Helping Bob trade the US markets

[ducati916]

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

 

[tech/a]

One above and below what?

Daily.
What would that be and why?

 

[ducati916]

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

 

[tech/a]

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.

 

[peter2]

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.

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.

 

[peter2]

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).

 

[Value Collector]

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?

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.

 

[peter2]

@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.

 

[ducati916]

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

 

[peter2]

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".

 

[peter2]

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?

 

[peter2]

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.

 

[peter2]

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.

 

[qldfrog]

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

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.

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

 

[ducati916]

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.

View attachment 106020

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?

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

 

[peter2]

@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.

 

[peter2]

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.

 

[peter2]

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?

 

[peter2]

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.

 

[frugal.rock]

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