Posts Tagged ‘reading the market’

Access Trade Risk

Thursday, April 26th, 2012

Today is April 26th, 2012. I would like to post the days chart first here today and then talk a little about the markets after.

Today we saw moves in both directions but the stronger positions were long (up). This is the smaller chart within what I call my T-2 trade screen. There is a larger chart that acts the same but is easier to see it from a bigger perspective. The signals it shows are still yet the same. This T-2 screen is the middle screen, as there is one screen smaller, for very small scalp trades, called my T-1 trade screen and there is one screen larger called my T-3 trade screen. All the charts act the same within the method, but give off different sized moves within there class. The risk and reward is adjusted for each and is always no worst than a 1:1 trade ratio and most often higher.

I say all of that to share the idea that every trading day is different and not likely the same as the previous session. Some days the market is really moving and other days it is range bound and going nowhere. Being ready for what ever the market decides to through out at you is something we need to be prepared for but how is that done?

With the T-3 screen, and or a larger view, a trader could see that there is still upside momentum within the markets. Many of the short trades may be short lived with this stronger upward bias and one would do better looking for long trade setups and leave the smaller short opportunities. Doing this gives you are greater reward when compared to your risk and something most traders actively search for during the session.

Being a scalp trader is a skill that can be learned, but also being able to spot the larger picture is still a big key to ones success. Weeding out the smaller moves or understanding what you can expect out of a trade is important to best and accurately access trade risk before you put on that trade. Not knowing how to do this or when its right to go long and or short will keep you guessing and there is no room for that. Unless you have an edge, you will just be gambling, something traders do all the time.

But how can traders know and put something to work that can be trusted?  You either have to do your own research and work on back testing your idea’s until you see it consistently come through in various market conditions to know it is of value. That process takes a long long time and for some their trading carreer will be over before they get to that point.

Seeing and believing in something that is proven to work for years, not weeks is what traders need. It can be anything that gives you that trading edge,  combined with low risk and that is a huge key, low trade risk.

When you might be in doubt about direction and its not really that clear, you can always default to a pure scalp approach. Taking 1 point out of the market with a 1 point trade risk, is a 1:1 trade ratio and acceptable. The reasoning is your trade percentage will be higher than 50% and thus the edge. In fact hitting something like 65-70 % is pretty good and what we should be shooting for at a minimum. When you combine the fact that you could be getting double the return with the same risk, now you have something very good. You don’t need to get that all the time, but as the market reveals itself to you, take what is offered.

Again, this is done by “reading the market“. Traders pick up the trading edge by reading the market first, then any trading indicators or confirmation method is nice to see kick in. Without the knowledge of knowing what you are doing in a field of professionals, we run the risk again of gambling and no one wants that.

It is a fine line, because if you don’t experience it, how will you ever get to the other side and that is where getting informed and trained first is the key. I know it is and can be hard to hold back and wait, but to many traders graduate themselves prematurely and find out later that they did not know all that they should have known. I might be stepping on toes and ego’s, not my intention, but its just the truth we seek. As I mentioned before, its the truth that will set up free.

Part of that truth can be found in consistent price structure. Something that we can come to count on again and again in its simplest form at a minimum to have that trading edge talked about. Acting on consistent price structure will offer us many things, one being that low trade risk talked about above. It will also offer, what I call opportunities to act on trade to targets, where you see the likely and probable spots on the chart that price will move to.

This all goes back to the opening paragraph where I talk about the three models for different conditions. If you choose to trade out of a bigger model, you will have to commit more time to following the markets for sure. A no trade is a trade while you wait for things to come together and that is work, even when you are doing nothing. It is not easy, but for those committed to the process and the rewards, it is often worth it.

Reading the market can be achieved with some level of consistency while holding the trading edge and being able to access trade risk all at the same time. That is a trading method that works.

There is more than one way to trade, that is for sure, find what works for you and look to higher time frames or tick counts to help lend insight for your smaller entry views.

I wish you all the best, Vince

Tags: , , ,
Posted in Risk Management | No Comments »

Reading the Stock Market

Monday, April 16th, 2012

Today is Tuesday April 16th, 2012 and another day in the trading world. The market movement has gotten a little better in the last few weeks and hope we see more of it.

The activity level goes in cycles with strong and weak movement, but as day traders, we have to take the good with the bad. Movement means opportunity and the lack of it could mean that traders struggle.

Taking what is available based on the current read of the market is a skill that can be learned. It is not easy, that is for sure, but it can be looked upon like you would read a research paper. It may not make sense at first, but as you absorb the content, it starts to speak to you.

That can only come about when you know the language and that is again something that can be learned. Every day the market exhibits a structured approach to what it does. Many who look on just see the moves up and down and it may look like it is random. I would say that it only looks random and there is much more structure than your natural eye see’s.

