A Look at a Stock Trader's Day

[brownsfan019]

There are some great posts in the P/L thread, but it's easy for stuff to get lost.

This post from Thalestrader is a look at how a stock trader structures his day. I wanted to highlight this post b/c Thales constantly cranks out impressive numbers on the p/l thread.

I asked Thales how he sets up his day since the universe of stock is so large. His response was:

1) I trade S & P 500 stocks only, except for an occassional IBD 100 stock. 2) I monitor the 10-12 biggest gainers and losers on a percentage basis. I use the biggest gainers for long candidates and biggest losers for short candidates. 3) I select trades based upon support/resistance, chart patterns etc. 4) All trades are based on decisions made watching the 5 minute chart. 5) I use no indicators other than I do from time to time place a 20 EMA on the 5 minute chart. I will sometimes use pullbacks to the 20 EMA to buy/sell short. So I am usually watching just 20 stocks, though I have the whole SP500 list on my screen. I simply scroll down through the top 10-12 gainers, and then I click on the %change column, and the watchlist reverses so that the biggest losers are now at the topof the list. I scroll down through the top 10-12 biggest losers. That is how I narrow the universe of stocks down. When I am scrolling through the 10-24 stocks that comprise the biggest winners/losers of the moment, I am looking for potential breakouts from consolidations, flags/pennants, etc. As an example, I re-attached the CME chart from today. I was a buyer in the area highlighted within the green ellispse. As I always say, nothing fancy. Also, you will see that I included my watchlist in the screenshot. Best Wishes, Thales

We don't have many stock traders here that post, but Thales was kind enough to give a look into his day.

[Eiger]

Simple, straightforward, and elegant in its own way. I like how Thales is very focused on a limited number of things. Good lessons for us all. Thanks for making this a separate post, BF.

Eiger

[brownsfan019]

No problem Eiger.

I also liked how he narrows his universe of stocks rather quickly and simply by looking for the stocks that are on the move. If I was to trade stocks again, that would be the approach I would take as well - look for the ones moving on the day and ride them as long as you can.

That is one major advantage of trading stocks vs. futures. With futures, you are 'stuck' in the market(s) that you watch whereas in stocks you can go where the action is. For example, there are plenty of days where the ES/NQ is doing nothing - almost flat-lining. During that same time, there's a good chance a handful of stocks are on the move for the day.

[thalestrader]

Originally Posted by brownsfan019 That is one major advantage of trading stocks vs. futures. With futures, you are 'stuck' in the market(s) that you watch whereas in stocks you can go where the action is. For example, there are plenty of days where the ES/NQ is doing nothing - almost flat-lining. During that same time, there's a good chance a handful of stocks are on the move for the day.

Another advantage trading stocks has over futures is that it is often easier to maintain a strict risk profile as stocks offer more flexible position sizing than futures do.

A disadvatage is that profits from short term stock trades are taxed treated as short term gains for tax purposes, whereas futures trading profits receive the far more favorable 60/40 treatment.

Another disadvantage of stock trading over futures is that the SEC, in its infinite lack of wisdom, has barred the trader with a small capital from day trading stocks. Instead, the trader with limited capital has to trade e-mini's where the leverage on a $500 day trade margin is quite high.

Gone are the days when Wyckoff could advise one with a mere thousand dollars in risk capital to learn to read the tape trading in 10-50 share lots.

Best Wishes,

Thales

[fishing]

hey Thales

i've never traded stocks before..

so if i trade stocks by adding liquidity, is it less costly to trade stocks?

thanks

[Eiger]

Originally Posted by thalestrader .... Another disadvantage of stock trading over futures is that the SEC, in its infinite lack of wisdom, has barred the trader with a small capital from day trading stocks. Instead, the trader with limited capital has to trade e-mini's where the leverage on a $500 day trade margin is quite high. Gone are the days when Wyckoff could advise one with a mere thousand dollars in risk capital to learn to read the tape trading in 10-50 share lots...

It's amazing how they view emini futures vs. stock. I guess they must be (over) worried about the corporate risk in the equities.

One way around the poor leverage is long, deep ITM options. This is a better solution for swing traders as you can day trade only a very limited number of option contracts at the moment. But more and more are becoming tradable on the intraday especially over the last 2-3 years. Something to keep an eye on.

Really nice work Thales - great to see the high quality thinking in your trading.

Eiger

[thalestrader]

Originally Posted by fishing so if i trade stocks by adding liquidity, is it less costly to trade stocks? thanks

I'm sorry, but I am not at all sure that I understand what it is you are asking, so I cannot answer your question.

[diablo272]

Originally Posted by fishing hey Thales i've never traded stocks before.. so if i trade stocks by adding liquidity, is it less costly to trade stocks? thanks

If you're asking whether or not you get lower commissions for trading more volume, the answer is yes.

[thalestrader]

Originally Posted by brownsfan019 I asked Thales how he sets up his day since the universe of stock is so large.

Hi Folks,

For anyone interested in freestockcharts.com, the software I use for intraday charting, I just received an email from them with the following link to some videos on how to use the software.

FreeStockCharts.com Videos

Best Wishes,

Thales

[brownsfan019]

For those interested in using the 20 EMA in their trading, here's a couple threads on the subject:

20 EMA and Patterns

20 EMA Article by Bo Yoder