Thoughts on Day/Swing Trading

[augubhai]

Re: How To - -

Well.. I would enter only after having watched the stock over a few weeks to get a feel of it. Assuming this were Nifty, I would initiate a intraday short at the red support line, with stop loss at red resistance. Trade to be closed EOD.

 

[Smart_trade]

http://img69.imageshack.us/img69/6259/rectanglel.png

This is an image posted by S-1585 . Kindly see this image....I will use this illustration ( with permission from S-1585 ) to discuss a very important concept of how different traders can alter a Reward/Risk ratio by trading the same chart differently. I wanted to take take this concept a bit later in this thread but as I saw this chart, decided to write a few words on this concept. Will discuss in the next post.........

Smart_trade

 

[Smart_trade]

Re: How To - -

The purpose of the thread is to know how a particular trader handles a particular scenario. The same picture/scenario is seen by many of us but might be handled differently based on experience, trading system etc. The idea is to know how traders think, apply, execute etc.

Starting with following chart. Chart is copied from stockcharts.com

Question is where do you apply stop loss after?

- Black line?
- Blue line?
- Green line?
- Fibonacchi stop (say 61.8% retrace)?
- ATR stop? ( say 2.1* ATR)

Different traders will trade this chart differently......Let us see how one can trade this chart.....

1) Entry Point : The chart shows a sideways distribution pattern in a rectangle.....the move has come from the top....so this pattern is likely to be a continuation pattern. Entry points in this trade are as under :

Trader A) Some traders will see the breakdown from the range and wait for market to come up near lower red line as a pull back or test and then seeing that the market does not go into the range it broke previously they will go short near the lower red line but on pullback.....

Trader B) Some traders will say that after such long sideways, market is breaking down so go short right at the point it breaks down without waiting for a pullback.....if the pullback does not come you miss the trade or you have to enter at less advantageous place later in the downtrend....

Trader C) Some traders will say let me short 50% of my position at the time of breakdown....and I will short balance 50% on pullback to the lower red line......but if the market does not give pullback, atleast I am in a good trade with 50% position....and if the market reverses on my first entry, I will loose only on 50% of the position.

2)Now we come to where to keep the stoploss point.....here again different traders ....different gameplan....

Trader X : He is a swing trader.....he will keep the stoploss at the upper red line.....and if the height of the rectangle is x he will say that my target is 2x after the breakdow....so he plays with 2:1 Reward/Risk.....great...

Trader Y : His target is also 2x but he wants to give less room to the stop point.....so he keeps it at the green line......his Reward/Risk will workout to about 2.8:1 or so......

Trader Z : He is the most aggressive......he goes for high R/R trades.....and converts his trades into high RR.....he will think after distributing for such a long time, the market has no business to come back into the rectangle.....so if it comes back in rectangle, my trade setup has failed and I will get out as early as possible. So he keeps his stops at black line or a pivot high just above the lower red line.......But see the effect on his R/R.....he is able to boost his R/R to 8:1 ......but that comes with a trade off ( there is no free lunch here too )he may have more whipsaws and he should be prepared to enter the trade again if necessary after he gets stopped out.....but trader Z can handle that as he gets a huge advantage in his favour.....

But the Reward /Risk of 8:1 gives huge advantage in the game to trader Z......

Which one is correct ? There is nothing right or wrong in trading in absolute terms.......one should choose the style with which one is comfortable.....

The above discussion indicates the way you can tilt the R/R in your favour and be ahead in the game....

Smart_trade

 

[S-1585]

Re: How To - -

Different traders will trade this chart differently......Let us see how one can trade this chart.....

1) Entry Point : The chart shows a sideways distribution pattern in a rectangle.....the move has come from the top....so this pattern is likely to be a continuation pattern. Entry points in this trade are as under :

Trader A) Some traders will see the breakdown from the range and wait for market to come up near lower red line as a pull back or test and then seeing that the market does not go into the range it broke previously they will go short near the lower red line but on pullback.....

Trader B) Some traders will say that after such long sideways, market is breaking down so go short right at the point it breaks down without waiting for a pullback.....if the pullback does not come you miss the trade or you have to enter at less advantageous place later in the downtrend....

Trader C) Some traders will say let me short 50% of my position at the time of breakdown....and I will short balance 50% on pullback to the lower red line......but if the market does not give pullback, atleast I am in a good trade with 50% position....and if the market reverses on my first entry, I will loose only on 50% of the position.

2)Now we come to where to keep the stoploss point.....here again different traders ....different gameplan....

