The Bulls just can't hold

Everybody is closely watching the 950 level on the S&P 500 for a breakout and confirmation that this rally still has room to grow. I thought we had that today as price consolidated for a couple of hours before breaking through toward the upside. I think the first green arrow was the best trade of the day as price broke though a narrowing consolidation (yellow lines) that formed a nearly perfect wedge.

I took a small position there because I was worried about the overhead resistance of yesterday's high (blue dotted line on top chart). Price couldn't break through in the morning hours, and I wasn't sure if there were enough buyers to push it through at 12:30. There were, and notice how that line became support.

I took a larger position at the second green arrow and held on as we were off to the races--quickly passing the 950 mark. I honestly thought that we were going to see huge buying pressure all the way into the close. But a significant divergence on the MACD at the highs of the day concerned me. After that first bearish candle, I exited.

I still expected prices to climb higher expecting the euphoria of breaking 950 to create additional buying nuttiness. It didn't happen and we bounced several times off of the support line before slicing through after 3 pm. Price tested that resistance line a few more times before heading down towards the 200 period moving average.

So once again we stay put in a trading range that has lasted about a week now. It will be interesting to see who wins this battle. Just make sure you're on the right side of it when it happens. It could get pretty ugly if you're not.

LA Traders Expo

My wife and I just got back from Los Angeles on Sunday. I attended the Traders Expo and my wife jogged around the city. She lasted about 30 minutes in a seminar before she decided that her time would be better spent running through the hills of Hollywood. There were a few seminars that made me wish that I was running with her (and I hate running), but for the most part, I felt like I learned some new stuff.


I had an enjoyable time. I was impressed by many of the speakers. A few fell short of my expectations. Some were there to sell stock systems for large amounts of cash. I resisted.

I got to meet in person several of my favorite authors and bloggers. I'll highlight them here:


Brett Steenbarger who runs Trader Feed and and has written a few great books on trader psychology. He talked about his new book The Daily Trading Coach and discussed how traders sabotage themselves while offering techniques to avoid common problems that traders face. I really enjoyed his talk. Dr. Steenbarger spoke for free and offered an hour-long question and answer session after his talk.

I was a bit shocked when he opened his talk with a story that involved an "F-bomb" and the word "whore". After reading his blog for years, I was expecting a quiet nerdy fellow. I found out that Dr. Steenbarger was a talented speaker who has an interesting background and a diverse set of hobbies and interests.

Scott Andrews who runs Master the Gap presented a couple of very interesting number crunching seminars on the opening gap on the indexes. I had no idea that a gap could be analyzed in so many different ways. The information was great and I was very impressed with Scott's presentation.

Corey Rosenbloom from Afraid to Trade presented an interesting seminar called Idealized Trade Set-ups for the Intraday Trader. Corey was a nervous that he would have a weak showing to his seminar because he was speaking at the same time as Tom McClellan--the designer of the McClellan Oscillator and John Bollinger--son of the designer of Bollinger Bands.

Corey had a gread turnout despite his fears and presented a terrific seminar that kept my interest despite my having weekly mentoring lessons with him.

I also enjoyed seminars by John Carter of Trade the Markets, Merlin Rothfeld from Online Trading Academy , and Leslie Jouflas from Trading Live Online.

Overall, I'm glad I went. It gave me a boost of confidence and helped confirm that I am on the right track.

Today's SPY action

Today didn't turn out the way I expected. After a rough day in many foreign markets, I expected the US markets to struggle more than they did.

I took a position right out the market open. Although the gap was not huge (less than a buck in SPY), I felt that there was enough negative momentum to push the market lower. The trade went my way after a brief move upward.

A pullback to the 20 EMA got me nervous and nearly stopped me out at break-even, but I held on expecting the market to go much lower. We got another swing low for the day that was followed by a stair-step retracement back to the 20 EMA. When that red candle busted past the lows of the day I started rubbing my hands together in anticipation of a large move down. But then the buyers came back in with a large (nearly engulfing) candle. That was my signal that "all was not right" and I got out.

Using the $TICK helped me avoid holding on too long today. We didn't make any -1,000 reading during the day indicating that the selling pressure just wasn't overwhelming.
The market made a new TICK high at 3pm indicating that new highs were coming. I have no idea what is driving the last hour of the market, but it seems to happen nearly every day. I am too much of a wimp to play it, and I've been burned by being on the wrong side, so I chose to close shop early today and avoided trading the afternoon insanity.

ANOTHER trend day with Elliott Wave

After a decent sell off last week, most traders were expecting an up day. I don't think many were expecting to see an up day with this kind of strength. I know I wasn't.

Today we got another trend day. I've learned from Corey at Afraid to Trade that trend days should be a day trader's bread and butter. Just one or two of these kinds of days can make enough to cover you for a week or even a month. I'm learning to be much more aggressive on trend days and much less aggressive on days that aren't trending. My trading has improved dramatically since I've done that.

Trend days are so easy--buy any pullback to the 20 period moving average especially if there is a "doji" style candle. Today provided more than six of those opportunities which I've pointed out with the green arrows. I'm still a weenie, so I only took two of those trades. I made enough for the week, but I should have been able to make my monthly goal today. Sometimes I wait for too many confirmations before going full-bore.

