There are some great comments on the previous few posts - if you aren't reading them, you should be.
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The Psychology of Handling Large Drawdowns
6 days ago
Tuesday, August 23, 2011
TIN - 082311
The Dow is up 3%, the NASDAQ is up 4%, and one of my best trades of the day is a short. No analysis, I think you guys can figure it out. There was also a nice "beyond the Fibonacci extension" setup that I did not take.
There are some great comments on the previous few posts - if you aren't reading them, you should be.
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There are some great comments on the previous few posts - if you aren't reading them, you should be.
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40 comments:
X-nice move on TIN. Also liked the 6-5" IB. It came up on the Busystock.com premkt WL(17) along with SINA SOHO FCMN ALV LULU COH PANL PWRD HNZ ARMH. I noticed some gap dn gold stocks and sub'd GDX GLD. no trades. GOOG and the rest of the high priced/hi option vol naz+ stocks did well GOOG rallied to its ATR(avg true range) of 22 pts. Unreal day and don't need much the mkt was at your back
8/23/11 trades
FNSR 11th 5m bar
This was a red hammer at the 8ema, 38 fib, and R1. Yes, the previous 5 bars were messy, but I thought the 3 points of support outweighed the mess. The trade was humming along, going past the ORH until about halfway to the FE (and R2), when the market fell and took FNSR with it. The straight down move made me scratch the trade at breakeven. Eventually FNSR dropped farther, but it missed my original stop by one penny. Then it rocketed straight up to the FE and beyond the 200 extension. I’m not frustrated this time (well, ok, maybe a little bit) because the strong down move had to be respected, and it seemed like luck to just miss my stop.
WFR 10th 30m bar
This was a hammer at the 5ema. It didn’t seem to have retraced “enough,” but the rising 5ema was supporting it nicely, so I took the trade. I was shooting for whole number 7, near the FE, but I got a few pennies out of it by EOD.
WTSLA 10th 30m bar
This was the same deal as WFR. Looked for whole number 5; got a few pennies.
OCR 10th 30m bar
Again, same deal as WFR and WTSLA, though this time the setup bar was a red hammer at the 50 fib supported by the rising 8ema. The stock almost made it to the ORH. There was a quadruple top at 29.75; I sold after it couldn’t break through on the 2nd try.
Missed trades
TIN 5th 5m bar short
As Grove Under did, I saw the big tail on the 5th bar and passed on it.
YGE 6th 10m bar
This was a hammer at the 5ema and 38 fib. I passed on it because I was getting into FNSR. Soon afterwards I saw that its tail coincided with the rising 5ema crossing the 38 fib and thought, gosh darn, I should’ve taken it. The stock hit the FE within one bar.
FSLR 8th 15m bar
This was a red hammer at the 8ema and 38 fib. R2 was nearby. I knew that I was probably not going to trade FSLR (high price = scary to me), but it was on my list just to see if it would set up. It did and it went, hitting the ORH, though the ride was choppy.
NFLX 4th 30m bar
This stock wasn’t on my list, but I checked it out for fun and saw this hammer with its tail almost coinciding with the rising 5ema and 38 fib (and R1), similar to YGE above. It would’ve produced 6 pts at the FE, but it would’ve needed a 2 pt stop.
SIRO 10th 30m bar
This stock set up at the same time as the 30m stocks that I traded above. I passed on it, and at the time I had thought, “That means this one will probably do the best!” And it did, hitting halfway between the ORH and the FE.
Very nice trade, Trader-X. Once I saw the deep retrace on the 5th bar, I made up my mind not to take the trade, which meant that I didn't follow it too closely anymore. (I happened to spot it later well past the FE and thought, "Ugh!") How do you stick with stocks long enough to find redeeming setups? I remember that you've posted other charts where the setup was, say, the 20th 5m bar on a U-turn that meandered until a hammer showed up at the rising 5ema and ORH! I would not have stayed around that long to find that hammer. I'm guessing that with your usually small watch list that you have the time to smoke out these nice setups. I'll have to work on that (and have patience) if I want to find similar setups.
