Last but not least, the MACD method

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

MACD.

Set MACD to the following parameters: First EMA at 0.213, second EMA at 0.108 and Difference between the foregoing EMA’s at 0.199. This results in a two line indicator.

When the fast line closes above the slow line, you have a buy signal.

When the fast line closes below the slow line, you have a sell or short signal.

Open positions are exited on the opposite signal although you could exit earlier on a trailing stop basis using price bars.

All the methods and systems from the book, when used for day trading, assume that you exit open positions before the close of trading each day unless stopped out earlier.

I'm taking a week or two off to enjoy the weather and will be back in mid-June/09.

...back in mid-June/09...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

MA Crossover

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

The Moving Average Crossover.

This uses a 10 period Moving Average of highs (“MAH”) and an 8 period Moving Average of lows (“MAL”). Filter trades according to the following.

Buying only is permitted when you have 2 consecutive bars above the MAH.

Shorting only is permitted when you have 2 consecutive bars below the MAL.

Then, subject to those filters, when price hits the MAL, buy and when price hits MAH, short.

Exit open positions when you hit the opposite Moving Average.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

The 3 H-L Channel System

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

The Three High-Low Channel System. This is the most complex one in the book.

This system uses a combination of the Momentum Indicator and two Moving Averages.

First, use a 28 period average of the Momentum Indicator. When the Momentum Indicator is above its 28 period Moving Average, assume the trend is up. Vice versa for downtrend.

Second use the following as a "trend filter". When the trend is up, take only the buy entries. When the trend is down, take only the sell short entries.

Then, subject to the trend filter, when price hits a Moving Average of the 3 period highs, sell short.

When price hits a Moving Average of the 3 period lows, buy.

Exit open positions when price hits the opposite Moving Average or on an adverse move equal to 1 ATR of the last 3 periods.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Leisurely One Hour Bar Breaks

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

One-Hour Breakout.

Plot the 5 minute bar’s closing price for the first hour of trading to establish a zone.

A breakout from that zone to the upside is a buy signal.

A breakout to the downside is a sell short signal.

Open positions are exited with a trailing stop based on the 5 minute closing price of the prior bar.

This seems quite leisurely..

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Open-Close Oscillator

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

The Open-Close Oscillator. This is a moving average crossover system involving two moving averages.

One of the moving averages is an average of the closing price of each bar.

The second moving average is an average of the opening price of each bar and which covers a time period twice as large as the first average.

When the first average crosses above the second, you have a buy entry signal. When the first average crosses below the second, you have a sell entry signal.

Exits on open positions are taken on a signal in the opposite direction or with a trailing stop based on the prior bar’s countertrend extreme.

...cont'd next week on Tuesday...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Stochastic Pop

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

Stochastics Pop. This fades the trades indicated by traditional Stochastic readings. Traditionally, Stochastic readings of over 80 indicate overbought and imply a sell signal while readings under 20 indicate oversold and imply a buy signal. However, the author of that book does the opposite. He buys when Stochastics is over 80 and Shorts when under 20.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Oops, a gap fade

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

Gap Fade. This is actually Larry William’s Oops Pattern. If a stock’s price opens beyond yesterday’s range and works its way back into yesterday’s range, then enter in the direction opposite that of the gap. That is, if the gap is down, wait for price to work its way back into yesterday’s range and then buy. Vice versa if the gap is up.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Compleat Guide to Day Trading Stocks, 1

...cont'd from yesterday...

The second book I read duirng my week off was The Compleat Guide to Day Trading Stocks.



Unlike the book reviewed yesterday, this book actually does describe several strategies for trading together with performance statistics for each strategy. In fact, according to my count, the author presents seven trading strategies.

The following is my understanding of the seven strategies. For details, either get the book or play with the strategies on your backtesting software to discover robust parameters that work for you.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Completely idiotic active trading

I just came back from a week off to catch up on reading.

The first book that I read during that week was The Complete Idiot’s Guide to Active Trading.



