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How to organize yourself for trading daily

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Everyday do the same thing over and over in a systematic manner.
Once you have a well thought out method the day to day challenge is largely about implementing your plan.
That requires setting up a daily routine and adhering to it as far as possible.

Situational Awareness

We know swing setups work, but overall market conditions can have impact on the % of trades likely to work. So SA helps you in controlling your trade pace. In good environment you want to be more aggressive. In bad conditions you want to focus on risk management.
Question you need to ask daily for SA:
What is your market bias today
Is there a plan to exploit it
Is there an alternative plan

Anticipation

Anticipation allows you to control risk and get in to setups early or as they are breaking out. Anticipation is also useful on current open positions. If you have thought through what you will do under different circumstances on your open positions you are in better position.
Question you need to ask daily for Anticipation:
What homework have I done to identify good opportunities ?
What are the 3 to 5 very high probability opportunities I must focus on today
What is my plan for existing open positions

What is working currently

Different phases of market favor different kind of stocks or setups. Some time beaten down stocks do well. Sometime stocks with momentum do well. Some time value or growth is in favor. Knowing what is working helps you focus on hot opportunities.
Question you need to ask daily for What is working:
What is working in the market currently
What stocks and sectors are leading the market currently
What style and setups are working currently
What kind of follow through is happening

The hardware and software

All our good plans or intentions or setups are of no use if our hardware or software fails or is not optimum for trading.
Are you setup for today
Is your hardware in proper condition
Is your software working without glitch
What is your backup plan in case of failure.

Your mental state

Your mental state affects your trading. If your are well organised and in proper frame of mind for trading you will be successful. If you are excited, harried, angry, disorganized you will find same thing in your trading.
Are you calm, excited, harried , or confused today?
Are there distractions likely to affect your trading today?

Continuous improvement

As a trader you need to focus at least 25% of your daily efforts on developing new trading setups and ideas and on enhancing your trading skill and knowledge of market. A purposeful plan to do this will cumulatively help you transitions in to new setups and ideas as market changes.
What is your plan for enhancing your market knowledge today
What is your plan for enhancing your trading skills
What is your plan for enhancing your trading mindset

What needs to happen for me to be a confident and in control trader

Do I have resources to get there?
Do I have the burning drive to get there?
Everyday using this kind of framework will make you a better trader . If you rigorously follow these kind of checklist you will see improvements in your trading in 90 days.

If you don't have a process you can not trade a method


If you want to trade any method you need a detailed process flow.
If you want to trade any method you need a detailed stock selection criteria
If you want to trade any method you need a detailed entry requirements
If you want to trade any method you need a detailed exit criteria
If you want to trade any method you need a detailed risk and stop management
You can not trade setups unless you start developing process flow.
However imperfect your process flow is at beginning , it is the first starting point.

How swing traders make money

Posted on 11/02/2017



DAIO is the kind of swing trade that I look for on breakout side daily. Stock showed up in breakout scans on Friday early morning. I entered at the price of  11.53 with 1000 shares order. 4 Days later sold it for 13.07 in the morning for a  profit of  $1532. 

Hundreds of trades like these show up in the market. These are momentum burst moves where stocks make 8% to 40%  moves in short period of 3 to 5 days. 


Swing traders look for 8% to 20% kind of moves in a short period of time. They look for hundreds of them in a year.
In order for these moves to make a difference to your account you need to understand the maths of returns.
Let us say you hold 20 positions of same size in your 100k account. Then each position becomes 5k. Let us say a stock you buy goes up 10% after entry , how much is it going to contribute to your overall profit.
Only .5%. You will need 200 such trade for a 100% returns.
But wait a minute for most traders the success rate of a trade actually working is going to be around 50% only. Which will mean 200 trades will not get you to doubling.
Supposing you risk 25% on each trade instead of 5% of capital. Then a trade with 10% potential will give you 2.5% overall return. If it is 20% return trade it will give you 5% overall return on your capital. You will need roughly 15 consecutive trades of 5% overall profit to double your money.
The implication of that is in order to make big returns in a year you will need anywhere from 300 to 1000 trades depending on how much you risk per trade.
This is in line with trade count of most traders who make money trading . I have asked several successful traders how many trades they do in a year and most do upwards of 200 plus trades.
Which most people do not understand and that is why they are looking for position trading method which will give them that kind of return in 4 to 5 trades.

