Sunday, March 29, 2015

My Day Teaching Day Trading!

I am on vacation for my Spring Break so I won't get to do my typical weekly recap so I though I would share this story about my experiencing teaching about day trading.  I had so much fun doing it I wish I could teach this to kids everyday.  I think my next blog will be about the new information I have learned about technical analysis.  I am glad I learned all of this in segments because If I tried to do it all at once I would have surely failed.

I teach automotive and motorsports technology and engineering at a career center to high school students.  One of my students takes a personal finance class at his high school and he shared with his teacher what I do and the little bit I shared with them in my class.  If some of the automotive tickers showed any momentum potential I would bring up the charts on the Smart Board and show them the news and a little bit of technical analysis.  Well I get an email from his teacher and she asked if I would come talk to her classes about Day Trading.  Of course the feelings she had towards day traders was not favorable so I felt she secretly wanted me to bomb and she could prove I didn't know what I was talking about.  The evidence I had was all of the times my student came back and told me his personal finance teacher said I was wrong and that I was an idiot and that I should stick to talking about cars.  So I knew I needed to be well prepared and I was motivated to make a good showing.

My goal was to share the differences between long term investing, swing trading, and day trading.  I took them through a typical morning in my life and how I use technical analysis as well as the "tools of the trade" to find and vet tickers.  I wanted to show them, and their teacher, just what day trading was all about and that if you followed a plan, you could be successful.  I didn't know how the network would work out but I really wanted a trade or two to set up during the classes.

The beautiful thing is it did not take long for the students to become engaged, and the teacher really warmed up to what I was covering.  I swear her bottom jaw was touching the ground for a while.  I don't think she believed things would go that well or that she would actually learn something from me.

Thankfully I was able to log into everything.  Equityfeed, my platforms, and chat.  The first class started early enough that I was able to actually take the through my morning routine.  We vetted the gappers that came up on my Equityfeed scanner and found a couple to watch out of the gate.  I had stated over and over again that I was long biased but I did show them what I look for when I short sell tickers.

When the bell rang we were watching CNAT, because I thought that would have the best chance for setting up for my 15 minute opening range breakout strategy and I could show them how the gap and go setup worked.  Well prior to the open the ticker faded from a premarket high of $8.94 to $8.26 at the open.  It seemed to sell off and I saw the twinkle in the teachers eye that what I was looking at wasn't working and she was ready to say see, I told you so.  Then one of the students asked if it made a lower high again would I short it.  A light bulb went off because honestly I wasn't thinking about shorting at all. So I said "of course! That's the beauty of day trading and why it's important to follow the chart and not your heart"! Thanks to that student I was able to salvage my day.  Now that was a reversal!

It made a lower high and I immediately shorted it.  I went in with 1000 shares simply because I was showing off.  Inside I was nervous as hell! I shorted it at $7.65 and it immediately dropped over .20 in 3 minutes. I got out at $7.44 for a profit of .21 or $210.  Perfect lesson for the first class!  And, one of the students made it happen.  Needless to say I was pumped and couldn't wait for the next class.

We had another opp for the second class but it took a little longer I only exited because the class was ending and it was time for lunch.  This time I entered at $7.41 and it faded until the class ended and I covered at $6.90 for a profit of .51 or $510. I proved my point about how day trading if profitable if you follow the rules and only trade using the chart, not your heart.


$210 profit CNAT Short Stock by AverageJoeTradr
$510 profit CNAT Short Stock byAverageJoeTradr



I shared our success in the morning classes with the afternoon class and I showed them our P&L.  $720 in about an hour total time. This is usually the time I switch gears and start looking for top and bottom reversals.  We found 1 ticker that was setting up for a bottom reversal.  I usually start watching them early to help me determine whether they are actually good candidates so this one was slow, but had a couple of good fakes that I could show the class and how if I fell for them I would have lost money.  It finally triggered but it died on the way up and didn't make the move I wanted it to but it was a win none the less.  The students learned and I looked very competent in front of a skeptical teacher.


$90 profit AEM Long Stock by AverageJoeTradr


I know I am still relatively new to trading and I am definitely still learning but I had a great time sharing my knowledge with these high school students.  They were blown away by what I showed them and I think some of them for the first time in their lives see a legit way they can make their dreams come true.  I honestly believe if I could teach this everyday in school I would not be looking to retire at the end of this year.  Also, the teacher has changed her tune about day traders.  Hope she doesn't read my blog because I shared it with the students.  By law I can't share my Twitter with them so I gave them my blog address.

Sunday, March 22, 2015

How I Use Level 2

One thing I found out quick when I started was that understanding level 2 quotes was vital to my success day trading. Many of us newbies are intimidated by the information shown in a level 2 window. All of those constantly changing numbers coming at you makes keeping up with it seems like an impossible task. I used to watch it for hours never understanding what I was seeing or how to use it.  What I'm going to share in this blog is how I use it to help me as I am trading.

To put it simply, a level 2 window is split in to two sections - the bid side and the ask side. The bids, which are located on the left, show the total number of shares that buyers wish to purchase at the corresponding price. The bid side is arranged in descending order, with the highest bids on the top and lower bids following below. The “ask side,” located on the right, shows the total number of shares that sellers wish to sell at corresponding prices. The ask side is arranged in an ascending order with the lowest ask on the top with higher prices below. This is an example that helped my understand Level 2 a little better .

