Posts Tagged ‘Day Trading’

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Follow the Market not your Emotions

Thursday, February 23rd, 2012

2-23-12; The market is still holding on and above support. Day’s back I gave some support numbers and we still remain above them and so the long term rally is still intact.

The market sentiment has backed off as well, giving some additional room for the market to advance in the face of this sentiment. Until we reach an extreme, the market is likely to continue to advance. This rally has lasted much longer than many have believed. This is all for the daily market and not a very big deal as it relates to day trading, but its always a good idea to know where you stand in the big picture.

In today’s trading, I started late, which is pretty typical, and missed the good moves from the morning session. I traded for 90 minutes and that is somewhat a limit for me. I really don’t like to stick at it for hours. It is too easy to get tired and make mistakes.

I have the turning points marked out as I usually do with a very nice trade at the low of the day, which just kept on going. That left me with the scraps at the top of the range where I started, but I won’t cry about it as I can only take what the market will give when I choose to trade it. Knowing how to read the price action per the trading method is the key and you can’t take what is not their.

Click on the chart and see the notes and the days action. I came up a little shy of a minimum daily goal but that is OK. I little more tomorrow and or one day next week will take care of that, no worries.

This is the beauty of day trading, as each day has its beginning and end with a new day again tomorrow. Leaving the past behind you, even if it is a great day. If you take your success into the next session, it can infuence your trading decisions and I believe it should not. The same is true for any losses, don’t take them with you into the next session. It is really best to let each day stand on its own merits, good – bad – or indifferent.

Traders need a base of operation to start each day. A frame work to follow that will hold them back when needed and get them to act also when needed. A point on the screen to trade towards and the flexibility to change with the conditions.

When builders set out to make a house, they always have blueprints and plans to follow. This allows them to start from a baseline that is consistent and neutral, but from that, they have to access the foundation and its conditions. Is it on a hill, near a river, on rocky soil?

This all relates into market conditions. Are we in a trending environment, is there overhead resistance where prices have had previous barriers or is there a clear path for unabated price movement.

From that, traders need to adjust to that current environment or take losses. We can never insist on our will or what we want, because the market does not care what we want. If anything, it is designed to take what you want away from you and leave you frustrated and will to often leave you with more losses.

This is the reason why I wrote earlier about each day standing on its own. The same could be said about each trade as well. It is not an easy thing to do, but if you can get just this one point from this article, you could make some improvements in your own trading.

Many have heard the term, losses beget more losses. This means that the last trades are having an impact on the next trade and it is negative. So you start out the next trade from a negative bias, with a little frustration built in, shaken not stirred for an emotional cocktail that leaves you spinning in the end, and you guessed it, more losses.

Let each trade stand on its own, be strong in mind not to let a mistake or natural trading loss get you effected one way or another. Don’t let yourself get to high with your gains and to low with your losses. If you can trade as close to an emotional flat line, you will then be making progress in that area.

We all have the ability, but we need that home base to trade from in the beginning, so we can repeat the process again and again. Refine your trading method or find one that you feel comfortable with and build on that. Don’t get emotional one way or another and keep moving forward, that is how winning is done, one day at a time.

Good Trading to all, Vince !

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Market Top In or Very Close

Wednesday, February 15th, 2012

The daily stock market is very close to a market top and or if not, its very close. It is possible we may hang on for another week, but we are fast approaching D-Day, (decision day). For those who are riding the wave higher, attention should be in order. I won’t rule out a one last push higher, then reversal back down in the coming week, but its getting close, which is just my opinion.

A break of 12,700 with a close below that for the Dow, will likely have follow through to the downside of significance. On the S&P emini futures, a break of 1333 and a close below that number will likely see follow through to the downside as well. That is only just a few small points from where we closed today, so there is not much room before things start to change up for a while. In today’s trading, I was at it for 60 minutes and picked up a modest daily goal in the S&P emini’s. As you can see above, there were a few mild market swings before we saw a drop kick in during the New York lunch time.

It appears that the volume and movement is kicking up and think that this may be a good sign that we will see more market volatility coming.

Day trading helps with greater market volatility because the market swings are bigger and they occur more often, giving you more trading opportunities in a shorter span of time, all a plus.

