The Power of Momentum Trading!

I have been out of trades for the last two days. I simply have not found an area of strength/momentum that I felt I could ride for a couple of dollars, so I watched patiently.

My intraday trading style is very practical. I think of the first 15 minutes of trading as very volatile (as we are taught). I think some of the traders who held overnight are taking profits, the amateurs are buying or pre-maturely selling, and some of the heavyweights are sitting and watching this cluster take place-waiting to make the decision to either double down, sell off, or buy more positions. At about 9:45, the stocks I like are starting to shape up very nicely (for my style). I am clearly seeing HRFP's on the 4 charts I use as key indicators. I have my "E" signals on my three MA charts. I have my MF, DM, and I am on the correct side of the 8 MA. I have the DOW and NAS going in my direction. By 9:46 or 9:47, the elements that move the markets have clearly shown me which direction I need to trade. Yes, the indicators are on my side, but I also feel the trade. If I do not feel the trade, I watch.

How do I feel a trade? I can feel the sense the energy and momentum of my stock based on the size of the candles, elevation or decline degree of my lines, whether or not I have a break on my previous day's high or low, how quickly the Dow and Nas are moving in my direction, and how other stocks in the sector are moving. Once I feel it is time, I flip to my smallest chart and confirm my intuitions. In almost all cases, when I flip to my 3 or 5, and my candles are screaming a trade, I see an immediate entry. After entering, I watch my 5 and 10 Ma charts. I am normally coming out, when my 5 crosses my 10. I find that my option prices hold stronger, if I exit when the 5 crosses the 10 on the MA chart.

A couple of key notes:
The momentum and energy push strongest from 9:45- 11:30. The sweet spots of my trade is 10:09- 11:40. I join my stock for lunch by 12:00. .

AMZN was my trade this morning. It was a classic setup and trade for me today. I picked-up almost $3 from about 9:45- 11:00. Since I enter and exit with pretty good accuracy (for a short period), my trading size is $5000-$7000 a trade. I normally make at least 10-20%+ on each trade.

I hope your trades are profitable, if not STUDY AND ASK QUESTIONS!

Sorry about the bad written communication above....

I look to exit when my 5 cross my 10 ON MY 5MA chart. This takes me out a lot faster, but again, I have experienced my option price dropping- when waiting for my 5 to cross my 10 ON MY 10MA CHART. Just wanted to make that point clear.

How do I feel a trade? I can feel the sense OF energy and momentum of my stock based on the size of the candles, DEGREE OF elevation or decline OF MY LINES, whether or not I have a break on my previous day's high or low, how quickly the Dow and Nas are moving in my direction, and how other stocks in the sector are moving.

Thanks

Great description rookie30. I do have a couple of questions though. I am not familiar with all the acronyms you used. What is DM? Also, please explain "a break on my previous day's high or low" and what are the 4 charts that you use?

Thanks,
rebwayn

Add me to those wondering what some of the acronyms mean. I believe DM is directional movement indicator (sometimes called DMI), but I am wondering if MF is money flow index.

Dan, you are absolutely right on both acronyms.

rebwayne,
I have a great deal of confidence in going long, if the stock opens or breaks above the previous day's high. I have a great deal of confidence in going short, if the stock opens or breaks below the previous day's low. For intraday trading, I feel this is very, very important. Once it breaks that level of resistance, it generally will move a bar or two in the direction of the break.

My 4 charts are, 13, 21, 34, 55. My 13 provide me with guidance. If I start seeing reversal signals on this chart, it confirms my exit. For example, AMZN moves so aggressively, so when I get a reversal signal, I generally look to exit because AMZN will turn and hurt me quickly. I use my 21 and 34 for core strength in the trade. If I have HRFP's on both of these charts, I know the chances of having a profitable trade is good. If I have fuel in my 55 candle and my lines are turned in the direction of my trade with MACD Histogram going my way, I feel I have momentum behind me. The 55 is my trend chart for the day. When I enter, I use my 13 as my guide.

