Saturday, January 31, 2015

Momentum Gapper Strategy

I wanted to share a new strategy that I have been working on and researching.  If you haven't guessed it I am long biased and until I have learned and am comfortable shorting stocks, I will continue to work on my long strategies because these I believe will help me continue to grow my account with minimal risk.

It has been a challenge lately to find stocks that will settle down after a big early run and start an ABCD setup for a later move.  It seems like they make a big move up, and then just keep going.

The gapper play is simple and is one of my favorites. It has the potential for larger gains.  It starts with me identifying the stocks that have gapped up prior to the market open.  I have a filter that I run on Equityfeed that I will run throughout the 1st part of the day, however at the open I only concentrate on the ones that I have identified during pre-market trading.  The parameters for this filter are: last price >=1, last price <=20, today's trades >=50, today's volume >=50,000, % change >=5%, markets NASDAQ, NYSE, AMEX.  This will filter out a lot of noise versus scanning market view.  I recently lowered the price filter from $2 to $1 because I found a lot of potential trades I was missing between $1 and $2.  I also raised the change in volume change to >=5 versus 3.  The higher the change %, the larger potential move the ticker can have.  I will continue to back-test my filter settings to see if I need to make adjustments.

Once a ticker hits my screen, I begin some quick technical analysis. I plug it into my charts on TOS and take a look at the daily chart to see if it is setting up for any type of daily chart breakout over multiple time frames.  I also check the average daily range.  I can quickly find all of the technical indicators I need at Finviz.com.  If it is very low then I wouldn't expect it to trade with enough volume so it doesn't make my list.  The daily chart technicals will also determine how I plan to trade the ticker.  I will try and give examples of each if I can find the charts. If it looks like a ticker I am interested in I add it to my on-watch 8 chart  montage.  I will only watch a max of 8 tickers at a time during the trading day. The gapper charts are initially set for 5 minute candles.

After the first 15 minutes of the market is open, or after the first three 5 minute candles are printed, I will draw a green trend line across to show the high and a red trend line to show the low of the first 15 minutes.  Then I switch to one minute candles and the two stocks that are closest to crossing the green trend line will go on my main screen.  My main trading screen has 2 charts with Level 2 and Time and Sales for each. Sometimes I have an immediate trade.  If I do not and it looks like I have a couple of minutes I will start building alerts in my TOS mobile platform to let me know when a possible trade is near on my phone. I try to set alerts slightly ahead of a breakout point so that I have enough time to wrap up what I'm doing and get to my computer. I have a 15 minute break that starts at 9:45 so it works out perfectly.  If I am in an immediate trade then my break miraculously extends to 20 or 30 minutes!  Now when I start shorting stocks I will use the red trend line to tell me when I need to possibly short it.  There are times when the stock will trade within those lines all day and offer no setup.

Once I'm in the trade I will use the price action to guide me.  I always have a goal for the stock to reach but if it ramps past it and it's still strong, I will let it continue, or at least that is my plan.  If you have followed my trades you will see that I have a problem following my plan.  I usually take my goal and run.  I need to raise my stop to the goal I had once it moves past that level so at a minimum I will get my target profits.  There are times where this initial move is the beginning of an ABCD setup for a trade that I may take later in the day.

OK.  Now for some charts.  This is GENE, which hit my gap screen during premarket.  If you look at the daily chart before the breakout day, you'll see that the price action had picked up the week prior, but with no volume.  Ordinarily I would not be interested but the ticker had already traded twice it's average daily volume from the last two weeks so I knew something was up and it needed to be on watch.  Then I look at twitter and it's lit up with GENE, but with 80% of people talking shot selling it.  I actually consider trolling social media technical research.  It's called croudsourcing.  So not only was this a 52 week breakout, but a potential short squeeze long as well.  I almost pissed myself with a setup like this.  Needless to say I added this ticker to my on-watch chart montage.




Next I waited for the first three 5 minute candles to print so I can draw my high (buy) and low (hard stop) trend lines.  Once I did that I saw how close it was to moving above my buy line so I immediately transferred it over to my main trading screen.  Below is the 5 minute chart.  I made a fatal mistake when I transferred the chart.  I did not transfer the low or stop line.  I drew it too tight and it actually came back to bite me.  I anticipated the move above the buy line and entered the trade.  However, when it pulled back it it my hard stop which wasn't correct and it stopped me out for a loss.  This totally screwed my mind up.




Now this is the 1 minute chart I trade on.  I did enter in the trade again on the next move toward my buy line but I went in small and exited early because I wanted to erase my early loss.  Another rookie mistake. My stop should have been moved up to my buy line at this point and I should have stayed in the trade.  It never came back to the buy line or gave me any indication to get out.