That is possible, if you are extremely selective in selecting your trades. And if you have extremely well developed expertise in identifying those 4 or 5 sure winners. Very few people in the trading world will have that skill. And if you are asking how to do it you have several years of learning curve ahead of you

The easier path is to swing trade and expect to make 400 to 1000 trade if you are looking for triple digit kind of gains.
But everyday look for opportunity where you can put in 25% or more of your capital in one idea. In a year if you get few of those big wins of 4 to 5% or 10% returns on your capital, it then drives your returns higher.
If you understand this maths you will also understand why good day traders make big returns. It is simple maths, there per position risk is higher. A day trader often puts in significantly large part of his capital in one single trade. So even a small 1 to 4% profit move contributes more to his or her returns. Add to that leverage and you are looking at magnified returns.
So let us say a day trader with 100k capital buys 1000 shares of 50 dollar stock and get out same day for 2 dollar profit , he has made 2000 dollars or 2% on his capital . Even catching a 50 cents move with 1000 share lots makes them 500 dollar or .5% returns on total capital. And then they make 20 to 25 trades like this in a day where they might just make 100 to 300 dollars , and lose 100 to 300 on some , in the process ending up with say 2500 dollar for day.
A swing trader will not be able to match a good day traders profit unless they find very big EP kind swings and risk big.
Now let us suppose you understand this maths , how can you use it in real life trading.
Look for opportunities to put bigger amount of capital per trade while managing risk. If your stop is very close to entry you can with just .25% or .50% risk put in sometime 60 to 70% of capital in one swing trade.
If large trades are not available then look for several small trades.
Strive to keep per trade loss as low as possible. If you can keep your losses small you will have better mood to trade and can take several trades without going through emotional ups and downs.
It does not matter if you have lot of wash trades you close immediately if they do not work. Especially if you are trading a momentum burst kind phenomenon you want the trade to rocket off immediately.

Anticipation allows you to put more money in trade for same unit of risk

The single biggest advantage of anticipation trades is it allows you to put a stop very close to entry.
As a result for say same amount of .5% or 1% risk you can often get sometime 70 to 100% or even more of account in one trade. That allows you to move the needle faster.
Dollar breakouts and Low threshold breakouts also allow you to do the same thing.
Focus on dollar breakouts, they offer you opportunity to risk bigger per trade.
Stop dreaming about doubling money in few trades (if that happens that is bonus, but you do not base your method on that). While it is possible and one must everyday focus on finding them at same time keep on collecting small profits. it will give you the ability to risk big on select few trades.
If you are holding 40 to 50 small positions, realistically look at the probability of you making big returns. It will be low. Mutual funds do that and that is why their returns suck.
Most importantly understand the maths of swing trading means finding 20 or so big swing trades where you can risk big up to 25% of capital and try and make 20 to 40% on them...... But frequency of those trades largely depends on market conditions
Your returns are also function of your ability to take bigger risk. For same % return trade a bigger size obviously magnifies return. A 5 dollar profit on 100 shares position is 500 dollar but someone willing to take big risk like Dan Zanger it might be 5000 dollar profit on 1000 shares.
If you want big returns, once you perfect your setup and have track record of over 100 to 200 trades with 2:1 profit and 50% kind success rate then you can increase your per position risk to 1 to 2% per trade and your returns will improve.
But when you do that number of trades you do will automatically decrease as you will not be able to take as many trades...

While most traders highlight carefully selected example of what has worked to show their greatness, reality is they also have many small profit trades.

It is also misleading way to lure people in to believing long term trends is best. Most of those examples are also old stocks. Where in hindsight saying you should have held CSCO or something like that.
They might be doing 200 to 400 trades but then they just highlight the 2 or 3 that gave them most profit to highlight their method. But that is reality distortion.
Many want to do very few trades. But then do they have the edge to find those kind of big winners. I would also like to do only one trade in a year and make triple digit returns.
The reality is then you have to be damn good at picking that one shot and risking 100% of your capital. It is a fantasy which many people have.
You might get something like that in a year, but you do not base your strategy on it. That is my view. Everyone has different view.
Understand the maths of swing trading and active trading and you will know which variable to control....
If your win rate is low focus on setup quality
If your per trade profit is low focus on either improving it or increasing number of trades.
At the end of the day most swing traders try and make money by doing several hundred trades that give them .25% to 5% returns on total capital per trade
5% kind returns not so common so they do hundreds of .25% to 1% return .

Study Anticipation in detail and put significant effort in making anticipation as part of your setup mix

Trading both breakouts and anticipation setup will give you better returns than just trading breakouts.
Many anticipation trades will move your account faster than breakout trades as your risk (entry-stop) will be lower.