Today provided another excellent Elliott Wave pattern (according to my novice interpretation). Corey has an ongoing educational series on his blog about using Elliott Waves in trading. I used to think the hole thing was bogus, but I've found his explanations to be very clear and free of jargon.

Kicked out of my office

My wife is painting our bedroom so I've been kicked out of my corner office. I am currently trading from the dining room table with a laptop and a 22 inch monitor (just to look cool). I'm planning on moving my trading station down to the basement to take advantage of cooler temperatures during the summer months.
By the way, if you're a trader, you need one of those giant calculators. I remember when my dad got his first calculator. It was the size of a small phone book and had a red LED display where then numbers appeared at the end of small tubes that had an incredibly narrow viewing area. It cost him $100 in 1975 which is about $400 in today's dollars. Mine cost a buck.

My Trades on a Trend Day

A couple of the three StockPunk readers have expressed an interest in seeing actual examples of trades that I've taken during the day. Although the day isn't over yet, I thought I'd post some trades that I took today. I've erased the number of shares I purchased so you wouldn't be overwhelmed by my massive account size (it's in the hundreds of dollars--I kid you not--OK, I kid you, but I'm still keeping my financial information private).

Today looked like a "trend day" from the very beginning. We had a large (over 1%) gap down from the day before. Price continued to push downward for 10 minutes until we got a retracement that never really got close to 50%. We had a -1,000 reading on the TICK right out of the gate (green circle) that was additional confirmation that price would probably trend down today. The TICK continued regestering -1,000 values throughout the day futher confirming that this could be a powerful move down.

I placed 4 short (betting on the market going down) trades (yellow circles) as price moved up toward the 20 period moving average (yellow line). My fourth trade was very large because I felt that the trend day gave very good odds of things heading south quickly. They did, and I exited my 4 positions at the white arrow.

I waited for another retracement to the 20 period moving average and place two more trades as price rode along the average for a few minutes. Another quick downward push and I exited out at the 2nd white arrow. You'll notice that the price continued down past where I exited and I could have made twice what I did. However, I've been learning lately that I do better if I set a conservative target and take quick profits. Otherwise, I hold on too long and often end up giving all my gains back.

I wimped out on taking a trade after what I perceived as Elliott Wave 4. Things seemed a bit wacky and overly volatile. I was wrong to hold off, and I missed another nice downward push.

Trend Day with Elliot Wave

Things are finally starting to click for me again. I've made my target for May this week. It helped that there were 3 trend days this week! Usually you can expect 3 or less trend days in a month, so it is best to take advantage of them when they show up.

I took advantage of the trend day Monday. We got another one on Wednesday, but I was so biased toward the bearish side that I refused to acknowledge the day until it was over. Today (so far) we've got another bullish trend day going.

I was bearish after the gap began to fill extremely aggressively after the morning "pop" I even went short on what I thought was a bearish flag pattern developing. A few minutes later and I was stopped out.

I've had a lot of trouble with my biases messing up my trading. I've got to learn that the market could care less about what I think it should do. it does whatever it wants to regardless of what everybody thinks it will do. I've stopped listening to news radio while trading because I've noticed that news reports influence my ability to stay focused on what the market is doing as opposed to what I think it will do.

I used to start preparing for the market an hour before the open hoping to glean some sort of nugget of information that I could use to make better decisions. I've noticed that my trading has improved dramatically since I've started turning on my computer and trading software just 10 minutes before the market opens.

I've also been trying to recognize trend days earlier, and that stop out was a wake up call that today was favoring one. I took a trade after the 2nd wave of an Elliot Wave pattern completed (right at the number 2). I had no clue that an Elliot Wave was forming, I was just anticipating a trend day trade.

I sold when price made a new high, and watched as the price continued on about 2 times higher after I sold. That should have clued me in that wave 3 was in progress. I missed two trades (from a to b in wave 4) and wave 5. I tried to get in as price touched the 20 period moving average, but I was too slow calculating everything and price rocketed to new highs and left me behind. Dang it.

I made another "trend day" trade as price consolidated around the 20. It was a hard trade to take because the stock chat rooms that I read were all saying that the rally was done and that we were headed lower and hard. I'm learning that the only thing that matters is what the market is telling us in real time.

A couple of 30 minute narrow candle trades

Today's prevailing trend helped push a lot of stocks upward. I took a couple of narrow candle trades that were trading with the trend using breakouts from narrow 30 minute candles as my entries. Here are a couple charts:

D.R. Barton Reviews Google's Stock Screener

Stock Screening - Google Finance Falters

by
D.R. Barton, Jr.

Last week we ended by talking about Google Finance's use of Web 2.0 tools to make an addictive little screener. And it is truly fun to play with. But alas, when the playing is done and it's time to get down to some real work, Google Finance's stock screener really has little to offer.

First the good stuff about the Google screener. Compared to almost every other screener, it's easy to find. A little thing, I know, but it's frustrating trying to go through the multiple layers of web pages to get to some of the better no-cost screeners. At the top of the Google Finance homepage, right next to the ubiquitous Google search box, is a single hyperlink, the stock screener (in typical Google minimalist style).

