bar, this is the relative price or relative volume against which the comparisons are made. So, if you run ascan and find only a grey bar, therehas been no change. Anyway, thereis one red bar which indicates a littlebit of price movement to the downside. In the next column there arefive green bars indicating a maximum increase in relative volume;in fact, there has been a relativevolume increase of 778% duringthis twenty-minute time frame. One quick glance and I new that I was at the beginning of a very powerfulshort rally. I did not want a short, so I moved to the next line.This was what I was looking for, a long. I’ll interpret the columns for you: BEAS was at $11.70 and up58¢ for the day. It was now mid to late morning and I wanted another trade before lunch. Not really a goodtime to enter a long, unless it had strong signals. BEAS had 3 green bars under % of price change for thescan period and was apparently ramping up. Other columns revealed that although volume was down alittle for the day, it was very heavy during the period of the scan which was twenty minutes. I clicked BEASinto Wizetrade and viola (that’s twice I used that word), a rally was getting underway. I got in for about atwenty-five minute trade which produced about 80¢ and went to lunch. With this kind of relative volume,it’s never like watching paint dry.Let me mention one other trade. On the second day, I looked for a long. I found a stock but failed tonotice that it was down -$3.86 for the day. I loaded it into Wizetrade only to discover that it had been a shortsince the open where it gapped and ran down for hours. It was 12:30 EST and was rallying to the upside.What did I find? Right, a dead-cat bounce. This particular trade was good for more than a point. I bet youknow what came next—right—a short. This was the setup for the next short as the stock returned to itsoverall trend. Since that time I look for these signals and have been able to find reversals, or dead-catbounces throughout the trading day: no muss, no fuss.There are far too many features to cover in this e-book without becoming a tutorial for HotScans. Ifyou would like to take a look at this revolutionary product, go to www.marketgauge.com and look for theHotScans link.
HotScans
HotScans draws on more thana month of historical data toevaluate a stock’s relativevolume, minute by minute. Aquick glance at this shows astock, NBTY, that hasexperienced a relative volumeincrease of 437%, and for thepast five minutes, is thestrongest stock rallying at thisparticular minute in any of thethree major exchanges.
8: Day-Trading StrategiesFollowing are many of the day-trading strategies in use by Wizetraders. I selected a handful ofstrategies that work well using the Wizetrade platform. Some of these strategies work best at the open oronly at the close, others require special light settings; I’ll point out any special requirements as we gothrough them. Often, there are one, two, or more methods for finding these trades, so I’ll try to identifythese also. Finding good trades has been the missing link; using Wizetrade to enter and exit a trade israther straight forward, finding a great trade is far more difficult. In the end, it is up to you to define andadopt a trading style and have a trading plan which best matches your personality and resources.We will begin the trading day with a gap up at the open:Charlene’s Method and Finding Stocks That Will Gap at the OpenDescription
AdvantageDisadvantageCaution
Finding the Trade
Optional Method
The purpose of this trade is to find stock that will run up or gap up in the open.Technically, this is not a day trade since the entry is as the close of the previousmarket. Traders often refer to this strategy as overnight trading.Requires only about and hour (maybe a little more) each dayMarket may go against you at the open; there is always a degree of risk in holdinga stock overnight. This method works best when there is a rally on the open.Check www.earnings.com to make certain you are not holding a stockthat is going to announce the following morning. Also check the news onthe stock.Find stocks with a fresh cross on the day and watch the short minutelights: 1, 2, 3, 5, and 10 especially. If the lights have good angle andseparation (at least 1 o’clock) and there is good volume, buy just beforethe close. Charlene likes to take profits no more than 40 minutes into theopen.Run HotScans looking for stocks that have significant increases in relative volume and price (5 green bars and possible a “+”). In the last 10minutes, run the scan in the 5-minute mode (Big Vol, Now) and check forstocks that have an increase of more than 1000%. Place your best choicesin Wizetrade and check the short minutes lights, if they continue screaminginto the close, you have stocks that have a high probability of gapping and/orrunning in the open. Check them in Wizetrade and use the three Wizemen forconfirmation.Jack’s System (Keakadog)from notes posted on the Wizetrade Users Site (Yahoo)
Description
Jack trades the first hour or so of the market (sometimes longer from his posts)and returns in the afternoon to look for potential trades for the next day. [Ed. Note:For those of you new to day trading, the big action is at the open and again duringthe last hour of the market. The open (first half hour) can be very volatile and riskyand is avoided my many traders.] For those of you who have watched the BootCamp Video Series, Jack’s system continues to evolve. His original system calledfor finding setups before the market opened. The following information comesfrom a series of posts on the message boards
AdvantageDisadvantages
Requires only about and hour (maybe a little more) each dayNo real disadvantages except it does require good trading skills and has a verytime-consuming process of finding trades.