Add high capitalisation and high liquidity setup to your mix for same reason

High cap stocks are not very fast movers but they have often low volatility , that allows you to risk big on them with close stops.
If is easier to take 3000 to 5000 or even more shares position in extremely high cap and liquid stock with close stop. A 8 to 10% move in such situation can help you move the needle on your account.
Focus on top 2% stocks by capitalisation and stocks that daily trade more than 9 million plus ( minv3.1>=9000000)
Look for low risk entry on them and do bigger size.

Overall add the following to your trade mix :

Anticipation
$ b/o
Low threshold b/o
High cap high volume stocks
This will allow you to do some size trades and possibly hold longer

If you are really serious about making money swing trading then develop expertise in these kind of setups. Once you master them you can find money making trades regularly.  

How to find the best anticipation setups

As stock gain momentum they undergo periods of fast moves followed by periods of pullbacks and consolidation. The pullbacks and consolidation periods offer you an opportunity to anticipate a breakout and enter with very close stop or enter with order few cents above the consolidation. 




To anticipate a breakout look at stocks currently not undergoing momentum burst. That means stock should not be going up or down fast. Stock should be in extremely low momentum phase for anticipation . It can be a shallow pullback or consolidation in established momentum phase.
To anticipate look for stock with extremely low volatility. During rallies stock go through high volatility and low volatility periods, the low volatility  (quiet) periods are where anticipation traders can focus. A stock with low volatility in last 5 to 10 days is ideal candidate as part of a continuation setup.




Look for series of low range bars in last 5 to 10 days to find good anticipation setups. You can look for stocks with bollinger band squeeze. I do not use them, I find it easier to just look for series of narrow range consolidation periods. 

Avoid Anticipation setups on extended stocks. First or second anticipation setup in established trend is best. As stock goes further and further from its rally start point the probability of anticipation setup working decreases. Extended trends needs to be avoided for anticipation as failure is high on them


Once you have anticipation candidate ,look for early entry on it. If you wait for breakout to buy then the entire effort is wasted. Ideal entry is where you risk just few cents or less than 2% to get in early. This requires either entering before breakout or entering with a order few cents above yesterday's action.

Anticipating a breakout helps you get an early entry and can improve your per trade profits. It also can lower your risk as your stop is closer. It can help you profit from even smaller moves as you can also capture breakout day gains. For that entry without waiting for breakout is best.
Anticipation requires more pre planning and effort than buying a breakout. You need a process flow to do that. The process should be efficient and done daily after the market close or open. It takes me around 15 minutes to generate my list of candidates daily.



What to look for in good anticipation setup

  • series of narrow range days in pullback/consolidation
  • orderly pullback with no 4% b/d during the pullback or consolidation
  • low volume pullback
  • low volatility during pullback
  • linear first leg if looking as continuation setup
  • Stock should go up smoothly and not in volatile manner
  • 3 to 10 days consolidation/pullback
  • not up 3 days in a row
Here is my watchlist for today

HOV KMX TSN VNET ALB SKX SQM LIT JELD SPPI PPC CC ILG COHU HII ROST VERI

Anticipation is a setup concept that can make you money

Posted on 10/26/2017


As detailed here I trade only one kind of anticipation setup: anticipation  as continuation setup on stocks with established momentum.
But you can use same kind of approach to trade lot of other types of anticipation setups.
If you want to do position trading look for ants on weekly timeframe where there is 4 plus weeks of tight tight tight consolidation . For that select stocks with longer term momentum using say MDT or DT and that are withing 25% of 52 week high.
You can use anticipation setup to find shorts on high momentum stocks for swing trade.
You can find anticipation setup on stocks forming bottom.

How to get in to breakout early and with close stop


YPF was showing up in anticipation scan for last 6 to 7 days. It had very orderly and compact sideways consolidation after  a swing high move in September.

The high of consolidation was 23.13 , I had buy stop outside that at 23.25. That got triggered early yesterday and stock started moving immediately. So stop could be put at low of the day at 23.02. After that stock just kept going up and closed near high.

Anticipation scan allows you to find candidates like these daily and plan the trade in advance. The setup gives you very early entry in to breakout and stop can be close.

You can find mt detailed videos on how to find these setups daily on youtube. 

Here is my watchlist for today

STMP
ALNY
PARR
ZYNE
CRS
KURA
FND
RDNT
BGCP
LOPE
BZH
ARWR
BANC
MCRN
BCOR
ATEN
ADNT
MTBC
DS
BSX
BWA
YUMC
APTS
ILG
CLGX
POT
FSNN
GPK
ALRM
RHT
TSN
NEWM
INOV
LIT
CTMX
GDI
COUP
STZ
OSK
CDNA
BCC
MTOR
TRUP
HALO
MU
NTNX
VLO
KMX
ANAB
PANW
LEA

How to find good breakouts daily

Most stocks start their swing move or big move with a 4% breakout. You can validate this for yourself by looking at every big winner last year.
Stock moves start with a momentum burst and that basic tendency of the stock moves has not changed since stock markets started.
If you just do a good job of focusing on 4% breakout you will find the best opportunities in market every week.

