Intuition while in a position?

[adrian 1]

Hi all,

 

Not sure where to post this. It's about trading intuition during live positions.

 

Through the chat room, some observations I have is that Andrew enters certain trades and exits when it doesn't "feel right". i.e.:

 

1. Volume comes in above average - price not breaking up or down significantly.

2. Price breaks up or down a consolidation - volume doesn't come in to support the price move.

3. Price makes HH or LL in 1/5min charts - volume doesn't come in to support the price move.

 

My question:

 

I was wondering are there any more such "red flags" that are developed through years of experience that can help us new traders exit a trade before they blow up on us.

 

Many thanks.

 

Adrian

 

[adrian 1]

ok maybe i wasn't very clear on what I'm really asking about.

 

It's more about mental stoplosses.

 

When you enter a trade, you set a mental stoploss. What situation would make you get out immediately from a trade, even when your initial mental stop is still some distance away?

 

any feedback appreciated.

 

thanks

[Robert H 450]

I've only been in simulator for 2 months, but here's my 2 cents:

 

It's part experience, and part gauging your indicators, price action, L2, volume, order flow, etc. I try to process as much information as possible while in a trade. Andrew gives a good example in class 4. He got out of a position before his stop loss because there was resistance at a Moving Average on the 1 minute chart. It wasn't evident from watching the 5 minute chart alone.

 

Personally, I look for different things depending on the strategy. For example, I went long a Fallen Angel strategy and exited well before my mental stop loss. The setup was not panning out as it should, so I decided to exit. What's the point of holding on to a low probability play?

 

For something like a Bull Flag Momentum, if the price/volume doesn't begin surging after a new 5 min high is made (within 5-15 seconds), it could be a head fake--and possibly a dump. I also watch Level 2 closely during momentum plays.

 

For VWAP False Breakout, if the price doesn't move decisively away from VWAP within a few minutes, then it's an indication that we may chop sideways. I get out and wait for a better opportunity.

 

I've learned that getting out before your stop loss is okay. Commissions are cheap and you can always get back in.

[adrian 1]

Hi Robert,

 

yes, I'm looking for ideas like those you mentioned about bull flag and VWAP false breakout. Like what to expect for time-based stops, or activity/price-action based stops.

 

About the 5-15 second surge for bull flags: you get out of a bull flag trade after 15 secs if it doesn't play out ?

 

For the VWAP, what's your definition of "decisively away from vwap"? how many 1min / 5min candles away (and how tall the candles should be? or is it irrelevant?) from the first break of the vwap? and does volume come into the picture for this continuation of the break of vwap? or just average volume would be ok ?

 

Many thanks Robert !

 

Trying to figure things out here. Pardon the barrage of questions ~

 

 

 

 

 

 

[Robert H 450]

I don't necessarily get out of the Bull Flag trade after 15 seconds, but I sure have my fingers on the trigger ready to sell at break-even. The reason being is that my entry is on a new 5 min high. The price has consolidated already (one of my criterion for entry). So if it fails to pop up within time, then it is either going down or sideways. Both of these outcomes are not what you want to see during a momentum trade.

 

As I type this, Andrew is trading GNC using the 1 minute and 5 minute chart. He got out of this last trade at break-even as it failed to break new high of the day. There's no point in waiting to sell at your original stop loss if the setup has broken down.

 

I've been taking less and less VWAP False Breakouts. What I mean by decisively is that the price ticks towards one direction after closing above/below VWAP. If I see the price marker really choppy, then we are probably going to rubber-band for a bit around the level. I give it 2-5 minutes to make up it's mind. Candle height isn't that big of a factor; I'm more concerned with choppiness. Volume isn't that important to me in this strategy as long as the stock is in play and hasn't stalled.

 

Funny--as I finish writing this post Andrew just bailed out of a VWAP trade on AA with a tiny profit. Reason being: did not like the price action. It was just too choppy.

 

 

These are my thoughts after a couple months of paper trading and observing Andrew. Your mileage may vary.