This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
I traded 5 times today–2 wins, 1 scratch and 2 losses, total -0.63R. Not good, but not bad, I guess. I also skipped two trades that would have been nice winners after the fact, but that’s how it goes when you play it safe. Here’s the trades:
IMCL Long. Traded this 5 min. chart, based on a green-red-green formation as my setup. I pulled this out of the air, rather than sticking to my fledgling system, and I was stopped out. I hate gaps where the stock was upgraded or downgraded! It seems like they never extend past the OR high and typically languish. So, a dumb trade, -1R.
Next, ISIS Long. Hayduke called it out on Wallstreak. It was set to break 13, which was a pivot point from the daily. Looked great. I bought with a stop at 13.02, sold half at 13.26 and then bailed on the rest after a retrace to my entry point. Too bad there wasn’t more follow through, or too bad I didn’t treat it like a scalp and dump it all when the momentum stalled, or I would have made more. +0.4R.
IMCL Short. No chart–I thought there was a lot of selling pressure in IMCL based on how I got spanked earlier. So I went short, realized I was wrong, and I got out very shortly thereafter at my entry point when I got a gift from Mother Market. Scratch.
AAPL Short. I was ahead of my time! I entered based on a candle closing weak below the 0% fib level, after continued failure of support at 135.42. Buyers came in and I bailed for a -0.37R loss, since I decided I was wrong. I would have been stopped out anyway, but look at the second chart to see what AAPL did later in the day!
Finally, I did some POT. Skyb0x on Wallstreak said it was sitting at 90, and it was. There was a big seller there, and POT just kept rising up to that level and hung there most of the afternoon. It just couldn’t break through. I had a buy stop in at 90.02, but I took it off and was ready to quit, then I was it lean on 90 again. It suddenly popped, and when the ticker said 90.04 I bought at market. I was filled at 90.02, and we shot to 90.20 or so. I sold half, and held the rest all the way back to my entry point. +0.4R. I should have traded this one as a scalp, too, especially since it was close to the end of the day. In my mind, when trying to scalp you’re trying to capture the smallest impulsive move you can, with the largest position size you can. My stop was 12.80, and it should have been much, much tighter! I was trying to trade it more as a trending move, where some retracements are acceptable. I thought I would sell half and then hold the rest, and it would eventually hit 91 or more, but POT took a dive down to the 89.20’s. At least I kept some of the money!
On low volume crappy days, I’m starting to think that scalping is better, along with fading strength and weakness. Most of my strategies and setups are breakout, trend-continuation plays. I need to get some working strategies that scalp and fade strength and weakness. Then I’ll have a toolset to better deal with any market environment, other than random listless chop. That’s a no win situation for practically everybody.
I watched the pre-carnage in AAPL in the afternoon from a volume based chart. Each candle is composed of a number of shares traded, rather than by the passing of time. I also have two other studies on the chart–the bid / ask volume trend (BAV) that measures volume of shares traded at the bid vs. at the ask, and on balance volume (OBV):
AAPL Entire Day:
AAPL During my Wallstreak Commentary. You can see the trend changes I was calling out in OBV:
AAPL during the big swing in the afternoon (while I was going long POT):
I don’t know what use the BAV trend is, really, since trades could go off at the bid consistently, and the bid could be getting walked up all day long. Maybe it’s good during a sideways period in the market to tell if the pressure is to buy or sell before it breaks out? Then again, maybe it’s useless information. Any ideas would be appreciated.
The idea behind OBV on this chart is to keep kind of an integrated volume, where the OBV line will go up if there is more volume during up moving candles than downward moving candles. If there is a big divergence between price and OBV, it would suggest that a price move is not sustainable. I’m trying to see if the volume precedes the price, or if they are simultaneously occurring, or if it’s all just random. Let me know what you think.
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
September 11th, 2007 at 5:42 pm
Check out MarketDelta.com. It has a unique way of visualizing the BAV (they call it Delta).
September 11th, 2007 at 7:12 pm
I stopped using BAVT because I’m not sure that it’s correct on QT (it may be an ameritrade datafeed problem … like how the prints on their T&S output is sometimes weird aggregate data, you know).
It’s funny how the OBV resembles the chart so closely on volume charts. I don’t know if there’s any unique kind of analysis you can do, because of that, or not. It’s kinda a picture of what the chart would look like if all the candles were perfectly trending and all the same size.
September 11th, 2007 at 8:52 pm
In my fledging system, I look for breakout plays in Nasdaq-type stocks in the morning and scalping retrace plays on thick NYSE stocks in the afternoon. Even in low volume crappy days, there are usually a few stocks moving if you can find it in time. And even in high volume trending days, the afternoon is usually choppy. The thick bluechips make me feel safer as I try to “catch the falling knife” on the retrace and allows me to put on bigger size to make up for the scalping. Of course, if someone calls out a breaking stock in the afternoon, such as POT on Wallstreak today, I would consider taking it—but only for a scalp since most of the day is over. I got in at 90.02 and got out at 90.05 one second later—lol what a wuss I was…
September 11th, 2007 at 10:28 pm
@Richard: You’re right about the aggregate data weirdness with TD, though I imagine rhe error is small. Maybe a volume chart is bad for an OBV study. I want a way to tell if buying or selling pressure is winning, as a confirmation with price.
@PN: what’s your setup on the NYSE scalps? How close is your stop to your entry? I’m interested in your fledgling system.
September 11th, 2007 at 11:51 pm
I was actually thinking that maybe a volume chart is especially good for the OBV, if you can think of a way to leverage the way it mirrors the chart. Does it mean anything if the price makes a new high but the OBV doesn’t? And then keep thinking into more and more complicated situations. Maybe it is useful.
For time-based OBV I just use it to avoid having to add up the red vs. green volume of the last couple candles. I can see at a glance their relative size. As the speed of the candles approaches 1 tick per bar, it should become closer and closer to the BAV. So, for 1 minute charts maybe there is still some buying vs selling pressure info amid the noise. On a 15 minute chart, I’m not sure if OBV really says much about buying vs selling pressure.
September 12th, 2007 at 3:49 pm
For longs, I look for the price to cross below the VWAP toward a support level such as a pivot point or 20MA on the 15 minute chart. Price needs to be above prior day’s low. I look for a reversal candle near the support on the 5 minute chart and go long at the break. Stop is the low the reversal candle. Taking the rest of the week off–going fishin’ for bluefin tooona…
September 12th, 2007 at 3:54 pm
For longs, I look for the price to cross below the VWAP toward a support level such as a pivot point or 20MA on the 15 minute chart. Price needs to be above prior day’s low. I look for a reversal candle near the support on the 5 minute chart and go long at the break. Stop is the low the reversal candle.