Archive

Archive for February, 2010

What to do when markets are in a range??

February 28, 2010 Leave a comment

One of the benefits of working on a trading floor is being able to gauge the type of environment we are in on a day-to-day basis just by opening up my ears.  You can almost feel the energy when the market or even just a stock is giving away money.  And on the flip side you can feel the boredom and frustration when the market is providing nothing.  More and more lately I have been feeling this frustration by the traders on the floor.  But during these difficult times is when traders need to step up and make adjustments in their trading and grind out a living.  You need to grind out a living and basically keep your head above water so when the markets pick a direction you are still around to capitalize on this opportunity.  Here are a few adjustments that I have been making in my trading lately. 

  • Be Prepared.  Far too many days lately have been slow grinds with small periods of activity.  If you don’t have a plan for the market at all times you may miss this activity.  And if you are an undisciplined trader you may chase this opportunity and compound the mistake by not only missing the high probability trade but also taking a low probability scenario. 
  • Lower your expectations.  When the markets are not trending you are basically momentum trading.  The key to momentum trading is taking what the market is willing to give.  Take your profits and reevaluate the trade.  Most trading is grinding out small profits and losses, the bigger money will present itself but don’t try to hit a home run every trade. 
  • Respect support and resistance levels.  One thing I have been noticing in my own trading is that stocks are not only pausing at area support/resistance they are reversing off of these levels.  And if you have not at least taken some of your position off you end up turning a good trade into a flat or a small loss.  They key is to get out at areas you believe will be support/resistance and if we do break through get back in. 
  • Hourly trends are most important lately.  Most of the stocks I have been watching the only trend I have been able to take advantage of has been on the hourly timeframe.  Stocks that are trending are basically doing so on a 3-5 day timeframe.  If you are paying attention to the hourly charts you may be able to take advantage of good setups by trading in this direction.  A good example of this last week was WDC as it traded from 44 to 38. 
  • Your first loss is your best loss.  With lower expectations and less opportunity must come tighter stops.  When markets are trending and the direction is obvious you may be able to let trades breathe a bit.  The environment we are in calls for watching order flow and when the tape doesn’t feel right you need to get out of the trade and reevaluate.

Hopefully these suggestions help you in your trading.  If you have any adjustments that are working for you either post them in the comments section or email me at kylemkramer@gmail.com and I will post them for us to discuss.  As usual best of luck in your trading. 

Kyle

Advertisements

Making Money When its Available

February 23, 2010 Leave a comment

As traders we are always looking for our edge.  Whether its 5 hours or 5 minutes we need to constantly be prepared.  This preparation starts in the morning with formulating a plan for the day.  What stocks on your list were weak/strong into the close?  What were the important levels from the previous day?  Where do you want to be involved?  All of these questions need to be answered before the opening bell, that way on the open all you are doing is following your plan.  An example of having a plan and following it presented itself in GoldCorp Inc (NYSE: GG) today. 

Going into today I knew GG was a short below $38.  Looking at the charts it was a huge level that the stock could not trade below going all the way back to Feb 16th.  GG traded below it for a little bit yesterday but could not hold.  I knew that if GG held below this number that $37 was the next level of support.  So my plan was to wait for GG to trade below $38, wait for the stock to prove it could stay below this number and then find a nice area where I could manage my risk. 

All of this played out in the first 20 minutes of the day.  GG opened lower pushed above $38 then started trending lower.  I waited for GG to push lower below the opening range knowing that there was a good amount of profit potential and entered on the first pause I saw at 37.60 with a stop above 37.60, so I had a risk/reward ratio of 6 to 1.  I booked half of this trade into momentum when the 10 o’clock number came out and held the rest when GG consolidated around the $37 area. 

They key to this trade was having the plan and making what I should have when it was available.  Everything happened so quickly that if I wasnt ready I would have missed the trade and probably gotten in at a bad spot.  We watched the entire day today traders giving away money instead of trading when things were obvious.  I will take easy .60- .70 moves in 10 minutes any day of the week.  Good luck in your trading. 

new trader poll: Please comment on your answer!

February 22, 2010 17 comments

Planning for the week to come.

February 21, 2010 1 comment


Last week the SPY rallied 4 days on average volume and found resistance at its 50SMA on the daily chart. It closed near it’s 61.8% retrace fib level from the lows made at 104.58 on 2/5. So the SPY has two major places of resistance at its current level with 50 day moving average and the 61.8% fib level.

I will be looking for two strategies to play off of these current levels. One based on a continued rally and one looking for a pullback from these resistance points.


