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Archive for October, 2008

Day Trading Technical Analysis

October 31, 2008 Leave a comment

10/31/2008   

Day trading Technical Analysis: 

The markets were making a symmetrical triangle and support and resistance within the triangle is 8200 and 9300 in the Dow. The bulls clearly defended the 8200 several times.  A break below would see the Dow at approx. 7100 – 7400 which would be the 2020 lows. A close above 9300 would signal a short term bottom may be in place.

 Credit spreads are gradually easing which shows some positive signs in the equity markets.  One way to gauge this is by looking at the “TED SPREAD” which is what banks charge each other for three month dollar loans.  When  the Ted Spread starts to fall we will then begin to see a relaxing credit system which in turn will be positive for the equity markets.

The markets are very volatile and we are still in a bear market.  Counter trend rallies are normal and are generally violent.  Play the bounces but do not pick a bottom!   

 Dow Industrials:      Support: 8200        Resistance: 9300

The Dow Industrials did hold the lows of 8200.  A break below will send the Dow to the 2002 lows 04 7100 -7400.  If we do close above 9300 could send the Dow at 9790.    

S&P 500:   Support 850   Resistance at 986

S&P 500 is in a symmetrical triangle.  A break below 870 would see selling pressure into the market.  A break above 986 would be bullish and could see the S&P 1005.

Spy:  Support 85 – Resistance 95

Spiders are in a descending triangle and is breaking out of the upper end of the trend line.  If it can hold would be a positive sign.

QQQQ Support 29     Resistance 32

Q’S   are also in a descending triangle and it too is at the upper end of the trend line. If it also can hold it would be a positive sign.

Our next level of support is 27.61.

Iwm:  Support 60.73    Resistance 68.04   71.37

Iwm looks like the stronger of the indexes.  Iwm is approaching the 20 sma and a break above the average would also be a bullish sign.    

 

Quote of the day: “Remember that stocks are never too high for you to begin buying or too low to begin selling”

Jesse Livermore

Keep in mind the trend is your friend.  Have a great day!!

 http://www.keystonetradinggroup.com/

 

Fed Cuts Interest Rates

October 29, 2008 Leave a comment

The Federal Reserve cut 50 basis points today to 1.00%, meeting the consensus forecast figure. Stocks had an unusual reaction to the news, first selling off, then rallying over 200 points only to fall 300 points in the final 30 minutes of  the trading day.  The Dow closed down -74.16 to 8990.96 below the critical  level of 9000. The Nasdaq closed in positive territory adding +7.74 to 1657.21 and the S&P 500 failed to hang on to gains losing -10.42 to 930.09. Crude oil rallied over 5 dollars today in the hopes that the rate cut will spur more spending. As always our traders took a step back in the minutes before 2:15pm EST as the fed made there announcement.  The moments following the anouncement are always very unpredictable and to trade then is one of the lowest probability trades available. Once the market settled in and the trin started to head down, our traders pounced on the long side of the market and rode their positions until we saw the ticks make a lower high and within seconds the markets started to fall to peices. The qqqq’s or nasdaq 100 fell .80 in a matter of seconds.  once we saw this we knew that the buying frenzy that had drobe the market up yesterday almost 900 points and another 200 in the afternoon today was coming to an end.  We waited patiently for the selling to subside and when the stocks started to rally a bit, we entered our short positions holding them until we closed out before the 4pm bell.

Due to the large amount of selling pressure that occured towards the end of day, we feel that the selling may continue into tomorrow.  Possibly a gap up open and then a sell off the rest of day.  The 900 point move on tuesday was significant and we may have come to far to fast. Yet we do feel that we have reached a bottom and if we see intra-day order flow to the upside we will get long, selling into momentum.  Until we cross over the 20 ma on the daily chart on the dow,  and comp, we will be less aggressive with the longs, and “we will sell when we can, not when we have to”

Keep the discipline!

http://www.keystonetradinggroup.com

http://www.keystonetradingconcepts.com

Categories: Uncategorized

knowing what “should” happen next when day trading

October 27, 2008 Leave a comment

Do you want to earn a great living as a day trader? The only way to do that is to understand probabilities and take every trade based on what is probably going to happen, not what “is” going to happen. When managing money you must always look both ways before you place a trade. Most new traders who come to the business only look at a trade and see what they can make. They are only looking to one side of the street. There is an old saying that is right on the money, amatuers first consider profit potential, professionals consider risk first.

I have managed several day trading rooms and as a partner of one of the fastest growing proprietary trading firms in the country  I can tell you I have seen it all when it come to explanations for some trades! As a professional sitting at my screen day trading for a living I am constantly asking myself “what should happen next?” Most traders sit at their screen saying “what do I need or want to happen next!”

It might not seem like a difference but I can tell you that the perspective is huge! I am constantly assessing ALL probabilities and adjusting my share size and leverage as the market tells me what it wants to do. I never ask the market to do me a favor. I simply listen, struggling traders put on trades and tell the market to prove their brilliant analysis correct.

