Stillkicking's Rules for Day Trading

[stillkicking]

Hello to all. Been awhile since I've posted. Been trading and learning and now have some time to share with the group.

Have moved away from swing trading for the most part. Honestly, there just was no fun in it for me. I'd place a trade and then sit and wait for something to happen. At my age, 65, life is just to short : )

Went back to reading all my day trading books from the late 1990's when I tried to make my fortune and loss lots of money. Have also watched a ton of Youtube videos related to day trading and this has gotten me up to speed on current procedures. I can now say I have the process down pat and can easily make money almost every day I trade.

The two most important and, in my opinion, the only two studies you need on your daily chart for day trading is the VWAP and the 200 (DMA) day moving average.

I've been day trading with just these two lines on my screen and I'm doing very well, thank you.

Here are my rules for day trading. Follow them and you will not go wrong.

Do Not Buy:

- before the 9:45am shakeout

- if price is below the VWAP or the 200DMA

- unless volume chart is reading <hundreds of thousands> of shares traded

- on a red candle

- if you see heavy selling volume

Also, no second trades in that equity unless the price breaks HOD (high of the day)

I'm running three screens and that really is all any home trader should need.

The screen on the left has ThinkorSwim, my trading platform, and the screen I will trade in and out with. The middle screen also has TOS running four smaller charts. This is where I place the stocks I will follow on any given morning. The right most screen has Finviz Elite, which gives me my daily stock screener.

After the bell, I will generally pick only two stocks to watch. I place them in the left side of the quad screen as one minute charts and as five minute charts on the right side. The one minute gives me up to the second price movement and the five minute takes all the noise out of the movement.

I only trade stocks between $1 and $10 and the lower the better for me. I take large positions of 1,000 to 5,000 shares so I can make a quick profit and get out. As I build up my cash account, I will take even larger positions. I expect to be taking 10,000 shares fairly soon.

I do not trade on margin and I do not short stocks. This way I stay out of trouble.

I try to not get too greedy. I'm happy to make $500 to $1000 a day, by 10:15 in most cases, and then close up shop for the day.

I'll be updating this post from time to time, so stay tuned.

 

[Panic!]

Thanks for sharing! I have very similar setup in terms of what I have open on my screens. I don't trade intraday anymore, but when I still did I traded around VWAP mostly.

Why do you only trade stocks beow 10 USD though, any particular reason for that?

 

[stillkicking]

Thanks for sharing!

You're welcome.

I have very similar setup in terms of what I have open on my screens. I don't trade intraday anymore, but when I still did I traded around VWAP mostly.

The VWAP is the most powerful indicator I've found for day trading. I will not take a trade if the bars are below the purple VWAP.

BTW: I had TOS send me another version of that study that only has the single purple line. Much easier to see what's on the chart. Ask them for it.

The same goes for the 200 DMA. I never take a trade below that cyan line. BTW: the version in TOS only works on a one year chart since it is a one bar indicator. If you use it for daily charts, it will be completely wrong. There is a fellow who sells the proper 200 DMA study for TOS that will work on any time frame. Ask me off list if interested. He can also supply his as a single line trace for clarity.

Why do you only trade stocks below 10 USD though, any particular reason for that?

I trade so-called penny stocks. Equities of $5 or less. They can be very volatile and their moves can be quite large intra-day. I buy as many shares as possible in one trade. If I pay $2 for a stock and buy 6000 shares, and it goes up just 15 cents, I can make $900. I'll take that any day of the week.

For example, here is my one trade for today.

Happy trading. If you have more questions, just ask me.

 

[stillkicking]

I broke my first rule and it cost me!


This is why you should not take a trade until after the 9:45 shake out.

Had I waited until after 9:45, I would have seen what was about to happen and not taken this trade. Point of fact, there was no reason for me to have entered when I did. The green candle did not make a new high.

The stock never recovered and I lost money. I screwed up.