Trader X : He is a swing trader.....he will keep the stoploss at the upper red line.....and if the height of the rectangle is x he will say that my target is 2x after the breakdow....so he plays with 2:1 Reward/Risk.....great...

Trader Y : His target is also 2x but he wants to give less room to the stop point.....so he keeps it at the green line......his Reward/Risk will workout to about 2.8:1 or so......

Trader Z : He is the most aggressive......he goes for high R/R trades.....and converts his trades into high RR.....he will think after distributing for such a long time, the market has no business to come back into the rectangle.....so if it comes back in rectangle, my trade setup has failed and I will get out as early as possible. So he keeps his stops at black line or a pivot high just above the lower red line.......But see the effect on his R/R.....he is able to boost his R/R to 8:1 ......but that comes with a trade off ( there is no free lunch here too )he may have more whipsaws and he should be prepared to enter the trade again if necessary after he gets stopped out.....but trader Z can handle that as he gets a huge advantage in his favour.....

But the Reward /Risk of 8:1 gives huge advantage in the game to trader Z......

Which one is correct ? There is nothing right or wrong in trading in absolute terms.......one should choose the style with which one is comfortable.....

The above discussion indicates the way you can tilt the R/R in your favour and be ahead in the game....

Smart_trade

:clapping::thanx:

 

[Satyen]

Re: How To - -

Different traders will trade this chart differently......Let us see how one can trade this chart.....

1) Entry Point : The chart shows a sideways distribution pattern in a rectangle.....the move has come from the top....so this pattern is likely to be a continuation pattern. Entry points in this trade are as under :

Trader A) Some traders will see the breakdown from the range and wait for market to come up near lower red line as a pull back or test and then seeing that the market does not go into the range it broke previously they will go short near the lower red line but on pullback.....

Trader B) Some traders will say that after such long sideways, market is breaking down so go short right at the point it breaks down without waiting for a pullback.....if the pullback does not come you miss the trade or you have to enter at less advantageous place later in the downtrend....

Trader C) Some traders will say let me short 50% of my position at the time of breakdown....and I will short balance 50% on pullback to the lower red line......but if the market does not give pullback, atleast I am in a good trade with 50% position....and if the market reverses on my first entry, I will loose only on 50% of the position.

2)Now we come to where to keep the stoploss point.....here again different traders ....different gameplan....

Trader X : He is a swing trader.....he will keep the stoploss at the upper red line.....and if the height of the rectangle is x he will say that my target is 2x after the breakdow....so he plays with 2:1 Reward/Risk.....great...

Trader Y : His target is also 2x but he wants to give less room to the stop point.....so he keeps it at the green line......his Reward/Risk will workout to about 2.8:1 or so......

Trader Z : He is the most aggressive......he goes for high R/R trades.....and converts his trades into high RR.....he will think after distributing for such a long time, the market has no business to come back into the rectangle.....so if it comes back in rectangle, my trade setup has failed and I will get out as early as possible. So he keeps his stops at black line or a pivot high just above the lower red line.......But see the effect on his R/R.....he is able to boost his R/R to 8:1 ......but that comes with a trade off ( there is no free lunch here too )he may have more whipsaws and he should be prepared to enter the trade again if necessary after he gets stopped out.....but trader Z can handle that as he gets a huge advantage in his favour.....

But the Reward /Risk of 8:1 gives huge advantage in the game to trader Z......

Which one is correct ? There is nothing right or wrong in trading in absolute terms.......one should choose the style with which one is comfortable.....

The above discussion indicates the way you can tilt the R/R in your favour and be ahead in the game....

Smart_trade

Thank Botton not enough ,

Thanks..........

 

[cbosein]

Re: How To - -

@ Smart Trader,

First time visiting this thread. I heard about 5min Intraday flow method but could not get details for study. I gone thro' all post but could not identify full details for this method? Kindly indicate post # to re-check (may be I missed).

Is there any afl for charting this method in Amibroker?

Thanks & regards,
Keerthi

Different traders will trade this chart differently......Let us see how one can trade this chart.....

1) Entry Point : The chart shows a sideways distribution pattern in a rectangle.....the move has come from the top....so this pattern is likely to be a continuation pattern. Entry points in this trade are as under :

Trader A) Some traders will see the breakdown from the range and wait for market to come up near lower red line as a pull back or test and then seeing that the market does not go into the range it broke previously they will go short near the lower red line but on pullback.....

