# Helping Bob trade the US markets



## peter2 (7 December 2019)

I play tennis with a guy called Bob. He's very consistent and I know the rallies will be long when Bob's on the other side of the net. I try to hit a winner against Bob and he just waits for me to make a mistake. Bob wins more points than I do.

Bob tells me that he started trading US markets about six months ago and it's not going well. He's asking for my help. What are you doing that for? I ask. Bob's trying to accumulate some short term profits and he's trading intra-day and short term. I know Bob's not a natural risk taker because I play tennis with him. Bob doesn't go for the lines he just keeps hitting it back.

Hell Bob, I say, why did you want to start the hardest trading job in the world (day trading)? Well Bob's no different to the rest of us as he's seen all the Youtube vids that show how easy day trading is.

Assessing Bob's resources comes down to three things, knowledge, time and capital. I know Bob knows the basics and his way around a trading platform. He's got a couple of hours every evening to look for some trade opportunities and I know he's not going to miss a few thousand dollars when he loses it. Bob wants to learn how to trade profitably.

You've no doubt spotted the inconsistencies in this story. Bob's not a real person, but I think the circumstances are quite common for beginning traders.  Should we help Bob?


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## peter2 (7 December 2019)

Of course we're going to help Bob.

OK Bob, show me what you've done. Bob produces his notebook with all his trades recorded. Hell Bob, why don't you use a computer spreadsheet?  Well Peter, why don't you use a mobile phone? 
I told you, Bob keeps returning my shots.

I entered Bob's results for the last few months into my spreadsheet and here they are.




No surprises there, Bob's losing money. He started with $26,600, stayed even for a little while, then started losing more consistently. Ring any bells? Is this like your trading account?

Bob's done some day trades (DT) and a few overnight swing trades (SW).

_Day trades_: Trade risk = $120 / trade. Bob's cutting his losers quickly. That's good, but I also think he's grabbing some profits too quickly as well. Typical newbie mistake. Bob's losing an average $11/trade. His round trip costs are $10 so he's not doing too badly at the day trading caper.

_Swing trades_: Trade risk = $300/trade.  With only five trades the numbers are too low for analysis, but there's been only one winner in those five trades. We need more information about his trading plans in this activity.

The number of results are too low to draw many conclusions but the equity curve is not going in the right direction.


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## ducati916 (7 December 2019)

For day-trading, you require a catalyst to create volatility in the day. News/earnings, something that can be picked up early enough to enter a trade and catch part of the move.

Good news/Bad news....stock trading higher/lower, likely to continue for a period, jump on, jump off. The thing you need to be aware off are the time frames above your entry. News should breach any resistance/support in higher time frames, but, not always!

Some like to trade with the market, some opposite to the market. I prefer with the market.

jog on
duc


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## frugal.rock (7 December 2019)

ducati916 said:


> For day-trading, you require a catalyst to create volatility in the day. News/earnings, something that can be picked up early enough to enter a trade and catch part of the move.
> duc



The 'something' that can be picked up early enough is price and volume movement when there's no apparent catalyst. 
How often do we see price and volume movement for no apparent reason?!
The schamistificated investors, director's, fund firms etc are often 'out to play' on the random stock/s of the day causing the volatility.
I generally just day trade on the general fluctuations on a few favourite actively trading stocks, trying to time a buy on or near the low of the day. Stocks I watch and trade generally on most of my free time so I get this sort of complacency towards them and feel like I know it's habits. 
However, there's nothing like trying to catch knives on a day trade to teach you a good lesson, or three
F.Rock


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## peter2 (7 December 2019)

OK let's deal with day trading first.  Bob enjoys day trading in the first hour of the US trading day and should benefit from having a regular routine to find stocks with a catalyst and then use a plan to trade them. Bob's not losing very much day trading and he should be able to turn things around fairly quickly provided he does the extra work.

@ducati916's short post was spot on.

The aim of the pre-market routine is to find stocks symbols to watch for your setups. 

_Macro-catalysts:_  General market sentiment (bullish/bearish), US and world general news, US scheduled reports (NFP, employment, FOMC news etc), Trump tweets, etc

_Sector catalysts:_ OPEC news, movement in gold price, USD strength/weakness, news on large cap stocks, etc

_Stock catalysts:_ Earnings (every 3mths), broker upgrades/downgrades, pre-market gaps up and down with significant pre-market volume, etc

The pre-market routine should provide 3 - 8 charts to watch closely for your setups immediately after the open. You only need to watch a few charts and you'll need to watch them very closely. If you're going through other watch lists or looking at too many charts you'll be distracted too easily and you'll miss your trade.


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## peter2 (7 December 2019)

Let me use an example form last night (061219). There was news from OPEC about possible reductions to their oil production. Just prior to the US open there was some confirmed numbers about their planned reduction. This news could lead to an increase in the oil price. One could trade the oil market or trade US oil producing stocks. 

