thalestrader

If you take a look at the LM trade I posted last week (6-2-2009 - page 6 or 7of this thread) you will see a decent example of what I am trying to accomplish. LM was a runner and I tried to use natural stops to stay in. At times, the stock moved very far without developing any new natural stop level, so I started to trail a stop a fixed amount below the 5 minute 20 ema. Here is the way I think: 1) Every trade starts out as a scalp (this comes right from Mike Reed at tradestalker.com), and I will close a position at the market for a small loss or small gain if price does not act immediately as I had anticipated that it would act. 2) If price does act immediately as anticipated, I then assume I have a runner, and I will do my best to discern where the market is developing natural stop points and set my stops accordingly, trying to capture as much of that move as possible. Best Wishes, Thales

I do not make it very complicated at all. The criteria are simply a new high of day for a long trade, a new low of day for a short trade, or pullback to 20 ema on a 5 minute chart after strong move. I do not use volume, indicators, candlesticks, wicks, tails, crossovers, etc. However, when deciding which particular stock to trade, I choose based upon how the trend looks, i.e. chart patterns, e.g. flags, pennants, lines (consolidations), and trendlines. As for the DTV trade today, by the time DTV had rallied into the list of the top 10-15 stocks with the biggest % gain on the day, it was very near yesterday's high - too near to warrant a trade. It met resistance at that high, and it seemed wise to wait for that high to fall. In other words, during much of DTV's rally, I wasn't even paying attention to it. By the time it did get my attention, I decided it best to wait to see how it handled the 22.50 price point. I really do not have any rules, per se. I try to let the market develop natural stop points, i.e. most recent support/resistance points. See, for example, the ES short trade I posted today. You can see how the market dictated the stops all the way down. Sometimes, depending upon the time of day, the order book, or simply how price is acting, I will trail a stop below the low of the previous 5 minute bar, or even trail every nickle, dime, or quarter. If the stock is in the midst of a trend day move in the direction of its daily trend, I use recent pullback lows as my stop points. If it is a breakout from a sideways consolidation, especially if the breakout direction is contrary to the daily trend, I will be trailing the stop closely, using either 5 minute lows, nickles, dimes, or quarters. I will exit at the market if price action seems not to be confirming my position. Again, none of these are rules. I'm a trader not an investor. I am seeking profit, not a rent or fee or interest on my capital. I somewhere on TL quoted Don Bright of Bright Trading on this matter - you should look up that post. I'd also suggest the writings of Gerald Loeb in The Battle for Investment Survival. He persuasively makes the case for using profit, not %return, as your organizing principle when deploying your capital in the market. I almost always trade a set number of shares on each trade. This is because my initial risk, as measured by the difference between my entry and my initial stop loss, is almost always within my %risk/trade limit. Of course, if there were an opportunity that had a larger initial risk/share, I would reduce the shares traded accordingly. I otherwise don't have any formulae. As I have said elsewhere, I have benefited from lots of screen time, lots of charts, and a single minded focus on, as pappo's acronymonous name teached, price action and price patterns only. I'm happy you have found it interesting, or at least entertaining. If you find it useful, so much the better! Sincerely, Thales

Well, we got a bit over 6 points higher than it was when I posted this, but I never said that it would stick!

Hi pappo, The stock trades I post are almost allways day trades. For swing trading, I trade IBD 100 stocks almost exclusively, and then I usually use options if the stock is optionable. I would always suggest that it is wise to look at the big picture on any stock you see me trading during the day before buying or shorting it for a swing trade. As you saw with DTV, it had great price action for a day trade, but when you look at the daily chart, it is not necessarily something you'd want to take home, let alone have to go to bed with it. Best to your trading, Thales

Hi Folks, Three Trades, two stocks: CEPH +49 pennies and - 10 pennies, and DTV + 41 Pennies for a total +$0.80/share traded. I also took a small ES trade for +6.25 points Best Wishes, Thales

Closed DTV at the market, fill 22.92

Trailing stop is at 22.81 currently

Here is my current stock trade, DTV: DTV slowly crept into the top 10 % gainers after opening lower this morning. I did not buy the pullbacks to the 20 ema, but instead waited for the breakout to new highs following the consolidation, with a buy stop at 22.51.

Didn't even have time to finish taking a pic of the es to set 940.50 as the next target. No I dea what happened there. Price really wound itself into a tight coil and then the spring was sprung! Looking for much higher prices on ES (5-10 points) today. I am in the middle of a stock trade (DTV) and will post charts soon.