Finding the Trade
Jack says he uses Wizefinder as the principal means for finding setups for hismorning list of starters. [Ed. Note: his original method called for finding stockswith a huge percentage move from the prior day that also had volume in themillions. The simplest method for screening for these stocks is to use the screener
on marketwatch.cbs.com.] He also uses smartmoney.com, CNet’s tech stocks topfive high and lows each day and Investor’s.com but finds IBD not very helpful. Allof his picks from Wizefinder and other sources are percentage and volume based.He places a great deal of emphasis on volume. He does not have a set goal,rather he tends to stay with the lights until they give him exit signals. “Instead oftrying to work every nickel and dime out of the process, I try to remember to takesome of it off the table. That is why I am in and out of some trades several times.I don’t need to get it all, just the biggest part of it!”Jack mentioned that he often uses the Gainers and Losers window looking forstocks that have made at least a 5% move. He moves all of his potential choicesinto Wizetrade for evaluation. (Jack uses the Three Wizemen.) He also mentions:“If any of the picks go south quickly, I’m out of it and take my losses rather thanride them down.” He also mentions the importance of staying glued to the computer when in a trade.Jack says: The first site I head to each morning (or the night before) is Wizefinder.Next, I go to smartmoney.com. Go to the Market section then lick on MarketMovers. A new screen will pop up which will give you ten options for the stocksand the lists for the [three major exchanges]. I use 600,000 shares as the minimum volume and percentages above 5% to choose the stocks using the ten options to cull for Wizetrade candidates; usually there are a small number of bothlong and short candidates resulting from this process every day. Next, I run themthrough Wizetrade to remove the weakest links and use the charts to rate thesurvivors as trading candidates.In regard to Wizefinder he says: I set my parameters between $5 and $25 anddaily volume of 600,000, although I do look at the Wizefinder selections between35¢ and $5 just to see if there are any stocks in this group. Here I may allow atrading volume of 300,000. My logic here is that if they show as a long candidatewith the 180, day, week and month all showing good separation, I may take therisk. I wait until the market open to see how strong the direction is. I do not shortthis way. In other words, the cost is cheap and it usually does not cost me muchwhen I’m wrong. I just get out and move on to something else. However, When I’mright, these are usually my best dollar plays of the day.RocketsDescriptionAdvantageDisadvantages
Finding the Trade
Optional Method
Rockets are those stocks that should shoot up in the open and possibly carry onthrough the day.The process of finding rockets is relatively quick. Setup work is not required theprevious evening. Many Wizetraders are claiming success with Rockets.You are trading in the open. There is no way to check for relative volume. Thismethod works best when there is a rally on the open. Results are dependent onhow relevant your database is. Also, the database is restricted to 500 stocks. Youcannot screen the entire market using your database.Run Gainers and Losers about 9:35 (EST). In order not to eliminate stocks at theopen, go the parameters section of Wizetrade and set volume to 8,000 and openup the spread. Run Gainers and Losers on Wizetrade; the first stock to come upwith volume is your rocket.Run HotScans looking for stocks that have significant increases in relative volume and price (5 green bars and possibly a “+”) beginning about 9:35 (EST). Runthe scan in the 5-minute mode (Rallying Now) mode. Place your best choices inWizetrade and check the short minutes lights. You may not be able to catch thetrade since they will be moving very fast. This is your decision; you may want towait for a pullback and a new entrance. These are the stocks that will move up allday.
