stock trading lessons: failed directional moves

Sometimes you can get valuable information from a trade entry signal that does not follow through, you just need to pay attention and have an open mind.

 I generally trade in and out of stocks during the day looking to get a “feel” for good order flow and if I do; those stocks will be the ones I carry overnight for a longer term trade. I came into this week looking to reestablish my short positions that I covered last week. So naturally my bias was to the short side and was stalking entries in that direction. As any good trader should, any time I got an entry signal based on what we teach in Equity Trader 101, I took all the trades.

What I started to get was a lot of trades going nowhere or moving quickly against me. I have been taking quite a few small losses this week. Now this is where most new traders go back to Borders and buy another trading book because what they read in the last book “doesn’t work.”

The market “should” have started back down this week, the subprime mess has not gone away and the FED keeps trying to stave off infaltion with surprise rate cuts and another one expected today. With all this happening the market has not sold off and actually looks strong, the financials have gained almost 30% in 7 trading days.

In order to be a successful long term trader you must learn to pay attention. I don’t have a good feel for order flow right now because it is not following through based on the price model we at Keystone Trading have for price action. There fore I am trading lightly or not at all.

day trading: expectations

When trading stock for a living you don’t need to know whats going to happen next to make money. However you do need some type of model for price structure. You need this so you can begin to form as many if-then scenarios as possible. The more high percentage scenarios you can create, the more trades you can take advantage of.

The successful progression we teach is to watch only a few stock, master the set ups in those stocks, increase your share size, then do it again adding more stocks to your list.

One of the simplest and effective setups to monitor for is a consolidation. A consolidation is a pause in a trend. No matter what time frame you monitir trades on, you should be able to find a consolidation which you can stalk. I say stalk because consolidations lead to trends. This can be done on a short term basis also. Yesterday was a very tight trading range, my expectation for today was not long or short, but breakout. I wasn’t going to guess, just sit back and let the natural price action of the market tell me what to do. Trend leads to pause, pause leads to trend. Pay attention

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swing trading: getting ready to short

Whether you are day trading or swing trading right now, you have to love this volatility. The extreme moves we are experiencing in both directions is perfect for short term trading. The market the last few weeks has been following a similar pattern on a daily basis, chop around the first 45 minutes find a bias and kick in the turbo boosters after 2:30.

This stock trading environment is heaven for traders who have experience and a plan. The traders who I can see on the floor of our NYC desk that are very frustrated are traders who don’t have a plan or a structure for price action. They view this volatility as “unreadable.” If you want ot join the ranks of experienced traders, sit down and write out a plan, have an idea of what price “should” look like so that when it presents itself, no matter how fast the moves, you will be prepared.

That being said, The 283 2.2% up move we had in the Dow yesterday is setting up a shorting opportunity for me. I will be looking for some follow through in price action to the upside today and maybe tomorrow. Once the upward momentum has subside I will look for sellers to take control again and join them on the short side.

http://keystonetradinggroup.com/trading.htm

Stock trading: the market this week

The NASDAQ was the only major indice to break out to the upside last week. It was obviously pushed higher by AAPL and the I Phone. A careful look at the Dow and The S&P will tell you they are making lower highs. Both are making a wide choppy topping pattern over the last two months. On the surface this would be distribution, we will know for sure if we see some big cap stocks breaking down with significant volume.

I say on the surface because we are in a confirmed uptrend on virtually every chart. No one knows whether it is distribution or just a pause, be patient and let the market tip its hand, not need to guess. Earnings season starts tonight with Alcoa (AA), lets see if it leads the next push.

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Trading Stock and market analysis

Whether you are day trading or swing trading, pay close attention to volume this week. The stock market is going to give us a big clue for things to come.  When I say the market, I am referring collectively to the Dow Industrials, The S&P 500 and the NASDAQ composite.

All three sold of last week on heavy volume, otherwise known as “distribution days.” The price action to monitor this week will be a “test” of the previous highs. If the market  retests the previous highs on light volume, we should finally be starting the pull back that is very overdue.

I am not predicting anything, just paying attention. I am  telling any of my friends who ask, lighten up on the long side.

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