Consolidation Area Trading Tips - from Fear&Greed blog

As I often do, I was studying Scott Farnham's Fear & Greed blog and found these examples of how he trades in and around consolidation areas.

July 1st

After my day-job project, I was able to get into the market for a few trades starting at about 1:30pm. Got off to a rough start when a quick drop in ERX blew through my mental stop in a fraction of a second. I did get out but took a 13 cent loss on what was to be eight cents. After that, I didn't do too badly, although stock movement seemed to be quite muted this afternoon. I had a couple scratch trades mixed in today, which I take as a good sign that I am getting disciplined about stops and trying to keep those pesky losses to a minimum in choppy consolidation areas. There is definitely an art to playing these "quiet areas" which lay between trend moves. One other notable trade was STEC which showed up on the IB "Top Price Range" scanner. I got in, then it moved in my favor. I had about a 7 or 8 cent gain on it so I decided to dump it for a small winner and move on to other stocks. I clicked sell, then the candle popped just a fraction of a second later, I got filled for a 2.5 cent loss, then it moved right back to where it had been when I clicked sell. Now, I know it wasn't my order because my paper-trades don't fire into the market. What it does tell me is that I am making moves in patterns which others are also making. I've seen other examples of this. To me, that is a bad sign... it indicates herd thinking which is preyed upon by experienced traders. In the case of STEC noted above, I remembered that the stock was getting stale at the price level it was resting on as I clicked to exit. As a novice at this, it seems that other novices who were trading Real Money probably got "beaten up and their lunch money stolen" for making the same move. Do I know all this as fact? No, it is a supposition. I think it has a high degree of likelihood.

I had a number of chances to double up on a stock as it moved in my favor today. I didn't take all of those chances but did take two. One was a long trade on ERX for $29.68 at 2:23pm. Moving well, I took it long again for $29.76 thirteen minutes later. I scaled half out 4 cents higher for a $35 gain and then let the other run to $29.87 before taking the whole trade off. Total gain was $105. I got 68 % of that particular move. It was my best trade of the day... took more than 65% of the move, added to a winning position, and scaled out to get some quick profit while letting the original portion run.

Another notable trade was on ERX at 1:49 pm. I bought at $29.86 and waited 10 minutes to sell at $30.02. I captured 64% of the move; 16 cents of the 25 cents available.

So far, so good... the best part of this new approach is not taking large losses. And while I feel as though I have regressed in my training, I know it is for the best in the long run. It will take time to adapt but I am excited about the future...

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8 for 13 winners. Success rate of 61% and a gain of $175 in 2.50 hours of paper-trading. Stops enforced on all trades and no adding to losing positions. Two scratch trades not counted here.

Recap for June

It was a good month except for June 1st. June first was the day in which I closed out my paper-trade experiment from May 29th. This was not a day-trade but two positions (GS,SKF) in which I had a big unrealized loss by EOD but held onto them to learn a few things about how IB worked with regard to margin; more specifically, the process of share liquidation to meet the margin requirement. (I refer you to my summary of May 29th for details) In the interest of disclosure, I will list that big losing trade but also do my monthly summary without it. Loss of that day was -$13,211.
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LIVE TRADING:

Live Trading Gains: +$257, net of commissions.
Live Trades: 23 for 30; 77%
Live Ave Gain Per Day: $51
Live Ave Gain Per Hour Traded: N/C cannot compute, mixed with paper-trading
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Days Live Traded in June: 5 out of 22; 23%
Days Live Traded With Gain: 5 out of 5; 100%
Days Live Traded With Loss: 0
Hours Live Traded: N/C, cannot compute
Largest Daily Loss: DNA
Smallest Daily Loss: DNA
Largest Daily Gain: $128 on June 18th
Smallest Daily Gain: $5 on June 16th
Most Active Day: 7 for 10 on June 19th
Least Active Day: 1 for 1 on June 15th and June 16th

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Paper-Trading:

Gain: +$10,065
Loss: -$3,146 (with June 1st)
Trades: 134 for 176; 76% winners
Ave Gain per Day Traded: $503
Ave Loss per Day Traded: -$157 (with June 1st)
Ave gain per hour traded: $116.59
Ave loss per hour traded: -$36.44 (with June 1st)
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Days paper-traded in June: 18 out of 22; 82% (19 of 22; 86% with June 1st)
Days traded with a gain: 17 out of 18; 94% (17 of 19; 90% with June 1st)
Days traded with a loss: 1 out of 18; 6% (2 out of 19 with June 1st; 10%)
Hours traded in June: N/C, mix of live and paper trading on some days
Largest Daily Loss: -$37 on June 29th (-13,211 with June 1st)
Smallest Daily Loss: -$37 on June 29th
Largest Daily Gain: $1,670 on June 8th
Smallest Daily Gain: $21 on June 17th (primarily because I live-traded that day)
Most active day: 32 for 40 on June 24th
Least active day: 1 for 1 on June 17th (live-traded that day, also day with smallest gain)

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Totals:

Gain: $10,322 (-$2,889 with June 1st)
Trades: 157 for 206; 76%
Ave gain per day traded: $516 (Loss of $144.45 with June 1st)
Ave gain per hour traded: $120 (Loss of $33 with June 1st)

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Days traded in June: 20 out of 22; 91% (21 of 22 with June 1st; 96%
Hours traded in June: 86.33 out of 143; 60.4%