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January 25, 2011

TraderMike.net Acquired by Reink Media Group

Filed under: Forex Trader — Tags: , , , , — admin @ 5:55 pm

When I started this blog on a whim back in 2003 I had no idea where it would take me. It’s been quite a ride from those days when there were only a handful of stock market related blogs to where we are today. From finding MaoXian’s site and stealing borrowing his “dummy” trading style to meeting Howard and helping to launch WallStrip (among other things) it’s been a great experience. But as long-time readers surely have noticed the pace of new content on the site has declined over the last couple of years. Somewhere along the line my zest for blogging waned. There are a few reasons for that but I won’t bore you with the details.

In order to breathe new life into the site I’ve decided to turn it over to Blain and his team at Reink Media Group. Blain, who I’ve known (virtually) for several years, is passionate about both his trading and writing. I know that he has big plans for the future of this site and I’m confident that it’s in good hands. I hope you will all keep visiting and/or stay subscribed.

I’m not completely going away though. I will still be day trading and I’ll stop by from time to time to post my thoughts on the market. Most likely that will happen when I see potential turning points coming. You can still reach me via email at Michael – AT – TraderMike – dot – net or @TraderMike on Twitter.


January 18, 2011

2011 Online Broker Survey

Filed under: Forex Trader — Tags: , , , — admin @ 8:18 pm

The folks at TradeWiser have just released their 2011 broker survey. I was a little surprised that E*Trade took the #1 spot but that does make me feel a little better about dragging my feet on moving my IRA away from E*Trade. (I planned to do that a couple years ago mostly because of their financial issues as a result of the subprime, etc.) Here’s what you can expect to find in their results:

After several hundred hours of research, testing, etc. I am excited to announce that the tradeWISER 2011 Online Broker Review is now live.

tradeWISER.com is currently the largest and most trafficked website for comparing online brokers. We formally launched the site last year which currently reviews 20 different brokers and includes a commissions calculator for stocks, etfs, mutual funds, and options alongside direct broker versus broker comparisons and even a full broker comparison chart.
The full broker review includes 23 different brokers which is more than Barron’s, SmartMoney, and Kiplinger and is over 4,000 words of detailed research and analysis on the top brokers. Ratings are out of 5 stars and cover the following categories:

  • Commissions and Fees
  • Ease-of-Use
  • Tools and Research
  • Customer Service
  • Offering of Investments
  • Education
  • Mobile Trading
2011 online broker review

E*TRADE took the crown with TD Ameritrade and Charles Schwab coming in 2nd and 3rd, respectively. View the full broker rankings for a complete list of how all 23 brokers fared.
The review also breaks down the best brokers for Active Trading, Options Trading, and includes a summary of the best research, platforms, and tools.


January 5, 2011

Tools of the ‘Trade’ — How I Work (2011 Version)

Filed under: Forex Trader — Tags: , , , , — admin @ 11:06 pm

This is an update to the post I made back in 2006. What I do hasn’t changed much but some of the tools have changed over the years. In short, the changes are:

  • I’ve changed brokers/trading platforms — a couple of times. Schwab shut down Cybertrader and sent me scrambling to find a new place to trade. I was with TerraNova (recently acquired by Lightspeed) for a little over a year but then they also shut down the platform I was using. Now I’m with MB Trading, where I’ve been for about a year.
  • I switched my charting package from eSignal to QuoteTracker with data from IQFeed.
  • Upgraded both computers.
  • Stopped using Briefing.com — This was a tough thing for me to do mentally. I had made so much money from Briefing’s “In Play” service back in the day… but that game hasn’t worked for a long time. I still liked to use Briefing to search for stock specific info and for earnings dates but I can get that stuff elsewhere (for free). Once I discovered Trade-Ideas my usage of Briefing dropped drastically to the point that it just didn’t make sense for me to keep subscribing to it.
  • A little less noise — When I switched from eSignal I never took the time to figure out how to recreate all those alerts. I still watch TICK pretty closely and I get the new high/low alerts via Trade-Ideas.
What I’m Trying to Accomplish

As you know on any given day there’s a ton of market data to process. I try to get the computers to do as much of that work as possible. My focus is first on identifying the ‘tone’ or direction of the day — bullish (up) or bearish (down). Once I’ve done that the computers help me to find the best setups for the market conditions.

