A Simple Trading method

[neil]

Here is a blow by blow account of a simple trading method.

Make of it what you will.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=11595&perpage=6&pagenumber=3

 

[rossy]

Hi, I use a similar method, but on a longer scale, used it for some time. I use 1 hour chart with 5,10 & 15 ema's. Same ema's on day chart.When ema's cross on hour chart in same direction as day trend, I enter and I exit when hour ema's cross. It simlpe, but makes me profits. Hope this is of some use.

 

[Tray_Dar]

Having looked at a few MA crossover systems, it appears that whipsaws are inherent to them. How do you avoid/minimise them in your trading?

 

[rossy]

Hi, I use what is called the bow tie system. I wait for all ema's to cross, then be in order ie. 5>10>15. if uptrending. Once crossed, I wait for the first price bar correction. ie the low of the price bar is lower than the previous. This limits wipsaws, but reduces trades. I deal on the Dow Jones index and this provides me on average 2 trades per week. If you have any other ideas to reduce wipsaws, i'm interested

 

[ChartMan]

Yes, take a look at your charts and search the archives here for "dow intraday".... It can be seen that when the price on the dow 1 min chart is within +/- 20 points of the 100EMA, then this defines very clearly a "keep out" band, i.e. don't enter a trade within this band.

 

[Naz]

Whipsaws are a problem with the ma crossover system.but they can still be handy for some people if you use them to manage your trade and understand the market your trading well.
If you notice this system makes a point of only trading the US in the morning and in the afternoon.This is where the strongest moves are.When it gets to lunchtime get out because you'll be whipsawed.

There was a chap on www.siliconinvestor.com called Thomas Carr a couple years back who had a realy popular thread which had a ma crossover system.It had a realy big following,it might still be there.It made big profits on volatile Nasdaq stocks.You were always in the trade either long or short.The key seemed to be picking the right stocks and this is where the thread helped.The results were extremely good.If youre into this type of trading check it out.I think the thread was called "befriend the trend" by Thomas Carr

UPDATE.
It got me interested so i just checked it out and its still there.Its grown and added options and daytrading.Plus they've opened their own web site at www.befriendthetrend.com stating that their sytem makes 316% annualized returns?

Just for interest if anyone takes this further and looks into befriend the trend could they post their findings on the thread.Especialy if they start earning lots of profit!

 

[TraderPattern]

For me, the surest way to make a living is on the basis of what the market is doing right now, not on the movements of moving average crossovers and things like that.

For me, just give me a Level 2 console and I will be quite happy.

 

[Hotwaxtraxx]

"Trade what's happening, not what's happened"

Are thee the words of a user named 'TraderPattern' ?!........strange...

 

[rossy]

Hi, can you tell me what a level 2 cnsole is?

 

[Naz]

Hi Rossy

A level 2 Screen is the ability to see underlying orders in a stock that exist beneath the inside bid and ask.Seeing these orders gives an indication outside the inside market price of players POSSIBLE intentions.

A level 2 order book exists in the UK but it is very far behind in its openess compared with the Nasdaq.

The Nasdaq level 2 screen has the advantage that,firstly it can be viewed on volatile Nasdaq stocks that give traders the chance to earn large short term profits.It not only enables them to identify each individual market maker and watch their trading intentions,but through an ECN it allows the trader to participate on the screen as if he/she were a market maker themselves.

Watching the true market action and being able to use direct access into the screen with a number of different orders allows the trader not only to get excellent fills on his trades but with skill learn how the stock is poised to move next before it appears on anyones chart.Making it truly an excellent trading tool for a daytrader.

It benefits ALL styles of trading in any time frame but is of exceptional use for scalpers who want to take very quick and small profits from the stock.Naturaly enough traders that use it are fiercely proud of their skill at being able to read and use it.They wonder with amazement why more traders dont check it out.As they say "trade what you see" and level 2 Nasdaq traders can see everything before it happens.Their direct access orders are probaly some of the quickest fills around getting them in and out in the blink of an eye.

Some of us try and be polite about other styles trading but we know we've got the best there is.

 

[options]

LOL, Naz,

I hereby award you this months T2W prize for gobledegook.

It took me a while to work it out.

"A level 2 Screen is the ability to see underlying orders in a stock that exist beneath the inside bid and ask.Seeing these orders gives an indication outside the inside market price of players POSSIBLE intentions."

That's scared off a few peeps m8.

All the best.

Alternative choice to prefer different selections from any alternative outlook.

(Options to everyone else.)

 

[madasafish]

I use a very simple method. Buy at the bottom of a 5 minute chart and sell near the top and vice versa..

Easier said than done?

Check out this automatically drawn and coloured chart...

Based on the ZIGZAG indicator,,

http://www.linnsoft.com/tour/techind/zigzag.htm

(I use support and resistance to help confirm signals plus multi time frames.. but it calls tops and bottoms amazingly accurately with 0.5% as the set level for 5 min charts..)

 

[dsmodi]

Hi Mads,

V. interesting post....

I'm not doubting you, but can you post your results from this for e.g. the last week.... As in how many points you were able to take from the S&P?

Many thanks...

 

[Naz]

Re What is a level 2 screen.Sometimes a picture is worth a thousand words.So here is a picture.I will also try and keep this simple.