Once you get to the screener you'll find four default screening criteria with boxes for minimum and maximum values. The truly unique part is the slider that's between the min/max boxes. Between the min and max sliders is a little histogram that represents how many stocks are at each increment of the slider. Cool. For most criteria, this looks like a normal distribution, with some skew to one side or the other. What makes this really fun is that if you move one of the min or max sliders to reduce the universe of stocks, you get instantaneous feedback on how many stocks satisfy the scan, plus a sortable list of stocks that meet all of the criteria. And when I say instantaneous, I mean less than a second.

As Google has set this up, it's a very visual process, but I'll try to describe one example for you. With all of the criteria set as wide as possible, Google shows 2,950 stocks. Move the 'dividend yield' minimum value slider to the right from 0% to 5% and the universe is reduced to 512 instantly sortable stocks. You can do this with 61 different criteria that Google provides, if you so choose.

But the good news pretty much ends there. The minus side of the ledger is unfortunately well populated for the Google Finance screener. And there are some deal killers.

First and foremost, there's no way to export the results of your scans to a spreadsheet or trading platform watch list. And if you devise a scan that you really like or need and want to run it later, there's no way to save a set of screening criteria. In addition, the universe of screening criteria is fairly limited.

Here's the bottom line. If you're just wondering how many stocks have a Market Cap over $1 billion and a dividend yield between 2% and 6%, and you want a lightening quick answer, Google can get you there with a sortable list. But you won't be able to save or export the scan, making the utility of this Google app marginal at best.

In the end, the Google Finance stock screener is a bit like a Slinky. It's fun to play with and can occupy you for minutes on end, but when all is said and done, you can't turn your time and effort spent into anything really useful.

Next week, we'll start to look at some screeners that scan for technical criteria. So please send any suggestions/thoughts/reviews of your own to drbarton "at" iitm.com. Until then...

Great Trading,

D. R.

About D.R. Barton, Jr.: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured guest on both Report on Business TV, and WTOP News Radio in Washington, D.C., and has been a guest on Bloomberg Radio. His articles have appeared on SmartMoney.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at "iitm.com".

We've got it good

My trading has sucked today, but I still have it much better than anyone had it 100 years ago. Life is good.

A TraderAM trade

TraderAM has an excellent site where he details every trade he makes and records the "R" value gains and losses. Today I made a successful TraderAM trade on RIG.
TraderAM looks for stocks that have gapped up above or down below yesterday's trading range. RIG gapped down today below yesterday's lows (white line). I bought on the fourth narrow candle after price pulled back to near yesterdays low and bounced off the 5 period moving average.

I trailed the stock down using the 5 period moving average stopping out on the 11th candle as it peeked out above.

DNDN Blowup

DNDN was a stock I was following looking for a breakout trade today. Fortunately, I didn't take a long position when it was up 16%. In a matter of a couple of minutes it went from being up 16% to down over 70%! Trading was halted on the stock after that insane drop. I can't imagine what people are feeling who didn't have a chance to get out.

There's an inherent danger trading individual stocks--even those with large volume. DNDN traded over 28 million shares up until the drop. Yikes.

A trade using Elliot Wave

I'm pretty new to Elliot Wave Theory, heck, I've been using technical analysis for less than a year. I'm pretty fascinated by the psychology behind it, and I've noticed that watching for Elliot Waves helps me avoid overtrading and seeing setups that don't exist.


Here's an actual trade that I took today using Elliot Wave. I have erased the number of shares (100,000--OK not really), but you can see my entry and exit on the fifth wave of the move on SPY. I got out before a move higher, but I was a bit skittish with this being my first try at using Elliot Wave.

I owe Corey Rosenbloom at Afraid to Trade credit for teaching me about Elliot Wave through his blog and personal mentoring. If you're interested in learning more about it, check out Corey's interview with The Disciplined Investor.

Happy Life Day

Bea Arthur ruined Star Wars

I know it wasn't her fault--she was probably just picking up a check, but there is really no excuse for this monstrosity. Fortunately, I didn't see the Star Wars Christmas Special when I was a kid. It would have ruined the series for me for sure. Of course, one could argue that the Christmas Special was better than the Prequels.

I'm a geek.

A look at the weekly S&P 500

I've been burned a bit during April because I've had a bearish bias all month. That hasn't served me well as price continues upward. Looking at the weekly chart gives us an idea why the March and April push upward occurred.

As price continued making weekly lows, momentum (as demonstrated using the MACD) was making new swing highs. This should have given me a clue that the downward move was losing steam and it was time to change my bias.

It looks like now that the rally is losing steam as it meets resistance at the 20 week EMA. I'm trying to ignore my biases (which are still bearish), but I can't imagine this rally lasting too much longer.

Divergence on Cambell's Soup

Campbell's Soup set up a nice bear flag on the 5 minute chart that met its target . It then set up another bear flag after that. Normally I would take that second bear flag (even though they don't occur very often). But the second bear flag occurred on the third swing up of the MACD as the price made its third swing down. Time will tell, but usually when we see a pattern like this it means that the run down has run out of steam and it is less likely that the trade will succeed.

Yay! A new post for StockPunk

I'm sorry to the three of you that read my blog (not counting the 3,000 Anonymous haters). I haven't been posting much lately because my trading has sucked and I've been trying to figure out how to stop the bleeding.

I had a pretty good month of March, but I've given everything back and more during the month of April. So, out of that frustration, I kind of put writing on the blog on the back burner.

