Archive for the ‘Trading Volatility’ Category

Trading Volume & Trading Volitility

Thursday, March 4th, 2010

Today is Thursday, March 4th and the markets were contained as they closed slightly higher +4 points on the S&P.

I had thought that we would see what I call a containment day or you can say, “an inside day“. What that means is, the market traded inside of yesterdays trading range. This is what I said was likely to happen for today and a general containment inside the Wedge Formation shown from yesterdays Dow chart.

One thing that I am not seeing right now is volume. That can be a little worrisome for the bulls out there. As we rally on light volume, it shows a lack of conviction to buy stock.

Trading volume for a day trader is very important, without it, you get little movement and limited opportunity. With it, and you have the market swings that can take your account equity up quickly. Often times, it takes a catalyst to drive the market, good news or bad. So, what is a trader to do as he looks for opportunities and how should he approach the day.

Let me give you one idea to think about, in trying to decide what kind of day we are going to have. If you take the average trading volume of contracts traded for the first 15 minutes on the S&P Emini futures over a set period of time, say one month or better and come up with a volume figure. Then going forward, compare that average opening volume to the past average volume and you will see it in one of three ways. It will be above the average, below the average, or the same as the average.

If it is above the average, most likely the days trading range will be greater than if it was not. The same is true in reverse. If the trading volume is lighter during the first 15 minutes of trading, it is likely that the trading range will be somewhat contained. You don’t have to make a science out of it, but if you can observe that the volume is very heavy on the open, it is likely you will see a lot of opportunities to trade for larger point returns going forward for the rest of the day.

If you take today as an example, you will see that the contract trading volume for the S&P 500 emini futures was very light during this first 15 minutes of the day. That helped then to set the precedent for the rest of the session. The trading opportunities were very limited and the range was very narrow. This is just something to keep in mind going forward, as it may give clues and bring perspective to your expectations of the day.

Trading volatility means opportunity, with low volatility, you get reduced opportunity. If you are approaching the market with high expectations of a big day and they don’t happen you are out of sync with the market. Day traders observe the price action, or that is what I feel they are supposed to do and trade accordingly.

If you are positioned to take 3 or 4 points out of the market, but you only see three or 4 ticks instead, you have only a few options.

1) Don’t trade at all and just wait. That used to be a good strategy, going into the afternoon session but the volume cannot be counted on to come back. We are to often seeing only modestly light volume increase after lunch period.

2) Bring your expectation down so that you can take advantage of what the market will safely give you. If it safely can give you 1 point, can you take it?

I know everyone has there own style to trade and that may not be your thing, but I have no problem with it, only because I can trade with a small stop and do it successfully. Many cannot do that so, they are left to be much more selective and wait a lot longer for the trades.

That is fine, if you can do that. Many traders can not and end up taking  non method trades for the sake of trading while they wait. This creates over-trading and can be defined as putting on a trade without having the trading edge. Taking 10 trades or more in a day is not a problem, if you have the trading edge present in those trades. When you lose the edge, Get Out. Don’t wait to be stopped out, protect yourself and your equity.

With all of that said, I hit my trading goal today fairly easily, but I did have challenges. The challenge was to start trading during the slow New York lunch period. I know this is not the best time to trade, but getting prepared for the market open is difficult as I live on the West Coast. To properly prepare, I would need to get up a 5 am. That has been my weak spot, because I am a night person, whats a trader to do? Well, I guess I am doing it.

There are dangers in trading during this slow period, but they can be overcome with precision entries and modest expectations. My first two trades had no follow through to them, so I quickly lowered my expectations and took the very modest moves the market gave me. You need good timing and you need to know how to trade in this environment. (Sniper Day Trading)

My first two trades were the only loses I had each for -1 tick. After that I had several small gains which added up nicely for the session.

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Listen to Price Action while Day Trading

Monday, December 14th, 2009

Today is Monday December 14th and the market moved a bit higher across the board

The Nasdaq saw the biggest increase with a gain of 29 points or 1% followed by the S&P with + 7 points and the Dow comes up with +30 points or +.28%. 

