ice please also that ETYS has the strongest run-up in themorning, meaning a lot of buyers were there for it. Another bullishsignal for ETYS making a run again within the next few tradingdays.
Aiso, know your stocks’ trading behavior, e.g., YHOO tends togap up after being oversold on a close. So, | would have covereda YHOO short at the end of the day.
Traders, do you understand why there's a smail ‘hook upwards’at the end of the day for all four stocks? It's caused by mm'scovering their shorts, whice drives price up. That's another piay,the “last-30-minute-ride-the-short-covers-up-on-a-down-day”action.
(note: we will cover volume and time-of-day patterns in another page)- Send us email DISCLAIMER
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Back to.Developing trading discipiine: using stops MODULE t
consistently for “insurance"®@ Main Points:
Enter a stop market seii order immediately after buyingstock (and getting confirmation from your online broker) sothat you know your “downside" as soon as you enter thetrade.
It's up to you to decide how close your stops should be. West &Friedfertig say your maxiumum should be 3/8 of a point in theirdaytrading book. | use even closer stops, particularly whentrading lots (1K shares), usually no more than a few spreadsdown.
Don't EVEN THINK about using so-called "mental stops" forseveral reasons:
TECHNICAL PROBLEMS: Broker and Internet Connectionslowdowns:
FIRST: You may easily run into the problem of a downed or slowISP intemet connection to your broker. You do Not want tofrantically try and close (sell) a position when your ISP is deadand you see the stock plurnmeting 1/2 point or more. Not fun,gang.
SECOND: Your Broker may be experiencing delays and problemsin receiving a sell order if you depend on fast executions. Evenpro daytrading brokers slow down sometimes and you do notwant to be on the wrong side of a trade when it happens.
THIRD: Your pe may have a problem; even though | have aP2350 128megs memory etc. the ram can run out and freeze upyour computer. You may accidentally hit a wrong key, have apower outage, spill coffee, have a nagging wife (lol); any ofahundred distractions may keep you from selling manually. Useautomatic stops instead.
MENTAL PROBLEMS: You hope it's going to go up after youbuy it:
Hope, fear and greed - welcome to the daytrading casino!Anything you can do to make your trading activities moreautomatic, using solid trading techniques, will help you becomeprofitable. Entering a stop market sell order after buying stock willhelp you with this.How to Use "T Stops"Tetaok te Prats
Ok, so you've just bought 500 shares of SPLS using a Limit Buy SPLS17 3/8 order.
You've clicked "Daily Activity” until you see the confirmation (in bold)that stock is "Bought":
110899 152603 152605 Buy 100 SPLS 1754, Bought* $1,731 25108999 1541.26 154198 Buy 400 SFLS 175%, Bought $6,959 99TORO 15:45:25 Sel 500 SPLS 174, Canceled1LOB999 15:86:16 Sel 500 SPLS 177), Canceled1LOB/1999 15.8:34 Sel 500 SPLE 177, Canceled1103/1999 155001 Sel 500 SPLS 171s, ChoredImag? 15:50:32 Sel 500 SPLS 17°, Cancelled1408/1999 155133 153250 Sell 430 SPLS 174% sold $7,580.171108/1999 155150 155194 Sell 70 SPLS 1746 Sold” $1,238.08
The very next thing you do is enter a Sell Stop Market order at, say 1/8thpoint under where you bought (in this case Sell SPLS Stop Market at 171/4). (Datek was slow this am, took 4 mins to confirm order).
Now, | nailed it correctly and more buyers came in. The stock moved upanother 2 spreads. So, | Cancelled my original Sell Stop Market 17 1/4order, clicked "Daily Activity” til the confirmation came through, then entereda Sell Stop Market order at 17 3/8. Congratulations - you've "cleared thespread" and can now sell stock for what you bought it at. Well, that's ok butI'm here to make money, so...
Repeat the process: cancel your original Sell Stop Market orders as theprice gets bid up and enter one spread higher each time. You can see |used "trailing stops" very close to the current market - | want to lock inevery penny of profit | can.
Finally, sellers start to come in at 17 5/8, and my stop is taken out. | am up1/4 point on 500 shares for a profit of $125 in 15 minutes. Continue doingthis throughout the trading day and make a good living.
If | was wrong, I'd be stopped out at -1/8 point, or just $60 (+$20commis) or-$80 on the trade.
Does that make sense? It's a tight "scalping" play, and shows just one ofmany ways to daytrade.“E4 Send us email DISCLAIMER
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Nudging more profit out of the trade: when to shake out vs. whe ;staying in the wade® Main Points:
« As you know, i advocate keeping smaii stops of no more than2-3 spreads under where you originally bought the stock foraii daytrades.
e There are, however, many different trading styies and stocksthat can be played; so | will give some tips and guidelineshere for those who use somewhat larger stops and may beswing/position players.
¢ These tips are also applicable to the higher-priced and morevolatile of the internet and hi-tech stocks that | trade: DCLKAMZN YHOO EBAY BEAS JDSU QCOM etc., as this particuiargroup of stocks often need to be played with larger (say 1-point) stops, due to the large spreads, sometimes as big as4/2 point.
The daliy chaiienge in trading highiy voiatiie internet-type stocksis, “do I stop out with a smail profit/ioss, or should I take on more
risk for a bigger reward (or loss)?Examples:
Here is an exampieof the 17-minuteeSignai tick chartsetup | use. Close-line, SOMA, RSI 12,Slow stochs 13,MACD 12,26,9.
DCLK on 11/23. ThePlay? It was insomewhat of atrading range allmoming (155-164);spotting the correctlong play seemeddifficult.
So, | waited til | sawhigher highs andhigher lows (roughly2pm, 14:00), to entera small shares trade.
| had spotted that 164was the prev.resistance (now
  
