This board is for daytrader’s interested in flipping “OTC tradeable tickers” and momentum stocks on the big boards. I make money for the most part buying tickers after 3:30 and selling them before 10:30 the following day. I target tickers I screen as having the potential to gap and run in the AM.
An “OTC tradeable ticker” is defined for this purpose as a ticker that:
1) trades for over $.05 (or has done so within past 2 months);
2) has been, for at least 2 days in the last 60 days, one of the top ten traded tickers as reported on the homepage of ihub at the end of the day on either the OTCBB or Other OTC.
OTC tradeable tickers are liquid and tend to have the volatility required to be consistently tradeable for a profit. The moderator is using this board to document trading activities and to potentially create a useful forum.
A couple basic thoughts describing the trading philosophy of the moderator are set forth below (the comments are not hard and fast rules but are merely intended to assist in making quick decisions; a daytrader should be nimble and flexible):
Some Comments on Promoted Tickers
• OTC tradable tickers are normally either pump and dumps (P&Ds) or bankrupts that formerly traded on the big boards and are now unlikely to successfully maintain any priceappreciation.
• Traditional fundamentals are of limited importance on the OTC as most of the tickers have no real value (no matter the market cap). For the most part, technical analysis, promotions, awareness and market sentiment drive OTC tradeable tickers. In this regard, it is important to note that traditional technical analysis does not apply perfectly to OTC tradeable tickers;
• Paid promoters drive volume and interest and it is important to follow both who is promoting an OTC tradeable ticker and what they are saying. However, nothing a promoter says about a ticker is reliable and should be assumed to be false – a promoter’s only goal is to increase PPS;
• To assist in gauging market sentiment, one should visit investment boards (ihub, yahoo market pulse, yahoo message board, stockhouse, ect.). However, anything subjective anyone says on a message board should be assumed to be false, biased, or to stem from ignorance (this rule applies to all boards, including this one). Valuable posts are the exception, not the rule. If a poster says a ticker is great and is going to the moon, they want to sell you their shares at a high PPS. If a poster says a ticker is crap and will crash, they are short or want to buy shares on the cheap. If a poster seems to really believe a promoter ticker has value, they are new;
• There is a lot of useful information made available on the well known penny stock sites, and these sites most be perused to assist in gauging the market sentiment in respect of an OTC tradeable ticker. Again, however, nothing posted on any of these sites should be considered objective, independent, or reliable.
Some Comments on Daytrading
• Daytrading is a business and should be treated as such if one expects to be profitable.
• Minimizing losses is of the utmost importance. It is better to minimize losses and to miss some big runs than to be overly risky and take big hits (i.e., live to trade another day). Big hits can eliminate a trader’s profitability, whereas minimizing losses and being risk adverse (to the extent possible when trading inherently risky tickers) simply limits upside potential. This is not to say that risks should not be taken, just that the expected returns must reflect the level of risk assumed;
• Don't trade with funds you cannot afford to lose. Daytrading OTC tradeable tickers is a high risk business (otherwise, the potential for large returns would not exist).
• Set targets (all OTC tradeable tickers will crash sooner or later - don't hang around too long).
• The concept of playing with house money is flawed. All profits must be respected, and all trades made using probability based analysis. Problem gamblers should join GA, not read this message board.
Basic Rules of Thumb for new Traders
• Apply probability theories when investing; other than for tax purposes, historical cost base is irrelevant when making a decision. As a general rule, trying to “average down” on an OTC tradeable ticker is a flawed strategy (there is always a reason the ticker is falling, and more often than not, it is a good reason). Basically, the only relevant question is, “would I buy this ticker today at this price”. Averaging up, on the other hand, can be a profitable strategy provided one sells as soon as the trend reverses;
• It is risky to buy large gap ups unless there is a history of gap and runs and the gap and run is confirmed before making a purchase;
• Where there is a history of gap ups, a ticker is up for the day, and the ticker is up for the last 15 minutes of the day, odds favour a gap up the following day. Some daytraders never holder over night, however, holding over night can be profitable when a gap up is anticipated;
• On a significant gap and run, conside using a trailing stop;
• A ticker that crashes will bounce, but don't expect the bounce to hit prior highs;
• Focus on the power hours (9:30 – 10:30 and 3:00 – 4:00);
• If a ticker goes from $1 to $1.50, it will probably come back to $1.30 before its next move (the same is true of $1 to $1.30 coming back to $1.20, and of $1 to $.50 coming back to $.70);
• On a halt, expect to get back 20% of the PPS at close. On post halt day 1, profits can be made by buying at open at market and flipping shortly thereafter.
