'TraderInterviews.com IdeaLab's Latest Ideas'

Comment by AceKingTrader

Thu, 21 Aug 2008 01:44:38 -0700

I can get a fairly good idea of a stocks range of movement (as a percentage), based on looking at a chart. For longer term swing trades, I set my targets as a percent from my entry point. I would only take profits if it broke my trailing stop (from some set moving average, not the price) before reaching the profit target.

For day trades, my method is different. I work off of pivot points to find an entry point. I am now familiar enough with the stocks I day trade to know how far the price usually will run from the pivot point. I only day trade stocks that I have watched and have an understanding of their typical behavior.

http://acekingtrader.blogspot.com

http://www.pivotpointcalculator.com

Comment by ORION

Sat, 02 Aug 2008 14:35:06 -0700

I am sorry but that saying also came into my mind while reading your statement. What on earth would give you the notion that supply and demand are non-existent? Did it ever occur to you that that is the only basis for price movement? Where is the edge?!?! The ONLY true edge any trader has is in cutting his losses and letting his winners run. The price will only follow the single rule it can... Fulfill orders. And how the hell do you suppose to SEE the traders who don't know what they are doing, because you will simultaneously see those who DO know taking their money. By the way, there are craploads of amateurs in FX markets.

Comment by MustangCarter

Fri, 25 Jul 2008 04:00:09 -0700

Well...

First, with proper money management derivatives offer traders the ability to limit risk by hedging your bets. With options you can purchase one contract which allows you to control 100 shares of stock, more leverage for smaller capital requirements = larger ROI. When buying options time decay is your worst enemy. A stock can go in the direction you planned, but if it does not do it in a sufficient amount of time you could still end up losing money. When selling options, time decay is your friend, but watch out for implied volatility.

Read OPTION VOLATILITY AND PRICING for starters.
Also, I like THE OPTION PLAYBOOK as a reference guide.
And visit http://www.optionseducation.org/classes/ for free options class basics.

Make sure your trading platform is option user friendly (I use thinkorswim-rated #1 options platform and trading platform by Barons for like 3 years, it’s amazing) and start small, simple and on a paper account first testing your strategies. And remember, if you start testing a strategy and think its “Just Too Easy,” if it were that easy everyone would do it so always expect the unexpected.

Comment by JamesEM

Sun, 20 Jul 2008 18:00:12 -0700

This is the very same point I'm at with the system I'm using. I'm absolutely confident in the systems ability to create great entry points but knowing how far to let the profits run is always difficult. I'd suggest doing a statistical study of your own past trades using the system. You're very likely to find some common areas of resistance (or support if shorting) that tend to hold in your unique situation which you can use to take partials/exit. When you know the probability of your winners running to 2R, 3R etc versus the win/loss ratio (obviously this will become smaller as you increase the R value) you can then decide whether you're comfortable letting them run further (if the statistics suggest it's a good idea)

derivatives

Sun, 20 Jul 2008 11:10:05 -0700

How do derivatives differ from stocks and what are the advantages or disadvantages between the two?

Comment by MustangCarter

Wed, 16 Jul 2008 14:20:25 -0700

It's amazing how things change in a year isn't it.

When to Take a Profit Early?

Tue, 15 Jul 2008 22:32:22 -0700

This is an area of my system I have contemplated and have not found a consistent rule for. I would like everyone's opinion, (granted only about 5 people ever participate in this idea lab, I value everyones opinion greatly.)

While target prices are subjective, I find myself pulling the trigger early on a portion of the position (to lock in profits) or letting a bounce get away from me and fall back close to my stop price. So...

Do I take some off the table when my profit reaches a certain number no matter what (say at $200 profit i always sell 1/4 of my positon)? Or do I hold more of my position letting the winners exceed the losers that started as winners? I'd love some input!

- tim

Comment by JamesEM

Sun, 13 Jul 2008 17:26:45 -0700

I use 200,000 as my minimum.

