Advanced Trading Methods

[sharpshorts]

Simple day trading method using divergences. Combining trend line breaks, P/A patterns and divergences...Add another set of tools to your bag of tricks.
For an indepth explanation check my blog Sharpshorts Day Trading .

Here was a mini 2B Dragon (just a double bottom) with 3xD indicator divergence followed by a break of the trend line.

[gloe]

Sorry I haven't posted for a while. Took a break from the market.

The signal switched to SELL in the last week of August and then back to BUY in early September. Still on BUY.

gloe

[gloe]

Thanks for the charts, M.

[Y worry Murray]

The weekly chart of silver gives a far clearer indication of the current trend (up, down or consolidating) than the daily chart. With a triple bottom at 26 it looks like the reversal low is in. If I'm not mistaken I believe the synchronous relationship between silver and the stock market is broken.

[Y worry Murray]

Hi gloe, Silver has finally broken out of it's trading range and is trending nicely. Here's HZU: Canada's HBP Comex Silver Bull + ETF. Much easier to swing trade than the stock indexes as of late given the impact of over night European news.

[gloe]

The signal did switch back to BUY. It appears that the CAUTION signal may be sufficient in and of itself to switch the signal. Still a work in progress.

[gloe]

Hi Duma, thanks for the long explanation. Glad it's working out so well for you.

[Duma]

Gloe, for a number of months I traded my SR60 only at 10am. I also wanted to be free from having to watch charts all day long. Then we started getting a series of 1 day reverses and of course I got chewed up. That was when I started trading at any hour of the day. The results have been so good that I have not been able to go back.

Having now done it for several months, I have sorta developed a feel for when I need to really pay attention to the market and when I can let it run without much attention. The last two days are good examples. All the action was at the open for about 1 hour. After that it was pretty much all over.

Since I only trade at the end of an hour bar, even when I am having to pay a lot of attention, I still have an hour at a time free. At other times I can tell from my indicators if I need to worry anytime soon or not. During these times I may ignore the market for hours at a time.

I will trade the 3pm bar, but never the closing bar. Many days I can tell at 1 or pretty much for sure by 2 that not much could happen by 3, so I often get a full afternoon without too much worry.

Another thing I do is set trailing stops and 50% profit stops. It may not result in the perfect trade, but it is sure a lot better than doing nothing.

I already know that I have to be at full attention tomorrow at 10 as I could very easily get a short signal. If I get that signal, I have a system for setting stops and reverses, so I pretty much go on auto pilot.

I have never tracked it, but I have often thought a system of only trading at 10am and around 1pm would also not be that bad. At least the most one would miss is half a day.

Anyway, I just wanted to give you some ideas about how I trade all day without really always being in my chair. I will be traveling again Thur and Fri, so I will have to develope a plan for my stops early in the morning so I will be free. Sometimes I am lucky and sometimes not, but in the end it has all worked out pretty good and I really don't feel a tied down as one might think.

I have only had 1 signal so far this month, but could easily be 2 tomorrow morning. This has been really hard for me to do, because if it is action one is looking for this is about as boring as it gets.

Just wanted to give you some of my thoughts. I really don't watch the market as close as it may seem. And I am gone often for hours at a time, but I manage.

[gloe]

I was shorting rallies (taking profits and then reshorting) until I got a CAUTION a few days ago. And now we have another gap up.

Since I've been tracking my signal in real time, all but one CAUTION signal resulted in follow-through in the same direction. Just noting this development as I continue to refine this signal.

I have great admiration for Duma sticking to his 60 min signal which does work very well in this choppy market, but my goal was to find a way to make good profits without too much intra-day trading, other than maybe watching the open and close.

gloe

[gloe]

Yeah, I got the same e-mail. They will not make any improvements to it but it is not going away. At least not yet. I do still use it.

[CITYHAWK]

HI Gloe

Thought you might be interested in this.

Important update about QuoteTracker?

We want to assure you that as a valued TD Ameritrade client, you will continue to have access to QuoteTracker and to all of its functionality: streaming real-time quotes, live real-time intraday charts, dynamic historical charts, more than 120 technical indicators, and more.

[gloe]

True.

[Y worry Murray]

Looks like the bulls got the retracement they wanted.

[gloe]

The signal has remained on SELL . . .

[Duma]

Just a comment about the chart in my last post. The cycles may not look that big, but they are huge. The last red box (cycle) down from top to bottom was 5.2%. If I can capture just 50% of these moves, I will be happy for the present. I missed the first gap down, but still made 2.9% on the trade.

This long entry was much better, so I might capture up to 75% of this move up.

I use numbers a lot to analyze what I do. As an example, if each cycle is 5 days (one week) and I can capture 1%, that is 50% annually. If the cycles change to 4 days and I can capture 1.5-2%, you can see that 100% is not that difficult. These small gains really add up especially when compounded.

