Nov 17, 2007

Tradeweek

With my new schedule I really needed to find a trading style that was simple, effective for gappers and could be applied throughout the day. What I ended up focusing on were two and three bar retracements. I find these to be not only easy to spot but also highly effective. Also, I'm also going to concentrate on just the :15 timeframe for a more 'relaxed' (dare I say) trading experience. The retracement trade is pretty simple. I look for 2 or 3 bar retracements (either up or down) with a reversal bar and I enter on a confirmation of the reversal. I also look for potential 'dummy' retracement plays where the reversal bar sets up against the retracement trend but there is no confirmation. I remember Trader-X saying a while back that this is a pattern you should look for if you wanted to reduce candidates or wanted more high probability trades. So, here's a look at some charts this week that fit the above criteria:










Executing all these trades, including partials, would've produced the following stats:
Total trades: 9
Win: 7
Loss: 2
Win rate: 78%
Total R: 14.46

26 comments:

Anonymous said...

hi,what do u mean by dummy reatracement?if u please make it clear that will help me to understand,i read ur blog every day,thanx for the blog.

OONR7 said...

anon: I'll use a long play as an example; if after a two or three bar retracement I see a down bar... I look at the next bar. If it's an up bar and does not break the reversal bar's low - I consider an entry. The FOSL and SSRI charts are good examples.

Anonymous said...

Ok,thanx,i understand but if next to the down bar is a up bar and it doesnt break the low its one point but if it break the high point,it happed in the next bar isnt more confermation.

OONR7 said...

huh???

bl said...

NR7, I don't understand. Retracement from what? Opening bar? Use FOSL as an example and what does the arrow mean. A step thru would be nice. Thanks. I'm looking at IB's using a mostly premkt 5%, mostly nasdaq(11/14 pre Friday)WL: NCTY-2/15"-2/30 CHRD-2/15 MSCC-2/15 ACTG-3/30 . Even some of the up/dngrades can fuel action CLWR -5/15 where it consolidated at 5%. Some nice 5" breakdowns: chrd-2/15 stv-2/5 mscc-4/5. some open reversals: sbux slxp adsl nuva. Trade: ACTG -6/15 for lunch
Aloha,
BL

Tom T. said...

oonr7 - I am likewise confused - I think a detailed post is in order. I am embarrased to ask but what is a retracement? For instance your arrow over the 13.30 bar on GG confuses me because I see two sets of 3 green bar retracements prior to that so why did you pick that spot instead of the 12:45 bar - maybe I am not sure what you are saying to even know if I am looking at this correctly. Sorry - Tom

bl said...

Correction:
adsk not adsl

OONR7 said...

guys... you're gonna need to look at the post and the charts again. My definition of a retracement means price movement. So, if price moves two bars up, prints a down bar then a confirmation bar afterwards... I look to enter. Of course, standard rules apply: reversal and entry bar must close below 5ema and fairly narrow in range (around 1%). I also like my entries to be at least within the 15-min opening range or near the ORL/ORH.

Tom: as for GG, two bars prior to my entry bar was also a valid entry point (probably a better one) but I didn't realize the low had been taken out. So, at least you recognized it. Also, I place my stop-limit orders 2 cents above/below my entry.

OONR7 said...

and, for now, I'm looking for entry bars with increased volume.

OONR7 said...

bl: as I mentioned above, it might be easier if you thought of retracement as price movement. So, using FOSL as an example... there was an obvious price movement starting at 12:30. And while the movement was part of an overall 4 bar move... the most obvious were the last two. Okay, now at 1pm, at the end of that move a down bar printed which would signal a reversal (especially after a 4 bar move). However, the 1:15 bar was an inside, up bar which never broke the low of the 1pm bar and never confirmed the potential reversal of the 1pm bar. My thinking now is that if the high of the 1:15 bar can be taken out it will just continue the upward move and prove that the 1pm bar was not in fact a reversal bar, but just a pause. This all comes from reviewing charts of stocks in my watchlist. I didn't take this trade but it will show up as a candidate the next time around. Greytrader first brought up FOSL in a comment on Tuesday.

Anonymous said...

best way to make money in daytrading is just take a shot at your watch list stock...
even at 50-50% probability that you would be right, all you gotta do is manage exit...
that is cut your losses and run you wins.
This is all you need for daytrade..forget all those lonwinded candles/retrace/NR blah blah blah..5/15 min graph.(does anyone seriusly believe that 5/15 min prints carry some trend..
daily movements are random folks (unless of course guided by broader market moves)
so manage you exits and just buy/sell your watch list
I have consistently made 50 k for 5 yrs this way and just working too 1 PM...
I have a life you know...

bl said...

Anon,
Sounds good to me. Trading Solar stocks has been very profitable for some. I think we are trying to better those odds with gap stocks which can have increased volitility than WL stocks.
NR7,
Sounds like your saying 2-3 bar price movement, 1 bar reversal, 1 bar confirmation of the 2-3 price movement? Also bars 8-9 up price movement, retrace 10, 14 could have broken 9 bar high. All higher lows. Or do they have to be continuous? (Bars 11,12,13 non confirming.) Then again 17 confirms up price movement of the whole mess!. Ah life show me path.