Comment by JuanISar

Thu, 10 Jul 2008 04:06:02 -0700

Go visit my web site, it is all in the articles for the last 3 years.
http://stockoftheday.blogspot.com/

You can always send me an e-mail: paperprofit1@mac.com

Has the forex market ever heard of supply and demand?

Tue, 08 Jul 2008 01:17:21 -0700

I trade stocks. My main methodology is based on simple supply and demand principles. Recently I opened a demo account to see if the forex market was anything like the stock market. I am so disgusted by what I see. It's like these prices don't follow any rules at all. How does anyone gain an edge in markets like this. It seems there are barely any concentrations of probability to play. Supply and demand are nonexistant. What am I missing here? Does the forex market have a concentric relationship with fundamentals? Or is the fact that prices seem to slide with ease past support/resistance areas due to the possiblity that the forex market is littered with momentum junkies? Where are the amateurs? I can't look at price and find the traders who don't know what they are doing like I can in the stock market. As I write I am reminded of the saying," If you can't find the amateur in the price action; you are the amateur." Any thoughts?

Comment by MustangCarter

Tue, 01 Jul 2008 01:59:24 -0700

What charting package do you use to setup for a tick based candle print?

Fibo Extensions

Tue, 01 Jul 2008 01:58:13 -0700

In some late archived interviews a few traders talk about Fibo Extensions. This consists of a Fibonacci Matrix drawn from the high of a trend to the low point of the trend or timeframe on your charts. Once drawn, along with the standard 38.2, 50, 61.8. a 127.1 and 161.8 can be established outside the trading range and represent price target projections. I have found these to be extremely accurate. Many stocks at their trending high’s after a small low volume pullback break through the recent high level before pausing at these two extension. Any input or thoughts would make for great conversation.

Fibo of the X axis is another aspect that I find interesting. After a trending move say a triangle formation that took 20 days to form, the stock seems to make its next move to the 127.1 and 161.8 within that same timeframe, in the example 20 days.

Minimum Average Volume??

Tue, 01 Jul 2008 01:50:50 -0700

What minimum average volume's does everyone use to filter in their stock scans and watchlists? While the main objective is to reduce liquidity risk, it helps to know the size of the position you are trading with you response. Thanks guys and gals!

Scans and Watchlists

Tue, 01 Jul 2008 01:48:53 -0700

Hey traders,

Lately I have been developing scans and watch list parameters and would love some input from fellow traders. Here are a few ways I develop watch lists for the following day...

52-Wk High List: For this list I record all the 52-wk high’s at the close of the trading session and after a few days I go back to the list and look for any that have formed my entry setup. Pretty simple, Great Trends, Strong fundamentally, and by limiting stocks less than 15 dollars, I have been quite successful with finding winners.

You can do the same with the 52-Wk Low’s and Shorts.

Strong Volume Gainers: For this, I pull up lists of the strong volume gainers and look for a hammer candlestick with a tail which undercuts the most recent low or a low within the past 30 days. This allows for defined exit and in combination with my entry rules a very high probability trade.

I experimented with Stocks that undercut the lower Bollinger Bands, buying over the high of the low day, however very few are in uptrend’s and I do not have enough statistical data for those that are in uptrend’s and fall down to their lower BB to make any conclusions or theories.

Any comments input or strategies are much appreciated. Thanks everyone!

I am interested to find watch lists developed using 200D-ma crossing a 50D-ma or 10D-ma crossing a 20D.-ma. As I am primarily a swing trader my timeframe is anywhere from 2 days to roughly 2wks.

Comment by shishir

Mon, 30 Jun 2008 00:02:29 -0700

Jaguar

I have just come to about the PCCRC Option Trading Strategy. I would like to leran more about PCCRC in details.

Would you kindly let me know the steps to achive the leraning PPCRC gola?

