Struggling and Aggravated

[Enigmatics 10]

Alright see I did it again this morning .....

 

EBIX shares hit the market as it drops down from 18.59 to 16.50. I checked the different time intervals on the chart looking for absorption or stop volume when I notice the 10min chart showing it at around 11:00am, that long wick where the price finished above 50% of the body of the candle. I also noticed that Motley Fool had come out with an article about good Q1 results on it. So I jump in at 17.12 ...... Starts looking like it's moving when it hits a wall around 17.22. It proceeds to drop down and I stop myself out at 17.02 ......

 

Whenever I see that stop volume, per VSA, it's supposed to be a cue that smarter money is accumulating the supply of shares in the market. My threshold for the dip though kept me out of what turned out to be a fantastic move. Although, in all fairness EBIX did drop back down to 16.80 before it started its real ascent to 17.75.

 

So let's look at this .... and now I feel really stupid .... I stopped myself out after a .05% stop. Had I allowed for more slippage, the most it would've been was 1.8% ...... oh and now look it's well over 18.10 ..... that sucker bounced nearly 10%! All I'm looking for is 3-4%.

 

Ugggh. This kind of trade right here has been what's frustrating me the most.

Edited June 3, 2011 by Enigmatics

[Tams 20]

there can be 3 possibilities..

 

1. the methodology is wrong

 

2. your understanding of the methodology is wrong

 

3. your application/execution of the methodology is wrong

[Tams 20]

there can be 3 possibilities..

 

1. the methodology is wrong

 

2. your understanding of the methodology is wrong

 

3. your application/execution of the methodology is wrong

 

hindsight explanation is just that... hindsight

[Enigmatics 10]

there can be 3 possibilities..

 

1. the methodology is wrong

 

2. your understanding of the methodology is wrong

 

3. your application/execution of the methodology is wrong

 

I've seen hundreds if not thousands of these since I started using it. It's most definitely my application/execution. Particularly my stops. Now psychologically it should not surprise me at all that people who managed to snag on the lower end of 16.50 would want to take some profit up near where my buy was at 17.12 .... therefore a dip should not be surprising whatsoever ..... but that long wick on the 10min chart is supposed to be a sign of strength for a bounce as someone is removing supply of shares off the market. I've seen it time and time again. There's always a chance of re-test of the bottom .... no patter is perfect.

 

I'm more then likely missing a sell cue and a re-entry cue which I need to work on.

[Tams 20]

I've seen hundreds if not thousands of these since I started using it. It's most definitely my application/execution. Particularly my stops. Now psychologically it should not surprise me at all that people who managed to snag on the lower end of 16.50 would want to take some profit up near where my buy was at 17.12 .... therefore a dip should not be surprising whatsoever ..... but that long wick on the 10min chart is supposed to be a sign of strength for a bounce as someone is removing supply of shares off the market. I've seen it time and time again. There's always a chance of re-test of the bottom .... no patter is perfect.

 

I'm more then likely missing a sell cue and a re-entry cue which I need to work on.

 

hindsight explanation is just that... hindsight

 

there is a difference between excuse and explanation...

 

the difference is in the denial of reality.

 

I don't know your reality, so I am not going to comment on it.

I didn't even read your explanation in detail, I don't think it would make a bit of difference to me (or you).

You have to deal with your reality... having a good system that you cannot execute is as good as having no system at all.

[Enigmatics 10]

You have to deal with your reality... having a good system that you cannot execute is as good as having no system at all.

 

Yes, you've made your point.

 

I appreciate it. Am now seeking the solution to executing properly.

[Tams 20]

Yes, you've made your point.

 

I appreciate it. Am now seeking the solution to executing properly.

 

maybe the solution is not in finding a way to execute...

 

maybe the problem is, the method you are using is not a good match to you.

 

ie.

match to your personality?

match to your trading style?

match to your environment?

match to your capital size?

match to your background?

match to the instrument your are trading?

match to the time frame?

... the list goes on.

[Enigmatics 10]

maybe the solution is not in finding a way to execute...

 

maybe the problem is, the method you are using is not a good match to you.

 

Have I studied all methods and tried them all? No. However, this method I use has made the most sense to me.

 

match to your personality?

 

Most definitely. Now, a lot of people equate bouncers to "catching a falling knife", but I don't look at it that way. I see it as opportunity to buy a stock at cheaper prices. I like buying as cheap as possible (who doesn't?) however, I'm also trying to eliminate as much downside risk as possible.

