Pump it up

Been a few weeks since I’ve done some journaling on here but I have been busy tracking some stocks and focusing on myself.

As a newer trader I have been trying to focus on one asset class and even currency pair or stock or whatever to really get good at.  Problem is that (I’ve mentioned this before) as a new trader we are like the dog in the movie “Up.”

“SQUIRREL!”

And we end up dabbling a lot.  Triangle pattern on a 5 min time frame, then oooh look here, a break-out trade on a daily chart.  Oh, wow, it’s a pull back on the 1 min chart.  And what happens is that it’s like the guy trying to build a beach bod for the summer.  Instead of focusing on a set of exercises or a plan that he found online for a week and giving it a chance, that guy instead sees someone doing the bench press, jumps on to do 1 set, then sees someone else doing sit-ups, goes over and does 20 sit-ups and then finally tries out the squat rack.  Look over there, that guy is huge.  I’ll ask him what he does and do that….  Oh, maybe crossfit works?  Doing this everyday is just not really going to get you any results and the reason why, like trading, probably 90% of people who go to the gym either quit or don’t get any results.

So I really did give it a good shot in forex trading the EUR/USD on the 1 min chart.  About 2 months of live trading.  And I didn’t really get anywhere as far as profits or loss.  I’m sure if I kept at it that I might have found more success.

EURUSDM1 WTF
How?  I know, just stay out.  But just sitting there for 2 hours with nothing is really hard, dude.

The problem I find in forex was that a lot of times I just didn’t have any trades to take and I forced a lot of things.  After sitting and watching for 2 hours with no real trades setting up, I would dabble.  Just like the fatso at the gym.

Some days (well actually a lot) of days are just mumbled jumbled noise to me.  No real trend or 20 pip spikes up/down leaving a huge pin bar, only to reverse out the other side and do the same thing.  It was so erratic for me that I just found myself getting really frustrated.  And I felt a bit limited only have one currency pair to trade.  You really need patience to trade one future or one currency pair because that’s it.  You have that 1 instrument to sit, stalk and watch with perhaps no opportunity for any trade.  *SQUIRREL!*

EURUSDM1 WTF2
You call it ranging, I call it I dunno how to….. oooh, lemme fade the bottom with a tight stop, oh, why is this not working.  Ok, let’s fade the top of it… but it didn’t reach the top again?  Aww man that isn’t in my playbook…. shit.

So I got back into what originally brought me into the realm of trading – stocks.  Might be my next dabble or maybe I am really onto something.  Difference this time though is that I actually did all of the data tracking, analysis and strategy formulation by myself.  I didn’t watch a youtube video or try to copy someone else’s style.  And what makes this a better personal fit for me is that I will know within 30 minutes of the opening bell, whether I have a trade or not.  I don’t need to sit and stalk for 2-3-4 hours like I did with a future or currency pair.  So,

First, I look at the pre-market movers.  Big volume with usually a big gap up.  Usually news or acquisitions. Found here:

http://www.nasdaq.com/extended-trading/premarket-mostactive.aspx

I have been tracking the behavior of these stocks now for the past 2 months.  Tracking the HOD, LOD, range, morning tendencies, average volume, etc.  Reason I tracked them was that they had the biggest volatility and room for profit.  What better stocks to trade than the ones that give you the highest potential of dolla bills ya’ll?

My data has shown that the HOD or LOD is almost always set within the first 10 minutes of the day.  9:35 seems to be a very common time when these are made.  So for the sake of simplicity, when I say ~9:35 it could mean 9:33 or 9:38 or something pretty damn close. Using this data I found that day 1 of the big volume push almost always has a morning spike.  I am only looking on the long side to trade these.

What is the criteria for entering?  Well, usually prices will pull back from the ~9:35 HOD and re-test later and either break out or fail.  So you can plan your entries a number of ways:

  1. Front fun the breakout by entering after the ~9:35 HOD is made and the pullback stalls and begins moving upward again.
  2. Wait for the actual break out a few cents above the morning ~9:35 HOD. Or,
  3. A combination of both.
LJPC - 02.27.2017
Example.  Morning spike and tops at out 9:35.  Price pulls back, re-tests the 9:35 HOD and boom, off to the races.

Of course nothing is ever 100% in trading.  What I don’t want to do is to blindly enter long after a pullback from the HOD as it may just fade off to the downside all day. So I think entering with a small starter position of a few hundred shares when price starts to move up after the pullback is a good way to get a better average on the price and then adding to the position at the break out point.  If your starter position fails, just get out quick with a small loss.  If it fails at the break out point, you might walk away with a small profit or break even.  A lot of times it will go back to re-test that HOD again anyway and having a small starter position with a lower average price gives me a bit more peace of mind to add to my position or re-enter again later.

MBOT - 02.22.2017
A bit tougher entry here because the pullback wasn’t as clean but you can see the morning pop ~9:33, pullback, re-testing of the ~9:33 HOD and +$2 run up before fading off.

Entry criteria is outlined above.  I think the part that makes a successful trader though is having the confidence to enter a trade with conviction.  Since I’ve put the work in and have traded my own strategy for profit, I can sit through a pullback or unrealized loss without panicking because I know the strategy and I know when it fails.  I don’t watch the P/L ledger.  I let the chart dictate what I do.  So the stops I use are usually not fixed.  It’s not like .05 below entry or slightly below the previous swing, etc.  Tracking and watching these, I usually just have that feeling that it’s not going to work out and exit.

Here’s one that failed but ended up doing what I thought it would, but I exited with a small loss once it rocketed back down after the break out.

AUPH - 03.09.2017
You can see the ~9:35 high, strong pullback, then that big spike around 9:45 and immediate failure.  I exited with a small loss when I saw it crashing down with some strong momentum. I could’ve re-entered on the next test, but was out of day trades.  Eeeek.
AUPH - 03.13.2017
Well, look at that.  9:35 HOD, pullback, re-test and off to the races.
CNCE - 03.09.2017
1-min on the left, daily on the right.  Again, quick morning open up, prices re-test, consolidate a bit and then…. you know how it goes.

When to take profits?  Well, I think taking off a portion as the price spikes and begins to stall is a good way to stay patient.  Even though you may have been able to make more by holding onto the full size, locking in profits never hurt anyone.  And doing so will allow you to sit through one, two maybe even 3 pullbacks so that you can realize the meat of the move.  AND, you can always add back to your position.  You entered on a break out, took partial on the first spike up, it pulls back and is ramping back up?  You can always add more shares and repeat until you get a lower low or prices are really parabolic and struggling to go higher, then take off the full position.  *I’d almost always recommend exiting before noon though.  Profit taking and those heavy short sellers start coming in making it difficult to profit on the long side.

Of course, how much to lock in, how many times, is up to the trader.  We all have different tolerances, trading account sizes, etc.  Best thing to do is figure out how you like to trade.  I like sipping fine single malt scotch, you like pounding Bud Ice.  Both get drunk but different ways of doing it – it’s about how you like to do it.

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