Breakout Trading using Time and Sales

[coopster]

sounds so simple and i guess it is really.

I need to put the time into this instead of marvelling at pretty candlestick charts and ignoring the news like so many other newbies!

Thanks for the advice.

 

[amit1986]

Don't underestimate the impact of news. Try to keep things simple and look for things that will attract a great deal of attention. If the world's biggest investment bank, Goldman Sachs, comes out with a buy/sell recommendation on a particular stock, then there's a great chance that stock will have a lot of interest from institutional traders, hedge funds, wealthy investors, and other traders who follow Goldman Sachs' advice! Some other big banks (JP Morgan, Merrill Lynch, Wells Fargo, Morgan Stanley, etc...) also publish ratings which provide excellent ways to gather stocks. The reason why these banks get a lot of attention is because they have very smart analysts working for them who come up with these ratings. Therefore, most people try not to be on the other side of their recommendation. If Goldman Sachs tells you to buy stock XYZ, then it would be stupid to be selling the stock.

There are many other news stories on a daily basis as well. Some periods of the trading year produce more candidates than others. Like I said, keep things simple. You want to find stocks that will gather the most attention on the day. That doesn't mean you find stocks like MSFT or INTC. But, if a pharmaceutical company comes out pre-market saying that their phase III trials did not perform upto expectations, then that is going to be really bad news for the stock. In fact, for the pharmaceuticals, after watching them for a while, you'll notice that phase trials play a BIG role in their stock prices. Once again, it comes with practice and experience.

You can even subscribe to the Wall Street Journal. Headline news on the WSJ are likely to be important and since most wall street players read those news, there is a great probability the stocks mentioned in that paper are likely to garner more attention.

So start by looking at the major news of the day. You don't need briefing.com for this. Any financial news website will tell you the most important news of the day. Check out finance.yahoo.com before the market opens. If you have an iPhone or iPod Touch, download the Bloomberg application. In that app, they have a "News" section, and in that section, they provide a concise summary of 10 - 15 stocks that are most important on the day. I'm sure they would have a similar app for Blackberry enthusiasts. There is also the CNBC app. After you start getting a feel for what sort of news play an important role (and you will), you can subscribe to briefing.com to read more in-depth news and have a greater list of stocks.

Hope this helps,

Amit

Thanks for the advice Amit, i will read the Mr charts thread and look at IB and e-signal.

I think the issue i have is reading the news and thinking "what the hell will that have an influence on?" OK some are obvious but what stocks would i choose when some seemingly unimportant government figure is released is at present beyond my understanding.

If you have any time, please give me an idea of the things to look out for. I am really coming unstuck with this. I think it comes from my engineering background. Everything should be black or white. Things like news and market mood i find very hazey and hard to comprehend.

Just ignore me if i am gatecrashing your thread. I'm sure with more reading, i can find my own way. PRobably most is already covered in the Mr Charts thread.

thanks anyway.

Coop.

 

[amit1986]

That's a good way of doing things, but if you wait for the market to open to scan for the big % movers, then most likely you will have missed a move by the time you find a position. In my experience, there are a lot of good moves that happen within the first half hour of the market.

For this reason, it is always good to have at least some stocks to watch prior to market opening. If nothing favorable is setting up, then you can look for others using a scanner.

Amit

i studied stocks/news for a couple of weeks and found that all you need to do is find which stocks the news effects. how do you know that? well wait for the data to be released and scan the market for big % movers and grab a share of those moves.

 

[FXTrend240]

That's a good way of doing things, but if you wait for the market to open to scan for the big % movers, then most likely you will have missed a move by the time you find a position. In my experience, there are a lot of good moves that happen within the first half hour of the market.

For this reason, it is always good to have at least some stocks to watch prior to market opening. If nothing favorable is setting up, then you can look for others using a scanner.

Amit

probably true , i wish i had time to day trade stocks, instead i'm just sticking to global macro/fundamental trigger technical entry style trading...until i can do both

 

[amit1986]

Oh, cool! What do you look for in your trades?

Amit

probably true , i wish i had time to day trade stocks, instead i'm just sticking to global macro/fundamental trigger technical entry style trading...until i can do both

 

[FXTrend240]

heh, i haven't went live yet i've got exams soon and those are priority, in the mean time learning economics etc.

Basically what i look for is to anticipate central bank policy and how that effects the markets and trade off of that, scaling in to get in on a trend.

 

[amit1986]

Interesting. Where are you studying? Are you studying economics?

I am also finishing up a degree in financial economics. Actually, one of my courses this semester, Macroeconometric Modeling, we just did a project that sort of relates to your trading style.

I investigated the effect of an increase in U.S. interest rates on Canada's macroeconomy using a macroeconometric model at my university. Found that if U.S. interest rates increase while Canadian interest rates stay constant, then this will lead to a significant appreciation of the U.S. dollar relative to that of the Canadian dollar.

To be completely honest, I don't trade FX. However, the fact that the Canadian dollar is almost at parity with the U.S. dollar (again) is just odd. There is no way, in the long-run, the U.S. and Canadian dollars can be at parity. It's definitely time to stock up on plenty of U.S. dollars and wait till the fed increases interest rates and the U.S. economy rebounds. Thankfully my broker account lets me choose whichever currency I wish to denominate my funds.

If only all trading would be as obvious as the U.S. - Canada FX pair.

Best of luck on your exams!

Amit

heh, i haven't went live yet i've got exams soon and those are priority, in the mean time learning economics etc.

Basically what i look for is to anticipate central bank policy and how that effects the markets and trade off of that, scaling in to get in on a trend.

