Search the Community

Hi Everyone, I am embarking on one of the exercises that Mike B has done and documented based on the writings of Mark Douglas. My goals during this exercise are the following. Goals: No micromanaging, or reflexive trading. Pre-determine entries and exits. 20 trade sample size with a defined edge. 3-4 sets of trade sample with journaling. R = $200 Daily R goals 2.5 R Max daily R loss 1.5R Edge Defined I wanted to develop my own edge based on my strength and weakness. From my journaling, and self assessment, my strength and weakness are listed below. Strength: High Risk Tolerance // Without proper use of Risk Control, this is my one huge liability. Good read of price action and Candle stick analysis Consistent Big R days. 7-20 R days. Weakness: Undisciplined Risk management FOMO, when using smaller time frames Big risky addons Big Volatility in profits and loss Micromanaging during the trade Strategy: 30 MIn ORB. Based on my experience and observation, using a longer time frame allows me to stay more in the pocket of a trade, using a bigger and well defined stops, and exits. First trade can be conducted at the open, if a well defined price range established. Else, the first trade will be conducted after the first 30 mins of ORB. Criteria for Entry: Once the price is at the top or the bottom of the range, we can take a long or short, pending on the strength and volume of the candles. For considerations for long or short, we will look at the overall trend on the daily, weekly, Pre-mkt high/low, and previous days open/close and the pivot points. Once I am ready for an entry, I will observe the 2/5 min candles, and find the lowest volume candle. The candles that follows the low volume, must have more then 1.5 x higher then the lowest volume candle, and it must move in the direction of the long or short. Long can be from the bottom of the range, or breaking out at the top. Good long entry on a bullish stock is the 9/20 trade. If the price is breaking at the top of the range, wait for a pull back (9/20), and a rising volume for the 2nd breakout point for entry. If the price is at the bottom of the range, and playing for long, wait for the first bullish candle with volume. One strong indicator that may show a sign of reverse is the spin top candle. Preferably, with a small to medium body, and long wicks. Price pivots on the 5 min is useful on price change. Most important, price range established by the 30 min ORB is very important. **Short plays will be just the opposite from above. ====================== Stock Watchlist ==================== Float - High or Medium float. > 50 Mil. Catalyst - n/a but big news is always considered. Price Spread = < .03 Volume = Higher then the normal Volume. Exchange = Nasdaq ===================== Trade management ===================== If the entry is within the 30 min range, the target exit will be the high or low of that range, pending on the long/short strategy. Stop is placed using the Kyle's dynamic hotkey with a fixed $ size equal to 1R($35). 1st partial 50% = > 1R #b/e stop placed 2nd Partial 50% = 1/2 ATR or other technical levels. #b/e stop placed Trail stop placed at 20ma of the 5 min candle implemented after 2nd partial. .25 R invested. B/E stop is removed. Share Size: Pending on Kyle's hot key. It is fixed dollar amount, and the size is dependent on the stock price. **3/4/2022*************** New trade management addedum. Take partials on losing trade to minimize risk. Also, 1st partial pending on the movement and stop size, anywhere between 20% to 50% to 100%. Biggest thing is the idea of taking partials only when green is not ideal. If the price moves against you, why wait for the stop out. Reduce your exposure, and give it a chance to play out, else stop out or close out. See this post from 3/4 for more details of implementation and the psychology behind it. **************************** Add ons. If the price is moving in the right direction, using the ABCD setup, add on 1R, if the price has not exceeded the daily ATR and the price is supported with Volume. If the price moves without volume, use caution. Possible trap setup. Day Trade Mental Check List ————————————————— Do you have a direction bias on the price? I have accepted on the unpredictability of the market. Are you certain on the momentum of a position to add on aggressively? One entry, one risk, one trade at a time. No more add ons, unless the trade is working extremely well. I believe the opportunities to make good trades are in abundance and money flows through me. Are you willing to bet on a position when it is extended? There is always a risk. Best to use your risk controls, and do not abandon it. Do you have the stops and risk control in place? I am confident on my trades, but the risk control is there to assist me, not to hinder me. Better the small daily loss, then large. Are you entries well defined technical levels, and the stops and targets defined? I plan my entries, stops, and target exits within 30 min range. Holding anything longer is just a lost cause. Entries will always be low for long, and high for short. I will have the patience to wait for the price levels to be crossed when playing a position. ================================== Technical Check off before each trade. ================================= what is the Ticker? What is the size position or Risk Level? What is the entry price level? What is the stop level? What is the target exit? What are the daily, pre-market, and moving averages? How does the L2 coincide with the technical levels above. Is the entry extended? If yes and a continuation, consider a smaller R value. Is there a large wick, that the 30 min candle closed on, that the price can retest? are the entry, stop and exit near a technical level, cam pivot, daily levels, moving average? *check diff time frames. If not a continuation, is it channeling, or sign of a selloff, or a reversal? Are we trading off the 30 min ORB, or pre-market range? If not, use smaller risk value, and bigger stops. Do not add on, unless it has moved to a different technical level, not on the first minor pullback. If trading a reversal, wait for the price hit the liquidation mark, and the moving averages and the candles to level off, and show a sign of either support or resistance, pending on the direction change. Did we check other time frames to see if the technicals of the moving average, and levels coincide with the L2 depth? How can you use the 9/20 as an entry signal? use the crossover indicators on the 2 min chart.