We will see what happens tomorrow as we are on the edge. I would like to see one more week of stable to higher prices, but its not up to me. Either way, being able to scalp a few points out of the market is a great skill to have. You are never held up by the market, because one thing is for sure, that the market will move based on perceived values from those who drive them.

Good Trading to All !

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Risk Reward Ratio’s and Day Trading

Thursday, April 28th, 2011

The market rally is continuing from a call last week. I said that we were likely to rally on Mondays Open and it would be a surprise with an upside move. That rally is now continuing for its third day in a row into new high territory.

I started trading yesterday and continued today from the Holiday break. Things went well today and yesterday too, but I did have a few mistakes that could have easily been avoided in yesterdays trading. Basically, I tried to get out on a limit order with a better price than my stop. The two orders, were so close to each other I canceled the stop so I would not get a double fill, that is a mistake, but it does happen once in a while. I need to leave my stop and just try and get the better price if I can and if not, then risk the double fill, it would be safer that way. The other option is hit the close button and I do that at times to eleminate the problem I am talking about.

The next thing was, I tried to scale out, but hit the wrong order. I was short and needed to buy, but sold 1 adding to the problem not making it better. These kind of things do happen, but its what we do after they happen that makes a difference. The best thing to do when you have made a mistake is cover it, immediately. I did not do that, but tried to fix it by allowing for the price to heal my wounds.

Today, was a round of scalp trading small moves. I had one runner, but mostly very small moves long and short. Some were counter trend in my T-1 scalp screen, which I don’t usually do much of, but with limited moves early on, I felt the urge to act on it. The charts and trades for Tuesday and Today are below.

Today is above and Tuesday is below

If you can scalp trade a few ticks here and there and do it with low risk, keeping your overall risk reward profile to a minimum 1 to 1 trade ratio, that is acceptable. What is not acceptable is risking 6-8 ticks for 2-3 ticks of profit. There are not many trade methods that can keep your overall risk down to the level I mentioned, but this is one of them. This short term small target trading is not for everyone. I do use it as I see or feel the need to. I really did not have to go that route as there were a few good moves for several points, but I needed to be waiting for them. I missed a few of them today as you can see, but there was enough of the other to do just fine.

When the opportunities open up, you always have the ability to open up the trade for a more meaningful move. Tuesdays late session rally helped me come out ahead, but only if I left the trade open to accept the gains. I saw the move coming as per the method and that is why I let that run.

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Risk reward trade ratio’s are a guide to help balance your risk and reward, just like it sounds. If over time you are overly exposed to greater market risk than that of your reward, it will get played out with limited profit. Having a balanced approach is key to long term survival.

When scalp trading for small gains as I mentioned above, for me and my method, what is acceptable is risking 2-3 ticks for 2-3 ticks rewards. You do not always have to only target 2-3 ticks, but if the range is tight and the market stingy, then that is very much OK. Where everyone else is getting whip sawed back and fourth with losses, you are snipping off a piece here and there.

It is not always the best trading plan to do this type of trading all the time, but knowing how and when you need to, is a very big plus and does give you the advantage. I have a different screen setup than what you see above, because the objectives are different, that is my T-1 scalp trade screen.

Most often when trading the S&P, I use a 4-5 tick stop and will often close the trade out before my stop is hit one way or another. If my entries are good, I don’t have to worry much about the stops other than moving them up and just managing the trade. There are plenty of trades that a trader can risk very little and get a return of many times that risk. That may be 3, 4 or even 5 to one. Those trades do help to make up for mishaps and bring greater profitability to light.

If one’s objective is to only trade for higher risk reward ratio trades, than you will need more patients and the ability to sit through the quiet times to wait for the movers. Every trader is different and that is the beauty of my method. It is not one size fits all. Tailoring the method to match who you are as a trader is key and what I recommend to all traders within my trading method.

Sniper Day Trading is about finding low risk / high reward trades as well as small scalp trades, always still with low risk, but equal reward. What ever the market is doing, you can come out on top. The market can only go one of two ways, up or down. Finding the dominant trade direction for a small amount of time, is all we need to do. With the trade method its not that hard, without it, well, I won’t say.

Good Luck in all your trade adventures.

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Are You Prepared for Day Trading?