This pre-market news should have you watching a few oil stocks for setups. This pic shows my oil stocks work space. The two major oil/energy ETFs are on the left (XLE - energy sector, XOP- oil/gas producers) and I watch USO. You can see the immediate price rise after the open on this OPEC news. 




On this day it didn't matter which oil stock you were watching. All of them went up. Even the ETFs are tradable.


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## peter2 (7 December 2019)

It's very likely that two people with a similar pre-market procedure may end up with different watch lists for the open. The work is very individual and influenced by our personal biases. For example, Bob may have read the news like I did and focused his attention on the better than expected jobs number that sent the market higher. There were a lot of stocks that were going to gap up at the open and his list may have included many of them instead of the oil stocks. Semi-conductor stocks were worth watching, so were banks, retail, tech stocks. It was that sort of open after the good news. 

I suggest that we keep notes about our pre-market observations and record our opening watch list. The idea is that we monitor the effectiveness of our pre-market routine. We should know how often our pre-market work selects stocks that actually form the setups we want to trade. 

There's a different catalyst every day and some days there's none. The market has sloppy choppy days and there's no trading setups in the list we choose. That's OK and we don't have to trade everyday.


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## peter2 (7 December 2019)

I'd discuss these suggestions with Bob and urge him to create his own pre-market routine. I'd suggest that he monitor his effectiveness at finding stocks that move the way he prefers. We'll talk about it in a few weeks time. 

I know we can open our trading platform just before the open and find something to trade fairly quickly. How's that working out for you? Are your stats where you want them? Bob's stats show that he can't cover his costs. He has to let the winners get bigger and this is hard to do without confidence.

Chatting with Bob it's clear that he's done a lot more trades that haven't been recorded. Is this familiar? 
All trades must be recorded and until then we won't know if there's been any improvement. 

Day trading is very much an individual activity. We can discuss possible swing trades as there's plenty of time while the market is closed. There's no time to discuss possible day trading opportunities especially in the first 30 minutes. They set up within minutes and we've only a minute or two to act.


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## qldfrog (8 December 2019)

Thanks for the thread Peter, i i am not currently interested in this type of trading, would probably not suit me well at all, but there are quite a few gems and many will benefit


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## Gringotts Bank (8 December 2019)

I like this guy's channel.  Tell Bob to consider adding.


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## peter2 (11 December 2019)

This thread has struck a snag and I need your suggestions. I thought I could talk Bob out of his day trading fantasy and switch him into swing trading or a US portfolio. I know we could make this work and I was keen to see if we could produce a much better performance with a US stock portfolio than AUS. I had dreams of maybe +50%pa. 

Well, the snag is, that Bob is determined to make day trading work. He's showed me some pie in the sky blue print aspirations that make my portfolio performance dreams look ordinary. I won't show you the numbers but you get the idea. Many of us probably started with crazy projections like this. 

Bob starts off with the aim of earning +1R /day that's +5R/wk etc... no I won't go on. 

I have to support Bob with his ideas and we've discussed the pre-market routine and I believe he's recording his notes and checklist's for our fortnightly discussion (Bob provides the food and drinks). 
Bob's given himself until the EOFY (Jun 2020 in Aust) to see if he can master this activity. 

*My query is, what can I show you to make this thread entertaining, educational and document a traders journey tackling something that's very difficult to master? *

I could post a few winning and losing trades but that gets a little boring after a while and then there's doubt that the examples are being picked to make Bob's trading better than it really is. You wouldn't know if Bob's showing me the on plan trades and is trading like a maniac off plan. This won't be a concern with Bob as he's given me viewing access to his account. At the moment I'm thinking of posting fortnightly updates of Bob's account and posting the results as a batch along with his cumulative progress.


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## qldfrog (11 December 2019)

peter2 said:


> This thread has struck a snag and I need your suggestions. I thought I could talk Bob out of his day trading fantasy and switch him into swing trading or a US portfolio. I know we could make this work and I was keen to see if we could produce a much better performance with a US stock portfolio than AUS. I had dreams of maybe +50%pa.
> 
> Well, the snag is, that Bob is determined to make day trading work. He's showed me some pie in the sky blue print aspirations that make my portfolio performance dreams look ordinary. I won't show you the numbers but you get the idea. Many of us probably started with crazy projections like this.
> 
> ...



Hi Peter,
As i see it, the problem is that fortnight result for day trading will be just figures..we lost or won xxx
A bit like these pie in the sky numbers "Bob" was mentioning...
Too far from the individual day trades actual action to be of much instructive value..could generate greed envy or fear but not much else?
And if Bob details his Peter flavoured trade, day by day, we might be flooded with details hiding the real information..
Too much information is no information. To little..the same
You are trying to solve a hard problem on my opinion.
I have to say i am not interested in day trading so this could have affected my judgement, or absence of if i listen to some posters there


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## tech/a (11 December 2019)

Im waiting to see something that I don't believe you can day trade without.
I haven't seen it mentioned yet in this thread.
Lots of things pertinent have been mentioned.
Anyway off to Melbourne. Presidents Cup and Shopping!!!

