May 5th, non-profit goal

Not much to say about the intraday market activity in the S&P 500 today, bears and bulls were uncommitted which makes for a range day. So, in the spirit of the day I took on more trades than I normally do, 10 altogether. I would consider that over trading as some of the entries may not have been justified or properly thought out.

Having said that I was working on a novel approach to the start of the day by setting out a goal, a non-monetary one by asking the question, "What do I want to work on today?", Inspired by Brett Steenbarger's post earlier today.

I decided to work on waiting for my target zone entry and getting my limit orders placed more timely.

Notice there was no hint of "making more money", "catching bigger moves" etc. I figure that if I can get into trades at better timelines then I can use tighter stop loss orders, have lower entry prices and be there when the moves do move. That will, eventually, turn into profits.

Here is the day chart for SSO, the Proshares leveraged ETF which exhibits the same rough pattern as the SPX, S&P 500 index. This is, more or less, SPY on steroids. The pivot point (blue line) and the yesterday's high (black line) are close tot he same area though.

From my pre-market journal entry:

"SSO to bump the 200sma then DT - at least range to the Pivot Point."

Well, it bumped and passed the 200, but I had a plan initially and it was close. So I am satisfied with that much to start.

Here are the trades in SSO, I should have followed my instincts and not placed any SSO orders so early, but the 200 crossings looked OK to test out my entries, they were tight, again, satisfied, just not the best ideas.

The TICK, as charted below for the same timeperiod as SSO above, has no real defined move past the + /- 800 (green and red). The trend, which is pretty obvious but I stuck the black line to represent the rough median, shows the inclination of the market to hover around neutral with a bit of a downward bias.

Here is the chart for SDS, Proshares leveraged bear ETF, for the morning showing my trades. This shows that my plan did, in fact, produce the results that I was looking for with my opening goal of what I wanted to work on today. Had I followed my original idea of only trading the downmoves toward the pivot (in SSO) which are the upmoves in SDS toward it's inverse pivot, then I would have made out better as I would have seen a 36 cps return instead of the piddly 13 cps that I did see.

In addition to having my entries down tighter and timelier I need to work on either following my pre-market instinct or at least recognizing the general trend as it develops better...or, more appropriately, not try so hard for the counter trend moves. I did like that little momentum move at the end of my SSO trading though. Once I realized that I could fade SSO off of the pivot back to the 200sma using the TICK as an entry trigger...that could have been made use of earlier in the day to my advantage...one thing at a time though.

BTW, I am glad that I did not try to trade into the afternoon as it was choppier than the morning and I might have gotten discouraged by the whipsaws. Looking solely at teh chart, without the TICK and anything else, I would have a hard time placing hindsight orders...although that muliple test of the pivot near the end looks like it needs some further investigation for possible setups in future...

Jeff.

Lunch interlude and beyond

I usually go home for lunch, and, due to a variety of variables, I end up going later than the classic noon lunch...but that is beside the point.

I opened up my trading platform and related softwares to see what was stirring. I tried a trade right around 1230h, once again, against my trading plan. I entered SDS on an downtrending 200sma...I was paying more attention to some twitters when I should have been paying closer attention to the market. Even so, an downward moving 200sma is pretty blatant and hard to miss.

I like to enter trades based on an upward sloping 200sma preferably with the 30 and 50 also above. These setups seem to work out the best partly due to they indicate a short term trend and partly as the price likes to crawl along the 200 often before making it's move, sort of a consolidation line. If it is downtrending the price often heads down for a bit first.

The one that I missed (yep, a day of missing here) was one that I aimed for, did not follow my rules completely...even though I was right I flubbed the entry as a result. Upward sloping 200sma, 30 and 50 above but I did not wait for the pullback to the 200...which happened afterwards while I was heading back to the office....to the penny. It also followed through precisely as I might expect it to. It did not move all that much but the entry was the idea, sort of a scalping trade at this point in the day, hard tight stops or just exiting upon apparent weakness.

I wasn't going to chart it, but here is the afternoon bit.


Jeff.

For the sake of a penny the dollar was lost.

Well, nothing was lost and, yes, for the sake of a few pennies a nice entry was missed.

Today was one of those days that I was hoping for, a trend setting right off the bell. As of right now it still looks that way but one ever really knows for sure.

So, after all of my hyperbole about "being there for the trend days" and seeing some really nice gains as a result, I missed the boat this morning... or did I?

The pre-market looked great, FTSE closed so no factor there at all, TICK all positive and strong for early trading, most sectors were up, swine flu down China stronger.

My journal entry included, "expect a small gap up or a strong start at $24.14, watch the range to $24.54". I set my limit order for $24.17 in expectation that the price would test the 200 around the $24.14 area...I watched as it hovered around $24.20-30 range. In this particular case I "should " have increased my loss allowance a bit to enter the trade at the 20 cent mark...but I did not. Where does one draw the line?