 Your neighbor Michael has a group of cars he wishes to sell for $20,000 a piece. Your friend Greg wants to buy one car for $19,500. Your cousin Steve thinks that the cars are a bargain and wants to buy 4 of them at $19,750 each. Your father James thinks the cars can be re-sold for a higher profit in a year and would be willing to buy eight of them, but will not pay more than $19,000 a piece.
A level 2 quote window for this scenario will look like this:
jayson_2.jpg
It is important to understand that a trade will only occur when a buyer and seller have identical pricing constraints. To illustrate this, Amanda, who lives a block away, is in desperate need of cash and has an identical car to sell. Seeing the level 2 quotes, she knows that there is a request to buy at $19,750 and is willing to sell at that price. Thus, Amanda will add her “ask” to the level 2, which will be reflected as such:
jayson_3.jpg
Now that Steve and Amanda have a mutually agreed upon price, a transaction will occur and the level 2 box will reflect the instance accordingly. The sale is going through at 10:30am facilitated by the Bank of Awesome. Steve has purchased 1 car and still has an open order for three additional cars. Since Amanda's order was filled, she is now removed from the level 2 box.
jayson_4.jpg
Every time a transaction occurs, it is recorded in what is referred to as the “Time & Sales” box, which lists the price, quantity, time, and market of the transaction. An example is shown below.
jayson_12.jpg

Since the Level 2 quotes update in real time, I use it to help me determine the short term direction of a stock. For example, if you have a lot of orders being filled on the “ask” side this might be an indication the stock is heading higher since buyers are clamoring to scoop up available shares at higher prices.

Conversely, if you have more orders being filled on the “bid” side, it may be telling me that the stock is ready to fall because sellers are willing to dump their shares at lower prices.

While a level 2 screen can seem somewhat complicated at first, it is a relatively simple entity. It is merely a mechanism for matching buyers and sellers in an orderly fashion. The only thing that makes it somewhat difficult to comprehend is the speed at which it operates, which just takes getting used to.

It is not hard to understand, but it takes time to get used to the speed that it moves given day traders are trading volatile fast moving stocks.  It just takes time to be able to spot when a stock may be under manipulation from a market maker putting false bids or asks to influence traders to make decisions based on what they see.


OK.  So I am in this trade long and I am watching the Level 2 quotes, the volume bars on the chart, the candlesticks, and the time and sales tape on the right.  Together for me this represents the price action.  My volume bars are set to a red and green color.  If there was more buying, meaning the ask was being hit, the bar for that minute will be green.  If there were more selling that means the bid was being hit and the bar for that minute would be red.

Likewise on the time and sales tape, the transactions that are hitting the ask, which means the sellers are in control, the time and sales will print green.  If the transactions are hitting the bid, that means the buyers are in charge and the time and sales prints will be red.  On this tape you will have the time the transaction was made, the price it was made at, and the amount of shares that changed hands.

Now, on the Level 2 quotes I am looking to see how many buyers there are and how many sellers there are on the active price.  On the left side of my Level 2 box are the bidders, or the traders wanting to buy.  There you will have the market makers who handle the orders.  Each market maker will display their best bid from all of the orders they are taking along with how many shares they want to buy.  On the right side are the sellers.  It has the market makers displaying the ask price from their sellers and how many are wanting to sell at that price.

When I entered the trade I was looking at how many sellers there were versus how many buyers there were and if the time and sales tape was matching what was showing.  So in this case there were more buyers than sellers, which would indicate the sellers were in charge and because of that the price should go up because the demand is higher than the supply.  But, Level 2 can be manipulated.  If you look at how many shares there are on the ask/sell side and the time and sales tape keeps printing sales on the ask or bid price and the share amounts are not changing, then that market maker can be hiding size and there may actually be more sellers than buyers, which will make the price go down.  I always wait for the time and sales to match what I'm seeing on level 2, and I verify it on the volume bar before I take a trade.  Sometimes I may miss a good entry but I'd rather be safe than sorry at this point.  I am trying to grow my account before I start taking a little more risk to make more money.




This chart shown is a chart of the trade that I am already in so I am watching the price action.  Right now there are slightly more buyers displayed versus sellers, but it's very close.  I am showing you this chart because this is how it usually looks when a ticker is trying to break a half or whole dollar mark. I know it shows a little more red prints than green but as I was watching it it was about 50/50.  I fully expected for it to go back and forth for a few.  If I start seeing more sellers start stacking up on the ask, I will keep a close eye on whether the sellers continue to build up and the buyers continue to get taken out.  If that pattern continues the price will keep dropping. Once I see this I will exit.


On this chart we see that the ticker is trying to bounce back.  The drop was sudden following the ticker ramping up toward HOD, which would have attracted some traders.  It started to consolidate. The sellers were taken out at 17.85. 86, and 87, then at .89 you have more sellers come in. But this could be a fake flash order to try and keep the price down.  The only way to confirm this is to watch the time an sales tape.  For this sellers to be legit you would want the time and sales tape to start showing prints at 17.89 while you see the numbers on the ask at 17.89 to get smaller. If that happens the ticker will hit 17.90 and theoretically the price will continue to climb as long as sellers continue to come in and buyers continue to take them out.  Now if that large order on the ask disappears and there were no sales then you know that it's someone attempting to manipulate the price. Also, if the sales continue to print at 17.89 and the number of sell orders on the ask doesn't change, there is someone hiding the size of their sell orders.  That can also cause a trader to read something in the Level 2 that's not accurate and cause you to make a bad decision.

