I will leave you with a chart of the "classic setup" from today - it eventually made it to the Fibonacci extension (FE), but I bailed at $30 (black horizontal dashed line). Please post your trades in comments, and I will try to post a few charts over the long weekend (no promises, though!).
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27 comments:
Traded ALTR today on the retracement of the 3rd bar. Jumped on the 4th bar and exited on FE 261% for 0.80$.
April 20th must have been a "classic setup" day, so I'm going to pile-on...
RHT
5 min, bought above 5th bar trigger (1 bar late trigger and entry)
* Successful, out at FE.
* A partially botched trade. Got in very late when it broke above the OR high. Entry still felt good there, but I left almost $.20 on the table.
http://imgur.com/TkAtw.png
VSEA
5 min, bought above 5th bar trigger
* On 15 min, had warning sign due to upper wick on 1st bar, and red 2nd bar trigger.
* But it looked good on the 5 min chart. Several bars (between 2 and 5) had lower (bullish) wicks. Rising 5 ma also helped.
http://imgur.com/EjIE7.png
***
I'm going to start tracking what percentage of these trades fail/reverse at the FE, and how much they pass through the FE before reversing.
If a high enough percentage of them:
1) Reverse after passing through the FE less than (let's just say for now) $0.15 (this becomes the stop loss amount)
2) Then go back and touch the OR (the potential profit)
Then this might be a "fade at the FE" setup worth considering.
Anyone ever look into something like this, and if so, does it have potential?
I like to analyze charts that had the "trader x set up" and eventually didn't work (i think one can learn a lot from it)
There are 2 reasons for a set up failure:
1.The set up is not as good as i think
2. It is good , but nothing is 100%..
On Friday, ALB, on 5 min. chart, had really strong first bar and a pull back to the 38.2 retracement line. Though the 4th bar was a green inside bar+narrowing range bar(set up bar), the pattern didn't work eventually.
reasons:
1.No support from rising MA
2.On the 15 min chart , the first bar had a long upper wick
Please feel free to write any opinion about the chart or my interpretations
thanks again for X and all the comments on this great blog
US
Grove,
Those are awesome trades. Holy crap I missed them!
Working on my stock selection/watchlist process and experiencing growing pains.
Great job Grove, I find I am all over the place still and trying to condense a little. I did see ALB trade US mentioned and kept an eye on it but it just never developed.
I think someone on an older post way back mentioned a site with gappers. I Googled "Option Trading scanner" and clicked on the selection " Option Trading scanner and free data on Option movers". A white page appears with 6 columns gainers/losers/Gapup/gap down/ 5 day high/ 5 day low.
In upper right you can see when it last updates and I refresh from time to time. Hope this helps and its FREE.
Great blog and I hope to contribute some trades soon.
Tom
US:
I agree that looking at failed trades is very valuable and I do the same. I want to feel good about taking trades that fail, as long as they had a good setup.
If you take 10 trades, at least 2-3+ will flat out fail. You never know if a big fund or trader dumps an order at the time you're in the "perfect setup." That's OK with me, since the odds in the long run should be in my favor.
I hate taking bad setups that succeed, because then it feels like I cheated.
***
Regarding ALB on 4/20, I agree with your assessment. One other consideration is that the first bar range was too wide.
The entire range for the day took place in 5 minutes. When the first bar is unusually wide, the theory is that most of the energy has been expended, and therefore the stock drifts sideways for the rest of the day.
Trader-X and Tom C. were talking about this very situation back in the archives of 2006 (I'm still studying the past posts). Beyond using the 5 ma, I'm not sure if they found a way to quantify whether the first bar is too big (e.g. it is < x% of average daily range?), but it might be more of an art rather than science.
If you look at the 15 min chart below of the past 6 days, you can see that the 1st bar was by far unusual in range.
http://imgur.com/uXmKq.png
But on the other had, if this trade succeeded, we would be saying, "Another great setup that worked!" :-) You're so right, nothing is 100%, and I constantly have to learn to live with it.
Flowtastical:
Thanks, but so far, finding those stocks was partially luck. I'm still trying to settle down on a constant watchlist routine, such as:
* At 9:37, look for "quick hit" setups on the 5 min.
* At 9:55, look for "classic setup" or "bread and butter" or "u-turn" on the 5 min.
* At 9:57, look for "quick hits" on the 15 min
Now that I'm reviewing the list above, I think it's too much for me right now -- running before I can walk. Looking for 2 min setups messed me up for a while, so I quit.
And if I get into a trade, I'm still trying to determine whether to continue looking for other trades, or monitor the existing trade closely, or both, or something else, or... Having thoughts in my head of "what should I do now" during trading hours can be detrimental to your account.
Still learning, still evolving, still making mistakes, but that's the best way, for me, to learn.
Tomross58:
Thanks, and I totally understand how you feel, I'm in the same boat as I mentioned in my comment above. Still trying to find my groove, and I know it will take a while (or never end!).
Appreciate the heads up on the Option Trading scanner. Will check it out.
Interesting conversation, and I feel compelled to chime in because my shift to profitability finally happened in 2010 after I came to terms with what you guys are discussing. You talk about failed "Trader-X" setups, but when you reference them there is always something lacking, such as no support from moving averages, not a valid candle signal, or in the case of the 15-min chart you posted Grove, I would not even have considered that because of the long upper tail on the first bar. What I am saying is you can't call them failed Trader-X setups if they don't fit the criteria to begin with. Grasping this concept turned me profitable. In the past, I made 5-10 trades a day. Once I finally forced myself to get selective, I started making 5-10 trades a week. And 10 in very rare. Most weeks I average 5-8. And guess what? My winning percentage is well above 80% for over 10 months now. Being selective and not trading as much is the key. But it is hard to do when you are conditioned to making alot of trades. Can you go a day without making a trade? It was darn near impossible for me a year ago, and forcing myself to do that some days was the hardest thing I have had to do in my trading career. But once you overcome that obstable, that mental block, the success is there.
Great comment Michael B., thanks for the motivation.
Great comments from Grove and Flow and everyone else as well. I get a lot from reading what you guys post. Thanks and keep up the great work.
Jarrod
Grove:
thanks for your detailed comment regarding ALB !!
i really don't know how to identify a "too wide first bar" as part of the set up is a wide range bar...
i was looking for some info. about it in older posts..i'm just reviewing them all..
Tomross58:
interesting site, i'll check it during the market hours
thanks
Grove Under:
On analyzing failed trade, I just want to get your opinion on WBC today (April 21), 5 min chart.
In my opinion, the first several bars look like its going to break up. It didn't, instead it went flat and sideway.
Why didn't it go?
Appreciate your, or others, opinion.
Thanks
will you guys take SLB, 2 min, fib high and low of the current morning day (4/21)
entry at the 6th bar
it looks very bearish on the 4th candle right?
what do you guys think?
Grove,
The 5 min charts are more forgiving than the 2 min charts for sure. With the 2 min you really have to know what your trading because your head will spin from going chart to chart every two minutes.
My method is every 4th minute scroll through the charts and see what is about to set up.
9:34, 9:39, 9:44, 9:49 etc.
I stop if something is about to hammer, doji, or looking like its an offsetting bar.
Most times I feel like if I can get my watchlist right and select the right stocks then the setup basically trades itself. Its those times that my head is spinning and I'm not too sure about my setups that I get smoked.
I think if you're trading well and profitable and the market is cooperating you can take a ton of setups. If your pnl is not consistent take fewer setups for sure. A couple times this week I took 5-10 setups that were good but not great and I got stopped out twice.
I remember from Sept to Dec in the bull run I would take 10-15 setups on the long side on quite a few days and be green on everything. This is obviously not the case now.
Times, lots of long upper tails in those first few bars, and the first bar was a little too wide-range for my taste. When I say wide-range, that is subjective. I compare the subsequent bars to make that call...had they been a little more wide-range and moved a little more, I might have looked at it longer. But I avoid w-r first bars followed by narrow-range subsequent bars. And the high tails were bearish.
Hi Michael, what timeframes do you trade and what are some setups examples?
thanks Michael,
very look bearish @.@....
Hi Walter, you caught me before I signed off for the weekend. I trade the 5 and 15-minute charts. Two examples from today are TZOO and AMGN, which are essentially mirror images of each other. TZOO was long with an entry on a break of the 22nd bar and exit at the Fibonacci extension. AMGN was a short with an entry on a break of the 31st bar and exit at the Fibonacci extension. Like I said, mirror images but the one thing they both had in common is movement.
Let me know if you have any questions, but I probably won't check until Sun or Mon. Take care.
Both of those were 5-min charts with Fibs over the morning range. I use a 5EMA.
Anon on WBC. I assume you entered on a break of the 4th bar, though you didn't say. It went up $1 from there, so what more were you looking for? Just my .02 but I would have passed because of the 3rd bar being so bearish, and offsetting the 2nd bar. But, again, it still went up $1.
DJA
I traded COF today on a 2 minute chart (above 6th candle). My rationale was that it made a nice move up, an orderly pullback and found support at the retracement zone as well as the 5ema. It worked out but I was curious if this is a trade that anyone else took because the 6th bar was more of a spinning top than a hammer. Was this a good trade, or more just lucky that it worked out? Any input would be appreciated. Oh, and I exited on the spike bar at 10:40.
Michael B.:
Great comment you posted at 9:37 am, very inspiring.
I know it was very difficult at the time for you to become selective and not overtrade, but how about now? Is it still a constant challenge to stay so disciplined?