Now my 3rd entry was anticipating the 3 break. I did a lot better job with patience and made a great trade.  The sad thing is if I had traded this correctly I would have made twice as much.  This is one example of how a gap trade setup works.  Just don't make the mistake I made.



Example 2


Here is another example. I did trade this but I will show the clean charts first, then I'll show you how I completely botched this setup again and missed out on some serious profits

This ticker hit my screener pre-market and when I looked at the daily chart I started licking my lips.  Not only did we have a ticker breaking out over a 45 day grind, there is a potential gap fill with incredible range.  It had a big gap down back in December and it kind of hung around the 6 to 6.50 range.  This ticker gapped up over the previous resistance during that grind.  It also had great volume pre-market.  However, this one did not have the same chatter.  Everyone still seemed to be focused on GENE.  I couldn't wait till the market opened




Here is the 5 minute chart with the buy and stop lines drawn using the first 3 candles. This set up exactly like I expected it to. It took off and never really looked back.



On the one minute chart you can immediately see that the ticker was strong and a good candidate to get in before the buy line anticipating the move above it.  The plan for me was to hold until I had a sell signal.  It would have been around the 11:00 mark.  The next good entry would have been around the 1:45 to 2:00 mark and exit after 2:30 or so.  Ok, next youll see how I traded it and completely botched it up.  I made money but I know I only made 1/3 of what I could have made.




Here it is.  I need psychological help because only a sick trader would chop a trade up like this.  Do not do this.  Trust the plan and the setup.  It works and if you manage it right and keep moving your stop up to protect profits the risk/reward is perfect for a new trader.  I will definitely look for this ticker to gap up again on Monday.  Hopefully it will give me another chance






Example 3


Here is an example of a trade that did not set up.  Had a huge gap up over prior 90 day resistance on the daily chart.  I liked the technicals so I put it on my on watch montage.





After the first three 5 minute candles I established my buy and stop trend lines.  As you can see it started a down trend and barely made it back over the stop line late in the day.  There was never a buy signal established for a long.










The beautiful thing about this setup is that you can trade it long or short.  As in the previous chart, you could have shorted it when the stop line didn't hold for a potential .50 gain.  For me my 1000 share position would have brought $500.  I have seen other charts drop $1 to $2 during intraday after a gap up pre-market.  I will most likely take a few of these short in the beginning to get a feel





Example 4


The last set of charts shows why you always wait for the setup to come.  If you look at the daily chart you'll see that earnings came out the day before so It is most likely up on earnings.  And, it practically opened at a 52 week high.  It had great volume so it's definitely was a ticker I was interested in.  Everything looked so good you would be tempted to long it at open.




This is the 5 minute chart after I added my lines



If you didn't wait for the 15 minutes for the first 3 candles to set up and went off of the 1 minute chart  at the open, you would have been faked out.  As fast as this stock dropped you would have been grabbing the oh shit handle.  Decent short after the stop line broke though.




Weekly Recap 1/26 - 1/30

Here is my weekly recap.  You can click on the green numbers, or red,  for a direct link to the trade summary on Profit.ly.

This has been an awesome month for me.  I think I have turned a page in my trading.  I more than doubled my account this month. I was not fixated on making my $250 a day goal, I just traded.  I did  realize I have picked up a bad habit from having to trade at work.  Even though I have a plan, I will not let the trade work.  I will sell into a quick run-up and then leave, come back and look for another entry, when If I had just let the trade work itself out, I would have profited even more and not racked up so many fees.  I will work on this in February as well as try my hand at shorting.

My ultimate goal is to become a full time trader.  I have decided that while I'm teaching, I will wire out each month and start over with 5k, providing I have made a profit that month.  I will save my profits and open up a Center Point account in preparation to going full time.  I will keep Suretrader as I will have to learn how to short stocks if I want to survive as a full time trader and they have excellent borrows as does Center Point.

I am not finding as many late day ABCD type setups which in my mind tells me the market is stronger than I think it is.  Most of the tickers I have traded lately never really pull back from the early run-up and just climbs till close.  Some will have a late day fade but no ABCD setup.  I feel I have adapted well.  I just need to have confidence in the plans I make for the tickers and just let them work

Total Profit for the Week - $2195 before commissions
Total Profit for the Month - $7195 before commissions
Commissions and Fees for the Month - $629.76
Net profit for the Month - $6565.24


$130 profit ARRY Long Stock by AverageJoeTradr


Based on the crowdsourcing I like to do I knew there were a lot of big traders shorting this ticker so I didn't go in anticipating the move over my buy line.  In these cases I'll wait for the confirmation of the first green candle above the buy line. These types of plays can take off fast either way so I am conservative with these. Ultimately I was looking for a larger move but took profits when I realized it wasn't as strong as I thought it was.  Short squeeze longs are my most profitable type of long.  I missed the early entry in the morning because we had assemblies at school and I was away from my computer most of the day so this was all I could get.



