trading your pre planned ideas

My plan today was a short bias on the markets and to sell stocks in my list that showed weakest on the daily charts, such as AK Steel (AKS) and Best Buy (BBY). Looking at Fridays trading, I planned two scenarios that I felt had high probabilities of playing out. The markets where either going to open weak and continue to sell off in which case I would short the 15 min ORB (open range break) or the markets would open with buying pressure and I would trade the first 15 min swing high, with the first profit target being the lows of the day; and possibly a break of those lows for continued selling momentum. As you can see from the price action the latter happened as the SPY in the first 45 min of trading tested the 15 min 20 period SMA which held as resistant creating a swing high, which gave us our first opportunity to short weak stocks.

Unfortunately I was not able to catch a good risk reward in AKS as the markets created the swing high, so I had to be patient and wait for a break of the lows around 13.07 as the next possible short; which unfolded for a nice momentum move down to the 12.80 area. In the afternoon BBY seemed to be the best short on my list in the lunch time consolidation below the morning lows. Even though price action did follow through to the downside in the late afternoon trading, you had to be quick on the keys and get a good entry to take advantage of the downward momentum.

My favorite day trading set up

One of our favorite plays is a weak stock closing strong. Tomorrow’s play is to sell short a failed test of the previous days high. This is a trade with terrific risk/reward. The existing order flow is selling pressure and the play is for it to resume.

The ability to put in a tight stop at a significant reference point with the potential resumption of the larger time frame move makes this a great addition to your playbook.

What to do when markets are in a range??

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

Making Money When its Available

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. 

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