Right. I noticed how much work it was on Wednesday, when I got whipped around and ended up 150 bucks down for the day. In hindsight, I was not giving the market its due, meaning the market was not making big moves up and down, the Dow was up 5, down 10, etc.
Under those circumstances, I would have been better off playing the short (real short) moves.
Tim, see if you can set up your screen to show these trading bands I was talking about last week. I use Townsend Analytics, and on that program, I can set up what they call "upper envelope" and "lower envelope". What it is basically is an average of 1% above the average price and 1% below the average price. On the screen, it looks like two parallel moving averages, one is usually above the actual price and one is usually below.
I noticed about a month ago that on some stocks, when the market was not really moving, I could sometimes get a good idea of entry and exit points for short moves by selling when the stock price went through the upper band, and buying when the stock went through the lower band. In many cases, the stock would go down FAST through the lower band and come back really fast. (You also have to have some kind of a grip on the overall direction of the stock, of course...) and these "bands" have to be adjusted sometimes for the stock, i.e. you have to set it up different for a stock that is 30 bucks and one that is 90 bucks. But the 1% range thing I mentioned above works for 40 dollar stocks, so you can see what I'm talking about.
You'll see what I mean if you set it up on your screen. Just look for the times when the upper or lower band was touched by the stock price. You have to have a bar chart (or candlesticks) to see it. I use a TWO MINUTE BAR, which I have found to be better (for me) than a one or a three. I don't know how this would work on a different time frame, like one minute bar, but I'll tell you that if you got into a trade this week and had it go 3/8 right and then come right back to even and then the wrong way 1/4, and then up then down etc. etc. you were not alone.
It's really stressful, because what I was doing was bailing out at a loss because the stock wasn't doing "what I thought", AFTER I'd had the chance to take a small profit and DIDN'T! Had I been playing the short moves, (this week), using this plan I just described, I know I would have done much better. I'm still working on this upper and lower band thing, but it looks to me like it could have good potential as a kind of filter to keep me from chasing an entry too far on a short term trade (in other words, going long after the stock moves up and touches the upper band)...which is why I started looking at it in the first place. |
