This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Stewie sends us more charts. Here they are: Read the rest of this entry »
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Wallstreak user Stewie has sent more charts for us. I’ll invite Stewie to field any questions on the setups or his trading style in the comments of this post.
Baidu.com, Inc. (ADR) (NASDAQ: BIDU)
National-Oilwell Varco Inc. (NYSE: NOV)
Terra Nitrogen Company, L.P. (NYSE: TNH)
And one more: FCStone Group, Inc. (NASDAQ: FCSX)
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| BIDU |  |  |  |
| NOV | | | |
| TNH | | | |
| FCSX | | | |
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
I traded Apple Inc. (NASDAQ: AAPL) today from a 1 minute chart. I saw the setup on that timeframe, so I stuck to it, even though other timeframes called to me with their siren song.
I was looking for setups as I talked about yesterday: A big move up, a shallow retrace, and a base breakout. I stalked a few names that failed, including NOV and QCOM. I watched the strength in AAPL, after a mention by johnson from Wallstreak. Because of my oath to only focus on my one setup, I didn’t want to jump in and chase the stock.
However, a bit later on, I was watching AAPL’s 1 minute chart, and saw this setup:
This is similar to my chosen setup, in that it is a base breakout, just at the high of the day rather than after a retrace. I consider this to be riskier than a base after a retrace, because you will often get to retest the day’s high, while in this setup there is no guarantee that price will continue to move up. The setup was compelling, though, so I took the trade, ignoring my advice to myself from yesterday.
I went long as price made a new high on the upper channel on my chart, filled at $125.70, with a stop at $125 even. The stop probably should have been tighter, but I wanted to give it more room to work out–a byproduct of my restricted daytrades. The target was the previous all time high of $127.61 as seen on the daily:
Since I was trading off of the 1 minute chart, I didn’t really expect this target to be hit, but that’s where I would take profits if I wasn’t stopped out.
I managed the trade as shown on this 1 minute chart:
You can see all of the places that I raised my stop. I described them in (almost) real time on Wallstreak. I trailed the stop up as new swing lows were formed on lower volume, and then price moved up on higher volume. Then price stalled out, and the volume trend reversed–low volume on the advances. Here is where a little man in a red suit appeared on my shoulder and said “Prospectus! (if that is your real name) switch to the 5-minute chart! The base is holding well on that timeframe!” Ignoring the temptation, I kept to my 1 minute chart and the stops based on that price / volume action, and ended up getting stopped out for a 0.79R profit.
This brings up an important lesson: Had I listened to the Beelzebub of Trading, I could have held on with my stop at breakeven and exited near the close around $127.20 for 2.1R. Equally as likely, price could have retraced to my entry point and I would have exited with nothing. Further, if the Father of Trading Lies was able to convince me to switch timeframes once, what’s to stop me from switching again? “Hey, there’s good support on the 15 minute timeframe, but you’d have to drop your stop a bit wider than you thought. But it’ll probably bounce from there!” And from there, if price kept retreating, he’d say “Hey, hold it overnight! It’s gotta come back! Look at the daily chart!”
No. Based on my information and the timeframe for making my entry decision, my best action was to get stopped out as I did. You can’t base the wisdom of a decision on the eventual outcome. You have to base it on the best probability for the desired outcome, taking the information known at the time into account.
Your trading timeframe is a paradigm–a way you look at reality. Reality is bid, ask and volume. That’s it. Everything else is some kind of derivative of those tangibles. A 1 minute chart tells a different story than a 15 mintue chart, a daily chart, or a weekly chart. If you change your paradigm mid-trade, you are fooling yourself and probability (there’s that word again) will come to bite you someday. I would have gotten away with it today if I had switched–but what about when I take a 4R loss, or worse, by switching around, and price keeps going against me? If you don’t have timeframe rules for your trading, you should. They may not be the same as mine, but they should be designed to keep you honest and keep your Trading Devil at bay.
Plan your trade, and trade your plan!
AAPL Long
Entry: $125.70, Stop: $125.00, Target: $127.61
Exit: $126.25, P/L: 0.79R
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| AAPL | | | |
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
I really intended to keep this trade on until the trend in the oil/energy sector changed. But, National-Oilwell Varco, Inc (NYSE: NOV) proved a little too sluggish and a little too choppy for my tastes.