• Don't buy a gapup stock until after 10AM and only then if the PPS exceeds the gapup PPS. I generally don't buy tickers before 3:30 unless it is an obvious runner (unusual).
Promoter News Sites
Most Volatile Stocks on AMEX, Nasdaq and NYSE Stock Market Exchanges http://www.marketvolume.com/stocks/mostvolatile.asp?s=nqnm&t=0-10
High Short Interest Tickers
http://www.finviz.com/screener.ashx [This is my favourite screening site; I rely on it to give me a fresh list of big board tickers with potential daily]
Other Message Boards
In the Doctor's opinion, all of the self-proclaimed penny stock gurus are crooks.
Mouthhee's Favourite Quotes from "Reminiscence Of A Stock Operator"
- I know from experience that no one can give me a tip or a series of tips that will make more money for me than my own judgement.
- I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell a particular stock.
- A speculator must not merely be a student, he must be both a student and a speculator.
- The big men of the street are as prone to be wishful thinkers as the politicians or the plain suckers.
- The recognition of our mistakes should not benefit us any more than the study of our success.
- The price has nothing to do with the line of resistance.
- Observation, experience, memory, and mathematics... These are what a successful trader must depend on.
- It cost me millions to learn that another dangerous enemy to a trader is susceptibility to the urgings of a magnetic personality when plausibly expressed by a brilliant mind.
- 2000: Volume 9, No. 1
What It Takes to be A Successful Day Trader
By Robert Deel
The grim reality is short-term trading and especially day trading can be hazardous to your wealth. Ninety-two percent of day traders trying to scalp loose money. Only eight percent are successful. Out of the eight percent, only two percent of the day trading public make money on a consistent basis. Why do 92 percent of day traders fail and what makes eight percent successful? Let's take an honest look at day trading without the hype and emotion that surrounds the subject and find out what it takes to be a successful day trader.
We go to school, gain an education, become employed, or start our own business. We learn what we need to know to be successful, but nothing in our education or work experience provides the comprehensive knowledge or psychological control necessary for success as a trader. Unfortunately, it's human nature to assume that if we succeed in one area we will automatically succeed in another. Most people who enter the market with the idea of becoming traders have a feeling of invincibility, superiority, and no clue of what they are about to experience. The dream of quick money and financial success can very quickly become a living nightmare. The first step in becoming a successful trader is to understand why so many day traders fail. Answer the following questions:
- Would you buy a business if you had no idea what the cash flow would be?
Would you buy a business if you had little actual experience or training compared to your competition?
Would you go into a business where your competition was well capitalized and you had limited capital?
Would you buy a business without a business plan?
If you're saying, "Not a chance," guess again. That is exactly what you are doing when you start trading for the first time. You must prepare yourself and realize that you are going to be up against the best traders in the world. Training, experience, psychological control, and a realization that your are not invincible or smarter than the market will lead you to success. Wall Street is paved with the bones of those who did not learn this lesson until it was too late.
Most new traders have the wrong focus. If money is your focus, you have little chance of success. Many new traders look at trading as a way to escape a job they hate. They know they have to make a certain amount of money to pay the bills and this becomes a psychological guillotine. When the trader fails to meet the goal, he begins to push trading beyond his true ability and skill. The result is a series of losing trades that could have been avoided if the trader had the correct focus. Your focus and the measure of your success should be based on following the trading plan, not money. If you follow the plan each day, you are a winner. If the focus is money, it leads to emotional decisions and emotional decisions lead to uncontrolled losses. Successful traders make decisions based on fact and analysis. Do this and money will follow if your methodology is a sound one.
The Mathematics Of Trading
Almost everyone has heard the term "cut your losses." Nowhere is this lesson more evident than in day trading. Statistics tell us that most new day traders lose over $21,000 dollars in their first three months of trading. If they use leverage the average loss rises to more than $45,000. Nothing supports the reasoning for not overtrading and cutting a loss more than an understanding of the mathematics of what it takes to recover from a previous losing trade. If you were down 15 percent, you would need to make 17.6 percent in the next trade to breakeven. This does not cover slippage or commissions so in reality you would have to do far better than 17.6 percent. Now, imagine making 30 trades a day and most of them losses. It has been my experience that it is extremely difficult to recover from any loss of capital above 25 percent for most traders. This is because it takes 33.33 percent to recover in the next trade. If a trader has allowed the trade to lose 25 percent they simply are not managing the risk. I have known traders to have 10 winning trades and lose it all by not managing the risk on two trades. The successful trader is ruthless about cutting a loss because they understand the mathematical relationship of trading. I have been in this business for a very long time and if I have learned one lesson it is this-once you enter a trade you are no longer a trader you are a risk manager. Never forget this.