I hope its clear to everybody that my goal is to find as many low risk, high reward trades as possible. I generally won’t enter a trade if I don’t think it has the potential to return 3 times my risk. So in R-multiple terms, I’m looking for trades that I think will be at least 3R. As you may have seen in my trading results post, the high R-multiple trades make the difference between breaking even and making money over time. The tighter the stop, the easier it is to make a high R-multiple return — a 10 cent stop only requires a 30 cent move for a 3R gain. However, those really tight stops also make it easier to get stopped out.

Hardware

I use two PCs: a desktop and a notebook. The desktop has a 2.8 GHz AMD Athlon 64 X2 Dual Core 5600+ Processor. It has 2 GB of RAM, a 500 GB hard drive, etc… Those specs are unimportant these days as any modern computer should be able to handle trading software. For me the video card is one of the more important parts — I installed a Matrox G450 MMS video card which can run up to 4 monitors. I have 3 17 inch LCD monitors connected to that card.

The notebook is a 2007 MacBook Pro with a 2.2 GHz Intel Core 2 Duo and 2 GB of RAM. It has a 15″ screen and another 17 inch LCD monitor is connected to the notebook. The notebook is WiFi enabled so I can move around the house (usually only for lunch) and still monitor my open positions. (I guess there’s no need to even mention that anymore as every laptop/notebook has wifi these days)

Both computers are (still!) running Windows XP. (I had no desire to move to Vista and I hear it’s a pain to move from XP to Windows 7.) Unfortunately most trading software is still Windows based so I run Windows on the Mac via Apple’s Boot Camp.

Internet Connetction

I use a cable modem which provides more than enough speed. It’s usually stable & reliable but every once & a while — usually at the worst possible time — it decides to have connection issues. (Usually due to Comacst doing something to the lines in my neighborhood.) When that happens I’m able to use my Verizon Palm Treo 700P as a backup modem. I haven’t had to do it but if I needed to I could log in to my account on my iPhone and manage my positions.

Software

QuoteTracker

QuoteTracker is my primary window into the markets. I run it on the desktop computer and usually have 17 charts up — 5 or 6 per monitor (see image above). In the pre-market I’ll go through all the gappers and pull up the best looking ones in QuoteTracker. During the day I’ll swap out the charts that appear to have less potential for better looking ones that may pop up on one of my scans. I always try to keep the best looking charts on-screen.

Position Sizing Spreadsheet

The desktop PC also runs my position sizing spreadsheet. Once I identify a trade I enter the ticker and the number of cents between my entry point and my initial stop loss. Based on the stop, my equity and the percentage of my equity I want to risk per trade (R), the spreadsheet tells me how many shares to trade. (You can download my spreadsheet if you wish.)

Trading Software

My trading package, MBT Desktop Pro, runs on the notebook computer. In addition to managing the actual trades it is also connected to Trade-Ideas so that when I double click on a stock that’s popped up on Trade-Ideas both its daily and intraday charts will get loaded in the trading platform. This allows me to quickly run through the charts of the stocks that Trade-Ideas picks up.

Trade-Ideas Scanner

There are usually three different Trade-Ideas scans running on the notebook. One window, ‘Market Watch Bull’, tracks all my alerts of interest for stocks moving higher (potential longs). The ‘Market Watch Bear’ window does just the opposite — it’s scanning for potential shorts.

The other scan, which I’ll just call ‘Stocks of Note’ tracks both bullish and bearish events on a select group of stocks. One of the nice features of Trade-Ideas is the capability to track events on a specific group of stocks via user-defined symbol lists. I have one symbol list comprised of the better looking swing setups that I find as well as any stocks that I just constantly want to keep an eye on, like GOOG and AAPL. I got the idea for the other list, ‘Top Alpha’ from UglyChart. It consists of the high volume stocks from BarChart’s Top Weighted Alpha stocks list. The ‘Stocks of Note’ alert window tracks both of those symbol lists.