Tuesday, March 15th, 2011

Stock Markets around the world took a dive as everyone looks onto Japan and the situation there.  The Nikkei, ended their Tuesday session down about 11% as Wall Street gaped down and moved lower in sympathy as we see the market coming off there highs looking for value.

We are likely to see increased volatility going forward with good moves on both sides. The Dow and S&P did make a big come back from the lows of the session which was almost -300 at its worst on the Dow and -35 points on the S&P to -138 and -15 respectively.

The Fed came out with a policy notice of leaving rates unchanged and stated that inflation was not a problem at this time. That gave the market added fuel to a already juiced market, as the energy was released back to the upside after the announcement.

In my trading today, I took 4 trades with modest gains on all of them, and would have to give myself a solid grade of (A) in trade execution. A loss does not really effect my own grading much, but a trade that goes outside my trading method definitely does. This grading that I have been doing for myself has been helpful in that I need to be accountable to myself and this is a way for me to do it and write about it. If I want a good grade, like in school, I need to do the right things at the right time and will then get rewarded.  Today’s trades below.

The market was very active early on and felt I needed to lighten up on contract size a touch to allow for a greater stop if I needed it. I didn’t seem to really need it, but the market was moving very fast on the open and the huge gap lower really threw things off from a normal open. That is the largest gap down I can remember seeing in a long time.

I hope and pray they get it together in Japan, because it will have an effect on earnings and the future outlook for the economy here and abroad.

From a humanitarian stand point, it is almost unreal that Japan could get hit with a 9.1 earthquake, the largest in recorded history for that part of the world, then a Tidal Wave wiping out everything in its path, then the reactor/radiation release and today I heard that Tokyo had a 6.4 earthquake and a Volcano had erupted to boot. WOW, that is an enormous amount of tragedy for one week which is not even over yet. We need to pray for relief for the people of Japan and hope that there will be better news coming in the days ahead.

Some of us have Tidal Waves in our lives and need to address those. It could be your trading results that has you down. If you want better for yourself, it first starts with the belief that things can change. If you want things to change, you can make them change. It may take you a month, year or even more, but I truly believe if you want it bad enough and are willing to push yourself farther than you have before, change is inevitable.

Much of a traders results lies in what he or she feels about themselves and their outlook on the ability to get it done. What I mean is, many traders could do better if they would look within themselves for the answers they seek on the screen. If you change your thinking and thus your mind, your results will follow the dominant beliefs that you hold within you. That might sound like a bunch of goop to some, but it may not make sense to you and you may reject that line of thinking as that may be exactly where you find yourself and not wanting to admit it.

We too often, will blame the market for our troubles and any other situation that may be convenient, that keeps us from meeting our trading goals. It is not the market, it is “us”.  I have to include myself in that too, as I have made all the mistakes any trader could make and then some. I speak from experience as I have written the last few years here in my blog. I know what goes through our minds, how we react to market frustrations and what it feels like to loose control of your trading. Been their, done that.

The thing is, traders start live trading far to soon before they are ready too. We all like to think that large draw downs won’t happen to us, but we are only kidding ourselves. To become a doctor, people sacrifice many years of their life and a very high dollar figure on top of that. How many doctors are there in relation to those in the service sector.

It takes a lot of sacrifice and dedication to make it as a trader. If everyone in the medical profession, (doctors) gave up when it was hard or when working their internship, staring at 18-20 hour shifts, how many doctors would we have today. Little to none, as they would have just given up. Before they practice medicine on real people, they put in years of education and sacrifice to have the opportunity and experience the rewards.

The thing is, there is no one watching you or grading your progress and you may decide to graduate yourself before you are really ready. If you have a very large pool of capital and you start with the smallest account size to get the feel for real live trading, then you may be OK as you learn while you are loosing small amounts of money, but that is not always the way it is for those seeking the rewards of trading for a living.

Another big problem is, traders start out without the right training and think they can do it on their own, only to find out they can’t. At that point it is often to late and trading capital has diminished and with it the opportunity to reach their goals.

I will really try and pick this up in my next post, stay tuned………………….

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Major Index’s move to New Highs

Wednesday, January 12th, 2011

Today is Wednesday January 12th, as we saw the Dow Index +83 points and the S&P emini futures +12.