OONR7 said...

anon... whatever works for you. For me, I don't just throw money at stocks hoping they work. There needs to be some kind of plan. For entries and for exits. I look for entries with the highest probabilities of success... then throw money at it :)

bl: yes, you got it right with your first sentence. As for the chart, remember that I am looking for increased volume on my confirmation bar. While there were other retracement plays... the volume might not have been there during confirmation. I still think there's opportunities to profit from low-volume confirmation bars... I'm sticking with the volume for now. You may want to experiment on your own to see what the results may be.
And yes, I do look for continuous retracement, not broken up.

Rudy said...

oonr7, what can I say? Simplicity at its best!.

An (1)orderly retracement, followed by (2) a candlestick reversal bar (top/bot)(3) reacting above/below 5ema, combined with an (4) internal bar, is sophistication at its humblest origin.

I like the 30 min for stalking the the candlestick reversal bar.

Like a fine wine, "I Let the trade marinate, with the discipline to be patient (for an internal bar to develop), and the conviction to act once the opportunity manifest itself".

Once the candlestick reversal bar is spotted, I like to stalk the 1/4 hr for an internal bar. On the 1/4 hr, I especially like when I see a WRB + NRB's "congestion area", then I know the odds favor a great r/r set-up.

Rudy

QQQBall said...

the 50/50 chance is really interesting, b/c fees are not high and yet its reported that maybe 90% or more of daytraders fail. i think this supports notion that trading is in fact very counter-inuitive. the same "bias" that causes most to fail would not, i believe, be negated by random entries.

gaps have directional bias, volatility, range expansion, volume and with fib extensions target prices. if i didnt trade gaps, i'd go back to trading only the Qs.

recently, ive been very tentative about taking trades. watched PBR and JBX on friday.

Anonymous said...

anon 11.18 AM, you may be onto something. I have incorporated OONR7 methodology into my program and trade 2 ways.
one as per the program and other just the reverse. That is if the method calls for a buy , it sells.
I am surprised that the reverse system is winning for the last 6 months.

Flatwallet said...

Oonr7,

Also consider the 30 min. Rudy's system is so darn simple. Sometimes, I wonder if I've gotten a touch smarter or if I am participating in mindless trading. These retracement bars on the 30 and many of the 15 mins are so simple. While I may not be able to carry Rudy's trading strap, I think I have been getting a bit better. I wish you lots of luck with the new calm trading approach. However, keep a book available on the side. You'll find yourself picking it up.

LP

OONR7 said...

rudy: thanks. What I like most about this method is that I don't need to change a thing to my watchlist prep work. I still only look at gappers and unusual volume. I definitely look forward to utilizing the 30-min as well.

lp: thanks for the advice. However, instead of picking up books, I'll be picking up my kids :)

to the anons: if the 50/50 system works for you... more power to ya. Seems odd to incorporate a system that basically says you're wrong. Sure it can work... but I imagine it would require a lot of capital to put the odds in you're favor.

greytrader said...

Rudy,

Why don't you post some of your trades on your site ? Great site by the way.

OONR7 said...

rudy, fw: on the 30-min... you look for the reversal after the retrace to be an inside bar, correct? Now, do you buy off a break of the confirmation of the reversal on the 30-min or always flip to the 15-min for entry? And if entry is on the 15-min... do you look for an inside bar to form immediately after the reversal bar has formed on the 30-min chart?

bl said...

Rudy,
Ditto with grey. How about an example from Friday, or Monday.

Rudy said...

GT: thanks for the complement. Someday I might. For now, I am more focused on the psychological aspects of trading. I can't imagine I will add anything new in terms of chart analysis that maoxian or trader x, did not already exponded upon.

OONR7: after a retracement, the reversal bar should be a candlestick top or bottom bar. This is usually a wider stop = higher risk entry point.

I will look to the 15min for a "congestion" breakout zone ... this may include one or more internal bars (the more the merrier). I like to set my stop at the prior 15 min high/low bar for an earlier and lower risk entry, than the 30 min.

However, I do confirm the 30 min for an IB, or a WRB (if 15 min "earlier" entry) to ensure the trade is "still going my way".

All things been equal, I do prefer an internal bar on the 30 min, and trading 15 min congestion range breakout!. Hope this helps. Rudy

Rudy said...

BL, JBX 30 min chart on friday:

(1) Retracement on 2nd bar
(2) Reversal bar on 3rd candle: (higher low), and notice 15min there was a hammer candlestick bottom.
(3) the 4th internal bar completed the set-up pattern.

In addition:
(A) on the 15 min, note the proximity to rising 5ema = not extended.
(B) also, notice the "congestion area" on 15 min = breakout player's paradise!.
(C) this was a base and break pattern, as opposed to a more meaningful fib. retracement pullback, which would have involved additional retracement bars. The give away was the 30 min IB.

Rudy

bl said...

Rudy,
Ok. 2/30 bar, an IB (or internal bar as you you call it?), had fib retracements of 1/30, and Thrs close to Fri 1/30 high. Buy the break of 4/30 or 8/15 IB?
Anon,
BTW 50k/yr would mean $290/day gross(taxes and 2 rt at Scottrade)or a 29 cent move 1000 shares x $30stock. Almost like trading with the b/o b/d of the h/l of the first hr say.

OONR7 said...

thanks for your time Rudy.

Rudy said...

BL: the set-up you are most comfortable with. I personally like the 30min IB break-out.

00nr7: anytime!. And on behalf of your readers, thank you for giving us a forum for interesting dialogues.

Rudy