support), so | bought200 at 164 1/4 at14:00 (2pm). Stop setat 163 3/4 (1/4 pointunder support level).
| could've shaken outafter the initial peakbefore 2:30, butdecided to stay in,with the stop at 164. |sold out right under170 (decade numberwhole resistance) fora nice profit of $1125at 3pm. | could'veheld for more, butDCLK seemedoverbought...it wentup a bit more, that's 7ok, I'm out with profit. esThis is an example ofan internet play that |used a somewhatlarger stop based onsupport/resistancelevels.
pr — Piva! lela)
 
AMZN on 11/23: Theplay? | was busywatching DCLK so |didn't play AMZN,though it had a nice runas well.
The buy signal?Volume breakout onhigher high at 1pm(13:00). | would havestayed in the trade untilit bagan making lowerlows on the pullback(around 83ish), eventhough it did continueup the safe exit wouldhave been using thetechnical indicator oflower low and lowerhigh as soon as it lost83.
Notice that volumestarted to decreasearound the pullback at83 right before 14:00(2pm) as well, anotherbearish indicator. It stillran up a bit beforefading, as 85 was thereal top.
 
Mini-Activity: Stay orshake out? See if youcan identify where youwould stay vs. sell.Hold your right hand upover the chart andmove it slowly from leftto right (or use an indexcard) to simulate theactual trading day.What technicalindicators (volume etc.)would you use?
Tips for Daytrading Net Stocks Through the Shakes and Wiggies:
+ The overall market is king of course, so always check the $COMPQ andespecially the $GIN to help you manage entries and exits. Where is itheaded? When will buyers return? When will they sell?
« Use the 3-stop guideline for net stocks as well, this time in combinationwith intraday support and resistance levels and volume and $GINdirection.
« Be more sensitive to when institutional "buy progams" and "sell programs"kick in for net stocks. Follow the $prem and $tring etc. as well as the $GINfor additional timing tips.
« Use stochastics and MACD if it helps. | rely on these, with volume, RSIand an MA curve for good measure, to give me an overall "feel" for what'sgoing on with this stock. Level 2 is alright, but not as useful for net stocks.| find level 2 gives false signals since there's so many daytraders/chippies(archips, players on ecn's like ARCA/INCA/ISLD) moving the stock price.
« Shakes and wiggles: | always like to use small stops and re-enter theposition, perhaps as many as 4 times, before capturing the true move.Playing net stocks is exciting, not recommended for players with less than6 months full-time trading experience. Start with the 'baby nets’ like MSPGCNET LCOS before playing with the pros on AMZN YHOO DCLK CMGIete.
 