Not Every Day
One of the interesting observations I have made over the years about day traders is that they have great difficulty not trading. Who ever said every day was a trading day was wrong. Only make trades that have a high probability of working out. This means that successful day traders make fewer trades and do not trade everyday. Look for strong trending market days and trade stocks that trend with that market.
Many day traders are addicted to the action and making money has little to do with their true reason for trading. These individuals are not traders, they are gamblers. Action addicts will lose as many times as necessary just for the adrenaline rush to win once. Most successful day traders make no more than three to five high probability trades per day. It has been my experience that if a trader makes over 18 trades a day, they are in all probability gamblers not traders. Successful day traders know that not everyday is a high probability trading day and overtrading can be hazardous to your wealth.
High Probability Screening
Most day trading cowboys will shoot at anything that moves. In most cases they walk into their trading room with no game plan other than to listen to the news and trade the momentary euphoric hype in the room. If this is your preparation for battle, your days are numbered and the following might appear on your head stone: "Here lies the bones of a day trading master. He was fast on the mouse but somebody was faster."
Screening for high probability profitability trades is of the utmost importance. We teach our students to quantify and select the three highest probability trades that have a reward-to-risk ratio of 2.5 or greater. The screening process looks for and selects the maximum momentum acceleration points on a given security. Out of a database of 500 stocks, our traders select the three highest probability profitability trades for the following day. Ninety-eight percent of a traders success is due to the work done the night or day before the trade occurs. Success in day trading means a lot of work and very few people will do the work necessary. Losers are always looking for the easy way out. Success is directly proportional to the amount of work you will do that no one else will.
What Kind Of Day Trader Are You?
One of the keys to successful trading is to understand that you are an individual and as an individual you have strengths and weaknesses. One reason that day traders have such a high percentage of losses is that they are trained to use a standard one-size-fits-all approach. Unfortunately this approach is a day trading style known as scalping. A scalper trades for small fractions of a point-from 1/16 to 1/8. This style of trading has a 92 percent failure rate. Most people do not have the psychological control or ability to successfully trade with this strategy. Another strategy known as intraday trend trading has a much better success rate. The intraday trend trader will stay in a trade until the trend reverses. This could take a few minutes or several hours. This style of day trading makes time your friend and enables you to trade for points instead of fractions. The trend trader is far less likely to be whipsawed out of a trade because the focus is on staying with the trend. Notice that I did not say momentum. Momentum is usually associated with scalping too close to the axis of volatility. This volatility is usually displayed on a NASDAQ Level II screen. Years ago this information was very useful for traders. Today it is not as important as it once was and in fact, professional traders use the day traders own out-of-date information about the Level II screen to lure scalpers to their doom. If you are trend trading intraday, Level II has less importance and your chance for success is far greater. Traders trading this style tend to trade much less and statistically have a more successful outcome. Successful traders identify what type of trader they are and do not try to trade a methodology that does not fit their personality.
What It Takes To Be A Successful Day Trader
A consistently successful day trader knows his or her success in not found in the box (computer software or hardware). Many times traders look for the answers in technology and it is not there. They blame technology for failure so their answer is to buy more technology. The answer is understanding and controlling your own emotion and taking responsibility for your own actions and making decisions based on analysis. If you are wrong, you do not personalize the loss, you just say "next." Successful traders know that losing is part of the cost of doing business. Great day traders know that you will never learn how to win until you first learn how to lose. How a trader psychologically handles loss many times determines success or failure. Success in day trading is most of all a mastery of one's self. This is not the get rich quick easy road to riches that some people think it is. It requires a commitment of time, money, and a willingness to work very hard.
Desire and working hard is not enough. You are going to need working capital. This is like any other business it takes money to make money. I suggest you have a minimum of $50,000 to $100,000. Many novice traders attempt to trade without being properly capitalized. Once you have the capital and begin to trade, never forget once you enter a trade you are no longer a day trader. Instead you are a risk manager. Trade only high probability trades and remember, every day is not a high probability trading day. Probability of Market Going Up Tommorow
Surprisingly enough, the results for what the stock market will do tomorrow can be predicted with a fairly high probability using some very simple observations. Many studies have examined what is called "Daily Price Persistency".