Separating the market noise from the key area’s of interest, is where is starts. As traders we don’t have to track and be ahead of every move, but just those moves that show a high probability of success in our favor. That means the majority on the other end are getting it wrong. What will make us confident enough to put up a margin with a controlling interest of many times that investment in the anticipation that it will roll in our favor?  The answer to that is knowing the market language and what to expect when the structure presents itself as such.

In today’s market, we saw just that language played out many times. Again, you don’t have to have every tick tracked and traced, but only those that present opportunity with a greater degree of success. You need a trading method that you can count on and one that is proven to perform and you yourself need to be reliable enough to execute it and not get taken captive by your wants and desires. Its not about you, but it all depends on you.

In today’s trading I did well, hitting double daily trading goal but it could have been a lot better had I woken on time. I won’t bore you with the details, but you can look onto the days chart and see what I mean. I had about a 12 point run just up to the opening bell and let it all slip away for a 3 tick loss. I did catch a early couple of trades and small loss in the night session, but it all turned out just slightly ahead.

Later in the session I took on a couple of small losses but saw what I was looking for with some nice extended gains scaling out towards my target area at the top for a nice day.

I did not post for Friday, so I will include Friday’s session here today as well. I remember that session had a large sell off early on then needed time to absorb that drop. That meant slower action and smaller moves. This is something of what I was talking about in being able to read the market. It said, it was not going to move big, but small moves yes. That is when I need to taylor at least in part some of my exits for smaller gains because that is all there is if I am trading during that time. My only choice is to wait for things to come together and that did happen in the last 30 minutes of Friday’s session. I called out the possible drop right at the breaking point but I was done for the session with daily goal in hand.

Tomorrow is a new day and new beginnings and so until then, good trading to all. Vince

Friday’s trading day below by itself;

Tags: , , , ,
Posted in Day Trading | No Comments »

Alert – Stock Market at Critical Levels

Friday, October 1st, 2010

Today is Friday, October 1st, 2010 and the markets did a great job in holding up as a lot of bears may be getting a bit nervous holding their shorts over the weekend.

Let me start out right now, I do not know which way this market is going to go with its next move. Many times the stock market has already tipped its hand and reading the move is really very easy.

It would appear that a break is in order, given the large run up and basing we have seen over the last two weeks or so. That has been the markets M.O. of the past and it is certainly possible again here this time around, but let me give you just a moment of pause.

Reading the market many times can not be done until something has happened. At this point nothing has happened that would say the market is going to drop. So the logical conclusion is wait until something has shown which way the future direction will take us over the next few weeks. It is very possible to do this and I have done it in all the major turns of the market of recent memory. Its not that I am so good at reading the market, anyone can do it;  you just have to know the language.

If you go to a foreign country, would you expect to be able to speak and read the language as you get off the plane.  How about after a few weeks or even months?  I don’t think that is realistically possible. The same is true when traders try and read the markets. It takes time. When you see and analyze price patterns again and again, you will see that certain characteristics are present in all of them. Since the stock market is factual in nature, meaning it mirrors the same type of price patterns or behavior across all time frames, you can learn the language that will bring you home, “trading for a living”.  A fractal Stock Market gives opportunities to all participants no mater what their style. The point here is, reading the market will open doors and give you the ability to write your own ticket.

So, back to the point. The market is sitting on cliff. That cliff will either be a stepping stone to yet a higher mountain, or it will be the catalyst for the tipping point over the edge it now sits on.

A couple of days ago, I wrote about the stock market having an inside day and that the volatility coming out of that inside trading day was going to produce big price movement. I did mention that we could possibly see two inside days together and that would create even more power and pressure once things got going. We have just seen two inside days but they are staggered. We came out of the first one violently, first to the upside and then quickly to the downside, + 100 points on the Dow and then down -200 points in a matter of a couple of hours. Today we saw the second inside day and yet again creating pressure for the next move.

A break of today’s lows at 1134.50 first and then on too yesterdays lows just after that of 1131.25 will produce a multi hundred point loss in the Dow and dozens of S&P points in just the first few days of breaking those levels. (my opinion only) (this is not investment advise)

If you know what is their, you would understand. What is their is, sell orders. They are parked there like automobiles in parking lot, just sitting there, waiting. If you get a few whales to push it over the edge they are all going to go off and it will induce mass selling.

On the other hand, everyone is looking for this market to roll over after putting in a reversal day yesterday, they are just waiting like it is a for gone conclusion. It very well may be that it will crack and I said I did and do not currently have a strong opinion one way or another right now at this time, but I believe we need confirmation to get this one right for sure, is all I am saying.