I think that the hardest part of reading Level 2 is trying to determine if the data is accurate or manipulated.  But I feel what I do by keeping it simple and looking at the Time and Sales tape and the volume bars along with Level 2 gives me a pretty accurate picture of what's happening about 75% of the time and I thing that is the best you can do in the market.  It just takes time to get familiar with it.  I've been doing this for about a year and I am still learning and getting more comfortable with it.

I hope this helps explain how I look at Level 2.  I hope it makes sense because if it doesn't that means I'm lost! LOL!


Weekly Recap 3/16 - 3/20 Defining my Stop-Loss

Well this week was an unwelcome reminder that I am in the busiest part of the year for work and that my trading will suffer because of it.  I'm frustrated because I do not want to lose the momentum I have trading.  I already feel it slipping away at times. but I will continue to press on and if I have to take a couple of days off again to bring it back around then so be it.  This is my future.

I am going to look at these bottom reversal setups more closely because I think I may be missing something.  I don't think I'm getting the profit out if these that I should be getting.  I don't know if I'm not finding the right tickers that move or is this a result of the uncertainty in the market the FED is causing. My task this weekend is to dig through these charts from the past month and see what I can come up with.

I have had some questions about my risk/reward strategy so I will explain it here.  It is not something that's mainstream and I believe it is unique to me.  It works for me and I can scale it as I increase my account size. 

I have a $50 risk on every trade I take.   The reason I am using $50 is that it is 1% of my initial account size.  I wire out every month because I am saving for my move to full time so I am still trading with a small account.  I start with 5k each month.  Right now I am at about 8k but I still stick to my $50 risk.  I have decided to bump up my account to in April to $7500 so my risk then will be $75. I am trading higher $ tickers now so by July I hope to have 10k in my trading account.

I let the price of the ticker determine my position size.  For instance, on a $2 to $10 ticker I will trade 1000 shares with a .05 stop.  If I need to give it more range I will reduce my position size so If I need a .10 stop I will only trade 500 shares or if I need a .15 stop to let the trade develop I will enter with only 300 shares and add until I get a full position if it is a true winner.  Then I'll set a mental stop at .05 below where I added to make my position full.  When I first enter the trade I use a hard stop.  Once it is a true winner, I will cancel that stop and read the price action while keeping my finger on the trigger to exit my position .  

The hard stop helps me with the initial emotions I experience entering a trade.  Once I know my stop is set, I can just focus on the chart, Level 2, and executing my plan. As I progress as a trader I'm sure I will be more comfortable, less emotional, and I will not need hard stops.  For a while I would even set sell stops at my target to make sure I profited.  As I got more comfortable with reading charts and Level 2 I did away with the sell stops.

I do want to add that if I see that the trade is going against me I will not wait for it to hit the stop. I will get out. I have only been stopped out a couple of times this month because the ticker dropped while I was away from my computer or it tanked the minute I entered.

The main thing that I keep in mind is that even though I get stopped out or I exit because the setup didn't make the move I anticipated, there is always a chance that I can get back in.  Sometimes I may be a little early for the move or it will have a stronger setup later.  I look at getting stopped out as saving my account for a better trade.



Below are my stats for the week from Profit.ly.  I like their tools for helping me analyze my trades.

                                                                    All Trades         Long Trades Short Trades
Total Net Profit                                           $1,257.45               $1,257.45                  $0.00
Gross Profit                                                $1,370.05               $1,370.05                  $0.00
Gross Loss                                                 $112.60                 $112.60                    $0.00
Profit Factor                                                12.17                    12.17                              0
Total Trades                                                14                        14                                   0
Percent Profitable                                        78.57%                 78.57%                        0%
Winning Trades                                           11                         11                                   0
Losing Trades                                              3                          3                                    0
Avg Trade Net Profit                                    $89.82                   $89.82                       �M
Avg Winning Trade                                      $124.55                 $124.55                    $0.00
Avg % Gain                                                1.55%                  1.55%                           0%
Avg Losing Trade                                        $37.53                   $37.53                     $0.00
Avg % Loss                                               0.49%                   0.49%                          0%
Ratio Avg Win to Avg Loss                          3.32                      3.32                               0
Largest Winning Trade                                 $280.00                 $280.00                   $0.00
Largest Losing Trade                                   $67.60                   $67.60                     $0.00
Largest Winner as % Gross Profit                20.44%                  20.44%                       0%
Largest Loser as % Gross Loss                   60.04%                  60.04%                       0%
Max Consec Winning Trades                       10                         10                                 0
Max Consec Losing Trades                          2                           2                                  0




Monday, March 16

Thought the day would be a lot better than it was.  The SPY was trading above the VWAP and I expected to find some solid bottom reversals.  Unfortunately nothing was moving.  Another day of mediocre morning gappers. The market seems to be hit and miss now for the setups I like to trade.

