How To Make Money Trading The Markets.

Mr. Charts

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#41
So what about ATR?
I use it in my personal trading as a rough guide to risk.
The higher the ATR is in the time frame I'm trading, the greater the potential risk as price is more likely to leap around. Stocks with ATRs of say up to 5c do move slowly and READABLY, ATRs up to 8c a little faster and are very slightly more difficult to read, 12c faster still and 20c+ really quite fast and dangerous.
Of course you can reduce position size accordingly with a higher ATR and that's fine, but again for me I know that the higher the ATR the more unpredictable a move can be and I prefer READABLE stocks I know I can exit from at the time of my choice at the price on my screen and not a price which has leapt away 10c, 20c, 30c in a second or two. I don't feel I'm in control in that situation, but that again is my risk averse personality. Others will differ and that's fine. Nothing is "right" per se, it's what works for the individual and their personality and above all what makes consistent money for them every day in all market types.
Richard.
 

Mr. Charts

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#42
trendie,
Although sometimes I do look at the previous day's big movers, my early attention is on stocks that have moved pre-market and/or news stories. However, I never trade the news, only a clean market reaction to that news if one of my dozen set ups occurs and then triggers.

timsk,
Thank you for your request to mods. I shall make a comment on that thread in a few minutes.

Richard
 

Mr. Charts

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#43
Ive got to love that line... there can be quite a lot under that personal preference title not related to the execution of a trade, brokers platforms, trading goog and so on. This is really what defines a traders personality.

Great thread Mr Charts, Lots of valuable infomration here is people prepared to do their homeowrk and read through and make the time to understand what is being said here.

On a slightly differnt note using the tape on FX last thursday (thats the last price on right hand side of chart...no time and sales on FX (n) ) to trade gbpjpy after it had already dropped 600 pips (average at the moment is about 200-250) and a little cross tape reading between gbpusd and usdjpy was telling me that GJ was going to go lower as gbpusd and usd jpy were taking it in turns to trade down on what you call micro analysis... and no charts involved. As you described in post #4 sellers have the ball on GU UJ and as a result still influencing GJ.... Tape pausing on UJ while GU's tape making LH LL's pushing down GJ... then GU would pause and UJ would start moving down in the same way causing GJ to move further down....

You dont always get to see this on FX but on stocks as like you say you can find these trade set ups daily and is a most effective tool for trading.

Not traded NASDAQ for a while now but you have certainly re-kindled the fire again

When we last spoke about this I think the best way to describe this price action is to think of Paula Abdul's song - 2 steps forward and 1 step back

For those wanting fast, daily/regular and profitable action should consider Mr Charts method of trading
Absolutely spot on as usual, Bomber :)
Richard
 

Mr. Charts

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#44
I've spent Sunday afternoon two finger typing here and catching up with EMAILS people have sent so I won't post again till tomorrow or Tuesday, but there was a "failed" trade using this method on Friday afternoon and I'll post that then.
It was still profitable but only by a few cents but does show the right time to exit the trade on the CHART as I couldn't use level 2 etc effectively because its signals were not clear at the time (sometimes they are not) so I exited as per the chart exit rule mentioned earlier in the thread.
Richard
 

Mr. Charts

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#45
By the way, I know some people would just like a "just tell me what should I do step by step 1 2 3 4 5"sort of thread, but I think on an open BB it's better to have the concepts gradually become clearer as no-one should accept something without thinking and understanding, even before they test a method for themselves. Trading must always have some thought and judgment and understanding involved, even if it's a small percentage.
However, I might possibly do a summary at some point.
Richard
 
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#46
Mr. Charts
I have been wondering what the meaning of T&S and ATR are?
Also, what kind of info do you get from Level2 (i don't even know what that is)?
I undertand that "microanalysis" is not part of your intention in this thread, so can you tell me where can i find more info about it? (just curious).

I appreciate the time you spend answering our questions.

Freeman
 

Mr. Charts

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#50
Mr. Charts
I have been wondering what the meaning of T&S and ATR are?
Also, what kind of info do you get from Level2 (i don't even know what that is)?
I undertand that "microanalysis" is not part of your intention in this thread, so can you tell me where can i find more info about it? (just curious).

I appreciate the time you spend answering our questions.

Freeman
Hi Freeman,
T&S = time and sales. That shows you the trades printing off (deals actually done), their size, price and time.
ATR is as superspurs (thanks superspurs) says. It is a measure of the difference between the high and low of a candle and is usually defaulted over the previous 14 time periods.
Level 2 shows you orders in the order book on the buy and sell side. I haven't the time to describe the structure in more detail as it would take quite a while, but you can google it.
As I said earlier I use my own phrase "micro-analysis" as a shorthand to refer to the way I synthesise level 2 orders, buy/sell pressures and T&S. It's no use googling that.
There is no book or web site which will describe it in detail I'm afraid, only me.
Most people have the fallacious belief that's it's just about what market makers do, but that is only a small part and is full of spoof orders. With knowledge and practice you can often spot the spoofs. Also there is usually not the primary and secondary axe operating in the same way they used to. Other types of trading behaviour and programs have reduced the effectiveness and usefulness of what people think of as classical level 2 interpretation.
The reality is that it has developed and so you need to know how to use it here and now. Books are out of date by the time they are printed and those of us who use the techniques don't broadcast the details too widely as we like to keep the strong edge it gives us.
I realise this answer is not comprehensive and not as helpful as you would like, but I hope you understand.
Richard
 

the blades

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#55
So what about ATR?
I use it in my personal trading as a rough guide to risk.
The higher the ATR is in the time frame I'm trading, the greater the potential risk as price is more likely to leap around. Stocks with ATRs of say up to 5c do move slowly and READABLY, ATRs up to 8c a little faster and are very slightly more difficult to read, 12c faster still and 20c+ really quite fast and dangerous.
Of course you can reduce position size accordingly with a higher ATR and that's fine, but again for me I know that the higher the ATR the more unpredictable a move can be and I prefer READABLE stocks I know I can exit from at the time of my choice at the price on my screen and not a price which has leapt away 10c, 20c, 30c in a second or two. I don't feel I'm in control in that situation, but that again is my risk averse personality. Others will differ and that's fine. Nothing is "right" per se, it's what works for the individual and their personality and above all what makes consistent money for them every day in all market types.
Richard.
Nice thread Richard.

As I'm here, it's dumb question time. You refer to te ATR in cent terms, rather than as a % of the price? A stock with at ATR priced at $100 is far less volatile than a 20c ATR on a $10 stock. Do you not factor this in?

Cheers,
UTB
 

Mr. Charts

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#56
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
 

Mr. Charts

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#57
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
 

the blades

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#58
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
 

Mr. Charts

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#59
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
 

Mr. Charts

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#60
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