I've noticed that when I write about some of the frustrating trades that I've made that it encourages folks to scold me and tell me that I suck so I figured that it was best not to post while I sucked so that I didn't have to receive several comments confirming that indeed I do suck.
On to the lesson of the day. These charts aren't complete because the day isn't over, but I wanted to show a trade I made and how using the MACD I was able to determine a good exit point. I traded US Steel (X) using 15 minute candles. I was looking for a breakout of the opening range low because I thought that we were going to see a big down day all around. As soon as that first candle was broken, I got in. I placed my stop just beyond the 200 SMA which was nearly triggered before the stock headed in my favor.
I took partial profits at 1 R, and planned to hold until the end of the day. But I noticed a divergence on the MACD on the 5 minute chart. As price continued making new swing lows, momentum made new swing highs indicating that with each swing, sellers were less aggressive. At the third swing, I decided that the move was probably pretty much over and it was time to get out. At least I got one decent trade this month.

Using Multiple Time Frames to Exit a Trade

SPY has been giving me fits lately, so I've been looking at other alternatives. A "narrow candle" trade setup on SYNA this morning so I took it. I risked 15 cents per share and gained about a buck per share for a 6.66R trade. It's been a while since I've had that much of an "R" gain on a trade. It's much harder to find those kind of risk to reward ratios trading indexes.
I've always struggled finding decent exits with these narrow candle trades. Using the 15 minute chart in conjunction with the 30 minute provided a great exit--the doji at 2:30 (red arrow). Unfortunately, I was away from my computer when it happened, so I exited at a less-than-perfect spot.

Finding great setups in other stocks

I've been concentrating on trading SPY lately (with limited success) and I've kind of stepped away from trading individual stocks like I used to. I watched APA as I traded SPY today and saw some great setups that I should have taken.

There are two trades that are really close. The first is the bull flag (click on chart to make it bigger). The flag dropped to a moving average with a doji in a very nice pennant pattern. Very near that point the moving averages crossed over creating a great place for a very tight stop and a specific target.

Soon after the stock took off again, price broke through the previous high and created a trend reversal trade that had a bigger target than the flag. You could have held on past the flag target for additional gains providing that big red down bar didn't scare you out of the trade.

I might have to start trading individual stocks again, because I seem to make many more boneheaded decisions trading the indexes.

Frustrating

The market has been hard for me to figure out lately, and I haven't been real motivated to post because I've had a hard time pulling money out of it. Today was no exception.

I actually would have made good money today, but when I attempted to short SPY at 10:30, TradeStation said they had no shares available. I tried to substitute DIA instead, and got the same message.

Instead of finding alternatives, I just gave up and sat back and watched. The anticipated plunge at 1:00 ticked me off. I took the first pull back at 2:00 and of course, it went against me. I held on for dear life. I just couldn't believe that the bulls were making a push late in the day. After I couldn't justify holding on for any longer, I bought the stock back, and (of course) just a few minutes later, the stock plummeted.

Frustrating.

I'm bored so here are some links

• Five reasons to avoid gold -- are you reading this Dad?
• Real-time charts for FREE. I'm very impressed with this site!
• Index Indicators
• Money Flows via the Wall Street Journal
• 2 pm in New York--Time to Buy!!
• Did you see the shot that Marcus Denmon from Missouri made yesterday. That was the first time I've seen a shot like that live.
• TraderAm trades 15 minute narrow candles and made 324.5R in 2008!
• Preparing for your trading day

Made some dough

It's a good thing that I didn't go out to lunch today because the best trade of the day came right at lunch time. It's also a trade that saved my buttocks because I was in the hole $1500 bucks until I took it.

I got into the hole early by trying to fade the opening gap. I was a bit over-anxious and got in right after the open hoping that the market would go down and fill the gap. I refused to take a stop loss as the market climbed higher and I nearly doubled the loss that I would have had if I had kept a solid stop-loss in place.

As price continued to climb, I started thinking that we were heading for a trend day and I started buying. I bought on three pullbacks and had made up my loss and more several times as I stubbornly held on. Price eventually crossed the 50 period moving average and bounced along the bottom. I had a chance to get out, but I was so biased to the upside, that again I held on past my stop and ended up losing more.

I was ready to throw in the towel, but thanks to my mentor-ship with Corey Rosenbloom, I saw a nice setup forming (the cradle trade as Corey calls it) as the moving averages crossed. I sold short and held on for dear life as the bottom fell out and the market went down in nearly a straight line.

I exited when price seemed to slow down forming a doji as the move lost momentum. Another pattern that I've learned from Corey is the "three push pattern" where price makes new lows or highs three times in a row, but the price moves are not confirmed by momentum. Often a reversal follows this pattern. I'd say we got one of those reversals today. Holy cow.

The market knows when I go to lunch

I had lunch with a friend today and left while this bull flag pattern was developing. I had even put a Fibonacci retracement on it thinking that it might be a good place to get in. It set up perfectly about 10 minutes after I left with a bounce off of 61.8% and went on to make its target right before I got home. More proof that the market hates me.

I'm such a wimp

I don't think I was alone in expecting this to be a down day. After the massive gap up, I was still doubting this rally--toxic debt relief and all.

I dipped my toe in after the doji at 11:30 (first green arrow) and quickly took my profits at noon. As price flatlined I ran some errands expecting the market to regain some sanity over the lunch hour.