SPY


($30) loss MVIS Long Stock by AverageJoeTradr
$170 profit MVIS Long Stock by AverageJoeTradr


On the first trade I got spooked by what I saw in Level 2 and clicked the mouse.  I kept seeing large sellers coming in which kept this ticker in check.  It didn't look like I was going to get any buyers coming in to take them out.

The second trade turned out to be a good scalp move but ticker did never could get out of the heavy resistance in the 3.30's and faded back.  I re-entered because I saw buyers coming in and I felt the ticker could finally get past 3.17-.18.  However, this ticker just kept running into walls and eventually faded.




Tuesday, March 17

Tuesday was a pretty descent day.  Found some good setups but could not maximize them due to being at work.  As long as I can consistently find good setups and profit I know that I will be OK.  The SPY started the day choppy and then faded below the VWAP but it recovered nicely for the 2nd half of the day and helped fuel some good trades.

SPY




$150 profit DSW Long Stock by AverageJoeTradr
$84 profit DSW Long Stock by AverageJoeTradr


This was a trade using my 15 minute opening range breakout morning gapper setup.  Caught the second move after the pullback as well.  There was an opportunity for a 3rd trade but I wasn't in a position to take it.


$99 profit NOV Long Stock by AverageJoeTradr


Bottom reversal setup.  Entered using the 15 minute chart after I had a 5 minute candle to make a new high.  I exited using the 1 minute chart on the first candle to make new low as a trigger.


$116 profit RSPP Long Stock by AverageJoeTradr


Bottom reversal setup.  Entered with a small position because I was anticipating a little. I didn't wait for the 5 minute candle to print a new high.  I added once it did to get me a full position.  I liked the way I traded on this one.  Learned a little about building a position.




Wednesday, March 18

Today was a little slow. I'm thinking it was because of the SPY trading sideways most of the day that we didn't get any solid moves.  Found a couple of bottom reversals around the time the SPY took off.  I have been paying more attention to the SPY and it has kept me out of senseless trades.

SPY



$215 profit SQM Long Stock by AverageJoeTradr


Bottom reversal setup I watched for a while but that only made me a little apprehensive entering so gave up some profit. Crazy price action for a minute. Decent trade though.



$84 profit EUO Long Stock by AverageJoeTradr


Bottom reversal setup that didn't give me the move I was looking for. Thought it had potential to pop up an least 1 point. Kept running into walls of sellers



Thursday, March 19

I seem to have lost my charts and notes from Thursday.  They may be on my computer at work so I will check Monday and post them if they are still on my computer.  The SPY was scary but managed to get one decent trade on a 15 minute opening range breakout.  The afternoon bottom reversals did not give much.  Should have been looking for top reversals to short with the SPY looking like it did.

SPY



$87 profit NUE Long Stock by AverageJoeTradr


$280 profit GES Long Stock by AverageJoeTradr


$25 profit SWN Long Stock by AverageJoeTradr


($15) loss LEN Long Stock by AverageJoeTradr




Friday, March 20

Friday was a very frustrating day for me.  I missed all of the entries on my setups in the morning because none happened during the time I had at my computer.  It turns out that the morning was the time for me to profit.  The afternoon session was choppy and slow. No big moves until after 3:15, which is during the time I pick up my kids from school.  These are the days I despise having to be at work.  The SPY started out a bit choppy then it traded well above the VWAP most of the day which encouraged me about my ability to make some $ in the afternoon session.  False hope and fool's gold is all I found.  Have to remember this is my busiest month at work and my trading will be slow.

SPY



($68) loss WLL Long Stock by AverageJoeTradr


What a stupid trade!  Did not wait for confirmation of the setup.  I think I was just itching to trade something because there wasn't any trigger on the 5 minute chart for me to enter into a position.  If I was speculating I should have entered a 1/4 or 1/3 position and built upon it if it was a winner.  Did not have a solid plan at all.


$60 profit PTEN Long Stock by AverageJoeTradr


Bottom reversal setup that didn't make the move I was looking for.  Had a good entry.

Sunday, March 15, 2015

Weekly Recap 3/9 - 3/13

Hell of a week and I didn't even trade on Monday.  I did take Tuesday and Wednesday off work to trade at home but I think I did just as good from work on Thursday and Friday.  Another exciting thing that happened was I was the Trader of the Week at Day Trade Warrior.  I had a great time talking to Ross and doing the interview.

These reversal setups seemed to have come at the right time when the gappers I normally trade are slowing down.  I'm working on another wrinkle to the morning gappers that will give me a trade if the ticker goes south at the open.  I think I have found a home at Warrior Trading as they trade the setups I trade, and they have helped me learn how to be more consistent and profitable with them.  I like the Gap and Go set-up that Ross trades but at work it is too fast.  I can only work that from home.

I did realize that I need to know what the SPY is doing that day so that I can plan my trades better.  If the SPY is trading below the VWAP, I need to be careful on longs after 11.  I need to time my trades with the uptrend or bounce back toward the VWAP.

