How To Make Money Trading The Markets.

The idea behind this thread is to show it is not difficult to make money from day trading US stocks given good methodology and the self-discipline and control to follow and trade it.

No complex formulae or indicators are needed. Neither do you need great foresight.

You need to see what is in front of your eyes and act accordingly on that evidence – nothing else, no hope, no fear.

This is just one of about a dozen set ups I use to day trade US stocks in all sorts of market types, trending, range-bound, grinding etc.

I’ve been earning my living doing this since 1999 and the methods work consistently well, but nothing is infallible and you need the right tool for the right job at the right time.

Above all you need self-control and the humility to realise you are not the master of the markets, you are not “clever”, you are merely an individual who is going to carefully choose high probability situations to make consistent money from the markets.

I often use specific triggers to confirm the trade entries and often the exits. Those triggers are level2 buy and sell pressures and Time & Sales. These refine the trades and often keep me out of the ones which don’t work out; not always, but often enough to give me a powerful edge.

I intend to show in this thread one of the techniques which works consistently.

This thread will only include charting, not level 2 buy and sell pressures and Time & Sales.

The method I’m going to show is fairly straightforward and works well with stocks which are either strong or weak and clearly trending. It is not necessarily about trying to find the beginnings and ends of trends, although it does sometimes indicate the end of a move.

This is about taking bites out of trends repeatedly and consistently.

I’ll talk about the set up, the conditions, how to decide about position size to minimise risk, where the worst case scenario stop can be placed, and why. Personally I tend to be very risk averse and will exit a trade even though the chart doesn’t show the end of the move is likely within the time frame I’m trading. My trigger for the exit is often when I see (in a short) buy pressure building and when I see (in a long) sell pressure building on level 2 T&S.
This often is apparent before any sign on the chart, which puts me ahead of most traders.

There will be examples and then descriptions and clarification to follow.

Remember, nothing is infallible, trading is a percentage business. Some trades will fail but it is absolutely vital that losses are kept to a minimum.
I don’t look for a huge move with this technique although it happens sometimes anyway.
Price action dictates the trade. I control maximum potential loss, (slippage is relatively rare), market action controls the exit from profitable trades.
I’m very happy to take what the market offers.

There were plenty such opportunities to make money this afternoon using this straightforward technique.

In all the charts the red cross hairs were at the time of entering the trade and the image captured at the time of exit.

Three of my trades this afternoon were using this technique. All were successful.

Richard

This is the first of the three trades from this afternoon using this technique.
It produced a profit of 43c, that's $860 for a 2000 share size, $430 for 1000 shares, $215 for 500 shares and so on.
I'll discuss and clarify tomorrow.
Richard

Thanks, options.

With this approach I'm looking for stocks which are already in a clear trend and I just want a bite out of that trend.
As the old saw goes, "the trend is your friend till the bend at the end", so I want some of that action and will be out either when level 2 buy/sell pressures T&S, (what I'll refer to as Micro-Analysis), warn me of a possible end to the move before it shows on a chart, or for the purposes of this thread when the chart tells me it might be over.

As can be seen on the chart posted yesterday I shorted after the trend was established, if anything a little late, but that was when I discovered the stock.

What I am looking for is an ongoing sequence of candles in the time frame I'm trading - one minute in this instance - where the tops of the candles are lower, (in a down move), than the previous candle. This tells me that sellers are still active and overcoming any buyers before the candle can even get above the top of the previous one. Although the last sentence is not always strictly correct, it is in over 95% of cases.
In other words, in this time frame the sellers are still in control of the ball.

As long as that continues I'm keeping my position open.

It follows that once that pattern is broken by a candle rising above the high of the previous one, then there is a serious possibility that the move might be over.
Time to close the position in full or in part and bank profits. Usually I close it completely.

In the example shown, Micro-Analysis indicated buy pressures mounting and selling pressures declining so I exited. As it happens that was the final candle before a bounce.

In the next post I'll talk about position sizing and ATR and after that about when to exit if the trades fails at or shortly after entry so any possible losses can be kept to a minimum.

There will also be more charts.
Richard

This is the second trade from yesterday afternoon using that same technique - also SUN.
This was 54c, again $1080 profit for 2000 shares, $540 for 1000, $270 for 500 etc.
The same conditions were fulfilled for another winning trade.
Richard

Again the exit was on Micro-Analysis and that candle turned green by the time the one minute candle was over and again marked a swing low. Had I not used Micro-Analysis I would have exited as per the rule in the earlier post at 42.19, still for a profit of around 39c.
Richard

Here's the third such trade yesterday.
This time AKS.
Again notice how all the conditions were fulfilled.
The exit was again on Micro-Analysis for +24c and the exit candle was the turning point yet again. Had I simply used the chart, the exit rule mentioned would have taken me out slightly later for +15c.

Don't go thinking every trade works, they don't, but a high percentage are profitable and the losing ones are always kept small by the rules I will explain later.
Richard

This afternoon there was only one trade of this type I actually traded though I'm sure there were plenty more opportunities; I was trading other set ups.
I'll post that chart tomorrow or Friday.
Richard

By the way, if anyone wants to ask a question about this technique, and doesn't want to post on the thread, please feel free to email me and I'll do my best to answer as soon as I can.
Click on my name in the top left hand corner and hit "send email to Mr. Charts".
Richard

What screener do you use to pick your watch list (if you have one)?
Thanks in advance

LZ,
Since I trade US stocks for a living I don't want to comment much about futures as I think people should only post in a thread like this about what they have considerable experience of and do for a living.
However, I used to trade futures but found stocks much more profitable as I can almost always find moving stocks whereas futures and frequently FX can be range bound.
Buy/sell pressures in depth, market makers, T&S in stocks are completely different to futures.
Richard

neil,
I use eSignal Turbo Scanner and also read the news pre-market.
Richard

Someone emailed me asking "why read the news...(re-post #14)...as everything is in the price."

I don't believe that for a moment. Price on trades printing off is about what people buy and sell at and that is often not in line with the hundreds of ways people "value" a stock or anything else. Value or worth is not price .

I don't really want to get into all of that, but I feel strongly that anyone who trades on the basis of the previous day's price at the start of trading should have a good idea of the environment they are trading in. In other words, what overnight news or events are dictating sentiment on the new trading day?
You should never trade purely on news, but on the reaction of the market to that news or environment, be it oil price, stock sector, FX, interest rates, economic news or several other things, even weather.

In my opinion to trade purely on technical analysis in its classical sense is to ignore so much else and invites failure.
For me, TA is part of reading the market activity.

Again I'm talking here about stocks, not FX and other instruments.

You don't go out and do anything without knowing something about what the environment is like today.
You don't work without knowing what current conditions might affect your work. Not rocket science.
Richard

I've been following the thread for a few days and although I've seen a couple of charts, some discussion, and an invitation to email more sensitive questions, I don't think I've seen the method described. Have I missed something?

Hi Mr Charts,

this is a very useful thread, thanks for sharing your knowledge.
I would like to know what criteria do you use to search for stocks.

Thanks

i mean that sounds like a winner to me.how did you do it?
what technic did you use.
im a new trader and my goal is to make beteen 300-2000 dollars weekly to start with.
useing penny stock.