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  • Saturday, July 30, 2005

    Entries/Exits: In its Simplest Form: Part 1

    Ok so you’ve found what materializes to be a great trade. All your signals and trade triggers line up, and you’ve got a potential winner with minimal risk. Now what! Many traders use many different strategies to exit, and well some have none at all. I think once you become a seasoned trader the entries take care of themselves. My own strategy for exiting a trade varies on several conditions. What stock am I trading? Am I familiar with how this stock trades? How are stocks trading in general for the day? Are they following through, or are they only making small moves only to fall right back? These are some of the more general questions I ask myself when taking a trade. Some of the more technical aspects of exits are as follows. First before I put a trade on, I always want to know where my initial exit will be if I am wrong about the direction of the trade. I emphasize always! I trade NYSE stocks; therefore I generally use a combination of a minor support area on the charts, and the NYSE open book. I will look for several orders in the book within my risk tolerance; this will vary from trader to trader. If my position falls back to either one of those levels with some kind of force against it I will exit, it’s pretty much that simple. This is not a 100% approach, because at times the stock will gap through these levels, but it has been very effective for me in minimizing loses. More times than not there are enough shares there to exit the position. There is a little more of an art to this strategy, but those are the basics of it. I will try and get into more detail later on.
    Now onto exiting the position once it is building in your direction. First of all, ask why you have entered the trade, and have those conditions changed since your entry. This in itself may be a signal to exit, at least half of your position. Second is there a sudden counter against you? This may also be grounds to exit at least half of your position. Watch the tape. In which direction are the prints going off? Do you have a target price for the trade? It is sometimes not a bad idea to take off at least half of your position at or near your predetermined target. Especially if you have a sudden up thrust, if you are long or down thrust if you are short. Up thrusts and down thrusts will often retrace. I am a very short term trader, so my time frame is a lot smaller than others. My favorite trades are the overshoots where they build up a spring like entry point, and then burst in one direction or the other. I will often offer out half of my position up near a resistance point or down at support level, and many times get that filled at a better price. Sometimes the stock may follow through. That is the point of exiting half; I have locked in some profit, and can now let the rest ride until my next exit signal. Moving averages make for a great exit strategy also, but I always like to see in the nyse book that I have a place to exit as the stock moves in my favor. As for chart reading, I find a 5 period sma to be very effective with a 15 period ema used as an exit point depending on the distance price wise. That will vary depending on your risk tolerance. I will get into more detail with that in another post. I hope I have shed some light on the subject, and offered some additional information for anyone reading this. For more info go to TraderMike, he has a great post on the subject of entries and exits.

    Friday, July 29, 2005

    Intraday Chart #2

    The gap support from yesterday did create a small bounce, but the sellers took over, driving the market right through the gap. Not the kind of day the bulls would've liked. As a trader I found today difficult to trade. There were only a few good setups in the morning on the short side, and other than some of the smaller energy stocks, I did not see much volume in stocks today.

    Intraday Chart

    The S&P has been trending down this morning,see if we get a bounce around this gap from yesterday.

    Thursday, July 28, 2005


    I suspected the market would attempt new highs, but wasn't quite sure(who ever is?), we broke out of a nice little bull flag intraday and closed near the highs.I'm still suspect of this rally,and not feeling very convinced.As for my style of trading, I was getting mixed signals intraday.I feel I am still in the payback cycle this week, and will remain cautious until my signals tell me otherwise. I had several small trades that added up, but have not been able to really catch the bigger moves, and feel my timing is still a bit off.What did work today was shorting the peaks, although I felt like a countertrend trader, and buying the pullbacks.

    Reversal Coming?

    Well I wouldn't count on it, but some of these stocks seem to be getting a little over extended.At the same time there is a very strong underlying sentiment to this market.
    I am using caution to the short side, and trying to play the strength on the long side, but I'm not chasing anything here.No setups at this moment.