Their is a chance we can still rally from here. It sure would catch everyone by surprise. The sentiment numbers still have bullish tones to it at only 43% bullish right now. Also given the fact that the first 4 trading days of the month are traditionally very strong. You can go back to 1930 and see a very consistent pattern of this being true. Call it human nature, but it is a fact that a lot of buying comes in at the first few trading days of the month. So, lets just see what the market is telling us on Monday first before we take the ride down. Once we see it, we will then know what the trading bias will be, in the days and even weeks to come.

——————————————————————————————————————————–

In today’s trading I had a nice easy day picking up a some nice trades. A few small scalp trades and one nice trend trade for 4 + points but only small size. It all adds up and made for a nice finish to a good week. I had good gains all week except one day of flat returns. I have been trying to change up the screen shots I post and am not sure what I will be showing in the weeks to come, but I don’t always want to show the same thing. In the mean time I was just showing my equity chart and not my trades. I am still thinking about how I will post future progress, but today I will show just a clean chart, no indicators in a different size tick chart. I will come up with something new, but don’t know what yet. today’s trades below.

Tags: , , ,
Posted in Market Call | No Comments »

Reading the Current Market

Monday, February 22nd, 2010

This is a short post from Fridays session, February 19th

Well, Fridays session had a little twist to it, in that the Fed had decided to raise interest rates. A good and bad sign. The good sign is in that they would have not done that if the economy was not growing. The bad sign is, that it could signify the start of a trend of increased rates, which could increase into additional borrowing costs for corporations and eventually could pose some interest rate competition to the stock market. Since rates are so low, it is currently not likely that investors are going pile into CD’s or Money Funds. There is not a return there at all, especially when you factor in inflation, you are looking at a negative rate of return. So again, not a huge risk at this point. The market liked it, in that it stopped a slide that had started in the night trading and could have turned into a route.

These are the unseen changes that can come up at any time. That is the reason, you have to be able to read the market and not be stubborn with your assessment of things, trying to force your will on the market, not usually a good idea.

By reading the current price action, you could have seen the small ralleys as they happened one after another. You may have played a short just before 7 am, but looking at the action around 7:20 a.m. West Coast, you would or should have seen that the pressure was on the buy side. At that point, you either wait for a clearer signal, or you go long.  Everything on my charts said buy, all across the board. If you are looking for a short, that was not the place. You could have been tempted at 8:50 am to go short, but you were too early. The topping process as it was finishing up at around 10:20 was a much better area to attempt it for any movement of size. Again, the market said at that time in point that it was getting tired and in need of a rest. It was over-run by the bears, but only temporarily. The S&P index did manage to recover from the pre-market selloff and added a little to its previous gains.

The market sentiment as measured by Investors Intelligence newsletter writers was again suggesting a market rally of some significance could take place. The bearish sentiment rose a little and the bullish sentiment also moved up a touch. It is still sitting around 35 % a very low number, suggesting as mentioned already a rally could come in here. I did comment on that last week, but thought we could get some sort of move back down for a spell. It still may come, but the current momentum is now up in the daily and the shorter term 120 minute charts. Will it continue, it’s currently hard to say, but given the sentiment numbers and that the momentum is up, it may be presumptuous of us to have any degree of certainty that the market is ready for a significant pull back. I don’t currently have any strong feeling one way or another for tomorrow, but would have to side with the current momentum. That would have been a smarter play for Fridays session, than trying to out guess the top the move back up. Either way, try to read the market and listen to what it is saying at the time you are trying to trade it.

Friday, I did not really have enough time to trade and thought I could slip it in. I was only trading small, but I did not like the very slow action waiting for the market to move, was killing me. I was trying to force something to happen. I did not want to wait. The price action from 10:30 to 12:00 on Friday was so slow, it looked like it was never going to move. I took a few trades, but just could not take it. I did see lower prices, but second guessed myself, because of the slow action. I stopped trading at around flat and decided to wait until next week. The conditions for me, were just not right and I could feel it. That is the best thing any trader can do. If things don’t seem or feel right, don’t trade.

Well, that is it for now. More good stuff coming this week to talk about, so until then. The few trades I took below.

Tags:
Posted in Day Trading | No Comments »

Good to get it right

Saturday, February 7th, 2009

It is Friday afternoon, February 6th and I am just thinking that it is nice to get it right.

The markets were up almost 3 % today across the board with an overwhelmingly large amount of the market participating. The depth of today’s move was impressive with 6 stocks going up for every one that went down.

Just after the open today, the market had a real nice trend line break, 4 points across the bottom, forming a declining wedge in short term downtrend, then, BOOM – IT HAPPENED! The market went up so fast like I had said it would, catching so many at their pain thresholds, having to cover in a hurry.

The Dow went up 170 points in less than 30 minutes, as well as all the other major indexes. It kept going up and closed near the high of the day, a positive for a follow through in tomorrow’s session. The daily chart is now positive, with the weekly trying to turn into positive territory, maybe next week. I have a chart of the two below. The weekly chart may turn positive, but I do not think the monthly is going to go positive for a long time yet.