Klaorman, your comment about "deep retrace" made me go back and look at the chart again. You are probably referring to the long tail on the fifth bar. When I am judging a retracement, I look at how far the real body penetrates the retracement zone (RZ), and neither the fifth or sixth bar closed beyond the 50% level. And my entry was based on a break of a trigger bar that actually had its entire real body outside the rz. All of those factors combined made this a bearish pattern and a good setup.
I just thought I would clarify!
PS - one final thought. While I like to see no penetration of the rz on a long setup's retrace (ie, I like to see a clean bounce off the rz), I give short setups a little more latitude when it comes to price penetrating...I am not sure why, but based on experience they still tend to work nicely whereas it can be a red flag for a long setup (take a long setup from an "A" to a "B" grade).
To say I'm inspired by this blog would be an understatement. I just discovered it on Sunday, and have learned more in the past three days than the past 10 years of reading books, hanging out in trading rooms, taking a few courses. This is amazing. Thank you Trader-X and all that contribute.
Trader-X,
Thanks for your detailed explanation. My question was about something else entirely, but your excellent answer brought up more questions:
* Are you saying that the tail matters more to you on long setups? So that if the bars on TIN were exactly reversed you wouldn’t have taken the trade, even with the 7th bar’s body completely above the RZ?
* I assume you had seen the chart on the 5th bar, with the long tail. Did you not consider that as a setup bar because of the long tail or because of the body straddling the bottom of the RZ?
* You said, “While I like to see no penetration of the rz on a long setup's retrace (ie, I like to see a clean bounce off the rz)...”; do you mean that you don’t want the tail to penetrate the RZ or just the body? I had talked about 2 trades (YGE and NFLX) where the tail did not penetrate the top of the RZ (well, NFLX actually did a tiny bit), and they both hit the FE. In your experience, do setups like YGE and NFLX have higher probability than ones where the tail penetrates the RZ?
My actual question concerned how you could stick around watching certain charts long enough to find setups when I had thought that any setup was already invalidated. My guess was that you had a small watch list and could pay more attention to each chart. True? But your answer raised some important questions, so great answer! Thanks a lot.
Klaorman, you are asking questions about X's watchlist. FYI, there are probably a dozen posts over the years and he has mentioned a key to his success is having a small watchlist and being able to dedicate more attention to it as well as open positions. This is where most of us learned to sort by volume and only focus on the top 20 or so on the watchlist. I think many commentors have given you this feedback over the past week.
I interpreted Klaorman's comment (correct me if I'm wrong) more along the lines of:
If a setup fails or you missed the trade, do you completely remove the stock from your watchlist?
Based on what I've seen in the archives, I believe the answer is no, keep it on the watchlist and continue to monitor it.
It seems like when a stock is really "in the groove", there are many times when there will be more than one good setup.
For example, a classic pullback to the retracement zone trade can result in a beyond the FE setup or some other setup. Like TIN yesterday (8/23).
Watchlists are easy:
1.) Compile list of gappers from your source. I use my trading software's gap lists. You can use CNBC, or a myriad of sources online.
2.) Sort by volume. I use actual volume, so it updates dynamically as the volume changes. What is on top one minute may be 4 or 5 down minutes later. It just depends on volume.
3.) Focus on going about 20 deep. My watchlist is setup to show 24, after 24 I have to scroll to go lower. I rarely scroll - when I get to the bottom, I just start over at the top.
4.) I don't change, remove, delete anything from the watchlist. I don't even look at, or care about, the symbols. I am just looking at the price action for patterns I trade.
All of the above is based on what Trader-X has posted here many times. It is the basics.
Focus on ONE timeframe, and you have plenty of time to go through 20 stocks and make good decisions based on what you see. It's not rocket science. A lot of people here don't really get to the "making good decisions on setups" stage because they are trying to look at 100 stocks and 5 timeframes. You'll never learn if you can even trade when you are doing that.
Ken
Ken,
One thing that I have trouble with when determining my watchlist, is which side to focus on. Long or short. Do you compile your watchlist from your source in a specific way depending on which side (long or short) the market opens up on.
For example, X traded TIN the other day when the market was up quite a bit. My top 20 candidates were all on the long side and TIN wasn't even on my list. I struggle with determining this and was wondering if anyone had any specific ways that they go about doing this?