The volume came early on and very late in the session. From 8:30 to 12:30 West Coast, the market went to sleep. That was 4 hours of nothing. It can be hard to trade with no volume and movement as I saw today.

I have gotten off to a slow start this year, with a few points gain on Monday and 1 point gain yesterday. Both of those days I was only in the market a few minutes combined. I did not have the time to trade and was able to slip in a few trades. Today I had more time but hit that slow patch in the market, that is just how it goes. I was down about 1.50 points with a few small losses in the S&P, but decided to take a trade out of the Nasdaq Market. I don’t usually switch markets, but did today and hit a piece of that late market move for a few points.  I show it in the U-Tube video below towards the very end.

The second video under that is from Monday’s sessions which just shows more of the same, turning points and continuation entries.  I or any trader does not have to trade all of these area’s, but just a few will do and often times, just one to make a nice daily return. It is not to hard, but using good judgment and the method in full which is never really talked about, can help you get that done.  Being successful at day trading is a lot harder than most people make it, because they are acting from emotions. Having a solid method that looks to price structure, support and resistance in a very unique way and the nature momentum of the market to help get this done is key. The trade indicators are only a reflection of all of these things just mentioned. When you have both, it can be a powerful combination.

Monday’s Session

Good Trading to all !

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Market Pressure Building for the Next Move

Sunday, November 21st, 2010

This post is for Friday’s session as we saw a fairly stable day in the index’s with the S&P flat and the Dow up 22.

In Thursdays post, I made a pretty big prediction as I see the potential for a large market decline greater than any time since this last April when at that time we were sitting around S&P 1200.  Within three days we saw the bulk of a drop coming off the highs with a -150 S&P points intraday drop. I don’t know if we will see price action like that at this time, but we are and will be setting ourselves up for a market decline very soon. I had hoped for a move back up to the highs and this week, we could see that. I will tell you a few numbers to watch for in Monday’s session and they are, 1193 on S&P futures. If we break that price area, we will likely see some aggressive selling. The next area of support and critical level is S&P futures 1180.  So, on the downside those are the numbers to stay above if this market is going to keep its short term momentum going. All of this is just short term if we stay above those levels.

Typically, the next few days are historically very bullish for the Stock Market in general. So, a move back up to the highs can not be ruled out. I do see in the night trading, Sunday evening, 10:38 pm, that the S&P is up 7 points, so a gap higher is possible on the open and we have seen plenty of gaps closed quickly the last few weeks. This is one of those days that a gap higher starts the day off, followed by the gap getting filled and a continued break down. Again, 1193 is the first line in the sand for Mondays session.

The market psychology has shifted and their are now new concerns. I mentioned in Thursdays blog that the Bullish Sentiment jumped about 8% and put us in the danger zone at 56% bullish.  A reading of 55% or greater is typically a trigger point for a possible shift in the opposite direction. In addition, the Bearish market sentiment has dropped to only 20% and is also a trigger point in reverse.  That means that only 20% of the professional stock market newsletter writers are Bearish as of Tuesday afternoon last week. That is a very small minority and will prove to the masses yet again that the majority is rarely ever right about market direction. This shift in sentiment does not mean that a drop will happen tomorrow, although now with this change, it most certainly can. We could build on this for a little longer creating something bigger. Being aware of this is essential and why I point it out.

This is something to be aware of and that is why I am writing about it. Most traders have no idea of these numbers and how to use them. I am sharing them with you so you will not be taken by surprise.

I trade off of small time frames in the context of a single days action. Following the daily market is a good exercise and fun to write about since so many traders and investors follow the daily market to some degree.

So, don’t let the market take you by surprise. The short term momentum is up, but that could change with the numbers I gave above. As I mentioned, I would like to see the market move back up the 1220 area and give everyone a few more days of gains for a nice Thanksgiving Holiday. It would be quite a surprise and an even bigger possible set up for the coming shift.

Tuesday a new poll will come out from these newsletter writers and if we get the typical pre Thanksgiving rally, it will only draw more people in to the false hope of recovery. Sorry to be so blunt, but I don’t see any substantial recovery in the economy. You may find this site interesting, its called www.shadowstats.com. It shows more closely what some of the real economic numbers are and thus the economy.

