Low Risk Entries

[Grey1]

One of my fellow traders just Pmed me to ask what are the LOW RISK entries I said I would open a thread..

Please add your fav low risk entry here


Strategy 1)

Always buy the second pull back from the HIGH of the day ..

( for exact entry point L2 helps a lot )



Same with the second rally on LOW of the day

I will add further

 

[Grey1]

Strategy 2)

1) Deduct HIGH from the LOW of the day

2) divide this by 2.... we call this Maxmum permissible deviation or MPD for simplicity ...

3) calculate your VWAP

4) go short when price is MPD above the VWAP ( same for long )


In all cases use L2 for fine tuning ( first support or resistance will do )

This is bargain hunting and you need a scanner to identify these situations for you ..

 

[Grey1]

strategy 3 )

Capitualtion sell off


When a stock closes well below its normal historical close due to down grade, bad news ( avoid profit warning news ) then take a long position // AMZN was sold off 8 % or MSFT was sold off 9 %

Reduce your positon size.. increase your stop loss to around 1% ( you are better off tohave a Money management stop than a set figure but i am only trying to give an example ) and let trade to run for 3 days...

 

[Grey1]

Few tips

1) They tell you to buy high and sell higher.. This is Bu**S**
Always sell into strength and buy into weakness..( I fully understand the above reasoning but it is not suitable for day trading )

2) They tell you to buy the strong stock on strong sector
Wohoo .. donot do it... they fall faster if maket goes down..

3) As soon as you made profit raise the stop to entry ..

4) Use Money managment stop.. this is far better than TA stop.. This way you are in charge of your capitaL at all times

4) Learn to use L2

5) Take what market gives you and donot sit there for a reward/risk of 3 ..... You might have to wait a long time

6) LOOK AT THE WAY BARS ARE OPENED AND CLOSED..

7) AND LOADS MORE I LEAVE THE REST TO MORE EXPERIENCED TRADERS WE HAVE .. OUR CITY TRADERS

 

[timsk]

Grey 1,
Fantastic thread! One question - I'm very confused about VWAP which I know you're very keen on. I've tried to do a search but can't seem to find a definitive explaination and method for calculating it. Could you provide a link and/or explaination please?
Many thanks,
Tim.

 

[Lambchops]

Grey 1 - Can you put some charts up to illustrate your strategies?

 

[Trader333]

timsk,

Here is a definition of VWAP:

Volume-Weighted Average Price (VWAP)- The VWAP for a stock is calculated by adding the dollars traded for every transaction in that stock ("price" x "number of shares traded") and dividing the total shares traded for a given trading day.

The calculation is:

VWAP = price x volume/ total Volume

But this creates a bit of a problem because you have to know the volume for every price increment. So it is sometimes calculated by taking the average price over 1 minute and using the volume at that average price.


Paul

 

[darrenf]

Grey 1

"3) As soon as you made profit raise the stop to entry .. "

I am puzzled when people say this. Could you explain what you mean?

ie at what level of profit would you move your stop to break even.
presumably you dont mean "as soon as" you are in profit otherwise your stop would be one tick away from the market price and I would imagine 99.9% of trades would be stopped out at breakeven?

Do you have a minimum profit amount ie 1 x stop value before you move to breakeven?

Thanks

Darren

 

[JTrader]

Buy only when oversold on RSI 14 (below 30), sell when overbought on RSI (above 70), in both cases when the prise rise or fall seems to have stabilised and may be starting to reverse. Seems to be a consistent indicator.
For individual shares use L2 so that you can see how much or little support and resistance there is on the order book before placing a trade.

 

[Grey1]

Darrenm,



I can give you TA reasons, ( some ATR away ...) statistical ( 1.2 SD or.. ) reasons but I am going to tell you a technique not documented but often used amongst TOP traders.. It is called
Spread stop..