 

match to your trading style?

 

Yes. I prefer not to be long in this market so that is why I've been day trading.

 

match to your environment?

 

Not sure what you mean here. I do not have peers around me. I simply trade from home in my own home office. However, if you're referring to my financial situation then yes there is a conflict there.

 

match to your capital size?

 

Perhaps a conflict exists here.

 

match to your background?

 

Essentially the market is a step out of the norm for me. As I've said before, I've been a very pragmatic person and the market requires risk management. That's a good thing though because it's an attribute I aspire to acquire.

 

match to the instrument your are trading?

 

Depends on the market day.

 

match to the time frame?

 

The set up I prefer works in all time frames, however it depends on the market day whether or not a longer term time frame will work over a shorter term.

[tolland76 10]

The set up I prefer works in all time frames, however it depends on the market day whether or not a longer term time frame will work over a shorter term.

 

Unless you can demonstrate your strategy is better than random, then you are just going to be ground down by attrition

[tolland76 10]

Alright see I did it again this morning .....

 

EBIX shares hit the market as it drops down from 18.59 to 16.50. I checked the different time intervals on the chart looking for absorption or stop volume when I notice the 10min chart showing it at around 11:00am, that long wick where the price finished above 50% of the body of the candle. I also noticed that Motley Fool had come out with an article about good Q1 results on it. So I jump in at 17.12 ...... Starts looking like it's moving when it hits a wall around 17.22. It proceeds to drop down and I stop myself out at 17.02 ......

 

Whenever I see that stop volume, per VSA, it's supposed to be a cue that smarter money is accumulating the supply of shares in the market. My threshold for the dip though kept me out of what turned out to be a fantastic move. Although, in all fairness EBIX did drop back down to 16.80 before it started its real ascent to 17.75.

 

So let's look at this .... and now I feel really stupid .... I stopped myself out after a .05% stop. Had I allowed for more slippage, the most it would've been was 1.8% ...... oh and now look it's well over 18.10 ..... that sucker bounced nearly 10%! All I'm looking for is 3-4%.

 

Ugggh. This kind of trade right here has been what's frustrating me the most.

 

dude, your trade signal is not significant compared to the randomness in the price action.

 

you are always going to lose over the long term, because even if your signal is 100% correct, there are going to be many false positives.

[Enigmatics 10]

Unless you can demonstrate your strategy is better than random, then you are just going to be ground down by attrition

 

It's not about "random" .... what I've learned is that there are various factors (layers to the onion) as to why the stocks will bounce and why they won't. It's really no different than any other pattern people may prefer. I'm merely seeking to benefit from that wick on a daily chart that you see on stocks that dip. That's it.

 

Again, I point to volume spread analysis, which details specifics on how to spot absorption and stop volume as the shares hit the open market on a dip. However, other factors come into play. How's the sector doing that day? Was there major global or stateside news (perhaps economic numbers)? Is the dollar up that day (equities and the dollar have been trading inversely for the most part)? Why did the stock drop, was it bad fundamental news or just some profit taking?

 

I don't think there's any way to avoid those factors is this market. I will attest that my opportunities become far more limited if something above is amiss and I am not yet adept at shorting the market. Another aspect that I need to fine tune about my setup, is profit taking goals (particularly sell signals) and risk management which we've discussed mightily in here.

[Enigmatics 10]

dude, your trade signal is not significant compared to the randomness in the price action.

 

you are always going to lose over the long term, because even if your signal is 100% correct, there are going to be many false positives.

 

Explain further ..... What is random about the price action?

 

From my experience in the 10months I've been day trading, false positives can happen no matter what the pattern of choice, for various other factors outside of the chart that extend well into the kind of market day equities are having and their sectors.

[tolland76 10]

Explain further ..... What is random about the price action?

 

hmm.

 

It's difficult to respond to that.

 

 

You should give up trading as soon as possible.

[Enigmatics 10]

hmm.

 

It's difficult to respond to that.

 

 

You should give up trading as soon as possible.

 

Or you should give up posting on internet message boards if you can't carry on a mature conversation.

 

I came here for advice. Not for smart mouthed answers.

Edited June 4, 2011 by Enigmatics

[SIUYA 11]

Enigmatics - my two cents.

Stock dropped and it seemed a big drop, the market is definitely nervous if you want some context, and therefore I ask - why are you trying to pick bottoms?

