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Hi David:
Good post.
I have been trying to day trading.
I have put my comments between the >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.
Subject:
My trading method
Date:
Sun, 22 Mar 1998 18:55:23 -0800
From:
David Fenstemaker <dfens@xxxxxxxxxxxxx>
To:
omega-list@xxxxxxxxxx
I day trade the NYSE, not the NASDAQ because of
needing to control slippage tightly to make a profit.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I trade the nasadaq.
I have been trading only one stock as an experiment. klac
My reason for trading the nasadaq is I could not find many nyse stocks
to
fit my criteria.
My criteria for selecting a day trading stock.
Daily price range (high- low) greater than $2
Daily volume greater than 2,000,000 shares
A spread less than or equal to 1/8
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
So here are the crown jewels:
Some stocks move alot and some don't. I only trade stocks
that average 500,000 share volume a day, and range at least $1
for the last 5 days between high and low. A stock has
to move and be volatile to day trade it successfully.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.
I look at the eod chart to see how many $2 days the stock has each
month.
I used supercharts to scan for a short list.
I think your window of 500,000 shares is a little low. My reason for
saying
that is because the datafeeds bmi, signal don't give enough data to
trade off volume
with any confidence.
Signal's accumulated total volume is pretty accurate. Signal tick data
ia only
about a 1/3 to 1/2 of what is really happening. If you try to use trade
volume index
it does not have enough data to make an accurate plot.
To work around that when I was using signal, I dde into an excel
spreadsheet and
got the difference of total accum. vol between ticks to get the true ?
volume traded
between ticks. That worked well to monitor the volume traded per
trades.
I agree with you it is important to watch the large blocks.
klac last week when it first hit the 36 area had a lot of large blocks
being traded.
Then the next day it when up $2. Somebody recommended the stock and
they loaded up
the day before, my guess. I got in at 38 a few days before and still am
holding.
I have been using bmi cable and that gives more trades but I don't know
if that is
even enough data to trade on. Their total accumulative volume per trade
is also
not accurate, but it give more trades.
I use this website to check the number of trade that were made and check
it
with how many trades supercharts has collected. I think you will find
that we are not getting enough data. Let me know if you find the same
thing.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I screen 3 shorts and 3 longs at night for the next day's
trading session. I do this because you do not know whether
the next day will be up or down, and you should always trade
with the market. Once the trading day starts, I consider myself
a trader, and I'm not doing technical analysis any more.
I'm only concerned with trade placement and exit. The reason
why I only pick six is because that is all you can fit on a screen
and see, and reasonably watch and gives you high
odds of making at least two trades, at least from my
exeperience. My goals aren't high - I just want to make at
least $1000 a day.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
At the open I have been noting if it is a gap up/down open or a open
at yesterdays close. I am still trying to see if that makes any
difference.
After the open I am looking for what I call a 7 oclock reversal. The
stock
will go one way getting all the buying or selling out of the way then
reverse.
Have you noticed this?
I have monitored the oex to follow market direction. klac is in the s/p
500.
If I see the oex or nasadaq compq reverse I look for klac to reverse.
Also I watch the trinq.
These are the trading entry points I am looking at:
Daily high reversal (go short )
Daily high breakout (buy)
Daily low reversal (buy)
Daily low breakdown (short)
7 o'clock reversal (pst) (buy or short depends on direction)
A uptrend (buy)
A downtrend (short)
I am trying to see, what relationship there is between the above and
what the indexes are doing and if that signals a trade.
I have thought about having a goal of so much a day as $1000 or so.
I think that distracts me from what I am suppose to be doing.
Which is to make a profitable trade. I have lowered my goal to take
what
I can get. If the price starts to go sideways or reverses, it is
probably
good to take your money and run.
I try to let the price and volume let me know what to do.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Once you start following certain stocks, throw the nightly
trading system out the window. Some do the same damn thing
every day. Some are like shooting fish in a barrel. Sooner
or later this changes and you have to find a new barrel.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I have been trying to see if there is a relationship between eod
charts and intra day charts.
I think if you are day trading you look at intra day charts.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I use 21 inch monitor and run eight windows:
The three shorts and three longs, (5 Min), with Volume bars
The Adv/Decline line on the NYSE (5 Min), with volume bars
The SP&500 (5 Min)with volume bars
Real time window of of the 8 pieces of data.
(This is the bottom window)
I set alerts for 10,000 share trades on the three longs
and three shorts.
