Learning strategy question

[MWarrior 0]

Hey all! 

I just joined BBT about a week ago after reading Andrew's book and finding it to be a great resource. I got started on sim this week and am already developing a love-hate relationship with trading (I see this as a positive). I am experiencing first-hand the psychological and mental challenges that, up until this point, I've only read about. Thanks for getting my foot in the door.

I started thinking about a learning-strategy that would keep me engaged while minimizing frustration. After a couple of days following the chat room, I am now thinking of focusing on one or two stocks exclusively while I better develop my skill-set. My logic here is that, by knowing a couple of stocks inside and out I'll be better suited to understand their unique behaviors.

Are there major drawback to this path I'm not thinking of? I recognize that I will probably miss out on great opportunities  afforded by creating a new list of stocks each day based on the gapper's scanner. But so far I've found that alternating between names makes me lose my train of thought and messes with my pattern recognition. I am currently only using one screen, which is probably a major reason for my issue, but was hoping to hear if anyone else pursued this concept and what their experience was.

 

Thanks in advance for your wisdom, and happy New Years!

[Willy 25]

Hello Mwarrior,

Excuse me if I make some grammatical mistakes. English is my second language.
I understand that day trading is different for everyone. I am not an expert but I have more than a year in front of the screens. I'll explain my experience so far and from there you take what suits you. The first thing I can emphasize is that day trading is a career, it's not something you learn in 3 months (with rare exceptions or maybe if  you have a mentor with you all the time). Based on that prepare to last a minimum of 1 year learning as long as you maintain the discipline of a journal and learn from mistakes.

You have to have some strategy but the most important thing is the following:

1. that your winners are greater than your losers.
2. Have good entries.
3. Define a maximum loss (2% of your account).
4. define a daily goal (1-2% of your account).
5. define a Monthly Max loss (6% of your account).
6. Stop doing trades if you have 3 erroneous trades in the day
7. Choose your trades well and don't do too many.
8. Stay away from low floats.
9. When you start live buy only 100 or 50 shares until you prove that you can be profitable.
10. Learn about the price action.

As for the strategies. When I read Andrew's book and tried to use his strategies, I realized that I did not apply them well because there are several things that you only learn and realize from the time of experience in front of the screen, mainly you have to wait for the ideal entry and If you do not succeed, you just do not do that trade.

I will explain 2 strategies that you can practice if they adapt to your way of doing trade.

To use a strategy you must try it for a reasonable amount of stocks. Let's say, for example, 50 times and if it works 80% of the time is a good one.

Regarding the selection of stocks, I think is not  a good idea to concentrate on a specific stock unless you do scalping with many shares.
For these strategies I use stocks in play with a good catalyst. (earnings, important news, etc). Sometimes it works with those who are every day in play as MU, SQ, AMD but I advise you for the moment and because  you have only one screen that is better to  concentrate  on the gapper with a higher percentage and greater relative volume of the day.

Strategy 1 (short).

Stocks in play (gapper + 3%).

Plan: Wait for the first five minutes. If the candle opens over the VWAP and closes under the VWAP and the candle is not very large. Seeing the 1 min chart,  sell it short as soon as it rebounds in the VWAP, the stop loss is on the VWAP and the first target would be at one of the pre-market levels. The final targets can be defined by the levels in  daily chart.

Strategy 1 (long).

Stocks in play (gapper -3%).

Plan. Wait for the first five minutes. If the candle opens under the VWAP and closes over the VWAP and the candle is not very large. Seeing the 1 minute chart,  buy it as soon as it rebounds in the VWAP, the stop loss is under the VWAP and the first target would be in one of the pre-market levels. The final targets can be defined by the levels in  daily chart.

Strategy 2 (short).

Stocks in play (gapper + 3%).

Plan. Wait for the first ten minutes. If the first candle is white and closes over  the VWAP and the second candle is red, look for the best possible entry for short, with the stop loss on the previous candle and the first target on the VWAP (you must watch  the 2:1 ratio). The final targets can be defined by the daily chart. LOD, etc.

Strategy 2 (long).

Stocks in play (gapper -3%).

Plan. Wait for the first ten minutes. If the first candle is red and closes under the VWAP and the second candle is white look for the best possible entry to buy, the stop loss is under the previous candle and the first target in the VWAP (you must watch  the 2: 1 ratio). The final targets can be defined by the daily chart, HOD etc.

 

Please check the examples on the attached files. 

I would like to see comments and opinions from other user too, about this strategies.

Estrategias 1 y 2.pdf

[Robert H 455]

It is a good idea for beginners to stick with watching a handful of stocks. However, the same stock won't do the same thing everyday. For example, some days AMD will be clean with nice patterns/setups, while on other days it is pure trash chop.

If watching two stocks makes you comfortable with identifying patterns, I recommend that you watch 2 stocks from the watch list. Stocks in play will present similar setups since the price action is representative of mass psychology between Bears and Bulls.

Lastly, the past month or two has been very tricky since most stocks are mirroring SPY to varying degrees. This is especially true after 10 AM. Keep this in mind since your 2 stocks are at the whim of the larger index. Best of luck.

[MWarrior 0]

Thanks for the feedback Willy and Robert. 

Willy- I've been thinking of practicing these types of ORB/VWAP strategies. Appreciate you sharing in detail what you have found works for you.

The more I thought about what I wrote the more I realized the idea has holes in it. I can see that the concepts taught here have more to do with strategies that work best for stocks that gapped with lots of volume, i.e. the setup is more important than the name. 

I have some other thoughts but I think I need some more screen time first. Thanks again.