I also could have entered as the $24.54 level was breached as it did waver at that level before taking off again. Technically that would not have been price chasing as it was a level I established as support/resistance. But it was not in my initial entry plan.

Anyway, using my 50sma stop settings I see a 70 cent gain and the trade would have closed about 1045h. I would like to think that I would have given the price more room and stuck with the S/R line just under until the price either re-crossed above the 50sma or tested it from the downside and failed. I should look at using 30/50 crossovers for stop settings as well.

Analyzing the trade closer, as if I knew that I was going to be correct in my forecast and nailed the first entry, here is the chart:


Doing the math on the entries assuming that I start with 200 shares. The $24.54 entry takes me to ACB of $24.37 and my stop climbs to $24.42 for the whole position as soon as I enter. That leaves me with at least a few cents per share profit. Following up the the next support resistance level and deciding that the market is still strong another 100 shares gets added and the stop is as depicted. ACB is now $24.46 and the stop is climbing from $24.60 to $24.70 and caps out at the next S/R at $24.82. Paper gain at this point, if stopped at the end of the chart would be about 49 cps or $245.

So did I miss the boat? Am I disappointed that I did not chase the price or make some of the other nice entries?

I don't really think so as I am not really profit focused but I am learning focused. I got to watch a really nice morning uptrend and play the points along the way to see what I could have done. Yes, I miss not having a position in play. I don't expect that I would have entered the last 100 shares, but I expect that I likely would have entered the second trade addition...or at the very least still been in my core position. I was determined to trade according to plan and right now I am focusing on plays that include the 200sma entry. I need to start somewhere.

The market still looks good but not strong. I am going to watch closely as the price and 200sma approach one another later today as I think there may be an afternoon reversal in the works.

I think that I would be taking some of the position off along the way, perhaps a stepped row of stop orders in 100, 200 and 200 size closures to ensure profit and leave more room for more rallying.

Jeff.

Information overload, tools and intent.

Too much information to try to assimilate and internalize in one go, even though it's been a longish go.

I am needing to concentrate on fewer things in order to focus and get into a groove in my trading. This switching over to the NYSE and AMEX have opened a whole new world of information that, while I knew it was there, still proves a daunting task to sift through it to select the parts that I need or want to use.

I need to pick one or two complimentary bits and work with them, prove their use then add on more as I feel more comfortable with the first.

I still like the PP200 entries, and they worked out well today, so that will be the basis for my trading. I like the TICK chart so I will add that to get used to the price moves and the TICK correlation as I have used it to help with some timing and trend indication.

So, 200SMA, pivot points (monthly and daily), previous day OHLC

I will continue to keep an eye to the ADD but I find it just follows along with the price of SPY, or the value of the SPX. Also I see that trading SPY or SSO are similar enough to not need the leveraged ETF. SH vs SDS on the other hand have such a variance in volume that I might be concerned with trying to get out of an SH trade in a hurry in a fast moving market.

Other things that have crept into my view are, in no particular order:

VIX (a very interesting beastie, but of questionable use)
VWAP and WVMA (Volume Weighted, jury is out on this one, just another MA?)
Converging MAs (this one looks cool but ties up CPU resources terribly)
Sector ETFs (good for a general overall view of a market, helpful in trend determination)
ADD (see above)
Volume by Price (not readily available in a useful format through Esignals, interesting and needs more attention though)
SPY spikes (I think these are indicative of the nature of the ETFs and may have some level of predictive value, more back testing)

Odd notes about Volume.

I am still not so sure how much good volume is when trading an ETF as the price is based upon the underlying index valuation...volume can skew the price by the spread, can increase or decrease the spread but cannot move the actual price. So the volume is more a market participant gauge rather than a sure fire method to judge a move. Although on a large volume ETF I guess it can be a good herd indicator. Spy is so popular that many trade it as if it were a stock...but it's not.

Today I did some quick back testing on a pure volume trade entry with manual stops in the vein of a semi-mechanical trading style. The back testing looked good, and I might post something on it another time, but, true to form, I put it to the test to see how it executes. Well, mix a new style with end of day market and I am sure to get burned.

More to the point of the ETF volume though, I think that a pure volume trigger could work but I would expect it would work better on a high volume stock... Mmmmm...I feel some more back testing coming up this weekend.

This leads me to thinking that perhaps the fun of trading is not so much the trading itself but the trial and proving of a system. I have a hard time sticking to one thing long enough and with enough tenacity to let it show it's merit before adding something else into the mix. Constant interruptions and the odd connection glitch don't help matters either, but those are just excuses for the fact that I am not trying hard enough to actually make any money at this little venture.

Jeff.

Morgan Stanley, the alternate trades and April 21st chart.