All this software is free from your broker.
On the left is an intraday chart of the stock.In the middle is the level 2 screen with the order entry box on top.The inside market is trading at $16-$16.01.On the right is the time and sales showing the trades going off and underneath is the island book which is one of the biggest ecn's.

As you can see you can view the underlying market underneath that inside quote.

 

[ChartMan]

Nice, so here's some relevant questions.
From the L2 screen, is it telling you support is at 16$ and why? Or is the L2 screen telling you support is at $15.90?
From a TA point of view, we see a tripple bottom at 15.90, and maybe (if other indicators were shown) some positive divergence or other confirmation....
Are the "shares" numbers 1 share, 100 shares, 1000 shares or what?
If you wanted to go long 500 ( assuming it's at support) , "instantly", would you place an order on Island at $15.99? Would you in fact get instatly filled? Or would you put an order in at ,say, $16.05, knowing that at that value, the reversal is confirmed.....

 

[Naz]

This snap shot is an instant in time.Level 2 is a story.The shares are in 100's.
What do we know about first boston(FBCO) playing this stock?How has he played it before at these levels.You see all those $16 prints thats him buying.How strong a player is he generaly and that day?If he's playing the axe then the key is he's a buyer.the inca order is a fake designed to look like size.OK so if FBCO is a buyer i'm a buyer.You see that print at $16.01 on the chart its nothing its one guy buying a 100.Colour FBCO in so you can follow him around and watch him.

Ok you want to get in hit the ask.Take 5000 off island because it gets you in and it'll print and jolt everyone to the fact that were moving.Use it to get your fill and by taking island out you start creating momentum.Dump as many as you dont want by hiding it infront of that island order at $16.04.every 1000 will make you $20 so that you can off load and cover your trading costs.For a scalp dump the rest at $16.119 on a hidden island order infront of that 3900 order.If it runs up strong and FBCO is a strong buyer sell 1/2 and run with the rest.the first 2000 would make $40 to cover the costs.the scalp with the other 3000 would make $330.Keeping half and shadowing the axe would make you $165 and another $1400 approx if we run to the next whole number.So there is a potential $1400,$165,$40 giving $1605.

Risk.The key is FBCO and how he plays it but two exits are $15.97 on island and sweep the island book getting most at $15.98. Another stop is $15.96.Meaning $250 or $150 depending on your game plan.On the $330 scalp its just over 2/1.If we see lots of strength and run to the next whole number with half its about 6/1.

Ok thats the story for experienced traders who are interested in how a scalper might think and play the move.

 

[Naz]

So now i'm a swing trader looking for a longer move.
If FBCO is the only player at$16 and when the time and sales shows selling,then he's the buyer,he's the only guy there.why am i interested in a little green candle from someones 100 share order.I want to see the real mm whos prepared to hold support and watch him.If youve watched him before you'll have even more of an understanding of his moves.

Lets say he drops it 5c to freak out all those t/a players who had their stops under $16.Probably that fake inca order could be his and he pulls it as well to start the downward momentum.then as every one dumps their stock he sits there showing 100 shares and keeps refreshing he's quote whilst he buys every last frightened trade.Thats your buying point.You run and manage the stock with him and hey presto it runs to the next whole number where he's now a seller,you sell and you've cleaned up.Who needs a chart, in that move he just fooled all the chart readers.They all sold when they should have bought.they looked at their charts, i looked at my level 2 screen.

If you dont believe that happens i've seen them do it loads of times on Intel.At $30 this year FBCO and GSCO did it numerous times 5c and 10c below support.then ran it up a $1.I know because i played it with them.trade what you see and you see it all on a level 2 screen.

 

[ChartMan]

OK I follow all that. Find the Axe, find the Gold.... I only have one point to argue, just because it's me and I can't let you get away with a clean sheet ........
If I was long at 16$, I wouldn't have my stop at $15.95 with any strategy. I probably wouldn't be buying at $16 either, more like $16.05. By then, the faking has been done and dusted. Agreed, it's less profitable and less fun.
For the record, we see that quite often on the DOW, preceded by, typically, a bull flag that you would expect to break to the upside, but it drops through the support sharply, then flys up to confirm. I call this a "dip 'n' fly". Maybe a multiple ocurance of the MM's on the stocks playing your tricks?
If you have the experience to recognise it, and the Ba*** to execute it, you get a nice long, with bias your way ( as the SB's are still in "short bias"). If you're green to the game, you take the short and take the hit.
Sweets to me and sweets to you

 

[tradesmart]

I think that there’s only one way to resolve the Level II / Charts conundrum.

We’ll give both Naz and Chartman a notional $25k to trade with for 1 week with their respective trading tools and the most profitable will be the winner………………

(either that or it’s a mince pie throwing contest on Christmas Eve!!!!!!!!!)

I’m sure I speak for many when I say thanks to you both for your fantastic posts on Trade2Win.

Regards, TradeSmart

 

[ChartMan]

TradeSmart, It's not about one against the other. It's about a balanced, unbiased view presented to our members. It is for them to decide which route to follow. I would be the first to admit that Trading L2 USA is probably the most profitable route that anyone could take. Just as long as you can become proficient at it. As much as I find it attractive, I'm not sure my ageing years could handle the action.
Anyway, I like TA, end of story. It gives me pleasure and it suits my personality.
Apart from that I'm a bad loser