If the market makes a new high, I am saying to myself “if order flow is still good this stock should retest that high.” I place the trade and let the market unfold. There is never a thought of this must happen, if I do that I am only seeing what I want to happen, I am eliminating possibilities. I am predicting not trading.

The biggest losing trades I witness from experienced well capitalized traders is when they tell me “I didn’t see that coming.” Nobody is perfect. Trading is not a business of being perfect, but it is a business of minimizing mistakes.

In order to earn a consistent living as a day trader you must understand when to push your leverage. In order to  push your leverage you must have as many if/then scenarios as you can think of during the day and for each trade. When if/ then works out, you push your leverage, when your if/ then scenarios do not follow through you scale back and evaluate again.

This sounds simple and common sense but the difference between planning it out before the trade thinking about all the many possibilities during the tradde and actually doing it make the difference between getting paid for the month and telling all your friends that day trading “doesn’t work.”

Do not spend all day looking for entry signals as most unprofitable traders do. Spend all day building scenarios, when one has a high probability in your opinion, place the trade. The entry is not as significant as the sccenario. The scenario is what should happen next.

http://keystonetradinggroup.com/

“How do I trade this market”?

October 25, 2008 Leave a comment

The curent market environment we are now trading in is one that has not been seen since the the 1920’s. Until we realize this as traders, we will be frustrated with our trading systems.  The volatility is great if you understand how to trade it, however if you are only relying on technical analysis you are going to face a difficult task until the fear in the markets disipate.  Of course, you want to use your charts as a guide, however, much of what is going on right now is momentum based.  Similar in some regards to trading during the internet boom of the late 1990’s, but different because at that time the momentum was mostly to the upside.  We will use our daily charts and our 30 minute charts to see the underlying trend, which at this point is clearly down, however, because we are so far stretched from the 50 day and 200 day moving averages on the Dow, we can only expect sharp rallies, which then ignites short covering.  These rallies are then short lived because hedge funds and institutions see these rallies as an opportunity to unload their shares which they have to sell because of client redemptions.  All this ultimately leading us to the violent gyrations in both directions.

So how do we trade this?  Well, because the underlying trend is down, the majority of our trades will be from the short side.  Like the institutions and hedge funds, we will sell the rallies and get short. Because the market does not go straight down and we do have the violent up moves, we are always “working our position”, covering some shares into momentum on the way down.  The common mistake for alot of traders is to think that the down move is going to go straight down and they try to hold the stock to make a point , when in fact all that was there was .50.  We must cover when we can, not when we have to.  THe rallies are so sharp and unforseen, that we would lose all of our profits if we did not book them into momentum.  There is also an opportunity to ride the momentum back to the upside and get long and ride the short covering. When we make this sort of trade, we know that is a contra-trend trade or against the trend so we know to book profits even sooner because it is just a matter of time before the “hedgies” and institutions start selling again.

The fact of the matter is that these are not easy times, but they can be profitable if you adapt and stay disciplined. Trade less share size until you get comfortable with the market conditions and do not rely strictly on charts. They are just a part of the equation.  Good luck and please let us know if you have any questions.

Remote Trading…

October 21, 2008 Leave a comment

Trading from afar: This week I am trading remotely as I am not in our NY office. I can say that it has been so far a good experience. I have set myself up with a couple of screens and have found that traders can do with what is available; the most important component in my opinion is RAM for the computer and a good internet connection. I didn’t have access to CNBC but found out that you can get the live feed through the internet for $10 a month – what else to you want. So once everything is set up, the markets, prices, and the flow is the same for everybody. The only difference was the lack of being able to talk to your fellow trades to bounce ideas around.

 

BUT at Keystone, we have an internet mentoring room that allows us to stay in touch. In many ways it can be the same as sitting in an office with fellow traders, but with the added advantage that you have a larger diversity of people with different experiences and with different skills sets. We are continuously exchanging ideas on the markets and keeping tabs on each other to make sure we are not in an equity “position” you wouldn’t tell anybody. In other words, can you justify the trades you are getting into to? It makes you think. And that is what mentoring is all about – keeping traders on track to a plan that works for them.

 

This is the key in finding the discipline to trading. Can you back up your though process to other traders, who see the same chart and have the same information as you? You should, otherwise the trade is most likely a low probability one. The mentoring room also reduces the costs of the learning curve for that reason alone, others will let you know if they have tried something that doesn’t work. We all learn from each other.

 

http://www.keystonetradinggroup.com/concepts/mentoringprograms.htm

day trading advice from 2003

October 20, 2008 1 comment

For those of us who were day trading full time after the internet bubble it was down trend after down trend. This move basically lasted from September 2000 – March of 2003. During that time it was just a matter of where you were going to short sell each day. Plenty of companies like World Com, XOXO communications and of course Enron were going down.

Day trading the short side was a little frustrating some days because of the uptick rule. It was common to see a short trade coming but not be able to get the trade off because you didn’t want to short the bounce (especially when things were in fractions). Bullets and conversions were available for the short sales but were expensive.

As difficult as it could be on some days to execute a short sale the moves to the downside intra day were consistent and there was good follow through. Basically all the market did was consolidate or go down. When the market consolidated many traders made a great living by performing what was called “rebate trading.” Essentially just  placing 25,000 – 100,000 share orders on an ECN attempting to take a flat on the trade and capture the rebate the ECN would pay. The stock didn’t even have to move it just had to print.

