WHich stocks

[SanMiguel]

I was going to focus on 4 stocks for daily trading. Any suggestions on which to trade?
I have some some methods where a scanner is used to look for trending or stocks that have reached yearly lows or highs but I'd feel more comfortable trading S&R and candle patterns I think.

 

[SanMiguel]

?

 

[TAjammy]

he wants to find some daytrader UK stocks, hmm, even though u live in the UK, i dont have much knowledge of the markets, but i imagine stocks like Tesco, BP,vodafone,

 

[SanMiguel]

Do you think it's best just to concentrate on 4 stocks and learn their movements?
I know of some methods that suggest scanning through hundreds of stocks with a bit of software and finding the top 30 that have either reached yearly highs or lows and look for reversals.

 

[ukdaytrader]

San - also have a look at nasdaq there are better trading opportunities this.

 

[dash riprock]

What if the 4 stocks you choose spend an extended time consolidating ?

If you are going to spend time day trading and only want to view 4 instruments you may be better focusing on indexes , say the FTSE ,DAZ , S&P ETC ETC

Just my opinion but one to consider.

 

[intradaybill]

I was going to focus on 4 stocks for daily trading. Any suggestions on which to trade?
I have some some methods where a scanner is used to look for trending or stocks that have reached yearly lows or highs but I'd feel more comfortable trading S&R and candle patterns I think.

If by daily trading you mean intraday trading it is better IMO to use ETFs or index futures.

If by daily trading you mean position trading then you should use stocks that have a price range that allow you to control risk and are liquid to trade.

Position sizing is very important especially when trading multiple securities. Here are a couple good articles on the subject:

Position Sizing - Trader Mike

http://www.tradingpatterns.com/PositionSizing.pdf

 

[SanMiguel]

If by daily trading you mean intraday trading it is better IMO to use ETFs or index futures.

If by daily trading you mean position trading then you should use stocks that have a price range that allow you to control risk and are liquid to trade.

Position sizing is very important especially when trading multiple securities. Here are a couple good articles on the subject:

Position Sizing - Trader Mike

http://www.tradingpatterns.com/PositionSizing.pdf

Most stocks aren't liquid I guess as they suffer from spikes don't they? Indices might be better but I was looking to trade S&R. S&R in stocks often seems to be exact lines to the point whereas in indices it's more of a zone?

 

[Brogden]

I think I have the same question as San but maybe I can express it in a different way:

My preferred method of trading is what I understand is called Position Trading - I am prepared to hold a position for days or weeks. I am broadly following the methods described in Malcolm Pryor's Financial Spread Betting Handbook. I look for trends and then chart continuation patterns such as consolidations, triangles and flags so that I can trade with the trend but take advantage of pull backs and pauses. Once I spot a likely chart pattern I look for nearby support and resistance to assess likely risk and reward, trying to get a reward/risk ratio of 3. For instance if I am going long I want to see some nearby support that I can place my stop loss just under, and no resistance above for at least 3 times the distance to the stop loss. I then size my position based on risking no more than 1% to 3% if the stop loss does get hit.

This sounds fine in theory, but I find I am spending lots of time looking at charts trying to spot patterns. I look at the FTSE 350 but even after cutting the 350 down to only those with average daily volume over 500k, which leaves about 225 shares, I still find this too boring and time consuming to do every day - after about the first 50 my mind wanders and I lose concentration, especially with so few shares actually trending at the moment. Do I just need to stick at it until I get used to the task, or is there a better way of identifying shares exhibiting tradeable patterns? Perhaps I should concentrate on just a few sectors or shares?

 

[SanMiguel]

I read that book but sold it on as I wanted to concentrate on Forex but now wish I'd kept it as wanted to refer to a few things
He lists some software in there to scan the market - do you use those at all?

 

[Brogden]

He uses ShareScope and lists three criteria to identify trend following shares based on the daily ADX, new 12 month highs or lows, and outperformance against the FTSE. But he doesn't recommend using software to scan the market: he says (page 151 in my copy) "The visual inspection approach is better . . . whizzing through the FTSE 350 . . . should take little more than half an hour".

However, having re-read this section of the book to answer your question, I realise/remember that he recommends doing this once a week to produce a shortlist of potential trades, and then ignoring anything that is not on the shortlist. Just doing this is going to cut down my time mucking about looking at charts and help me focus - I'm off to give it a try right now! Oh, and I am going to try to get ShareScope to do the shortlisting for me, despite what he says about the visual approach being better!!

 

[SanMiguel]

I think I have the same question as San but maybe I can express it in a different way:

My preferred method of trading is what I understand is called Position Trading - I am prepared to hold a position for days or weeks. I am broadly following the methods described in Malcolm Pryor's Financial Spread Betting Handbook. I look for trends and then chart continuation patterns such as consolidations, triangles and flags so that I can trade with the trend but take advantage of pull backs and pauses. Once I spot a likely chart pattern I look for nearby support and resistance to assess likely risk and reward, trying to get a reward/risk ratio of 3. For instance if I am going long I want to see some nearby support that I can place my stop loss just under, and no resistance above for at least 3 times the distance to the stop loss. I then size my position based on risking no more than 1% to 3% if the stop loss does get hit.

