Trading Nasdaq Stocks - scary or what ?

[alanb41252]

I have recently started trading Nasdaq stocks through IB after a first few months of reasonably successful spread betting on the FTSE and Dow.

I have previously monitored Nasdaq stocks, have been an avid reader of posts on this page, read a few trading type books on TA and pyschology etc and attended a 121 session for 2 days with Nas.

My previous trading experience was trading aluminium and copper on the LME for several years.

Nothing prepared me for my first week of trading Nasdaq stocks. Although I have avoided disaster and come out pretty unscathed, my first week has left me breathless, stressed and unsure if this is what I really want.

I have discovered the rapid action of Nasdaq stocks and have been amazed at the speed with which the price can change by a very large amount. Some of those 5 minute bars are pretty b****y long !!

Sure, there is money to be made with these price movements but there is also money to be lost.

How do you Nasdaq traders out there cope with the frequent and violent price moves ?

Any advice and tips would be appreciated.

 

[Trader333]

Alan,

A lot of this is down to having the correct order routing ready for transmitting immediately if the market moves against you. Once in a trade I only look at the Level II and Time & Sales screen with my hot keys ready to exit in a flash

Also I tend to enter trades where violent swings are not immediately probable. Which stocks have you been watching and how have you been going about placing your orders ?


Paul

 

[alanb41252]

Hi Paul

I have been looking at "gappers" mainly - stocks that gap up or down at the open.

Also looking at some Chinese internet stocks plus Yahoo, CDWC, JBLU etc . Anything and everything really !

On the order front, I have been entering various orders, ready to hit the buy or sell key to exit. But you need to be careful doing this as it is easy in haste to transmit the wrong order - which of course I have done on occasions.

I think it is a question of concentration, focus and organisation.

 

[dax]

A lot of US stock traders trade NYSE stocks - tend to be very liquid and usually bigger market caps than Naz stocks. You might want to pull a few charts up and see if they fit your style.

 

[Naz]

Alan look at my SINA trade on the October US equity trading thread.

Nice and gentle.You should know the reasons i took it.If not email me and i'll talk to you about it. [email protected]

You get used to it.After all if they dont move you cant make any money.

 

[alanb41252]

Naz.

Yes, I understand that trade and it was a very sweet trade.

But it doesn't always happen as nicely as that and there can be a very violent swing along the way which shakes you out - and shakes you up !!

Something that I will need to get used to I suppose. ie. the knowledge that just about ANYTHING can happen at ANY TIME.

 

[Naz]

Good luck Alan,just take it easy with a hundred shares.Call me any time.

Naz

 

[Grey1]

Alan ,

A lot of discomfort of fast moving stocks comes from your risk toloration... I strongly advise not to risk any of your cash until you can analyse the risk of each trade.. The good news is it is all common sence and you donot need to be a rocket scientist..

Time is 5.19 now take a look at FLEX hedged against T.. very low risk trade

 

[Grey1]

this is the quick chart of the trade

 

[alanb41252]

Ok, in a nutshell - how would you analyse the risk in any given trade ?

You can go over charts for a particular stock until you are blue in the face but still the unexpected and "impossible" can happen.

Presumably it is a case of assessing probabilities based on past performance, plus what is currently going on - ie. company results, interest rate hikes etc etc.

 

[Grey1]

Alan,

One can 't measure risk unless he has a bench mark to measure price.. I have out lined the mean trading and its implications on Risk of each trade in the US oct thread and many other threads if you wish to search for them .. just trying to help


Hope you are watching the pair trade I posted above in real time..

 

[alanb41252]

Thanks Grey

 

[Mr. Charts]

alan41252,
There are many ways of trading Nasdaq stocks, some fast and furious, some rather more gentle and relaxed, and approaches which are in between the two.
You really need to find the way which suits your own personality so you can blend together the "soft" methods and the "hard" methods into a successful trading strategy which you are comfortable with.
For example, Naz has his own excellent methods and I have mine, which work for me.
I like pattern trading, with news analysis, gappers, movers and shakers and my own core stocks to find the great moves. This is integrated with tape reading and also I do use level 2 some of the time.
You need to find your very own way, but it sounds as if you're getting great support.

