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>You said, "trade what you see, not what you think" when short term trading.
I
>agree, but could you be a bit more specific. If you wanted to follow 10-30
>stocks for prime short term possibilities, what filters would you use to
>select those stocks from the thousands? From what you said, I assume your
>filters include more than just volatility. I think this would make a good
>discussion for the stock traders on this list.
>
>Russ
>
Hi Russ,
My statement related specifically to automating the entry/exit decision to
the extent that opinion, emotion, and "soft" data cannot possibly factor
into the equation.
As far as my personal trading strategy is concerned I am strictly a
daytrader. Entry and exit are based on a Joe Ross-type approach, which is
almost exclusively price-dictated. I use volume and the behavior of similar
stocks within the same sector as my only filters, and not always. The "keep
it simple" trading approach has worked very well for me and has allowed me
to make snap decisions which are about 85% correct, simply by the quick
reading of a chart's price action, in combination with the dynamics of the
L2 chart. If I am able to define a trend based on 123 and Ross Hook
criteria, the entry decision is automatic. The exit is dictated by L2
action, i.e. the spread, bid/ask sizes, and the position of the best Island
bid/ask. A time stop works very well in volatile issues - if the stock does
not move in either direction after a short while (in most cases less than 20
seconds), or if it turns against me immediately, I bail and watch for a
possible re-entry.
As far as stock selection, I also keep it very simple. I focus on
newsplays, earnings plays, and split plays, mostly as covered at
http://www.briefing.com/Schwab/inplay.htm. I plan on subscribing to
TheStreet.com in the next few days to broaden the scope a bit. I have also
begun studying the charts highlighted in Investor's Business Daily under
"NASDAQ stocks in the news" for possible daytrades whose entry is supported
by the last few months' worth of price action. In this respect, I tend to
favor stocks which have been basing for 6 weeks or more and stocks which
have a cup-and-handle formation.
If this sounds exceptionally basic on many levels, that's because it is.
It's the most common-sensical approach I could find. Initially I tried
using a whole range of indicators as filters, but their use did not in any
way enhance my success as a trader - if anything, I became convinced that
their possible benefit in the entry/exit decision was, at best, arbitrary.
As far as the Ross books which provided the foundation for my trading
approach, these were Electronic Trading 'TNT' I - Gorilla Trading Stuff and
Electronic Trading 'TNT' III - Technical Trading Stuff. The books are part
of a 4-part series recently co-authored by Ross and Mark Cherlin. Both are
available from Amazon.com and from Ross Trading Inc. The titles may seem
frighteningly stupid at first blush (they did to me anyway), but both books
are excellent. If you are interested, you can get a flavor for the author's
publications at http://www.rosstrading.com/.
I hope this answers your question and welcome any feedback to this post.
Best regards,
Paul Szilassy
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