Look at AMZN this morning. I was very close to going short, but one thing kept me out of the trade. Look at all the indicators! The DM, MF, 5 and 10MA, broke previous day's low, HRFP's on all charts EXCEPT THE 13! I did not see a FP on the 13 either, so I held off and waited until the 9:56 candle painted on my 13. My thoughts and interest in trading AMZN started to fade because candles were out side the bottom BBs on my 13, so I know we are taught that they do not breath outside the bands for very long. This was not good, but I waited until the next candle painted (10:09). This was the "straw that broke the camel's back". It was a huge white candle, so I was out, and on to the next. I had no chance of trading AMZN in my sweet spot, so I was not going to chase and force a trade. I thanked my 13 and moved on. AMZN was simply not a trade-not because of what I saw on my charts of strength (21, 34), but what I saw on my chart of decision and guidance-my 13. Look at AMZN now on my 10:22 candle. It is going back up strong, but I do not gamble. If I am not familiar with trading the conditions, I sit on the chair and wait for a lame duck. Right now they are flying too high for my little "pea brain" to visualize.

I hope this helps a little.

I also don't like it when my stock is getting pinched in the moving averages especially the 50 and 200 like LNKD this morning on the 55. This week has been difficult although I have made some $$'s the market is just looking anemic to me.

If I was asked to describe the market I would have to say.."Pull the plug doc I am not getting a reading!"

Yes, it has been very difficult to find good trades.

I am glad someone is making some money. I am sitting on the dockside again- BUT I STILL HAVE MY BASKET!!!
I have traded maybe one day this week, but I am ok with that (well not really), but again it beats, losing my basket.

I also nearly jumped on AMZN this morning when the stock was beginning to break below the 200MA on the 13 chart. However, I didn't like how below the LBB it was either, so I waited a bit before skipping this one.

My trade today is VZ. Right now @ +$950.00.

Leaving VZ Sept week 4.... Put contracts...

Profit $1,498.24 about 71%

Charts were showing a trade. The GW (HRFP on 55, 34, and 21) and E charts confirmed the trade. 9:50 AM 10 E chart confirmed the trade. In on 3 E chart candle close @ 9:51.

Because of the gap on the 55 I used the 55 chart to exit after gap closed. Look on 55 VZ using gap on 8/28 as support. VZ closed this gap on 55. I use gaps on the Daily, 233 and 55 to estimate some of my trades.

VZ also under pressure on Daily with 200 and 50 moving average weighing down stock. This added to the reason I bought VZ Puts.

Good stuff Darcy. I am diving back in your head again as I read about Gaps in every book I have. The best education for me is to break down your trades and figure out what you see and how you draw conclusions to entry and exit based on Gaps. I will take a look at VZ. It is not one of my stocks, but I want to take a look at your trade, and follow it as best I can. This is not easy stuff, but I need this knowledge to improve the amount of time I stay in trades. I typically exit too early, leaving profit on the table.

I am reading Trading for a Living. It is a good read. I also like the Master Swing Trader.

Darcy,

I noticed that VZ went down through the 8/28 gap on 9/3 and rose back up through it on the 12th... didn't that constitute a gap closing and eliminate it as a support/resistance level? Just trying to understand gaps better.

Note I also said look at the daily with the 50 moving average weighing on the stock.

I don't pay a lot of attention to gaps that close on the 55 unless they have been closed for at least quite a long time (several months or more).

For instance look at the gap created on the 55 chart on June 19 & 20. That gap closed also but look what happened to VZ @ the end of July.

VZ could POSSIBLY be traded between the gap of 8/28 - 8/29. Then you have a gap from 8/30 - 9/3. Take the top of that candle of 8/29 (about $48) to the bottom of the candle on 9/3 (about $45-$46) and you have a trading range of $2 on a stock with a spread of .01 to .03 and whose option costs from .50 to .80. Therefore a .20 move in VZ can bring you to $1,000.00 or more depending on how many contracts you buy. Ths spread is over several days and I am in a stock and out in one day almost always. So I am looking at the possibility of 8-10 trades in 10-12 days.

Also if you mark the top of the candle on 8/29 you'll see the stock hit there and went lower.I drew a red dash line off the top of the 8/29 candle and could see using my Stock RSI my MACD my directional movement lines along with my gap lines I would be facing some put trades. The lows are getting higher but the highs are about the same. This is great on a stock like VZ as I have said where a .20 move in the stock can yeild some nice $$'s on a trade.

Now I can't say you will find how I study gaps in any book. It is just something I have been doing now since 2005. I look at gaps and half gaps and over time I have been able to estimate a stocks move my measuring these gaps. It has worked for me on the daily and the 55. I don't go any smaller than the 55 chart.

I use the moving averages with the gaps to tell me if I will go above the past gap(s) or below them.

Now IMHO VZ will double bottom around $45- $46 IF....IF....IF the 200 ma crosses the 50 ma on the daily chart.

When? Now that's the million dollar question isn't it?

I hope this helps. Sorry for all the editing but this broken finger isn't helping me much...although I can say neither does not knowing how to type!