Rocket Theory With A Twistposted on message board by Debbie Rogers
DescriptionDescription
Parameters are:Stocks: 1-15Volume: 800,000Spread: .05Default Sort: Percent
`
Rockets are those stocks that might shoot up in the open and possible carry onthrough the day. Debbie Rogers supplied her version with a twist.• Pre-market, I will look at the heat map and futures for a green and positivetrend• From market open at 9:30 to 9:45 go to Wizetrade’s G&L Biggest Gainers andpick the first fifteen stocks and enter them into Wizetrade; look at the 15-, 30- and60-minute charts for good angle and separation. If some of them don’t meet thecriteria get more from the Wizetrade Biggest Gainers list. Try to fill the fifteenwindows in Wizetrade unless you run out of time.• Between 9:45 to 9:55 pick the one(s) that have the best angle and separationin the 3-5-15-30- and 60-minute charts. Look for a fresh cross on the 3- and 5minute charts. Why enter between 9:45 to 9:55? Because stocks tend to loosesome value the closer you get to 10:00 and you get a better ask price, then theystart back up right after 10:00.• Exit before 11:00. Stocks tend to go flat and it’s profit-taking time (just as before 10:00). Remain if your pick has solid-fuel tanks and it’s unstoppable.• Exiting using the typical technique. If the 3- and 5-minute charts are tanking,exit, or if the 15 is arching over to the 4-6 o’clock angle, and the 30 min turnedred.
Finding Trades with a Little Homeworkfrom a message from Patricia Valentine
Description
Patrica Valentine uses a worksheet to select potential winners for the next tradingday.
Description
After selecting the list of winners for the day, via Wizefinder, CBS Market Watch,and Barcharts [barchart.com] (I personally only scan $1-$10 stocks with a 10%gain—as do many of us.) I cross check, select the top 25 or so, then I use the worksheet. I collect the data for the worksheet from Yahoo Finance. I like to use anaverage volume of greater than 500K however, sometimes I will go less if there isgood news or a good reason to consider a little lower volume. Then I look at thehistoric price for stocks that are below their 50-day high; once again, I will sometimes trade those at their 50-day high if the news warrants it. I look at insiderbuying, the message board (which usually is a lot of nothing to pay attention to,but I do look), I look at the news (significant news goes under miscellaneous). Theselection process rules out low volume, and stocks at their 50-day high withoutsignificant news. I plug the remaining into wizetrade and look for the rockets. Ithen rate the wizetrade results on an scale of 1 - 10 (usually I just put that to theleft of the chart in the margin). My buy picks are the ones with the highest ratingon my list. I do miss sometimes, but on the whole it works fairly well for me.Symbolxxxxxxxxx
Last
Avg. Vo.
Hist. Perf.
Mess. Bd.
Misc.
Fail-safe Method(notes from the message boards)
Description
The Fail-safe Method isFailsafe Methodin use by several expeTiming LightsDirection Indicatorsrienced traders with812 60 78 135 90 Day3success. They cautionMin min min min min min minthat this is strictly a daytrading method. If youare familiar with the 8Steps to Success, orFailsafe Method/Alternative Settingshave not used theTiming LightsDirection IndicatorsWizetade method suc810 78 90 180 Day Mth4cessfully after paperminminmin min minMintrading for a month, thismethod may not be foryou. It has been usedfor both shorts and longs profitably. Trade in the direction of the “D” lights whichare the three longest minute lights. Use the lower minute lights, the “T” lights, totime your fresh cross 8 minute fresh-cross entry or exit. Obviously, if the threeWizemen are in sync with the “D” lights, you are far better off, but that is not arequirement. Timing the entry or exit with the overall market’s daily pivots is moreimportant. Once you are comfortable with going in the direction of the “D” lightsyou can trade against them which is more risky but often very profitable. Remainaware of the of the location of previous support and resistance on the Wizetradechart when you set objectives entries and exits. As with any system new to you, trypaper trading first until you gain the comfort level you require. (SongmanV)
Finding the Trade
This is a day-trading light setup and does not address finding trades.
Optional Method
Steve writes: “My lights are 1 2 4 8 12 24 78 D. I rarely use Three Wizemen Ifyou’re a beginner, I would suggest you use 3WM until you get the hang of this. Iwatched these stocks for a few months before I became comfortable with the styleI trade. I do however always use FAST. Sometimes I enter on the open using the1-minute light. For the most part I will use the fresh 2. For my exit strategy I getout when I’m satisfied with my profit or when the trade STARTS to go against me.I don’t use any stop orders because my trades happen quickly for the most part soI stay at the computer and in my case, watching my profits go down is the beststop I can use. The way I trade is a little risky and I wouldn’t recommend it forbeginners. I play the ups and downs in these stocks which means that all my lightsare rarely in agreement. As I stated in my previous post, I spent a lot of time justwatching the way these stocks move and doing nothing but that. The best adviceI can give you is take your time with this. You will make your share of money soonenough so don’t jump in unprepared.”
