Trading steps

[Grey1]

Before you start your trading days what are the steps you go through before the market opens ?

Do you watch the news ? if yes what part of news interests you .. Announcements, earning , ...

Do you want to know the fair value and how that affects your decision

What pre market signs are important to you ?

Do you care about news ?

Do you trade if you miss the opening of the market ? is that important to you the way market opens ?

Do you have any pre determined strategy in your head for going to war?

What does futures tell you ?

Are you fear ful of your trading day before the opening bell rings?

lets share...

 

[BBB]

I scan through 100 stocks looking at the intraday action and important levels of stocks that may interest me. ($20-40, volume 500,000+) I will then look at the longer term charts to see what story they tell. If they confirm, I note possible trades/setups that may occur. This list of possibles will be around 10 stocks.

I catch up with any news before the open and check the news for significant events in my list.

I focus on the price action of those stocks only during the day. I am looking for the setups that I have noted earlier. Once a set up exists, I then check the volatility before entering. Volatility acts as another filter for me. If I see anything else that looks tempting, I ignore it. I know what I am looking for and I only trade that IF it occurs.

An example of something I may look for is matching congestions. A b/o of the 2nd, 3rd congestion where they occur at similar price levels is an example. So if I note congestion in DGIN yesterday, and I see congestion occur again after the open at the same price, I trade a b/o. A spike reversal bar at/ near the previous days low may also be a valid set up if taken in the direction of the daily chart trend.

I appreciate the futures and indicies can give pointers to overall market action, but to be honest they do not feature in my strategy. I'm not afraid to go short in PQRS if $ tells me to do so, despite the index going through the roof. I pay little attention to fair value.

I pay no attention to the news during hours. Price will tell me what to do way before if comes out on bloomberg/CNN etc

I am not saying the issues Grey1 mentions are not useful indicators to other methods. Maybe they will help me?? My strategy is simple, and I have a plan before each day. Keeps me calm, on top, and able to act when the time comes.

 

[BBB]

Grey1 - I'd be interested in understanding your views on the points you raised - especially Fair Value

 

[Grey1]

BBB,


I spend a lot of time studying the fundamentals of the companies which I have long term interest in..

Day trading is different and I spend very little time to study yesterday's chart for tomorrow's trading ..

I simply believe yesterday is gone,,

Few years back :--

1) Watch the news.. Some one else's analysis of the market
2) Do all sort of analysis on yesterday's chart
3) Identify the support/ resistance pivot points
4) Watch the spread from Fair value to gauge the market direction
5) watch Trin , Trick , SOX, ..

Few years later

1) Donot watch stock news. just greeney
2) watch the way market opens. positive or negative and by how much..

3) Donot care to be hit by program trades ( index arb buy/sell programs only) .. They donot last long and I can not get on their correct side..
Rule 80A curbing rule has been altered.. Just watch the Quarterly figure
4) Watch DOW direction
5) just stick to 4-5 strategies I know and two simple MM formula's

If it is not simple . It wont work

 

[BBB]

Thanks for that, and I'd agree with most of what you say.

I do believe however that key levels that were traded over the last few days are significant - if only because the numbers are still fresh in traders heads. e.g. if the price found support 4 times yesterday afternoon, then should price that level again the next day, there is a good chance the crowd will remember that price level - may be in terms of pain or reward - and behave accordingly. Maybe, that huge order that GSCO are filling over the course of the next few days kicks in at that other resistance level etc etc. As a value trader, I thought these issues would still be on your radar???

Out of interest, why do you pay so much attention to the Dow? The SnP I could understand as it is more reflective of the market, but the Dow as we know is a very small segment of the market that is concentrated on issues that A/ dont even trade on NASDAQ (ok, a few do ) B/ only represent the largest cap stocks which we may not be trading.

Could it be that the Dow is a leader and the SnP follows? or is it that program trades kick in based on the Dow? I dunno!

 

[Grey1]

Quote " Could it be that the Dow is a leader and the SnP follows? or is it that program trades kick in based on the Dow? I dunno! "

S*P and Dow are both as good and reflect the market sentiment.
These two indicators are watched and followed by nearly every one..


The art of trading is about using these indicators to read the market and get that all talked about edge..


Some traders watch DOW all day but they simply don't know what is going on..

PS:- At some stage during my trading life the " bug " was the only indicators we used to scalp the spread but things has changed a lot ..


regards

 

[china white]

lads - very good thread!

as for me i also look for possible set-ups and trade them only WHEN and IF they happen trading UK techs

most of my trading comes from ES tho. To be entirely honest I very rarely trade in the 1st hour (9:30 - 10:30 am EST). I usually wait untill the 1st hour pivots are established and the overall picture of the market at 10:30 (internals, key averages etc...) is clear - from which i decide whether it is a trend or a non-trend day at 10:30 time pivot.

to make me trade in the 1st hour i need something just screaming out at me - like a massive tick div on a non-trend day or a test of 20/40 ema/5min on a trend day (so screamingly trending that u dont need to wait until 10:30 to figure that out). But honestly such a test on a trend day within the 1st hour happens once in a blue moon

 

[Trader333]

Grey1,

Rule 80A curbing rule has been altered.. Just watch the Quarterly figure
4) Watch DOW direction
5) just stick to 4-5 strategies I know and two simple MM formula's

Can you explain what you mean by the quarterly figure ?

