Nov 23, 2008

Watchlist changes

I have always said that compiling a good watchlist is just as important as having a good strategy to trade. Recently, I've loosened the criteria of what makes my list and what doesn't. In doing so, I somehow got it in my mind that any stock on my list was good to trade. I lost focus. The focus of checking the opening range, where price action compared to the opening range... so forth and so on.

I reviewed every stock in my list over the past two weeks and one thing was obvious. Stocks trading in the lower (for shorts) or upper (longs) half of the opening range had a much higher probability of a good setup. So this is what I will focus on. That's the first thing I will change this week.

The second change will be my entries. I was very selective before... almost too selective. Always looking for the narrowest range bar entry and bypassing the rest. That needs to change. I need to trade the chart, not the candle. I will actively look for entries occuring around the ORH/L on strong, weak or NR bars. My preference will still be that my entry bar is NR, but more in relation to the previous bars than a % of closing price which is what I was basing it on before.

Will these changes work? Who the hell knows. But I do know these changes will put me focus on the setups that are leaning in the direction I would like the trade to go. 

Just to give you visual examples of what I'm talking about, the two charts below represent the kind of price action and opening range strength/weakness I want to look for.

-Strong first bar (weak for shorts) with price closing in the upper (lower for shorts) half.
-Price action generally staying below/above the halfway point of the OR
-Look for entry at the ORH/L with a closing price at or above (for longs) the ORH (vice versa for shorts). Stay away from entries with long upper tails (longs) or lower tails (shorts). The only exception would be a hanging man setup on a short.


TraderAm said...

Good Info 00nr7.

A lot of traders (myself included) could be better off incorporating what you have just said.

OONR7 said...

thanks traderam... I hope this turns things around. I've come to the conclusion that I just want to find a couple of good entries every day. Put myself in a position to spot and act on them. The rest of the stuff is just noise and I have enough of that :)

bl said...

NR7, going back to basic materials on Fri, say x mt rio, etc: They all gapped up, faded, had many tails on the 15", small reversal 11 am, then neg reversal, then the Geitner announcement 3pm, and the whole market reversed. Gold stocks abx nem au kept going from the get go. You would have been stopped out on the basic mats no doubt in the am. Unfortunetly, I lost all my sector list data and have to redo it, but it is nice to have a 400 commodity WL(finance, retail, bio/health, tech WL also) and just see how things are stocking up at the open, 1/15, 1/30, etc and just observe which of the commodity sectors are moving: gold, fert, coal, metals\steel, oil...and hop on. I have a problem with real time scans. I like premkt or Group WL(with sectors with in. There's no mad scrambling.

TL said...

That looks like a good start. btw, your OIH trade looks pretty much the same as my BHI trade (same day). Where is the entry? the green doji or the red hanging man -like?

OONR7 said...

bl: I am definitely going to keep an eye on the moving sectors.

tl: there are 4 entries IMO: 11:15 bar low (which would stopped me out). Then 1:15 and the inside spinning top right below the ORL at 1:45. I don't like the hanging man at 11:30 because the stock was in a downtrend (which makes the action more bullish, IMO).

FX said...

I like your blog but never read it because I'm too lazy to come over it every day and in my feed reader there is only paragraph or so from your each post. So could you please change feed settings in your bloglines so that everything goes to rss feed.

OONR7 said...

fx: that's one lazy ass excuse :) However, you're right... didn't realize it didn't show the full content. Fixed now, I think.

FX said...

I'm addicted to my google reader so I'm not interested in anything than various blogs meat :D

I don't know is it fixed yet, probably it will be in new posts.
If it's not I will be loud again.
I made mistake, I said fix your settings in bloglines, I meant blogger.