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What stocks to trade?

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Hi everyone. I have been trading for 1 year at a prop firm in Atlanta GA. Our office focuses on trading energy as a sector. For example I trade HES, COP while using the XLE, OIH and Crude futures as leading indicators. This style of trading worked for a few months but lately (the past 3-4 months) it has been falling apart and now crude prices have been sliding while the energy stocks themselves have been much slower to move down. Long story short I want to move away from energy. All I've been taught up until now was energy sector related. What other stocks or sectors are good for beginner daytraders like me?

 

Traders at my firm like stocks with 1-3 million shares traded daily, second or third tier stocks. But most books I read tell me to focus on the leaders with high volume. Any advice on criteria you guys use to choose good stocks to daytrade.

 

Thank you very much guys!

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When I day traded stocks, I picked sectors that were nice to look at. The charts were clean and had flow to them.

 

But what ever tickles your fancy. Pick a sector/stock that suites your temperment and personality.

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It's curious to find some prop firms are so focused on a particular market or sector or a trading methodology. There's no room for creativity? Of course, that's also disastrous in itself but you know what I mean.

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Thank you for the replies. I've been trading for only a year so I think for me the difficulty is in really knowing what my style of trading is or has been because up until now my winners and losers have felt random. Even on days or even months where I have made decent money I don't really know how or what methodology I used. The trading style I was taught was completely discretionary focusing almost all decisions on what occurs within level II quotes.

 

wsam29: You said you "use" to trade stocks. What made you switch from stocks to something else?

 

torero: I agree completely that prop firms leave very little room for creativity. They focus a lot on burning tickets and getting in and out very quickly. It is tough to find help in learning new trading styles when everyone around you pretty much does the same thing. Which is why I am here, to learn from all of you guys different insights and new ideas.

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They teach you how to scalp stocks because it requires a lot of margin to make any decent money, by doing so they retain your talent/skill so you don't run off and trade your own capital.

 

They preach volume, in and out, in and out, 1 tick here, 1 tick there, its almost a game of bingo if you ask me. you don't get a general feel of the bigger moves when your micro-nano scalping. But yeah, it is all random that us why you feel you really have no clue what you are doing. I felt like that I made my first $10,000 day trading the SP. What ever I did I could not repeat because it was just going with order flow, but what were my entry criterias? (currently working on some that I can live with and trade day in dayout)

 

What was the reason for that large order being pulled and seeing a large print on the tape? Its the games they play on level two. Only super fast execution order entry can you play those games which are suited towards prop. firms. As for attempting to apply strategies and ideas to your prop. firm it will not fly with them because they have a tried and true system, why mess with a good thing when you are making money for them? they also see it as, why risk 0.10 on 1000 shares when you can swing a 10,000 share trade and risk or make 0.01?

 

Even though I was only prop. trading for a couple months, it took a while to readjust to sitting back and letting the trade work rather than in, out, in, out, because commissions alone will chew you up! That is where you may have troubles adjusting because they got you so "brain" washed so to speak.

 

The reason I switched was the leverage, you need lots of capital to trade stocks for a living, even if you get more favourable margin rates. not to mention knowing what type of execution platforms that are out there, really big disadvantage when you think about it if you are trying to trade like they are.

 

having also experianced trying to trade with level 2, I would say tape reading and scalping the e-minis would be a good start since you are able to make lightning quick decisions and your eyes are already accustumed to seeing numbers fly by, just be mindful of the commissions and fees invloved that will chew into your profits or increase your loses.

 

the rest as to where to enter, exit, is really your personality and temperment. meaning are you the type to sit and wait for a test of the pivot point? resistance 1? Or in my case a simple price/tick/volume divergence is good enough for an entry for me. There are many ways to skin the cat, you just need to kind the right knife now to get the job done consistantly.

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hey, thanks for that reply wsam29. Your right I really don't have a clue what I am doing even after a year of jumping in and out for 3-4 cents. I feel like its pretty ridiculous sometimes to trade this way but I see traders make pretty decent money scalping a few cents here and there. It could just be that this type of trading is not for me. Im more for of an easy going and mild tempered person hyperactive trading really messes with my psychology. Seems like everyday I make a resolution to get my head out of the level II but by the end of the day that is all i look at. I will have to stop trading randomly to stop getting random results. I've tried to use just an MACD histogram to find divergance and then use the level II to confirm any turning points but I just can't sit on my hands and wait for good entries and exits. How did you get out of that churning mentality that the prop firm taught you? Thanks again for all the advice.