This sounds fine in theory, but I find I am spending lots of time looking at charts trying to spot patterns. I look at the FTSE 350 but even after cutting the 350 down to only those with average daily volume over 500k, which leaves about 225 shares, I still find this too boring and time consuming to do every day - after about the first 50 my mind wanders and I lose concentration, especially with so few shares actually trending at the moment. Do I just need to stick at it until I get used to the task, or is there a better way of identifying shares exhibiting tradeable patterns? Perhaps I should concentrate on just a few sectors or shares?

He uses ShareScope and lists three criteria to identify trend following shares based on the daily ADX, new 12 month highs or lows, and outperformance against the FTSE. But he doesn't recommend using software to scan the market: he says (page 151 in my copy) "The visual inspection approach is better . . . whizzing through the FTSE 350 . . . should take little more than half an hour".

However, having re-read this section of the book to answer your question, I realise/remember that he recommends doing this once a week to produce a shortlist of potential trades, and then ignoring anything that is not on the shortlist. Just doing this is going to cut down my time mucking about looking at charts and help me focus - I'm off to give it a try right now! Oh, and I am going to try to get ShareScope to do the shortlisting for me, despite what he says about the visual approach being better!!

I haven't tried it yet but have a look at:
ProRealTime.com

If a stock's ADX is above 30 but it has reached all time lows, what is he looking to do, buy or follow the trend down further?

 

[Brogden]

He isn't advising trades from these criteria, he uses the three criteria to identify stocks to analyse further; if a stock meets any one of the three criteria it goes on a shortlist for further analysis.

 

[SanMiguel]

San - also have a look at nasdaq there are better trading opportunities this.

The nasdaq seems to make fairly decisive moves each day up or down. Are there any tools we can use to guage momentum?

 

[timsk]

. . .This sounds fine in theory, but I find I am spending lots of time looking at charts trying to spot patterns. I look at the FTSE 350 but even after cutting the 350 down to only those with average daily volume over 500k, which leaves about 225 shares, I still find this too boring and time consuming to do every day - after about the first 50 my mind wanders and I lose concentration, especially with so few shares actually trending at the moment. Do I just need to stick at it until I get used to the task, or is there a better way of identifying shares exhibiting tradeable patterns? Perhaps I should concentrate on just a few sectors or shares?

Hi Brogden,
The comments I'll offer don't reflect my personal views especially - they're more of an amalgamation of views expressed by experienced swing traders that I've picked up over the years. Traders that fall into that category can wiz through 250 charts in an hour quite comfortably - probably less. This is because they know the exact patterns that they're looking for and can spot them instantly. The fact that your attention span wanders and you find it boring, suggests to me that you're spending way too long on each chart, probably because you don't know exactly what you're looking for - or you're trying to spot too many different patterns. If you don't have the time or inclination to do this on a daily basis - then you could pan out and trade weekly charts. Alternatively, as you suggest, looking only for strong stocks in strong sectors and weak stocks in weak sectors would also cut down the number of shares you need to look at. A top down approach where by you assess the main market index - then the sectors and then individual shares - makes a lot of sense. It has other advantages too. If the market is bullish and trending up - only look at sectors doing the same or, if they're all trending up, pick the strongest. Visa versa if the market is trending down. If the market is in choppy rangebound mode, you have the option of simultaneously going short the weakest stock in the weakest sector and long the strongest stock in the strongest sector. Then, if the main market does breakout in favour of one direction, it should (tehe) take one stock with it, while the other stock resists the move. That's the theory anyway! Just make sure your position size is evenly weighted to ensure that you're not too biased in either direction.
Tim.

 

[Brogden]

The comments I'll offer don't reflect my personal views especially - they're more of an amalgamation of views expressed by experienced swing traders that I've picked up over the years. Traders that fall into that category can wiz through 250 charts in an hour quite comfortably - probably less.

Well I can do 250 charts in an hour and I am getting better at spotting patterns, but out of the 250 there are usually very few with tradeable patterns, and spending an hour looking at 250 charts every day without finding a trade is a bit of a drag, which is why I am looking to find a more effective way of identifying shares exhibiting tradeable patterns. From your comment, it sounds as though you don't do it this way either?

A top down approach where by you assess the main market index - then the sectors and then individual shares - makes a lot of sense. It has other advantages too. If the market is bullish and trending up - only look at sectors doing the same or, if they're all trending up, pick the strongest. Visa versa if the market is trending down. If the market is in choppy rangebound mode, you have the option of simultaneously going short the weakest stock in the weakest sector and long the strongest stock in the strongest sector. Then, if the main market does breakout in favour of one direction, it should take one stock with it, while the other stock resists the move. That's the theory anyway! Just make sure your position size is evenly weighted to ensure that you're not too biased in either direction.

It's good theory and I have read it many times starting years ago with Stan Weinstein who described it as the "wood to the trees" approach. But having tried it I am not sure it is the best way to go. Even in a weak sector there can be a strong share with a rapidly rising share price that would make a good trade, but if you just look at the performance of the sector, that share's performance can be hidden by the mediocre performance of all the other shares in the sector. And again it sounds as if you don't do this either?

I appreciate your comments and please don't take this the wrong way, but I am looking for more practical suggestions as to what actually works in practice rather than more theory.