Friday, 2 January 2009

Strategy as from Jan 2009.

A brief recap of my strategy as we go into 2009.

As mentioned before, it is based pretty much on the TraderX blog strategy with a few minor adjustments which fit in with my views on trading. So many thanks to TraderX for sharing.

Here are the main components:
  • Trade gap stocks (Nasdaq and NYSE) both long and short.
  • Mostly (90%) I will trade gap stocks which are trading outside the previous days range.
  • Timeframe for trading is 15min charts (first 15min candle defines the "opening range").
  • Mostly (90%) I will trade stocks in range $15 to $180 and where volume in first 15min > 120k.
  • I use the 5ema,volume and atr as the indicators on my charts.
  • Use of price action of the stock as denoted by candlestick behaviour and patterns.
  • Use of price action and CCI of the DOW index to judge market direction and attempt to trade in same direction as the general market.
  • Trend trades are based on trading pullbacks with narrow range and/or inside bars with the 5ema as support. Ideally with candle price action as supporting factor.
  • Breakout Trades are based on breakout of the "opening range" with pattern candle and with market and ema as supporting factors.
  • Gap Fade Trades are based on breakout of the "opening range" with pattern candle and with market and ema as suporting factors.
  • Breakout and support/resistance trades are based on a breakout coupled with a retest of a significant support/resistance level (e.g OR, previous day's high/low etc).
  • Stop is usually opposite end of trigger candle in a lot of cases. In some it will be an alternative support/resistance level.
  • The Fib Extension level 1.382 is used to judge potential profitability of a trade. The two points used are [previous day's high and the current day's OR low] for shorts and the opposite for longs.
  • Risk a max of 0.5% of capital per trade. Position size based on stop distance.
  • Once 1R reached I move stop to breakeven. Depending on market conditions, I may take partial at 1R. I will also tend to take partial at Fib Ext and/or 2R and/or $1 gain.
  • I will only ever lose a max of 3R in one day. E.g. If I have 3 trades running and none of them has reached 1R (i.e. to breakeven) then I will not open another trade.

8 comments:

rudy said...

Nice Post TR. I was mulling over as to why it is so difficult to learn trading, and I thought I did share this with your readers:

1. Need to internalize lots of trading simulation of specific set-ups in real-time to trade effortlessly

2. Need to trust money management system to weather +10 losses in a row

3. Tuff to internalize that its the 5-6 huge monthly runners that is the big pay-off days

4. Must master +3 trade set-ups to make money consistently month to month.

5. It takes considerable time to mathematically think and act like a trader

6. Trading is a performance skill which requires mastery of every element of trading

7. It requires time capital and considerable effort to achieve the experience to make it effortless and automatic

8. It takes several attempts at different trading methodology to sync with a trader's personality and cognitive strengths

9. It takes time to set and internalize specific rules that embed a sense of mastery

10. To survive in trading requires weathering the lengthy learning curve

I wish everyone lots of success in 2009, and TR, thank you for sharing your excellent blog.

Rudy

Z said...

HI Am,

Nice recap for 2008. Yeah, Trader-X is awesome, I wish I could meet him in person and just shake his hands. Wish you the best for 2009! I hope to start my own blog one day once I start risking real capital.

have a great one,
Z

rudy said...

TR, nice post as usual. Here are some of my goals for 2009:

* Gaps: will qualify each trade as break-away, run-away, or exhaustion gaps from the daily chart.

* I will track daily gap trades to determine which hold and trend higher/lower, fill gap, etc?

* Gap-fades: I will pass on break-away gaps. On a daily chart, a break-out from a consolidation range is sign of a powerful trend.

* Ultimately, my 2009 goal is to exploit my edge with frequency and size ... to press an advantage when it's there!

* I will exercise daily - If I push myself physically, I will push myself mentally

* It is not enough to repetitively practice a skill, I must do so with ever greater speed and accuracy, by creating conditions of extremity

* I will start thinking like a Trader - this means knowing what traders look at when they assess markets, the economy, news events, etc.

* My end of day review will finish with my setting a goal for the next day's trade.

* A balanced life makes for balanced trading.

My 2 cents.

Rudy

OONR7 said...

nice list... I particularly like points 9 and 10.

Trader-X said...

Good post - quick question. Do you mean you are drawing your Fibs over the high/low of the first 15-minutes?

If so, you might consider researching the first 30-minutes as your timeframe for the OR. I am not saying it is better - but it is worth your time doing the research.

TraderAm said...

Thanks for all comments.

TraderX : Yes I am using first 15mins high/low as OR. However I will definitely have a new look at the first 30mins as OR.
Many Thanks for the advice.

rudy said...

TR: I am thinking of upgrading my computer trading system and I was wondering if you can share some insights as to minimum hardware and software requirements? I did like a laptop computer that will not become obsolete within the next 3 years. Also, any preference for a specific brand, such as IBM Think pad, Toshiba, etc? What are the configurations of your present computer system? Any preference for Macs versus Windows?

Thanks for your input. Rudy

TraderAm said...

Rudy.

The main requirements are IMO a very good internet service (speed and reliability) and also the most RAM you can get into your machine.

Charting packages and broker software rely mostly on Internet Service and RAM processing power.

Anything above that depends on which trading software you use. For example something like Tradestation can make use of dual processor technology, so it may be an advantage to have that if it is able to be used.

MAC vs Windows ? > Never tried MAC.

My Config : Dell Vostro 410 (home)
and Dell Insprion (work).
I also have a Aries AMD PC as backup at home.