Spread stop is when a trader decides to have a multiple of spread in the stock as his STOP Loss level and would raise his stop to entry when the stock moves X multiple of this spread above his entry ,,

Example

NTES has a spread of 7C ( just for the sake of the argument)

you then set a stop of say 14 C ( 2 times the spread ) as your stop ( in another word if you are wrong by 2 SPREAD THEN THERE MUST BE SOME THING WRONG WITH YOUR ANALYSIS IN THE FIRST PLACE ) and your first target of 14C for your profit.. As soon as
your first level of profit is HIT you move stop to entry .. )

Actually there is a nicer version of this technique. which would come under Low level Time frame asset diversification which I use myself .. It is dead simple and trader is under full control of his risk level at all times .. I will elaborate later..


Lamchop,

Please see the US thread for the chart of Second pull back rule

MY thanks to paul for explanation of VWAP . I have also posted a downloadable article in US thread about VWAP

 

[Grey1]

Tip of the day ( lol)

If the LOW or HIGH of the day happens during the first 30 minutes of trading BE SKEPTICAL about it.. Give much much more weight to the high and low after this period..

The first 30 minutes is pure PANIC.. Gamblers are all for quick buck ... Hence these levels are set irrespective of stock's internal qualities..

May I ask other traders to contribute to this thread as well .. it is kinda lonely on my own

 

[darrren]

Grey 1

Thanks for sharing those strategies with us - much appreciated.

Let's hope other experienced members will also be as generous.

Darren

 

[oatman]

jtrader, is your RSI on a 1min?

 

[mma]

* They tell you to buy high and sell higher.. This is Bu**S** *

As far as indeces go I agree , but there are some very notable exceptions - ie. emerging market stocks in bull markets .

* I LEAVE THE REST TO MORE EXPERIENCED TRADERS WE HAVE .. OUR CITY TRADERS *

you were doing well until this bit . you are not leaving us at the not too tender mercies of bank traders are you ?

Like Mr. Peter * dyke * young ??

Hellllppppppp !

 

[Newboyneil]

Low Risk Entries
One of my fellow traders just Pmed me to ask what are the LOW RISK entries I said I would open a thread..

Please add your fav low risk entry here

Can somebody explain L2 in the following paragraph please

Thanks

Strategy 1)

Always buy the second pull back from the HIGH of the day ..

( for exact entry point L2 helps a lot )

 

[DaxTrader]

Good thread, interesting

"They tell you to buy high and sell higher.. This is Bu**S**
Always sell into strength and buy into weakness..( I fully understand the above reasoning but it is not suitable for day trading )

I think you are too harsh on this, this applies to trend trading and can work in many time frames , not just daily. Trying to pick tops and bottoms - some people say that is a mug's game, and the bit in the middle is the bit to go for to avoid getting chopped on market turnarounds. "The pioneers are the ones with the arrows in their backs..."

"2) They tell you to buy the strong stock on strong sector
Wohoo .. donot do it... they fall faster if maket goes down.."

If you are a short term trader, that's ok, if you are in for the bigger move that is how the big money is made - most of the Greats say that. ie vodaphone has continued to be relative strength leader over BT etc

"3) As soon as you made profit raise the stop to entry ..

Unless it is a technicaly significant, then it is waste of time doing that. The market doesn't care where your breakeven is, so the only way to tell where and when to raise it is with experience seeing what is a balance between defensive and leaving the upside open enough.

 

[alanb41252]

Always wear a condom

 

[Naz]

Hi Newboyneil,

When they say "for the exact entry point L2 helps a lot".Grey i assume is talking about Nasdaq Level 2.In my opinion this is the only way to trade Nasdaq stocks without it you're trading with your eyes shut.

 

[Grey1]

DAX,,

Thanks for your comments..

On the subject of Buying high selling higher :--

I need to know your views on birth of trend and why you think it is ever possible to catch the middle bit.. What are the tell tale signs? What technical or statistical algorithms define the start and finish of a trend ?

On the subject of sector strength :--

High beta stocks fall faster than low beta instruments ... Time frame is not relavant..

On the subject of moving exit to entry :--

Does it not make sence to you to reduce risk to zero once into profit ?


NAZ,

yes ..I am talking about Nasdaq L2..

 

[Naz]

Here's a low risk entry for me.Short where the red arrow is,with a stop over the previous high.