The market is being so pinched and squeezed here at the very top of the range, something is about to give one way or another. I mentioned this yesterday with no great need to carry on. Time is going to expose its real intentions and so everyone is going to have to wait.

I personally would like to see the trend continue for everyone’s sake, but my personal wishes have zero effects on the outcome. As day traders, we only really need be concerned with the direction of the short-term moves of the market. I cover the larger direction because a lot of people follow it and it does help a bit in getting large direction in your favor, but I use my own method for telling me where prices are likely to go.

Yesterday, I was saying that it would be best to trade early and hang it up. That turned out to be good advise. The last 2 and half hours of the day today only saw a total swing from high to low of 2 whole points. That is it. I mean, that is sad. It has been a while since I have seen such little movement in the afternoon session, but that is normal and that is why I said anyone wishing to trade this market should look to the early morning session to get there points.

Now, I would be the one who really needed to take my own advise today and I mean it. Guess what, I got caught in that 2 1/2 hour churning, going nowhere fast. To be honest, I know I could have still turn it out if I had done a little different. Scalping in the chop zone would have served me well today, but no, I had other things in mind. My first daily lose in quiet some time.

I was not listening to the market and wanted, what I wanted. Too bad for me, I didn’t get it. Today, I had a net loss for the day of -2 points. I took 7 trades and thought about stopping earlier, but I tried to come back with no avail.

I was looking for a break out after some of that consolidation and we did not get it. I had many chances to do much better and actually hit my goal, but if I would have just scalped my way there, I would have had it. You could say, I had a touch of greed in me. The price action said, to take the profit, I said no. The price action said to get out at even, I said, no. I had 10 minutes to get out of one trade at even, but said no and it cost me 2 or 3 ticks.

It was a funny day, but I have 100% total confidence in my method and my approach. Losing days are going to happen, but you need to cap the loses to a minimum. Never let yourself have huge loosing days. It does damage to your confidence and sends a message that you are not in control. That is a definite no-no. Don’t do that. You always have tomorrow to come back. You don’t even have to have it your mind that you are going to get your loses back in a hurry. Do it slowly and don’t think about it much. Just take the trades as they come to you and you could do the “Trade by exception” approach, so you don’t feel compelled to trade every wiggle.

Today’s early morning saw, beautiful price swings with sufficient volume for some easy turns. Lets try this again tomorrow and see how it goes, but lets all start early or not at all.

Until tomorrow.

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Stock Market Building Up Pressure, tomorrow could be the day

Thursday, November 19th, 2009

Today is Wednesday November 18th and tomorrow could be the day.  

I am sure as I said yesterday that I know a lot of traders are just a bit surprised that we have not dropped big as of yet. I think they still think it is coming, but it won’t come until the majority stop expecting it. That is just how it works. If the majority were always right, no one would make any money.

We are playing off many emotions at this point of the rally, those who are just sure we are going to drop like any moment and are building positions to take advantage of that drop. They have been loading the boat, so to speak during the last few days.

What is going to happen, when the boat leaves the dock and decides to go to Alaska and they have only packed cloths for Cancun. The itinerary changed and they did not get “The Memo”. Can you say, short covering rally. I can it say just fine.

All of this talk, is  just to get your attention, to pay attention to the price action and don’t get sucked in too much by your emotions.

Trading is an emotional endeavor and will always be that way, that is what gets people to place orders, their conviction about direction in the stocks they follow. The important part is to not become attached to any one position or belief that is so strong that you can not see the changes that are taking place.

If this market takes off , I believe it will be a rally of several hundred points on the Dow. That is not a popular opinion right now. I may be all by myself with that call and that is OK.

I will tell you, if certain events happen and things change, I will change along with them. That is how it is during the day while day trading which is what I do.

If you get to convinced that a move is going to happen or about to happen, you can become blind. I am not kidding. I can only imagine that it must happen to a lot of people.

This is one of the biggest things that turned my trading around and was one of the biggest problems I had to overcome. CONVICTIONS. If they are to strong, and you dont’ get it right, you are in trouble. You end up building your game plan around what you have already decided and see everything through the conclusions that you have already made. This is big one.

I hope everyone reading this can let that sink in a bit, I am sure I was not the only one who used to do this. I know it happens everyday by more people than would care to admit to it.