[Duma]

You listed several thinks that are needed for a reverse. I was agreeing will all of them until you said a lower low or higher high was needed. Then I saw your chart and saw that you were referring to a 5 min chart. Then I was ok with what you said.

I trade off the 60min chart, so of course I am in reality trading the lower lows and higher high, not waiting for them. But if you can use your knowledge and experience on a 5 min chart to time the trades, I think that would be great.

I don't care how one makes the decision to execute, what's important is to execute.

On my chart in the iBox, I use solid red and green lines to draw the tops and bottoms of the multiday reverses. Then I add the dashed lines to show the trades.

Below is another way of looking at it. The boxes show the swings and the purple lines show the trades. I thought I liked this better yesterday, but after sleeping on it, I think I like what I have done in the iBox better. With either chart, the key is showing the cycles that are to be traded. Of course the last box is not complete.

[Y worry Murray]

I like the idea of momentum trading as opposed to swing trading. I suggest that your success is due to your choice not to predict reversals which is very difficult to do consistently. An overbought or oversold market will frequently get more so and quickly chew up your account.

I can see 3 pushes up in a bear wedge although one would expect to see a trend channel line over shot & reversal (TCLR) to be confident that it is complete. There is also a intra-day DT and this is what the swing traders have seen.

In my opinion it is too early to be swinging short. A reversal requires 1st a trend line break (TLB) then usually a back test of the TL and even a multiple top or bottom (not necessarily in that order). Ultimately a lower high (LH) or higher low (HL) before one can be confident one has taken place.

Entry can be at a prior high if a double top (DT) has formed with a tight stop or the inverse on long entry. Unfortunately the stop does not work if holding ETFs over night (ON). Therefore waiting for a LH or HL becomes ideal entry. This is then basically a momentum trade!

[Duma]

I may be wrong but I have come to define what I do as momentum trading as compared to swing trading. I see swing traders as one who will decide it is time to reverse a position long before any kind of reverse is in place. All the "swing traders" I watch are now short assuming the current ramp up is over. I will wait for the momentum to change and then jump on the new trend.

Small point, but big difference in thinking. Maybe all swing traders were once momentum and they finally learned how to truly read the market.

[Y worry Murray]

I didn't realize that you were posting all of your trades. I will pay particular attention to them in the future as it is my objective to compliment my day trading with swing trading. Congratulations on your profitable system even if it is not 100% mechanical especially given the longest trend since May has been 6 days!

[Duma]

Your comments about my system were very telling. Too me it is a mechanical system with a few judgement calls for support/resistance and very short term trends, but then it is my system so I understand it well. Others must feel the same that you do, so you must have a point. I tried to learn NERS but I felt the same about it that you described about my system. Others however used NERS very effectively.

I have studied several systems over the last several years and I never adopted any of them for various reasons. Mostly because I always felt there were rules being used that were not stated.

I have tried very hard for the past several weeks to announce what I was seeing before each trade. Then I came back and talked about each of the entries. It has generated zero discussion, so it is certainly a waste of my time. But I really don't post the comments for others, I do it for myself and to keep me honest. Once it is in print, it is hard to second guess on the decisions.

I don't know of anybody who posts their trades and then logs them the way I do. I think that what I do should be easy to follow if anyone is interested, but no one seems to be interested. Everyone wants to do there own system and I certainly shouldn't complain because that is exactly what I did.

I would suggest one thing that I haven't seen many people talk about. After failing at trading with a daily chart and initially struggling with even the 60min chart, I finally started to draw the short term (2-6 day) runs on a chart that I wanted to trade. Then I started coming up with different TA's that would track those trades. Even today, I continue to change things a bit when my system is not giving me the signals that I want. It's a back door approach, but I think it has great benefit. Don't let a system dictate how you trade, make the system (TA's) trade how you want to trade. I think this is a very key idea.

I really hesitated to write what I did yesterday, but when I see comments like "I don't see how anybody can make money in this market", it tells me that the system being used is not suited to the market.

Thanks for your candid comments and good trading.

[Y worry Murray]

The markets are at the trough feeding off of table scraps from the bankers That is all it took to send the markets into the stratosphere. It was enough to make me want to be a trend trader, however I know ON surprises can be CT. Bear in mind that it is an election year but we could easily return to chop in August.

To be honest I have not really studied your trading style, but from what I have observed you claim to trade a mechanical system but I think your tading is somewhat subjective and augmented by it. Please correct tme if I am wrong. Your results are excellent but for the previous statement I don't feel that I can duplicate them. I do not even know if it is an always in system.

There are no real divergences on the 60 " chart but I would not be surprised to see a pull back on the open. The Sto 60 on the 5" chart was above 80 all day and closed there. This is always good for a short term short. If you truly feel your last statement is right why did you not take profits on Friday or is it really a 100% mechanical system you are trading?

