(Day) Trading Without Charts

[DionysusToast]

All

I know 2 traders that don't use charts in their trading and one that is half way towards not using charts.

1 - Forex Desk Trader
This guy runs a forex desk in Asia. He is connected to a number of banks, an open outcry system and he makes the market. Sometime sellers/buyers are really there at a level and sometimes they aren't. He matches pairs them when they are there and creates interest when the market is one sided.

2 - Ken Wolff
I've had a few chats with Ken & his mode of trading is pretty much to get a feel for 40 or so stocks and watch them every day, waiting for them to roll over. He will also watch perhaps 1 or 2 big news stock a day. His mode of working is to keep his nose stuck to a L1 screen. He does review charts before the open to see what moved with the market yesterday and what didn't. I am not actually sure if Ken uses charts on entry but I do know it's not what he looks at all the time. He can look at L1 for 40 stocks and see which one's of them are slowing down/speeding up. Note also that he does use realtick which colour codes the 'momentum' on the L1.

3 - He who shall remain nameless
This is someone that trades a fund. There are 3-4 researchers who feed him info on news/earnings stocks, they also watch Bloomberg for news and they watch for sectors in play. None of this requires a chart. Again, the mode is to keep their eye on L1 screens throughout the day to see what is moving and what isn't. I am close to one of the researchers and he has 5 screens up during the open and all that is on them is news and L1.

To give an example of the type of trades you would take in this mode. If a stock is down 10% for the day with no news, it would be a candidate for a long. You are also expecting stocks to reverse at the .00 and .50 mark. This is not rocket science.

Now - I like charts, I've tried looking at just L1 for a day or 2. You can see the days change, the high, the low, the current price. You can put hundreds of stocks up, something you can't do with charts. You can see when a stock has made a high, pulled back and is about to break out again.

This is not what I do. It would require me to take a lot of steps backwards in order to trade this way. I do see the benefits though. I am not sure how one would transition from charts to this method but I can see how people that didn't take the chart route would be able to take to this.

Thoughts ?

 

[BSD]

Personally I think it's total nonsense for anyone doing any short term trading, the days of trading of off level 2 are long gone and done with in the day and age of high frequency trading that makes up 70 % of eg daily volume on the NYSE.

And guess who some of the clients of eg Tom DeMark's indicators are...

George Soros, Paul Tudor Jones, Stevie Cohen, ie the tops of the pops in trading.

UBS's global head of the banks fixed income, rates and currencies group says:

"People sometimes scoff when I refer to Demarks indicators - that is until they see for themselves that they work."

All that from

Trader Daily March / April 2008 p42

No professional I have ever seen trades without charts these days unless they're a market maker.

 

[DionysusToast]

Just for confirmation BSD. You are saying that I am lying here, right ? Or are you saying that these people are lying to me ? Perhaps my friend specifically set up a bogus set of screens for me to see when I came around so I wouldn't see the charts.

What motivations would I have for lying on the internet ? I am mystified. Also - you mention Demarks indicators. How does that relate to this topic specifically ? If we are discussing trading without charts, how on earth does an indicator become relevant ?

If you day trade stocks (which I presume you don't), you will see stocks making intial overextended moves before snapping back in the opposite direction. You will see stocks with good news go up pre-market, then sell off to a round number in the opening 30 mins before moving up. You will see pullbacks and breakouts. Anyone trading US stocks will know these things happen day in day out and will tell you that in reality, these early moves can be seen on an L1 screen but it's very hard to do if you are used to charts. If you know low, high, current & % change, you have all the information you need to tell you what the stock has done that day - especially in the first hour.

On the topic of L2, it does indeed help. If you study the DOM for the ES, you can see the work of people building up short term positions of thousands of contracts and moving the market but only in the very short term. You can see the footprints of people building short term positions by enticing people to sell. For instance, you will see large qty on the sell side at the high of the day and minimal on the bid, you may see the price tick down a bit but if you look at the tape you will see the volume of trades going off at the bid is much higher than the size on the bid - there's an iceberg order in there. The buyers are the ones showing size at the ask, they are enticing people to sell whilst absorbing that selling at the bid, they'll of course let the price tick down to encourage more shorts and also so they can get a better average price. When they have built their position, wham - they'll dissapear from the ask, price will move up, people will start to cover and they'll have cornered 6 ticks or more on their 10,000 lots.