$190 profit HIMX Long Stock by AverageJoeTradr


I am proud of this trade.  I was patient and followed my plan.  This was one of my gapper setups, which I have decided to do my next blog about.  It's a really simple strategy with a great risk/reward level built in.  I need to be consistent with trades like this and just follow my plan. I think I usually leave probably 2/3 of potential profits on the table  when I sell into the first run-up.



$85 profit HIMX Long Stock by AverageJoeTradr


This trade should have been a carbon copy of the trade on the same ticker the day before.  Classic example of not following the plan and worrying about not getting profits.  I have to start trusting my plan and stop worrying about having a profit and then losing it.  Time to be a trader, not a troll.




      $170 profit PSTI Long Stock by AverageJoeTradr


Another gapper play that worked out pretty good.  I anticipated the move above my buy line.  I did not exit until I saw 2 red candles and the change in price action.  I feel I have a good handle on knowing when a trend change is coming.



$150 profit ZIOP Long Stock by AverageJoeTradr


ZIOP was a ticker I had on watch as a potential gapper play.  It actually went red on the day. So it did not set up for that but started gearing and perking back up towards going green on the day so I took a trade based on that setup.  I anticipated it nicely but the move did not stick so I exited when the trend changed and volume decreased.




($140) loss GENE Long Stock by AverageJoeTradr
$215 profit GENE Long Stock by AverageJoeTradr
$1,230 profit GENE Long Stock by AverageJoeTradr


What can I say?  Another short squeeze long.  I love them.  I made this trade more difficult than it should have been.  I set my initial stop to close and got stopped out. Once I got in I should have held it until It gave me reason to get out.  I made a decent profit but I could have done better.  The ideal trade would have been to hold until just after 3pm.



$65 profit KBH Long Stock by AverageJoeTradr


Another example of not letting the trade work and sticking to the plan.  I'm not trading with too much size so I don't know what the hangup is.  It was taking it's time so I got bored and exited my position just so I could watch GENE on my main screen.  Then it broke out and I should have had a great payday.  Hopefully I'll learn my lesson soon!



$100 profit PSTI Long Stock by AverageJoeTradr


And another example of not letting the trade work and sticking to my plan.  Left way too much on the table.  I know the chart doesn't show it but after this bounce the stock took off and ran.  Had I stuck to my plan I would have been running too!  All the way to the bank!



$320 profit IMGN Long Stock by AverageJoeTradr
$330 profit IMGN Long Stock by AverageJoeTradr
$140 profit IMGN Long Stock by AverageJoeTradr
$360 profit IMGN Long Stock by AverageJoeTradr


I love the profits but the way I traded this makes me sick.  I should be beyond this entering and exiting 4 times a day.  If the ticker never breaks my line in the sand, it stays on unless it gives me a reason to sell.  I think my entry was perfect but I should have held until I sold it for the 3rd time.  All 3 trades should have been just 1 trade.  The last trade I think I made correctly.  May have anticipated the move and gone in in the 7.80's-7.90's range but I was waiting for confirmation of the trend


Friday, January 23, 2015

Weekly Recap 1/20-1/23

Here is my weekly recap.  You can click on the green numbers, or red,  for a direct link to the trade summary on Profit.ly.  Didn't meet my $1250 a week goal but I'm happy I'm making progress.

Total Profit for the Week - $1350 before commissions
Total Profit for the Month - $4890 before commissions

UPDATE: I completely forgot about the trade I made on Tuesday.  I did actually meet my weekly goal so I feel better about the week as a whole.

$170 profit SWHC Long Stock by AverageJoeTradr

This was a late day scalp that I made after I missed entries on both of my top watches, including this one.



I have already recapped my Tuesday trades in my previous post so I won't go through them again.  My strategy is to only look for solid long setups that I can make a small profit on.  Some may call it swinging for singles.  I am just trying to grow my account so that I can one day make these 5k, 10k, or 20k days.  I do take some trades looking for large moves but I will take profits if it starts to slow down.  I am trying to be patient on trades that turn against me immediately but that doesn't seem to be working out.

So, let's start with Wednesday.  $LPI was a textbook trade for me.  I wish I could find this setup everyday.  If I was trading twice my normal size I could really grow my account. So, for my 1st entry I based it on the price action so I went in before any pattern developed.  Because it wasn't my typical setup I only went in 500 shares, with a plan to add 500 more right before the 10 break.  I did not like the price action or what I saw in Level 2 so I took the trade off with a little profit.  I saw more sellers coming in and the volume thinning out.

My 2nd entry was based on the ABCD pattern so I felt more confident about the position so I went in with 1000 shares.  Once I define "C" I go in at that point.  As it got close to 10 I noticed it was slowing down again.  I believed that a pullback and consolidation was coming prior to the 10 break so I exited my position.  Even though I wanted more, the gain was more than satisfactory for my goals.  Obviously I was mistaken because a pullback never came.  Only consolidation at 10, and then a little push higher.

Now for my 3rd entry I just jumped in because I thought it was going to run a bit.  All of a sudden, the volume went away for a couple of minutes.  That scared me so I took the trade off.  Still made about .10 on the trade though.  Yes, in hindsight I could have just held from my initial entry but I am in the mindset of locking in profits to grow my account.  I had no idea whether it would keep going or not so I'm going to take it when I feel the need.

$105 profit LPI Long Stock by AverageJoeTradr
$220 profit LPI Long Stock by AverageJoeTradr
$110 profit LPI Long Stock by AverageJoeTradr



$BBRY totally fooled me.  I missed the morning move because I was working but I knew It would set up for me to get in after lunch.  Once I saw it making lower highs and lower lows, I took it off my radar.  Then, about an hour later, I get a trade alert on Equityfeed because $BBRY broke HOD.  I was pissed!  But that's why I take profits the way I do.  You never know what a ticker will do.  I thought about getting in on the little pull to 10.90 but I felt I would just be chasing a ghost.



Thursday was a trying day.  Had assemblies for the morning and I couldn't trade at all.  I missed all of the sweet setups from the morning.  $JBLU is a ticker I have traded several times before and I thought I had a good feel for.  For my 1st entry I noticed the ticker gearing up so I went in with a small position.  The plan was to add to it approaching the HOD break.  Bids and volume dried up so I bailed.  After it made higher lows again I was interested in getting back in for the HOD break  Same result as earlier for my 2nd entry, bids and volume disappeared so I got out for tiny gain. 

$75 profit JBLU Long Stock by AverageJoeTradr
$60 profit JBLU Long Stock by AverageJoeTradr



For Friday, my 1st trade of the day did not follow my plan.  I entered because the ticker looked strong and I believed it had a .15 to .20 upside before it would pull back.  I was patient through a couple of moves but the move never came.  It never gave me at least a .10 gain to take profits. Since the move was failing and the volume was dying out along with the buyers, I had to exit for small loss.


($20) loss UCO Long Stock by AverageJoeTradr




This was my 2nd losing trade in a row.  Freakin bought damn near the top expecting a push through HOD but it went red.  And kept going red.  No indication that the stock was breaking down. I tried trading this on my mobile app since I was away from school but I will never do that again.  Stupid expensive lesson!


($80) loss RIG Long Stock by AverageJoeTradr




$P hit my scan before the open.  It surprised me with the parabolic move but I expected it to settle down and give me an opportunity.  It came a little later than I expected it to but it came and I was able to make a decent profit.  I waited for it to confirm the trend by making higher lows. I broke my rule a little and went in with 1000 shares instead of 500 but I had making up losses on my mind, which is wrong.  Glad it didn't cost me.


$440 profit P Long Stock by AverageJoeTradr



$JDST is a ticker that I should have swung on Thursday.  I am looking at doing some swing trading since it would work even better with my job.  It is a lot harder than I thought.  My mind is not programmed yet for swing trading. I waited for it to setup for me today and it paid off. I was looking for it to ABCD but it just started grinding up towards my trigger line that I established earlier in the day.  It tested it once, pulled back, and started gearing back up.  That's when I got in.  I got out right when the volume left.


$270 profit JDST Long Stock by AverageJoeTradr



I am glad I ended my week on a  positive note.  It has definitely been a challenging week for me, even though it was a short one.  I am happy with my progress so far and I am continuing to look at the chapters on short selling in Textbook Trading and Tandem Trader anticipating a move to that strategy by March.

Tuesday, January 20, 2015

How Emotions Can Ruin My Day

What a MonTuesday!

Let me start by first saying that even though I have been trading for a year I still have a "newbie" strategy.  I wired out half of what I gained last year to give my family an awesome Christmas and pay off some lingering debt so I could start the year off with no stress.  So I started with $5000 which makes my account very small.  My priority is to protect the little capital I have by taking low risk trades with not a lot of size.  I do not look for home runs.  I look for singles so most of the time I wait for confirmation of a trend before I enter a trade.  I could have an even better win % if my stops weren't so tight.  80% of my losers would have been winners if I had just been a little more patient by 15 to 30 minutes. 

Last year I had the same strategy but I was abusing my leverage.  I would take the same safe trades with tight stops, but instead of starting with 1000 shares, I'd start with 5000.  Yes, a .20 move netted me $1000, but I cut off way too many trades too early because a - .10 move is - $500.  It was stupid.  I still have the issue of making my stops too tight, but is is much better than last year.

I started out my day on a bad note when I accidentally deleted my watchlist and notes from last night. So I started my Equityfeed scan for gappers and immediately found $SWHC.  I new this one ticker could make my day before 12 so my watchlist was forgotten.  I formulated 2 plans for when it opened. I expected it to continue it's move up so I was ready to make a move.  $SDRL gave me some good gains last week and it hit my gap scan again.  Because of my limited schedule at work, I decided to make these two tickers my main watch.  I knew that $SDRL followed the $SPY so I had that chart up as well.  That was a big mistake.  I started watching it and it effected my entry on $SWHC, which could care less about the $SPY.  I became hesitant about entering either trade and I sat on my hands.  By the time I got back to my computer, I had missed my entries on both.  I do not chase at all so I just let go and blew up.  No control over emotions at that point.  Thank God I haven't left my job yet.  I have a lot to work on.

I was upset so I just took the rest of the morning off because I didn't want to do anything stupid. I missed secondary entries as well.  The good thing is that I got my head back together after lunch and got back on my game.  I made a classic "newbie" mistake.  I was trading with too much noise, which took my focus off of what is really important to my trading, the chart and the price action.  That will tell me everything I need to know based on my experience level.  I actually know guru's that mainly watch the price action and occasionally glance at Level II.  Every time I feel a little comfortable in my trading, old Mr. Market lets me know I have more lessons to learn about keeping focused on what's really important.









I did come back nicely though.  Got 2 safe OK entries late on both tickers for .11 and .17 gains respectively.  Should have been a huge day but at least I didn't lose any money and I hit my modest $250 a day goal while trading at work.  I will drown my sorrows in this and call it a day!


Saturday, January 17, 2015

How I Learn (Weekly Recap 1/13-1/16)

Below are my trades for the week.  This is an example of how I reflect on every trade I make to see where I could have improved.  If you click on the dollar amount of each trade it will take you to the details on Profit.ly.  I'm not perfect and what I see may be totally wrong or different than how you see it but this is how I am continuing to learn.  After I review and reflect I go back and watch the corresponding chapters on Textbook Trading and Tandem Trader.  It works if you are dedicated to making trading a full or even part time career.  I wired out all but $5000 so this is what I started with last week.  I am beating my goals so far but with this market who knows how the next two weeks will end up.  I have a little over $8200 equity now.

Total Profit for the Week - $1835 before commissions
Total Profit for the Month - $3540 before commissions
Total Profit for the Year - $3540 before commissions


$80 profit SDRL Long Stock by AverageJoeTradr


This was my 3rd entry into this stock today.  I was looking for a stronger move up to and through HOD.  I waited for a while but after a pullback to support at 10.07 I got out.  It never moved out of the 10.10 10.14 channel after that.   Can’t see where I could have done anything different on this.


($110) loss CLF Long Stock by AverageJoeTradr


My initial plan in this was to get in ¼ size and let it work most of the day.  However, the price dropped .25 in 3 minutes right after I bought it.  I had a mental stop in the 8.45 range but a hard stop at 8.34.  That’s where I got out and ironically that was LOD.  Watched in grind up to the 8.90 range late day, which is what I originally was looking for.  Another ticker that if I hadn’t succumbed to my emotions would have been a nice gain instead of a loss.  I made the right decision with having my hard stop at 8.34, 1 tick under previous LOD.  I stared at this chart for hours and couldn’t figure out what I would have done differently other than try to keep my emotions in check.  I can't let a move like that rattle me.


$190 profit SDRL Long Stock by AverageJoeTradr
$130 profit SDRL Long Stock by AverageJoeTradr


For the most part I think I nailed this trade both times.  I was patient and waited for confirmation of the setup.  The first time I bought the stock was making higher lows so I wanted to ride the trend.  I usually look to sell once I get the first .10 gain.  I know this seems like a small gain but once I start trading with some size the $ amount will be decent.  The second entry was based on a textbook ABCD setup.  I usually look to start selling around .15 to .20 gains on a secondary move to make sure I am locking in profit.  I am only looking for singles to keep adding capital to my account.  I tried to be patient here and gave up .05 that I normally would have taken, but that’s ok.  I recognized the weakening of the stock and sold for a nice profit.  I look at it this way.  If I had traded with 4000 shares versus 1000, I would have made 1280 for both trades.  Not bad for less than 30 minutes worth of work.


($60) loss PBR Long Stock by AverageJoeTradr


I should have taken the .10 profit but the breakout showed promise.  Since it was later in the day I expected a dip and a move back to and through the HOD.  If I had traded this earlier in the day I would have looked to sell once I got the .10.  Once it broke the line in the sand I drew, I got out. I could have held to break-even but stuck to plan and once that support level broke it could have faded into close.

$65 profit SYRG Long Stock by AverageJoeTradr
$50 profit SYRG Long Stock by AverageJoeTradr


Just couldn't get a handle on trading this stock.  Never could time the moves I wanted. The spread was as much as .10 at times.  I think I will staw away from price action like that until I can get some more experience.  Since I am sticking to my 2:1 leverage max goal this year I am only going 500 share lots on stocks above $10 so I am looking for a minimum of a .20 move to take profits. However, I will take the .10 if price action dictates it.  Now as my account grows I will begin taking larger positions again.


$130 profit SDRL Long Stock by AverageJoeTradr


Entered into the trade because ticker was making higher lows and I believed it was going to continue to grind towards the HOD.  Held through my initial .10 buy to see if it would continue trend.  The $SPY started coming down and I know this ticker usually follows the $SPY so I exited the trade. This was good with me because this is all I'm looking for to get my day started off on the right track.  If I can only find 3 to 4 of these a day I would be very happy.


$140 profit UGAZ Long Stock by AverageJoeTradr
$460 profit UGAZ Long Stock by AverageJoeTradr
$220 profit UGAZ Long Stock by AverageJoeTradr



I loved what I did on this ticker.  She kept giving and I kept taking.  I followed the chart and price action and they didn't lie to me this time.  I could have saved about $45 in commissions by just holding all day but to make sure I made $ I kept taking profits and entering back in when the setup came around again.


$110 profit VSLR Long Stock by AverageJoeTradr




Took this trade anticipating a daily and intraday chart breakout.  Didn't get it.  Also expected more volume to come in as it inched up closer to the daily chart breakout and didn't get that either so I exited my position. Think I was a little early so will keep it on watch the next couple of days.


$330 profit UGAZ Long Stock by AverageJoeTradr


I loved this trade.  I exercised patience.  My plan was to hold through the initial spike because I anticipated a better than .10 to .15 gain on this one.  Loved the volume and price action.  Almost got scared out but stuck to my plan and trusted what I saw.  I need to attack all of my trades like this.


$130 profit ARNA Long Stock by AverageJoeTradr
($30) loss ARNA Long Stock by AverageJoeTradr


On my first trade I should have taken profits on the initial move like I usually do.  I like to get a good .10 gain for $100 or so to start the day off.  It puts me in a far better place for the day.  The price action was funny and I should have gone with my plan.  When the action doesn't look or feel right, exit the position.  However, I did take my profit on the next move and proved my point to myself.  If I can hit four singles I will score at least 1 run.  Sometimes I may get 2 or if I hit it in the right place, 3 runs will score.

Sunday, January 11, 2015

What I Learned in 2014

What I Learned in 2014

January 2015 marks my 1 year anniversary in day trading.  I felt that in honor of my 1st year, I would reflect on the things I have learned over the past year.  In education, reflection is the key to becoming a better educator. I have used it to become a better teacher, and about halfway through 2014 I realized that I could use it to be a better trader as well.  In this blog I will share the things that I have learned about my trading that has consistently helped me to move forward toward making this a career.  I know they have worked for me because when I stopped and looked back over my first 5 months, made adjustments, I went from $800 to a little over $9800 in 6 months.  Yes I used too much leverage and traded with way too much size in relation to my account size, which is a mistake I will not make this year.  As I looked over what I did, I see that I was 1 trade away from blowing up! I will be more responsible this year.

Lesson 1:  It is so easy to get lost in the market, in a trading community, or just life in general.  It is not wrong to be driven in the pursuit of success.  To be successful in anything I do I know I have to have passion and be driven to accomplish my goals.  It is when I get lost and disconnected from the world around me that the problems come in.  I learned I have to stop and self-reflect to make sure I’m still on the right track to accomplish my goals. I have to take time to specifically focus on questions about my goals and my general state of mind.  it wasn't until I started taking steps back each week to analyze where I was in reaching my goals, to decide whether based on what I have learned this week, are my goals realistic, and how I may need to adjust my strategic plan to reach my goals, that things started making sense to me. I had to detach myself from Twitter, chatrooms, charts, etc.  I had to set aside time each week to unplug from everybody and everything.

Lesson 2:  I learned that I can’t try and take short cuts and find deals on everything.  With the exception of FINVIZ, Twitter, and YouTube, all the tools I need to be successful costs money.  I know the TOS platform and other platforms are supposedly free but we pay for it in other ways.   I can honestly say it is all worth it.  For instance, I pay $150 a month for EquityFeed. If I find just 1 or 2 trades I have made my money back.  Everything after that is just gravy.  I look at everything as just the cost of doing business.  If I use the tools correctly and I trade correctly, I make money.  Anyway, it’s tax deductible!

