June 7, 2015

Stock Market Analysis and Trade Management

What's up everybody? I hope you've enjoyed your weekend. I've had a great weekend so far visiting family and getting to watch the final horse race for the coveted Triple Crown, the Belmont Stakes. Finally we have a Triple Crown winner in over 30+ years! I don't know about you guys but it felt like watching history! Anyway, enough slacking off and back to business.

In today's post I wanted to talk about how I find the best stocks to trade, how I analyze them, and how I trade them, as well as some key insights to remember. The following structured process continually evolves as I grow as a trader. Some of the terminology won't make sense unless you've been trading for a while or have read Al Brook's books on trading price action (I get zero referral fee if you're wondering).

I think it's important to reiterate I'm not a professional trader or a FURU masquerading as one. I'm an aspiring trader continuously learning about and adapting to the market. My process discussed below is the current culmination of lessons learned up to this point in my career as a trader (2+ years as of right now). And as always, I appreciate any feedback or constructive criticism in the comments below!

The Best Trade Setups
(risk the same dollar amount per trade, trail stop to recent HL/LH)

1. Trends (enter at pullbacks, bet breakouts succeed)
     a. with-trend stops/limits at pullbacks (H1-2/L1-2, or wedge flags)
     b. with-trend stops/limits at pullbacks to 20EMA/trendlines
     c. close of with-trend bars (scalp for .5-1R)
     d. with-trend stops after failed reversal TL BOs/BDs

2. Late trends reversals
     a. reversal stops at wedge channelline overshoots (3rd push+)
     b. reversal stops after TL BOPB MTR higher high/lower low (H1/L1)
     c. reversal stops at failed L2s/H2s
     d. reversal stops at failed breakouts

3. Trading ranges (enter at top/bottom of range, bet breakouts fail) 
     a. reversal stops/limits at top/bottom of ranges with bias to MTF trend direction
     b. add in higher/lower about the size of bars, exit at original entry or other side, stop out at close of any strong bar going against you
     c. with-trend at new breakout pullbacks (H1/L1 or limit at sup/res)

4. Channels (spikes in higher time frames, bet breakouts succeed, DON'T allow pullbacks above/below bear or bull bars)
     a. with-trend limit orders at high/low of prior bar, trendlines, or closes of ANY trend bars
     b. add in higher/lower about the size of bars, exit at original entry or other side, don't allow pullbacks
     c. with-trend stops/limits at pullbacks (H2/L2, or wedge flags), especially with good signal bars

Stops (swings trailed to recent HL/LH, scalps don't allow pullbacks = any L1/H1 just after entry bar)
1. Above/below signal bar, entry bar, previous high/low, or above/below counter-trend bar if scalping.
2. Once entry bar closes, move stop to above/below entry bar (actual risk).
3. Once scalped out of half at 1R, move stop to entry price.
4. Swing the rest until L2/H2 or 60min trendline break.

Market Analysis and Preparation
1. Find the best MTF daily chart patterns (FINVIZ Top Gainers and Top Losers):
     a. MTF BO/BD
     b. Overextended
     c. MTF flag in a strong trend
     d. First red/green day
2. Perform TA on daily or 1hr chart and the 5min chart (chart pattern, trendlines, sup/res, bar behavior, and total pushes if there's a pattern)
4. Look for a best trade setup. Strong trend days don't need great signal bars, but reversal trades require strong signal bars
5. Continuously analyze bar behavior to determine the quality/strength of momentum, and trend versus trading range
6. If stopped out, enter the next bar if it breaks over/under bar that trapped you out

And that's my current thought process regarding stock market analysis and trade management. Please let me know what you think in the comments below. I'm not sensitive and I appreciate feedback, good or bad!

Thanks for stopping by FTG!
Jory

2 comments:

  1. Interesting blog for capital market beginners and can be useful for experienced traders too.

    ReplyDelete
    Replies
    1. Thanks SGX, I appreciate the feedback.

      Delete