Another view of the ES as price grinds higher from the low. Having come this far, I'd be betting (if I were betting or if I were already long) that 934.50 -935.75 would be my upside target, while a break and hold below 929.25 would lead me to believe the rally may be over.

Brownie, That is one of the funniest emoticons I have ever seen - and I know that feeling well. Sorry you had a bad day with the 6E, but thanks for making me laugh (at the emoticon, not at you!). Best Wishes, Thales

I agree with you. Trader Vic is Victor Sperandeo, and he has two very good books out (though in each book the real useful stuff is but a few chapters) Mike Reed is a trader who offers educational material and a subscription service as well. I am not a subscriber, though I did purchase his eBook. I had subscribed previously, and he is as good a person to learn S/R trading from as any. I just like to give credit where credit is due. Best Wishes, Thales

And for any other Vic Sperandeo students, out there, a 2B buy would occur with a 928.75 print, and you can see how price has stalled at 928.50. No doubt indicators the world over have a momentum divergence into the 925.50 low. But do you really need an indicator to tell you that price thrust into the first low with more momentum than the second low, given the gap down at the open? By the way, that 2B buy just triggered, and it will be working against the TVGR. I am not taking this long, as TVGR leads me to believe that odds favor a close on the lows and not the highs of the day.

Flat at 927.25 for 6.25, a 25:1 R/R

And here goes that lower low ... I have a stop at 928.75, just in case we get a wild spike, but I will not likely allow myself to give that much back.

Hi Brownie, Here is my chart with some notes. I'll go over the trade in more detail later if necessary. But basically I adhere to the TVGR, the Trader Vic Gap Rule: If the arket gaps open, and the gap is not quickly filled, then odds are +90% that it will not fill that day, and price will close in the direction of the gap. Also, price stalled at Friday's low. A stall is a term used by Mike Reed at tradestalker.com. He has an eBook called Read the Greed where he discusses stalls. The stall at resistance (multiple price bars with identical highs) coupled with the gap down gave an excellent R/R as a 1 tick loss with a minimum profit target of 26 ticks. Like I said to you before, I do not trade th ES everyday, but I do watch it everyday, and I trade it when I get an excellent R/R situation. Best Wishes, Thales

I suspect we may get lower low before the market tips its hand as to whther it is trend down or not. With the gap open, TVGR (Trader Vic Gap Rule) is in effect. Best Wishes, Thales

Stop is 930.75 Will watch what happens at 927, should price get there, to decide whether to take or run profit

CEPH pulled back to support, bounced, and broke, so small loss on that one. Best Wishes, Thales

Stop is now 933.25, which is is one tick below entry and 1 tick above last rally high.

I'm not sure if you are being critical of my suggestion or not (and it is ok if you are). My opinion is that an initial stop loss ought to be at a price point where the odds flip from favorable to unfavorable for continued price movement in the direction of your bet. The size of the stop will be determined by the difference between my entry and that objective price point that would turn the odds from being in my favor to being against my position. Right now, odds are favorable. Best Wishes, Thales

Here is a chart with my two entries on CEPH. I was stopped out with a small profit on the first entry at 58.25, and now I'm long again at 58.86 Also, the ES has stalled at 933.50, and a little short there with a 933.75 stop is my sort of ES trade, looking for a retest of the low of the day. Best Wishes, Thales

Looking for the ES to find signs of support with a gap open into the shaded support zones. Good Luck Today, Thales

In this economy, many folks now unable to provide adequate food and sheler for themselves are only recently in such a situation. When you find yourself suddenly homeless, that cell phone is likely the only thing keeping you regularly connected to the rest of your life. Anyone here who has more than they need ought to consider how he or she can help those who have been harmed by this depression. For example, our family gives weekly donations of food to our local ecumenical food bank. And I am sure the majority f those who benefit from the food bank also have cell phones. I hope they can keep them, as they will be very important in helping them get back on their feet. Best Wishes to all, Thales

Hi there, Interesting post - I have a few questions: 1) Are you still trading this way? 2) If yes, have you tried just using trendlines and dropping the adx altogether? What I am getting at here is do you think that the adx reading has anything to do with the the price movement subsequent to the trendline breaks? 3) In my opinion, trading properly drawn trendline breaks is an excellent trading strategy. From the charts you posted, it seems that you are not consistant in the manner in which you select your pivots on which to anchor your trendlines. So my question here is how do you determine which pivots you use to draw your trendlines. Thank you, Thales