    SP U5 minor support(intraday) at 1243.50, gap support at 1241 and 1239.20

    Wednesday, July 27, 2005

    Capital Preservation

    The market has been very choppy today and rangebound until the recent move up in the last hour. I have withdrawn from any more trading for the day, realizing I am in a possible payback period. I have a small gain(very small), and would like to keep it that way. My timing has been way off, and I have missed the few opportunities that there were. Some traders may disagree, but I am realizing that there is a time to retreat temporarily, especially if you are feeling withdrawn from the market. The downfall of many traders is there inability to admit when they are off. The market will still be there tomorrow and the next day. I am not saying to totally withdraw from the market, but to take a step away briefly, and setup for the next string of profitable trading. Bo Yoder has a very good article on the payout/payback cycle,it is a must read for any trader trying to further his/her career.

    Tuesday, July 26, 2005

    WLT Long

    This trade was taken mainly from the action in the nyse book and level II. I had missed the earlier move off the 44.55 support, and didn't feel I should chase it until I saw three things. One being a very large order in the book holding the 45.10 area. Two the order moved up to 45.18 and created a nice little sideways channel on the chart. Three the breakout above that base and the fact the specialist moved up to squeeze all the shorts ( sorry if you were short). MACD was also rising on my 5 min and 13 min charts and just starting to turn on the 60 min. Entry was at 45.32, exited half at 45.40, and half at 45.70. I had several factors in favor of taking this trade. Two mistakes I made in this setup were that I didn't play enough size, and that I exited half for a reason still unknown to me, other than a little wiggle action in the nyse book. When you are picking good trades and on you have to play bigger, it's that simple.

    Small gains add up

    Have taken several smaller trades today.
    NEW had pretty consistent selling off the reaction of a 50 dma break.
    WLT offered 1 or 2 small trades on the short side also. I will continue to watch the 44.55 level for a possible move down to 44.11. Backing off for now as I feel I am pressing the short side, and as lunch time approaches.
    S&P futures seem to be holding the 1232.50 level for now.
    Trades were all on the short side.
    WLT never transpired a short, no entry taken. Missed the up move,not chasing anything here.
    3:04 - FMD looks like an interesting long, if it can trade above 34.67
    3:20 - WLT small trade long taken at 45.32 sold half at 45.40 and half at 45.70
    Looks like I took WLT anyway, large size entered the nyse book moving it up.

    Thursday, July 21, 2005

    NEW Short

    NEW was taken short off the 1 minute chart above. I had been watching it flop around for about an hour, before entering just below a minor support area. Large orders came into the nyse book stacked on top of each other. MACD was declining on all my charts (1 minute,5 minute,13 minute,and just turning down on my 60 minute), and the S&P futures were also in a minor downtrend off there highs. Short entry was 51.52, exited(covered) half at 51.25 and remaining shares at 51.03. All my signals lined up on this one, and once again patience pays off. A little luck was involved on that one too, I really had no idea it would burst down the way it did. Then again a trader makes his own luck by strategizing, and acting on the trades.:-)

    Wednesday, July 20, 2005

    Don't Let The Big Ones Get Away!

    Missing your entry on a trade, or missing the trade all together, can become very frustrating. Sometimes it is the missed trade that can lead to bad trading decisions, more than a losing trade. This trade (WLT Long) had all the makings of a very good opportunity. Tight channel,rising MACD on both the 5 minute and 60 minute charts,and good support with a rising 5 period simple moving average.Not to mention it had plenty of shares in the nyse book to exit on if the trade went bad. The point of this post is you can have the sun,the moon, and the stars all line up, but you have got to act on your trades, especially when your system says go, and there is minimal risk at hand. On the brighter side, the market is there everyday, and gives us opportunities to improve on our trading skills.