Food for thought.

 

[kutcher]

Thanks for the tips! They are really good for newbies like I am.

 

[Pat494]

Do you use a stop loss ?

 

[stillkicking]

Do you use a stop loss ?

I'm terribly sorry. I just saw your question tonight.

I did not use them when I started and that was a big mistake. I do use them now, yes. I will either use a fixed price stop loss or a trailing stop that tracks the price by a fixed amount when it goes up but locks at that highest price when it retracts.

ThinkorSwim allows me to place these at the same time I place my buy order and you can set the stop loss offset as a percentage or a fixed amount like, say, 10 cents

 

[stillkicking]

I came across two excellent videos on using the VWAP I think others might be interested in watching. They are both short, concise and well produced.

Day Trading with VWAP

Learn how to trade with VWAP

 

[stillkicking]

I've created this little form I will be using when looking at a penny stock I might be
interested in trading. I need to check off all the bottom "musts" before I can consider
the stock.

I should add here, I do not trade a stock less than $1.00 but prefer stocks $5 or less so I can buy large block of shares and take advantage of a small price move to the upside.

 

[TradeKing305]

I am truly admiring your setup. The clock underneath the monitors is a nice touch.

 

[CertainWay]

Hi Stillkicking,
I use vwap in my intraday trades too and they are very, very useful IN fact VWAPs have become an integral part of my strategies. I also use Anchored Vwaps on higher time frames as well as on hourly charts.

I came across two excellent videos on using the VWAP I think others might be interested in watching. They are both short, concise and well produced.

Day Trading with VWAP

Learn how to trade with VWAP

 

[stillkicking]

Testing a new set of chart studies with ticks in place of time

I've started testing out a new way to view my potential stock trades by setting the chart to display tick candles in place of the more common method of using candles that display time. Ticks are another name for trades. Each 100 shares traded will advance the tick by a factor of one. Setting the chart to display 100 ticks will mean each 10,000 shares traded will create a new candle. Unlike using, say, a one minute candle which will advance no matter how many shares were traded during that period.

I find ticks to be more representative of the market. I am still running the time candles on my second system, though, because I find the volume bars to be more accurate. In fact, I have removed the volume scale from the tick chart altogether. I found it meaningless.

Here is a example from today. I did not trade this as I am still testing this strategy but had I done so (hindsight is 20/20 I know) I would have made a tidy profit and with little risk, as you can see for yourself.

There are two studies below the chart I'm also testing. StochasticFull (can also use StochasticSlow) and MoneyFlowIndex. You can play with the settings or use what I have, here. Also notice, I still have the VWAP running. Not all chart lines will remain if you switch to ticks so I lost the 200DMA, but that's OK. I still have that on system #2.

Following my rule for not entering a trade below the VWAP... take look at both studies at the 10:25 time period. Both are above the 50% line. According to the MFI study, new funds are flowing into the stock at a very good rate and, second, at the same time the Stochastic is indicating the price is closing at the high of the range for the period it's looking at. Third, the price trend is clearly heading positive per the candle chart and finally, although it is not displayed here but can be seen on my system #2, the volume bars are green, green, green and getting taller indicating more buyers than sellers for the stock.

That's four confirmations! IMHO, this looks like a good time to take an entry.

Now, slide over to the 10:35 time period. Red candles all around and both studies have now dipped to crossing the 50% level. Money is flowing away from the stock, the price trend has flipped, multiple red volume bars appearing... the sellers are in full force. Time to get out. Again, you have four separate confirmations to go on.

Personally, I like them odds.

NOTE: You will have to adjust your ticks setting depending on the trading volume. I usually start off with 50 at the bell, then go up to 100 or higher for stocks trading in the 10 to 20 million range.

 

[CertainWay]

Hi there,
Tick charts smooth out flat areas particularly during low volume periods. For any market I trade, I tend to have both a tick and a time chart for intraday trades. Sometimes I use share bars on my platform(volume).