Here is more on how I set up my filters and alerts in Trade-Ideas.

TeleChart (aka TC2000)

As I’ve discussed before, I mainly use TeleChart after the market has closed for my swing trade scans. However, I also use it during the day to check out longer term charts for support/resistance, etc.

How I Actually Use All This Stuff

Reading the Market

As I think you all know, I typically don’t trade until after 10:15 (or 10:30 if there are econ reports due at 10:30). I wait until then to allow the 10:00 reversal to pass as well as to give me a chance to determine the day’s trend. I use the NDX / QQQQ as my primary trend indicator. All of my charts are 15 or 30 minute candlesticks with 5 and 10 period exponential moving averages on them. The way I tell the trend is simply to look at price and the moving averages. For me to be in ‘buy’ mode I need the faster moving average (the 5 period MA) to be above the slower (10 period) moving average. Price should also be above the 10 period MA.

For example, here’s an NDX chart which shows the moving averages doing a bearish cross just after 10:00. The NDX tried to break above the 10 period MA around 11:00 but it failed, setting up a nice short selling entry.

Another reason I wait until after 10:00 is to monitor price in relation to the opening 30 minute range. I (usually) don’t want to be entering longs if the market is heading for the lows of the day. Reverse all of the above for ‘bear mode’ (a down day when I’d be looking for shorting opportunities).

The Advance/Decline line also comes in handy when I’m trying to figure out the ‘tone’ of the market. When I’m in bull mode I want there to be more advancers than decliners. There have been many days when the market was showing all indications of wanting to head higher but the A/D line was negative. That’s often a good warning sign of an imminent reversal. Once I’ve got my read on the market’s direction I focus on the appropriate scans. I watch the NYSE and Nasdaq A/D numbers in my trading platform.

Finding Candidates

There are basically two categories of stocks that I track, stocks that have presented swing trade setups and stocks that are making strong moves on above normal volume. Although I no longer swing trade I still run my scans each night to see if there are any really good setups (potential for a large R-multiple move). I’ll set alerts in my trading system for those as well as enter them into my Trade-Ideas ‘Stocks of Note’ symbol list. If they trigger I’ll trade them as day trades if I can find an entry that I like.

The bulk of my trades are from stocks that are moving on above average volume. These stocks typically come from one of two sources — that morning’s gappers or stocks that appear on Trade-Ideas.

Trade-Ideas provides a constant stream of interesting stocks throughout the day. I have it set trigger certain alerts for stocks which are on pace to trade at least twice their average volume. Some alerts that I find most useful are 15 minute highs/lows, 30 minute highs/lows, ‘30 minute opening range breakout/breakdown’ and ’60 minute opening range breakout/breakdown‘, ‘15 minute hammer’ and NR7. Here’s a portion of one of my Trade-Ideas windows:

Probably the most popular question I get is what kind of setups I’m looking for. I’m simply trying to identify stocks that are trending with the market and then find a low risk spot to jump on the trend. For longs (reverse for shorts) I want the stock to be above its 10 period MA and to present a consolidation and/or narrow-range bar (NRB) to execute against. Those NRBs and consolidations are what allow me to get tight stops and, thus, opportunities for large R-multiple winners. There are several examples in the ‘Trade Examples’ category. (MaoXian has about 100 examples of the types of things I’m looking for.)

Entering Trades

Once I see a setup developing I simply enter an order and wait for it to trigger. Typically I’ll enter a buy stop for longs and a sell stop for shorts (I want to buy once the stock has cleared some resistance level, which is usually the previous or current candlestick on a 15 or 30 minute chart. I want to sell below support for shorts). For less liquid stocks and/or those with wide wide spreads I’ll use limit orders but over 90% of my orders are market orders. That’s because I mainly trade very liquid stocks and I want to get in quickly instead of haggling over pennies and risking missing a move.

