…It’s what you do with it that counts. That’s what they say, right? Nonsense. Size matters. A lot. At least when it comes to trading. It matters for two reasons.Continue reading “Size Doesn’t Matter…”
The two trades I’m posting today have some key commonalities. In both cases I came late to the trade. The reasons were slightly different each time. First up, let’s have a look at my old friend NVDA:
This was both an early entry and a late one at the same time. Anyone who follows my strategy knows that I have two common entry points in the morning. In the case of NVDA I took the earlier entry, but I took it late. That’s because I wanted to see what happened at the previous day’s high. There’s no point trading directly into a hard ceiling, that would be like walking into a set of automatic doors before they opened and hoping that they would part before we hit them. Better to make an approach, be ready, and wait for the way ahead to be clear. In the end, that level didn’t present a problem, so in I went and rode it until the first sign of the move faltering (coinciding with a target price). That came out at just over a thousand dollars profit for about fifteen minutes in the trade.
Here’s the next one:
This was obviously much later in the morning. I had the stock on my watchlist for reasons that, again, will be well known to followers of my strategy. But when the move came, it came very quickly and not while I was watching this particular stock. Missing moves is all part of the game — we cannot expect to catch every trade, we must accept that some will get away. Normally I would have let it go. However, the previous day’s range came into play here like with NVDA. As the price dropped through that significant level with some hefty momentum behind it, it was a clear signal that there was more to come. I jumped aboard and rode it down to a logical exit. That one proved more profitable, taking almost two thousand dollars in about fifteen minutes again.
Two trades, taken in opposite directions, both late, and both making use of the previous day’s range. It’s funny how sometimes there’s a kind of symmetry to the day.
A couple of nice little trades to post today. First up, Match.com:
A nice easy entry right off the bat. Volume was a bit low I must say, but the momentum was there and carried it to almost $500 profit in under ten minutes. After that it all went a bit sideways and unpredictable, and we were better off out of it.
Next, a bigger winner from ROKU:
A bit later than MTCH, and this time to the short side. The setup was not as clean as the price had crossed the EMA, but that’s only a yellow flag, not a red one.
As is so often the case with ROKU, when it dropped, it went far and fast, blasting through the most obvious target without any difficulty. The exit came when momentum turned. Reading that tape is what it’s all about.
Two trades, both about ten minutes. One had a better setup, but the other one generated three times the profit. Just goes to show that we know nothing, and can only trade what we see in real time.
It’s been a relatively quiet week on the markets (a busy week away from the screen, but that’s a different story). Tesla has been coming up with the goods, and I’ll share another trade from Elon’s Twitter-powered stock in a moment. First though, here’s a nice — if late in the morning — little trade on VTR
After a brief spurt of activity at the open, this one went sideways for a long time. I thought it was probably a bust, but there’s a reason we continue to watch the watchlist for as long as we are trading the session: we never know what’st going to make a move.
The move it did make was not exactly spectacular, but we got more than 50 cents out of it in about fifteen minutes, which is better than…well you know what.
Here’s that Tesla trade I mentioned before:
This also came late in the morning session. It was typical Tesla; like their cars in ‘insane mode’, it took off suddenly and moved like a rocket, and stopped almost as abruptly. Not the biggest TSLA trade of the week, but taking more than $600 in under five minutes was nothing to be sniffed at.
It was a quiet start to the week. A few moves, but relatively subdued. Tesla though, can usually be relied upon to give us something interesting to do. This is what we got:
It was a fairly straightforward trade. The only thing to remark is that it looked like there might have been an earlier entry. Why didn’t I take it? This is a classic case of the chart not telling the whole story — although it did leave a massive hint. The answer of course is that there was no momentum behind the first move, as we can see from the lack of volume.
In real time, when we are watching the chart unfold, we can’t wait for the volume bar to finish printing to let us know whether to enter or not — by then it’s too late. But in real time the lack of momentum is clear on the tape.
When the second move came along, the volume and momentum were there to push things along nicely.
Something I see beginning traders struggle with a lot is blindly following rules and then wondering why their trades don’t work out. It’s an honest mistake to make, after all, we are taught from an early age that rules are to be respected at all times. Formal education hammers into us the idea that to succeed in any endeavour we must follow a prescribed path, we must conform, we must stick to some predetermined plan. The trouble with that kind of thinking though, is that’s not the way the real world works.Continue reading “Day Trading Is Like Living In The Matrix”
Creating a daily watchlist of stocks that are likely to move well is crucial to consistent profits in day trading. With such a huge universe of stocks out there — thousands that are worthy of consideration — we can’t possibly watch them all. We have to narrow them down to around a dozen or so that we think have the best chance of making an easily tradable, high probability move. Watching a dozen stocks is easy.
Added to the daily watchlist are a set of ‘core’ stocks — stocks that tend to make good moves at least a few times a week. They’re like reliable old friends. In my stocks book I talk at length about the methods I use to build both my daily and core stock lists. For today’s trades post, I wanted to show you a couple of trades that came from my core list (these are from Wednesday 12th June).
First up, ROKU:
When we watch a core stock, we aren’t looking at it any differently to the daily picks. We want to see the same patterns. We’re using the same rules and guidelines to judge them. And we want to see the same criteria fulfilled before we take an entry. The same goes for exits. We trade core stocks and daily stocks exactly the same. So here on ROKU it’s a standard entry pattern confirmed by momentum, and the exit happens when that momentum falls away. As it happens, there was more to be squeezed out of the trade, but not using my trading plan. Following the plan is the most important thing. Like I said yesterday, we can’t trade hindsight.