Now - it is not only on the ES that this occurs - it also happens on stocks. You can see the same action on L2 as you can on the DOM but you can also see who it is that is 'claiming' to be a seller and therefore is a buyer.

There's all kinds of games going on there, this skill is not in simply looking for a snapshot of one side appearing to overwhelm the other, it's about what is happening on L2/DOM over time as well as the trades that are actually going through.

I guess you'd call it "Tape Reading Plus"

 

[Hilarymannah]

Ding ding,....round one !,..: )

 

[timsk]

The only way I'd trade without charts is if I found a method that gave me greater insight into the market than charts provide. I accept that for some clever peeps, the level II screen can do that. But, I'm a visual person, I can relate to a chart, where as a load of numbers flashing by leaves me cold. If I was told that I couldn't ever look at a chart again and that - if I wanted to continue to trade - I could only do so by looking at the level II screen - then I'd stop trading today and walk away from it for good.
Tim.

 

[DionysusToast]

Tim - actually, the Level 1 data is the most important, not the L2 in terms of 'not using charts'.

Think about this - if you had the following information right from the open and just watched 1 stock all day, you'd have a pretty good idea where it had been.

Open for the day
High for the day
Low for the day
% change since open
% change since yesterdays close
Last trade price
Last trade volume
Bid
Bid Size
Ask
Ask Size
Total Volume

For a start, you'd know for sure if you were about to break out to a new high or low for the day, right ? You'd know which had sold off the hardest and may be due a bounce. You'd already know which were in the news. Throw in alerts at the 52wk high & low and there's a lot of information to trade off.

For people to do this, there must be some advantage for them OR it's just the way they learnt. The trader that runs the fund is in his early 30's, so it's not as if he's old school. I would imagine the benefit is that you can monitor more things. If you are running a fund, you can't please your investors by trading one stock a day. Both the fund trader and Ken Wolff are fairly good at predicting where a stock will go to before reversing. They say this comes with experience but I have a hard time wrapping my head around that skill too.

Perhaps we should turn this around. From a day trading perspective, especially for news stocks where the action will defy most technicals - what is it you get from the chart that you don't get from the above information ?

 

[redart]

I suppose if one likes to trade using patterns like channels and trendlines etc, then they'd need a chart..

 

[DionysusToast]

I suppose if one likes to trade using patterns like channels and trendlines etc, then they'd need a chart..

Absolutely agree with that.

 

[barjon]

yeah, I know a couple of guys who rarely look at a chart and I suppose if you're the sort of guy who thinks in numbers then they (the numbers) make more sense to you than a picture.

I guess everyone's doing pretty much the same thing though, whether they come in via numbers or charts.

jon

 

[Hilarymannah]

Isn't using market profile the same/similar strategy ?
And there are quite a few traders who swear by it. Each to their own I suppose,..what ever works for the individual,...

 

[D70]

My 2 pence.

For illiquid instruments I see guys trade off the bid / offer of their brokers (so for a hedge fund trading itraxx xover) they trade almost entirely off what the "runs" tell them, that and the s&p bid because candlesticks mean nothing in thin markets (which is everything but the fx majors and indices pretty much).

Also, most pros tend to drop charts because (I have said this before), they already know the levels in their head, they dont need charts, they already know they are bid for 5000 at 384, or whatever. They would rather trade off a quote board that shows the feel of the market and it's participants. MA's, flags and all that wot not start to mean very little when you get close enough to the market.

What is the point you are trying to make DT?

 

[rajgreenpeace]

Here is the formula...trading with out chart......if a stocks....break firsrt 30 mnt high I will buy.....same...break 30 mnt low ..i will sell:clap::clap::clap: