okay....
here's a few things I have found over the past couple months or so.....
as I said previously, it's good to keep track of "trends". it's good to know the overall trend of a particular stock, and then it's also good to keep track of the daily trends of a stock and the market each day you trade.
what I usually do each evening, is look at the daily, 60min, and 30min charts of stocks I'm interested in. what has it been doing lately? by looking at these longer charts you can see over the past few days; are the candles moving in an overall down trend, or an uptrend? again, it's best to determine this, and not try to go against the current trend. I look at the MACD line. Is it low (below 0) and getting close to crossing up, in the middle, or is it high and getting ready to point back down? also, I look at those daily and 60min and 30min volume candles. are they mostly red, mostly green, or a mix? looking at these things will help you to determine which way to play a stock when it's moving on the day you are trading.
with that in mind, the next morning before open, I will get the charts up on the handful of stocks I like to trade, and watch the pre-market activity on L2. I set the charts up with bollinger bands that will show you the range the stock is trading within, and the MACD. these are the most important things I look at for initial entry. this is all on a 3min 1day chart mostly.
Much like SDH and a few others, I use the MACD crosses for entry. the position of the MACD is important. again, you want to look at the position of the MACD on the chart. Is it really high, in the middle, or low? as an example, if it's really high and crossing up, that might not be a good indicator of a strong move up, because it might not have much room left to sustain a run up. if it's low and crossing down, that might not be a good indicator of a strong move down because it might not have much room left to move down before it pops back up. if these things aren't lining up, look elsewhere.
If I see a possible good setup on the 3min chart, I will change it to the 5min chart, and then wait to see the same there (a definite MACD cross). I've been tricked many times on the 3min, because it might cross on the 3min, but still be a ways off from crossing on the 5min. a cross on the 3min, might result in a bad entry unless it is a VERY strong cross. so for me, the 3min chart gets me ready for entry once the 5min confirms.
These next things I have on my chart, I use more for determining when to exit. once I am in, I switch back and forth between the 3 and 5min. Watching only the 3min, might cause you to get out too early, but it helps you to see which way the near-term movement is headed. I put a 5 EMA line and a 10SMA line on. I use these lines similar to the MACD as they will show the most likely near-term movements. if the 5 EMA crosses up on the 10 SMA, it's saying the move is most likely up. if the 5 EMA crosses down on the 10 SMA, it is saying that the move is most likely down. I watch these so that I'm aware of what they are saying, but I don't use them alone for making a decision. I also have the directional movement indicators (D+ line, ADX, and D- line), and the full stochastic lines on. if the D+ and ADX are both pointing up, this indicates that the stock is moving up. if the D- and ADX are pointing up, this indicates that the stock is moving down. the full stochastic lines moving/pointing up are telling me it's still moving up, but when they stay high and mostly flat for a while, that might signal the end of the run up and vice versa. I also still watch the MACD very closely. again, if it's beginning to cross against the way you are playing on the 3min chart, it's time to start looking at getting out. For me, if it's close to or already crossing against the way you're playing on the 5min chart, it's DEFINITELY time to get out. This is still the way I determine when to get out. As I've said, I've done this and missed out on profits, and I've ignored this system and waited too long and missed profits. Bottom line is......there's always another play out there, and I'm still always reminding myself of that. In trading options, you can do soooooo much with the $100-$300 or more profit you take, but if you don't take it, and then end up with a loss of any kind, well, that's just not good trading.
once you take several of those profits and have more funds to work with, it opens the door to being able to do more with what you have. you can buy much closer to the money which allows you to make money easier and the stock doesn't have to move quite as much. many times, I'll only buy 1 contract at or near the money. you'll see that the stock doesn't need to move as much to get you those $100, $200 or more profits. it might not seem huge at the time, but just think about putting together 5 straight trades where you make $100-$200. it really adds up. once you have a comfortable amount of funds in your account to trade, everything else needs to go into your bank account. for me, having too much money to work with leads me to be more careless with the trades I get into.
let me know if you have more questions!
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