SCALPING: If you are new to day trading, many of the techniques,such as the two above, involve sclaping. This term originallyapplied to fighting for the difference between the the bid and theask (spread) but has come to mean simply taking very shortterm trades. There are day traders who buy at the open and remainall day, possibly trading one of the longer signals such as the150, 90 or 60. The trades that we are covering at the momentsometimes involve trading the very short lights. These are thetrades which carry the most amount of risk.
Trading on the 5-Minute Trend, or FASTERDescription
This system of fast trading is often referred to as John Tuma’s Method. Johnbrings to the day trader the ultimate in fast scalping with his FASTER method.[The following description comes from a handout John distributed at the 2002Wizefest.]
Execution
Some stocks tend to have long smooth runs during the day and others seem to bevery unstable. These runs can last from 20 to 45 minutes. The key is being able tofind the stocks that behave this way and then identify when these runs start. Theruns are found using the fast technique. It uses the same concept as the day,week, and month with the exception that it is much faster. In addition to havinglong smooth runs, the stocks need to have significant variations when they aremoving. I look for three things in a stock. It must have large volume, significantvariations in price every day, and it must have several longs smooth runs eachday. With this technique, you don’t care what the market is doing of what the stockis doing. All you care about is that each stock varies about 10% each day and ithas long smooth runs on the five-minute chart. You must watch your stocks andwait for all the lights between the 1- and 5-minute to be the same color. What Ihave found is that if the 5-minute charts are strong, up or down, with good separation and the 1-minute is not converging, that trend will probably continue for another 2 to 10 minutes. Sometimes it may go for 20 to 30 minutes.
Finding Stocks
John uses Wizefinder to find stocks; these are his parameters:•Trades at least 5 million shares, on average, per day.•Less than $10 in price. I use a $10 maximum because you can buy a lot ofshares with a small amount of money. In addition, the spread is very small,typically no more than 2¢.•The price of the stock varies about 10% every day. All you care about is thepercent of change. To determine the variation, enable the pop-up screen inthe parameters section of Wizetrade. Slide the cursor across the bottom ofthe 1-day chart and look at the high and low for each day. Just estimate 10%as you check each stock. A 10% change in $5.68 stock is roughly 60¢. That is,it might vary between $5.23 and $5.79. Don’t get hung up on exactly 10%, weare looking for about 10%.•The stock makes long smooth runs with good separation on the 5-minutechart. (A long run is 20 to 40 minutes.) A good example is SEBL and a bad oneis PALM.•The lower the price is, the higher the volume needs to be.[John buys in 1000 share lots of less than $20,000. For example, $9.76 = 2000shares; $4.25 = 4000; $2.56 = 6000. He only buys 5000 - 6000 shares on highvolume stocks. He doesn’t buy more than 6,000 because these trades move toofast.]
Execution
John sets his lights to 1, 2, 3, 5, and 8 plus the Day, Week and Month. To identify5-minute trends, wait for the 5-minute lights to turn. You need to have a freshcross on the 5-minute chart with good angle and separation (FAS). Once you haveFAS on the 5-minute chart, look at the 1-minute chart. It must have good angleand separation and not be converging. John says: “Be patient. Don’t jump in toofast. These runs happen several time each day. Wait for them. Make your buy orsell decision only on the 1-minute chart (never on the color of the light). ”Once you are in the trade, look only at the 1-minute chart. To decide when toget out, watch the angle of change. The lines on the 1-minute chart are alwaysmoving and usually rapidly. The green and red will switch many times during along run. If you are long, watch the angle of the green line. If it goes flat or closeto flat, keep watching. It can go to a 4 o’clock angle and that’s OK. If it changessharply (greater than 4 o’clock) get out. A 1¢ change on 6000 shares is $60. The
beauty of this technique is that you will ride the gains as long as they go, but willget out quickly if it turns around. You minimize your losses this way. The gains faroutweigh the losses.Other Information
To use this trading strategy, it is imperative that you have a direct access (ECN)trading platform with level II data feed. (John uses Carlin Equities.) John alwaysuses market orders and mentions that because of the high volume of the stockshe trades, upticks occur very rapidly (important when shorting).