Last week, industrial goods had the strongest showing of the week with the sector up 4.2%. Financials were up the second most at 3.5%. If the market does break the resistance then I will be looking at longs in the industrial goods sector mainly BA & CAT. Although, I would like to see a pullback in BA after it’s 4 days of rallying before wanting to get involved. I am still not convinced that financials are on their way up as they are one of the weakest sectors over the past month, so I will concentrate on industrial goods.

BA made new 52 week highs last week.


The laggard last week was healthcare which sector gained only 1.6%. If the market fails to break through its resistance, then I am looking for continuing weakness in this sector. Healthcare is also one of the weakest sectors for the month down -3.6%. Stocks I will be looking at are MRK and BAX. Both are below they’re 50 day moving averages and are setting up for good shorts.

MRK looks good for a short if SPY can't break resistance.

Because I don’t have a crystal ball to see the future, I want to have a plan for which ever way the market goes. So if it rallies I will be looking at industrial good makers like BA & CAT. If it fails to break through resistance then I will be looking at health care stocks.
For a good site to look at the sectors and how they fare on a daily, weekly and monthly level I like to use Finviz.com and go the page under groups. Good luck trading the next week!

Turning a bad day into a tremendously bad day.

February 18, 2010 1 comment

Today was one of those days where though the market is choppy some stocks did have good moves. Western Digital (WDC) which is a stock I have been trading well finally broke out of its range to the upside and was up 6.62%. Although I have been trading it well the last few weeks, I chose to trade gold  in anticipation of it breaking 1120 and that potential upside. Mistake #1.

Gold had been up $16 dollars overnight and seemed to be poised to break the 1120 level, which had been resistance. I am salivating at the market open thinking I got dollars coming my way. I am looking at $AKS and $GG, both of which are poised to gap up from the open above levels I had wanted to get involved. My strategy was to wait for the pullback.

It gapped up in the morning and then sold off for 30 minutes, but did hold the gap. I got involved early, but got shaken out as it broke below the figure. It rallied after I got out and then preceded to chop around. It never trended like a $WDC or a $AKS and I did a couple range bound trades to get close to flat.

The blood started innocently enough. I threw out a short at the top of the range with a quick out if it broke above the range. I was in the money for a while, but then it came back and I was flat. Mistake#2. Not trading your plan. It’s a scalp take your 10c and know that it’s been choppy all day. Don’t hope for some follow through. I deviated from my plan and started salivating at the thought of it making the lows and filling the gap.

I took a small profit on one piece and probably should have taken a small profit on the other to be flat on the day. The blood starts gushing from here. It breaks above the 35c range and I hang on telling myself it might be a fake out and it will certainly go down. Mistake #3. Not trading your plan and getting out at the exit level.

It goes up more and I am just letting it run. Close to covering, but not wanting to get out just to watch it go my way. I let it run against me way too far. It was painful and my flat day went to a significant loss day.

Why was I hanging on? My logic was gold would sell off a bit since it didn’t cross the resistance at 1120. I got out of my position angry and took a break. It was a bad loss and it was stupid because I basically risked 30c to make 10c. There is nothing right about that logic unless your goal is to lose your money.

Anyways I should have just left for the day upset at my lack of discipline, but I came back hungry to make my money back. So what if it’s 3:45, I can get it back. I saw that after the rally of $GG that stopped me out, the stock was pausing and looked like it was ready fly to the upside, so I went long. That’s where bad became worse.

I was long near the top and saw a support level to manage my risk at only 3c and the upside at least 20c. It broke my support and like a fool I kept holding. It broke the next support level and I kept holding. It broke the next level, which by the way would have made me flat on my original short, and I kept holding.  I kept thinking there would be buying coming in since the pits had looked ready to break 1120. After the pits failed to break above resistance at 1120, they did sell off. My exact plan from before, yet now I was long. I was a sucker both on the way up and way down!

I defend none of my actions above as I let my emotions rule me. If I could do it again I would do it this way. First, get in a trending stock like $WDC or $AKS. If I did that I would have had one of my best days. The rest of the mistakes would not have existed. Lesson: find a stock that’s in play and not one that is chopping around.

If for some reason $GG is the only thing I could trade. My first mistake was not getting out of my short immediately when the channel broke. That right there would have pretty much saved me from every other mistake afterwards. Second one though was letting the short run so far that I took such a loss on it. Third, coming back unstable to trade and then putting a trade on that would double my loss for the day.

$$$ NYC Trader Expo $$$

February 16, 2010 Leave a comment

So I’m in Time Square and there are lights flashing all around on giant TV’s while news scrolls by endlessly. It’s 7:30am on this chilly President’s day and I’m on my way to the Marriott Marquis at 45th and Broadway to go to the trader expo!