The ES has completed a 2nd push up in a bear wedge and I expect that it will attempt a 3rd although I have no idea what that will look like!

[Duma]

I know the market is not behaving as many expect it to, but it has actually been very tame of late as I see it. It was driving me crazy a few weeks back when the reverses were coming every 1-2 days. We are now getting very nice 3-6 day runs.

I am still having a lot of success with SR60. Maybe I was a little lucky last week, but I do have many months of good results. I was not having any success with daily bars which is why I converted to 60min bars about 18 months ago.

SR60 was up 5.5% last week, up 10%+ for the month and 27%+ for the the last 3. My trades are logged and chart marked up in my iBox. Maybe you have seen what I do and have decided that my trading style is not right for you. I can understand that.

My key rules:
Rule #1, don't listen to any TV
Rule #2, don't think about what the market should do.
Rule #3, just trade my chart and the reverses as they appear.

Probable going to get toasted Monday at the open as the Euro rumors fade, but at least I do have a nice profit cushion. Good luck.

[Y worry Murray]

Unscheduled ECB bailouts which launch the indexes as opposed to bond downgrades which hammered the indexes are the reason I am not comfortable holding positions ON. I don't see how anyone can be profitable swing trading the indexes unless they have inside information when the focus is on the PIGS and when one wags it's tail the market explodes or colapses!

[gloe]

daily

[Y worry Murray]

What TF were you looking at for IWM: hourly, gloe? StockTiming.com suggests watching the DVOL given that the VIX is not reflecting the market weakness.
http://www.stocktiming.com/Monday-DailyMarketUpdate.htm

[sammy1024]

thanks g makes sense

[gloe]

From the iBox:

Mark Douglas: The 5 Fundamental Truths of Trading

1. Anything can happen. 2. You don't need to know what is going to happen next in order to make money. 3. There is a random distribution between wins and losses for any given set of variables that define an edge. 4. An edge is nothing more than an indication of a higher probability of one thing happening over another. 5. Every moment in the market is unique.

[gloe]

I don't KNOW. Nobody knows. Usually the first test of the 50 or 200 day will hold. After that it's a crap shoot.

You will recall there were times that I prematurely took profits . . . This time I decided to hold the TZA since
I had a good entry and the flat CO as IWM moved up was a real giveaway for me.

Nothing is perfect. And nobody knows what the market will do tomorrow. You don't have to KNOW what the market will do in order to make money.

[sammy1024]

how do you know the market won't bounce off the 50 ma and 200 ma on iwm like it did last time when you took profits? thanks

[gloe]

The signal has remained on SELL.

This last little rally (IWM) off its 50 day MA was accompanied by a flat CO. Good indication to short the rally.

[gloe]

The signal is still on SELL, but that doesn't mean that I ignore what the market is doing. I always watch support and resistance.

Toward the end of June, IWM tested and held its 200 dasy MA and bounced strongly off of it. On July 12 IWM tested its 50 day MA and now continues to bounce.

I never ignore S/R.

gloe

[gloe]

The signal is still on SELL. But look at IWM's 50 day MA. That's where I took profits on my TZA yesterday.

Sorry I haven't been around much.

[sammy1024]

hi still sell?

[gloe]

Sorry, SELL signal on July 9.

[grasshoppah]

Should I still be buying the dips here? Thanks!

[gloe]

Yes, I said that. It is an overbought BUY signal.

[Y worry Murray]

Be very careful gloe, the NYMO and NAMO McClellan Oscillator is indicating a very over bought market.


c/o breakpointtrades.com

[gloe]

Still on BUY.

[gloe]

Very nice Murray.

[Y worry Murray]

The Vegas patterns on the NQ were immediately confirmed by TLBs on the subsequent 1" bar, how's that for pattern confirmation! Here I'm using the V to take profits.

[gloe]

The signal switched to BUY but it is an overbought BUY. No, I'm not happy with the way this has played out.

[Y worry Murray]

That sounds very reasonable, especially in light of the fact that most traders have taken the week off. The PPT or GS could easily run it up this week to have the Boys return it south next week.

[gloe]

The Vegas was always my favorite pattern.

[gloe]

I don't really know how to answer you. The signal is on SELL but indicating the possibility of more UP. Which if it happened, would mean the SELL signal failed.

[Y worry Murray]

The only Woody pattern I like is the Vegas but I really like it and enter on a break of the =/-100 by the Turbo!

[Y worry Murray]

Is the caution because the market could capitulate or because your signal is not clear? The NYSE McClellan Oscillator closed back just in the over bought region (it can get much more over bought before correcting).

[gloe]

The signal is on Caution. No kidding.

[gloe]

You're so right.

[Y worry Murray]

End of quarter "window dressing". That's the investment advisors game: assets under management times management fee. No surprises here but will your signal still be short in July: I wonder? That would be the time to resume the down trend.

[gloe]

Still on SELL.