Managing the Stops

Once I’m actually in positions I start to focus on my profit-taking exits. My initial goal is to reduce my risk to zero as soon as possible — but not too soon! As I wrote a while back I discovered that it’s usually best for me to wait an hour before touching my stops. So after an hour passes I’ll move my stop to break-even once I have a gain equal to my initial risk (1R). When and if the stock reaches 2R or 3R I’ll consider taking a partial profit. Ideally I would wait for a bigger gain before taking some off the table but it just depends on how the stock and the market are acting. If the stock spikes in my favor I’ll be quicker to take the partial vs. a stock that is moving in a more orderly fashion.

While a stock moves in my favor I’ll use a trailing stop to lock in my profits. After I’ve moved my stop to break-even what I generally do is lock in about a third of my gains. As it gets closer to the end of the day I’ll make the stop much tighter. By 3:45 I’ll have the stops so tight that they may be locking in 90% of my profits. At that point I’m still trying to hold for a last minute surge but I definitely don’t want the stock to reverse too much on me.


December 8, 2010

December 7th Recap Plus a Look at Silver and Gold

Filed under: Forex Trader — Tags: , , , , , — admin @ 1:08 am

This was an interesting session, although you wouldn’t know that just by looking at the change in prices day to day. We gapped up to new 2 year highs then gave back half of the gap, rallied back up and then sold off hard late in the day to close near unchanged. This is a day when the candlestick charts can give you some extra insight. Despite the innocent looking small changes in prices by day’s end, we had bearish candlesticks made all over the place. In the case of the indices (and many stocks) those candlesticks printed right at old resistance. I still feel pretty much the same as I did yesterday but today’s action gives me a little more confidence that the market is in for a little cooling off. That could just mean sideways… doesn’t have to be a drop.

Silver and gold had some pretty impressive reversals today. On both charts a breach of the November lows will confirm double tops.

Trend Table

No changes

Trend Nasdaq S&P 500 Russell 2000
Long-Term Up Up Up
Intermediate Up Up Up
Short-term Up Up Up

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.


December 7, 2010

December 6, 2010 Stock Market Recap

Filed under: Forex Trader — Tags: , , , , — admin @ 1:52 am

While I’m impressed with the market’s ability to hold up over the last couple of sessions I’m not thrilled with the action. I’ve always been wary of an instrument approaching old highs on declining volume and that’s exactly what the Nasdaq and S&P 500 are doing now. This is an interesting juncture. The action over the last two sessions reminded me of the old saying: “If it’s supposed to go down but it doesn’t then it’s going higher.” However, with the market being short-term overbought and bumping up against resistance I would not want to initiate new longs here. Stepping back to a slightly longer time frame, I’d certainly be holding if I was already long from lower levels. I might consider selling if we broke last Wednesday’s lows but otherwise I’d just try to ride out any minor shakeouts.

Trend Table

No changes

Trend Nasdaq S&P 500 Russell 2000
Long-Term Up Up Up
Intermediate Up Up Up
Short-term Up Up Up

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.


December 2, 2010

December 1, 2010 Stock Market Recap

Filed under: Forex Trader — Tags: , , , , — admin @ 3:52 am

The indices gapped up this morning and never looked back. It was the biggest day in about three months and an impressive turnaround from yesterday. Even better, this rally was based on some actual data — manufacturing data out of China and Europe. Several indices made new 52-week (plus) highs today, including the Russell 2000. The S&P 500 and Nasdaq closed inside the gaps from early November, which is the last serious resistance that I see from keeping them from also making new 52-week highs. Once again things are setting up at important technical levels ahead of the monthly payroll data. That report could be make-or-break on Friday morning.

The bear flag is still there on the Nasdaq but I’m a lot less concerned about after today’s rally. I’ll put it out of my mind unless the bottom of that flag is threatened.

The S&P is looking pretty constructive after popping above 1200 and the trading range it’s been in for the last ten sessions.

The small caps made a new ~2.5 year closing high today, although the index is still about two points off of the spring intraday high.

Trend Table

Everything is up again…

Trend Nasdaq S&P 500 Russell 2000
Long-Term Up Up Up
Intermediate Up Up Up
Short-term Up Up(+) Up

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.


November 30, 2010

November 29, 2010 Recap: Is That a Bear Flag?