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hey, thanks for that reply wsam29. Your right I really don't have a clue what I am doing even after a year of jumping in and out for 3-4 cents. I feel like its pretty ridiculous sometimes to trade this way but I see traders make pretty decent money scalping a few cents here and there. It could just be that this type of trading is not for me. Im more for of an easy going and mild tempered person hyperactive trading really messes with my psychology. Seems like everyday I make a resolution to get my head out of the level II but by the end of the day that is all i look at. I will have to stop trading randomly to stop getting random results. I've tried to use just an MACD histogram to find divergance and then use the level II to confirm any turning points but I just can't sit on my hands and wait for good entries and exits. How did you get out of that churning mentality that the prop firm taught you? Thanks again for all the advice.

 

 

seems to me like you know what you are doing in terms of level 2, now just apply those skills you've acquired and apply them to reading the tape for say the YM what ever market you decide to trade.

 

You'll notice patterns within the tape.

 

Me personaly I DO NOT use technical indicators liek MACD or RSI when it comes to trading the YM, they are too slow.

 

Try Souls strategy with pivots, sit on your hands and wait till prices reaches a pivot and then decide, that is when you implement your tape reading skills/level 2 to see how the market is acting to that level.

 

Even watching how the market reacts to a daily high/low, previous day high/low is something you can look into without using technical indicators.

 

How did I get my head out, I knew if I picked up on that skill and required their execution platform to make a living, I would be stuck with a prop. firm for the rest of my life. Your ideal goal is to trade with your own capital and keep all profits to yourself. Mind you exection is important so you will need to find a good broker that has a decent platform for the way you intend to trade.

 

I'll elaborate some more, I need to get going now.

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funny that you mention pivot points i just finished reading about them and am planning to implement exactly what you said. I will calculate the pivot points and just wait until those points to read the level II and tape and then make my decision rather than trading at random points. I will try and post the results tommorrow after work.

 

Take care!

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if you use tradestation at work, there is an indicator that plots the pivots for you based on your inputs, really handy, sure beats draw line by line by hand.

 

you'll do fine as long as you learn to sit on your hands and wait for your trades.

 

even include volume.

 

There are many ways to skin the cat so to speak, but when I was trading stocks, I would also include the sector index in which it may be part of.

 

ie trade INTC, watch $SOX and plot pivots on it as well. That way you can also guage whether your stock you are trading is leading or lagging for the day.

 

Just some ideas, get your creative juices flowing once more.

 

look under "forum jump" indicators.

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I tried the pivot points and they worked pretty well. But I wasn't really disciplined enough to take some of the signals but I will continue to practice. I attached three charts. ATI, SU, and XLE. I traded mainly SU, the XLE is the index I follow. But it isn't a very good one, atleast not today.

 

In the morning I managed to sit tight until about 10:30 when SU crossed its PP. I got short and had a bid out at 73.66 which was S1. The last print to go off before it reversed was 73.67, go figure. So I didn't get the fill and ended up just taking the offer. Unfortunately I didn't have the guts to reverse and get long. And as you can see it reversed. I didn't get long until the PP where it crossed through and pulled back on the one red candle. I managed to make some money there.

 

So it reaches R1 and here is where I got whipsawed for a good while. I should have known to sit out because it was nearing lunchtime and such. But I kept getting long and short multiple times. That killed my profits just from commissions.

 

Finally around 2:15 I got short and made some there. But the price never really reached PP so I had to cover. I waited for the price to approach R1 again and it did I got short but it popped a little and I covered the top but I immediately reshorted and made some money back.

 

That is pretty much the jist of my day. Any suggestions would be greatly appreciated. It was a very sloppy day to say the least but I think I can really practice hard and make good use of pivot points. It was the first day I used them so can't expect much.

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5aa70dc41201a_ScreenHunter_03Feb_0115_18.thumb.gif.02c999ad5396871b65610ce227d342c1.gif

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I Unfortunately I didn't have the guts to reverse and get long.

 

 

That line that you entered yourself tells a great deal about really how you are trading.

 

You are still missing 1 key indicator in my opinion that would have given you more reason and confidence in taking that trade.

 

I put up the same chart myself and my key indicator and it would have meet my entry criteria.

 

Remember we're trying to figure out "collectively" what the market is trying to do. My personal analysis only goes so far if the market does not see it that way as well, so go with the net order flow.

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I will continue to use these pivot points and work on my tape reading skills. Also I'll keep looking for that 1 indicator I may be missing. I am on the right track now. Thanks for all your help wsam29, I'll keep posting my progress as I refine my strategy.

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