8/24/11
Hooray for palindromes. These two were my best trades today. Weird.
PNC and CNP, 5m, 5ema, Fibs OR, entry above bar 3, exit near FE.
t-money,
I only take entries that exist outside the previous day's range. All of my trades set up this way, even though they may open the day inside the previous day's range.
The specific comment that might help:
"I want to see which stocks can move strongly outside their previous day ranges within the first 30m to an hour after the open. This will catch the gapping stocks automatically and still allow non-gappers to establish strong, green or red bars well beyond yesterday's ranges."
t-money, I don't try to guess the direction of the market. I take the gap up and gap down lists, and combine them into one watchlist. Then I look for setups. I don't look at what the general market is doing - adding in another factor like trying to game overall direction is a recipe for disaster imo.
Regarding your list, if you are looking for one specific pattern you can obviously cull it down by deleting symbols that are not setting up for that pattern. That will probably get you deeper in the master list, but once you have your candidates you could still focus on the top 20...they are just the top 20 that have the potential to be the one pattern you are looking for.
Ken
Couple other 8/24 setups similar to Chip and Salsa's nice PNC and CNP trades:
WFC above 3rd/4th 5min bar
CHU above 4th 5min
I love these patterns, but not sure how to categorize/name them, somewhat like the "push through" and "quick hit" setups, or just a shallow pullback to RZ on a shorter timeframe.
Is there a name for this setup? All I know is that these setups seem to work well.
WFC didn't have as clean of a setup bar on the 5min, but it still hit the FE. However, it's interesting to see it on a 2min chart -- it was such a nice setup. Add "fill in the tail" and an ascending triangle based on that more detailed view.
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I had ZERO trades today, since these trades nor any others I was tracking didn't fit the very strict criteria of my trading plan for this week.
It was a bit tough to pass up those trades, like trying to walk past a $100 bill on the street. But I made a commitment to follow my plan.
"Discipline trumps conviction."
Thanks for the response Ken,
So just to be clear, you take all gappers, both long and short, put them into one master list, and sort that list by top 20-25 using volume.
So your top 20-24 has both long and short candidates within it, correct?
traderx: i never knew you concentrated more on real bodies. thanks for pointing that out. the wick would have scared me right out of it.
if anyone uses quotetracker, it has a neat volume indicator; it is vol%. when sorted this way, it compares the volume as of that moment in relation to average volume. so say stock "A" has traded 2,000,000 shares by 11am and has average daily volume of 10M, it is about on target. whereas, stock "B" has only traded 500,000 shares (so, sorted by regular volume, it will be ranked lower than "A") but its average trading volume is 1,000,000. ranking by vol% will rank/sort stock "B" higher because it has more volume today than normal. i also switch my sorting during the day to see which are up/down the most.
It wasn’t about gathering a watchlist.
I was admiring how Trader-X could find his setups because for me to do the same sometimes would be akin to finding, yep, a needle in a haystack. And sometimes when I would find that needle, I would look at it and wonder, “What would Trader-X do here? This bar looks great, but would he take the trade?” Usually the answer is, “I’m not sure, so I’ll pass.” I’m currently most focused on the pullback to the RZ trades; I only want to work on these for now, and perhaps later I’ll branch out to the more fancy ones. Again, once I saw TIN’s 5th bar and decided to pass on it, I didn’t pay too much attention to it anymore. It was still on my watchlist, but I probably didn’t understand the significance of the setup bar when I saw it.
I looked at my comments and saw that in my first one I had said, “I'm guessing that with your usually small watch list that you have the time to smoke out these nice setups.” I already know about Trader-X’s small watchlists. But then in my second comment I had said, “My guess was that you had a small watch list and could pay more attention to each chart. True?” That made it sound like I didn’t know, which was bad rephrasing on my part, so apologies for that. Plus it was a silly question anyway since all Trader-X can say is, “Yes!” Apologies for that too!