OK...so you say you are not adept at shorting and the market is slightly amiss for going long....then dont trade. You are not penalised for sitting in cash.

Wait for the markets to become bullish again, develop shorting strategies (harder than you might imagine in stocks), or if you feel you must try and buy dips......here is a little hint.....be patient. There are not very many V shapped bottoms, often a stock will fall, rise, make a slightly higher low and then rally....wait and punt the slightly higher low. If you are wrong and the stock goes lower, you are in the same position as you are in - getting stopped out. If its a V bottom, so what it cost you nothing to miss the trade. If you are right you dont get stopped out only to watch it rally. Patience pays. Dont chase and hit offers in a nervous or bear market.

[xioxxio 10]

SIUYA well said.

 

The trend is your friend, to pick a bottom is very difficult and I believe is luck. Rather stay out and look for other stocks.

 

The are three positions: Long Short and Out. Rather be out than loose money.

[bigsnack 10]

Enigmatics - my two cents.

 

This I think is very valuable. What turned my trading around was learning how to spot reversals, waiting for the reversal to be confirmed FIRST (via a HH, break of opposing trendline, price closing above the most recent volume "node", whatever you use.), and then buy / sell the first pullback. Every time I get antsy or over confident, I start thinking "The signs of the reversal are here, I should just buy the low so I can get a better fill" That's when the final stop run kicks in and takes my a$$ out. Overall, I'm probably only catching 30-50% of every trend, but it's a consistent catch. Maybe this approach might help you?

[RobS 10]

Hey man, here are a few thoughts after reading this thread:

 

1. Do I understand you hve $10K and trading will be your primary source of income? Commissions alone will kill you. But even beyond that, how much income do you need to generate to cover your expenses? 100% return? 200% return? You'd have to be trading at the super elite level to reach that kind of return consistently. This is like saying you want to join the Yankees and bat .350 year after year. What are the odds? If this is your sitiuation and you need to generate this kind of return to cover expenses, YOU SHOULD NOT TRADE.

 

2. Your stops are waaaay too tight. Don't you know about program trading algos? They hunt for stops like yours based on the order flow. Your tight stops are dead money man. Markets are simply not going to stick to key levels right to the penny. In fact, it's very typical for the market to trade below key levels, take out the stops, and then go back in the main direction. If you don't have enough bankroll to tolerate larger stops, YOU SHOULD NOT TRADE.

 

3. VSA provides a framework to use, but I'm not sure it's such a great day-trading method. Wykoff himself was not a day-trader exclusively. Beyond that, I have read up on VSA and there are a number of very good threads about it on this forum, but I'll simply say some VSA concepts are dead wrong. For example, that whole "there must be hidden selling within the bar" thing. That's so wrong it's amazing they continue to say it. Volume is just the exchange of shares. The amount of selling is exactly equal to the amount of buying, by definition. Now, maybe you don't trade based on that concept, I don't know. But still, this method isn't working for you and you need to figure quickly whether you need a new method or whether you are not applying the method that correctly. Until you get a better sense of this, I strong recommend that YOU SHOULD NOT TRADE.

 

4. I have read repeatedly that like any difficult skill, it takes years to get good. The usual length I hear is 3 years just to get profitable (and this ain't batting .350 in the major leagues). Do you have enough money to survive your learning curve or will you be broke before you know enough to be profitable? You know what I am going to say man: if you don't think you have enough money to survive a realistic learning curve, YOU SHOULD NOT TRADE.

 

From reading this thread I can tell that this isn't what you want to hear, but I'm just trying to help. Get a day job and study the markets at night. Save your money so you build up a bigger account and then when you have a bigger cushion to work with, as well as greater understanding, you'll be in a much better position.

 

Best of luck to you.

 

-Rob

[Enigmatics 10]

Enigmatics - my two cents.

Stock dropped and it seemed a big drop, the market is definitely nervous if you want some context, and therefore I ask - why are you trying to pick bottoms?

OK...so you say you are not adept at shorting and the market is slightly amiss for going long....then dont trade. You are not penalised for sitting in cash.

Wait for the markets to become bullish again, develop shorting strategies (harder than you might imagine in stocks), or if you feel you must try and buy dips......here is a little hint.....be patient. There are not very many V shapped bottoms, often a stock will fall, rise, make a slightly higher low and then rally....wait and punt the slightly higher low. If you are wrong and the stock goes lower, you are in the same position as you are in - getting stopped out. If its a V bottom, so what it cost you nothing to miss the trade. If you are right you dont get stopped out only to watch it rally. Patience pays. Dont chase and hit offers in a nervous or bear market.