Also why stock
There is a myriad of Futures.
Long and Short.


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## peter2 (11 December 2019)

Why equities? I'm comfortable with them.

The main theme of this thread will be on Bob's day trading journey but there's no reason why I can't provide a bit of competition by managing a Wkly/Dly portfolio of US stocks. I help Bob and get experience managing a US stock portfolio. Seems like a win-win situation.

Hopefully the thread won't become confusing. Bob and I will both provide fortnightly updates and  between the updates we can post a few examples that demonstrate our trading setups and discuss aspects of trading as they occur.

*I'm mindful that I placed this thread in the beginners section here at ASF.*
This means I'm happy to reply to any and all questions related to trading US stocks from Aust.

Why trade the US market?   It's bigger,  the volumes are huge and it's much easier to day trade and short stocks.


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## tech/a (11 December 2019)

Ok Peter I understand.


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## frugal.rock (11 December 2019)

So Poiter, 
I am wondering, does Bob have a contingency plan for Forex rates?
I don't know how it works apart from there's a spread of what, 2%? on exchange, and if the AUD gets stronger again, does this add costs into Bob's arrangements or can he make a bit from Forex swings as well, assuming he masters his venture in 6 short months and has profit he wants to bring home?
I get the monstrous exposure comparing US markets to ours.
Where a company is listed on multiple exchanges, do SP movements mimic or relate?
Example, a stock on the asx goes up, is it usually or often reciprocal in the US ?
F.Rock


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## peter2 (11 December 2019)

This is an important notice for US day traders and particularly significant for Bob's account as the balance is $25.6K. Bob opened a normal equities margin account with a large US broker and has started trading. Bob is aware of the SEC Pattern Day Trader (PDT) rule. 

From Investopedia:



If Bob executes more than 3 day trades within 5 days his account will be flagged as a PDT account. If his account balance falls below $25K USD he will not be allowed to trade until he tops up the account to >$25K. Once an account is flagged as a PDT account it's extremely difficult to have this reversed. 
Bob's options: 
(i) Restrict his day trading to no more than 3 day trades in a 5 day period. (Might cramp his style)
(ii) Top up the account to provide a buffer until he's consistently profitable.
(iii) Trade as much as he wants (account flagged as PDT) but does not let it go below $25K. (Only trades winners, yeah, good luck with that).

_Note_: Brokers handle this rule intraday with slight differences, but they must comply at the EOD. It's up to the traders to understand how their broker handles this rule. If you have an IB account in Aust and day trade US equities you must understand how IB handles this rule.


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## peter2 (11 December 2019)

@frugal.rock   Poitier is not here at present but "Guess Who's Coming for Dinner?"

No, he's not concerned by changes in currency exchange rates. I suppose once his account gets into the 1000s of Ks he might be a little more concerned. It's another cost of business but the much lower commission rates in the US help. 

Yes, the prices of stocks on multiple exchanges mimic each other and take into account the fluctuating exchange rates. There are bots (algos) that pounce on any differences in milliseconds.


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## ducati916 (12 December 2019)

peter2 said:


> we can post a few examples that demonstrate our trading setups and discuss aspects of trading as they occur.




This is generally more interesting to me than just purely looking at the results of some mechanical selection.

Being that it is the US, also, more interesting.

The thing with DT US is that the DT stocks change over time. In the late '90's it was a list of QQQ stocks. Today the DT stocks are the TSLA, NFLX, etc.

Wait to see which way Bob jumps.

Just looking at market overall, looks like a couple of down days are setting up. If you trade in general market direction, I'd be looking for short set-ups.

jog on
duc


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## ducati916 (12 December 2019)

For those feeling brave, and clearly Bob falls into that category, TSLA looks (to my eyes) a good short set-up for today.

So as a (paper) trade Short 500 TSLA @ $355.40

jog on
duc


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## ducati916 (12 December 2019)

Now actually a real trade:

Buy DIA....100 @ $278.97
Sell QQQ....130 @ $204.31

Pairs trade looking for convergence.

jog on
duc


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## peter2 (13 December 2019)

@ducati916  thanks for your comments and contributions. It encourages me to continue with a bit more detail. 

Bob has decided to go with option (iv) (his own). He's going to trade his setups whenever he see them and if the account falls to 25K he's prepared to deposit another 2K USD to give him a buffer. It doesn't matter to him if the account is flagged with PDT. 

With that sorted we address the all important topic of his trading plan. As well as the trades he showed me Bob's been trading in a SIM account. Bob's trading setups are varied and many. I don't think this is a good thing for a new trader. 

I ask Bob what sort of price movement his he attempting to trade? 
Is he trading individual chart patterns? Is he trading these patterns with the trend of the market and sector? It's much easier to swim with the tide. If he's trading patterns then he must allow time for the patterns to form. He's unlikely to be starting a trade in the first few minutes. 

eg. TSLA has been one of the strongest stocks in a rising market over the past three days. TSLA has gone up every day after the open the past three days. There's been good opportunities for a continuation long on each day. Since TSLA has been so strong I would be reluctant to start a short now, even though its at a prior swing high. After three consecutive days up I'd be reluctant to go long also. (Note; I've heard of the Taylor swing cycle but never really studied it.) 