I see part of what you do is akin to what I do. You want to buy it when price pulls back to the vwap and then closes above it. Obviously you have two other indicators to confirm this. I tend to keep a Peak Volume Price Line in addition to the vwap to confirm value and trend. Thank you for sharing.

 

[stillkicking]

... You want to buy it when price pulls back to the vwap and then closes above it.

Thanks for your reply.

In the past, I probably would have entered this stock at the first green candle to make a new high after the red doji candle a bit later than 10:15. Depending on how tight my stop, I might have gotten taken out shortly after.

Now, using these two additional studies I might have waited longer and gotten in after that quick pull back. More or less clear sailing up from then on. However, without these two studies I might have held out longer after the dip from the HOTD price and loss much more profit expecting a reversal that never came.

Now, to put this into actual practice.

 

[stillkicking]

Tossed in the towel as far as using ticks

I found it way to confusing. Just too many bars to deal with. It got even more confusing every time I looked over at the one minute candle chart on system #2. There was just no correlation and that was throwing me off.

So, back to using time candles... running one minute on the main system along with the synchronized volume bars. I did keep the stochastic study and the money flow index study. Both of those did offer me confirmation for good entry points.

Maybe others out there will have better luck. Was worth a try, though.

 

[CertainWay]

Hi
I can understand. A lot of traders don't feel comfy with tick charts and tend to stick to minute charts.

I use a combination of tick and time for each market since I don't like minute charts when markets are slow and dull. I've experimented with Range charts to address this issue too and might consider it at some point in time. I'm also trying a couple of other variations of candlesticks.

IF you look at certain times of the day when nothing is going on(for example during lunch in NYC traders go for lunch and markets tend to contract; same thing say on Friday afternoons; part of Mondays; time before a major announcement or economic report; parts of summer when people take vacation like in August for example) I find that tick or volume charts are much better than time charts.

Having said that we all have to find what suits us and there's no such thing as a right or a wrong when it comes to picking the type of charts or a time or a TICK chart.

Tossed in the towel as far as using ticks

I found it way to confusing. Just too many bars to deal with. It got even more confusing every time I looked over at the one minute candle chart on system #2. There was just no correlation and that was throwing me off.

So, back to using time candles... running one minute on the main system along with the synchronized volume bars. I did keep the stochastic study and the money flow index study. Both of those did offer me confirmation for good entry points.

Maybe others out there will have better luck. Was worth a try, though.

 

[wackypete2]

Great thread!

Peter

 

[stillkicking]

Lately, I've found the market to be very choppy, if I can use a technical term

Not as easy to make a profit as it was just a month or so ago. Many head fakes and very little follow through, intraday. The momentum that was there is no longer nearly as strong.

Now, I cannot speculate what this means long term only to suggest, if it is here to stay, making $$ has just become way harder.

That said, it has, for me at least, become more an issue of protecting capital. Tighter stops are the law of the land. Sometimes the stock does reverse but I also find that, more often than not, it takes a nose dive.

Penny stocks, like those I trade, are risky to say the least.

 

[stillkicking]

"Sell in May and go away"

This old stock market saying has actually been proven true time and time over the years and it's one I'm finding applies to day trading, as well. The momentum is just not there in the market, as I stated some weeks ago (see above).

I, for one, plan to sit out the next few months and wait for things to pick back up in the fall.

For now, I'm enjoying my Summer. Plan to buy a small plane and go back and finish my private pilot training.

 

[lmans66]

I use Yahoo Finance forum which shows one minute charts... My question is; when I look at a stock, how do I really know if the next minute it is going up or down or going to stay up /down for the day? There is no way. Only in hindsight can I see. But when I view a chart like I am viewing now (AMD), I can see where the stock was edging up nicely, but wham...it went down. Then wham, it went up again. Given that, during those lows and high Whams, what clue is there to buy or sell or hold ?