    Monday, July 18, 2005

    In Depth

    MACD has been one of my strongest indicators as of late. I mainly use it for determining trend. The standard for the MACD moving averages is 12/26 with 9 as a signal smoothing average. I like to use 15/26 with 7 as a signal smoothing, but I only watch the 15(fast) line for trend. The other is hidden(or made white on a white background), because I feel no real need to watch it. Stochastics is where I will look for crossovers . I'm just looking for trend to develop preferably in sync on my intraday charts.Those being 5 minute, 13 minute, and 60 minute. A common trade I have seen is one charts' MACD may be just starting to turn up/down while the other two are already in the same trend. This is where I will look for big orders accumulating on one side or the other. This is not the only indicator I base a trade on, but it is an important, and thus far, reliable tool to back up my reasons for taking a trade.

    Friday, July 15, 2005

    JOE Long

    Finally! Patience pays off, I've been waiting for this move all day.JOE was taken as a long for several reasons. S&P futures played out like I thought and made a strong move up off gap support. JOE also had some gapping plays of its own.It gapped up slightly this morning then partially filled the gap,came back up and traded sideways most of the day.I took the trade based on the rising MACD on my 5 min,13 min, and 60 min charts all in sync. Also used the S&P technicals as a fourth reason.My entry was a little late, but again I like confirmation of orders in the nyse book.Entered at 84.35, exited half at 84.49 and the other half(remaining shares) at 84.79.Discipline,discipline discipline. Gaps are powerful, Joe failed to follow thru at its previous gap from 2 days prior. :-)

    FRO Long

    Finding very little follow thru on anything today so far. FRO was taken long for a small trade at support area.Reasons for entry based on rising MACD on both 5 min and 13 min charts, had lots of support(orders to buy) under my entry,just had no real follow thru.Entered long at 43.12, sold all at 43.33 and 43.30. The market is holding gap support from yesterday for now, just a choppy morning, will wait for my trades before jumping on anything. I have a tendency to overtrade days like today, so I will adhere to my discipline in waiting for trades with several factors in favor of the trade.

    July 15th data

    Jul 15 08:30 NY Empire State Index Jul
    Jul 15 08:30 Business Inventories May
    Jul 15 08:30 PPI Jun
    Jul 15 08:30 Core PPI Jun
    Jul 15 09:15 Industrial Production Jun
    Jul 15 09:15 Capacity Utilization Jun
    Jul 15 09:45 Mich Sentiment-Prel. Jul

    Earnings Jul 15

    Thursday, July 14, 2005

    RMK Short sell

    RMK was taken short as a fade off the morning gap up. The gap was crossed thru as MACD began to turn down on my 5 minute and 13 minute charts.Large orders also began to come in on the offer at the same time. Again I had several reasons to take this trade.Short entry was 27.90, coverd at 27.71. My exits have been a little premature today, at the same time it's a little harder to have conviction on the short side with this market pushing ahead as it has.

    WLT Short sell

    Took WLT short with all signals clear.Shorted off of a 5 period moving average. This was what some might call a 3 lane highway setup.All my charts were in sync, MACD was trending down, and market was trending down.Shorted at 42.33, covered at 42.00. Might have covered a little early, but a profit is a profit.These are the kind of trades you have to be patient with and wait to pounce on.My entry was a little late,but I also like to see big size come in and drive the stock down, along with several charts lining up, a good chunk of the move was still captured.

    July 13th FMD

    FMD was taken as a daytrade for several reasons.In the morning it had traded up quite a bit, then continued sideways for most of the day in a nice tight channel.Once it traded above that channel I entered long off of the 5 minute and 60 minute chart. Both charts had a rising MACD.Reason one for taking this trade was its trading above a sideways channel, reason two was its rising MACD, and reason three was that I had been watching SLM, which trades in the same group as FMD, keep making highs on my list of new highs for the day. Along with the fact that new orders were climbing over each other to buy, I had several factors in my favor, and it was a low risk trade.Entered at 35.25, exited half at 35.73 and the remainder was exited at 35.81.