 

Bottoms became more attractive to me because I was trying to eliminate as much downside risk as possible. Now, originally when I began charting this and dabbling with my cash account, I was concentrating on daily charts with the setup I preferred. As I started day trading, I noticed there weren't enough "daily" chart opportunities and I could get the same indicator setup on smaller time intervals. Obviously day trading that setup on an intraday is not always like a daily. The daily charts tend to be depressed for a period. So there is inherently going to be more downside risk.

 

You're very right about the V-shaped bottoms. That is the ideal result, but it's obviously not the typical one on each instance. It wasn't until I started reading about volume spread analysis that I started understanding what it was that was going on at those attempts to form bottoms and reversals ........... much of which is predicated on the kind of volume happening at those levels. I've since incorporated the ideology expressed.

 

Patience is two fold for me. I used to jump in too early instead of waiting for a confirmation. Thru VSA, I developed a much stricter confirmation strategy .... it's just that as you described, these bouncers can often test a slightly lower low, before doing exactly what I thought it was gonna do. This is what guys like Richard Wyckoff and Ted Williams describe as a "test" as supply is still being removed before a reversal can take place and accumulating hands can begin distributing into a bounce. My "patience" issue runs amuck when I don't get the V-Shape and it ends up testing a slightly lower low and I'm keeping my stops too small.

 

This is why I think I really need to examine the risk/reward ratio on my trades.

[Enigmatics 10]

SIUYA well said.

 

The trend is your friend, to pick a bottom is very difficult and I believe is luck. Rather stay out and look for other stocks.

 

The are three positions: Long Short and Out. Rather be out than loose money.

 

Honestly, I've done nothing but watch dippers and bottoms for the better part of the last 2.5 years. It's not nearly as hard as you think it is. People are just extremely fearful of "catching a falling knife" and prone to going after something that's already moving.

 

The more I've examined the responses in these threads, the more I realize much of my inability to execute my strategy up to this point has been because of my psychology (dependence on income from trading) and improper stop loss goals (risk/reward management).

 

Seriously these setups yield really nice moves when approached correctly.

[Enigmatics 10]

This I think is very valuable. What turned my trading around was learning how to spot reversals, waiting for the reversal to be confirmed FIRST (via a HH, break of opposing trendline, price closing above the most recent volume "node", whatever you use.), and then buy / sell the first pullback. Every time I get antsy or over confident, I start thinking "The signs of the reversal are here, I should just buy the low so I can get a better fill" That's when the final stop run kicks in and takes my a$$ out. Overall, I'm probably only catching 30-50% of every trend, but it's a consistent catch. Maybe this approach might help you?

 

Well I'm typically looking for high sell volume on a hammer candle or candle where the price finishes above the 50% of the body of the candle ...... indicating that absorption of the shares is taking place and a reversal (whether short term bounce or legit) is trying to take place. I then look to enter based on the next candle, particularly when it opens above the previous candle's close.

 

Richard Wyckoff described some of these and noted that there were ones that had "automatic" reversals which bounce, but then fall back off again testing a new low before accumulation hits and a real bounce commences some time later. These are the ones giving me the most trouble because I haven't sold when the signals were there that the bounce was going to play out as planned. Then I get stopped out as it tests a new low because I keep my stops too tight.

Edited June 5, 2011 by Enigmatics

[Enigmatics 10]

Hey man, here are a few thoughts after reading this thread:

 

1. Do I understand you hve $10K and trading will be your primary source of income? Commissions alone will kill you. But even beyond that, how much income do you need to generate to cover your expenses? 100% return? 200% return? You'd have to be trading at the super elite level to reach that kind of return consistently. This is like saying you want to join the Yankees and bat .350 year after year. What are the odds? If this is your sitiuation and you need to generate this kind of return to cover expenses, YOU SHOULD NOT TRADE.

 

Well I'm down from that 10k, which is also why I'm feeling the pressure. Alas, I look back at this journey and I agree, perhaps supplementing my income would be a smarter route.

 

2. Your stops are waaaay too tight. Don't you know about program trading algos? They hunt for stops like yours based on the order flow. Your tight stops are dead money man. Markets are simply not going to stick to key levels right to the penny. In fact, it's very typical for the market to trade below key levels, take out the stops, and then go back in the main direction. If you don't have enough bankroll to tolerate larger stops, YOU SHOULD NOT TRADE.