Best regards

Shishir

Comment by MustangCarter

Sun, 22 Jun 2008 00:28:44 -0700

Fantastic, thats exactally the kind of feedback I'm looking for. I definitelly feel that once you begin to trade as your means of income that you put yourself at a disadvantage and "force" trades. From other traders I've talked to I've heard "have two years living expenses and a generous account size in the 6 digits." According to my statistics and trading history a 5 digit account would sufice for a 50k a year salary. As for how long I've been trading, I'm a sernior in college and have been trading since my freshman year so basically it's either trader work for a short while until I can make the move to full time trader. Granted I have many years to become a sucessful trader, I'm trying to get a feel for how other full time traders made the transition and how it worked out for them. I have another year of school so I will trade again throughout the year and see if I can establish a big enough line to swing on a full time basis. Thanks for your comments! It's nice to finally get people to comment on posts.

Comment by AceKingTrader

Thu, 12 Jun 2008 23:08:58 -0700

If someone tells you in a interview that they make $1000 a day, that really doesn't tell me anything. In order for me to know how I stand up against the trader being interviewed, I need to know how much capital they are using to get the $1000 a day. I can then calculate their "Average Daily Return on Equity" This is calculated as the Average Daily Profit Amount divided by the Trading Capital. Do they average .005 (.5%), .01 (1%), maybe 2%+ a day on their capital??

It really doesn't matter whether they trade long term or short, because you can always calculate an average daily profit amount over any time frame. This is the only way to compare a trader with a $1,000,000 account to a trader with a $150,000 account. Otherwise, you are comparing apples to oranges in my opinion. Another option would be a weekly calculation.

As to whether you should ask "the question", I say you should if they are trying to sell their trading knowledge to others. Again, "the question" means little unless you ask them about their trading capital and their average daily or weekly profit amount.

Comment by JamesEM

Thu, 12 Jun 2008 12:44:46 -0700

Hi MustangCarter,

Just wondering...how long have you been trading? The reason I ask is because what you're saying reminds me of the way I was thinking last summer...I was extremely consistent with the trading and decided I'd try "full-time"...the reality for me was the pressure to make the bills was too great and, as a result, I actually damaged my trading (after some initial success going into the latter part of the year) Just recovering now. In hindsight, it probably would have been better to continue with my Job and get some more experience under my belt...I'm not saying it can't work but be mentally prepared for the inevitable set backs that come with the pressure of living solely off of trading profits...that'd be my advice.

Comment by Longfellow

Sun, 08 Jun 2008 21:40:43 -0700

Things to consider:
Are you looking at number of trades per tick or an amount of volume? They are different.
Are you trying to identify real, market activity and not waste your time on a false market
solely manipulated by broker and/or source liquidity? If you are interested in something even close to
a trade-able market, you should abandon Forex and focus on equities or futures.

Comment by MustangCarter

Sat, 31 May 2008 20:58:57 -0700

For my strategy, the Price trend I am looking for is made up of higher highs, and higher lows, where I look to enter on a low, preferably on a hammer which tail undercuts to make the low for that particulat pullback. I then enter in over the HIGH of that hammer. (I use a standard bollinger band to determine whether the stock pulled back enough and validates the hammer as the bottom of the pullback, look at RIG for the months of April and May.

I also look at the time it took to form a particular rally and pullback, and allow the same amount of time for the next rally. (ie: stock rallies for 10 days, pulls back 4, my entry on that 4th would be a ten day timeframe to make it's next move higher).

As for price targets, I scale out, selling a portion at the previous high of a stock (because I bought the pullback remember), and then usualy a 127.1 Fibonacci extension as the next price target (again RIG back a few months put in a large hammer and ran right up to the 127.1 Fibo extension).

Another way to asses a price target is to take the difference between the high of the pattern and the low of the pattern and add it to the high. So a stock hits $50, pulls back to $45 and starts to turn higher, I would buy as close to $45 (with conformation the stock is now moving higher) and sell a portion at $50 leaving the rest to run to a price target of Fibo Extension 127.1 (which may be $53) and then an my $55 target last.

Buying into a security is the easy part, knowing when to sell is what takes skill I've found. If you sell a portion whether it be half or 1/4 or whatever on a big up day in the stock or at a previous high or just selling into strength, you limit your risk to the downside. I always net positive using this scale out strategy over a statistical set of trades. You can never pick EXACT tops and BOTTOMS, my as well take some off the table when you have a profit.