I have been taking some time off from trading.  The trade volume is only good early on, so, if you don’t trade early, be prepared for slow going.  In a slow market, it is easy to make mistakes as everything takes just to long to set up and can try even the most patient trader. Pre Holiday volume is typically light and it gets lighter as the week gets closer to Thursday. Tomorrow, I will likely show the same kind of chart (weekly) from the last 10 years as I did from the the 1930’s in Thursdays blog.

Good Trading to all and trade safe.      Vince.

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Emotions and Day Trading

Friday, September 10th, 2010

Today is Friday, September 10th, 2010 and we saw the Dow up 47 points and the S&P December Futures up +7.25 points.

We continue to slowly move higher as today was a very quiet trading day. We saw most futures traders in the financials switch to the next front month as I mentioned in my blog yesterday. Traders need to be aware of these days as it could end up costing them money. Mark your calenders and know when that day is coming so you won’t be surprised.

Today’s trading was pretty uneventful for me. I wasn’t even going to trade, but late in the session I did decide to engage. I had only a few trades and picked up a small sum. I did not pressure myself with hitting my daily goal, because of the slow low volume day. I missed all of the early session and started to watch things during the slow time of day. Later on, it did pick up, but only a touch. Anyway, I have a video of the whole session showing the turning points and the new contract month for the S&P, ESZ10.

Their is not a whole lot as far as direction and trend that I have not already said in recent days. I do see some competing area’s of leadership when compared to the Dow and the S&P. The S&P has cleared some overhead resistance that it needed to get over and it has done that the last two days, while the Dow has not. About 80 Dow points higher their is some invisible resistance to overcome, so we will see on Monday if we trade to that area and then take a breather.

It was good to see the market close near the highs of the session, a bonus for Mondays open. The closing days position has a lot to do with future direction as it relates to the daily and even the weekly charts. Depending on the previous price action, a close near the highs of the day, will tend to have bullish tones for the next session. Many traders take their Que from this type of closing position and will have orders pending the open of the next session. That leads to buying and often times, buying begets more buying, (short covering and regular interest).

Going forward, I do believe the bias will be to the upside. I really should not get to caught up into figuring out every twist and turn in the daily and weekly charts. I do that because I know many people follow it and it does give me something to write about. It is very interesting to do so, but as day traders, we are really most concerned with the turns inside each day. Every day is a fresh start with no baggage before it. We need to leave yesterdays gains and or losses behind us and focus on what is in front of us. If any trader gets to preoccupied with past history, whether it is good or bad, it can be harmful to your current fresh start day.

Traders need not get giddy with large gains or depressed with losses. If you do, you will be working against yourself. Everyone is different and your excess emotions will get played out negatively against you. How do we guard ourselves against this emotion?  Decide now that you are a professional and then act in accord with what you feel this image best represents yourself.  Controlling trading emotions should be at the top of the list.

Next, I could think of bragging about one’s new title as “Day Trader”. It is an admired profession, but most people know that this is a very hard thing to master. By releasing the controllable emotion of excitement and hope for your new future to others, you work against yourself in ever realizing those dreams. The energy that gets released in the form of loosely sharing with others, takes power and energy away from you. One of the reasons and their are many, is, you create an image for yourself that may be hard to live up to. If things take longer or don’t work out the way you plan, you may find yourself  fibbing about your progress to keep up the image you created by loosely sharing and that creates a whole new set of problems.  In addition, the emotional high of sharing and releasing this emotion is in itself a form of gratification, which then reduces your resolve to make it all a reality.  It is sad to say, but that is the truth. This makes it ever so much more difficult to reaching those sought after goals. So decide now that you will keep your new venture close to the vest.

Emotion come in many forms. The ones I mentioned above are not easily identified by ourselves when we do it. It sometimes takes an outsider to point it out to us, because as mentioned, its not easy to see.

We are much more akin to hearing about the emotions of  “Fear & Greed”.  One can never over state those two. They make traders do things that they never thought they could do in a rational world, but once those two emotions latch on to you, watch out. If you can identify it ahead of time and that is what I am trying to do here today, we should just stop trading. That may be even if you are up on the day and especially down for the day. Usually, our trading only gets worst when you let these emotions out of the bag. Rather than go into it now, I need more time to better address those two. I have wrote about it before, but many months ago I am sure. My perspective has likely changed a little as I have a lot more input to add against the topic.

