StockFetcher Forums · Filter Exchange · the chart tells why 95% of the people lose in the stock market<< 1 2 3 >>Post Follow-up
Rock Sexton
109 posts
msg #113829
Ignore Rock Sexton
5/31/2013 3:00:35 PM

Investing and trading is tough if one doesn't learn when to pick their spots. That is something even I still haven't adhered to 100% yet. Could be much further a long if I did.

In my 3 years day trading full time, I've learned then you have to be willing to sit and wait for your preferred setup/strategy to take shape. Attacking the market is a recipe for destruction. One doesn't have to be a master of all setups/methods in order to make money.

418 posts
msg #113831
Ignore klynn55
5/31/2013 3:39:56 PM

rock: your use of the words "even I" suggests you to be profitable, three years of full time trading also suggests you to be profitable,
perhaps like Option you would share some insight into winning ways, just for the benefit of newcomers of course. maybe just like optioner a bit learned here and there might be beneficial .

Rock Sexton
109 posts
msg #113837
Ignore Rock Sexton
5/31/2013 8:07:34 PM

I explained in a previous post what I use for trading ...

- Volume
- Volume Profile (otherwise known as "volume by price"), especially volume POC (Point of Control)
- VSA (Volume Spread Analysis) ... there is a pdf of the book "Master the Markets" by Tom Williams floating around the net
- Wyckoff Accumulation/Distribution Model .... also can readily be found on the net and was Tom Wiliams teacher
- Market Auction Theory (most use it for market profile, but I apply it to volume profile)
- Divergence between Price and a momentum indicator
- VWAP .... an institutional benchmark

It's basically an amalgam of different things I've learned along the way and from the countless hours spent late at night Googling various methodologies. When I first started trading I was predominantly an indicator-based trader. My specialty was Pinch Plays using the PPO & ADX. The problem I ran into like everyone else using indicators, is that they work when they work and don't when they don't. If I'm going to put my hard earned money on the line, I knew I was going to need a better edge. However, I did see the potential of the setup because it led me to "discounted" prices. I'm not a chaser. I want to try to be there when professional money was buying into weakness and is accumulating or they're done accumulating and prices are ready to be marked up (i.e. Wyckoff Accumulation/Distribution model). Just a small fish around the shark's mouth enjoying his feast.

Eventually I learned there was a "map" or compass behind the price action - volume. In my opinion volume studies are criminally overlooked or not utilized by most of the non-professional trading public. It's because everyone wants something "easy", they just want to look at a squiggly line and have it tell them when to enter or exit, whether that's an RSI, 200ma, etc. etc. Trading these days is mostly a function of supply and demand of shares. Simple economics 101, you remove available supply to create demand and higher prices .... and then visa versa. Sure, things have their fundamental values but the big mystery is "when" it will hit those values and is the person's analysis of that value correct in the first place? Most of the fundamental info we get via outlets like Yahoo Finance, Google Finance, and all the others is dated. We're not getting what is happening currently.

The reason things have gotten this way in terms of supply/demand is IN MY OPINION because of the domination of high frequency and algorithmic trading systems. These systems pay very close attention to volume points of control and imbalances in supply/demand (i.e. the extremes). The pubic is out there trading the middle stuff where the action is very volatile and they get whipsawed a lot or they trade news reports and wonder why in the long run they never win. I cannot tell you how often I witness this in the marketplace.

I traded a setup today though, that is an example of when sellers exhaust themselves and professional money absorbs their supply:

Here is a link to my post on it over on HSM:

Where I noted the setup @ 7:53am
My sell @ 8:11am
My follow up post with chart and explanations

It was the prototypical early morning absorption of selling, followed by a reversion to a volume point of control. This very trading phenomena occured 3 times in the last 6 days. That particular trade was worth a potential of 111 ticks in 18mins on the SPY and for someone like me trading SPY options it provides more than enough opportunity.

Now, I'm not going to sit here and say I've figured out the entire market and I'm making a kajillion bajillion dollars at this. I should be a lot further along than I am, but am still dealing with psychological barriers ...... namely my relationship to money. There's a certain mindset it takes to do this. Some guys are naturally risk takers and they don't fixate on the $ factor. I'm also learning to become a better risk manager. Any shmuck can enter a trade, it's how they manage it there-after is what will determine how successful they become. That is why I laugh my ass off when OP333 posts his "look at how much you would've made" garbage. That's a bunch of bullcrap. Nothing ever moves straight up or down. There is an ebb & flow of price movement which can mess with traders' heads causing them to make impulsive decisions before the target is achieved.

The other thing is alot of traders enter trades without knowing what their possible risk/reward is. Picking an entry is only a fraction of the entire equation. I know for myself I spent a large amount of my first 2 years quick trading and bailing at the first target or when I'm up a set amount of $$. At one point I got so fixated on a certain daily profit number that everytime it came up on my unrealized profit screen I'd become anxietal and immediately lock it in. This impulsive style of trading sabotaged the potential for much larger gains as I wasn't maximizing my winners. I'm still working on utilizing scaling in/out techniques to better allow for it. It's important to note though that if you're somebody who's always risking 1 to make 1, you're going to have to maintain a very high win % just to breakeven. If you're somebody who's consistently picking out trades where the risk is 1 but the reward is 2 or 3, well you don't need to maintain a higher win % to get ahead.

At any rate .... I could talk for hours about this stuff. That example I gave of the trade I took today SHOULD be the trade I sit and wait for every day. Well that and divergence setups. Enough of them happen over a month's time frame that if I only traded them when they appeared I'd be up nicely .... and if they didn't, so be it I don't trade that day. However, like others still coming up in the business sometimes we get caught with our pants down trying to trade momentum or forcing iffy trades because they "kind of" look attactive instead of letting them come to us when they fit all our criteria.

StockFetcher Forums · Filter Exchange · the chart tells why 95% of the people lose in the stock market<< 1 2 3 >>Post Follow-up

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