I got in on a break to new lows that failed. So, this was one of those painful trades where you start in the red. But, the trend was still with me, and I wasn’t anywhere near stopped out. So, not bad, as trades go. Once I got any kind of drop below my entry, almost 30 minutes later, it wasn’t too strong a move. Plus, the oil sector was showing some strength at the time. So, I wasn’t about to let it go red again. I jumped out with a small profit when the price started moving against me.
Just after, the price then crossed my entry price, which satisfied me that I had done the right thing. A couple minutes later, it turned right back around and dropped about 50 cents. Darn. This would have been a nice trade to hold all day, though I would have been awfully frustrated with the slow pace, for a 50 dollar stock.
Here’s the chart (click to enlarge):
0.2 R. In reality, it doesn’t matter what the stock does after you get out. I didn’t want a short position in a sector that had found support in an uptrending market. Not for me! So, I give myself a good grade, with demerits for not finding another entry later in the day, when things were rosy to be short oil-related stocks again.
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| NOV | | | |
Early on, it looked like I might break through my undertrading barrier today. Several of my watchlist items were sending me alerts. But, as it turned out, most were not tradeable. Let’s see ‘em…
First, National Oilwell Varco Inc. (NYSE: NOV) gapped through my target of 64 on the open. If it were a small gap I’d consider my trading options, but it had gapped all the way to open at 65.50, and approached 68 within the first 20 minutes of trading. So, so much for NOV… I’m noting now that it closed at 64.20, so if it bounces off 64 tomorrow I may get in. Then again, it may be trying to close that gap…
Next, Ceradyne Inc. (Nasdaq: CRDN) tapped the highchartpatterns target of 50, but didn’t trade in a way that triggered the trade. It made a couple half-hearted tries to re-reach 50, but gave up by noon. So, again, close, but no cigar.
Next, Garmin Ltd. (Nasdaq: GRMN) fell through highchartpatterns target of 95, and triggered the trade. However, it fell so fast my order did not fill, and I’m convinced I would have been screwed on a market order in that action. So, I had to sit this one out. That’s a ten-minute candle, where it falls from 95.65 to 92.07 and climbs back to 94.12. That’s volatility!
Seeing that Akami Technologies, Inc. (Nasdaq: AKAM) gapping up, I changed my view of it from short to long, chosing an entry point above 37.40 based on the weekly charts. When I was out at lunch, I got the email that said it traded at my price. Man, I could not get a break! But, I checked with my blackberry a few minutes later, and saw that it had already fallen to 36.20 again. So there wasn’t even a trade to miss! What a frustrating day! But, I’ll note that it closed reasonably strong at 36.83, so any kind of healthy follow-through tomorrow has a chance to get me into the trade.
So, after I got back home from lunch I made one trade, in United States Steel Corporation (NYSE: X). I got 1.5R out of it. You can see my sloppily scratched blue lines marking my entry and exit.
Unlike yesterday’s 1R loss scenario, I tried to be very aware of whether I felt a need to take profits, or if I feld that the trade was turning against me. You can see that the exit candle closed near its high (I think these are called Doji’s when they close at their open prices, but I don’t believe in the named candle patterns intraday). So, when it was steadily climbing, I decided the stock could reverse. The markets where positive/negative/positive see-sawing in the afternoon. Eventually, you can see that the stock made lower lows by the close, but I would have stopped myself out at breakeven before that, in the candle after my actual exit. So, I am pleased with my choice.
I hope everyone had a good trading day!
On Pivots
After seeing a note yesterday on Trader-X’s blog, I was reminded that I have been meaning to see what pivot points can do in sideways markets. I had read about a pivot strategy for flat markets in a book a few months ago. So, last night and during today’s session, I kept the standard pivot points overlayed on my charts. At first glance, it does appear to be uncanny the way they line up with the actual price action. I know the formulas for the pivot levels, and I can’t think of any reason why they hold so well. One explanation, obviously, is that enough traders use those pivots to make them a self-fulfilling prophecy. Another explanation, is that my eyes are drawn to spots where the prices and the lines match, and I unconsciously ignore all the places where there is no correlation whatsoever. More investigation is needed.
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| NOV | | | |
| CRDN | | | |
| GRMN | | | |
| AKAM | | | |
| X | | | |