I felt a bit vindicated when I got back as price head downward and started licking the 50 (blue line). I was sure we were headed down and that the trend would end. After the buyers and sellers painted a doji (second green arrow) just above the 50, I started getting uneasy. Should I get in!? Can the buyers push this thing higher!?

My indecision cost me a lot of money as price bounced between the averages and then rocketed upward through the 20 (green line). After that, there wasn't a safe place to get in and we ended the day after a massive trend day up 7.21%.

Once again my bias has cost me a lot of money. I'll probably never learn.

The trading gods hate me

I was able to make my monthly goal during the first few days of March. After an awful February, I thought it would be nice to sit on my winnings and trade with a simulator to test some strategies. I found a strategy that was working very well. Yesterday the strategy was up over 8R.

I decided to do some more testing this morning. The market opened kind of scratchy anyway. So I took several trades to test out how the strategy performed right after the markets opened. I found out it performs quite terribly. After losing a bunch of "sim" cash, I decided to switch back to my real account and take a trade on SPY.

I found out switching was unnecessary, because I was ALREADY USING REAL MONEY!!! I had forgotten to switch the account and took hit after hit using my real account. I felt sick.

The rest of the day was spent trying to earn back what I had lost. This never works, and it didn't work this time. I added another 500 bucks to my losses.

Of course my father called after the market closed. He really doesn't understand what I'm doing as a trader. He asked me how things went for me today because he assumes that whenever the market is up I make a lot of money. I didn't have the guts to tell him that I'm a moron and I lost a bunch of money while I thought I was pretending.

They say a loss hurts much more than a win feels good. They are right.

A trend day that wasn't

It looked like we were going to have another trend day today. I wrote to Corey at Afraid to Trade and lamented that I wasn't playing for a trend day even though the market was having one. He wrote me back and said that he highly doubted that we would end higher--there was just too much against another trend day. He ended the e-mail with, "Got some major confluence overhead that could stop this rally any second now."

As soon as I got his response (about 1:45 EST) the market began its tumble down. That guy knows his stuff.

Despite the day ending lower, there were still opportunities out there for nimble traders. I highlighted the flag patterns that occurred today and met their targets. I also played for a gap fill today. I managed 1R before heading back to break-even.

Consolidate, try not to hate, love your mate

There wasn't much action in the major indexes today as we kind of churned after a huge day yesterday. I did notice a nice bear flag at noon that met its target. I've been playing around with Fibonacci retracements on flags lately, and I've notice that they often provide concrete areas to place stops.

In this instance, there was a nice doji around the 50% retracement that provided a good entry. Placing a stop just beyond the 61.8% retracement would have provided a nice risk/reward ratio.

Let's say you sold short at the 50% retracement ($69.70) and placed your stop 10 cents above the 61.8% retracement at $69.89. That gives you 19 cents of risk.

The trade worked out and your exit would have been at $69.15 giving you a 55 cent profit or 2.89 times your original risk (of 19 cents).

Finally!

For those of you who enjoy seeing the market go up, today was your day. It's nice to have some good news once and awhile.

This was a trend day, but it was difficult for me to trade. I was chomping at the bit after the opening gap of over $1, but I couldn't find a decent place to enter. I took a trade on the first pullback of the day (first green circle), but I had a hard time finding a decent place to put my stop after that huge run up.

I ended up placing it below the low of the day, right at the 50EMA. The market was already up 250 points at that point, so I didn't feel like there was a lot of upward potential left, especially with the size of my stop.

We drifted into two periods of consolidation that each lasted a long time. After the first consolidation we broke through at noon with some huge volume and I thought we were off to the races. But price couldn't break though the highs of the day and continued to bounce up and down along that channel until the final leg of the day began at 3pm.

I was tempted to call it quits as price broke the 50EMA. Fortunately, it didn't stay below it too long, and I finally made some decent money by the end of the day.

Any of the green circles were decent places to take trades today (in my opinion). I took two of those trades. If you were smart enough to buy right after the opening gap, you had a tremendous day--congratulations!!

Is this the bottom?

Visit Isthisthebottom.com for answers about whether it is time to call the bottom and jump into the market.

DinosaurTrader linked to a site with some excellent articles and charts dshort.com. Check out this cool Bear Market chart they posted:
For those of you who have friends and relatives who think you are just "gambling" when you trade, here's a site that allows you to do just that--bet on stocks--RawTrader.com.

Trend Day (I missed it)

Except for the little bump at the end of the day this was a perfect trend day. Unfortunately, I was hesitant to trade it and I lost out. I've circled the high probability trades (shorting). I took the pullback in the third red circle and held until the end of the day for a wimpy 1R gain. I wish I had taken those three dojis just after the open and held on all day with a nice big position.

I've made decent money this week, and after blowing good gains on several Thursdays and Fridays, I was reluctant to risk too much. Oh well, at least I didn't lose my shirt today.

Is this market a mess, or what? It's crazy for me to think that I made my first short trade only 6 months ago.

Trend Day (Almost)

One type of trading that I've been working on for the last few months is a "trend day" in DIA. I've had real trouble trading trend days because I second guess every decision and usually end up making a whole host of mistakes.

