Short term trading help

[troy81]

Hi,

I have started short term paper trading and had a long view on the following stocks:

BHP - Trade entered 1st July @ $33.83, stopped out at $32
Stock moving sideways and entered at bottom of recent trading range with view of move to recent highs of $37 with stop at $32 allowing for a bit of volatility

RIO - Trade entered 1st July @ $48.50, stopped out at $47
Just before rights deal and had thought that all of this effect was built in. Stock was moving sideways and entered on low of recent trading range with stop at $47 allowing for a bit of volatility

BSL - Trade entered 1st July @ $2.52, stopped out at $2.35
Stock was moving sideways prior to entry and bought on price support with view of move to recent high of $3 with stop just below recent low

CSL - Trade entered 1st July @ $31.89, stop set at $30.50
Clear up-trend looking at target of $35
Stop at start of up-trend

Each of the stocks to me exhibited the same kind of pattern that I initially have been looking for - sideways movement with view of this building support from which an upward trend can be generated. I have consciously decided to focus on price and volume with little to no indicators at the moment as I would like to understand the basics.

However can somebody please give me some guidance or other indicators in these stocks that stand out as signals not to enter the trade? i.e. if there are common trending patterns that I should have seen or if there are other indicators that would have indicated not to enter.

I am not looking for a one size fits all answer but constructive criticism/ideas that will help me in future trades.

Thanks,
Troy

 

[Trembling Hand]

Each of the stocks to me exhibited the same kind of pattern that I initially have been looking for -

What is the success rate of this pattern? 30% hit rate but a 1:10 R:R? Or 60% with a 1:3 R:R? When has your market shown the same patterns? After the XAO has made a 4 week low? after its made a 3 month high?

What evidence have you that this pattern is worth trading and are we in the same market conditions? that's the basics - start there (thou very few do )

 

[skyQuake]

Yeah what he said :

No but seriously do backtest it.

heres food for thought:

Each of the stocks to me exhibited the same kind of pattern that I initially have been looking for - sideways movement with view of this building support from which an upward trend can be generated. I have consciously decided to focus on price and volume with little to no indicators at the moment as I would like to understand the basics.

Could this have been sideways movement after a strong rally, with distribution occurring and preparing for the next downmove?
You're on the right track, just get more screentime!

 

[el caballo]

A quick opinion ... on the CSL trade, you are entering after a one month countertrend, which took place within a longer-term downtrend (see the first lower high on 1/5/09). 29/6/09 provided the second lower high. Your trade on 1/7/09 is against this longer term trend. I think the probability of it continuing to rise after you placed your paper trade was lower due to the fact it had already risen for a month within the longer-term downtrend.

 

[Aussiest]

Also, look at the broader patterns. If you're looking at longer time frames and sideways movement (to identify short term trading opportunities), it might be a good idea to determine where is the market heading next. Eg, what news or data is due out that could possibly move the market?

My thoughts: probably not a good idea to go long a few days before US is set to start releasing reports.

 

[troy81]

Hi guys,

Thank you very much for the timely, quality replies. More screen time and looking at longer term trends are great and will come with time.

I am relatively good with numbers and will be taking on TH's suggestion of working more on probabilities of patterns. This will be difficult with the amount of analysis that could be done and fine tuning what will be useful and not.

I have started looking at BHP and the correlation with day ranges that are 1SD, 2SD and 3SD away from the mean, then taking the corresponding entries and looking at the average return over differing periods.

This is just one idea that I have had but am wondering if this is the kind of thing that TH is referring to and if so what other measures have people used and found useful.

Thanks,
Troy