January 28th

I had some extra time today to practice trade today so I took advantage.

Nothing unusual really... just looking for my favorite signs of direction change as guideposts for my entries. While my instincts seem to be improving, I still find myself in early, unable to sit back and wait for the candles to show me the way to a timely entry. Inevitably, I am also early getting out, though that is less of a concern to me at this point. When using 5-minute candles as signals for a call to action, I must allow the candles to complete unless it is an extreme move that is developing.

It is at my peril that I not develop the appropriate amount of patience.

January 27th

One lonely paper-trade today.
In between day-job appointments, I had about 15 minutes to stop at the office, eat a late lunch, and catch a glimpse of ERX while I ate a warmed up cheeseburger.
The 2:15 & 2:20 pm volume rush and the corresponding candles with their large wicks but relatively tight open to close ratios spoke of an impending burst of price. I was a shade early but correct in my idea when I took my long. I exited with a gain far too early but I was running late for my second appointment of the day as it was...
The close of the next large candle after the one in which I exited (2:40pm) was an ideal exit point; the big volume spike suggesting a change of direction might be approaching. Alas, I am still a prisoner to my day-job and don't have the skills sharpened enough to merit trading with real-money. However, with every practice trade I approach my goal.

January 26th

Wow... AAPL was a beast today! I picked up a tiny fraction of it as it fell off its HOD. My paper-trade was a two-position short and my exits were between 2:19 and 2:20 pm for quick scalps. ok... no guts, no glory. It was more fun to watch and learn on such a big mover than to actually try to trade it. The point of all this is to learn, after all. What a ride it would have been to have 1000 shares up then 1000 shares down... a possible gain of about $20,380 from four trade executions: bottom to top and top back down to bottom.

It was a big mover but from the chart you'll see my "What's Familiar" marks on the chart are still relevant; those little lines pointing to likely reversals which are so familiar to me are still relevant!

So, for experienced traders, today was a real nice payday because those clues to stock movement were there even though it was moving unusually for multiple dollars over the 6.5 hours of the trading day.

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Days like today in AAPL are why I continue to study and learn, to pursue trading for a living.

January 25th

Just before 3:00, I had a chance to sign in on the markets to paper-trade and focused on TNA since it was the one that popped up on my screen. I started marking the "What's Familiar" on the chart in little white lines... those candlesticks that have importance to me as likely indicators of direction change. While I did not take the short, I pegged the one at 2:55 pm and then watched it drop... I continued to watch and absorb what was printing in front of me... then, I felt that a surge was about to occur at 3:25pm so I went long and was rewarded with a gain. I sold too soon but am happy for the winner. The next candle was a near-doji and one of my personal indicators of reversal. I waited for confirmation that the 3:40 candle was going to clear the low of the 3:25 candle then went short. I exited too soon again with a scalp gain. The 5-minute time frame ended at the bottom of the candle so I jumped in long for the expected reversal... Sure enough, there it was and I picked up another scalp gain. Practice trading is fun when you feel like you are "zoning in" on market movement.

January 22

Messed around with some papertrading this afternoon and had some success playing slight pullbacks of the downdraft in TNA. For some reason I just can't shake my impulse to fade the trend. This is something I must work on if I am to become a trader for money. Trading with the trend is by far the prefered approach.
A good week-end to all!

January 21

Wow, the markets were lively today! Too bad I was out pretty much all day on Day-Job. I did get a chance to sit in on the markets for the last hour or so and saw many practice trades I might have taken. However, I was content to mark my charts and watch closely at the movement of FAS and TNA. For a person who knows how to trade, today was a banner day. I'm still looking forward someday to being practiced enough to get in with real money on days like today. I did take a practice trade long in FAS off the deep dip candle that happened at 3:05 pm. At the next candle, near its bottom when I felt the momo had subsided, I went long then sold a bit early but for a winner. Then, I closed out a TNA short from yesterday afternoon which I had held overnight (something I would not do with real money), also for a gain. I took one more trade at the close, a long in TNA. The trade did not work out and I sold it for a loser about 15 seconds before EOD. I was originally looking for a rally off support around 43.75 but the EOD dump was too strong. Support was finally found by TNA but it was at the LOD.

Snow Day

Snowing like crazy here in this part of Maine. And the market is not open.
Looks like I'll be plowing the white stuff along with wiring some of my new home project today...