“A Send us email DISCLAIMERModule Essential Skills for All Dayiraders to Leann; 9 “@PREMIOUS NEXT ®
Back toWhat the market makers and pros dont want you to know ae ,
@ Main Points:
« There are a few things that professionai traders and marketmakers do differentiy from the generai daytrading pubiic.
« Capitalizing on these tactics and protecting yourself, movingquickiy and with more concentration, wiii heip you to profitconsistentiy in the market.
e You shouid not try to make a consistent iiving tradingNasdaq stocks without investing in level2 equipment andquotes.
What the Daytrading Pro’s Don’t Want You To Know
How You Can Muke theMarket & Frontrun
Professionals do not make their living
buying stock at 30 1/2 and selling at 33 fora 3-point gain.
UO - Te bE a2 Maz eT IE
We make much of our iiving off the iessdramatic but more consistent order fiowderived from buying on the bid andselling at the ask many timesthroughout the trading day ; this works inflat and choppy markets.
 
Farrell's book has some ok insight intodoing this for listed stocks; but it's not avery good book imo.
If | can join the ISLD bid for 1K sharesNOVL at 17 7/16 and then offer it out on theask at 17 5/8 I've just taken $187 profit offthe street. | do this 20 times in a day andI've made $3600/day income. Not bad. If |really nailed the bottom (rare) and usetrailing stops I'll take even more off thestreet.
If | really want the stock | may split themarket and offer to buy 1K shares at 1715/32. This is my "plan b". Unless the stockis in a dramatic upswing with no sellers insight, | almost never - REPEAT NEVERPAY THE ASK. For 1K shares I'm down$62 + commis. already if | do that. | can'tmake a living paying up 2 spreads. Neithercan you.
Concealing « Many times a market maker like MSCO will get anPutterns for institutional buy order for, say 200K shares of alarge Orders stock. He doesn't want you to know about it, or else
you'd buy too, and the price would go up. He'd lookbad to his client.
« What do you do? Look for whether the mm stays onthe bid consistently, the size of blocks that are beingtraded, the overall volume of the stock at that minute,and where his “trade box" is at. (trade box = thespread between where he buys vs sells the stock. egMLCO above is at 17 7/16 x 5/8).
« If he returns to the inside bid more often in size (10)than the ask, he is probably a buyer. But, he willfrequently camouflage his intentions usingISLDANCAfother ECNs (See next point).
Detecting mm'son INCA/ISLD
« Market makers (and us too, forthat matter) like SBSH can routetheir orders several differentways: INCA/ISLD/Selectnet/etc.
« So, you may see SBSH offeringto sell 3 spreads away frorn themarket, but he's really selling aboatload via ISLD on the insideask.
« How we detect this is to seehow many times the order is
 
