Dec 6, 2008

What should've happened

These are the setups I should've been interested in and focused on. All the entries occurred after a fib. level (and some pivot levels) had proven to act as support. The entries were also supported by the action on the QQQQs (first chart) - which is what I use for market direction.

Patience is the name of the game which is what I lacked yesterday. I should've stuck to my plan.


Attitude Trader said...

I'm discovering that part of my patience problem is that I have more fear of missing out on a move than I have fear of having a losing trade.

But by reviewing charts like you're doing here and reinforcing what a winning setup looks like and more importantly, that they keep on occurring if you can just wait for them, I think you can work your way into the "patience" state of mind that is necessary to be consistently profitable.

Have a good weekend.


rudy said...

IMO, yesterday was an anomaly. When back testing, is your strategy for gap reversals consistently reliable during "normal times"?

Just my 2 cents.

OONR7 said...

rudy: that's a good question. But a question back at you is... what is normal? I mean, I have to take what the market gives me and what falls in line with my trading strategy. So, while yesterday may have been an anomaly the setups were not. I don't trade strictly in the direction of the gap anymore (like my GE trade earlier in the week) so for me I need to take advantage of opportunities as they arise and, as of late, as they occur when the market moves.
Now... with all that being said I didn't post the charts trying to prove that I would've made a lot of money as I don't know if I would've entered all of them. The purpose was strictly to prove to myself that I wasn't focusing correctly and I should have drawn my fib. lines the way I was drawing them all week. I varied and I got smoked. Also, most of the charts showcased traded around the fib. ext area from yesterday's high to low. This is not an area I'm used to trading but they are basically the same retracement zones and I should keep an eye on support and resistance at these levels as well.

rudy said...

Thanks for the feedback.

"normal", IMO, is the perseverance of gaps to follow thru. I will venture that +90% of gaps staged a reversal to the upside Friday.

(on a side note: such reversal patterns when observed on a consistent basis usually signals the end of a prolong downtrend. Interestingly, when charting all my daily gap trades, long and short, I observe the market in a consolidation pattern. Coupled with days like Friday's anomaly, a likely breakout to the upside? Will have to wait and see.)

When whittling a watch list during trading hours and repetitiously reviewing charts every 15 min, it seems difficult to simultaneously center on "shooting fishes in a barrel", while at the same time, judging the discontinuation of the trend.

IMO, while it is important to find additional trading ideas in times when systems take vacations, it is equally critical to remain focus and discipline to "show up to bat each and every day". One never knows when the system will return from its slumber.

Yet again, if you can manage to isolate such a dichotomy, the better trader you are. A feat that still escapes me.

Nevertheless, intensive back testing during all market periods can only lead to confidence trading.

My 2 cents.

OONR7 said...

rudy: this is a really good conversation... appreciate the input. What essentially happened on Friday was a massive gap fade. In the past, most of these stocks would've been nixed from my WL but I've come to the realization that I was unnecessarily excluding some good stocks. I also didn't have a good system to trade these kinds of moves either.
What I don't want to do is trade with blinders on. I have rules in place based on fib. levels but what I love about Fib. lines is that they naturally adapt to a stock's volatility. I don't force anything... just look at the fib. levels and wait for something to happen. I didn't wait on Friday, I forced the action by re-drawing my fib. lines based on the intraday high-low.

Take a look at those charts again. You'll see that every entry was after price broke through a fib. level that was once resistance then retraced back to that fib. level and showed it was now a support area. That's pretty much the essence of my trading style.

Now with all this lengthy talk about what happened on Friday... I don't expect that to happen all that often. In fact, if I had just traded PRU (as I was looking at in real-time), I would've been very happy.

rudy said...

Yes, I must 100% concur!.

Trading in the direction of the gap, from a subsequent pullback to a key level of support/resistance area, and after a pattern candle, as PRU demonstrated, is the essence of a sound trading system.

Coupled with good money management, such a time tested method will lead to consistently profitable monthly returns.

However, the secret is to "letting profits run".

bl said...

NR7 might want to put dig or dug up for confirm with the oils and spy in general. $5-30 >20k gap up
>1m daily vol scan first 20 of open Friday: hig pru lnc met= insr co's. Just follow them. Others: pfg pld amp sfd wri stp sndk drys lcc mscc.(all over 10%). Shorts: pkg aes hk sto ener mbt cbst. Total 65