I don’t see the big deal about looking at multiple timeframes. Trader-X had said something similar to, “A chart is a chart, no matter what the timeframe.” And as I had mentioned, I start with the 2m and 5m in the morning and then move to the longer timeframes as the day progresses. Since I’m only looking for the pullback trade, once the time for feasible 2m and 5m setups is past, I’ll have to move to the longer timeframes to find setups.
But what about my questions about tails? I had thought that they were very good questions, and I’m curious about the answers. Would anyone like to take a crack at answering them? Thanks much!
Klaorman - that Trader-X quote doesn't mean trade them all in one session, it means that patters occur across all timeframes. You say you don't see the big deal, but no less than 3-4 people have made multiple posts telling you it is about focus, and having the time to properly evaluate setups and make the right decisions. You don't seem to want to listen. That means you are probably making money doing it your way, so more power to you. But the reasoning others have taken the time to share is sound advice for the other 99% of people trying to trade.
Joshua - I don't think Trader-X was saying real bodies are more important than tails, or he concentrates more on one or the other. Rather, he is showing the distinction of price closing inside the retracement zone (or, for that matter, above or below any key area) VS. price penetrating that area but reversing to close back on the other side.
A real body close above a resistance area is most likely bullish, but price penetrating that level and falling back to close below resistance is most likely bearish. And the opposite is true - a real body close below a support area is most likely bearish, but price penetrating that level and rising back to close above support is most likely bullish (and a hammer of some kind).
Martin, that is great analysis on tails vs. real bodies. Thanks for sharing.
Mike
um....what do you think about SIGM 10th bar, 5 min
1st 5 bars are bearish and it close back to the support
Times:
For me, SIGM looked a bit too choppy. And when it did make the move down (8th bar), it had a bullish lower wick. I can see the 5ema coming down to touch the top of the 10th bar, but if I step back and look at the overall action, I just think, choppy, and would have passed. Just my 2 cents...
* * * * *
Overall, mostly choppy stocks on my watchlist today, but I did take 2 trades (both in BCS) that I considered were decent B grade setups:
BCS - Sell below 14th bar - Beyond the FE setup. Fibs over opening 20 min range. Scratched the trade. But in theory, I should have stayed in.
BCS - Sell below 12:00 red shooting star - Beyond the FE type setup. Fibs over 20 min opening range. Hit the 200% FE target.
BCS is an ADR and is essentially a proxy for BAC and other financial stocks. But as narrow ranged and clunky as BCS is, it seemed to have less "noise" and easier to trade vs other similar stocks.
Martin,
Oh yes, I fully appreciate all the generous comments and thank all the commenters for them. And I do understand that the comments are for all readers, not just for me. But I had mentioned that I’m currently only looking for the pullback trade. When the feasible period for such trades on the 5m passes (for me, that’s less than an hour), should I be done for the day? I just move on to the 10m, 15m, and 30m. Sometimes stocks set up on multiple timeframes at once, which gives more weight to the setups.
I’ve been finding good setups on all timeframes, especially the 2m, now that I’ve started looking at it. My problem is not about finding good setups; it’s about entering them when I should (even when the stocks are a bit spready or when I’ve missed their ideal entries by a few pennies or when their stops are a bit larger than I would like) and managing them properly when I do enter them.
8/25/11
Picture-perfect set-ups to me, but all of them fell apart.
JBL, WFC, OVTI, IVZ
Yes, I took all four at once. Caffeine helps.
5m, 5ema, Fibs OR, entry above bar 3, all four trades stopped out for a loss.
Worst day I've ever had.
A short would've worked, but I was trying to trade without concern for market direction. Obviously, I'm not understanding something.
I don't normally combine my long and short watchlists into one. Was this my mistake? Would that have tipped me off to more volume going into shorts than longs?
I don't know. Comments welcome. I'm gonna go have a drink and punch myself in the back of the head many times.
Chips and Salsa,
JBL - you entered directly below the standard pivot line of R2. I wrote this same response to you a few posts back. Do you actually read feedback when you ask for it? Every charting package I know plots pivot point lines, or you can Google them for the calculation.
WFC - there was no support from the moving average - it was far away. And that first bar with the upper and lower tail isn't as strong as you might think; those tails represent indecision and while it is not a classic Doji, it certainly is closer to that than it is a strong bar.