Lesson 3:  About halfway through the year I realize I hated OTC’s.  I especially didn't like shorting them.  It seemed like shorting crappy OTC’s was the only way make money with them.  So in May I started looking for something different and that’s when I found Nate at Investors Underground and his DVD Textbook Trading.  Before I bought in I watched some of his video lessons posted on his YouTube channel and asked a few people I knew.  I made the mistake of jumping in chat too soon because I spent more time trying to figure out what they were talking about.  I spent a couple of weeks on the video and got a good fundamental understanding of how the community trades and their lingo. It helped me learn which setup I liked the best without paying any tuition in the market.  Once I got my bearing it was great.  So the lesson I learned is that if you join any chat, make sure you take some time and learn the language of that community.  It can determine whether you will get anything from your subscription or not.

Lesson 4:  I learned that for a new person starting out that it is best to focus on one type of setup at a time.  As I said before I used the DVD to help me identify the setup I liked the best.  Make sure you can correctly identify and trade that setup before you start looking at another one.  When I did that I started making money.  I put all of my time and energy in to studying everything about the setup I liked the best.  I planned to build up some capital with it before I start branching off.  So in 2015, I will start learning short setups.

Lesson 5:  I learned that you really only need to follow 1 Guru and his community.  If you’re trading GURU A’s setups, don’t look at GURU B to give advice.  It doesn't work.  I did my homework and found someone that is genuinely interested in teaching you to be an independent thinker and how to understand every part about their trading strategies.  I knew that if I wanted to be successful in this that I had to learn how to stand on my own 2 feet.  I am not in chat during the school year because it doesn't benefit me.  I will get back in during the summer and when I go full time, I will be in chat full time.  I know that there are free chatrooms out there but I will not contaminate my mind or cloud my judgment.  I am successful trading and I am not going to mess that up.

Lesson 6:  I needed to trade small to eliminate as much emotion from my trading decisions as I could.  I came up with an amount I was willing to loose and stuck with it.  I started trading 100 share positions on stocks less than $3.  There were limited opportunities in NASDAQ’s but I wanted to practice identifying and trading patterns.  As my winning % improved, I took larger sizes.  I was able to get all of the dumb mistakes you make when new out of the way and gain valuable live trading experience.  I did not paper trade because I felt it wasn't real.  For me there is no emotional attachment to fake money.  Trading small helped me learn how to manage my emotions when a trade didn't move the right way initially.  I learned how to respect the plan and if a stock didn't cross the line in the sand I set before the trade, it stays on.  90% of the time the stock came roaring back and I was green again.

Lesson 7:  Cut losses quickly.  Sometimes I had to admit when I was wrong.  I had a hard time with this because I felt that if I was wrong, I was not learning and I might not be cut out for this.  I had to realize that even the best traders are wrong.  The setup may be right, but the market decides if you are right or not.  Once I was comfortable with this and knew that I was able to cut losses fast and not worry about a winning %, I could trade with more size.  Since I had a small account I had to protect my capital and could not afford big losses.  I learned that cutting losses quickly had to be a part of my trading plan and that it could actually allow me to make more money in the long run.

Lesson 8:  I learned that I needed to take profits on the way up.  It is hard to do with a 100 share position but I had to set a goal to take profits when a stock reached a certain point, regardless of what I thought it might do.  When I started trading with 1000 shares, I could take ½ off at 3% gain and let the rest work.  I figured that I would not trade a ticker unless I expected at least a 5% overall move anyway. Now, I always take profits on the 1st red candle during a move.  I always make sure I pay myself something.  I had so many trades that I could have made $75 to $100 on but didn't take some profits off the table and ended up losing.  With a small account these $75 and $100 wins add up, especially if you do several a day.

Lesson 9:  I learned to only trade when I have a setup that I like.  I learned not trade out of boredom.  I learned not to chase stocks that setup but I missed my entry.  I had to realize that I am only trading 1 strategy and if the market is down or slow, I may not have any trades that day or I may miss the entry on the one that setup.  The next day may bring more than I can handle.  I had to learn to be patient and only trade my setups.

Lesson 10:  I had to reduce my trading station from watching 4 screens to 3.  Too much "noise" when I'm trying to trade was killing me.  I was missing more trades than I found because I was looking at too much.

Lesson 11:  Last, but not least, and I should have known this from the start, there is no substitute for education. Textbook Trading and Tandem Trader were my best investments.  Without them I would be nothing right now. Watching all the video lessons I can and participating in all of the webinars I can I know makes a difference.  I had to take a step back, take my time and learn what I needed to so I could be successful.


So I can sum it up like this; Reflection, Education, Patience, Education, Patience, Reflection.  I know I will never stop learning in this business. 

Wednesday, January 7, 2015

How I Find Stocks to Trade: Part II


How I Find Stocks to Trade Part II
My Morning Scans

I like to make premarket scans because it can give me stocks that are gaining momentum that missed all of the scans the previous night.  I pay close attention to the volume though.  If a stock jumped up $2 but only shows 1 or 2 trades and low volume, then it’s just noise.  If the volume is high along with a high percentage move, then I have a good chance to predict the trend for the day.  My favorite early trade setups are the gappers, or stocks that have gapped up premarket.  I have a specific strategy to trade those and often times I will have 2 opportunities to trade that one stock as seen with this chart on ARNA. 