I am trying to focus on one sector or index at a time in order to get familiar with the activity well enough that I don't have to think much about the indicators, just glance at them and know what may be coming next. As much as I may not be profitable right now I am gaining knowledge and that familiarity that cannot be gained in a strong easy to trade market.

Having said that I have kept my eyes out for those other gems that may be out there and are within my trading range. Morgan Stanley, MS, is just one such gem. Lots of volume, lots of activity and a price that allows me to choose a variety of position sizing.

The only real reason for not getting into this stock is that I cannot short sell in a registered account so my playing is limited to the upside trades so I am just on the sidelines for now. Later I may get my margin account going for some shorts.

This basically means that I am stuck with ETFs of the bear variety to play any downside.

On that line, I see some argument for sector rotation for trading. I see that this is similar to choosing a stock that may be a good trade on a particular day as, no doubt, the sector that a stock is in will be reflected in the stock movement, or the other way around.

I am trying not to get caught in the indecision that comes with choosing a different issue for a day as I tried that in the past and I invariably chose wrong and ended up fighting the tape for pennies when i could have grabbed a nice trend in one of my other choices... in hindsight of course.

So this is why I stick it out with one set of ETFs in one index right now. I figure that I will fight on those range days when almost no moves are terribly predictable but I will be there on those days that the ETF trends with the index. April 21st was one such day...and I recall not being able to trade until late in the day...after 1500h so I missed it but not due to trading something else, I just was not there. This was so shortly after switching to the NYSE that I don't know if I would have recognized the trend or if I would have just traded my plan and been caught up in the trend by default. I would like to think I would have been positioned right but I also think that I would have stopped out quickly.

I see that I did not post a chart for the day, I only had one trade late in the day and I am not sure now exactly why, my journal entry is not clear. I think I just felt the need to try a late day trade to see if I could catch the right side of the late day volatility... I was not successful.

Here is the chart with some arrows indicating possible trades and direction. I would be playing SDS for the short trades. I think that the TICK for the day was mostly positive off the start so today I would not likely have entered any SDS (short) trades at all. There are a couple of points where I may have entered additional lots along the way, perhaps not then so the point is moot. I might now once there is a enough money on the table to turn a profit even after the cost averaging.

SSO for April 21st:

The long green arrow represents my use of the 50 sma as a stop guide. I worked out a variety of methods of trend stop setting (125 sma, pivot point & support lines, 200sma stops) The 50 sma worked out the best price but even the worst was within 12 cents of the best. There were at least two more decent smaller trades after this main one, which I did not mark. These were the 200sma retest at 1500h and at 1545h.

For interest sake I entered long at 1535h, I must have been trying to get the bounce off of the 50sma, oh well.

Jeff.

Looking for a nice trending day.

I have now reigned myself in so that I trade according to my plans, the trouble is that my plans favour a trending day better then a range or mixed day as I tend to try to leave the price room to go when I should be exiting on momentum. I need to work on recognizing when the trend shifts so I can better use momentum targets and wider stops when appropriate.

As a result I had a mixed day today. I expected the downmove in the SPX off the start but didn't get my order in for SDS quick enough at my price to catch the move...next move I tightened up too soon expecting a similar quick rally. The day kind of went like that. Seeing as I was using the 200sma to use as my trade launching and there were three solid crosses and as many periods when it was being tested I had lots of opportunity to try some trading... just not a lot of large quick moves from it.

This is a day when it would be better to fade the moves toward this line, but where to select the entry... I think that these would be less likely to be good clean entries than what I am playing with now so I will continue this method.

I am getting to recognize the TICK divergences on the fly, good day to watch those setup with the price moving about as it did. Something about a three wave pattern seems to be normal for a ranging or mixed day...might even be able to time trades off of the extreme TICK moves...sort of like a reversion to the mean but not specifically with the price action. More on that another time as I think it warrants some investigation along the lines of trading the reversion to the 200 or maybe the pivot point.

Here is the 5 minute period chart for SPY today, note the nice smooth wavey 200sma green line. I recalculated the SMAs to be valid as if this were a minute chart...so the 200 on the 5 minute bar chart is still a 200 minute moving average. I don't have the patience to trade five minute bars but they are nice for quick reference.

I had eight trades and none of them were great gainers or losers, suffice it to say I got a little chopped up even though I had good entries. Some stops were too tight and I didn't feel comfortable getting back, a couple of trades were just wrong, the idea was sound, I misjudged the strength of the market at the time...or perhaps the weakness.

I have not done the overall profit loss for the week but I know I am down, just not how much. Regardless, I am really enjoying the revelations that I am having and am looking forward to the time when I can trade and be confident of a good day regardless of the market activity.

BTW, I am heartened by some of the timelines for active traders to start being good as heard from professional traders when they are referring to their new traders in there firms. Seeing as I have had zero formal education about trading and markets I can consider myself doing as well as can be expected...actually better as most have lost it by now, apparently.

Jeff.