Swing or Scalp ?

K

karabugla

hi,

i started trading us stocks about 6 months ago, before that i did german stocks, so i´m not a complete newbie to this business.

i basically trade one setup: breakout after a consolidation near the intraday high (5 min candles). before i enter the market , i have a quick look at the daily chart to spot 200ma/50ma/res-levels etc which could lead to a fake. if it´s possible i try to avoid setups with res-levels near the actual price, because they are more difficult to trade. the same if bigboys like msco mlco gsco etc are sellers showing a thousand at a time.
the ideal trade for me is opening a position within the consolidation (stop placed at the lower end) , stock breaking out and trending higher and higher until the end of the session closing at or near its intraday high. in this case i´d close the position mkt on close or 5 minutes before closing bell (no overnights for me!)
the only 'bigger' problem is to decide whether the breakout is a short scalping opportunity or if it´s a swing trade with the stock trending up until the end of the trading day.
for all of you who trade a familiar setup - what do you do to decide whether it´s a short scalp or a swing? i tried several overbought/oversold indicators programmed in omega´s tradestation, but they all seem to be rather useless...

thanks for sharing your thoughts!

kev//

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btw: for some of you this might sound quite old-fashioned, but this setups still works
 
kev,

the only 'bigger' problem is to decide whether the breakout is a short scalping opportunity or if it´s a swing trade with the stock trending up until the end of the trading day...what do you do to decide whether it´s a short scalp or a swing?

One solution is to scale out a portion of your position when your scalp target is met. That locks in some profits, and then you can move your stop up to your entry point and let the rest ride. I would never let a scalp that went bad turn into a swing play, but I would do the reverse. That is, play stocks that have a good shot at a larger gain and if things aren't progressing well for whatever reason, turn it into a scalp.
 
sorry - i knew i forgot one thing - exits.

depending on how big my position is, i sell the first half or a third after the breakout (if occurred) just in case it´a fake and i end up without any profit. for the remaining position i use my initial stop at the lower end of the consolidation or a trailing stop if the stock is trending.

regards,

kev//
 
karabulga,

I'm assuming from what you said that you are sitting there watching all day, rather than just entering orders and leaving it. What do you use for intraday stops after you put on a position? The problem I see with your method is you will tend to enter at the high of the day. Of course, if you enter at intraday support, it's not yet a breakout.

The idea of taking quick partial profits has great appeal, but I did extensive backtesting on S&P futures and it was always a suboptimal strategy. If your method is profitable, you are almost always better holding for a big move on the full load. Either you are scalp trading or you are not. Others will no doubt disagree with me, but I would like to see the proof.
 
yes, i actually spend a lot of time in waiving through charts. but i also have an intradayscanner running that scanns for my setup (500 symbols at a time) - that makes it a lot easier....


as a stop after the breakout i use the lvl2 with times and sales to decide whether to dump the whole postion or sell only the first half/third.
as trailing stop i use the average wiggle after the last 10 upmoves.

as you said i sometimes might catch the HOD, but of course try to avoid it. for this reason i again use lvl2, times and sales and volume (looking for blocks, increasing vol, mm-moves etc). with this you get quite a good indication if there´s a break ahead or not.

two examples from friday (i use 5 min candle):

BPRX - quick fake in the end
OVER - trending til (almost) the end after b/o @ 2.30 p.m.

regards,

kev//
 
Karabugla,

I have been daytrading for 3 yrs & play the same/similar setup as you. I have done many tests and research & have found no way of being able to tell in advance how far the move would go. I have settled on the following: Take full position size on breakout, sell 1/3 when it moves to 2x my risk(stop at the bottom of consol range) & move my stop to breakeven. If it goes it goes, if it doesn't I take my stop & move on. I screen for only the highest volatility stocks - avg range in the last 6 days 1.5 pts & min volume 1 million). I find with these stocks if they get moving you can usually get the first 1/3 out. Good luck & I would like to hear more from others on this subject.

Tony
 
karabugla,

I also trade intraday breakouts/breakdowns.. i generally scalp though.. usually i sell half of my position when the stock starts to stall.. and then watch for a move with higher volume/increased pace of buying to sell into.. of course if the ndx starts taking a dive i might bail early, but volume is my primary indicator.. ive looked at all kinds of indicators to try and tell me to hold or sell and basically settled on a momentum type approach.. i do use stochastics to give me an idea of overbought/oversold, but i dont place alot of confidence in it.. i have specific rules that i follow depending on my P&L as well..

what software do you use to scan? i currently have ravenquote.. it works but it really boggs my system (PII 350) down as it scans.. so i just set it at 5 minuite intervals.. im currently scanning a list of about 400 stocks priced between 5 and 40 dollars.. my scanner is set to look for stocks up/down more than .50 and in the top/bottom 8% of its current range.. then it sorts the results by volume.. on gap days i remove the .50 restriction.. mostly i am interested in 3 setups.. the first being a stock that has made a substantial move and is basing near its high/low without pulling back.. the second, stocks that have made a substantial move and pull back creating a cup or H/S pattern.. and third, i also look for 5 and 15 minuite breaks on stocks that gap at the open.. and on tight range, low volume days like the entire month of august, i prefer to go golfing..

if any of you guys that trade breakouts are interested in hooking up for a couple days on Yahoo chat to share ideas let me know..

-qwik
 
qwik,

I would like to get together on yahoo chat.

I have been trading breakouts from pivot points in the direction of a 3 day trend. It seems promising, as I'm finally having more profitable than losing days:)

Let me know if you would like to share concepts.

kempo
 
thanks again for your thoughts.

i´m currently using omega prosuite. it´s quite hard to set it up properly on a fast machine, so i would not recommend it for a pentium 350. i have tried a dual pentium 500 and an amd thunderbird 1.4 ghz, 512 mb sdram, dsl - both configurations really do their job.

radarscreen is scanning for consolidations 2% below the intradayhigh. just as qwiktrade i tried several indicators but i havent found anything that could help for swing/scalp-decision or break/no-break-decision. also volume is my most important indicator. b/o without volume are mostly fakes.

i would really appreciate sharing thoughts on the yahoo chat, though i will be off monday and tuesday.

regards,

kev//
 
kempo and karabugla,

my yahoo ID is qwiktrade2.. IM me in the morning and we can create a chat room..

do you have to have an account with omega to buy the software?

-qwik
 
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