Can you expand on the two simple MM formulas or have we already covered this ?



Paul

 

[Grey1]

Paul,

The Trading collar levels is not a fixed value any more and is calculated on the quartely bases..( 2% of Average closing value of DOW ).

The two formula's I have already given in the chat room ..

One for stop and the other for Pos sizing ..

 

[Trader333]

Grey1,

Thanks, I thought we had and I was just checking.


Paul

 

[china white]

G1 - sorry just stopped me eye - u mentioned a formula for stoplosses and pos sizing trading dow futures? cud u pls let me in on this, if its not proprietary info of coz. it took me many trials to get comfortable with my present 0.3% trailing stop losses on ES - and again AT PRESENT LEVELS of front-end volatility. Isnt this an empirically found number that makes a trader confortable with HIS risk/reward "appetite" and therefore is different for different ppl? Can there possibly be a formula for it?

I am extremely interested. As for position sizing on ES most of time I enter on "ladders" or as some call it - staggering entry. Still the position can be quite different in size - anyway I am all ears

 

[BBB]

China -

'most of my trading comes from ES tho. To be entirely honest I very rarely trade in the 1st hour (9:30 - 10:30 am EST). I usually wait until the 1st hour pivots are established and the overall picture of the market at 10:30 (internals, key averages etc...) is clear - from which i decide whether it is a trend or a non-trend day at 10:30 time pivot.'

This sounds quite interesting, but I'm not sure if my understanding is correct. Do you mean that you wait to see what the opening range is during the first hour of the day. The high & low of that hour giving you the pivots? You then use the pivots as a trading range from which to base trade parameters (similar to basic support & resistance?), unless price breaks out of this range - in which case there is likely to be a profitable trend?

I'd also be interested in understanding Grey1's formula's as unfortunately I missed the session due to flu.

 

[china white]

BBB - yes u r r8 the high and low of ES during the 1st hr gives u the pivots.

then at 10:30 i take a butcher's at the internals, not only the primary, but also secondary which btw r VERY important. Lemme give u an example - say at 10:30 its a non-trand day (from primary internals) with secondary ones showing some strength. The rule will be fade the first pivot tested after the 1st hour (since it is a no-trend) on a Tick divergence but given the strength of the secondary internals - if it is the upper pivot tested 1st - expect to find that Tick neg divergence a couple of points above it, if it is the lower - expect Tick to come into play slightly above it. Etc.....

 

[TheBramble]

But honestly such a test on a trend day within the 1st hour happens once in a blue moon

Well, the next Blue Moon is in July - so I'll keep my eyes open...

 

[TheBramble]

The two formula's I have already given in the chat room ..

One for stop and the other for Pos sizing ..

Grey1 has suggested I ask you guys in the T333 room today (Tuesday) to perhaps expand on these for those of us that couldn't make last week's trading sessions.

POS size = Total capital /( diversification coeff) ( stock price )

Stoploss =Stock price (spread in stock ) (volatility coef)/15

Diversification coes is a figure between 1-4
Volatility coef is a figure between 2-3

Would be much appreciated.

 

[Grey1]

Bramble,

These two equations are suitable for US stocks. They relate to real time volatility of stocks than historcal ATR or SD performance.. The stoploss equation keeps you out of trade when spread widens and quite rightly it should do that ..
The stoploss equation is not only a stoploss level it also works as a filter to stop you from getting burnt when MMs widen the spread due to excess uncertainty they face too.

The position sizing equation does not allow you to trade with more than 25K of your total capital on each trade.. This limit is the " threshold limit to be able to apply proper risk management " and is covered " under minimum fund concept theory ".

Both formula's have been simplified to make trading simple and implementable for real time trading, and been designed to trade stocks between ( $15- 60 threshold only )

Best to explain the above two in real time and test drive them again in real time..

Remember some thing and this is very important.. If it does not work inreal time and immediatley then the chances are that it does not work at all..This includes all theories, indicators, patterns, stoploss formula's..

 

[ColinRiche]

Can i ask that we sort out any questions before the open
or at least before 3pm

thankyou
.

 

[Grey1]

Colin , I wont be available today but am at your service from Wednesday on wards.. Trade333 is ur man to day in his room ..

 

[BBB]

Grey, Bramble, China - thank you all for your replies. Much appreciated. I'm still knocked up with this flu. Think I must have caught it from a chicken its that bad!

 

[china white]

Bramble - this Volatility coefficient*15 makes perfect sense. 15.7% annualised volatility is 1% DAILY volatilty and i am assuming yr volatility coefficient is essentially volatility beta measurement - so for a stock at 62.8% volatility it will be just 4 which multiplied by 15 will give u exactly stock's volatility = ruffly 60%. This is what I thought. Many thx