OVTI - the third bar was not bullish in comparison to the second, down bar. It didn't even reach the halfway point of the second bar's body. Meaning buyers were not very strong.
IVZ - you entered directly below the standard pivot line of R2, and there was no support from the moving average - it was too far away.
Chips and Salsa - you need to stop trading so much brother. Limit yourself two trades a day, that way you force yourself to only take the best. You'll have to ask "is this a setup I want to use for one of my two trades?"
One of mine today was BTU. I know X doesn't trade late in the day but I bought when it broke the OR high. It made a nice little hammer at 2:00 and I bought when it broke that high and rode it for .80.
Hang in there, focus more so you can spend time making sure the setup is good, and don't trade so much.
Th 25aug. Classic reversal sell the financial(especially-WFC JPM C GS ZION) on the BAC news on a 25% gap up 20 min into the open. Best % gap up on my at the Open WL: TIVO, all others had red 2nd bar 5 min chart. When you see that happening watch out. Market not cooperating with the longs...why force it nothing wrong with contra trades. No set up short charts. Alot of sliders: CIEN like.
Roger,
Thank you for the analysis both this time and last. I always read the feedback given by everyone. After your previous post, I plotted Persons Pivots, then standard Pivot Points on my charts (not at the same time, of course).
I decided not to use either study because my charts were too cluttered when adding Fibs and EMAs. I was looking at so many lines of support and resistance, my clarity was hampered. Apparently, removing them was a mistake. I'll have to revisit these studies and see what I can do to include them permanently. You use Fibs and Pivots? How do you navigate so many indicators? Don't things look too busy? Or perhaps you don't use Fibs?
Zorro,
Thank you, sir. You're right. The higher volume of trades is great when I'm winning. But when I'm losing, it's a bear. It's also taxing to move so furiously into so many trades in such a short timeframe. I'll take you up on your recco and only trade 2-3 trades max per day. That will keep me much more selective. Thanks, man. I like your name, btw.
bl,
Great points on the market reversal. If a trader doesn't watch "the market", I'm noticing that most folks are still watching something. Whether it's their watchlist going all-red 10 minutes after the open or some other action on their platform. I wasn't watching BAC closely enough this morning. Nice job.
One other thing that I've mentioned before, as have others. The EMA is not always close to the trigger bar, and the trade pans out often enough anyway because of sheer momentum at the open with the first few bars, as long as the Fibs provide support.
I've seen X post trades where the EMA is relatively far off, but the bar is working with support from the 38.2 line, and the trade is successful (and the EMA eventually catches up). Maybe the subtleties are so nearly indistinguishable that I'm not yet at that level of discernment.
The default position of safety would be to pass on these "at the open" trades that have no direct support from an EMA and just wait for set-ups where the EMA contacts a trigger bar directly or is very close to doing so. Like what Ken was talking about when he uses the 5 EMA in a very strict manner. Maybe I'll just start doing that.
At any rate, thanks for the feedback, all.
Chips and Salsa,
I have the pivot point, R1, R2, S1, and S2 on my charts. I don't pay much attention to these lines after the first 30 minutes or so. What I mainly do is look to see if the gap is directly below a level, specifically R2. This is the kiss of death a lot of times, and I won't take trades. Conversely, you can use them as a filter and only take trades above R2 (or below S2), or some other variables you might decide after study.
So to answer the question about charts being busy, no not really but only because I only look at certain levels, and usually (not always, usually) only early in the session.
Hope that helps.
Chips and Salsa:
Totally know how you feel, I've had those days, like I'm sure all traders have had one time or another.
You've made many great trades and know what needs to be done, so I'm positive you'll be back in the groove in no time.
In fact, you do know based on the great comment you made to me a couple months ago!
http://traderx.blogspot.com/2011/06/make-it-your-own.html
Just read your other post, chips and salsa. I don't think you will find a lot of X trades that are far from the EMA. I am sure there are a few, but I doubt many. Of course they sometimes work out, as X pointed out a while back sometimes bad setups work. But, that doesn't mean you start taking bad setups because they sometimes work. You are in it for consistency, not getting lucky.
Roger,
I needed to hear that last post. Much appreciated, man. You're right.