These show that the action of the market today has a definite influence on what the market will do the next day. Here are the probabilities of the movement of tomorrow's
based on the action of today's
If today's market is up
...there is a 73% probability of tomorrow's market being up as well, and a 27% probability that tomorrow's market will close down.If today's market is down
...there is a 62% probability that tomorrow's market will also be down , and only a 38% probability that the market will close higher. Historically the market has advanced on 58% of all market days, demonstrating its overall historic upward bias.There is one other factor that we can add to the mix that can improve our predictions just a tad bit more. By examining the last 15 minutes of trading action and determining the direction of that last 15 minutes we gain additional insight into tomorrow. If the last 15 minutes of market action are positive and the market overall closes higher, then the odds of tomorrow being an up day improve to 77% compared to the 73% previously stated . Conversely, if the last 15 minutes of the market are negative on an overall down market day , the odds of the market going down tomorrow increase to 73% from the above mentioned 62%.These statistics demonstrate that although the markets have a high degree of efficiency, there still is a demonstrable psychological "herd instinct" when it comes to the buying and selling of stocks. From TradingDay.com
) 20 Golden Rules for Traders
Want to trade successfully? Just choose the good positions and avoid the bad ones. Poor trade selection takes a heavy toll as it bleeds your confidence and wallet. You face many crossroads during each market day. Without a system of discipline for your decision-making, impulse and emotion will undermine skills as you chase the wrong stocks at the worst times.
Many short-term players view trading as a form of gambling. Without planning or discipline, they throw money at the market. The occasional big score reinforces this easy money attitude but sets them up for ultimate failure. Without defensive rules, insiders easily feed off these losers and send them off to other hobbies.
Technical Analysis teaches traders to execute positions based on numbers, time and volume. This discipline forces traders to distance themselves from reckless gambling behavior. Through detached execution and solid risk management, short-term trading finally "works".
Markets echo similar patterns over and over again. The science of trend allows you to build systematic rules to play these repeating formations and avoid the chase:
1. Forget the news, remember the chart. You're not smart enough to know how news will affect price. The chart already knows the news is coming.
2. Buy the first pullback from a new high. Sell the first pullback from a new low. There's always a crowd that missed the first boat. [This rule will save you a lot of money - very rare for new highs/lows not to be tested; don't buy at the peak or sell at the floor.]
3. Buy at support, sell at resistance. Everyone sees the same thing and they're all just waiting to jump in the pool.
4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover. [This is key in Penny Land - short the promo just before the dump; it is too late after the dump hits.]
5. Don't buy up into a major moving average or sell down into one. See #3.
6. Don't chase momentum if you can't find the exit. Assume the market will reverse the minute you get in. If it's a long way to the door, you're in big trouble.
7. Exhaustion gaps get filled. Breakaway and continuation gaps don't. The old traders' wisdom is a lie. Trade in the direction of gap support whenever you can. [Also don't sell a gap that does not fill too early; use a trailing stop instead.]
8. Trends test the point of last support/resistance. Enter here even if it hurts. [Some of these are reptative aren't they - probably only need 10 "golden rules".]
9. Trade with the TICK not against it. Don't be a hero. Go with the money flow. [i.e., the trend is your friend.]
10. If you have to look, it isn't there. Forget your college degree and trust your instincts. [My graduate degree never helped me learn to trade the OTC. As i recall, my corporate finance professors always did crap in the markets by their own accounts.]
11. Sell the second high, buy the second low. After sharp pullsbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try.
12. The trend is your friend in the last hour. As volume cranks up at 3:00pm don't expect anyone to change the channel. [I also love morning power hour; I have always said I only need 2 hours of trading to make money, and they are at open and close - this is especially true on the OTC..]
13. Avoid the open. They see YOU coming sucker
14. 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom.
15. Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it.
16. Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.
17. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action. [One of the reasons I focus on the power hours.]
18. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.
19. Bottoms take longer to form than tops. Greed acts more quickly than fear and causes stocks to drop from their own weight.
20. Beat the crowd in and out the door. You have to take their money before they take yours, period. [i.e. don't be greedy, but be early.]
All traders are responsible for their own trades and any losses incurred. Nothing on this board can be relied upon for any purpose. All postings reflect personal opinions and biases. Postings are provided on the understanding and basis that none of the posters or other persons involved in the content of this board shall be responsible for the accuracy or currency of the contents, or for the results of any action taken on the basis of the information contained on this board, or for any errors or omissions contained herein. No one involved in this board is attempting to render investment or other professional advice. If investment advice is required, the services of a competent professional should be sought. Most, if not all, respected investment advisers would recommend retail investors not trade OTC tradeable tickers.
Dr Key is not a licensed physician.