Being Persistent

As I have discussed in previous posts the current market environment has not been offering many consistent opportunities.  Sometimes there is easy money to be made for about an hour or two each day.  Another characteristic of this market has been the increase in program trading, also known as algorithms.  These “algos” seem to take traders out of the best risk/reward setups.

Basically I have found that there are two ways in which we as traders can adapt to these programs.  The first one is to let trades breathe a little bit more than usual.  This can be a problem sometimes as we take a much bigger loss than we wanted because the stock blows through the price we wanted to get out at.  Then we wait to see if the stock is going to stay there and instead the price goes against us even more.  The other way I have found to combat these programs is staying on top of good scenarios and reentering them when opportunity presents itself.  I found two trades this morning that I think illustrate this idea of being persistent perfectly. 

The first trade was in JP Morgan Chase (JPM).  The scenario this morning was that JPM was opening strong basically right around the 2-day highs of 43.00.  I wasnt going to take the inital break of the number but was looking for a pullback to find a good area to manage risk.  This happened around 9:55 as JPM pulled back to test the 43 number.  My first entry was at 43.03 which was the 2-day high, with a stop under the figure.  As you can see from the chart we couldn’t trade out of the range from 43.15 to 42.94.  Now I didn’t want to give up on this trade but my job as a trader first and foremost is to manage risk.  So I kept trading around a core position and probably reentered this trade about five times.  The key to this trade was having small size when the stock was heading down below the figure but because I was confident in the setup I wanted to have the most size when we finally broke out.  The stock finally did break out for a nice .50 profit in about 20 minutes.

The next setup that occurred where I needed to reenter many times was in Las Vegas Sands (LVS) this morning.  LVS had been trending higher on the hourly chart and what I was looking for was to first open above the 19 level then hopefully trade above yesterdays high of 19.30.  Once LVS got above this range The next level of resistance I saw was 19.80.  LVS opened above 19 then traded above 19.30 almost immediately.  Basically LVS chopped around in a range between 19.40 and 19.20 for about an hour.  The key to this trade was the pullbacks were on lower volume then the up moves so I kept taking small profits and losses until we broke the 19.50 level then sold my long position at the next level of resistance which was 19.80.   I didn’t care if LVS went higher from here because I could have always reentered if we broke out from here. 

Hopefully this post will be helpful in your trading and as usual best of luck.

Kyle

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