A Look at a Stock Trader's Day

[sep34 10]

I would always suggest that it is wise to look at the big picture on any stock you see me trading during the day before buying or shorting it for a swing trade. As you saw with DTV, it had great price action for a day trade, but when you look at the daily chart, it is not necessarily something you'd want to take home, let alone have to go to bed with it.

Thales

 

Absolutely.

 

 

 

Best regards

[thalestrader 14]

When you are buying new highs or shorting new lows how many criteria do you use to do decide it you like the trend enough to buy in? It appears you waited on DTV for the trend to reach the previous day's high before buying.

 

I do not make it very complicated at all. The criteria are simply a new high of day for a long trade, a new low of day for a short trade, or pullback to 20 ema on a 5 minute chart after strong move. I do not use volume, indicators, candlesticks, wicks, tails, crossovers, etc.

 

However, when deciding which particular stock to trade, I choose based upon how the trend looks, i.e. chart patterns, e.g. flags, pennants, lines (consolidations), and trendlines.

 

As for the DTV trade today, by the time DTV had rallied into the list of the top 10-15 stocks with the biggest % gain on the day, it was very near yesterday's high - too near to warrant a trade. It met resistance at that high, and it seemed wise to wait for that high to fall.

 

In other words, during much of DTV's rally, I wasn't even paying attention to it. By the time it did get my attention, I decided it best to wait to see how it handled the 22.50 price point. I really do not have any rules, per se.

 

 

 

How do you determine your exit stop or sell point?

 

I try to let the market develop natural stop points, i.e. most recent support/resistance points. See, for example, the ES short trade I posted today. You can see how the market dictated the stops all the way down.

 

Sometimes, depending upon the time of day, the order book, or simply how price is acting, I will trail a stop below the low of the previous 5 minute bar, or even trail every nickle, dime, or quarter.

 

If the stock is in the midst of a trend day move in the direction of its daily trend, I use recent pullback lows as my stop points. If it is a breakout from a sideways consolidation, especially if the breakout direction is contrary to the daily trend, I will be trailing the stop closely, using either 5 minute lows, nickles, dimes, or quarters. I will exit at the market if price action seems not to be confirming my position.

 

Again, none of these are rules.

 

 

You post your gains on the P/L thread as cents/share. Why not put as % gain based on investment? Do you always by the same number of shares, no matter the stock?

 

I'm a trader not an investor. I am seeking profit, not a rent or fee or interest on my capital. I somewhere on TL quoted Don Bright of Bright Trading on this matter - you should look up that post. I'd also suggest the writings of Gerald Loeb in The Battle for Investment Survival. He persuasively makes the case for using profit, not %return, as your organizing principle when deploying your capital in the market.

 

I almost always trade a set number of shares on each trade. This is because my initial risk, as measured by the difference between my entry and my initial stop loss, is almost always within my %risk/trade limit. Of course, if there were an opportunity that had a larger initial risk/share, I would reduce the shares traded accordingly.

 

I otherwise don't have any formulae. As I have said elsewhere, I have benefited from lots of screen time, lots of charts, and a single minded focus on, as pappo's acronymonous name teached, price action and price patterns only.

 

Thanks for posting so much good information. Keep it coming.

 

I'm happy you have found it interesting, or at least entertaining. If you find it useful, so much the better!

 

Sincerely,

 

Thales

[thalestrader 14]

Thalestrader -

What criteria do you use to decide to day trade a stock? I know you have said that you usually buy new highs and sell new lows but what other factors do you take into account in determining if the odds are in your favor? Also, what parameters do you use in setting where you will put your stop and where you will take your profit?

 

 

If you take a look at the LM trade I posted last week (6-2-2009 - page 6 or 7of this thread) you will see a decent example of what I am trying to accomplish. LM was a runner and I tried to use natural stops to stay in. At times, the stock moved very far without developing any new natural stop level, so I started to trail a stop a fixed amount below the 5 minute 20 ema.

 

Here is the way I think:

 

1) Every trade starts out as a scalp (this comes right from Mike Reed at tradestalker.com), and I will close a position at the market for a small loss or small gain if price does not act immediately as I had anticipated that it would act.

 

2) If price does act immediately as anticipated, I then assume I have a runner, and I will do my best to discern where the market is developing natural stop points and set my stops accordingly, trying to capture as much of that move as possible.

 

Best Wishes,

 

Thales

[Dinerotrader 10]

Thalestrader -

Thanks for all the info. You gave me some ideas and a good direction for my current research. I am currently a CPA and professional photographer in Phoenix, Arizona. It is my dream to be able to become a profitable day trader. To me, being able to make money consistently on the market with reasonable risk would be like a dream come true. I only hope I can find the right strategy based on my trading skills and personality to become profitable. You and Brownsfan019 consistently provide great insight. Thanks again.