So, in short, look both ways and try and come to an understanding of how price movements work. Indicators are nice, but they have limitations. You want to be able to understand why price is moving and how it relates to momentum and  the release of pressure points.

Momentum takes place in every time frame and is relative to the time and space that it takes up. When you ride through highs and lows to an overall price objective, it can be said that you are in a trending market. You have to be willing to give up profit, for the great gain down the line, which means you need to stay in the market longer.

Having an idea of how far the market will carry you towards your price objective is important, but how do you do that. Well, as I said, I believe every trader needs to understand how, why and when all of this takes place. A better way to describe it is coming to understand that the stock market is 3 DIMENSIONAL . You may say, “what is he talking about”?

The three components that make up the market are as follows;  * TIME * PRICE  * SPACE . It is the spacial relationship of these three components that drives the stock market. The combination of these three elements are what moves markets. When one of these three and or a combinations of them in varying degree’s gets out of whack, they re-align themselves and adjust.

If a market stalls and goes sideways for several days, it may be absorbing previous gains and needs to rest, so time is now a factor. As time passes, buy orders are being placed on both sides of the market and will add to or take away from the current price in a very big way. Prices have as well stalled along with time and will only add to the move once it again resumes. Space is the element of the current price range that takes up the previous two, time and price.

I will tell you know, this is not an easy concept to explain and if I choose to expand on its many functions and how it relates to price action, I promise I will do it slowly. There really is something to this. Understanding how and why prices move and how it can be used to identify key target area’s can only add to your overall bottom line.

Maybe tomorrow, I will go back to a very simple way of explaining this concept first and if I continue with expressing myself on the subject I will go a little deeper. Overall this is not rocket science or has nothing to do with things like Eliott Wave or what have you.

I have only heard one person in my 25 years of following the market talk about these spatial  relationships. I have looked on the internet and I can not find anything on the subject. I have seen the fullness of this expressed in the markets on a daily basis. Writing about it here, affords me the opportunity to clarify my idea’s and hopefully help a few people on the way.

That is it, I hit my limit, 1000 words. STOP, DO NOT PASS GO…..

 

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Big News Week Ahead, Volitility to Increase!

Monday, November 16th, 2009

Today is Sunday, November 15th and this is a post is for Fridays session.

I will try and get the Friday edition out on Friday, next week so we have current market action to go over on the weekend.

This week is going to bring a lot of movement, mark my words. We are at a critical juncture and the market is going to have to make some decisions here pretty soon. Those decisions will have to conclude, which way we go from here. Everyone is expecting a big pull back and it may happen. I have to remain open to that, but it could go the other way and I am really watching that. It will not take me by surprise, that is for sure.

While it is deciding, we now have pivot lows above us and ones below us. That will set the stage for the next major action. The markets move by pushing through highs and or taking out lows. At every turn, there are support and resistance levels that go with it. Once a new level is penetrated, the likelihood of a new high increases. That is how it was all the way up to the level we are currently at.

I won’t go into it much here right now, but I will come back to the subject some time this coming week.

Fridays trading was OK, I did take a few trades I did not like, but that is the way it goes. I need to follow my method just like anyone else. If I do, I will have an easy day, if I don’t, it could be more of a struggle than I want. 

 I am running short on time and will cut it short for today. Below, is a video I did on Friday and will post it here showing a few comments towards the end.

Here is a good example of what I have said in the past a few times. Trading is about, examining conditional situations, like, “If this then that”.

Friday I said, if the break on the 5 minute chart gets broken, in either direction, that was the way the market would trade into for at least a tradable move.

That is exactly what happened. The support was broken and something happened, that is where a trader needs to react and place a low risk directional order based off of what just happened. The price action that followed, was an 8 point move in the S&P of which a trader could have captured at least 5 points of that move or maybe a little more.

So, you can see, I made the call before it happened towards the end of the video, something took place and subsequently a move in the direction of the break happened as well. Knowing how price action works in its most basic form, is essential and is the starting place for every trader in my opinion. Indicators can be helpful but it is better to be able to get your own fish than wait for someone to bring you one. If you do that, you may starve in the waiting process. What does the saying say, teach a man to fish and ….. , well, you know what I mean.