Edited 3 time(s). Last edit at 09/29/2013 05:43PM by Darcy2.

Darcy,
As always, I enjoy your posts and your willingness to share. Just curious as to your use of Weekly Options. Is this something relatively new for you and what is your rationale for using weeklies vs monthly options.

Traildoc,

Reason: The weekly's were available.

Rationale: I am generally in only a few hours. Sometimes over night. Seldom longer. If I see a trade that I want longer even if weeklies are available I buy the month I am in.

I just made a very, very quick trade off my 5MA chart. I traded NFLX-going against the market. It is obvious why I made the trade-if you have read any of my posts. I trade momentum-PERIOD! If you take a look at the 21,34,and 55, you can clearly see that I had a tremendous amount of strength behind me on this trade. The only big monster that was not going in my directions was the DOW or NAS. I knew without a shadow of doubt that if I was going to make this trade, it had to be made from a very small chart. I also knew I was going to need to glue my eyes to the trade. I noticed NFLX had been consistently going up-despite the market going down, so I felt as if that motion would stop before too long, but I wanted to time the trade perfectly.

After knowing I had strength behind me with my bigger charts ( 34, 55), I started analyzing my 10, 5 and 3MA charts. I had my "E" on all of them, so I was ready to pop the trade. I bought calls and entered off my 3 MA off the 9:51 candle. NFLX was at about $326. I immediately flipped to my 5MA chart. This chart was my decision. I knew I would bail when I get the first reversal signal. I was already shaking in my boots because it is uncommon for me to trade against the broad market. I exited the trade when that "thing" called hammer or something painted on my 5MA. I do not know my technical terms for those signals, but I know what looks bad-and that one looked bad. I exited at 10:10 with a $2 up move. I probably could have stayed in longer and made more, but I absolutely hate trading against the market. I was truly H.I.S with my dollars.

Smart move. The zig and zag of the market is all based on Washington news at least until Oct 4. I got in NFLX off the open based entirely off the continuation from 10/1. Left trade abt. little after 12:00. Went out to eat....



Edited 1 time(s). Last edit at 10/02/2013 01:03PM by Darcy2.

This explains a hammer. It is one of the stronger candle signals.

This hammer tells of a different direction. Look for the trend in the chart and where the hammer appears.



Edited 1 time(s). Last edit at 10/02/2013 01:24PM by Darcy2.

I am in DECK. When it dropped below the previous day's low of about 66.38, I entered. All other indicators were clearly present, so it was an easy trade because the momentum was charging in my direction of a Put. I am still in and will stay in until I have a reason to exit.

Just following the rules!!!!

Exited DECK at 11:20ish at $64.38. Big move for me this morning! Finally, I am starting to get a decent size chunk in the middle. I am going to lunch, along with DECK!

nice trade rookie... I'm moving towards practicing exits on the smaller charts as well... seems like if the 10ma on the 5 chart crosses the 20ma then I watch the 10 chart... too many times I see the 10ma on the 10 chart get right up against the 20ma and then continue on in the direction of my trade... mentally its tough since it looks like the trade is ending... but staying in can double your trade, or breakeven if it goes against you

AAPL, PCLN, and ISRG were all trades today, ISRG starting an uptrend according to RTT and looks like a GW earnings play based on 233/D/W... perhaps BCT can confirm or deny that... AAPL too?

Chairman,

In the case of ISRG is a perfect example of why MOST should turn the candles off. Please look at the daily chart on ISRG with the candle ON then OFF. IT is pretty clear to see that the CC has in fact not crossed at all and there is no trade to be had there. That can be verified by the fact that there is no weekly indicator verified support. Also, wouldnt make it a 233 trade bc of no weekly support.

BCT

BCT,
thanks for the heads up on this, I may have gotten a bit lucky with it getting a second wind this afternoon, looking at it now and for the sake of learning here is what I see, we're within the 3 week window for earnings as a catalyst on ISRG, there is a valid 233 entry, HRFP....Daily: CC about to cross, histogram reversal, directional cross. W:CC about to cross, RSI crossing, below 20... HRRP + sufficient support in my opinion.

I am by no means trying to sway you or anyone out of the trade. I simply dont trade big charts when there is that much space between the current $$$ and the bottom boll band. Also analyze the gaps that you see that flow into the weekly. Adage on the street is gap down to go down.

BCT

no worries BCT, I hadn't thought about the $$ value and space on the BB or the gap down adage you mentioned... your insight is appreciated