OR Is he trading against other traders? This will be difficult to convey as I've not written about it before. There's a constant battle between supply/demand every minute the market is open. However on certain occasions the emotions of fear and greed are more dominant. 

eg. Price gaps up on good news. All the shorts realise they're wrong and must get out immediately (they buy to cover, increases demand). Demand also increased by the FOMO crowd (retail traders, not the pros). The sudden increase in price induces many holders to sell or take partial profits (supply increases). The pros (instos) also take the opportunity to sell some of their inventory (more supply). The chart shows the outcome of this opening battle. How many times have we seen price gap up on good news and immediately fall? How many times have we seen good news spur the price higher? 
Either can happen, so what are you waiting for to trade?

IMO a DT has to decide how he/she is going to tackle a gap up. Do you wait for a setup to go long or do you wait for a setup to short it? If you wait for either then you're likely to miss them. 



ducati916 said:


> Some like to trade with the market, some opposite to the market. I prefer with the market.




I'm with the ducati916 on this.
In the few minutes after the open if price gaps up, I'm only looking for a long setup. If price gaps down I'm only looking for a short setup. If the market is going up I'll be watching my pre-market charts for longs only. I won't have any shorts but I will watch an inverse ETF in case the market turns down. 

_Aside_: Wow, the US market has just spiked up and pinged me into two trades and they've hit their targets within minutes. 8 minutes after the open and I'm done for the day. (Unless I hang around to watch what happens next  ). 

Back on topic. I'm trying to say that a DT must have a plan A and also a plan B. 

I'll end here as the market has turned my head inside out.


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## peter2 (13 December 2019)

IMO Bob has to decide what he's going to do. If he's going to trade individual chart patterns then his W% will be 45 - 50%. If he's trading with the market as well, maybe 55%. If he's trading with the market and the sector, maybe 60%. If he's trading the strongest stock in the strongest sector in the same direction as the market, maybe >70%.

The more information Bob has, the more he's able to make a better decision at the correct time. Assembling all the right information and evaluating it quickly while looking at your fav charts for your setups and placing the orders at the correct time takes *lots* of practice.

_Aside_: _the market is still going higher and I'm out. It appears that a Trump tweet about China trade just after the open has spiked the market higher. Gotta love that man._

Bob has to either improve his W% or let his winners get bigger. I'm trying to point out that he can do both if he does some pre-market analysis, simplifies his TP and executes it consistently well.

From one of Aaron Korbs youtubes (thanks @Gringotts Bank ).
Step One: Master your TP setups.
Step Two: Become consistently profitable
Step three: Scale UP.


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## peter2 (13 December 2019)

Today (12/12/19) provides a good current example of what I'm trying to convey.

The US market have been going up over the past five days. My bias is to the long side. My pre-market work finds me some bullish charts and I place a few stop orders on a few charts soon after the open. If prices go down, I delete the chart. Not interested in that stock for the rest of the day.

Today soon after the open, Trump tweets again and sends the market to the moon. This is unexpected but great. Prices are on their way to the moon but my price targets were only in the stratosphere and I'm taken out for nice regular size profits. My day's work is done.

Now, if the Trump tweets sent the market lower all my pre-market work and bullish charts would have been for nothing. Except, that I watch inverse market ETFs (UVXY, SQQQ) as a back-up (plan B). When I see the market start to fall I will look to the appropriate charts for a setup to go long as they're inverse.

On a normal day I'll see what the index has done during the Euro session (pre US) and see what happens at the open. After two minutes I'll know which sectors are strong and weak. If the market is going up I'll go to my semi-conductors page and find a perfect setup.

Q: What do you happened in the semi-conductor sector today?
Check the image to see if you're correct.




Even after the initial reaction to the Trump tweet, were there any low risk setups (opportunities) to go long in this sector? 
[Yes, check out the shallow red bar pull-backs in the charts of AMD, MU, WDC, QCOM, NVDA.]


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## peter2 (13 December 2019)

Whoa there, P2.
Going over my last few posts, have I given far too much information for a beginners thread?  (*)
I won't move this into the ASF members section (yet) but I will ease up on the information I post.

I hope Bob assimilates this information and can apply it in real time. I know he's more analytical than me and probably more determined. It'll be interesting to see his next real (not sim) results.

* - Inside joke, 99% of people reading this will not do the work required.


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## ducati916 (13 December 2019)

So just an update on the paper trade.

If Bob (aggressive) had been DT and now we know he is, then on  his TSLA short he could have exited at the close at $352.70 +/- for a profit of $3 +/-

jog on
duc


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## frugal.rock (22 December 2019)

peter2 said:


> * - Inside joke, 99% of people reading this will not do the work required.