I nearly blew my chances again today at about 1:10pm where DIA's price dropped down to the 200 SMA (red line). I had a stop set just above the 200, but fortunately after my 4th entry of the day, I cancelled the stop order to add the additonal shares I had purchased. Price dropped quickly through my previous stop and I watched as my dialy positions dropped to -$2000. I held on and after price formed that nice little hammer, I set the stop under the 200. Fortunately the price climbed from there.

I got spooked at 3pm when volume surged and price formed the bearish hammer, and I dumped all my shares. I was regretting my decision a few bars later, but the drop at the end of the day through both the 20 and 50 period moving averages made me feel glad that I had dumped my shares when I did.

Corey Rosenbloom on Andrew Horowitz

Corey at Afraid to Trade was recognized today for his diligent (some say "insane") work on and understanding of Elliot Wave Theory on Andrew Horowitz's blog The Disciplined Investor.

After the article was published (you can read it here), Corey told me that his blog was inundated with traffic and he and his web team had to work hard to keep the blog from crashing. It was down for a bit, but they have got it up and running again.

Corey has been a mentor and advisor to me over the last 8 months, and although his knowledge goes way beyond what I can fully comprehend, he has been able to dumb down many market concepts. I even kind of understand Elliot Wave Theory.

I would encourage anyone who is interested in trading for a living to seek out someone who is doing it. Anyone who has survived this past year is a good start. Many bloggers offer their services for ridiculously inexpensive rates. I have consulted one on one with successful traders who charge me less than the guy who fixes my car. I've been able to transform the money I paid for trading education into winning trades that paid for my education in a day or two.

So get out there and find someone who can teach you the ropes of this difficult profession called "trading". I think Corey still offers mentoring opportunities, but you might have to hurry as he becomes more well known.

Two decent trades today

My first trade was a gap fade on DIA. I wimped out and got out before it met its target for a decent (1.4R) gain.

The rest of the day was pretty choppy so I stayed out and traded EQ's narrow 30 minute candle. I placed a stop above the candle (orange dotted line) with plans to sell at the lows of the day near the close. I wimped out on this one two as price moved up and I jumped out. If I would have held until the end of the day I would have made 3.32R. I made about half that.

Frustrating

What a frustrating day. After the gap didn't fill, I went long on DIA only to be quickly stopped out with a stab beneath the 50 EMA. Then price formed a nice bear flag at 12:00 (first set of blue dotted lines) and I attempted to short and was told that the stock wasn't easy to borrow by my broker. A stock that trades 31 million shares in the day and it isn't easy to borrow?!!

I assumed it was a glitch and watched as the bear flag met its target. Price then set up another bear flag and I attempted to short it. Same message. I couldn't short it. Again the flag met its target as I sat idly by.

I then switched to SPY hoping to trade the next bear flag setup (I was pushing it with three in a row--that's pretty rare). I set my stop way too close to the 50EMA and barely stopped out as the 50 was breached for a moment. DANG IT!!

I immediately shorted again when SPY formed a couple of dojis near the 50 (first blue arrow). Price took a dive, just as predicted, but I was too bothered by my other trades and I move my stop to break even so that I wouldn't lose any more money.

Of course the price bounced off the 200 MA, came back up, took out my stop, formed a doji and then headed hard down. I was too exasperated with my losses to take the best trade of the day that would have made all my losses back (and more).

I'll need to pick myself up and brush myself off and see if I can do better tomorrow. The Office is on tonight, and that show usually seems to boost my spirits. I hope your day went better than mine.

A one trade a year system

If anyone out there has a system that picks stocks like these the day before, I'd be interested in hearing a bit about it. This one would have made my decade.

Trading 30 minute candles in conjunction with 5 minute charts

I love trading narrow 30 minute candles for several reasons:

1. They provide huge risk to return ratios.
2. They don't require constant monitoring.
3. You can easily set up a "bracket trade" and let the market do its magic.
4. They provide a narrow 2 to 3 hour time frame for trading entries.
5. It can be much easier to spot a trend on a 30 minute chart.

I've learned that trading 30 minute candles indiscriminately, however, doesn't provide a trading edge. There are hundreds of stocks that paint narrow 30 minute candles every day. Very few of them go on to provide a nice profit.

But, by combining 30 minute candles with other time frames can provide an extremely probable and profitable setup that's hard to beat. Let's look at an example from today on MOS.
The narrow candle at 11:00 provides a great entry point. If you placed your stop right above the candle (red dotted line at $43) and sold short when the 11:30 candle broke down below the close of the 11am candle (orange dotted line at $42.40) you would have risked 60 cents per share ($43.00-$42.40). Holding on to your MOS trade until the end of the day (about $35.95) would have made you $6.45 per share. That's 10.75 times your risk ($42.40-$35.95)! Risking $1,000 on the trade would have made you $10,750. Nice.

Let's look at the 5 minute chart to see if there are any clues that this is a decent trade.
At the exact entry point in our 30 minute chart, the 5 minute chart shows two edges--a bollinger band break and a moving average crossover right at yesterday's closing price. To manage risk you could use the 5 minute chart to trail your stop along the 50 EMA. If you are more agressive, you could just leave your stop all day. I like to move my stop to break-even as soon as the stock has made 1 times my risk (in the case of MOS 60 cents).

Using multiple time frames (you don't have to get fancy) can really boost your confidence and help you see trades that may need some confirmation before you take the plunge. In the case of 30 minute narrow candle trading, the 5 minute chart confirms the 30 minute chart giving us a high probability trade with huge returns and little risk.

