Archive for May, 2009

getting the sequence correct when day trading

May 26, 2009 1 comment

Day trading often has the frenetic quick paced action most people associate with the internet boom. Most charting packages give you the choice to create a chart that can go all the way down to a “tick” chart. This is basically creating a chart that is formed from every print in time and sales. When traders do this it is for one reason and one reason only, to minimize risk.

The shorter the time frame the tighter the stop losses will be. This type of trade analysis creates many many trades with a one to one risk reward scenario. generally speaking the shorter the time frame you are identifying a trend or entry signal the more often you will be forced to trade. This is because on those short time frames the trend will change frequently.

I am not saying this time frame is wrong to look at, what I am saying is that if it is the ONLY time frame you are looking at you will be missing out on some “easier” bigger profits. Before you zoom down to the shorter time frames to enter a new trade, you should always develop your ideas on the higher time frames.

There is no reason to look for an entry if the scenario is not obvious. Too many traders focus on where to get in to a new trade when the real focus should be “is there an edge?” That edge is found on the higher time frames. make sure you get the sequence correct for bigger moves (even if you are only scalping!)

Throughout our discussions with the thousand or so inquiries we get per month, it is quite common for us to hear someone tell us, how successful of a trader that they were in the late 1990’s, that they left the business and now would like to get back into the business of day trading, with Keystone’s capital.  They expect that we will impressed with their trading track record which is over 10 years old.

That being said, we felt it is important to conduct a webinar series on the differences between day trading in the late 1990’s and day trading in the year 2009.

We invite you to join us on Thursday June 4th for an Online, Live Webinar which will begin at 6pm EST. We will break down what we feel to be the biggest differences between trading in those 2 time periods.

Click here to register for the event.


Financials getting heavy

Day trading the financials has been relatively easy for the last two months, find a spot to get long. Today may have been the kink in the armour. Yesterday the market had a very strong day with the DOW finishing up 235 points while BAC was floundering during the afternoon rally.

Today the tech stocks and specifically the QQQQ had a strong day and made new highs in the early afternoon while the XLF, SPY and DIA di not make new highs. We went out to the floor and told everyone be careful with agressive shorts this afternoon because of the divergence from what has been the market leader the past few months.

It took a while but the sell off happened in a big way after 3pm led by the financials. Good consistent trading starts out with learning the difference between a high probability scenario and mediocre one. Longs this afternoon were a mediocre trade.

Next few days will be interesting to see if the bulls have any steam left for the banks/broker dealers or if the money is starting to rotate into tech and coal stocks. Stay tuned

day trading to be right

Day trading for a living first requires learning how to not lose money. I know that is not the sexiest advertisement for a career as a trader but it is true. In order to understand how to use leverage properly you must have enough “screen time” to have an understanding of when to scale up or down you share size. The only way to have enough screen time is to be in the business long enough to see many different market conditions.

It is especially important in the beginning of your trading career to have a clear trading plan. This must include scenarios for if a trade moves in your favor or against you. Most new traders only have the first one. If you don’t have a plan that tells you exactly what you will do your trades will become emotional decisions instead of business decisions. In other words you will end up trading to prove your idea right instead of trading to make money.

Spend some time tonight working on your plan. I went through the same thing when I was a new trader. Too many emotional, last second trades is a road to nowhere.

Markets Exhaust

Today was a day that many traders have anticipated for the last 4 weeks or so. The sentiment on wall street had gone from doom and gloom right back to the raging bull of the late 199o’s at the flip of a switch. Truly this is what made the trading over the last few weeks somewhat confusing. We go from a point in which every day we had either Obama, Bernake, or Geithner on TV trying to make the country feel secure, yet all they did was create more panic to a point where bad news was ignored and the market raged higher.

By 8am this morning the markets had a feeling of exhaustion, a point in which a stock has no place to go but to reverse.  This morning Bank of America was up over $2 premarket after it had just made a run from $3 – $13 in a matter of weeks. It just felt like the right time to start testing the short side of the market. The shorts have been getting beaten up for weeks. Anytime a short trade was placed it was back in your face right away. They just did not work!  Today that changed. It was the first time that shorts were following through and each and every rally was an opportunity to short again.  Bank of America still remained one of the stronger stocks, yet at one point was down to $12.75 after trading at $15.10 in the premarket.

The stress tests were released this evening and it seems as if there were no major surprises , as there were many leaks this week.  So where do we go from here?  Good question!  Remember, we are still above the 200MA of a good portion of the S and P 500 stocks. This means the market still remains strong and today was just a pullback in an uptrend. There will be many opportunities to short over the next few weeks as the market takes a breathe from this historic upmove. However, you must be diligent to keep tight stops and recognize that we still have the ability to move higher!

As always please email us at info@keystonetradinggroup if you have any questions about trading