This.
Not going there.


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## peter2 (23 December 2019)

Now that we're in the holiday season the daily ranges and volume are declining. This makes day trading much harder. The US markets have been gaping up on the open taking most of the daily range away from the individual stocks. Of course there are plenty of good trades but one has to be lucky enough to be watching them before they trigger. Bob and myself have noticed that opportunities are decreasing and the ranges contracting. 

It's probably better either taking a break from the markets or preparing for next year.


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## peter2 (27 December 2019)

After another tennis session, Bob still didn't make many mistakes (= I lost) we discussed his day trading progress.

Bob's got an issue that I think is reasonably common. It's an issue I deal with also. The issue is "failing to pull the trigger" or coulda, shoulda but didn't. This is usually due to a lack of confidence in what you're doing or a fear of losing money or being wrong.

Like me, Bob is an analytical thinker. We know that we must first identify the problem before we can work on fixing it. (Sounds a bit like me and my computer atm.)

Fear of losing money is the easiest to diagnose. Bob is not risking too much and has even reduced the initial risk that he was using to $60 / trade. The problem remains.

So it's a lack of confidence or fear of being wrong. I don't think Bob lacks confidence in the process of trading as we've discussed it many times and Bob understand the principles of profitable trading. He's alos done a lot of correct sim trading to perfect his trading process. I also don't think it's a fear of being wrong. Bob admits to being wrong once or twice in his life.  Bob's profession is accountancy. The numbers must always add up and with Bob they always do. I think Bob like myself has a problem dealing with uncertainty.

Trading requires us to deal with uncertainty using a probabilistic mindset. Unfortunately our brains have been conditioned to treat uncertainty as a threat that must be avoided (flight) or confronted (fight). This automatic (limbic) response is hardwired and bypasses the rational thinking mind.


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## peter2 (27 December 2019)

Confronting the markets by risking too much and refusing to take losses is a recipe for disaster. Avoiding the markets is the safest option but that means we don't trade. 

Starting the day with I'm going to "trade the plan" is all well and good but the market does it's dance in front of us and our primitive (limbic) brain detects the threat of uncertainty and instigates the pre-programmed response. The first thing we actually think is that we missed the trade. No, we didn't have a chance.

However trading psychologists believe that we can re-condition the auto response by willfully changing our core beliefs. These beliefs are created by our rational mind to explain what's happening. We develop beliefs that trading is hard, that we need another plan or another indicator, that we don't deserve success or the money etc. 

Welcome Bob, to Trading Psychology 101. I'm no expert and I admit that the market uncertainty still triggers my primitive brain to avoid it.


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## peter2 (27 December 2019)

The resource that helped me deal with this problem was the book written by Mark Douglas, "Trading in the Zone". Mark points out that the problem with poor trading results is not the markets but the trader. All traders start with beliefs about the markets and beliefs about themselves. Most of these beliefs are not helpful in developing a consistent probabilistic mindset. 

Mark outlines an exercise in the book that may help. Start with an amount of money that you can comfortably lose as a tuition fee. Divide that by 20 and use the value as your initial trade risk. Then complete 20 trades according to your trading plan. No changes to the TP can be made during the batch of 20 trades. Once you've completed the batch you start another. (egads! My copy of TITZ is missing. Who has it? )

The possibly loss of the next trade is lessened by realising that it's only one in the batch of twenty. Once you've completed the batch you've got some stats to start working with to improve your performance. 

The first task is to get through your first batch.


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## frugal.rock (27 December 2019)

peter2 said:


> (egads! My copy of TITZ is missing. Who has it? )
> .



Teenage son?
And you thought he wasn't interested in 'the zone'.
Thanks P2, learn something new from nearly every post, and if it's not new, it's great positive reinforcement.
Must remember to look up limbic. That's a new one for me.
F.Rock


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## peter2 (27 December 2019)

The problem with Bob's earlier posted results was that he was trading two methods, swing trading (poorly) and day trading (inconsistently with no plans). 

Bob has decided to day trade only. We've outlined two trading setups to use. One continuation pattern when the market is moving in that direction (both up and down) and one reversal pattern when the market is reversing. We're always trading with in the direction of the market. We're only looking at a small manageable selection of charts for the trading setups. 

I've suggested that he use only the continuation pattern for the next batch of 20 trades and that he only trades "long". When the market falls there will be setups to go long in the inverse ETFs. If the batch shows a profit he'll build confidence that he can trade the pattern profitably. It's important to master one pattern that'll you'll always have confidence in and will be the"go to" pattern when trading gets you down.


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## peter2 (27 December 2019)

@frugal.rock  The fact that you acknowledged the acronym shows that your limbic or primitive brain is in excellent working condition. You probably posted the response before you thought it funny enough to do so.


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## frugal.rock (27 December 2019)

peter2 said:


> @frugal.rock  The fact that you acknowledged the acronym shows that your limbic or primitive brain is in excellent working condition. You probably posted the response before you thought it funny enough to do so.