Process Loop

I run scans like 4% and $ breakout along with my anticipation watch list and low threshold breakouts throughout the day and trade candidates as and when they show up and meet my criteria.

The 4% scan and process loop

c/c1>=1.04 and v>v1 and v>100000
The scan looks for a stock with price and volume surge.
The stock should be up 4%,
volume should be higher than yesterday
and volume should be greater than 100000.
Once you run the scan you will get several stocks meeting the scan conditions , but they are all not buy candidate.
A buy candidate should meet the setup definition for a breakout swing trade. If the context of the breakout is right , it should be bought for 3 to 5 day hold trade.

A good setup should show following characters:

stock should close near high
prior to b/o day there should be a narrow range or negative bar
stock should not be up 3 days in a row
stock should have a narrow range sideways consolidation or narrow range orderly shallow pullback prior to b/o day
the previous leg of up move should be linear
the breakout should be first to third setup since start of the move
as far as possible look for young trend and not extended trend ( youngsters defined by number of days stock has been rallying in overall move)
first and second pullback/consolidation in rally are preferable
extended rallies are vulnerable to correction and b/o failure
In process term I run the above scan from 9:30 onward and look for candidates meeting setup definition. As and when they show up I enter. The stop is low of breakout day
This is an example of process flow to find swing trades daily.

The $ b/0 scan and process loop

c-o>=.90 and v>100000
The scan looks for a stock up 90 cents plus. It is more useful on high priced stocks above 40 as they do not often breakout with 4% move.
The stock should be up 90 cents plus.
volume should be greater than 100000.
Once you run the scan you will get several stocks meeting the scan conditions , but they are all not buy candidate.
A buy candidate should meet the setup definition for a breakout swing trade. If the context of the breakout is right , it should be bought for 3 to 5 day hold trade.

A good setup should show following characters:

stock should close near high
prior to b/o day there should be a narrow range or negative bar
stock should not be up 3 days in a row
stock should have a narrow range sideways consolidation or narrow range orderly shallow pullback prior to b/o day
the previous leg of up move should be linear
the breakout should be first to third setup since start of the move
as far as possible look for young trend and not extended trend ( youngness defined by number of days stock has been rallying in overall move)
first and second pullback/consolidation in rally are preferable
extended rallies are vulnerable to correction and b/o failure
In process term I run the above scan from 9:30 onward and look for candidates meeting setup definition.
As and when they show up I enter. The stop is low of breakout day.
I am looking at hold periods of 3 to 5 days on these trades or even lower as long as they give 8% to 20% profit. For $ b/o I am looking for 5 to 20 dollars move in 3 to 10 days. Once I am profitable I am looking to move stop to break even and protecting open profit aggressively once it is more than 8 %.

Where to exit

image
These exit guidelines are specific to swing trading and 4% and $ b/o setups.
Exit at least 50% of position on third day at close. by third day the moment stocks goes up start protecting profit by moving stop 25 cents below the high.
When swing trading it is critical to take profits in to strength.
After your entry next day or same day if the stock goes up 8% or more exit 50% of the position and move stop 25 cents below the high of the day to protect profits.
Exit a stock in pre market or at open if it gaps up 20% or more after your entry next day or third day.
The essence of swing trading is about capturing such explosive moves and selling in to strength.
If a stock does not follow through in 3 days exit or move stops to break even If stock starts to fade gain after entry exit same day.
If you study the stocks up 25% or more in a month you will see that they make bulk of their move in 3 to 5 days out of 21 trading days in a month.
Typically most of them go up for 3 days after breakout and then spend next few days going sideways or giving up part of the gains made during those explosive 3-5 days.
These are exit guidelines for swing trade not absolute rules..

Best breakout candidate typically show up in first 30 minutesHow to find good breakouts daily

Stocks move from low volatility periods to high volatility periods

Posted on 10/16/2017


43552_stockbee_bee_only_trans_background.png

Stocks move from low volatility periods to high volatility periods

Stocks spend time in low volatility periods during which time they have orderly consolidation or pullback. Such low volatility periods are characterised by cluster of small daily up or down moves on relative low volume .

Let us look at recent example of PH trade

ph.png

Stock formed a cluster of compact moves. The highest %  move in 56 days was .21%. On upside and -0.15% on down side.

Such volatility compression periods are followed by range expansion in direction of the move most of the time.