Trader B) Some traders will say that after such long sideways, market is breaking down so go short right at the point it breaks down without waiting for a pullback.....if the pullback does not come you miss the trade or you have to enter at less advantageous place later in the downtrend....

Trader C) Some traders will say let me short 50% of my position at the time of breakdown....and I will short balance 50% on pullback to the lower red line......but if the market does not give pullback, atleast I am in a good trade with 50% position....and if the market reverses on my first entry, I will loose only on 50% of the position.

2)Now we come to where to keep the stoploss point.....here again different traders ....different gameplan....

Trader X : He is a swing trader.....he will keep the stoploss at the upper red line.....and if the height of the rectangle is x he will say that my target is 2x after the breakdow....so he plays with 2:1 Reward/Risk.....great...

Trader Y : His target is also 2x but he wants to give less room to the stop point.....so he keeps it at the green line......his Reward/Risk will workout to about 2.8:1 or so......

Trader Z : He is the most aggressive......he goes for high R/R trades.....and converts his trades into high RR.....he will think after distributing for such a long time, the market has no business to come back into the rectangle.....so if it comes back in rectangle, my trade setup has failed and I will get out as early as possible. So he keeps his stops at black line or a pivot high just above the lower red line.......But see the effect on his R/R.....he is able to boost his R/R to 8:1 ......but that comes with a trade off ( there is no free lunch here too )he may have more whipsaws and he should be prepared to enter the trade again if necessary after he gets stopped out.....but trader Z can handle that as he gets a huge advantage in his favour.....

But the Reward /Risk of 8:1 gives huge advantage in the game to trader Z......

Which one is correct ? There is nothing right or wrong in trading in absolute terms.......one should choose the style with which one is comfortable.....

The above discussion indicates the way you can tilt the R/R in your favour and be ahead in the game....

Smart_trade

 

[Smart_trade]

Re: How To - -

@ Smart Trader,

First time visiting this thread. I heard about 5min Intraday flow method but could not get details for study. I gone thro' all post but could not identify full details for this method? Kindly indicate post # to re-check (may be I missed).

Is there any afl for charting this method in Amibroker?

Thanks & regards,
Keerthi

Keerthi,

5 min Intra Day Flow is not presented anywhere in this forum.....it is traded in a different forum in its advanced section. So you will not find it here. It is not a AFL based method ( none of the flow methods are AFL based) You will not find it in any other forum.....

Thanks for your interest in the method.

Smart_trade

 

[CASPER]

Re: How To - -

Different traders will trade this chart differently......Let us see how one can trade this chart.....
....................
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....................
Which one is correct ? There is nothing right or wrong in trading in absolute terms.......one should choose the style with which one is comfortable.....

The above discussion indicates the way you can tilt the R/R in your favour and be ahead in the game....

Smart_trade

ST.,

Excellent explanation..., Thank you ...,

Now i have a question on the same chart ( Posted below ) ..,

Why not short at the first (bearish ) Candle immediately after the second upmove .. Why to wait for a breakout of the rectangular pattern ?

Since during the second upmove there is no money inflow as per Chaikin Oscillator....



My Reasons /explanations to short are in detail on the chart ...,

Is it a Trade Setup that One would short ONLY after a breakout from the Rectangular Pattern ?

Thank you for your Reply...,

Nithin

 

[S-1585]

Re: How To - -

ST.,

Excellent explanation..., Thank you ...,

Now i have a question on the same chart ( Posted below ) ..,

Why not short at the first (bearish ) Candle immediately after the second upmove .. Why to wait for a breakout of the rectangular pattern ?

Since during the second upmove there is no money inflow as per Chaikin Oscillator....



My Reasons /explanations to short are in detail on the chart ...,

Is it a Trade Setup that One would short ONLY after a breakout from the Rectangular Pattern ?

Thank you for your Reply...,

Nithin

Nbolar,

Sorry to butt in, but I assume that the purpose of the post was to explain the concept of Risk Riward and not the trade entry.
Just like, there exists many variations about keeping Stop Loss, similarly there exists many variations about trade entry also.
Just my opinion.

 

[Smart_trade]

Nithin,

I picked up this chart from a post of S-1585 where he had asked a question of where to keep stoploss once we go short on the breakdown of lower boundry line of rectangle.....

Actually the second upmove is a kind of double top....also the oscillators might have given a negative divergence ( I have not checked that......) and the failure to cross the earlier high was a good place to short on a red candle.....plus the money flow indicator reason you have given......you are correct shorting there ....stops are close and we get a high R/R trade.....

You nicely picked up the correct place to go short......Great going.....

Smart_trade