Also, on the trades you took today (Thursday, April 21: TZOO and AMGN), I can't seem to line up your entry based on # of bars. Could you provide the time?
Anon @ 1:18 PM:
I saw WBC early and got scared off by the wide spreads and fast moves. In my opinion, it also had too wide of a morning range. See how big the first hour was compared to other days in the prior month:
http://imgur.com/n5Z18.png
WBC seems very similar to my comment posted this morning about ALB -- too much energy expended in the opening range. But I'm not sure how to quantify it, other than to say, "it looks really big compared to prior days."
What's interesting is that since the morning moves in WBC were so big and fast, you had to go down to a *1 minute* chart to see any reasonable detail. And hey, look there, a "classic setup" buy! If I didn't tell you it was a 1 minute chart, you could have believed it was a 5 min chart. However, I'm not sure how reasonable it is to trade on a 1 minute level.
http://imgur.com/dPLTS.png
And as you can see in the chart above, I also got a bit scratched up in WBC today. I thought getting over the Opening Range high and over the $69 whole number would take me to the moon. Nope, tried it twice, and it didn't work. Breakout fakeout. And the wide spreads mean I got more slippage than usual on the fills. Lessons learned.
Times:
I saw SLB and thought it was too spiky with wicks for me, and I personally would have passed without even taking a closer look.
I'm just not good enough yet, but I'm sure there are others who can successfully read and trade those charts (reminds me of those spiky ES futures or SPY).
But I also agree with the other comments that bars 2-4 with upper wicks looks bearish.
http://imgur.com/gxVi8.png
Flowtastical:
I like your process of going through the watchlist a minute before a bar closes to see if anything is lining up. I might just be making my monitoring process too complicated!
And you're so right about those days when you get your watchlist selection right and everything just works smoothly. I've also had days when a chart I put up hours ago (and had written off and never removed) all of a sudden has a great setup. I admit that's luck, but I'll it anytime I can get it.
t-money:
Nice trade in COF! I didn't have any trades in COF today and saw the setups way too late. But I'm not sure if I would have considered the 6th bar on the 2 min version a "clean" setup. Do you mean your trigger was the solid green 8th bar? I might have taken that one.
http://imgur.com/aRlBk.png
I only saw the trades I missed on the 5 min level (10th and 34th bars) which would have entered me into a trade at a much higher price vs your entry. There were some red flags, but with support from multiple timeframes, I believe that offset some of the concerns.
http://imgur.com/VNxl2.png
And based on a much smaller profit potential to the FE on the first missed trade based on Fibs drawn on the opening range, I probably would have redrawn the Fibs to include the low from yesterday to current OR high (as Trader-X recently wrote about) and have a higher FE target (which it exceeded a bit and quickly dropped, right around the same place as your exit).
Getting back to anon's 6:02pm comment on WBC, i didnot enter on the 4th (thinking it was a bit risky given the bearish 3rd candle.) I actually entered on the 6th when it cleared $68.83, expecting it to go up to $70 (138.2% FE with Fib plotted between the low and hi of the first 2 bars). It stalled at $69.36!
I'm seeking opinion to validate if i had mis-interpreted the set up leading to a failed trade.
Thanks,
Grove Under
your comment on WBC lighted up a blind spot for me. I should have compared its move vs prior days to realize the move was big potentially expanding energy too fast.
Thanks,
Reffering to X trade (GLNG) on the 20th - 5 min chart.
Just wanted to get your respone on the stop. the 5th bar low was 28.67
X enetred the break of this bar's high which is 29
would you willing to pay the stop loss had this trade didnt work 0.33 cent? (1.1 % of yur money)
Anon, you need to start putting a name even if you make one up or else people will stop responding. Just FYI.
Regarding GLNG trade, I am confused what you are asking. The profit potential looked to be almost 5X the stop loss if price reached the Fib ext, and no matter what you trade those are good odds even if your win rate is 50%. Not to mention it was a perfect hammer and setup.
Anon @ 6:54 AM:
Raj already left a good comment regarding the GLNG trade's stop size.
But another point I wanted to make is that Trader-X risks a set $ amount per trade, and adjusts the share size accordingly (at least that's what he has mentioned in the past).
Assume this setup you see on the charts:
* Stop amount = $33.00 (yes, an extreme example)
* Potential profit = $165.00 (5x loss amount)
* Success rate of setup = 50%
If you usually risk $100 per trade, then buy only 3 shares and your potential outcome is:
Fail = $100 loss
Success = $500 gain
Already a great expected profit per trade at 50%. Bump up the success rate to 80%, and only taking this type of trade will make you lotsa coin!
P.S. If anyone can share with me a 5:1 trade that takes place every day, is 80% successful, and is guaranteed to work forever, please let me know ASAP and I will be eternally grateful! :-)
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