« This is why “tape-reading" is such a vitalskiii you must master.Homework assignment:watch the tape and 1-
refreshed. If you see ISLD 24 minute chart for ane of
your stocks that has over2M average daily volume.See if you can detect
1/4 ask 10 size and yet time andsales shows over 40K being soldat that price, for example, youknow there's probably one or tape support and
more market makers routing their resistance levels, alongorders on ISLD. Their “public with the "pivot points",face" is what they show on level where stock is changing
2, the "true action" happens hands between the
when orders are routed via market (eg at 24 1/32 fordifferent ECNs to the market. the I2 box above).
Know what to look for.
7 « If you want to daytrade for a living, it will be muchwith the easier if you learn how to short as well as go long.= « More money can be made shorting than going long;however I'd recommend getting at least 6 monthsexperience daytrading the long side first.« You have to be able to play both sides of the market tosucceed at daytrading.« You should have no preconceptions about what yourstock is going to do over the next hour; you are aspeedboat darting in and out of positions in response tothe larger trend: up, down or sideways.
Shorting with the ax: first of all figure out how to identify theax. This link will give you some likely candidates for yourparticular stock; just look at who in the top 3 is one of themajor players (MSCO MLCO SBSH GSCO). Ignore nite, pwijc,mash etc.
Next, make sure the market direction is in a selling mode.This can be at the open (shorting an open gap up), or a safershort at lunchtime, on a stock that's making lower highs andlower lows. The open gap short will probably be coveredwithin 15 to 45 minutes, while a short during lunchtime willprobably be covered by 2pm.
Find out which ax stays at the inside ask and keeps
refreshing his bid. He may back away now and then to avoid
being obvious, or he may keep selling. Enter a sell order at
the uptick you feel is a good place to short, and of course
enter your stop market buy order after receiving confirmation.“Ea Send us email DISCLAIMER
 
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Back to
Getting Your Trigger Finger Ready: How to MODULE 1Overcome “Fear of Trading"@ Main Points:
 
All of us have a “Fear of Trading", (usually often!), aswe fear losing money in our trades. This is healthy andnormai. What is unheaithy and stupid is to faii toprotect your capital and enter a daytrade as thoughyou are an investor, thinking “it's a great stock for thelong term."
fae ey The minute you confuse daytrading with investing is
the minute you start losing capital to those of us whoare daytraders. In fact, we count on it. (This was my mostdifficult lesson to learn as a new davirader. )
Tips for Buildi radingExamploss conrinthed.
First: To REDUCE the Fear of Trading, Enter a Seii Stop MarketOrder IMMEDIATELY after receiving your buy confirmation fromyour broker. This will protect your capital and let you know whatthe downside is upon entering the trade. (ciick the fink for moreon this). My stops are always within 2-3 spreads of my buyprice. This is a ultra-conservative strategy that limits my lossesto $20 - $200 per trade maximum.
 