If you have never been and you want to be a trader, it’s an excellent opportunity to immerse yourself in a myriad of techniques and strategies.  Admittedly, by 7pm, my brain was feeling a little like mush from all that “strategy!”


Below are a list of some the presentations I attended. Some were good and offered practical approaches and strategies for various markets. Some were a little more like snake oil salesmen claiming they can teach me how to take $10k and make $250k while only working 5 minutes a day! Come on, do people really believe such a system exists?

AT 8:00 am I hit a panel consisting of five successful traders with five different approaches.  They each explain what they look at to find and manage winning trades. One plays oil futures and makes trades based on the tumultuous relations between the US and IRAN. Another panelist plays only stocks in the news that have at least 3% moves. Another one manages her stock trades exclusively around Fibonacci levels. While another strictly trades on technical analysis.

Next presentation I visit  is how to play ETF’s long and short using a sector rotation strategy.  Unfortunately there was no real sector rotation strategy, just a moving average play using the 2 and 5 on the five-minute chart.

I also visited a forex speaker to kill some time and thought it was going to be a waste when the speaker showed us a picture of himself as a competitive collegiate skier. It got interesting however, when he broke into how he uses Elliot wave and Fibonacci levels for his trades and what markets(copper, bond, S &P) lead what currencies. It was a good mini introduction on Forex.

The next man is sort of a cult figure on the trader scene who wears a very expensive watch and whose body guard wears a hat with a feather.  The room is packed with probably 300 people crammed into a long hall that seats only 200. People are lining the walls and sitting on the floors. These people love him as he tells them how successful he is. It took the speaker a while to go through his background (like an hour), but then he walked you through what basically was a breakout play off the first 5 minute candle.


Finally I go to a presentation on exploiting the increased volatility in the market. The speaker was like an encyclopedia of strategies. He threw out 5 different trades using 5 different indicators to make trades. He also has several strategy’s based on price plays with cool names such as “The Ambush, Hot knife through Butter and the Gotcha Zone!” It was pretty exciting, yet really left me wondering how he could possibly ever have enough time to implement more than a few of these strategies.

The varying strategies and markets just represent the varying personalities that exist. However, out of all the ideas and trade strategies, there was one underlying concept. Have a clear plan. Each one knew their exact entry signal,their profit target and their stop-loss.


The expo continues tomorrow and is free if you pre-registered. There are more presentations and are certainly worth the time and experience.  Be sure to stop by the KeyStone Trading Group booth on the 5th floor at #5203. Pick up a free DVD and talk with Erik and Pete about trading.

EU’s possible support of Greece leads to rallies in US markets

February 11, 2010 Leave a comment

https://i1.wp.com/www.timelessmyths.com/classical/gallery/parthenon.jpg

The Greeks are known for many things. The Parthenon, Pythagorean theorem, mischievous God’s and a debt crisis that is moving the US markets. In this week alone, the market has rallied on news that the EU would help Greece with its debt.


Wednesday, Feb. 9, at 11:45 am the SPY (chart below) reversed their downtrend on the day and bounced from their lows of 106.27 to make new highs at 108.15 ($1.88 or 1.74%.) This 45 minute move was based on unfounded rumors the EU would help out Greece.

Thursday, after an announcement from Brussels that no resolution was made, the SPY bounced from 106.62 to it’s high of the day of 108.25($1.63 or 1.5%.) Again, nothing has been decided although the EU is pledging support.


The dollar, which was gaining strength against the EUR/USD (chart below), initially bounced after the news, but then came back in as it was found to be “premature.” The EU is looking to give in-direct aid, but there won’t be any more details until sometime next week. As of this writing, the EURO is continuing to give up ground to the dollar.

The biggest gainers in US equities on the strengthening dollar have been basic materials. Although the overall sector has been the weakest over the last month down -9.2%. This week it is up 3.7% and more than any other sector. Today it was up 2.7%. (Bar Graph Below)


AK Steel Holding Corp (AKS) was up today 4.74%. It found resistance at it’s 50-day moving average. I will be monitoring it closely to see if it continues to rally as well as paying attention to the EUR/USD.

Shaded areas represent the volatility to the upside in the market.

The dollar is clearly getting stronger against the EURO

Week performance

Day Performance