Anyway, I have decided to change up my method of trading. Prior to this week, I had been taught to trade off the 1 minute chart. This is totally asinine in my opinion! After conducting my own research and listening to daytradingradio.com, I realized that trading off the one minute chart is as good as going to a casino. I'm not looking to gamble here, I am looking to take profits!
Anyway, after some research and reading through other blogs, I have realized that trading off the larger time frames is much more profitable. I am now using the 3, 5, 15, and 60 minute time charts. I also have the Stochastic Momentum Index (with settings of 14, 7, 3, 3) on each of my charts along with the 20 and 50 period moving average.
I am now trading a bit more efficiently, and I am going to continue to test out this way of trading thanks to some chat rooms and blogs I have read. One great blog that I have been reading is www.AmIBald.com. This site has some really great insight and gave me a new way to think about my trading. Like I said, I am looking to enhance my trading skills... I am not looking to walk into a casino every day!
So, here is how I have been trading:
-I use Finviz.com and screen for stocks that are under $10, have a volume of over 2 million, and are categorized as being the most volatile. (I chose these parameters because I currently don't have a huge bankroll and cannot afford to take big size in more expensive stocks)
-Then, based on the charts, I take my picks for the day before the market opens, and I watch them each on the 5 and 15 minute charts. The 3 and 60 minute charts are just there for reference (the three minute chart has too much noise in it sometimes; the 60 minute chart gives me a good idea of how the stock is trending for that hour, if it's trending at all.)
-From here, I look at the stochastics and see if they are bullish or bearish. Then I see if it matches up with the trend of the stock on the 60 minute chart. After that, I wait until at least 9:35 am and take a position if the stock breaks the high or the low on the 5 minute chart... or I wait until 9:46am and take a trade if the 15 minute chart breaks the previous high or low.
-When I get into the trade I look at areas of support/resistance to see where my exit should be. Also, I check for pivot points... if the stock can't break through a pivot point, I lock in profits there and thats it! If not, I let it run!
So far, this method has been working well for me, and I have been paper trading it. I have taken 1 trade using this method yesterday morning (2/6/09), and it produced good results! I'll show some of the trades below:
In the chart below, I had NCX on my watchlist. At 9:45AM on the 5 minute chart, I saw an entry at $1.60. I was risking to the bottom of the previous green bar, which was to $1.49 cents. So if the stock dropped 12 cents, I was pulling out. I set up a trailing stop for 12 cents. If the trade came against me 12 cents from its highest point printed, my computer would send a limit out to sell 3 cents below the last print. An hour later, the price went up as high as $1.96, and the retraced to $1.84, at which point my PC sent a limit out at $1.81 cents and I got filled immediatly for a profit of $0.21 cents! Not too shabby... a 13.125% return on my investment!
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