See you all on Monday,

Good Trading,

Vince

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Volitility move, showed up right on time !

Thursday, October 22nd, 2009

Today is Wednesday, October 21st and the markets really got going today.

The direction was, well, exactly like I thought, in that the first move after the open was a nice move up. At that point we would have put in a pivot high and  a pivot low. The move after that was going to determine the direction of the trend and when broken it was going to be with increased volatility. That was pretty much what I said was going to happen, and it did. I will say, I did not know yesterday, which way the market was going to break after the first big move up as I said. I could see a push up, as a natural rhythm flow of market action after the open, again that is what we got. The move after that was the key. As I was talking about in some of last weeks posts, “If this, then that”, statements.

I could not see two moves in advance, but really only one first, then after that, the second one. You can not get ahead of the market, but you can rehearse in your mind what you will do if this happens or that happens. So, the second move took place at 11:15 am West Coast time Short, we had a reaction move back up off that and really got the break that took off at 12:14. The next 45 minutes, we saw a 23 point drop in the S&P to the low. That is a lot. I pointed it out to my subscribers in their daily turning points video. You saw where to get in exactly and where to get out exactly on the smaller time frames

We react to what takes place in the market, not the other way around, that does not work. In chess you need to look ahead and be ready for what your opponent will throw at you, but being proactive and seeing the potential ahead of time, in either direction, you will not be taken by surprise, but be ready to act without fear. You can only really play the move that is in front of you at the time, but ready for surprises.

I don’t have time to show the turning points here today as I said I would. I am traveling in the Bay Area and will be back in my office in the next day or two. So lets hope for tomorrow when I have more time.

Vince

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The Markets Are Back on the Move

Wednesday, July 15th, 2009

Today is Tuesday July 14th and all is well.

I took some time off recently and will probably start trading again and keeping my blog updated. I have my internet connection problems behind me and feel pretty rested.

Today’s market was an extension from Monday’s big day. I could say even though I did not post it, I knew that we were going to bounce big in Monday’s session. If it did not happen on Monday it was going to be Tuesday. It took off on Monday with a couple of head fakes early on which were great opportunities to jump on board.

As I write this, the after market trading has spiked up to the top of the channel and hit a little resistance there at 912 on the S&P emini. Earnings on Intel came out and were favorable so I guess they liked it and bit up the whole market – nice excuse.

The market is acting as I thought so far. The false head and shoulders neckline break threw a lot of people for a loop. The market is not out of the woods yet but it is looking better for a push up through the overhead resistance. We will have to wait and see, but keep your eyes open for some good moves to the upside, keep your timing sharp.

I do think the gap of about 6 points will be filled sometime tomorrow or even in this evening’s aftermarket session. Should be an active day tomorrow. The volume has been way off with only about 2 million contracts trading, instead of the the 3 million plus we are used to seeing – “the summer”.  This is the time to take time off or scale back and the street is apparently in full stride.

The sentiment numbers look steady but I will be looking at this week’s numbers closely to see if there are any changes. Market Harmonic’s http://www.market-harmonics.com/free-charts/sentiment/investors_intelligence.htm link will take you right to the free information, but it is two or three days behind. The numbers come out on Tuesday but you won’t see it until around Thursday unless you subscribe, still good for free. I had thought the sentiment would have turned more bearish during the recent downtrend, but as I have said, not a lot of movement there yet, that is why I will be looking this week.

This push may be the push up that I had suspected we would be getting that would take us through the rest of the summer and push us up to a higher resistance level, from where we would struggle and eventually fall hard and fast. It looks like the scenario that I had painted months back is still in place, time will tell. Currently short term bullish, long term bearish, that is my position for months now and this pullback is just exactly as I previously talked about. A pull back that was not very deep catching the bears by surprise and another push to new highs for the big set up?

A few screen shots of some potential trades.

http://www.screencast.com/t/cyGEJaQ6Pn

http://www.screencast.com/t/PxR0rLv5

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Volatility Returns to the markets

Wednesday, November 5th, 2008

As I thought, the volatility has returned to the markets after the election. The last two days we have seen a return to some big moves in the market. It was expected.

