit over the last month, I'm starting to believe there's less need for such a long list. Adding some additional scripts has tailored the scan to better fit what I'm looking for, and I was already looking at reducing at some point.
Maybe this is a sign that I should go ahead and scale back. Like everyone else here, I'm learning, developing, testing things out, etc.
"The wise man changes his mind. The fool never does."
8/16/11
BKD, 5m, 5ema, Fibs OR, entry above bar 10, exit 1/2 at 3R, exit 1/2 on close below FE, net 2.5R profit.
Messy set-up, but the 10m and 15m looked solid. Took GILD & ITMN as well, but ITMN was less than ideal.
Had some 2m set-ups this morning that were absolutely horrid and not worth posting. Still green for the day, but could have done much better. Will probably stay away from 2m charts for a bit, tending to my wounds and pride.
will you guys take the IBN, 30min, 6th bar entry?
A tale of two diametrically opposed strategies (8/16):
SODA - sold under 15th 5min bar. Exited and resold higher at top of the 14:00 bar. Fortunate to catch a big chunk of the ride.
TNA - 103 round trip trades (206 total trades), too numerous to list (ha ha...). At least the chart is somewhat entertaining to see.
See charts here.
I actually made a conscious decision to scalp TNA using 100 shares to try and minimize damage. Regardless, it was good commission day for TradeStation!
* * * * *
Times:
For me, the IBN 6th 30min bar looked a bit to wide. But I don't trade the 30min, so please take with a grain of salt!
IBN,
I wouldn't have taken 3/30" IBN: 1) I don't trade foreign banks- generally a low ATR 2)a wide 1st red bar composed of 3 full bodied red 10 min bars can signal an end to the move
206 trades? That's more than I do in almost two months!!!
ah thanks
or i guess the 8th bar is a warning sign that i should exit some positions
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