These traders would short sell stock and if the stock bounced they would short more, when the market pulled the stock back in they would take a flat and capture the full rebate. So a 25,000 buy and sell on the BRUT ECN at that time would pay a rebate of $2/1,000 shares. so a FLAT (in and out at the same price) of 50,000 shares would yield a profit of $100 just for the execution!

It was a relatively safe trade at the time because every blip to the upside came back down. So whether you were shorting and capturing the rebate or shorting size and holding on for the day, it was just a matter of when it would go down.

Then came march of 2003. When the statue of Saddam Hussein was pulled down by a tank that was the bottom. The news was still relatively bearish but the market stopped going down.  The little blips to the upside didn’t come back this time. Rebate traders were blowing out their day on one trade and bigger traders were blowing out their month on one trade.

Why did they do this you might ask? Well it worked for the last 2 1/2 years thats why! The news was still bad so they were justifying the short sales. It was one of the most frustrating periods to trade those next 6 months. The market would go up for 2 or 3 days, you would find a great spot to sell short, the market would pause, you would feel confident and then the market would blast off to the upside again. Frustrating.

What does this have to do with today? If you have an opinion on how bad things are in the market or where prices should be get it out of your head. Just pay attention. This is why in our training program Equity Trader 101 we are insistent on “it is what it is until its not.”

One of the biggest questions we get is what makes Keystone Trading Group different and the answer is we actually trade full time. There are many people who are great salesman who have never traded full time. As one of our traders you will be able to benefit from our real world trading experience.

Don’t have an opinion on how bad the market is right now. Trade the order flow in front of you, you will be glad you did. You don’t want to short an obvious uptrend and wonder why it’s happening because you think the news is bad.

www.keystonetradinggroup.com

notes from a new day trader

October 19, 2008 Leave a comment

The following is an email from one of our new traders. Nice job Debbie, keep up the enthusiasm!

Hello All !

(Pete and Mario  I Cc.’d to you since there may be some strategies that all of us share at different times  that you can incorporate in your classes for future students giving them what to put on post it notes on screen may move everyone to a shorter learning curve and more profits for us all.)

Also, if anyone sees any mistakes in information then please correct me—team work is a wonderful thingJ

I am studying this weekend and reorganizing my trading space. I have made a big leap this past week and a half in my learning (I came to this entire experience with basically 0 knowledge (except for the reading of a few books which at that time were very hard to understand). In addition, I took this leap (fully), I do this full time and I don’t have another stable income (my business that I started is also very new and something that takes a lot of time to build). This jumping off the cliff strategy that I undertook in my life is not recommended but it works for me based on my circumstances, high tolerance for stress, and my intense attitude of determination and persistence .

So, I am in this to book profits and make the learning curve shorter. Whatever your situation (as far as your learning and trading) perhaps if I share this will help others (if this is beneath where  you are at in your development as a trader  then great—go make money and share with us please). Also, all of this info. you have is in the Trader 101 but I find that I need concepts in my face (LOL) in order for me to internalize them and consistently apply them while trading. So basically this is my in my face strategy for myself LOL!

I redid all of my post it points which I have on my computer screens. My notes are as follows because these are going  be my focus since my goal is to be making money consistently so I can move on to next step with keystone and start trading more shares. So here they are:

1. TRIN-Leading Market Indicator; 1.0 Neutral-1.2 Rising (Bearish-Selling)-.80 (Bullish-Buying)

2. TICK Reading +1000 or greater scale out if long or book profits; TICK Moves From +1000 or greater and Pulls back to Zero Line (+100 or-100) Look for another Long Entry.

3. TICK Reading -1000 or greater scale out or book profits if short; TICK moves from -1000 or greater to zero line (+100 or-100) Look for another short entry

4. If Tick Does Not Read Higher +500 or -500 NO INSTITUTIONAL order flow so do not be too active, don’t expect follw through, look for test trades.

5. Support and Resistance

-OR

-Today’s High and Low

-Previous days high and low

-Previous days high and low of previous 20 days

**If In A POSITION THEN BUY AT SUPPORT AND SELL AT RESISTANCE.

**IF NOT IN POSITION Buy AFTER RESISTANCE IS BROKEN AND SELL AFTER SUPPORT IS BROKEN; TRADE A TEST FIRST WITH A WELL DEFINED STOP LOSS OR TRADE BREAKOUT OF RESISTANCE AND THEN EXIT FOR A PROFITABLE TRADE

6. Inside Day: Trade Breakout of Inside days high or low, expect trend type day, expect short pauses in trend, add to position as pauses occur.

As far as adding to positions many of us may not be allowed to do that at this time (so all of Keystone’s rules for each of us supersedes anything here) but if we know that is a goal then we can prepare for it when we actually can implement some of these things.

Here’s to all of our successes in our lives and this path to financial freedom!!

Have a good one!

Dr. Debbie Badawi

www.keystonetradinggroup.com

Categories: Uncategorized