Since my interview debut (lol!) I have received a lot of questions concerning the same topics so I will do another blog answering them.  I did not wire out all profits last month because I believe I will need more $ to trade some of these high $ tickers in Ross's chat room.  So, here's my week:




Total Profit for the Week - $2,445.00 before commissions
Total Profit for the Month - $3,857..00 before commissions
Total Profit for the Year - $17,726.00 before commissions

                                           

Monday, March 9th

No trades

Monday was a frustrating day.  Kept missing the entries on all the setups I was watching.  The good thing is I didn't chase and force any trades.  Plus, I knew I was going to be off on the next two days so I was good with it.

Tuesday, March 10th

I learned something on Tuesday.  If the SPY tanks and falls below the VWAP, be very careful with long positions.  As you can see by this chart of the SPY, it tanked after 11 and it fell below the VWAP, and started chopping around below it.  Once I figured that out, I shorted the next three tickers

SPY




$231 profit LL Long Stock by AverageJoeTradr


This was a morning gapper that I traded using my opening range breakout/modified gap and go setup.  It broke the pre-market high and it was moving up with so much momentum that I entered the trade before the 3rd 5 minute candle printed.  When the setup is this strong I will enter early.


($51) loss STX Long Stock by AverageJoeTradr


Bottom reversal set-up that I entered too early.  There was a small move but this ticker never made it close to the VWAP.  I eventually figured out why.



$81 profit GNC Long Stock by AverageJoeTradr


This is another bottom reversal setup that didn't give me the move I looked for.  Then I realized the SPY had tanked after 11AM and was chopping below the VWAP.  When that happens, longs are not going to flourish.



$108 profit ACAD Short Stock by AverageJoeTradr


I started trading the top reversal setups once I realized the SPY settled below the VWAP.  This was my first try and I didn't trade well.  Still need a little practice with these


$117 profit SGEN Short Stock by AverageJoeTradr


Did not get the fade I was looking for on this ticker but it was a good scalp anyway.  If I had more size I would have had a nice payday.


$243 profit ACAD Short Stock by AverageJoeTradr


Caught the second top reversal setup and traded this one a little better.  Not hard to trade these setups but just need to practice a little.

Wednesday, March 11

I struggled on Wednesday and again did not pay enough attention to the SPY.  I made a decent profit on the day but I believe had I focused on the top reversal setups I would have been more profitable. The PPC trade happened when the SPY was trending back up towards the VWAP but the market was still weak.
SPY



($50) loss SUPN Long Stock by AverageJoeTradr


Trading the opening range breakout on this ticker but was early and quickly got stopped out.  Missed the next move.  It eventually made the move I was looking for.


$120 profit VRA Long Stock by AverageJoeTradr


Working the bottom reversal but the ticket didn't move enough back toward the VWAP.  Expected a larger move but profit is profit.


$285 profit PPC Long Stock by AverageJoeTradr


Traded the first move on the bottom reversal strategy well but missed the late day reversal



$150 profit GME Long Stock by AverageJoeTradr


Traded 100 shares more than I wanted because I started small intending on building a position if it went the wrong way initially. It did but I ended up adding 100 too much but it worked out.  First time trying to build a position on  ticker that did not make the move initially.  Don't know If I like this strategy or not.


Thursday, March 12

The SPY was trading above the VWAP all day and we had strong moves on the bottom reversals.  Unfortunately I was at work and only had the chance to trade one of them but it was a good ticker to trade.
SPY




$360 profit SGMS Long Stock by AverageJoeTradr
$290 profit SGMS Long Stock by AverageJoeTradr


Perfect bottom reversal strategy trades.  The notes on the charts say it all.  The SPY was strong all day and helped this ticker make the strong moves up.




Friday, March 13

Even though the SPY was trading below the VWAP the trades I caught was during the uptrend making the move back up towards the VWAP.  The tickers tended to move with it and gave some decent trades.
SPY



$198 profit CBI Long Stock by AverageJoeTradr
$63 profit NOV Long Stock by AverageJoeTradr


Both bottom reversal setups.  NOV moved a little too slow and I had to go to class so I exited my position. Of course it made the moves I was looking for after I left.  Just happy to know I predicted it based on technicals and it happened.


$55 profit AEO Long Stock by AverageJoeTradr


Bottom reversal strategy setup that moved a little slower than I expected.  I got the first push to the VWAP just in time for me to go to class but I missed the second leg of it.  It was a good setup and should have traded more size.


$220 profit BCEI Long Stock by AverageJoeTradr


Excellent bottom reversal set-up.  Made a good move for decent profit.  I love trading these.

Saturday, March 14, 2015

Answers to Questions I have Received

I have received a lot of questions after my interview with Ross last week.  I figured the easiest way to answer everybody is to answer all of these in a blog post. I think I have answered them all but If I haven't just let me know. I don't mind answering questions or sharing what I'm doing


How did you make $9000 in 6 months with just $800?

To put it simply, I took too much risk. I used max leverage on every trade.  Suretrader was 6:1.  They didn't have all of the safeguards in place then to protect you from yourself.  Knowing what I know know I was a time bomb and I wouldn't recommend over extending yourself at all.

I studied one strategy with a couple of setups.  Textbook longs straight from Nate @ Investorslive Textbook Trading DVD.  No shorts, just the long strategies.  I caught a couple of massive short squeezes and banked so that's where half of the profits came from.  The only good thing was I was patient.  I just waited for the setup to come to me and I took them.  That period was hot for ABCD setups and all the textbook longs.  But like everything else, things change and those setups slowed and I had to branch out.