To recap, all successful traders need to see themselves as they want to be. “A professional Day Trader who earns his living or supplements is living from the financial markets”.  Maybe it would be a good idea to write down a few things that you need to change so that you can mold yourself into that description. It is different for everyone, but if we take this one step forward towards that end, we will be making progress and isn’t that what it is all about. We are all on this journey together, so you are not alone. I have many things I need to change to better meet that description myself. Even if financial goals are met, often, their are other area’s of self improvement that we know we should be addressing and that is progress one day at a time.

Good Trading to all and have a great weekend, Vince

P.S.  Do something fun before the weather changes !

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Market Turning Point Coming, Get Ready !

Tuesday, August 31st, 2010

Today is Tuesday August 31st, 2010 and I really think tomorrow is the day, we rally.

I have taken things a little on easy side lately, trying to enjoy the summer days as they are here. I have wanted to write and keep up with my blog, but the calling for time off was just a little greater. So, to those who are loyal followers, I apologize.

In today’s trading action, I was on pins and needles as we were coming into the close. I kid you not. I saw few things that told me, “if we did not rally up as we did, there was trouble for tomorrows open”. I remember it clearly, as these thoughts were traveling through my mind. I looked at everything and it all said, rally or die. We rallied at the close and I felt revealed.

The reason is, traders pick up on were the close of the day is. If it is on the lows, it sets the tone for many scenario’s. Program traders, Black Box traders and on and on. This would have had very negative signals for the coming weeks. There is a path down to S&P 945 and I did not want to see that happen. I am a long term “Bear”, just to let you know, if you didn’t already, but I just don’t think it is going to come when everyone else thinks it should.

We are going into the worst two months of the year historically, September and October. I can not tell you how many bad periods I have seen first hand with these two months as they are in-front of us. With that said, their is always the exception and what a better time then now for it.

This market has been very tricky lately in trying to fake out those who believe they have it figured out. It has waited to the very last hour of the very last day, to make a lasting impression on those who believe we are about to crack on down to lower levels from here. I tell you know, I could be wrong as I have stated before. We have not as of yet cracked as those who say we are going to, but have waited for the last 6 days in a very narrow trading range to either prove me right or wrong. It is just an opinion and is not going to change one dollar from my personal bottom line, but, I would like to get this call right in that I see everyone biting on the short trade right now and would like to be in the minority to better prove them wrong and share my insight why to those who follow my writings.

OK, I think you know I am short term bullish from here and am expecting a big rally as of tomorrow. I can’t see this going another day. It looks so right for a rally and or a crash. I can’t be blind to the fact I could have it wrong, even if I don’t think so. I always need to look to the other side. Even in a short term trade, you have to look to both sides. If you don’t, you could be blinded to what you want to see, rather than what actually is.

I made that one mistake today. I was tired in doing a phone session with a potential client and did not take a break, but just stayed at the screen and I started to see what I wanted to see. Almost like a mirage, and suddenly it appeared. In my delusion, I created a scenario of what I wanted to see, not what was. This can happen to any of us and it is not the first time or won’t likely be the last time.

By being over stretched and not fresh and or having little ability to exercise “The Power of Concentration” I am not surprised I tried to create a trade in my own mind. If you watch the video below, you will see the trade I was talking about. Looking at my trade indicators, you can clearly see that I really making a stretch for a long in the place I took that trade.

After I woke up from my slumber, I could see I was only dreaming. To take a long trade where I did, I must have been asleep. The other trades were OK, as they were all winning trades, but I could have done better there still. I did have to compensate for a bad entry by a  couple of ticks, which I don’t really like to do. I should not be complaining as I had 5 of 6 and ended up very nicely for the day. I had one loss for 5 ticks and multiple points profits. 