Aye, I love it how you twist my primitive brain. I resemble that remark. I wonder how many other people trade like Bob? Bob and I are remarkably similar, quite uncanny really...


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## qldfrog (28 December 2019)

https://www.google.com/imgres?imgur...0&q=We Are Legion (We Are Bob)&source=sh/x/im


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## qldfrog (28 December 2019)

Hope you do not mind the holiday spirit fun there, but are we not all Bob....


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## peter2 (3 January 2020)

Spent a couple more US sessions with Bob. He's not trading freely yet and misses the setups he should be trading. I raised this problem of failure to pull the trigger because I thought it might be pretty common. Seems Bob and I are the only ones concerned by it here at ASF because there's been no discussion on the topic since I mentioned it. 

Or it could be that you're afflicted with "failure to post on ASF syndrome". That's pretty common around here. 

Once again Bob has showed me his plans for growing his account. Hey Bob, you've got to take the trades first.


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## qldfrog (3 January 2020)

Is it based on fear: absence of confidence in self or  system, or circumstances due to holiday season?
Maybe bob Bob is not ready enough, and need to paper trade a bit longer..but then be hit by regret and rage if he ultimately starts real $ just before a whiplash...


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## tech/a (3 January 2020)

Why has no one suggested to Bob that if he is day trading he should be using lower time frame charts and Patterns?


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## ducati916 (3 January 2020)

tech/a said:


> Why has no one suggested to Bob that if he is day trading he should be using lower time frame charts and Patterns?




Well 1 above and 1 below works well.

jog on
duc


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## tech/a (3 January 2020)

One above and below what?

Daily.
What would that be and why?


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## ducati916 (3 January 2020)

tech/a said:


> One above and below what?
> 
> Daily.
> What would that be and why?





Just timeframes: if you trade the 15 min chart, then one below might be the 5 min and one above might be the 60 min (or any combination you prefer). Essentially on this basis you are scalping trades.

jog on
duc


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## tech/a (3 January 2020)

ducati916 said:


> Just timeframes: if you trade the 15 min chart, then one below might be the 5 min and one above might be the 60 min (or any combination you prefer). Essentially on this basis you are scalping trades.
> 
> jog on
> duc




Not necessarily 
Volume and number of trades in whatever lower timeframe 
Will likely determine the one selected.

personally I have a group of possible trades on a watchlist 
I’m looking for is a price move which is way out of the norm
Getting on as quick as I can on the other side.

it’s always clear on the smaller timeframe charts 
There was a couple of rippers on TLSA last week.


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## peter2 (15 January 2020)

Update on Bob's progress. Well, there hasn't been much. Bob's having trouble with the time difference between Aust and US. The US markets open at 0130am locally and Bob's been asleep the last two US opens. I might have to step in and post a few thoughts.



ducati916 said:


> There are any number of day trader videos on Youtube, and I do watch the odd one...I am constantly amazed at how much money they leave on the table. This is due to the fear of turning a good trade (profit) into a bad trade (loss). You can almost feel the mental exhaustion. Swing trading suffers from the same issue, it is just not as visible as it is in the day trader.




@ducati916  Brilliant observation. It's an aspect that I've struggled with for ages. The aim is to turn a day trade into a weekly trade. It wasn't that long ago that you were discussing TSLA at $352 in this thread. tech/a also mentioned it. TSLA is now at all time highs near $538. A day trade back then with a $3 initial stop size would be approx +60R now. The account could be doubled with a bit of pyramiding into the current TSLA rally. 

I'd need a separate and very clear TP for this sort of activity. The W% would be quite low although there would be lots of BE results as price falls back to entry. I'd need to know the average win in order to be able to hold onto a trade to make it reasonably profitable overall. 

The hardest aspect for me would be holding through minor pull-backs that might see 10R wiped off the trade during the pull-back. I know we can't get to +60R without a bump of two on the way.


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## peter2 (4 March 2020)

Good news, US daylight savings starts March 8th. That means the US market will open one hour earlier  12:30am instead of 01:30am. When DST stops in Aust on April 5th the US market will open at 11:30pm AEST.  

Between March 8th and April 5th,  Bob and I can get better prepared for some US day trading fun/business (serious business).


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## Value Collector (5 March 2020)

peter2 said:


> I play tennis with a guy called Bob. He's very consistent and I know the rallies will be long when Bob's on the other side of the net. I try to hit a winner against Bob and he just waits for me to make a mistake. Bob wins more points than I do.
> 
> Bob tells me that he started trading US markets about six months ago and it's not going well. He's asking for my help. What are you doing that for? I ask. Bob's trying to accumulate some short term profits and he's trading intra-day and short term. I know Bob's not a natural risk taker because I play tennis with him. Bob doesn't go for the lines he just keeps hitting it back.
> 
> ...




I think Bob should play the market the same way he plays tennis.

E.g. just get the ball over the net and wait for the other guy to make a mistake.

To me it sounds like he is better suited to investing, particularly value investing for the longterm.