How did you overcome the fear of losing?

I had a serious problem with my mindset and I worried so much about losing.  I had to come up with a simple risk/reward strategy.  I said I was willing to risk $50 for a potential gain of $100.  So when I entered a trade, I immediately entered my stop loss.  I made it a hard stop so that I didn't have a choice and I wouldn't lose any more money than my initial risk.  That worked a good but I found I was cutting my winners short.  I was watching my P&L like a hawk. If I was up like $80 and it dropped to $50, I would sell, cutting my winnings short.  Most of the time if a trade was up that much, a slight dip was to be expected.  I wasn't watching the chart or Level 2, I was watching the P&L.  I think that is the biggest mistake traders make.  Yeah, you want to maximize and protect profits, but you do that by watching your charts and Level 2.  I had to start letting the chart tell me when to sell. So I hid my P&L and I started focusing on the charts.

When did you get your first AHA moment?

I guess my first "aha" moment came when I focused just on textbook longs from Nate's DVD. The ABCD setup, gearing and perking, the red to green moves.  And also knowing that there will not be trades all of the time when you limit yourself to one strategy so it forced me to be patient.  However I felt it was necessary to do that while I am learning how to trade.  You will be amazed at how well you can do with just 1 strategy.  I also had to not compare myself to the other guys in chat and on Twitter who were making these large profits.  There was a time they were right where I was and I had to remember that.

Who do you feel has the best chat for newbies?

I think Ross's chat at Warrior Trading is the best place for newbies.  His strategies are simple and he explains everything he is thinking. It would be hard to lose money following his strategies.  I don't recommend the gap and go strategy when you're getting your feet wet.  They are a little fast.  I still don't really trade those since I am at work most of the time.  I only trade those when I'm at home.  I still use my opening range strategy on gappers which I did a blog on.  Once I get to go full time on my summer break I believe I can average $750 to $1000 a day just trading his simple strategies alone. That is more than enough for me!  Here is a link to his YouTube Channel.

What are the tools you use for trading?

- I use TOS for charting.  It's free when you open up an account with TD Ameritrade.  It is a very powerful platform but I do not trade with TD Ameritrade right now.  I do plan to use my account there for swing trading in the future

- I use DAS Pro for my trading at home and it is super fast.  I am stuck with Active Web at work due to the filters they have on the network

- I use EquityFeed to scan for stocks to trade

- I use Finviz to do my technical research.  It has all of the information I need to vet the tickers I find with Equityfeed.

- I track my trades through Profit.ly.  I am able to get all of the stats and data I need to analyze my trades

- I am in the Day Trade Warrior chat room where Ross has a live screen share of his scanners and trade ideas.

What are your favorite set-ups?

I am long biased however I have recently started shorting. My favorite long set-ups are the morning gapper set-up, the bottom reversal set-up, the ABCD setup, the gearing and perking (flat top breakout) set-up and the red/green move.  I like shorting the top reversal setups the best.

What technical indicators do you use on your charts?

When I started I did not use any indicators because I was only focusing on the setup and reading the chart.  I like as "clean" of a chart as possible. I traded only based off of chart pattern indicators.  I believe that technical indicators have significant lag because they are based on what has happened. Since they are based on mathematical calculations the price has to happen first so the indicator will always follow the price. In other words, the signal that the indicator produces will always occur after the price has moved.  The charts are based on the price action happening in the moment. So there is no delay in the signal or trigger produced by the chart.  This follows my belief that getting a good entry is more important than getting a good exit.  I know some believe exits are more important but based on what I have learned, for me, entries are more important.

I recently began using the VWAP (Volume Weighted Average Price) and the RSI (Relative Strength Index) indicators.  The VWAP I use to help me plan my exits because it is usually a place of support or resistance intraday.  For instance, if I am trading a bottom reversal setup, my initial profit target would be for the price to move back up towards the VWAP.  Likewise for a top reversal, my initial profit target would be the move back down towards the VWAP.  I like it better than the moving averages because it it based on intraday data.  The more data an indicator uses, the greater the lag so the VWAP is the best indicator to use for intraday trading.  It does not work on daily charts.  I may do a blog on how I use the VWAP in the near future.  It would be a lot easier to put together than the Level 2 one.

The RSI indicator I only use to tell me if a ticker is overbought or oversold.  It's a bottom indicator so it doesn't dirty your charts.  It's not very sensitive so it's not an indicator that you would monitor all day.  I only use it when I am vetting potential bottom or top reversal trade candidates.

How do you pick the stocks you trade?

This is explained in my previous blogs; "How I Find Stocks to Trade I and II" and "How I Vet Tickers"  It's a lot of info to type so it's easier to check it out there.

What are some suggestions you have for new traders like yourself?
   
     1.  Education.  Education is the key to success.  I suggest you read this blog post from ClayTrader.  I haven't seen anything else better that gets this point across.  Here is the link.  And a quick tip video from him as well.  Here is that link.

