keep on keeping on

Still here, still trading, always adapting. Been very light trading in the morning, with 1/4 size and a "right or right out" mentality. I have been making more successful trades in the afternoon after things shape up and the direction of the day becomes clear, so have shifted accordingly. It seems the market is all about headfakes in the morming. I remember a time when most my trades were morning gappers, and what you saw was what you got, but that is not working so much for me now, so mostly sticking with unusual high volume stocks and playing breaking news. I was 2 seconds away from getting DRIV, and missed LEAP and PCS entirely. I took PFE but got wick'd and didn't get back in, but I did get AVP. I was late and missed the initial move, but took the second break and it worked instantly. One good trade makes up for a stretch of tight misses.

Initial spike trade - OCZ

OCZ came up on my scanner last week with a big volume and modest price spike. Part of the trade was a simple break of the high of the spike, but I also got into some at the low of the initial pullback, based on some reckoning on where it might dip to and how much I was willing to risk. I should state, which I did not in the chart notes, is that my calculated stop was just below the base created before the spike, around a 6.66 stop, about .10 risk, figuring a successful hod break would take it to test 7.

JPM trade

Pressed for time so just marked up the chart and blurted out some stuff. I did not call this one out live. I trade with people who are much much better than I at entries and have a higher success rate and actually move markets on the thin ones, so I mostly keep quiet unless I can offer something that was missed. The room is busy, I am pretty new there, and I feel only the best traders should be taking up the roll. Plus, this type of trade moves so fast that an entry call out is not really actionable by anyone else. Anyway, here goes:

"Buy low, sell lower", or "Too high to buy."

This radiolab episode is worth listening to, not only because it is well done and interesting (at least to me), but I think it is worth considering if these natural tendencies have sway over ones trading decisions, especially for long traders/investors. Are the best traders those 1 in 5 people?

tighter and tighter

How long has the market been tempting a run in the morning, only to pull back below lows of the day and threaten to deteriorate into a nasty selloff, only to rally back into neutral or break the high and finish near highs? Weeks, that is how long. I can only recall one day that turned into a trend down day (off the top of my head). So today the same thing happened. It will keep happening until it does not. That is the trend. Could end tomorrow, could be a week, a month, or 6. Could have 2 off pattern days, then right back to the pattern. So in keeping with this current pattern, I have been playing it light in the morning and heavier in the afternoon. It has served me well. I took modest positions in the morning, sold out of the weakness for a small drawdown, held on to what held up, and then laid it on thick in the afternoon, HSOL being the big winner today. Good day. I think the whole trading room was in on HSOL, so this was not some genius trade I ferreted out. It was such an obvious tight pattern, and the TAN was the leader on my industries watch list. So for now I continue in this manner.

Best and worst trades, February 3rd, 2012

Good day. Being patient in the morning, being very careful with overnighting, and guarding profits was the key. Kunal at BOWS mentions about quickly guarding profits and ticky-tacking your way up. He is quick to take profits and move along. This has been very good for me to hear, as I often want to hit the homerun. I have the habit of seeing the greatest technical potential in a move, and pre-setting my expectations (sell targets), when I should be letting the price action influence my sells more.

My worst trade was not taking THLD. It was on my morning screens, I watched it shape up, I even saw a pre hod b/o setup that I did not take, and then did not take the hod. (sigh) It worked out nicely. I had good profits by that point and just wanted to guard them and let what was working work. Mistake, overtrading was not my problem and I had cushion, I should have taken the exposure.

The identification of hot industries for the day and identifying good setups that have not moved yet (sympathy play) have also been stressed recently. Common strategy, but for some reason I have not really focused on it, so have been making more of an effort. I set up a real time watch list with as many industry index tickers as I could find. I noticed the XHB was hot, went through my list of homies, and found PHM had a nice looking chart but had not made a move. It was not exactly a homerun trade, but I god a double dip on it, and I will take these every day. Here are the entries and exits:

observations

My AM trading not so good, my PM trading good, so keeping sizes smaller in AM and scalping or putting stops to b/e asap. Staying away from one dollar opening bar ranges and looking for tight setups for the first 15 mins. So many days of people expecting the market to pull back, then it does not come, or does come like today, so you just have to wait and see how supportive the market will be. It has been hard (for me) to hold swings as you have to go through that morning dip routine which can keep your eyes off hotter plays, and make you feel like you are starting the day in the hole. So I have reduced my swings to only those in solid support and letting them float around, or with entries with good cushion on the close.

I go through 1-7 day old finviz heatmaps to find flag setups, and have noticed many more continuation plays. This has been going on for weeks. If a stock has a huge candle, then it is worth putting on the front burner the next day and use a top of candle trigger, red to green, intraday flag, whatever, as an entry. Szaman had a killer play in YNDX today that was just that kind of continuation. I got a good first day entry in IBKR a last week and decided to hold a 1/4 overnight, and it did the same.

The big Fed inflation day? I noticed GDX well outperformed SLV and GLD, so playing the bling makers vs the bling may be the way. There should be plenty of time to let some setups happen. Hard for me to trust the miners. Funny market when homies, banks, solars, shippers, miners, and airlines are charging (among all else). It's a rising tide, so even listing hulks are getting a ride.

Being in a new room with all new traders has been great. You learn so much with all the voices commenting on everything from stocks to economics. I also like how each individual style becomes hot for a stretch, so if you are struggling you can ride someones wake for bit, get yourself back on course. I always keep others trade ideas small and tight if I take them, especially if it not in my setup comfort zone, and always assume I am being sold into, especially the thin crap. I do trade with a tinfoil hat on.

Follow the trends until they are not.