 

[Mr. Charts]

Looking again at your initial post on this thread, perhaps it's worth considering reading momentum so you can learn how to exit a trade when it turns against you in addition to tracking level 2 players. Only in my humble opinion, of course.
Horses for courses etc.

 

[alanb41252]

Thanks Mr Charts.
Yes I think trading style is a very personal thing and I have to spend some time to find "my way " to trade.

 

[stevet]

the reason it moves a lot is that no one knows what its gonna do - and therefore the participants are running stocks up and down - but as you look more closely at the price action - i promise it will start to make sense - and you will see that there are key entry and exit points - and the real noise is in the bits where no one knows - just watch the bid and ask price and volume for the all the data you need - level 2 was designed to lead you up the wrong path - and you just dont need it - but only trade the real liquid stocks

 

[Naz]

Stevet is right about the noise,being the part where no one knows and its important to be able to filter this out in ones mind.

In recent years i've always added chart patterns to my level 2 trading.Remember the t/a and level 2 thread a while back.

I play things very similar to Mr Charts,with the gappers,news stories, core stocks etc but then i add fibonacci and level 2 more.

All my big set ups come from how i read the chart patterns. These could be traded with an ib account and never look at a level 2 screen.

However i add the edge of level 2.In the morning SINA move yesterday it was the way the axe played the stock on the level 2 screen that gave the signs for the move along with the chart pattern.All i did was shadow the axe.

When it was running my stop was right behind him.
When he started to get nervous and undecided i was out.

Was i getting freeked out by all the noise going on,no i was blind to it,I knew man who would lead me and i let him show me on the level 2 screen.

The move is on the October US equity trading thread.

 

[Trader333]

Naz,

All my big set ups come from how i read the chart patterns. These could be traded with an ib account and never look at a level 2 screen.

I can hardly believe you have said this and in my view anyone who was to trade any chart pattern without the aid of level II is substantially increasing their risk. I know you go on to say that Level II improves things but I simply wouldnt trade without it.

For me there have been numerous occasions when a chart pattern gave a great setup and the bid ask spread was only 1 point and I was looking to go long. But one look at the level II screen showed that there was a gap of 15 points or more from the inside bid to the next price level. This cannot be seen without Level II and has prevented me from taking a position that would then have had an immediate 15 point or more loss.

My first trading priority has always been how do I reduce my risk in any trade I make and I have found that Level II helps me enormously in this area.

I accept that trades can be made without the aid of level II but for me that is engaging in an unnecessary level of risk taking, others may disagree which is fine as we are all entitled to our views.


Paul

 

[Grey1]

Paul,

Quote "My first trading priority has always been how do I reduce my risk in any trade I make and I have found that Level II helps me enormously in this area.

I accept that trades can be made without the aid of level II but for me that is engaging in an unnecessary level of risk taking, others may disagree which is fine as we are all entitled to our views. "



An excellent comment... I hope our fellow traders read this comment more than once...

Stevet

Quote " level 2 was designed to lead you up the wrong path .

http://www.elitetrader.com/vb/showthread.php?s=&threadid=20940


Despite all comments in the link above I still use it just to reduce risk of entry .. and that is all..

If you are interested in L2 trading , you can try paltalk's trading room . There are few very proficient L2 Players... Their calls on entry is good but can hardly get the exit and market direction right..

 

[Naz]

Hi Paul,

You know that i look for a chart pattern and then zoom into my level 2 screen.That is the way that i believe it should be traded.

However the thread is Nasdaq stocks-scary or what.

So rather bury my head in the clouds and think that everyone is a fully paid up memember of the level 2 traders club.I hope i'm sensible enough to realise that lots of people trade at different levels.You are very proffessional in what you do and i admire your level 2 skills.

However there are lots of beginners out there and they need to understand that there are gentler ways of trading Nasdaq stocks if they so wish.That is why i mentioned the charting ib route.You know as well that after a while most Nasdaq ib chart traders end up watching level 2 screens.