[thalestrader 14]

I'm having something of a rough morning - 6 trades. Five are closed and I am at absolute breakeven on the day.

 

I just got stopped into FLR. Buy stop was 53.95, but my fill was 53.92. That tends to make me suspect the trade may not go my way.

[thalestrader 14]

Consolidation at the high - I am waiting patiently either to win or to lose

[thalestrader 14]

I lose. -13 cents on FLR

[thalestrader 14]

MEE Buy stop 24.31

 

I do not like trading this time of the day, but the patterns I trade are here now.

[thalestrader 14]

MOS Buys stop 53.50

 

MEE Long 24.31

[Dinerotrader 10]

Are you looking at MOS because of an ascending triangle formation or is there some other pattern you are seeing?

[thalestrader 14]

Patience is its own reward

 

Carrying tight stops on these

[thalestrader 14]

Are you looking at MOS because of an ascending triangle formation or is there some other pattern you are seeing?

 

MOS gapped open higher and the gap did not fill. I did not buy the first new high after the pullback from the high struck in the first 15 minutes because of the proximity of 6/5 resistance.

[thalestrader 14]

MOS Buys stop 53.50

 

MEE Long 24.31

 

Updating the charts - still long MEE from 24.31 and MOS long at 53.52

[thalestrader 14]

AKAM buy stop 22.31, stop loss 22.21

[thalestrader 14]

Updating the charts - still long MEE from 24.31 and MOS long at 53.52

 

MEE stop is 24.81

 

MOS Stop is 54.02

[thalestrader 14]

AKAM buy stop 22.31, stop loss 22.21

 

Order cancelled with trade below intended stop.

[thalestrader 14]

NDAQ Buy stop 22.01, stop loss 21.97

[Dinerotrader 10]

NDAQ -

Now that is one tight stop! Why didn't you buy the 2nd and 3rd new high of the day at 21.97 or 21.98?

[thalestrader 14]

Made a nickle/share on NDAQ. It was going no where and distracting me from MEE and MOS, so I closed the trade.

 

Also, I noticed all my charts today are misdated 6-7 instead of 6-9.

[thalestrader 14]

Made a nickle/share on NDAQ. It was going no where and distracting me from MEE and MOS, so I closed the trade.

 

Also, I noticed all my charts today are misdated 6-7 instead of 6-9.

 

Now how is that for timing!

 

Well, it happens.

[thalestrader 14]

NDAQ -

Now that is one tight stop! Why didn't you buy the 2nd and 3rd new high of the day at 21.97 or 21.98?

 

Since it did not gap open higher, it did not interest me until I saw the tight action that you see in the first screen capture I posted. That tight action is what called for the tight stop.

[thalestrader 14]

Since it did not gap open higher, it did not interest me until I saw the tight action that you see in the first screen capture I posted. That tight action is what called for the tight stop.

 

Here is the chart of NDAQ highlighting what I was speaking of above

[thalestrader 14]

MEE stop is 24.81

 

MOS Stop is 54.02

 

MOS +50 pennies

 

MEE + 50 pennies

[Dinerotrader 10]

Since it did not gap open higher, it did not interest me until I saw the tight action that you see in the first screen capture I posted. That tight action is what called for the tight stop.

 

Putting all your recent explanations together - you prefer watching the gainers of the day that have gaped up, fill that gap, and make a new higher high for the day above previous resistence from prior days. Correct?

[thalestrader 14]

Putting all your recent explanations together - you prefer watching the gainers of the day that have gaped up, fill that gap, and make a new higher high for the day above previous resistence from prior days. Correct?

 

1) I prefer stocks that have gapped open and do not fill the gap.

 

For example, today I traded FCEL, JASO, TROW, BEN, TMO, FLR, MOS, MEE, NDAQ. All of these gapped open higher (I mistakenly said earlier that NDAQ hadn't gapped open, but it did, but it filled the gap during the first 5 minute bar), and I believe that only NDAQ filled the gap back to the prior day's close.

 

2.1) I will be mindful of prior highs and lows, and I do not want to buy a new high of day if the prior day's high is just above the proposed buy point.

 

2.2) If there is some distance between the proposed buy point, i.e. a new of high of the day, and prior resistance, I will take the trade.

 

For example, today, MOS had a HOD at 53.35, so my buy point would typically be 53.36. However, Friday afternoon MOS saw resistance about a dime up from there at 53.46, so I would want that resistance cleared first. I waited until 53.51 to buy. However, if the first high today had been say, 53.15, my buy point would have been 55.16, and with 30 cents of daylight between that buy point and Friday's high, I would have bought then.

 

I think that if you would look back at the charts I've posted, most of the trades involve stocks that have gapped open, then pulled back but held above the gap, and then gone on to make a higher high (You would reverse this for short trades).

 

Best Wishes,

 

Thales