As you'll find in other pages. it's fine to get “stopped out"severai times tii you get the reai bottom, or on wiggies. it's notfine to take a 1/2point or larger loss.
Second: Practice papertrading until you get correct on at least1/2 your trades. Because of your use of trailing stops and stopmarket orders, you do not need to be right 80%+ of the time tomake money. Your risk:reward ratio is profitable.
Third: Start with smaii share trades (100-300 shares) untii youbuild confidence in your trading skills. Increase your share sizeto 500+ shares oniy after you've been trading 6 months orlonger.
Another Idea : Celebrate small stops taken well. That's asimportant, probably more impecrtant in your first couple ofyears, than making profitable trades.Have you ever taken karate? The FiRST thing you Learn is HowTo Take A Fail and Not Get Hurt. Same thing in daytrading.Before you get to be a black beit in the offensive, you MUSTLEARN HOW to PROTECT YOURSELF from pro traders iike meand the market makers who want to take your money. Be happywith iosses under $200. Be ecstatic for getting out at 1/16th-1/4point losses.
These things buiid your confidence as a trader. if you're tradingscared, you'll probably lose more. If you have several winningtrades in a row, don't get cocky and rationaiize that you're“playing with house money”. You earned the money. Now,continue trading with the same intensity and care that you didbefore your winning trades.
What Eise Works? | tell many of my traders to make sure they havea comfortable, well-lit trading area with motivational messagesand trading tips posted around to reinforce what works. | still have"Tight Stops - NO EXCEPTIONS" posted on all my monitors.
Don't drink too much coffee..you don't want to have to run to thebathroom in the middle of a trade. After a few $80 cups of coffee |learned that one! lol
Make sure to communicate your trading goals to family membersand others for support.
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<=> Moduie One: Worksheet 1 - Caiiing Topsand Bottoms
xf
MODULE 1
e Akey skiii in trading is to deveiop a sense for theapproximate intraday bottoms and tops of stocks.Many Say it can't be done. It can.
« We learn how to play “pivot points" using acombination of techniques:
1. Fibonacci retracements (38%, 50%, 62%) of the averagedaily trading range are worth looking at.
2. Looking for higher highs and higher lows off a bottomwivolume
3. Seeing the trade sizes and blocks at potential pivot points onLevel 2
4. "Momentum Patterns” that you recognize as being tradable
5. Knowing the 5- and 10-day trading range of the stock helps -see bigcharts.com.
You shouid use this worksheet (or a similar one you makeyourself) to help develop your skills to play the tops andbottoms of stocks you trade.
Directions:
1a
Choose 3-5 stocks to follow.
Write down the multiday trading ranges (top and bottorn) foreach stock in the space provided. Choose somewhere from 3 to10 days' range.
. During each trading day, try to guess where the stock's most
iikeiy top and most likely bottom will be (write in the spaceprovided).
This technique works best for stocks that are in a trading range(eg UIS, NOVL).
. Use this worksheet to help you learn how not to get “surprised”
by a stock's price movement, and to develop patience inentering and exiting trades.
Circle an "S" or a "B" to indicate whether you are buying thestock as it is still in an uptrend (B) or if you are trying to pick thebottom as it is selling off (S).
Remember that the trading range is often established by 10:30-11:00am EST, so try and call the bottom and top earlier in thetrading day. Good luck!Tops & Bottoms Skill Building Sheet Goal: Improwe my ability to accurately predictstock tops, bottoms & buy opportunities.
Ticker Pattem (Sell/buy) BOTTOM & MY TOP ‘tual BOTTOM, & TOP BUY TIME _Best BUY TIMESs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ta |ua |ca |ta |ce jee ka | tal cal ca ta joa | tal cal cal ca) ca} ca|ca jee |natt | tae OP |S Yt oo Bo | Oo) bo] te Yo Jd | tet by bo) bo] | | to ft to
 
 
 
 
 
 
 
 
 
 
Example: here's 4 days of UIS price movement. The 4-day range is 23
/8 to 25 3/4. The approximate support and resistance levels are 24-25
/2. Lexpect the stock to trade in this range, and am unlikely to buy if theprice is in the middle of the range. I'll wait until it gets oversold to 24 1/4to buy long or to short up at 25 1/2, depending on the $SPX (S&P 500index), $COMPQ (Nasdaq composite index), $TRIN and $PREMdirection, along with technical chart indicators, such as volume andtrendlines. The point? Don't make low-percentage trades by buying inthe middle of a stock's trading range; buy on oversold dips that havebuyers coming back or into uptrends w/volume.
  
 
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cessful Online
 E [ i Dy adler BackModule = Essential Skills fon AC WS tO Le wate
Module One: Worksheet 2 - Trading SkillsPractice: Your DAILY TRADING JOURNAL
« Failing to learn from mistakes and capitalize on gainshas been the downfall of many potentially successfuldaytraders.
« Keeping a daily trade journal like the one included herewill help you to spot both profitable and unprofitabletrends and patterns in your daily trading style.
« We encourage all our traders to keep a daily tradingjournal for at least the first 6 months of their tradingcareer.
+ You should also keep one whenever you're in a strongwinning or losing streak to capture the why's andhow's of your trades. You'll start to see patternsdeveloping after awhile that will help you to become abetter trader.
 