To finish up, I see this market has gone 6 days in a very small range and it is wound up so tight, it is just waiting to pop. The question is, which way. With the market sentiment so negative, I have to give the bias to the upside and say the surprise is going to come in with a big rally. I mentioned a few days ago that 1100 is strong resistance and we will likely trade up to that level pretty soon. Backing off from their a little is normal and a little expected, but if a break above 1100 S&P futures kicks in, we will see higher prices on top of that. So everyone knows what I am looking for, but will it happen. It is not the popular opinion right now and I am OK with that. Either way, I will make my daily goals when I trade because I will be reading current price action. That is the basis for my trading method. All trade indicators are secondary. That is a real big point and is exactly as stated. With that said, I am happy to have the trade indicators I use of which I only show a very small part of them as in the video.

I wish all my readers the very best. If anyone has comments or wants to ask questions I am very available to answer and would be glad to do so. Even if it is not about my trading method. Just ask and I will respond to you ASAP.

Vince

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Fractal Nature of the Stock Market

Wednesday, March 31st, 2010

Today is Wednesday March 31st and the market bounced off some key support today, 1162, two times.

The S&P market is holding in there. It does not want to go down and not able to move up, for some time now. A big report is coming out on Friday, the unemployment numbers. The last report was the first decrease in unemployment since the recession started and a back to back positive reading is going to send a strong message to Wall Street. There are many traders and investors thinking only one way. That this market was going to go down. That is having tunnel vision and not usually a good idea. You need to stay open to direction and then interpret the price action to properly trade this market.

I know there are traders who are adamant about this market falling and they may be right, but it has made virtually a complete come back from the drop earlier in the year. If the unemployment numbers are good, it may spark a big rally just be ready either way.

The trend is up and holding, but five trading days ago, we traded at 1177 to the next days low of 1157 and we are currently at 1167, right in the middle. We have bounced up and down inside this range for the last 5 days. That is why yesterday I said that we will probably see inside action over the next day or two, “Containment”. This containment is only adding to the fuel that will be expelled once the market gives way outside of this consolidating range. I will show a chart of it tomorrow and explain a thing or two about it, so be sure to come back and get some insight as to the next big move.

In today’s trading I took 8 or 9 trades and did pretty well. I only had two small losses for a few ticks, the rest gains. I scaled out of the early trades and took an all in, all out approach for the last bunch. equity chart below.

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I have been talking in between various topic’s, like trading within your dominant trading personality. If you trade stocks and look at 15 bar charts, your pool or available trades are going to be limited, but your rewards are going to be much bigger than someone trading 5 or 1 minute bars. Your stops are going to automatically be larger based on your time frame, but everything about trading is still the same and is relative to the time frame you are trading.

That is because the stock market is fractal in nature. Some may not know what that means so I will explain. If you trade daily charts and follow a set trading method, you will have to wait for days as the bars line up to a desired formation or condition as per your method or system. Again, your rewards will be much greater than someone trading hourly bars, but your risk will be greater as well. The stock market shows consistent patterns inside of every time frame and can virtually be traded exactly the same in any time frame producing the same type of results, but with relative returns. I have an example of this fractal nature found in nature itself below.

This is the reason why it is important to trade within the time frame that best serves you and your personality and situation. With the leverage available through trading futures contracts, a trader does not have to trade for very large moves to make a good daily return, but he needs to be able to keep risks small and exploit market moves as they are given to him. Just as the price moves are relative to the time frame you trade, the returns are as well relative. By using leverage in the market you magnify your moves, positively and negatively or you could say, for you or against you.

It has been said, that the smaller the time frame you trade the harder it is. Now, why do you think that is?  I think the reason is, traders are not conditioned enough to react as new patterns are presented to them. They are pron to make more mistakes and to over-trade. What can be done to change this. Practice and get the conditioning you need by knowing what to do and when to do it. Get the knowledge you need to exploit these price imbalances and live your dreams of trading for a living. There is rarely any way around paying your dues if you are going to attain this goal. Many forgo training and leave there results to a combination of idea’s, but never having a complete trading method, and road map to follow. If you are going to trade, you need knowledge and support.

If you become proactive in learning how to trade, you can trade stocks, commodities, forex or any trade-able investment instrument and speed up your learning by trading the smaller time frames. You will be forces to interpret the price action and follow what ever indicators you have if any, to gain the trading edge.  After doing this, you will see that when you go back to higher time frame instruments, you will see, feel and know so much more than when you traded daily, hourly or 15 minute bar charts. In addition, you may find that this smaller time frame type trading is what you are best suited for all along. That is how it was for me, but it took years to figure it out on my own. I am just presenting the idea’s to those who have not thought about it.