I always trade in either 2000 or 4000 share lots. I do this because
it keeps the arithmetic simple. Also, on margin, trading a 2000
share lot of a $30 dollar stock only costs $30,000. A 25 cent spread
on a 2000 share lot makes $500 dollars.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>..
I think spread is the difference between bid and ask.
Hate to be picky.
It may confuse the new people.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
If the adv/decline line is positive, and the SP 500 is positive,
and I get a 10,000 share trigger long, and the bid/ask spread is
1/8 I immediately place a trade long at the ask price
before 10,000 trade trigger if it ticked or not.
If the adv/decline line is negative, and the SP 500 is negative,
and I get a 10,000 share trigger sell, and the bid/ask spread is
1/8 I immediately place a trade short at the ask price
before 10,000 trade trigger if it ticked or not.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Does it matter to you if the 10,000 shares block is a buy or a sell.
It is hard to know if the trade is really a buy or sell, because
they might have moved the bid or ask or they are trading in 1/32 or 1/64
and
rounded the price.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
You need to trade stocks that the market maker moves. Don't
trade dead fish, unless you want to remember all the swear
words your Irish grandfather taught you fishing as a boy.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I cannot see who the mm are so I look at volume.
One thing I have asked my broker is what mm did my trade.
They will usually call me back and tell me. Most of the time
it is mash, I hope that is right.
Just for my info.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
This is where it gets interesting.
The trade will usually trigger a rollover,
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
What is rollover?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
and you'll be in at the
bid price. You just zeroed your slippage. If you do not get a fill at
your price with 60 seconds, cancel the order. You do
not want to get hit with the market moving back against you.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I phone my orders in and usually put in a limit order.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Some low cost brokers will send you a cancel confirmation but fill
the damn thing anyway. Don't stand for it. If you are making
over 500 trades a year, somebody will take your business.
Only trade online. You can't wait to place an order with a
human.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>..
Have you every sent in an order and called the same time to see if they
got it.
Were they right on?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Now, have your calculator handy. Follow the real time order flow,
and stay your position if the order flow is in your favor,
and the price is going your way, otherwise exit
immediately.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>...
I dde into a spreadsheet and I can see what my profit and loss is.
If I get a quick $500 to $700 plus, I will exit if things slow down
or my limit order is hit.
Sometimes after I get a confirmation I will put in a limit order to
sell at 50 cents to $1 and let it ride.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Trading this way you cannot afford to lose
anything except for the round trip commission, or a 1/8
tick. Just stay with strength and take what the market
will give you. You only have to do this twice a day
to make $1000 - $2000 dollars. Often you can make a $1
spread, but I consider 37.5 to 50 cents a deal. Trading
this way is mentally exhausting. As soon as a bag
one or two, I quit.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
$1 per day x 200 days x 1000 shares = $200,000
I am looking for $50,000 on $40,000
Pretty good odds.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Once you are in a trade you must concentrate - make
sure you know what is going on. Watch for the adv/decline
line to stay in your favor and the SP&500. Sometimes you got filled,
because its turn around time, or a sucker play by
someone trying to start a rally in the opposite direction
they really want to go. This happens alot more than
people realize. When this happens some mutual fund is
dumping 100,000 is the opposite direction of your position.
If you see a rally and a 25,000 order a against it,
reverse immediately, you are going to make money again
in the opposite direction. Don't get over confident
though, it can swing back just as quick. If you trade
this way, its not a good time to go to the bathroom.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Another thing I am watching is the in the money options on the stock.
I ask myself, why is the price going up and there are a lot of puts or
calls
coming in.
Are they using the 200-1000 share trades to position there options?
Where is the smart money going?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Trade late in the day and be obstinate. Meaning, lets say you bought
2,000 shares at 20. Its at 20 1/8 - 20/1/4. You want to sell and get
your crummy $500 dollars. Place a sell at 20 1/4. At 4:00 you will be
filled.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I am not watching time of day to much. I watch price action and
chart pattern formation.
I have not decided if time of day matters to much to me.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
This is a mechanical as it gets. If you have
discipline and quick reactions, you can trade this way.
You must always execute immediately. Don't confuse
this with SOES trading. They are pounding the keyboard
all day scalping pennys. This is a two hour style
that works at open or close best.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I love soes traders. They move the price.
If you are looking for a broker ask if they have a perferred phone line.
Ask them what size account and trading you have to have to use it.
If they give it to you don't abuse it. If you are doing a limit order
use the regular line.
Good trading to you all.
Please comment. ALL comments are welcome.
David, thanks.
Bob
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Does anybody else trade this way?
David Fenstemaker
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