March 19th 2008
Did Anyone Make Money Today?
So, I’ve been getting sucked back into day trading. If I am honest with myself and my readers, I don’t want to do it. I think there’s a fundamental flaw with day trading. That flaw is the number of decisions a trader is forced to make. I can make swing trades and make a handful of trading decisions a week. For me, trading less is a risk management technique. I may risk more on an individual trade, but my trades are thoroughly researched, and emotion is better kept in check.
If I’m going to day trade, I’m going to use one setup: The trap. I’ve detailed traps before. Today it worked really well. Let’s look at some examples:
Not a perfect setup on the daily, but I couldn’t ignore the gap this morning.
15mn entry over the HOD/triangle break worked out well. They don’t all run like this.
One other example.
I guess LOW was just “oversold”
Two nice entries depending on your timeframe. I prefer the 15mn, but also trade the 5mn.
Traps don’t happen all the time, and when they do happen, they’re not always tradeable. But if you can be patient and pick your trades carefully, they’re a very reliable pattern. If I can catch a few trades a week, I’m very happy.
The volitility in the market is killing my swing trading, but it’s this erratic market action has helped my intraday trading.
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7 Comments »
Dave on 19 Mar 2008 at 12:43 am #
Nice. I caught a C&H break out of MA late in the day.
I added your trap screen to the list of scans I run in the morning, but I think I need to tweak it a bit. I need to work on putting in some filters that help me narrow it down to simply the best trap setups out there.
Any suggestions?
Thanks.
Jonathan on 19 Mar 2008 at 7:03 pm #
Where to begin…
Well, two or three days on one direction is a good filter. The logic is the more people short, the better. The higher the gap into the previous day’s range the better as it traps more people. The higher the gap the better, but the less likely the gap is going to be “tradeable”.
I like higher beta stocks, but that’s more because of anecdotal reasons than any hard research.
Options Strategery on 19 Mar 2008 at 11:01 pm #
I lost less money than I expected; does that count? I have no commodities exposure (much to my detriment for the past year). But today was great, I got plenty of Schadenfreude.
Alex on 20 Mar 2008 at 4:26 am #
Hi Jonathan,
you said you prefer not to daytrade. What setups do you use for longer time frames? Are they the setups you mentioned in your Setup Categories (Flags, Bases, 123…)? I thought they were for daytrading only…Hw do you get out of positions?
thx
Alex
Jonathan on 20 Mar 2008 at 5:08 am #
@OS. Hey, losing less is a nice feeling too.
@Alex Thanks for feedback. Now that I look at it. I didn’t really make the distinction as to the time frame of the setup. I’ll also focus some time on documenting my exits. Thanks again!
TraderAm on 20 Mar 2008 at 6:23 am #
Hello.
Nice blog and have been reading it with interest. Have added to my blogroll.
Wonder if i could ask a few questions about your Trap strategy.
Do you run some sort of scan (and if so which one ?) every night to come up with a shortlist of stocks which have had consecutive strong (or weak) bars and then check this list against a gapper scan to see if any have gapped down (or up) ?
Does the prevailing daily trend enter into your thinking? For example, stock ABC is in an uptrend, then has 2 or 3 weak days (say 3 red wrb candles). Next day it gaps up, so you are in trap mode and looking to trade in direction of the daily trend. On another situation stock CDE is in a daily trend down. Then it has further falls with weak red candles, before a gap up. In this case trap mode would be going long against the daily trend ?
I suppose my question is would you trade both of these scenarios ?
If the gap is outside the prev day’s range, do you still trade it ? or do you prefer the gap to be within the previous day’s range ?
Thanks very much for your time. Apologies if these have been answered already on your blog, just direct me to where.
Jonathan on 20 Mar 2008 at 4:35 pm #
Hi TraderAm! Thanks for the add. That’s exactly it. I have a couple of stockfetcher scans I run and then paste my picks in a watchlist and watch the open.
Regarding trend, I like stocks that have strong moves in one direction for a two or three days. This is just simply to allow as many people as possible to get in the wrong way.
If the gap is outside the prev day’s range I absolutely trade it. However, if it gaps too far, I’ve found the intraday action to frequently be untradeable.
Thanks for the great questions and I’ll be sure to check out your blog.