Two Market Rallies Disappear

It's kind of crazy to think that we are now at the same point we were in 1996. How awful for people who trusted others to manage their money.

Like others, I didn't have the clairvoyance (or the opportunity) to move my retirement money to the safety of cash. Most of us don't have many options when it comes to our retirement and even if we have a little bit of market knowledge, we are still extremely limited in our choices. I had 10 funds to choose from, and was discouraged from keeping my funds in cash (it was a rigorous process to sell the funds and place them into a cash account--and I was too lazy to the paperwork).

I decided last week to cash out my accounts after seeing how decimated they were over the past year. I haven't been saving for retirement very long. I started in 2003, so I didn't have much of a nest egg built up. But what I got back (after taxes and penalties) was half of what it was a year ago. The 10 percent penalty added to my frustration. I'm paying a penalty because I'm tired of market "professionals" losing all my money!

This might be extremely irresponsible of me, but I'm not planning on keeping a retirement any more. With the insanity that has happened in the government and the markets, I don't feel that I can really trust that the market will "always go up", or that my account is safe from a desperate government that has run out of ways to raise capital.

The spring sprung

Our "coiled spring" is now broken--to the downside. That's not good if you're a bull.

Today's action was difficult for me to trade. For the most part I avoided dumb impulsive trades. I didn't make money on any of the 5 trades I took today (the red arrow is one of the short trades that I made and stopped out). My chart on Tradestation didn't look as bad as the one above does. Today was much more choppy than I realized.

The blue dotted line at the bottom is the low of November 2008 (on a closing basis). You can see how the bears kept pushing us to the breaking point, but we didn't manage to bust through until the close. That makes tomorrow an interesting proposition. Will the bulls see this as reaching "capitulation" and try and take over, or will the bears see this as the bulls giving up and push the market down further?

I've included a bonus "narrow candle" chart for a trade that I didn't take today on EOG. If you would have sold short when the narrow 9:30 candle got broken (red arrow) with a stop above (orange dotted line) you would have made 2.7 times what you risked.

There weren't a lot of trades out there today after that awful gap down. Tomorrow should be interesting.

A coiling spring

The market's wedge has been narrowing for a long time now and seems poised to break out pretty hard. The premarket chatter points to the down side today and there doesn't seem to be anything positive to counteract all the negativity. The November lows are well within reach, so I'm looking for at least a retest of those lows.

I don't know if it will all come in one day, but even though I'm supposed to be waiting to let my account settle, I just might have to trade if the market opens itself up and gives us a strong trend day. Stay nimble out there. Be patient and wait for the opportunities to present themselves.

Still coming down

The snow is still piling up. I made a few pretend trades this morning. I don't feel the pain of losing as bad when I'm paper trading, but I had to look to make sure that the account was not real several times just to make sure.

I was up $1,000 for a bit and then ended up down $700 by the time I was finished. I'm not sure what my problem is, but I'm glad the money wasn't real today. Maybe this three-day weekend will give me an opportunity to re-evaluate everything and make some changes.

Snowbound

The market looks a little tepid this morning. That works out well for me, because I'm not trading today. We're getting a snowstorm this morning and the above photo is a look out my window. I like being able to stay home and enjoy the snowfall with my kids.

It's a good life so far. We'll see how long I can keep it going.


I'm just finishing up a book called High Probability Trading by Marcel Link. He addresses several issues I've been having lately (overtrading, "show off" trading, lack of self control, fear) in the book.

He highlights setting realistic goals, using multiple time frames, trading with trends, using oscillators. He also includes some very practical advice about placing stops and exits, trading systems (he includes TradeStation codes for simple systems), managing money, and backtesting.

Link isn't afraid to share some of his worst failures as a trader and I really appreciate that. Too many writers aren't very honest about how difficult trading can be. I enjoyed the book and recommend it to anyone wanting practical and timeless advice about trading for a living.

Can't seem to make a buck

I'm having trouble finding a trade that works lately. I'm planning on taking a few days off to regroup and figure out what my problem is. I'll probably try again next Wednesday.

The slide continues

I had myself all geared up for a good week this week after contemplating my mistakes over the weekend. It was all for naught as I traded away another 3R before calling it quits for the day. Of course, a perfect setup appeared 15 minutes after I quit.

I've gotten good advice from readers, and I think I'm going to back off a bit until things start "clicking" again. I plan to refocus on the "dummy trades" that I was making back in August and September. I was very successful with those trades, but I found other styles of trading that I thought would suit my lifestyle better.

The last 3 months have left me without a profit, so I'm thinking that I can't really handle day trading just the DIA and I need to branch out to other stocks using longer time frames.

Dumb mistakes

The week ended on a sour note for me as I lost another 3R on Friday. As I thought over things this weekend I think I've come up with some reasons for my poor performance the last two days of the week. My mistakes stemmed from three different sources:

1) Overconfidence
2) Impatience
3) Emotions

I guess number three could cover all of them, but I wanted to break things out a bit so I could focus more clearly on what was going on.

It seems so silly to me that emotions play such a large role in trading success or failure. I consider myself a very logical person who is rarely overtaken by emotions (some of the scenes in Finding Nemo and Dances With Wolves are exceptions for me--yeah I cried a bit). But during the trading day, my emotions often take over and I make boneheaded decisions.