 

[FXTrend240]

Interesting. Where are you studying? Are you studying economics?

I am also finishing up a degree in financial economics. Actually, one of my courses this semester, Macroeconometric Modeling, we just did a project that sort of relates to your trading style.

I investigated the effect of an increase in U.S. interest rates on Canada's macroeconomy using a macroeconometric model at my university. Found that if U.S. interest rates increase while Canadian interest rates stay constant, then this will lead to a significant appreciation of the U.S. dollar relative to that of the Canadian dollar.

To be completely honest, I don't trade FX. However, the fact that the Canadian dollar is almost at parity with the U.S. dollar (again) is just odd. There is no way, in the long-run, the U.S. and Canadian dollars can be at parity. It's definitely time to stock up on plenty of U.S. dollars and wait till the fed increases interest rates and the U.S. economy rebounds. Thankfully my broker account lets me choose whichever currency I wish to denominate my funds.

If only all trading would be as obvious as the U.S. - Canada FX pair.

Best of luck on your exams!

Amit

can't say where i study .

if US interest rates increase then money from lower-rate canada 'should' flow into US interest-yielding accounts.that happens but not all of the time , depends on global risk appetite/risk aversion , or if the US economy is in a real state then canadians may not want to put money there. Also CADUSD is very correlated with oil due to the US's inelastic demand for it. There are many many variables with fundamentals and imo it can be very tricky to figure out what's going on, however, that's why imo scaling in is good, scale in some of your capital, if you're wrong, meh you lost 4-5% (depends) but if you're right, you've caught a nice trend and can pyramid in and ride for potentially year-making gains .
lots can be made day trading stocks too, just watched john carter making over 100,000 in one day trade .

Also, with global macro views you aren't just tied to currencies, you can try going long the SP500, gold,oil, bonds, whatever!

 

[amit1986]

Very interesting post FXTrend!

I am simply saying that when the U.S. economy starts to get on its toes again (which it will do), then the U.S. dollar is definitely going to appreciate against the Canadian dollar. The two dollars cannot be at par in the long-run.

Amit

can't say where i study .

if US interest rates increase then money from lower-rate canada 'should' flow into US interest-yielding accounts.that happens but not all of the time , depends on global risk appetite/risk aversion , or if the US economy is in a real state then canadians may not want to put money there. Also CADUSD is very correlated with oil due to the US's inelastic demand for it. There are many many variables with fundamentals and imo it can be very tricky to figure out what's going on, however, that's why imo scaling in is good, scale in some of your capital, if you're wrong, meh you lost 4-5% (depends) but if you're right, you've caught a nice trend and can pyramid in and ride for potentially year-making gains .
lots can be made day trading stocks too, just watched john carter making over 100,000 in one day trade .

Also, with global macro views you aren't just tied to currencies, you can try going long the SP500, gold,oil, bonds, whatever!

 

[amit1986]

Been a while since I posted here last. Today presented quite a few good trading opportunities (unlike yesterday's slow behavior), so thought I'd post one of those trades here.

This trade, FITB, is based on Mr. Charts' strategy on this thread. As it opened, it fell with every candle making lower highs. Entry on the cross-hairs at 14.30 due to strong momentum on level 2/time and sales and exit two minutes later at 14.11 for a good 19 cents per share. Not too bad for 2 minutes work.

Amit

 

[Mr. Charts]

Nice one, Amit
Take care,
Richard

 

[amit1986]

A bit of a different trade today - slightly different setup as the one on Mr. Charts' thread.

Although this chart shows no evidence of a trend, it was a pure level 2 breakout trade. Many people say that level 2 is pointless nowadays, however I disagree. It may be the case that level 2 is not as useful now as it may have been several years ago, but there are still techniques on level 2 that give traders an edge in the markets. I learned these techniques from Mr. Chart's himself through the one-to-one coaching.

BIDU breakout 4-minutes after the market opened. Quickly scalped (not intentionally) 38.5 cents per share in under one minute! There were a couple of other good breakout trades this morning as well. If anyone is interested, I can post them as well.

Amit

P.S. For all those skeptics out there who may doubt the validity of my trades, I am also attaching a screenshot of my broker window with my trade details!

 

[Mr. Charts]

Nice trade, Amit
Richard

 

[amit1986]

Thanks Richard!

 

[amit1986]

BIDU is starting to become one of my favorite trading stocks!

Took two trades on BIDU today.

Trade 1: +16.5 cents per share
Trade 2: +31 cents per share

Amit

 

[timsk]

BIDU is starting to become one of my favorite trading stocks!

POT was my favourite when I traded stocks - couldn't get enough of it!

 

[neil]

POT was my favourite when I traded stocks - couldn't get enough of it!

You get arrested for that you old bugger

 

[Mr. Charts]

You get arrested for that you old bugger

 

[amit1986]

Don't always get entries/exits right all the time...

I don't get entries or exits right all the time. Here's a quick example from this morning. AMZN gapped down and started trending up. I went long at 108.17, just prior to the breakout level as I saw strong momentum on level 2 / time & sales. Exit 16 seconds later at 108.33 for only 16 cents per share.

Clearly, from the chart, I got out too early - far too early. The stock continued rallying to 110.35. However, it was just far too volatile and I was not at all feeling comfortable staying in it, so decided to get out.

Can't be too disappointed I guess.

 

[amit1986]

The following stocks could present some interesting trading opportunities today: TEVA, DNDN, BIDU, NFLX, and GERN. Going to be keeping a close eye on them as the market opens.