Guitars & Motorcycles

What I try to play & what I ride...

What's Familiar - January 14th

A bit of the What's Familiar... continuing the occasional theme from last September which outlines the oft-seen signs of reversals of direction.

On the right is Elsie, my dear departed Lab Retriever on the screen saver. On the left is the chart of FAZ from today which has a few short yellow lines pointing to areas where dojis, near dojis, five-minute candlesticks which end at the high or low of the time frame, five minute candles which have wide price range but tight open to close prices. Also, high volume spikes which often correspond to reversals have magenta lines at their extreme price points with the white line coming up from the corresponding volume spike below. These high volume spikes are excellent exit points from successful trades or cautiously, present opportunities to fade the most recent move for reversal.

Clearly, not all reversals are large enough to play, and some indicators mentioned don't materialize into reversals at all... that is why stops should be implemented. --"do as I say, not as I do" (chuckle!)

January 13th - Early trade

Before I started my workday, I thought I'd take a chance on a paper-trade scalp in ILMN. I saw the tightening consolidation at 9:40 & 9:45 am after a big run-up from yesterday. At the time of the trade, I noticed that the SPY was rising and ILMN wasn't rising with it... so I took a trade short considering that when the SPY slipped down that ILMN would move down in a stronger fashion. It did and I covered for a small gain. The little drop in ILMN continued into the next candle before a nice burst back up shortly afterward. Lots of price volatility makes this possible. There's no way I'd be able to scalp $129 from this move on an "average mover" stock.

As I write this, the clear winning trade was buying the "burst" up that I mentioned above. It has been about 12-13 minutes since I covered my short and the price has climbed as high as $1.12 per share from my cover price of $39.37! The screen shot above is later than the orginal I took of my trade so to exhibit the "pop" I've mentioned.

As an aside, the price moved down toward the 7-EMA during and touched in the next candle just after my trade, before that burst upward... the 7 EMA continues to be a moving average corresponding to support/resistance. This EMA profile I use is recommended by Robert Deel in his book and is present on Scott Farnham's charts at FNG, though by his own admission does not really use them in his trade decisions.

I am likely done for the day with this one trade. I have much day-job to perform and am late getting to it because of my market attention so far.

A good trading day to you all.

Good to know...

I saw this at Dr. Brett's site http://www.traderfeedblogspot.com/ and thought it was important info to reprint. Dr. Brett does a lot of analysis around identifying and quantifying the presence of large, institutional buying and selling of stocks as a way to anticipate market movement. His posts on the subject are frequent and as such, hard to track because of all the links within the essays he has written over the recent years. They are a broad web of posts that interlink, but, navigating all the paths of information on his site is worth the time; an eye-opener for new traders. Go to the original post at his site if you wish to see the chart he references in the essay.


Sunday, October 08, 2006
Who Controls the Markets?

In my posts, I have frequently emphasized that large market participants dominate the equity index markets and control its movement. My trade-by-trade analysis suggests that the largest 3-4% of trades (those over 100-200 contracts each in ES) account for well over half of the total volume in that market. Because volume correlates very highly with price volatility, the presence or absence of large traders in the marketplace is an important determinant of opportunity for the intraday trader.

Above we have a demonstration of how size controls the markets. The chart represents the S&P emini futures (blue line) over the past month. The red line is a cumulation of the ES price changes over the month that included only those one-minute periods that traded on twice (or more) the average volume expected for that time of day. In other words, the red line is price change solely attributable to time periods in which size has hit the market. These high volume occasions accounted for only about 11% of the minutes in the trading day.

The two lines correlate almost perfectly: .96. Essentially all of the movement in the ES can be accounted for by the small number of periods in which large participants have entered the market. When large locals and institutions are not in the market, the market--for all practical purposes--goes nowhere.

Many market indicators and technical analysis formulations treat each time period during the day as equivalent. An alternative--and promising--strategy is to separate signal from noise by analyzing only those time periods in which large participants are present.

My data suggest that fully half of all ES trades are one and two lots that only account for 3% of total market volume. In a very real sense, over half of everything that occurs in the equity indices doesn't matter. The key is focusing on the trades--and traders--who do move the markets.