As I was discussing yesterday’s daily price action, I could see that the pattern was a bullish one that I have literally seen thousands of times before. You can see the same patterns in small time frames giving you the same results, time and time again. Reading the markets is not a science, it is more of an art. You do use probabilities and pattern recognition to help you identify areas that have low risk and yield you positive returns, but you have to know what you are doing. The only way that happens, well you guessed it, practice. 

Make no mistake about it, trading is not that easy overall. If it were, there would be a lot more people making money at it and you don’t hear that very much these days.  Having said that, I would beg to differ with those people who say that the average guy out there cannot compete with the professional traders all over the world. I say you can, if you have what it takes. 

You may be asking yourself, what does it take then? And if I don’t have it, how can get it or find it?  That is a question every one needs to take seriously if you plan on being successful. You need to find out what it takes and are you willing to pay the price.  I had to ask myself that question a long time ago and my answer was, what ever it takes and how ever long it takes.

Let me say, I would not do anything unethical to advance myself for the sake of advancement of my goals, but barring that, you have to work hard. If you have a mentor or someone who can show you how to cut down the learning curve, I am all for that.  Without learning from someone who has already done it, you will add many years to becoming successful, something I never had.

First, there are the three things you need to find within yourself to be successful and they are, “Discipline , Focus and Patience”.  Those are the first things you must have. I will go into more depth with these at another time, but these are essential. These qualities are from within you and you may have to dig inside yourself to find out where you stand. There are mental exercises you can do to bring the best of those qualities out.

I say all of this because trading is not only about putting on a buy or sell order. It goes way beyond just trying  to make money. If you are not prepared for the mental side of trading, you will end up doing everything wrong and you won’t know why that is, even when you know better at times. You need a solid trading method and solid mental skills and be willing to be honest with yourself and not think more highly of your skills than you should.  The markets have a way of dealing with people like that and I would call it an old fashioned humbling.

We need to stay thankful for what we can take out of the market each day and resist the temptation of GREED. That word I just mentioned has killed a lot of good traders. The other word that goes with the last one is FEAR. Those two go hand in hand with each other. Again, these are emotions and they need to be controlled or they will control you. You first need to be aware of them to try and control them and that is why I am bringing it up. It takes a lot to become a consistent trader who can take money out of the markets on a regular basis and you just need to ask yourself, do you want to become one of those people.

You can make a lot of money when you can come to terms with the points mentioned above. To control greed, you can come up with a modest profit target that you would like to make each day. That right there, in its basic form, can do wonders for you. An example from today would be taking a small profit of 1 point on the S&P when I could have had 3 or 4 easily. If I let my emotions take over, I will be kicking myself saying why did I take my profits so quickly while I could have had a lot more. Next time I see that, I will go for it. When you talk like that to yourself, you are setting yourself up for something that may not be there and you may be wishing for it. You place the trade it moves up over 1 point and then backs off quickly stopping you out. Then you say, “why didn’t I take my 1 point target.”

It never ends with the mental battles you face unless you come to grips with sticking to your plan and taking what you need for the day, 2 or 3 points.  I guess this story fits well for me today, because I knew I was not going to trade a lot today. I just needed to get my daily goal and be done with it.

I had 4 trades today, +3 ticks, -2 ticks, +3 ticks and the last was split into two sells for +7 ticks and +4 ticks. This got me my minimum daily goal for the day of 2 points after commission in just a few minutes. If you follow my trading plan of gradually increasing your contract size as your profit increases, you don’t have to trade all day to make more money, just increase your size gradually.

I will be increasing my size next week to account for this myself. Also if you learn to pay yourself a little each week, you will come to see that you will be rewarded for your discipline, focus and patience. Starting with only 1 contract and following my plan as outlined, trading for only 2 points on S&P per day can make you all the money you could need to live a very comfortable life. For someone to make that kind of money, you would have to be a top executive, doctor, or other highly educated profession. The one thing that they don’t have is the time and freedom to enjoy what trading can give. In 30 to 60 minutes per day, it is possible to get a modest goal of 2 points and keep doing it.

That is one more reason why I like the way I trade. There are so many opportunities to pick that up in just a short time. If you didn’t get it, you stay with it until you do. The trades are posted below. I’m still doing an introduction to my method tomorrow for those interested. There is no charge. I will be starting at 8 am West Coast time and going to about 9:30.  Email me at vinnie@sniperdaytrading.com . Read my post from yesterday if you missed it and it will explain what to do.

Bye for now. 

Vince

http://www.screencast.com/t/LMfgyPXvu              Some of  today’s Live trades

http://www.screencast.com/t/gv4Xif7zBo              Today’s equity curve

http://www.screencast.com/t/AZAJpcM1              S&P daily chart update

Tags: , , , , , , , , , ,
Posted in Market Call | No Comments »