This book is a worthwhile quick flip through for anyone new to trading. The best place to get this book is at your local public library for free.

Don’t bother looking for precise strategies for trading in that book because there are none despite the chapter headings indicating that there are such strategies described in the book. I believe that even the book’s bibliography would not be of any use for the purposes of creating any strategies for trading.

Instead, the book has a good explanation of the distinction among the different time frames active traders use, namely Short-Term Trading, Swing Trading, and Position Trading. For anyone new to trading, that could be a broad starting point for selecting a time frame for trading.

The feature of the book I like the best is the author’s emphasis, repeated over and over, that almost everyone who tries active trading loses money, but the odds are no worse than surviving in a new business.

The title for the book is very appropriate. It is for complete idiots. And it will guide them away from trying active trading. So much the better, and more money left in the markets for traders who are absolutely committed to succeeding at trading .

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Keep score daily

...cont'd from yesterday...

Throughout the day, I keep a record of the tasks I want to perform so that I stay consistent in trading only the pattern I intend to trade and no other pattern. Those tasks include the things mentioned in this week’s blog articles. At the end of the day, I notice if I am doing those things as frequently as I want to do them, namely at least every hour.

Here’s an example of what the record looks like, in part.

Looked at picture of target pattern: ///// ///// /////
Read over checklist of target pattern: ///// ///// /////
Self-talk reminder to look at picture and checklist: ///// ///// /////

TOTAL SCORE FOR THE DAY: 45.

...back in ONE week, skipping out next week...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Hourly reminder

...cont'd from yesterday...

Just before starting to trade intraday, I remind myself that I will only trade the pattern shown in the picture and the checklist mentioned in the blog articles of this week. Throughout the day, at least once per hour, I remind myself about this.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Use a checklist

...cont'd from yesterday...

I have a printed checklist of the features in the pattern that I intend to trade. Then, just before starting to trade intraday, I read the checklist over and compare it to the picture of the pattern that I intend to trade. Throughout the day, I look at that checklist and the picture to remind myself about the pattern that I intend to trade.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Picture it

...cont'd from yesterday...

Just before starting to trade intraday, I look at a picture of the pattern that I intend to trade. Then throughout the day, I look at that picture to remind myself about the pattern that I intend to trade.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Consistently trade the same pattern

A popular goal among traders is to aim to consistently trade the same pattern.

Generally, a good way to do that is to replace discipline with conditioned reflexes. See my article at http://LeisurelyCashFlow.Googlepages.com entitled Replace Discipline.

This week, I will be writing about some specific techniques that I use every day in addition to conditioning reflexes. Most of them are low-tech simple solutions that anyone can readily use.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments

Market stages too confused

...cont'd from yesterday...

Cont’d example of my application of Stan Weinstein’s Stan Weinstein's Secrets For Profiting in Bull and Bear Markets for the purpose of deciding whether to buy, sell or keep my money safely tucked away in my mattress.

WARNING: The contents hereof shall not be construed or relied upon as investment advice, and the contents herein shall not be relied upon to do anything or refrain from doing anything.

Yesterday, April 30, 2009, SPY showed the following at the end of the day after all trading had been completed yesterday.

Day Chart. Stage 2. Second bar since ricocheting upwards, closed lower than open.

Hourly Chart. Stage 2, closed near rising 21 Moving Average.

Half-Hourly Chart. Stage 4.

Quarter Hour Chart. Stage 4.

Inferences at the Open of today.
The Charts in the aforesaid time frames are mixed. Therefore, expect trading to be choppy until they all get into the same Stage.

Decision.
Wait until all the four time frames above are unanimous. If they all go to Stage 4, then short sell anywhere near the 21 Moving Average. If they all go to Stage 2, then buy anywhere near the 21 Moving Average.

Results.

SPY was in diverse stages among the different time frames throughout the day. Money was kept safely hidden in mattress pending unanimous condition among the market stages.

...back next week...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2009 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments