Thursday, April 06, 2006


I like to trade box breakouts, no matter what the direction, but obviously its preferable to go with the trend. The trade is put on as soon as I see a candle breakout. To get in the trade I look at the bid and ask and time and sales to find the best entry in the next 10 seconds after the candle breakout. I'll buy or sell 100 or 200 shares with a limit order using hot keys, buying at the ask or selling at the bid. I'll initially put in a stop loss order 30 cents away. As soon as I go in the black, I'll re-adjust the stop loss to 3 cents away from the bid or ask, depending what way I'm trading. If I shorted at the bid at 400.50 while the last price was 400.55, I would have a stop loss order 30 cents away from my entry, or 30 cents from the bid at 400.80. As soon as the trade goes into the black I'll hit a hot key to readjust my stop loss. Here is an example chart.

On this trade I sent an order to short at 11:18:08(yellow arrow) and was filled at 11:18:16(green arrow). Quickly, GOOG dropped and I readjusted my stop using a hot key that sent an order for a buy stop that was 3 cents away from the last bid. I continued re-adjusting the stop 2 more times(making sure I canceled the old cover buys quickly so I wouldn't be stuck in a position if GOOG quickly reversed). My last buy cover was at the bottom green arrow at 11:18:11, with a buy cover on the current bid at 412.67 (My bid cover was 3 cents away from the current bid; moreover, my buy cover on the bid was 412.70, this is so that I wouldn't be taken out of the position, but giving it 3 cents of leway to decide what way it will go). The red arrow shows where my buy cover on the bid was taken out at 11:19:19 and my trade came to a close with a 34 cent profit, or $70 in roughly 1 minute.

Note- 200 shares were traded, if you were trading with 100 shares your fills may have been quicker and better, but you would have only $35 profit. I like 200 shares on GOOG because with the minimum 25k on a 4-1 margin it's possible to trade up to 100k worth of stock, great for big position sizing on volatile stocks like GOOG, also with my broker 100-200 shares is the same commission, $1, charging 0.005 cents per share. Low commissions is just another reason why high priced volatile stocks are great to trade.


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