 

Oh trust me, it's one of the most frustrating aspects ..... My stops are "mental" stops too. I'm not actually physically setting them. I stay away from out of control volume too because of this. Again I agree this is forcing me to re-examine the risk/reward ratio and my position sizes.

 

3. VSA provides a framework to use, but I'm not sure it's such a great day-trading method. Wykoff himself was not a day-trader exclusively. Beyond that, I have read up on VSA and there are a number of very good threads about it on this forum, but I'll simply say some VSA concepts are dead wrong. For example, that whole "there must be hidden selling within the bar" thing. That's so wrong it's amazing they continue to say it. Volume is just the exchange of shares. The amount of selling is exactly equal to the amount of buying, by definition. Now, maybe you don't trade based on that concept, I don't know. But still, this method isn't working for you and you need to figure quickly whether you need a new method or whether you are not applying the method that correctly. Until you get a better sense of this, I strong recommend that YOU SHOULD NOT TRADE.

 

I'm not going to sit here and say VSA is the gospel but there are many excellent nuggets of information gained from it. It also explained what was going on down at those bottoms and why I liked the setup I did. It forced me to pay more attention to what was actually going on with price and volume instead of blindly following lagging indicators.

 

4. I have read repeatedly that like any difficult skill, it takes years to get good. The usual length I hear is 3 years just to get profitable (and this ain't batting .350 in the major leagues). Do you have enough money to survive your learning curve or will you be broke before you know enough to be profitable? You know what I am going to say man: if you don't think you have enough money to survive a realistic learning curve, YOU SHOULD NOT TRADE.

 

From reading this thread I can tell that this isn't what you want to hear, but I'm just trying to help. Get a day job and study the markets at night. Save your money so you build up a bigger account and then when you have a bigger cushion to work with, as well as greater understanding, you'll be in a much better position.

 

Best of luck to you.

 

-Rob

 

I can't really dispute this. It takes money to make money. Being under-capitalized and trading from the "necessity" stand point instead of opportunity has slowly but surely put me in an unenviable position. I've been doing a lot of introspection into my trading since (especially after I started this thread) and it's becoming increasingly clear that I need to alleviate the pressure of trading for income while I'm still learning the ever-changing landscapes of the market.

[SIUYA 11]

Apart from knocking you down and destroying the dream of trading by saying dont trade.....as I am all for people following things and trying things. I also dont think people telling you how to do things is going to help, you need to work them out for yourself to be of any real value.

At present......You will struggle with your money issues and your mindset I think which means not trading at present is good advice.

 

A couple of thoughts from my own experience and in trying to get you to critically think about your method.....when you say

"Bottoms became more attractive to me because I was trying to eliminate as much downside risk as possible. "".............this is only if you are buying dips in a bull market, otherwise picking a falling knife (while can be done) is tough and potentially frustrating. Recently this is not the market for it, and the stock drop you mentioned in the example seems more than a dip.

 

"V-shaped bottoms.That is the ideal result, but it's obviously not the typical one on each instance" - so if its not typical, why try to go for them, and if its not typical, use some patience and go for the one pattern that is more typical. The discipline is to be patient, not worry if you miss the atypical trade.

 

""My "patience" issue runs amuck when I don't get the V-Shape and it ends up testing a slightly lower low and I'm keeping my stops too small. "..... a bit confused. If you get a V so what, missed opp that is rare. If you have patience and it goes to a new low, then it s typical loss, which will always occur - thats trading, also when waiting for the Higher low, you can either punt it or wait for confirmation in the direction you want, with a tight stop. A bigger stop wont help in this case as you have just confirmed with a lower low that the pattern you were trying to trade is now null and void.

 

"Honestly, I've done nothing but watch dippers and bottoms for the better part of the last 2.5 years. It's not nearly as hard as you think it is.".......clearly it is! This is where I and others are suggesting that your mindset is not quite right. You say its easy, it looks easy in hindsight, but for some reasons its not working.....this is what you need to think about.

[hweinstein4 10]

Stick with a 15 minute chart. Trade it religiously without any hesitation at all and you'll do just fine. I am referring to of course, IWM, DIA, QQQ, etc.

[xioxxio 10]

I also dont understand what you mean by "V" shape, Are you referring to a pullback in a up trend? or a proper "V" shape?