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## peter2 (5 March 2020)

@Value Collector  Astute of you to make that connection between tennis style and investing type. The real "Bob", not the caricature I've depicted in this thread is a successful long term investor and wouldn't really consider trading short term. I think he only mentions day trading to get a reply from me. I know he's fishing and won't go for the lure. 

The Bob in this thread is probably every person who thinks day trading stocks is an easy and profitable activity. Until they try it.


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## ducati916 (5 March 2020)

peter2 said:


> The hardest aspect for me would be holding through minor pull-backs that might see 10R wiped off the trade during the pull-back. I know we can't get to +60R without a bump of two on the way.




A way forward is Options. Options can provide you with a defined risk trade. No need to watch like a hawk from the moment you enter the trade till you close it.

You already have a method of selecting trades. Simply substitute an Option contract for stock. Incorporate (as Skate does) a time filter (which provides the time to expiry for the trade) and voila, you can capture the bigger moves with defined risk.

Not to mention, as Options are highly leveraged, the ROC is far higher.


jog on
duc


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## peter2 (16 July 2020)

Apologies @ducati916 for not responding to your prior suggestion to use options. I was too distracted at the time. 

Options: Yes, I agree this is probably the best way to handle that activity. The chance to win big or take a defined loss, without stress. The hard part is selecting the option strike price and expiry that provides the best "bang for buck".


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## peter2 (16 July 2020)

I noticed something odd in the US market tonight that I thought is worth recording (where's your journal P2?).  While I was monitoring the market I noticed this anomaly. I've only recognised this pattern once before (I didn't journal it, tsk tsk) and I remembered that I traded it and lost. (That's why it wasn't journaled hey P2?)

The markets involved are the SPY, TQQQ, TNA and VXX. All ETFs that I monitor for day trading. The VXX is an ETF that is highly correlated to the CBOE VIX value. I've noticed that the VXX inversely follows the SPY (SP500) more closely than the QQQs (Nasdaq). This means that when the SPY goes up, the VXX goes down. Well, almost all of the time. Tonight it did the opposite for a few minutes. 




You can see the normal inverse relationship between these two charts. The SPY goes up and the VXX goes down. Check out those last 8 bars on the VXX (lower chart). Whoa, what's happening here? The VXX is going up while the SPY is going up !.  Is the VXX indicating that this might be a great time to short the markets?


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## peter2 (16 July 2020)

Is the market giving me a high probability indication that it may fall very soon? 
Well, I don't really know do I, because I haven't recorded prior events like this in a journal.

Clearly, I'm thinking short (sell this this sucker, the VXX is always right).
OK so which market do I sell?  The weakest one. Which one is the weakest at that moment?




TNA is making new highs and is the strongest atm. Not this one.
SPY looks strong as well. Also it's too pricey to use for a day trade.
TQQQ looks the weakest and I'm comfortable shorting this one. Sell this one.


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## peter2 (16 July 2020)

Do you want to see the third part of this story? 
Do you want to know what happened next?  OK. . . ta dah...




Yep, you'll have to click on the thumbnail to see what happened. 
TQQQ along with the others fell like a rock. That's a great day trade opportunity. 
TQQQ was at 112 in the chart above, at the time I'm writing this I see that the markets have fallen further and TQQQ is now near 110. 

_Summary_: This is another example of how a trading journal will help a trader remember events like this one and perhaps profit from something like this in the future.


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## qldfrog (16 July 2020)

peter2 said:


> Do you want to see the third part of this story?
> Do you want to know what happened next?  OK. . . ta dah...
> 
> View attachment 106022
> ...



Well spotted,as a novice trying to learn about VIX correlation, this is most interesting.my timescale is too large for acting on such micro event but will this repeat...
So far Nasdaq is till lagging other indexes and Russell is the star .all up.
Reversion to the mean? Or just tremor before bigger crashes


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## ducati916 (16 July 2020)

peter2 said:


> I noticed something odd in the US market tonight that I thought is worth recording (where's your journal P2?).  While I was monitoring the market I noticed this anomaly. I've only recognised this pattern once before (I didn't journal it, tsk tsk) and I remembered that I traded it and lost. (That's why it wasn't journaled hey P2?)
> 
> The markets involved are the SPY, TQQQ, TNA and VXX. All ETFs that I monitor for day trading. The VXX is an ETF that is highly correlated to the CBOE VIX value. I've noticed that the VXX inversely follows the SPY (SP500) more closely than the QQQs (Nasdaq). This means that when the SPY goes up, the VXX goes down. Well, almost all of the time. Tonight it did the opposite for a few minutes.
> 
> ...




The big issue with day trading is that you need to make a decision possibly hundreds of times a day to be long or short. Conversely, there are day traders that will limit themselves to 1/2/3 trades a day or limit trading to a pre-defined loss limit.