This allows us to put buy stop just near or slightly above the cluster of moves high. Stop can be very close.

Because stop is so close to entry you can put in lot of capital on a trade like this  making it a good risk reward trade.

The low volatility cluster takes some days to form, so you can plan this trade in advance

How can you find setups like these

In order to find setups like these you need to scan for stocks having cluster of small moves in last 3 plus days.

The Anticipation scan which I have shared multiple times in recent videos will show you how to find this.

The Anticipation scan which I shared is more broad based but if you want to go deeper and narrow it down to less than 3 to 5 extremely high probability setups then you need to modify it to find cluster of moves like in above PH example.

You can modify the scan for finding these kind of setups without going through 800 stock charts by looking for only half of 1% move. The modified scan will give you 75 candidates to look at.

Let us look at PNR as a stock I am watching today which is similar to PH

pnr.png

Now in this case a buy stop just few cents above recent volatility compression can get us into a good breakout trade with very close stop.

Some more setups like this for today :

gpc.png

kmx.png

dhi.png

DHI might need few more days to setup even better.

Do you want to find and trade setups like these

All that you need to do to find setups like these is to scan daily for them on stocks with established momentum and spend less than 10 minutes to find 3 to 5 good ideas.

Once you find good idea create a buy stop order or enter on price alert. Stops go near low of entry day or low of consolidation.

It is a planned trade so no emotions involved.

If you are serious about making money swing trading develop a bunch  setup ideas like these which offer you extremely low risk profit making opportunities with a planned trade ahead of time.

If you want to be a profitable trader you must understand momentum

Posted on 10/03/2017


It is the most persistent tendency of stocks and it offers you multiple ways to make money. 

A thorough understanding of momentum and how to make it work is something every trader must focus on.


Starting next week I will be discussing momentum for a month

 Specifically I will focus on following  topics.
--------

Understanding momentum

Why you should master momentum

Momentum is structural tendency

How to profit from momentum

Ways to calculate momentum (TI65, DT, MDT, IBD RS, Minervini template, M20, Rel strength)

Momentum swing trading breakouts

Momentum swing trading using anticipation

Momentum swing trading pullbacks

Momentum for long term investors using DT , MDT, EP, and Minervini scans

Momentum strategies for  ETFs


Momentum +growth

Momentum+value

Momentum+chart patterns


Momentum Based short selling


A thorough understanding of momentum will give you life time rewards.

What to look for in a good swing breakout

Posted on 9/27/2017
First leg should be linear
Not up 3 days in a row
Orderly consolidation /pullback pre breakout
No 4% breakdowns in consolidation/pullback
Day prior to breakout is either negative day or narrow range day
Closes near high
These are the criterias used to select candidates from 4% b/o and $ b/o scans.

xone.png
XONE : First up leg linear . Breakout today (4b/o). Not up 3 days in a row. Closed near high.


rdnt.png
RDNT  : First up leg linear . Breakout today (4b/o). Not up 3 days in a row. Closed near high.

GOOS BRC ADTN other good setups

If you want to make money swing trading develop these scans and you will find good setups daily.

Stockbee Low Threshold Breakout (SLTB)

Posted on 9/25/2017
SLTB helps you find another buy point in a stock with established momentum. Not every stock shows up is Stockbee 4% breakout or Stockbee $ breakout scan because they often breakout with lower tyhreshold price or volume move. The SLTB helps you profit from those setups.


SLTB scan for Trend Intensity Above 1.05


minv3.1>=100000 and c>=1 and avgc7/avgc65>=1.05
and c>o and c>c1 and c/c1>c1/c2 and c1/c2<1.02


minv3.1>=100000  looks for stock with atleast 100000 plus volume in last 3 days
c>=1 stock  price is above 1


avgc7/avgc65>=1.05 finds stock with Trend Intensity above 1.05  (it gives you stocks with established momentum)


c>o close is above open


c>c1 price today is higher than price yesterday


c/c1>c1/c2 price % change today is > price % change yesterday


c1/c2<1.02  price % change yesterday was less than 2%


SLTB scan for stocks above 200 day moving average


Use this if you want more candidates . This looks for stocks above 200 day MA but that have TI 65 less than 1.05 that had SLTB


minv3.1>=100000 and c>=1 and c>o and c>c1 and c1/c2<1.02 and c/c1>c1/c2 and c>avgc200 and avgc7/avgc65<1.05


Guidelines for selecting setups from these scans are similar to 4% or $ breakout.


Major advantage of SLTB is low risk entries in established momentum stocks.


It can allow working people to find low risk entries which work with next day entry.


It allows you to put very close stops , reducing risk.

It allows you to find good low risk entries on pullback setups.