I get up at 6am to get ready for work so I cut on Squawk Box and listen to what the early morning market chatter is.  I get to my computer about 6:30 and there is usually some activity on my watchlist. I'll look to see what is going on with those and sometimes I can immediately eliminate one or two from my list.  I'll take a quick look at the MarketView on Equityfeed.  This gives me info on all of the stocks that are moving in premarket.  I won't do much between 6:30 and 7 other than try to get a feel for how the market is setting up like which sectors are hot and which are not.  My major preparation will come once I get to work.

I will reference EquityFeed a lot in this blog but the best way to understand the power this tool has and how you can use it is go to the website. Just click on the name throughout this blog and watch the videos on the web site.  What I can tell you will not do it justice.  I am sharing how I use it now and as I move forward in my trading career I will be taking more advantage of it's features and integrating them into my trading strategies.

Once I'm at work I pull up my TOS platform, my Tweetdeck, and Equityfeed.  I glance at my Twitter feed but during the trading day I try to filter out as much noise as I can.  I have my MarketView set to where I have the largest % movers on top.  I also have a filter that only will allow stocks between $2 and $20, that have traded at least 100000 shares, and with over 25 transactions. This will eliminate any fluke trades that have no relevance.   I am only interested in tickers that have gapped up at least 5% from the previous close.  I will vet them the way I do my scans at night.  I only keep the ones I feel will give me the best chance.  At this time I give all of my watches a final look and pick the best 8, my top 8 at 8.  Usually I'm done by 8:30.  Waiting until 9 is better but my students start coming in at 8:30.  This is how the MarketView looks


I also have a specialized filter that I built utilizing Filter Builder in Equityfeed.  This is what I have running after 8:30 to only deliver stocks that meet my criteria for potential trades.  The parameters for this filter are: last price >=2, last price <=20, today's trades >=100, today's volume >=100,000, % change >=3%, markets NASDAQ, NYSE, AMEX.  This filter will run all day but I mainly use it for my morning trades.  This is an example of how it looks. on a typical morning.



After I vet the tickers I'll plug them in my TOS platform.  I have an 8 chart montage that I put them in at home but at school my monitor is 1/2 the size so I have 2, 4-chart montages.  The charts are set for 5 minute candles.  My main trading screen has 2 charts with Level 2 and Time and Sales for each.  Once a ticker is in play and ready to trade, it will put it on my main trading screen and the charts are set for 1 minute candles.




After the first three 5 minute candles I will draw a green trend line across to show the high and a red trend line to show the low of the first 15 minutes.  Then I switch to one minute candles and the two stocks that are closest to crossing the green trend line will go on my main screen.  Sometimes I have an immediate trade.  If I do not and it looks like I have a couple of minutes I will start building alerts in Equityfeed to let me know when a possible trade is near. I try to set alerts slightly ahead of a breakout point so that I have enough time to wrap up what I'm doing and get to my computer. I have a 15 minute break that starts at 9:45 so it works out perfectly.  If I am in an immediate trade then my break miraculously extends to 20 or 30 minutes!  Now when I start shorting stocks I will use the red trend line to tell me when I need to short it.  And there are times when the stock will trade within those lines all day and offer no setup.

Now there are opportunities when I get the morning break to trade and then the stock will start setting up for an ABCD type move for later in the day.  It is not uncommon for me to trade the same stock twice in one day.  If after 1pm all of my potential trades have dried up, I will use the Trade Alerts feature on EquityFeed to look for stocks hitting the HOD or making 52 wk highs so I just check day high box and the 52 week high box. Everything else I leave blank. For the filter settings I look for stocks priced between $2 and $20 and a volume over 1 million. As the tickers come up I just click on them and a chart pops up and I can quickly identify if the chart looks like the ABCD patterns I like to trade.

There are many potential trades everyday.  The only reason I would miss making a trade would be because of my schedule at work that day.  Everything I trade right now follows either the simple gap pattern or the simple ABCD pattern.  The hard part is trusting what I see and clicking that button.  Not everything works perfectly nor do I trade everything perfectly but the potential for me to make a few thousand dollars a day is definitely there once I get more experience.

One thing I can tell you is that having a tool like EquityFeed is a necessity if you want to control your own destiny.  You do not want to depend on someone telling you to buy and sell this or that.  You need to know what you are doing and why.  I have had a slow start to 2015 trying to do 2 things at once but once I get my rhythm back at work I know I will be back on top of my game, well back to making progress toward reaching the top.

Well, until next time, happy trading!