Day traders will (normally) trade off of a chart. That chart tends to be fast (1/5/10 mins) some move out a little farther. Almost invariably what happens is that they develop a counter-trend trading style. CT trading is (a) far less profitable and (b) far harder. Why do they do it? Probably because when you watch every tick and each tick is worth $12.50/contract, or more commonly you are trading very volatile stocks with enhanced intra-day buying power (we were allowed x100 leverage on stocks over $40 at the time I day traded) you can add up profits losses very quickly. It just seems that a CT style lends itself to better defined entries. Day trading is ALL about entry. Exits are important, but if you f*** up the entry, it's over before it has even begun.

Now the anomaly that you have noted will further encourage a CT style. I'm suggesting that this is probably counter productive in the long term. To trade the twitch, I would say (a) use Futures on an Index, (b) use the $TRIN to that index and get on the right side of the impulse that will at least have (a) defined entry and (b) defined exit. The $VIX for day trading, not so much if you are using it CT. To catch the trend (swing trading) is a better use.

jog on
duc


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## peter2 (18 July 2020)

@ducati916 Once again thanks for your input. 
I'm the day trader who does 1/2/3 trades in the 1st 2hrs with a loss limit of -2R/d. 

Interesting, I'm a BO-trader and primarily a trend trader (shorter term swings). However my day trading stats show that I'm doing more CT trades than trend trades. Why? Better defined risk with the CT setup? Possibly. In my case it might be that the CT setups take longer to form and I'm more likely to be ready to nail the entry. I find it difficult to nail the entry when the trend is underway. I see the defined risk trend setup (very short pause in price movement) but the good ones take-off so fast that I have to anticipate it happening to nail the entry. It's hard learning this skill set. Is it worth learning? With a W% > 85% at 2:1. Hell yeah. Unfortunately that's not my W%. Mine is ~50% at 1.2. [BE]

Yes, the anomaly mentioned does encourage CT trades. I've noticed that most of my market observations encourage a CT style. I can see the weakness (supply) appearing while price is going up and I can see strength (demand) appearing when price is going down. I wait for the defined risk setup to form and nail the entry. My W% for the CT trades is ~65% at 1.5.

Thanks, Duc, you made me think about what I'm doing and I realise that perhaps I've been fighting against what I do well. I've been spending a lot of time trying to nail the trend trade entries because having this skill would improve my overall expectancy enormously, while ignoring the CT setups that provide a consistent profit.


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## peter2 (18 July 2020)

Another day trading observation (for those who are interested in this trading style and as a reinforced learning lesson for me). This is another market observation that I would describe as a CT opp. 

I monitor the oil sector everyday for day trading opportunities. As you know, oil can have large moves at times. I know the POO has risen before the US open (UK session), so I'm expecting a gap up.  XLE does move higher after the open BUT USO the oil ETF doesn't. USO falls. I'm thinking that if the POO is falling then the oil sector ETF XLE should fall also. The overall market was not a hindrance as the SPY was going sideways with a hint of weakness also. 

I'm thinking that I'd better short an oil stock. COP seemed weaker than my 1st preference XOM. 
You can see my observations on the charts at that time.



COP opened low and is trading below yesterdays close. 
XOM opened at yesterday's close and is trading higher. 
QED: COP is weaker and should be the better short.


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## peter2 (18 July 2020)

What happened next? Did P2 get it right this time? I'm shorting at the HOD (day's high).  




COP fell by 1.00 and my risk was 0.20. (+5R). Nice.

Did you notice that USO had stopped going down and was now going up, showing strength?. What would you do now? Unfortunately if you said buy oil stocks, you'd have lost. XLE and the oil stocks, after a small rally, fell further but not too far down.

_edit_:  The oil stocks didn't fall much further because the POO was rising and perhaps the days price movement had already reached it's average daily range (ADR). We don't short stocks after an above average move down, do we?


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## peter2 (18 July 2020)

I hope a few of you are enjoying these intra-day snippets. I'm posting them in this thread as its focus is day trading US stocks (even though the thread's title is all about Bob). I don't mind hiding these day trading snippets under a misleading title. Those interested will find them. 

They also provide me with a reminder when I review my threads. It's important to review what I've learned and posting here at ASF helps.


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## frugal.rock (18 July 2020)

peter2 said:


> I hope a few of you are enjoying these intra-day snippets



Must say that I am, much obliged. Have purchased amibroker and hope to find the time to nail it down.
My trading style seems to align with your own, however the consistency and the unemotional entries/exits don't... work in progress


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## qldfrog (18 July 2020)

peter2 said:


> I hope a few of you are enjoying these intra-day snippets. I'm posting them in this thread as its focus is day trading US stocks (even though the thread's title is all about Bob). I don't mind hiding these day trading snippets under a misleading title. Those interested will find them.
> 
> They also provide me with a reminder when I review my threads. It's important to review what I've learned and posting here at ASF helps.



Much thanks Peter,
While i am now sure day trading is NOT for me, i would never have been able to reach this position without valuable input such as yours.
Knowing what not to do is often as important as knowing what to do.
So your time was not wasted, be sure of that
Have a great weekend


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