Thanks for the Pivot info. I'll keep 'em in my peripheral. I'm glad you pointed out R2 and S2. My software package puts up 9 pivot lines by default. If I streamline to just R2 and S2, would that suffice?
Grove,
Thanks, buddy. Being on the other side of the equation makes it surreal to read that post again, haha. Needed that.
Rogers,
you mention,
"I have the pivot point, R1, R2, S1, and S2 on my charts. I don't pay much attention to these lines after the first 30 minutes or so. What I mainly do is look to see if the gap is directly below a level, specifically R2. This is the kiss of death a lot of times, and I won't take trades. Conversely, you can use them as a filter and only take trades above R2 (or below S2), or some other variables you might decide after study."
so from your experience if the price pass to certain level of R1/R2 or S1/S2, it won't work that well?
Thanks
i think you are right Grove Under
2nd bar is red flag cuz it is solid green, but even the 3 to 6th bars are bearish, it is not bearish enough cuz no solid red body that can cancel the 2nd bar, it take many small steps to do it. Also the 8th bar has a lower tail which show bullish sign, not a good trade, also the volume was enough, so little volume for this trade to work
8/25/11 trades
RIMM 5th 2m bar
This was a red hammer at the 38 fib, though the 5ema was closer to the 50 fib at the time. The stock hit over the ORH nicely as I eyed the FE, which was just under R2. Perfect! As RIMM started falling under the ORH, I thought, “Should I sell? -No, that’s what ‘they’ want me to do! I’m going for the FE!” As RIMM hit my entry price, I thought, “Should I sell? –Nah, this isn’t a logical place to sell. I’ll hold my original stop; it’s not too far away.” As RIMM hit my stop price, I thought, “Should I sell?!” -kidding, I always respect my stops. What I really thought was, “Well, dang it, I was ‘good’ for once by not selling too early, but all I got for that was a stop.” However, if I’m consistently “good,” then I should be able to balance the stops with the FE hits.
AGNC 4th 15m bar short
This was a shooting star at the 5ema and under the 38 fib and S2. It was kind of like a fill the tail setup, but there wasn’t a tail; I just liked the basing at the lows. The stock dropped nicely, hitting past halfway between the ORL and the FE, but then it bounced. I held on, looking for the FE, but I had to cover near breakeven. My platform doesn’t plot S3 or R3; sure enough AGNC bounced near S3. I’ll have to remember to calculate S3/R3 all the time.
AONE 3rd 30m bar
This was a hammer at the 5ema and straddling the 38 fib. The stock almost hit the ORH, but near EOD I scratched it at breakeven.
NLY 6th 30m bar short
This was a shooting star at the 5ema and 38 fib. The tails on the previous bars formed a pennant, making the shooting star look appealing. The stock moved slowly though, and I covered at breakeven when it attempted to drop but then got held up. It did almost hit the ORL at EOD.
Missed trades
AONE 5th 2m bar
This was a red hammer at the 5ema and 50 fib. The tail was below the RZ though, and the 4th bar’s drop had offset the 3rd bar, matching it in shape almost perfectly, so I passed. However, I didn’t stick around to see that the 6th bar had hit the ORH strongly, on big volume; that would’ve been a great setup bar. The stock hit the 300 extension in 3 bars.
PRX 8th 15m bar short
This was a great-looking shooting star at the 8ema and 38 fib. The previous bars looked great too, with wide bodies and tiny tails. However, I only saw the bar after it had triggered and then bounced. The stock meandered and bounced off S2, where it had bounced earlier to create the ORL. At EOD it finally hit the ORL.
CISG 8th 15m bar short
This was another great-looking shooting star at the 5ema and 38 fib, though the 6th bar bounce almost offset the 5th bar. I didn’t have shares to short, though. The action was choppy as the stock almost hit the ORL.
chips, too early and too far from EMA. i usually wait until 10am to start trading.
i only saw one decent trade today which was BECN. i'm like klaorman only following one basic setup. gap up pullback.....
Roger:
Thanks for sharing the info about the pivot levels. I watch them, but never interpreted them the way you explained for the opening range. Very helpful, thanks again.
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