I think part of the problem is that I'm still in that "trading is a hobby" mode. It hasn't quite hit me yet that my SOLE INCOME is now depending on whether or not I can pull money out of the market consistently. That "hobby" mentality sometimes causes me to trade with reckless abandon and only after the day is over do I look back and think, "Hmmm, that sucked."

Friday was an excellent example of my lack of patience. There was no gap at the open, but we moved higher on several strong pushes by the buyers. My first thought should have been, "This looks like it might be a "trend day" and watch for confirmations. Instead, because playing pullbacks to the 20MA has worked so well lately, I focused on that and made a trade that eventually went against me.

That was OK, but then I let my biases and emotions get in the way and I made the SAME TRADE again, right after I had stopped out. My thinking was that it didn't work the first time so it HAS to work the second. I stopped out again--down $1,000. I should have just quit.

Finally, as I sat back and watched things develop, I was able to determine that we were in a trend day and it was time to take trades accordingly. I did, and I made back my $1,000. But immediately, the market started going against me and I panicked. I moved my stop up above where I had logically placed it, and wouldn't you know, price dropped just below my stop, took me out, and then moved higher--down $1,700 and done for the day.

I've got to learn (and quickly) to avoid rushing in and trying to put on positions. There are so many opportunities each day, and I need to only take those high probability trades that I can feel good about taking even if they go against me.

We'll see how week two goes. If it ends up with results similar to this week, this could be a very short experiment.

Day Four-- Pigs get slaughtered

Whenever I get a little cocky, the market teaches me an unpleasant lesson. Today it whipped my buttocks thoroughly. I'm OK with a few trades that I made, but I made some boneheaded decisions today based on my bias that the market would go down hard today--another lesson to avoid the news and sentiment and just follow the chart.

Learn from my mistakes:

We started out the day with a gap which I attempted to fade and quickly stopped out with those two down bars. I'm OK with that trade.

Trade two was a divergence trade back to the 20EMA after a new low for the day. That one worked out (I love divergence trades). Back to even.

I was flabbergasted to watch price continue through the 20EMA (green line) and then the 50EMA (blue line). "There's no way it will break over the 200 (red line)!" I thought to myself. I shorted on the doji (trade 3) at about 11:05am. I should have targeted yesterday's close which would have been more logical than the 50EMA. It hit yesterday's close and went on to stop me out on the big up bar around noon.

Then I got all stupid and started taking edgeless trades. I took two (not shown) "it can't go any higher!" trades which stopped out as it DID go higher. Just dumb.

My next trade (#4) was a good one except I was pushing for just a few more bucks (I'm a pig). I shorted after the new high at about 12:15pm on a slight momentum divergence and targeted the 20EMA. Price mocked me as it neared the 20 and headed back up. Corey Rosenbloom told me that I should set my targets just a tad less aggressively since I'm missing them by pennies at times. I should have listened.

I lost 3R for the day which sucks because I decided today to double my position size to .5% of my portfolio value. It always seems to work that way.

Day Three -- Made up for day two

I was able to make up for yesterday's wash with a decent gain today. There weren't a lot of opportunities until about 12:45 when we got a bear flag out of DIA. The first flag met its target and then created a second bear flag which went on to meet its target (and then some).

I got out before price dropped below the 200 period moving average (red line) and I missed the divergence trade back to the 20 period moving average (green line) after the day's lows. I came out of the day with a 2.5R gain on a day that was kind of squirrely. I'll take it.

Day Two--Broke Even

The market provided several decent trades today. Unfortunately, I had a hard time taking the trades and sticking to them once I took them. I ended the day even.

The first trade I missed was a small gap that filled in 15 minutes. The second was that doji right at the 200ma. I missed that one.

I took the third trade which I saw as a big bear flag (it didn't go that way). I had a small target at the lows of the day and missed it by a few pennies. @#$$#!! (pretend cursing).

I took the first bollinger band breakout at about 1:30 and held on but then got all wimpy at exactly the wrong time. I should have seen that momentum high for the day (gray arrow) and expected price to go higher. At the same time the 200 moving average was helping out the 20 moving average provided and excellent supporting "intersection" of moving averages. But I had made up my losses for the day and was satisfied with that. Stupid.

Price went on to make another high (with a momentum divergence), but I was out, and I didn't feel like playing anymore. I went downstairs and worked on my wife's treadmill some more. It's still broken.

Day One--Trading for a living

I would have posted last night, but I hurt my finger trying to fix my wife's treadmill and it was difficult to type. I'm doing better now, and I can type once again. Thanks for all your kind cards and flowers.

Yesterday was hard for me to trade. Fortunately I had a trade go my way right off the bat for a 1R gain meeting my target for the day. Unfortunately, it was hard for me to take other trades I saw because I didn't want to lose my "salary". Here's a pretty picture of my day in trading on DIA:

I was on the fence about fading the gap after the open, but the market seemed to be recovering it's losses from the open so I bought and held until price reached the 20 period moving average. Right after I sold there was a decent opportunity to go short, but I was too happy with my gains and I passed it up.

The only other opportunity I saw was the "bear flag" near 2:00pm. In my opinion this was the best trade of the day. A short there would have quickly made its target.

So far so good.