Consider it a training boot camp as you get dozens of market conditions reads per session, capturing the trading edge.

Give it some thought, trade on and trade safe.               Video of today’s turning points using tick charts, take a look.

http://www.screencast.com/t/NGJlNTJi                     Equity chart of today’s trades

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Reading Price Action gives you the edge

Tuesday, March 23rd, 2010

Today is Tuesday, March 23rd and the market is still running strong +8 points on the S&P, +102 on the Dow and +22 on the NASDAQ.

Another nice showing for those on the long side of the market. Today the market did something that it does about once per month. I call it “Search and Destroy”. That is, the market makes a slightly new high, followed by a slightly new low, then a slightly higher high, followed by a slightly lower low and yet again the same. The price is taking out players just above new highs, hitting there stops and at the same time making those who play breakouts go long and taking  them down. Both players long and shorts are getting killed when this happens, thus the term “Search & Destroy”. It is searching for stops and causing breakouts players to go long only to make them both loose. This is pretty brutal if you don’t know how to handle yourself. This was just a quick easy observation.

The market in general is designed to keep you guessing or it seems like that for most players, but there is a consistent element that runs through each day and those traders who know what to look for can take advantage of this.

By getting comfortable with this new language that I was talking about yesterday, traders will know when to enter long and or short with a high degree of accuracy. Trading for one to one (1 to 1) ratio is alright as long as you are right more often than not. In addition, when you have 2 or 3 to 1 returns, it makes it nice and keeps things simple. But two or three trades for 3-4 ticks each is “A OK” in my book, always has been and always will be. I only run a 4 tick stop on 95% of my trades and my average stop out is really only about 2 or 3 ticks. This is not an accident and can be learned.

There were a lot of nice easy trades today that could have been taken by those who know where to place there buy orders and where and when to get out. It all happens at the pressure points, like an acupuncturist at work.  They find the points on you body that will release the built up pressure on the nerves and muscles. As they apply pressure to a very small defined area, the toxic build up is released and body feels better by the release of energy in that area. This is exactly how to read the price action as it relates to day trading. This is best I can do without going into it further, but the most important thing I have said about this topic since I started a couple of days ago.

In today’s trading, I only put on a couple of trades and was in the market for only a few minutes. In fact, I came onto the screen, looked at few things for a minute, went to my my scalp screen and waited for just a few moments, took a trade long for a nice quick gain and walked away. I was coming up into the New York lunch time, so I just left and said that I would return for a trade in the afternoon session. I did just that, looked at my screen for just a moment to see where we were at and place a trade short for another easy trade. I had in my mind that was enough, no struggle, just a quick small scalp trade and done for the day. I definitely could have taken several more trades and could have picked up 3-5 points more at least for the session if I continued to trade the afternoon.  But what I had was enough for today. If I start early and traded the morning and afternoon session, I feel I could have picked up 6-10 points net almost any day. As I said yesterday, it is not about being over confident or cocky, but knowing how to read that trading language that could do it. I definitely need to respect the markets, for sure. The day I don’t is the day I will see a stop out day for myself of -4 S&P points if I take it that far.

Trading for most people is very difficult, but it does not have to be that way. Traders need to trade the easy and obvious. If it is not easy and obvious, then you should wait until you see a trade that fits that description. Don’t underestimate that last statement. That could be the second most important thing I have said the last three days, certainly in this post anyway. To often, traders want to live up to the scenario  that I laid out above and it can hurt them. I can see the charts and read the language very well, and you can do it too, but it will take you some time to learn it. If you spend your time only following indicators, then you will miss out on valuable life changing skills, where money and earning a living are not as important because you have enough from the trading markets. That is only going to come when you understand the trading language and can read the daily price action with confidence.

If anyone is interested into learning this trading language and posses within them the ability to trade any market with confidence, then I would say, send me an email and we can talk about it. I have the time to pour my knowledge into those who are willing to learn. If this is something you are interested in, this is a good place to do it. You only go around this life once, fulfill your dreams, you will be glad you did.

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