Trading Styles

A

AllenZ

This thread will attempt to get traders to post and explain their styles and how they are working or not working in the current environment.

Too much is being put on setups and asking traders to give away their setups. Styles on the other hand, can be taught and this thread will allow traders to show their styles and hopefully how they are applying them daily.

I trade the QQQ and NQ's and will attempt to post actual trades I made and will hope that many of you do the same either for futures or stocks.

Newbies deserve the chance to see what successful traders are doing and this thread will offer a good forum ( I hope ). In posting a trade please attempt to show how your style lead you to the trade and what your thought process was in making the trade. It doesn't have to even be a winner, as some of the greatest lessons are learned from past mistakes. I enjoy helping new traders and will do my best to create a thread where you can come to learn something and add something of value to someone elses trading experience. We were all newbies once.

For all the newbies coming in to learn, please note the style used and the traders thought process as this is the true mark of a great trader, the ability to create a style that works and the patience to seek out a trade that fits their style.

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" Do not seek to follow in the footsteps of men of old; seek what they sought "
---- Matsuo Basho ( poet )
 
Today was an interesting day, to say the least... WCOM was a particularly interesting stock... CNBC was continuously highlighting the demerits of ownership of this Nasdaq constituent, and varying rumors abounded as to the weakness of this stock...

A picture is worth a thousand words and all lay within the price action... twas apparent, upon a cursory glance of an intraday chart, that WCOM was exceedingly weak... an examination of a 5 min chart of the stock over the last couple of days (corroborated by a 1 year chart) affirmed considerable technical weakness... the breach of the 52 week low proved to be the epitomy of a 'sweet' entry (but some dexterity was required in capturing a much maligned 'uptick')... closure to the trade occurred at the potential volume capitulation in the vicinity of ten and a half dollars, giving the astute trader plenty of time for an afternoon siesta...
 
"Too much is being put on setups and asking traders to give away their setups. "

I just finished reading a quote in "Fooled by Randomness" where he says: "If rational traders detect a pattern of stocks rising on Monday's, then, immediately such a pattern becomes detectable, it would be ironed out by people buying on Friday in anticipation of such an effect. There is no point in searching for patterns that are available to everyone with a brokerage account; once detected, it would be ironed out."
 
Well today worked out very nicely for me!!!! Nice fluid moves all day in the futures as we had a wide range trend day. although I must admit my first trade did not work out as I entered long near the early highs in anticipation of a breakout. After that stop though we were off to the races:

Shorted the Nq's at 1574 @ 10:14 anticipation of breaking the lod which happened in short order, covered the trade at 1565 as selling began to stall near moving ave support.

Shorted NQ's again at 1570 @ 10:50 on the bounce off first lows and into resistance on the 3min, covered 10 minutes later at 1558 into support from Mondays late surge.

Went long NQ off 1550 @ 11:22 at pivot support from mondays trading stopped out at 1547 for a small loss 14 minutes later.

Short again at 1554 @ 11:50 on the bounce from Mondays lows into resistance once buying stalled. Held for 20 minutes covering at 1538 once selling stalled after an extended morning move.

I also had two late trades, one stopped out flat and the other was a nice long of the double bottom around 13:20est. All in all great day. In the NQ's I have found good entries offer moves of 12-16 points and I often look to exit positions once that distance has been covered from entry. today my style was shorting all bounces into resistance once we double topped at yesterdays highs. I also was looking for a reason to go long off 1530 support and found it in the double bottom that occurred just after lunch. This is a peak into my trading day, yes one of the easier days lately, but you must make the most of days like this as they come few and far between.

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" Plans are nothing; planning is everything "

----Dwight D. Eisenhower
 
easyrider,

That's an interesting quote from what I gather is an interesting book. It seems to me to miss the point however. The point of using a set-up or pattern is not that it predicts the future but that the set-up is an integral component of the future. For example, say I buy breaks of 5 day highs. Do I think that predicts a run up? No, but breaking a 5 day high is a necessary component of going much higher. I am just using that signal to say, ok here is a stock that possibly is going much higher. By contrast, making a lower low is not a necessary component of going higher. You might get lucky and bottom tick something and it turns around and goes up, but it just as easily could go down more.
 
AllenZ:

What indicators or conditions led you to believe that there might be a breakout on your first trade of the day?

Why not fade that move into R1 rather than entering a trade in anticipation of a breakout?

BTW, good trading !!
 
I totally agree, this is IMO exactly the role of setup - not predicting tool but rather a structure, or, as you put it, part of the structure.
Also, I don't think this is exactly right:
There is no point in searching for patterns that are available to everyone with a brokerage account
More...
Astute trader observing markets constantly can see the moment pattern weakens and start fading it. They go in cycles: appear, get tested, get widely acknowledged and used (abused :) ), weaken, turn around... then cycle might repeat itself or not, but in any case it's certainly worth searching for. Book author uses expression "ironed out" but before doing that pattern reverses first since those that stuck in worn out setup need to get out.

Best regards,

Vad
 
AllenZ: “… one of the easier days lately, but you must make the most of days like this as they come few and far between.”

Oh so true.

“In the NQ's I have found good entries offer moves of 12-16 points and I often look to exit positions once that distance has been covered from entry.”

Interesting. My setups in the NQ yield roughly a 9 point average before a 50% retracement from entry (calculated after a threshold value has been broken) which occurs 33% of winning trades, a 13 point average before I observe a reversal setup which occurs 18% of winning trades, and an average maximum extension from entry of roughly 16 points which occurs 8% of winning trades. These figures will vary depending upon the lookback range.

The most fascinating point is that managing trades for maximum extension vs. a target yields roughly the same P/L after commissions. A slight edge goes to maximum extension for greater profit while targets get a smoother equity curve.

AAA: “The point of using a set-up or pattern is not that it predicts the future but that the set-up is an integral component of the future.”

Interesting observation.
 
What indicators or conditions led you to believe that there might be a breakout on your first trade of the day?

Why not fade that move into R1 rather than entering a trade in anticipation of a breakout?

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To answer these questions all i can say i was fooled, plain and simple. I bought in anticipation of a break of yesterdays high in the NQ's. That did occur by .50, but quickly reversed, the volume was there and we had ma support underneath. Entered at 1585 and stopped out at 1578. My stochastics were not overbought and we had a solid thrust bar on the 3 and 5. Happens to the best of us.

Generally if we open above the central pivot point I will not fade R1 resistance. Although it worked well in this case.

Thank you also tymjr for a great post about ave trade distance and reversal percentages. You seem to be on top of your trading, well done.
 
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