Next, Tesla, a stock I’ve been trading a fair bit recently.
Again, this is a standard setup with an entry confirmed by momentum. As it so often does, TSLA fell far and fast. I almost exited on the green bar, but with the previous day’s low just above I decided to hold it and see which way it would turn. There was already so much profit on the trade that I was happy to put my (mental) stop above that previous low. I was rewarded with an elevated heart rate and an extra two grand or so in profit, which I think was a fair exchange.
Five Grand In Half An Hour?
Making almost five thousand dollars in twenty minutes, TSLA was obviously an outlier of a trade, but lesser four figure trades from TSLA do occur several times a week. It’s not a stock for beginners, but it does go to show that once you have a system nailed down, and the psychology locked down too, you can take on these bigger stocks.
Taking those two trades together, it looks like I made more than five thousand dollars in about half an hour of work. But of course the reality is somewhat different. My ‘work’ starts before the market opens, building a list of stocks to watch. Yes, these trades came from the core list, but that has to be built too. Then there’s the waiting time. Both trades were over by around 10:30, but I still had to be in front of the screen waiting for them to set up then play out. With premarket work and waiting time, half an hour becomes two hours.
Five Grand In Two Hours?
The same goes for trading. The two trades I posted here may well have made more than five thousand dollars in about thirty minutes, but really that profit comes from years of study and practice and experience.
Does that mean I made five grand in two hours? It would still be a good hourly rate, right? But no, that’s not how it works. Because we have to count the time spent learning, practicing, and honing our skills. Nobody is going to come to a stock chart and make five grand on their first day, just as nobody is going to start any new job as an instant expert. A plumber might fix a broken heating system in ten minutes and charge me a small fortune for it, but I’m not paying for the ten minutes she had her tools out and the cover off the boiler. I’m paying for the years of training, apprenticeship, and experience she has been through that enabled her to find and fix the fault so quickly.
Continuing the theme of posting some non-tech stock trades, here are a couple more. First up, UTX, which provided another nice trade after yesterday’s four-figure winner.
It doesn’t get much more textbook than this. Perfect setup, staying below the EMA the whole time, and a nice entry on volume and momentum. The exit came when that momentum dropped away to nothing, and we hit a logical target. $1300 banked in about fifteen minutes.
Next up, another non-techie stock — SFIX.
Trading to the long side this time, this was a little more tricky. There was a possible earlier entry but this was best avoided due to the lack of real momentum behind it. As it happens that entry would have worked out okay, but we can’t trade with hindsight, we can only follow the rules. So the second entry it was, with some real momentum to push it higher. The exit came when it turned, which was obvious from reading the tape (alas not always so obvious from the chart). Not a huge winner, bringing in $390, but not bad for about ten minutes.
Finally a tech stock, to remind us all that sectors don’t matter. This came late in the session when I’m normally starting to think about calling it a day. But there was a lot moving, and it’s a shame to miss out for the sake of an early lunch.
CRM was on my list for the day, so when it made its second move I was ready for it. There were two very obvious exit targets to aim for, and it blasted through the first without too much difficulty. The price didn’t quite manage the second, hesitating for a bit as it decided where to go next, so I was out. $1550 better off for the trade, and still done in time for lunch. In the end the price decided to go further, and anyone less lazy than myself could have had a pop at that third entry for potentially another thousand dollar profit on top.
Time again for a quick reminder that I don’t post all my trades on this blog, only a selection that are interesting for one reason or another. There were a ton of tech stock winners on the day that I haven’t posted here because they all look much the same. Hopefully this selection reiterates my point from yesterday that sectors don’t matter, only the chart does. There are winners — and losers — in every sector. All we have to do is find and trade them.
I said the other day that it sometimes feels like I only trade tech stocks, but that’s not the case. In an effort to diversify what I post here, here’s a trade on UTX, a stock that — whilst it has ‘technology’ in the company name — is not a tech stock in the strict sense.
As we can see from the chart, it doesn’t matter what the industry sector is (aerospace in this case), the patterns and setups work exactly the same. I don’t care if UTX sells microchips, aircraft, or ice cream. All I want to know is where those little red and green bars go.
And on Monday they went down. Fast. We love momentum, so when the pattern set up I was ready to dive in with a short and ride it until it faltered.
It faltered on the next bar. Momentum reversed, a battle raged between buyers and sellers, and I was happy to cover my position and let them have at it. A nice four figure profit in about five minutes.
It’s been a while since I posted a Tesla trade, so let’s rectify that situation right away.
This was short, sharp, and to the point. The trade lasted about six minutes, so that works out at more than $200 a minute (a meaningless but fun statistic).
My study of this particular stock continues, and continues to bear fruit. I could point out that Tesla has been playing around at the $200 price point for a while, but I don’t care about that. I only care about what it’s doing on any given day since the open. I care about short term (i.e. single morning) price patterns. And I care about how the price moves on a minute by minute basis.
My method for trading Tesla is scalping, really. Certainly there are trades to be had on longer timeframes, anything from hours to days, but that’s not my style. Any time we have money in the market, that money is at risk. Tesla is a particularly risky place to put cash because Elon could tweet something mad at any time and send the price goodness knows where. So these quick in and outs are my preferred way to go. In on the entry signal, and out at the first sign of weakening momentum. The great thing with this stock is that a quick in and out, around five minutes in a trade, can yield a four figure profit with alarming regularity.