Filed under: Forex Trader — Tags: , , , , — admin @ 1:55 am

It was a choppy day as the market tried to figure out if it liked the Irish bailout and the Black Friday results. We finished on a high note with afternoon strength but overall the day didn’t give us much new information. The indices are still consolidating as they have been for at least a couple of weeks. Perhaps they’re building strength to get back above the spring highs but the technical patterns I’m seeing make me think that a downside move is more likely. The S&P looks like it just wants to drift sideways while the Nasdaq appears to be printing a bear flag. If it does breakdown it would still need to break its 50-day moving average before I’d be concerned and/or an all-out bear.

When I last posted GOOG almost two weeks ago it was deeply oversold. It’s now worked off that oversold condition but it’s made no progress and is still in danger of filling that October gap. The 50-day moving average is the last obvious support before it hits that air pocket.

Trend Table
Trend Nasdaq S&P 500 Russell 2000
Long-Term Up Up Up
Intermediate Up Up Up
Short-term Up Lat Up

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.


November 23, 2010

November 22, 2010 Stock Market Recap

Filed under: Forex Trader — Tags: , , , , — admin @ 3:58 am

After a shaky morning the bulls were able to keep the indices positive or near unchanged. So the oversold bounce that started last week is still intact. The trend table is looking better now that all of the short term trends are up or lateral but I wouldn’t sound the all-clear just yet. First I’d like to see the indices climb back above or into the gaps from earlier this month. That means the Nasdaq above 2541 and the S&P above 1200. I’d like to see that happen on decent volume too, so if we creep up there on light volume this week I’ll be really skeptical of that holding up after the holiday. Likewise, I’ll likely view any light volume downside moves as noise, especially if the indices hold above last week’s lows.

I hate to keep harping on the financials but I think it’s noteworthy that XLF made a lower low today and showed poor relative strength. The action in the financial sector still seems like a bad omen to me…

Trend Table

Some recovery in the short-term trends…

Trend Nasdaq S&P 500 Russell 2000
Long-Term Up Up Up
Intermediate Up Up Up
Short-term Up(+) Lat Up

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.


November 17, 2010

November 16, 2010 Stock Market Recap

Filed under: Forex Trader — Tags: , , , , — admin @ 12:54 am

Well it was looking like a pretty harmless pullback last week but today we got the catalyst(s) to really create some downside damage. The same old global economic/financial worries that have been plaguing the market for what seems like forever came back to the forefront today. On November 4th I wondered whether the gaps up that day were of the exhaustion or the continuation variety. They certainly feel like exhaustion gaps now. I don’t know how much of that buying was short-covering vs. actual new longs but those new longs have to be seriously questioning themselves right now… assuming they’re still long.

I don’t like (for the bull case) that the indices have slipped back beneath the spring highs but it’s still promising that they haven’t broken their 50-day moving averages. Those moving averages are where I’m looking for buyers to step up and support the market. So I’ll be looking for some hammer-shaped candlesticks to start showing up near 50-day moving averages in my stock scans over the next couple of days. In fact, I’m already seeing stocks (like AMZN) try to bounce at their 50-day averages. I’ll be looking to get long above those reversal patterns if they appear.

Trend Table

The short-term trends flipped to down late last week when the 10-day moving averages were broken.

Trend Nasdaq S&P 500 Russell 2000
Long-Term Up Up Up
Intermediate Up Up Up
Short-term Down Down Down

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.


November 9, 2010

November 8, 2010 Stock Market Recap

Filed under: Forex Trader — Tags: , , , , — admin @ 2:51 am

The indices haven’t done much since Thursday’s pop but the bulls should be happy about that. Price has consolidated on decreasing volume, which looks pretty constructive to me. At this point there needs to be a good (bad?) catalyst to create any kind of significant pullback. If we do sell off I’ll be looking for those August trendlines to hold. I see little reason to try to short unless those lines are broken.

Trend Table

No changes

Trend Nasdaq S&P 500 Russell 2000
Long-Term Up Up Up
Intermediate Up Up Up
Short-term Up Up Up

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.


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