Stocks
Examples of the stocks traded by John Tuma in JNPR, SEBL, JDSU, FLEX,SUNW, CIEN, NTAP, NXTL, ORCL, Q, BEAS, VRSN, SANM, RATL, and BRCD.
West-Coast Offense(notes from the message boards)
Description
Markie writes that this is a good scalping strategy for the last half hour of themarket. It may work well for the folks who have a view of the Pacific Ocean anddon’t want to get up too early to day trade.
Execution
With one hour left in the session, go into Wizefinder and search for NASDAQ onlystocks with the highest percentage gain for the day. Look for a well-developed daywith good separation (no bounces). Look for stocks that are $10 and up with aminimum volume of 500,000 (average daily volume). Then, with 45 minutes left inthe market, start watching for lots of good scalps.Note: This is also a potential entry into a swing trade. If you plan to hold overnight,then you should have entered the trade on a fresh cross on the Day with strongWeek and Month charts.
Shorting Tips(notes from the message boards)
[Jim on Shorting in response to someone who had just taken a loss in his first short]Shorting is not upside-down-buying long. It is easy to short (using a limit entry). But it is not easy toset the stop for shorting. It requires strong character for you to execute the cover (accepting a loss) whenbased only on a signal bell you set on an eSignal chart. The Wizetrade short interval graphs themselvesprovide one of the best stops for a short position. If you were wrong, Wizetrade will show it. Because of theuptick rule, right from the start youwill have a small market moveGary writes about using the TICK and TRIN for timing your entry.This applies to any pick when you are going long. It’s difficultagainst you plus the spread andto make money in this very volatile market so you want to havecommissions. Count on having threethe odds in your favor. There are 3 leading indicators which Icharges against your account forrecommend you watch during the trading day. They are the TICK,shorting.TRIN, and S&P Futures index. I will keep this short but in generalHere is how I set a stop for mybefore you buy your stock check the TICK and make sure it’sday-trading account. I try to limit mypositive (number of stocks ticking up is greater than the numberlosses to around $100, which on 500of stock ticking down on NYSE). The TRIN measures volatilityshares I consider to be 20¢ from theand has an inverse relationship to the TICK. When advancingentry point. On 300 shares I wouldstocks dominate volume flow, the number reads under 1.0. Whendeclining stocks command volume flow, the number exceedsallow 30¢ ($90). You would only en1.0. You want the TICK positive (usually a range of 200 to 600)ter a short when the stock is runand the TRIN below .9 when you execute your trade. Also whenning high volume. Of course, youthe TRIN exceeds 1.5, watch for stocks to rebound and whenlook at the recent top and the genmomentum momentum momen/TRIN is less than .4 watch for a sell off. Similarly, when theeral market. One-minute eSignallocation1000locationlocationTICK approacheswatch fora sell off and when it’s -600 tovolume colors will switch from gen-1000 watch for a rebound. Also watch the trend of the S&Perally green to generally red. Youfutures index on 5 minute chart. ($TICK and $TRIN)want to see the change of stock
ownership from strong hands to weak hands. This means you have to pick the turn down closely. Twosignals that will greatly increase your likelihood of a successful short position are: (1) having the TRINindex somewhere around 0.40 (Ed. note: information about TRIN can be found at http://www.stockcharts.com/education/What/IndicatorAnalysis/indic_TRIN.html, and (2) having mysterious high volume spikes appearin the stock, along with very little price motion (one-minute chart). There is one rule that must be followedwhen shorting: DO NOT ever short a quiet market. Do not break this rule. This means shorting in the DeadZone can be the riskiest time of the day. A quiet market can explode to the upside at any moment. Beforetaking a stock down, market makers will often run the stopsKeeping tabs on the QQQs and/or inof the shorts. No use taking you along for the ride. There candex, plus volume will give you thebe a dramatic rise off a quiet market. If the stock is goingsignals everytime.down, this raid on the stops is all over in a few minutes. Asight to behold. The market is crooked? The market makerswill give you head fakes to sucker you into taking a short position and then run the stops against you?Naaaaahhhh. Don’t even think of it. They are nice guys. They aren’t that desperate for easy money (not).With any luck at all you just might get a short away somewhere near the end of a panic short covering rally.(MACD and CCI help here.) But once all the shorters have bought back their positions, the stock may turnand then fall like a stone. Shorting such a downside leg is very difficult.The Heatmap StrategyDescription
The Heatmap Strategy appears to be a straightforward, relatively easy tactic toimplement. However, it appears by all the chatter on the message boards, that anumber of Wizetraders have added their own twists. These variations and commentary will be presented here. This is a strategy to play the market open.