     2.  Follow the Gurus that trade similar strategies as you.  Since I am in Ross's chat, I watch his videos on his YouTube channel.  His webinars are on the e-signal channel on Youtube.  You just have to look for his.  I think there are 2 but they are awesome. You have to follow the Guru who is trading the strategies you are trading.  I trade the gappers first which Ross trades.  Then, I usually found that they will tend to follow Nate's Textbook Long strategies after lunch like the ABCD setups, the gearing and perking setups, and for the ones that went south after open, the red to green setups. After 11 I start looking for the bottom reversal setups and I will trade a top reversal setup if it looks really good and safe for me because I'm not comfortable shorting yet. 

     3.  Establish a risk/reward system that you can stick to.  I risk $50 on everything.  If you see on Profit.ly that I have a loss of over $50 I didn't stick to my plan. For you it will depend on your position sizes and how much you have to trade with.  For instance if you are trading with 2k, and you want to enter into a position with a $10 stock, you can only buy 200 shares.  If your plan is to risk $25 to make a minimum of $50, your stop will be set at .12 or .13 below your entry price. Likewise your target profit exit would be  .25 above your entry price. Then, as the trade is progressing and you reach your $50 goal, don't sell.  Just set a sell stop at .01 above your profit target and let the trade work until you get a signal to sell. If it washes quickly before you can pull the trigger you have a sell stop to protect your minimum profit target.  

I set hard stops for my stop-loss and profit targets. This takes a lot of emotion out of my trading. Once I have my max loss set and my minimum profit is safe it frees my mind to focus more on the trade and getting as much out of it as I can. I think this was the key for me to reaching my next level.

     4.  Focus on entries. A good entry will maximize your profits more than a good exit will because if the ticker gets stuffed before it takes off, you still should have some profits versus the trader that took a bad entry and the trade immediately goes south.  For me, it's all about the entry.  If I don't get a good entry, I just leave it alone until it sets up again.  I believe this is why I have a good win %

     5.  Do not compare yourself to other traders.  Most are at a different level in their careers.  I had a hard time with this.  Unless you know their position size and account size and they are trading the exact same ticker you are, it's not worth it.  I think it's easier to compare with Ross because most of the time you know his position size and you can compare your trade based on the % your size is to his.  For instance if he trades 3000 shares and I trade 1000 shares, then my results should be 1/3 of his. 

     6.  Reflect on each of your trades at the end of the day.  I started a blog to help me with that but you can start your own personal journal.  I like to have charts that I can reflect on in addition to the narratives.  I also post my trades in Profit.ly and that gives me all of the percentages and financial charts I need.  Some like to use Excel spreadsheets to track their data.

Sunday, March 8, 2015

Trading Setups Update

As I mentioned before I stopped building watchlists at night.  I start early in the morning looking for the tickers that are building momentum for that day.  Some mornings I have 7 or 8 tickers that have gapped up premarket that I can vet.  Other mornings I may only have 3 or 4, but I will always find momentum gappers that are up on news or earnings with decent premarket volume.  I have done a couple of blogs on how I look to trade gappers so I will not go back through all of that.  I just want to share how I am looking at them now and any changes I have made.  You can find the previous blogs here: http://averagejoedaytradr.blogspot.com/2015/01/momentum-gapper-strategy.html 
and here: http://averagejoedaytradr.blogspot.com/2015/02/momentum-gapper-strategy-update.html
and how I vet them: http://averagejoedaytradr.blogspot.com/2015/03/how-i-vet-tickers.html

Even though I have been trading for a little over a year, I still consider myself a new trader.  As a new trader, I can't stress enough how important it is for you to learn one strategy first and just build upon it as you learn more about trading and the market.  I am still in learning mode.  I'm closer to reaching the next level but I know I can't stay there if I am not willing to continue to learn and adapt.

The first setup I learned was the ABCD setup.  Then I started looking for tickers that are gearing or perking up making higher lows possibly setting up for a breakout.  I think Ross at Day Trade Warrior calls them flat top breakouts.  Then I started looking for tickers that were on the verge of making a red to green move on the day and pairing these setups with the daily charts.  Then I started learning how to watch tickers at the open to see if they would have a weak or strong open and whether I can identify a setup to trade.  I did good with these but I realized the opportunities for these longs were not always there.  I knew I needed to add more dimensions to my setups and that's when the momentum gappers came along.  There are always gappers to trade both long and short. It took me a couple of months but I believe I have put all of the pieces together.



This chart shows the same ticker that gapped up on consecutive days but it also shows the two different ways a morning gapper can set up.  Previously I focused on the setup on the right, where you would get a small pullback and then it would continue to run up.  The setup on the left is when the ticker opens a little weak with profit taking, and then a big sell-off.  This is the Gap Retrace & Go.  I call it this because it retraces back the morning gap-up and then it recovers and goes back up.  This is a good short opportunity on the wash, but odds are it will recover some.  In this case we had a little over a dollar coming back up. Some tickers will even continue back up towards and past the HOD or pre-market high.

I use the same signal to short or long that I do when I am looking to trade a bottom reversal setup.  To short, I simply look for a candle to make a new low compared to the previous candle.  I'll look to enter on the next candle using the high of the previous candle as my stop.  I will look for just the opposite on a long.  For me, this only works on the 5 minute chart.  A 5 minute chart forces me to be patient and I have to be patient trading from work without my good "tools".



