Sunday, February 26, 2006

keys to the trade

When you watch the screen day in and day out you recognize a pattern of support and resistance zones which are tested and then finally broke through. A good way is to set up your chart with pivot points which tell you if the support or resistance has been broken and where the new objective for the next support and resistance zone is. You can use Fib retractement when you believe the equity has reached a top and also by checking this with a stop or decrease and momentum and the equity has already passed one of the support and resistance zones and may be getting ready for a pullback of atleast 38% and for a complete reversal if the 61.8% line is broken. The reason these zones work is beacuse the professional traders and pit traders will put set stop losses on there trades and if the equity moves to this point then they all sell and then momentum comes in from the price going higher/lower by even more stop losses being triggered until finally a pivot point is reached and profit takers begin to get there 10-20pts from the breakout which sets up for a fib retractment of 38% almost always when the trend is at its near end and the equity has already moved a large percentage in one direction when compared to the average price distance it moves in one direction for short term intraday swings..

Friday, February 24, 2006

Reflecting on past trade from jan 31

Upon further anaylsis of this trading day, I would have been better off setting an order with a defined stop loss in place and a target of 5-10 pts and if I was playing 2 cards I would let the other one ride for the potential 30-100pt run if I were live trading.

At my current stage I am trading intraday live on the YM with the tick, trin, dow volatility index (DJX), and using trend lines, CCI, momentum, MA's for longer term, fisher transform, chaikin money flow, woodies pivots, neak line break. In the future I look to getting a squack box, and backtesting some strategies using tradestation or wealthlab.

I'm going to put most of my equity in goverrnment bonds to accrue interest and all the while trade using this as my margin requirement, which is pretty cool. Also going to do some credit card arbitrage as described by my money blog by opening a line with Citi on a 0% APR BT and purchase line,,,it'll be great if I can get at least 5k to sock up in some govies or a high yeild savings account.

The best dam Charting software I've seen for free is's product. Jerry MedVed designed it, and his cutomer service and upgrades to the software is awesome.
I'm going to learn how to use the paintbar to use with my own designed indicator in the future, but I may have brush up on learning code for the complex stuff.

Indicators help to confirm a trade, but price trumps all. When trading index futures the most important thing I use are trading support and resistance zones (aka pivot points and some people use woodies pivots, pivots can be calculated by h+l+C+C/4 and then you derive the high and low for the next day using this mean for your deviation number , but the best zones use the opening price plus yesterdays H and low and close, woodies uses h + L + O + O /4) , trend lines, tick, trin, put/call ratio, volatility index, past history of the price, and most importantly the NEWS.

What is the easiest to trade? Things with a trend, and those things are bonds, commodities, currencies, indices, and lastly stocks. Take a look at the weekly of the 2 year gov bond, or how about silvers nice climb nice run or the peso.

Wednesday, February 22, 2006

If not indicators, then what?

Some say chart patterns don't matter and that the patterns are just as likely from occuring by flipping a coin. Some say that there are no holy grail indicators. Some say there is no way of knowing what way the market is going to go. Fine. Don't use any of that. Then what are you going to use. Your answer is the news and has always been the news and will forever be the news. Plain and simple example, the terrorists attack the U.S. september 11....should you go long or short...hmmm,,,short,,why?,,because we are under attack and freaking out,,thats why!
Example 2: Oil production has slowed and supply next quarter will be lower by 50 million barrels,,,,hmmm,,,,last time oil went up the DOW went down,,,,so we short the Dow and go long the oil contract. Example 3: Biotech company Novavax says they have a way to beat the scary bird flue virus which could kill millions,,,,hmmm,,,,the stock is at $1,,,,I'm going to buy,,,Oh look, its $3,,,$5,,,,ok back down to $4,,,not to bad. Biotech company will release news on there FDA approval,,,,its approved,,,,,dam,,wish I would have bought, or good thing I didn't buy,,,,how about trading the competitor biotech firm the other direction,,,like INSMED and TARCEVA.

Moral of the story,,News trumps all at affecting the markets. If not news, then technicals and institutions with deep pockets are moving the market the way they want it.

Monday, February 13, 2006

Volatile trading instruements

If you have alot time, then trade futures. If you don't have a lot of time, and you are prone to getting stopped out when a trade does indeed go your way or sometimes you get scared out of the trade from too much heat, then why not options?

Good option vehicles are in the form of high priced stocks which are volatile and liquid such as GOOG, PD, and CME.

Options that follow indices are even better, such as DIA, SPY, and QQQQ being the most volatile.

Options on futures have larger spreads, but they too are a choice, such as YM, ES, ER2, and NQ.

Here's a list of the active ETF's which you can trade options on:

Also, you can trade volatily, trading CBOE's product VIX, which follows the DJI volatility and acts as a contrarion indicator or the inverse of how the DJI moves, however, these options are European style, and the VIX futures are illiquid.

Saturday, February 11, 2006

Use the news

You can use the news to help you trade different setups. For the futures, you can get the pit noise and the broadcaster giving the play by play before you even see the quotes on the T&S. Use You need to do your homework for the trade before the open. Identify current trend and S and R zones. Know what news is pending and be ready to react. Get a traders calendar. You can use Camtasia Studio to record live trading to analyze where you would place your trades in case you couldn't watch for the paticular day.

Friday, February 03, 2006

Dow play by play

Here is todays play by play for the last hour trading:
free stock charts from ADVFN.COM

Entry signals

First determine where the index stands relative to the 5 and 1 years chart. Then Check out the 6 and 1 month. Then check out the weekly and determine where the support and resistance are. Draw your trend lines on the 1 year, 3 month and 1 week................
This is a good way to get into the correct mindset, but what happened in the past doesn't always predict the future. When day trading, were looking for 3-20 pts and if were lucky 60-120pts. Using tech signals like CCI, fast stochastics, Heinken-Ashi chart, momentum, volume, support and resistance zones, and trend lines.

Here is the yearly analysis:

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