January 12th

I had a couple hours to sit in front of the markets to practice-trade. I was not too concerned over wins/losses but rather, trying to measure and peg reversals of direction based on the common indicators I look for: exceptionally high volume spikes, dojis, near-dojis, and wide price ranges with relatively tight open to close ratio within a 5-minute candle period.

January 8th

I was in a great hurry yesterday as I finished the upload of these two trades to the blog and didn't have time to write a caption or comment to the chart & trade-log. So, I'm doing it on Saturday morning.

It was good to get back into the markets for practice trading after an absence. It took me about 30 minutes to get the feel of what was going on after being away for so long... I took these two trades in GENZ after getting the sense that momentum had stalled and a reversal was coming. In both cases, my instincts were correct but on both, my exit was quite hasty. I left a lot on the table as GENZ continued to sink each time. I still have no idea what happenned after I printed this chart because I haven't logged into IB since then. Who knows where GENZ ended up afterward... I'll check the chart later, for curiosity sake.

saw it, liked it.

I saw this on Dr. Brett's blog post from yesterday, January 7th, http://traderfeed.blogspot.com/ and liked it. If you are a trader in training, I continue to recommend his site to you. It is one I visit daily...

Trading Risk: Time is Size
The recent post addressed the issue of adding to trades following adverse movement. Here is a trading faux pas that has cost me in the past: I don't add size to a trade that's in the red, but I have added *time*.

In other words, a trade will move a bit my way, then a bit against me, then back to scratch: back and forth for a while. Often this occurs in slow markets.

Normally, my trade ideas include an estimate of time: I should see the market move my way within a matter of minutes from my entry. If that doesn't happen and I stay in the trade, it's been a pretty good predictor of a losing trade.

One reason for that is that adding time is like adding size: it increases the variability of returns. If I turn a short-term trade into an intraday swing trade or an intraday swing into an overnight hold, I've effectively added to the size of the trade. Instead of adding risk on a promising trade, I'm adding it to one that has fallen short of promise.

Equally important, every trade idea with a target and time frame is assuming a particular level of market volatility. If the trade has not moved much in the allotted time frame, it means that the estimate of volatility may be off, which in turn suggests that market participation has declined. Again, this is hardly a good reason to add risk.

Some of my worst trades occurred when short-term trades turned into miniature investments. You don't have to add size to a losing trade to add risk; in the market time *is* risk.

2010 - What's In Store...

Here's the new year, here's the new decade. But, it seems it is more of the recent same for me. My time in front of the markets is reduced compared to where it was late winter, spring and the early summer of 2009. What I discovered was that the old adage is true: you cannot serve two masters. My two masters are the stock market and my small business. By dividing my time pretty evenly between the two for much of 2009, I was doing both a disservice. Now, I have thrown a major home construction project into the mix! For the next few months, the stock market will be the lesser of these three priorities. However, for the long-term, it is my first priority. As I have blogged before, the construction project is an apartment which will generate income. And starting February 1st, I am actively seeking a buyer for my business, which I hope will sell by years end. The sale of the business will produce revenue and time necessary to follow my path to trading the markets full-time. Construction and business sale... these are the short-term foci of attention here at bluecollartrader central. "Winners Finish Strong" is a phrase I've heard and like. That is my intent... to finish my business strongly enough to be happy with the outcome. This is not to say that I will be ignoring the stock market... not a chance. I will continue to practice and blog my results, to follow the blogs I like, to read and re-read books on the subject, and keep track of the general condition of the economy through the news and CNBC.
I believe I reached the point last year where I could not advance in my abilities unless I was trading full-time. I have a pretty good grasp of technical analysis and a basic understanding of momentum analysis. What I lack is perspective and relevance. Both of these require experience... face-time in front of the computer studying the intra-day movement of stocks; continual attention. But, I cannot apply this required amount of effort this year to practice trading. It would not be in keeping with "Winners Finish Strong;" as I defined it above. At age 44, I have the entire second half of my life to trade stocks. I can sacrifice another 6 to 12 months in service to my business and other matters which in the longer term, will free me financially to pursue my goal of earning my living as a self-employed stock trader. I expect that what you'll see in 2010 here at http://www.bluecollartrader.blogspot.com/ is close to what you saw between August 2009 and the present and less like what you saw from February 2009 through July 2009.
My best to you all for a stunningly prosperous 2010!

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Goal Oriented and Finishing Strong, Assisted by Common Sense & Life Experience.