No momentum

Agree with the above:
stop trading break-outs until they work again.

What works now will probably not be working very well in a month or two... But the shift between what works is usually continuous. If you spend enough time in the market you will get into the habit of recognizing these shifts and flowing with them.


FUNDAMENTALS AND BALANCE SHEETS:
Yes, I study them. Most of my TRADES (60+%) are made because of technicals, and fundamentals are only given a cursory check. However, I check.

5-10% of my TRADES are made for FUNDAMENTAL reasons.

The rest are a mix of the two.

Why do I bother? I believe that fundamentals can be sucessfully applied in investing for the purpose of outperforming the market...

So I study both and integrate the results.
 
Originally posted by wwatson1
I don't know if it is just me but I am finding potentially good breakout set-ups, watching them breakout of a consolidated price range only to see them come right back to the breakout level and fall through closing me out at my stops.

I just can't seem to get a run on anything. Any constructive thoughts?
:confused:
More...

I agree with your observations. However, it's not that breakout don't follow through, but it's more that the follow-through is much shorter in time frame than in the fall.

You should also remember that breakout type systems tend to make most of it's money in a relatively few of its trades. While it's tough to "remember" this while trading, it's the nature of the methodology. I've made most of my breakout profits on 2 to 3 days in January, and the rest of the days have been down or neutral. Tough to stomach, but that's how it is. That being said, January is one of the worst months I've had with my breakout systems
 
1. Study fundamentals for the stock you are trading
2. Execute a daytrade in direction of your stock fundamentals
3. Daytrade fails
4. Let your daytrade become swingtrade
5. Swingtrade fails
6. Let your swingtrade become investment

If all fails, blame yourself for taking my stupid advice.
:p
 
Miki,

If all fails, blame yourself for taking my stupid advice.

I hope you were kidding, as that's a surefire recipe for going broke. Instead, always keep your discipline, never let a failed daytrade turn into a swingtrade, or a failed swingtrade turn into an investment.
 
Originally posted by Shorteee
Just out of curiosity does anyone at all study fundamentals, balances sheets, management etc before they trade a stock or does everyone on this board just trade a stock because of what they see on a chart?
More...

We encourage our people to read and understand the fundamentals of all the stocks they trade. Since our more successful traders never trade more than a few stocks at a time, it is much easier to keep a handle on their balance sheets and other financials.

Fundamentals come into play when the market begins a significant direction change, since the "money on the sidelines" will be appropriately guarded in their movement to individual stocks, thus seeking out some fundamental basis for their purchase of shares.

It's kinda like..."well, I think the markets going up, but even if it doesn't then this stock should hold it's own beacause of (pick one: book value, P/E, etc.), and it is important to know this information so you don't get yourself caught short a stock at its' low or near it.

Our traders don't do a lot of charting, at least intra-day.
 
I have noticed in daytrading that the majority of the time, stocks tend to trade to whole numbers, and it seems that most of the time, they'll just hit the whole number bids or take the whole number offers, no matter how big the size is, maybe go lower or higher a few cents and it'll just reverse.I see this happen constantly on Nasdaq. So basically, if you are daytrading,as long as the futures are going the same way as your position, you can short or buy a stock, say .20 or .30 away from the whole number bid or offer, in anticipation of the stock trading towards the whole number, where you then cover or sell out your position. Do this several times a day and the money adds up.
 
Its true that the market has no momentum right now, and you can see it nearly everyday when you notice that the nasdaq range is 20 points or so.

Use that lack of momentum as a tool. Ive been trading the opening 30-60 minutes like I always do. Then, after the first 60 minutes or so, I pick relatively strong (or weak) stocks, and scalp them based on simple overbought/oversold indicators for 20-30 cents on increased size. Ive been doing this for the last 3-4 weeks, and have exceeded my daily goal 15 out of my last 17 trading days.

Hope that helps.
 
It's my understanding that if it's a NYSE stock the specialists and maybe the floor traders will know where the buy stops are (usually near whole numbers, etc.) and kick the price up if they can in order to activate the orders, which in turn causes the price to rise a bit so they can scalp. If there is no Real interest in the stock, the price will then collapse back down to where it was a few minutes earlier.
Does anyone know if this same idea applies to NASDAQ stocks?
 
Most breakout trading systems will average only 30-40% winners over long time frames. These systems are proven money makers if you can stand the drawdowns and if you trade them across a portfolio of markets, ie. not just stock indexes, using sound risk controls. Many have attempted to improve the results by incorporating filters to avoid trading during choppy periods or by adding counter-trend modules to try to range trade when appropriate. Of course, the problem with filters is these are homerun hitting systems and by taking the bat out of their hands, you risk missing the grand slam that makes your year. Probably a better approach is to use a breakout system with a portion of your funds and just ride it out. In the end you will probably be glad you did.
 
The dynamics are completely different, as there arent specialists, stops, etc., but functionally the same result occurs.

In my opinion, heres whats happeneing, on many failed breakouts.

Theres a large following of people who like to play breakouts, especially because they are easy to identify, and in the PAST, they used to work well. As the stock nears its break out point, the flock starts to get in, and many times actually pushes it thru, but becuase there is no momentum, the buying activity isnt sustainable, and thus the stock then falls back. The only thing that really happens is the breakout point moves another dime.

As long as the market isnt breaking out as well, in the same direction as the stock, the VAST majority of breakouts fail in this manner. In my opinion, as long as the market is going to trade in these tight ranges, you will make more money (small scalps of 20-30 cents) fading these false breakouts, then you will by hoping the run will continue.

Keep in mind that the KEY point in my analysis is whether the market is breaking out at the same time. I wouldnt ever fade against the market.
 
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