The S&P moved from the inside day I had talked about to the upside by about 45 points (roughly 400 dow points). Today it moved right back down and then some. I have posted below the results of yesterday and today’s trading. Only trading between 1 and 4 contracts with 2 being the average. I will write more on Thursday about what is happening, so until then, enjoy your day.

Vince

http://www.screencast.com/t/XtWQf3bQ

http://www.screencast.com/t/FQQ1U4zh

http://www.screencast.com/t/5TfW5OWxGAT

http://www.screencast.com/t/nemDxDwpW6T

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Biggest market moves since 1933

Thursday, October 16th, 2008

The Market has a lot of pep these days, unfortunately it’s mostly to the downside. I guess we should not complain because there is no shortage of action in the S&P E-Mini futures market. As I understand it, the market has not had this kind of volatility since 1933, with over 10% swings in a day. Incredible. I may even change up my strategy a little and be on the prowl for more of these big moves. I have plenty of tools to help me stay in the trade longer, while taking some profits early and letting the rest run, baby run. It might work out after I pick up say two times my daily goal and then just wait for the right time to strike, like a sniper would. He waits as long as he has to in order to hit his MARK.

I missed a good 15 point run today by moving my stop one tick down and getting stopped out. I wasn’t happy, but I pulled myself together and waited it out for another setup. That’s what I teach myself and today I had a chance to live it.

Below are a few 5 minute clips of some of my short term scalping. I was only trading 2 contracts on most all of these, but it adds up fast.  I hit my daily goal in about only 5 minutes of trading, which was nice. I have come to expect that, but I know that if I let my guard down, I will get spanked like a little baby and today I deserved a spanking, for a few impatient entries.  I was able to come back right away but that is beside the point. Anyway, here are the posts. I may not be putting my screen shots up like this, but I will post my equity charts, showing all my trades for the start of my day, first hour at least. My trade post will now be in my new web site, www.sniperdaytrading.com. Enjoy the rest of your evening and we will talk tomorrow. 

Vince

http://www.screencast.com/t/3xos4WoOjs   Today’s Profit trading only 2 contracts

http://www.screencast.com/t/EuGBVN97

http://www.screencast.com/t/ISBvjtvo5

http://www.screencast.com/t/1ZWoLGCcgt

http://www.screencast.com/t/pxBTy8BvSk

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High volatility just means more opportunities

Thursday, September 25th, 2008

Today, I counted the number of trades generated by my method on the S&P E-Mini’s and there were 107 trades of 1/2 point each.  I took many of these trades in the first hour of the day with another 5% gain in my account.  Since last week I am up 33% in my account. (100,000 to 133,800)  We don’t need to be afraid of the increased volitility or swings.  We just need to follow the trading rules and chip, chip, chip away.  It adds up. 

My minimum goal is just 4 of these little 1/2 point trades.  It is no problem at all to get this, when you chip away at it.  The market swings fast, very fast, and that is why my method is working like a charm.  I have not had a losing day in months.  When I place an order to buy, I have, at the very same time, my stop in place and my target in place.  With one click of my mouse, the rest of the process is automated. 

I was timing how long my orders are taking to complete and I would say that on average it is about 15 seconds.  That sounds fast and it is.  You sure don’t have a lot of time to stress during the trade and that’s great.  If you multiply that times 4 trades (15 seconds x 4 trades= 1 minunte in the market.  With each trade profit at $125 dollars you are looking at 4×125= $500 per day and that is just starting out with 5 contracts. 

You need $7,500 as a deposit to place this trade.  So that’s 1 minute netting $500 dollars.  Don’t get too giddy in thinking that this is guaranteed without work.  It is very attainable, but you need to be committed to the process and be teachable.  When the time is right, I will share more of this information with a select few. 

Below is a chart of the first 20 minutes of trading this morning. Please click on it and read some of the notes I have posted.  It will give you an idea of what I am doing.  Drag your mouse over the link below and click on it after you see the picture.

http://www.screencast.com/t/k4outkMcBB

http://www.screencast.com/t/LnO2M2cR

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