How To Make Money Trading The Markets.

This is a discussion on How To Make Money Trading The Markets. within the Stocks forums, part of the Markets category; This might be difficult for some people to understand but my trading is not dictated by mathematics, algorithms or indicators. ...

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Old Sep 8, 2008, 5:25pm   #57
 
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Mr. Charts started this thread This might be difficult for some people to understand but my trading is not dictated by mathematics, algorithms or indicators.
I READ the market by the price action itself and use about a dozen of my own set ups and then momentum triggers on Micro-Analysis to enter. The set ups can still be used very effectively WITHOUT M.-A., but it does give me an extra edge as sometimes, NOT always, it shows me pressures building and their effect on the trades printing off or their LIKELY imminent effect.

I also marry "fundamentals" in news terms with reading the market.
TBC
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Old Sep 8, 2008, 5:26pm   #58
 
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Originally Posted by Mr. Charts View Post
I assume you mean do I normalise.
I'm not a mathematical trader and I merely use ATR as described to very roughly filter out very volatile stocks. Of course low ATR stocks can suddenly have huge range expansion.
Thinking in terms of "cent" movement is a powerful disincentive for me personally to trade higher volatility and higher priced stocks where risk is greater.
If I see the ATR is 8, for example, then I tend to think from pure experience over many years that I could very quickly get an 8c move against me if I'm trading on a 1 min candle. If the ATR is 24 then I know I could easily get it moving away from me by 24c. It is nothing more than a very rough rule of thumb and is not really mathematically based. Some might find such an approach abhorrent, but it has worked well for me for many years. If I'm looking at a longer time frame than 1 min then that ATR number is less significant.
If one of my set ups is there on a high priced high ATR stock and is triggered then I will sometimes take the trade but with a smaller position size. However that is unusual.
I tend not to trade higher priced stocks as I really like them to be readable on level 2 even if it's simply the ebb and flow; I also want them to have tight spreads. These conditions apply much less with higher priced stocks with higher ATRs. For me that increases risk and I minimise that as much as possible in my stock choice and trading.
I hope that has explained the way I use ATR better. I don't use it the way most people do, but then I don't trade the way the vast majority do.
Richard
Thanks for the explanation Richard. It's made me think about the way I position size - basically I divide the dollar ammount I want to hold by the price to give the number of shares - hence my dollar exposure is controlled. That said, it's the volatility I'm trading from and where the risk is - so I think I agree this isn't quite right.

Hmmmm.....

UTB
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Old Sep 8, 2008, 5:38pm   #59
 
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Mr. Charts started this thread
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Originally Posted by the blades View Post
Thanks for the explanation Richard. It's made me think about the way I position size - basically I divide the dollar ammount I want to hold by the price to give the number of shares - hence my dollar exposure is controlled. That said, it's the volatility I'm trading from and where the risk is - so I think I agree this isn't quite right.

Hmmmm.....

UTB

I couldn't agree more
For me risk involves price moving suddenly away from me and I need that to be under my control so I can exit quickly and safely when a trade goes wrong. That is much more difficult with a high priced high volatility stock.
I would rather take a larger number of shares for a smaller cent move and then I'm in greater control and my risk is smaller PROVIDED the move is readable on level2. If it's not readable then my risk is too high because of the larger position size.
I know a lot of people like to trade the high priced shares and enjoy the excitement, but that's not for me. I'm about making money every single day for minimum risk.
I must be one of the very few people who have gone to Las Vegas and not gambled a single dime. I've traded casino stocks very profitably over the years though
Richard
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Old Sep 8, 2008, 5:51pm   #60
 
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Mr. Charts started this thread I also marry "fundamentals" in news terms with reading the market.

This morning for example I thought there might be many traders and institutions who were short FRE and FNM from last week and would be be keen buyers of those stocks.
I kept an eye on them and when they became "hot" in the sense that momentum buying came in I jumped on board the rising candles because that was confirmed on "level2".
I had no idea how much profit I would make but I knew that if that momentum would have died or reversed as soon as I entered I would simply have exited immediately and maybe lost 3c or 4c at worst as there was plenty of support on the bid depth. I made 67c and that was on a stock where news alerted me to it, thinking for a moment raised the possibility of a short squeeze, and I then waited to see if it happened on momentum.
67c on a stock which bounced from a low of $1 to a swing high of $2 isn't bad.
That's a good example of marrying fundamental news to trading price action.
I didn't take an image on exit but anyone can look back to the opening minutes on their feed and see what I mean.
Fundamental news matters, price action matters.
Richard
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Old Sep 8, 2008, 6:00pm   #61
 
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Mr. Charts started this thread One other thought - I don't regard ATR or intra bar volatility as necessarily being "noise".
Price has moved - that's it. Don't label it as something because you feel a need to label or even explain. The price moved. Why does that have to be "noise"? Don't get tied up by indicators and labels. Just see what is happening and be open minded.

I mentioned a "failed" trade from Friday.
In this instance Micro-Analysis didn't help, it showed nothing significant and I exited as per the rule I mentioned earlier in this thread.
It was still a profit of 10c, even though it didn't follow through.
This is it.
Entry on the X hairs as always, exit at time of screen shot

Richard
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Old Sep 8, 2008, 6:07pm   #62
 
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Mr. Charts started this thread I think it's worth checking through the earlier charts so you can see the similarities between all of them. That will help anyone who wishes to recognise the pattern; visual repetition is worth many words.
Richard
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Old Sep 8, 2008, 6:17pm   #63
 
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Mr. Charts started this thread This pattern cropped up many times this afternoon and I'll post the relevant chart of my HUN trade tomorrow or Wednesday. It's a nice waterfall
I've been on here long enough the last couple of days. Maybe I should learn to touch type.
Richard
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Old Sep 8, 2008, 7:03pm   #64
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thanks mr charts for this thread, very good.

from what i can see you find stocks that are in a clear trend and the trend is well developed, you then seem to buy or sell on level 2 volume pressures. Can I ask what else does a stock have to do fundamentally to qualifiy for your shortlist on a particular trading day, if your perpred to ask of course.
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