This chart shows how I look to trade this gapper if it set up like this.  Now if you look at the VWAP, which is the purple line, you will see how I can use it to determine my entries and exits.  When it falls below the VWAP and continues I know it's a good short opportunity.  If it dips below and comes back above, I will exit the short.  Not only do I look at the VWAP as a potential support or resistance point, I also use it as another tool to help me determine the strength of the ticker.



Another element that I started looking at is the potential support and resistance on the daily chart.  You can see that the previous resistance level held as support. Below is the daily chart that shows where I found the support level and the two gap up days on the daily chart.  Needless to say I will be watching this one again on Monday.



The strategy that I am using after lunch in addition to watching the gappers from the morning to see if  they are setting back up is the bottom reversal strategy.  I got this one from Ross at Day Trade Warrior.  Here is the best explanation of the strategy: http://www.warriortrading.com/bottom-reversal/

I discovered one key component to this that I don't think Ross talks about.  If the SPY is tanking, the reversals, if they occur, will be weak at best unless there is a catalyst that comes in to move it against the market.  So I will be watching the SPY in the afternoon while I am trading these bottom reversals.


Here was the SPY on Friday.  Below is a chart of RAI, which I traded as a bottom reversal on Friday. On a good day, the reversal move should have come all the way back up to the VWAP.  There were several tickers I looked at and they all looked worse than this.  I made a profit but it was small compared to what I was expecting.  Then it hit me to look at what the market was doing.  I looked at the SPY and that told me all I needed to know so from now on I will make sure I know what the overall market is doing when i am looking for setups after 10:30 or so.  Unless there is a catalyst to give a ticker a reason to move against the market, it usually follows it.


That's it so far.  If I have anymore updates I will share them with you.

3/2 - 3/6 Weekly Recap

Busy month continues at work so my trading has slowed considerably.  I am learning and working on new strategies that would allow me to be able to trade more when some of my setups are not working with the market.  I'm still finding new wrinkles to the morning gappers so I think my long setups I trade are enough to keep me going for a while.  I'm still working on finding shorting opportunities off of my morning gappers and I think I will have that together relatively soon.

The bottom reversals I trade using the scans in the DayTrade Warrior chatroom which always seem to have the higher $ tickers.  I think I am trading them well but I do not have enough capital to make decent money on these yet.  I will keep trading these and learning the setup in hopes of building my own scan to find lower $ tickers

Decent week considering how little time I have.  Made a few dumb mistakes trying to make something happen in the short time I am at the computer but I think I righted that ship pretty quick.  Kept my losses small.

I plan on doing a blog this weekend specifically on the setups I am trading and what I have learned that has helped me trade them better.  I don't have much commentary on my trades this week since I will explain most of it in my next blog.  Also, due to lack of time I can't make my charts and put notes on them like I used to.  Should be back to that after a few weeks.



Total Profit for the Week - $1,412.00 before commissions
Total Profit for the Month - $1,412.00 before commissions
Total Profit for the Year - $15,281.00 before commissions



Tuesday, March 3

($10) loss ATHX Short Stock by AverageJoeTradr


On this trade I entered without any signal to.  I was just trying to make something happen while I had time at the computer.  No indication that this was a good short. It was actually a good reversal candidate.



$190 profit BABA Long Stock by AverageJoeTradr



I think I did a great job on this trade.  Played the reversal setup perfectly.  Just need more capital to go in with more size then I could really bank on these.


Wednesday, March 4

$105 profit EXAS Long Stock by AverageJoeTradr


Caught a quick scalp on the push towards HOD.  Something I caught when I came back to my computer



$36 profit CNX Long Stock by AverageJoeTradr


Looking for a bottom reversal but was a little early.  Would have re-entered if I was at the computer



$90 profit WNR Long Stock by AverageJoeTradr


Another textbook reversal setup.  More size would equal decent profit


Thursday, March 5


$480 profit PEIX Long Stock by AverageJoeTradr
$250 profit PEIX Long Stock by AverageJoeTradr


Morning gapper setup.  If I was in more size I would have scaled out instead of getting all out then back in again but great trade for me to make my week.


($20) loss VSLR Long Stock by AverageJoeTradr


Entry was a little early but could not keep entry because I had to leave computer.  I seem to be in all the right tickers now but not being able to watch the charts all day is really hurting me.


$84 profit AMBA Long Stock by AverageJoeTradr


Another bottom reversal try.



($15) loss RAI Long Stock by AverageJoeTradr


In a little too early.  Ticker took off about 20 minutes after I exited.  Had to teach class so I missed the move.



$93 profit CYH Long Stock by AverageJoeTradr


Bottom reversal setup




Friday, March 6


$129 profit RAI Long Stock by AverageJoeTradr




On this bottom reversal trade I used the nearest level of support as an entry point.  It's not as safe as waiting for a signal of a trend change in the chart.  I figured that if I was wrong the worse that could happen is that it consolidated for a candle or 2 and I could get out even or with a few cents loss.  It's a high $ ticker so I could only got in with a 300 share position.  I also noticed that in the previous hour that I was watching It consolidated and around the 70.82 mark some resistance had built up.  I went into the trade with the idea that I would exit at .82 if I didn't like what I saw in the price action if it reached that point in the trade.