Procedures
The original method, which I was taught, was to evaluate the NASDAQ pre-market Heatmap (NASDAQ.com and follow the links). I remember Mark McDonnellsaying that you should look for a stock that has moved at least 2.5%, with the bestvolume possible. If you are going long, then you won’t enter at the open unless allof the indices are long; if you plan on shorting a stock, then all of the indicesshould point to a short opening.I always thought of this as a strategy to play at the open. However, the following isfrom Vic West (message board): “With all other indicators correct for a heatmapplay, you enter in pre-market around 9:15AM and exit quickly after the open. It ispre-market gap strategy. [Uh Oh, it’s now a pre-market gap play.]However you decide to play this strategy, there are a few things to consider:
Cautions
First of all, a market maker friend of mine told me that he thinks only pros shouldplay in the pre-market. “It’s far too dangerous for all but the professional trader.”You must enter with a limit order.Consider that the heat map shows only one-hundred NASDQ stocks, not the entire NASDAQ or the entire market, so you are limiting your choices for a run up orgap up at the open.This is a tough market and if you enter pre-market, the indices have a nasty habitof late of flipping or turning against you at the most inopportune times.Finally, I have used this strategy a number of times with the intention of enteringat the open. Many times, a stock that is displaying strength in the pre-market justdoesn’t perform as advertised. So use this strategy with a great deal of caution.If you are looking for a gap in the open, you might wish to consider Charlene’sMethod or the optional HotScans method at the previous close.
Breakouts/BreakdownsDescription
A fellow trader named Mike Gorchav developed this system about a year ago andwe traded it exclusively for quite a while, at least until we tired of all the preparation. The purpose of this strategy is to have a steady stream of trades all day. Allof these trades are break outs or break downs because of the method in which thisstrategy is structured,. Personally, I prefer playing reversals, second stage rallies,and rallies, but; I used the system with some success for quite a while.
Procedures
The following steps must be followed, some every evening:1. Make a list of about 50 of your favorite trading stocks. In Mike’s case, hechose the 50 stocks that had the greatest volume. I picked stocks with reasonable volume that had the largest average daily range. I also limited my selections to stocks that traded at least 1-million shares on average per day.2. Once you have chosen a list of stocks, you need not change them everyevening, but you are free to add or delete stocks from the list.3. Every evening or after the market, you must set a trigger to buy or sell shortfor each of the stock on your list. Each stock will have two triggers, one forlongs and one for shorts. For a long trigger add 6¢ to the currents day’s high.For short triggers, subtract 6¢ from the current day’s low.4. Set up alerts. Many trading platforms allow you set up alerts. Some are sophisticated and have popups, others send e-mails. There were days when Ihad so many alerts I couldn’t look at them all.5. At the open, eliminate any stocks that gap. Period. They are not in play for theday.6. When you get an alert, treat it as any potential Wizetrade. Evaluate the charts,look at the indices, and be sure to check the volume. Most of the time theseare profitable trades since they are breaking up or down past short term resistance or support.
Follow-up or Secondary RunsDescription
I have repeatedly observed that when I find a stock that is in play (food stocks—not) that is, a stock that is driving the market on a huge increase in relative volume, the stock will often pull back and give the trader a second trading opportunity. Earlier I mentioned a stock that I found afterit had already run up 2 points ($2). Later in themorning it pulled back on the 10-minute light (8minute for you sophisticated traders) and commenced another run for $2.60. This isn’t your every-day rocket, this is the monster of the day.When you find it, stay with it no matter what.
Finding the Trade
In this case, I’m looking for a one-day-wonder.Since I’m a day trader and will NOT hold overnight,