You should use this worksheet (or a similar one you makeyourself) to help you see what types of stocks you play best,how long your profitable trades are, and reasons for enteringand exiting trades.
Directions:
1. Download and print at least 30 copies of this Microsoft Wordfile: tiournal.doc
2. It can be viewed with the word viewer (link here) or word pad(wordpad doesn't include the table borders, though)
3. Keep a daily trade journal that details your trades for the nextmonth. Start by just making one trade per day minimum for thenext two weeks (100-300 shares), dpending on marketconditions.
4. At the end of each day, study the time of day, reasons for tradeentry/exit, and sector you were trading in(internet/techs/boxmakers/retail etc.).
5. Modify your trading style based on what you learn aboutyourself: your trade management. What did you do correctly?What was an error? Do you know why you entered and exitedthat last trade?
6. Modify the Daily Trading Journal to include more spaces forareas that you want to capitalize on (for winning patterns) andstop doing (for losing habits).[Daytraders’ Daily Trade Journal Date: Net Profit/(Loss): $
sTOcK Sector #SHARES BUY SELL NetGAIN TIMEofDAY  TotalTime Reason You ReasonYouPrice Price or LOSS Bought/Sold ithe Trade? Bought Sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A final note: you should also track your daily profit/loss and tradesizes on a graph (| use excel), so that you can see your progressover time.Module = Essential Skills for All Daywaders to Leas: Back toOne MODULE }
> Module One: Worksheet 3 - Opening GapTrading
Two of the most profitable daytrading plays on the market
 
open are to:Buy a stock either Sell a stock on the openpremarket or on the that has gapped up by atopen that has gapped least 5-10%:
down at least 5-10%:
   
Remember the module 1 trading examples on this topic? (click for review)
Let's practice how to do this over the next week of trading, ok? Rememberthese are plays that are made premarket and into the open.
Perhaps buy on ISLD premarket after a stock has tanked and buyers arereturning (then sell somewhere from 9:30 to 10:00 depending on momentum).Or, short a stock that's gapped up on the first uptick on the open (at 9:30-9:40am)
A second daily skill youshouid master is to keepan eye on the volume and __ [Bigessesbewseos
- . 2»price action from 9:00am a= zi IE WSite| Datel. OPTIMIZED (Cus
to 9:30am - is a stock you Nasdaq Composte 09-14-28,watch gapping up a bit 3.10357 0.00 (0.00% §39.95 0000007 3.44781 0.00 (000%)
Yolume Bid Lastbefore the market on good
3,352,600 26 26 5/16volume? If so, there's a 3,108,400 104 105
    
   
      
+ = ‘ 2,168,000 40 1/2 40 13/16good chance it will continue 1,653,500 66 3/16higher on the open before 695,400 56 1/8 55 7/165 ws, 216,200 97 93 1/8sellers come in. This is aa paneer 93 3/16different from the large 83,400 80 3/4 80 1/4gap plays you see above 23,000) 91 1/8 9111/8se . 51,400 4213/16 4215/16- this is small gapping of | 30,900 152 146 5/8under 2-3% generally that is 27,000 231 226 1/2i i 17,800 180 1773/16a good indicator of the first Ta.500|129 3716 126 5/16half-hours’ price movement 11,600 267 265 1/2(9:30-10:00) ahead for the 9,600 60 1/8 58 13/169.7NN ARs 1/7 BR4-2 4/4
stock.
In the example to the right,you can see CSCO hasalready traded over120,000 shares at 9:14 amand has gapped up 1 1/4points already. Sure
enough, CSCO went on up
to 95 1/4 before selling off
around 11:30am. Be sure to
follow the premarket action on
any stock you intend to trade -
the volume should be over 20K
shares by 9:30 to provide any
meaningful signal. Which other
stocks below are gapping
premarket? (note: only nasdaq
stocks are followed this way).Screensnap: Worksheet 2- Click here to d/l Microsoft Wordworksheet file (1