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Here's my dodgy day trading system: What's it called?

Discussion in 'Trading Strategies/Systems' started by SmellyTerror, Nov 21, 2009.

  1. SmellyTerror

    SmellyTerror

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    Sorry for being a slack bastard and not researching this better, but maybe people will be amused by my flailing about.

    Ok, so I don’t have time to read squat, pretty much, and won’t until February (domestic situation). But I watched some of my long-term shares moving about, saw some patterns, and start doing a wee bit of day trading. It’s been good. I’ve had two experiment weeks and have made money – I mean, two weeks isn’t worth a damn thing from a statistical point of view, there are grannies who picked something at random that made 200% in the last couple of weeks, but it’s made me hopeful I can build on this.

    But I don’t know what it’s called, and my occasional squinting at forums and blogs hasn’t helped. I want to learn more, but I need to know what the thing I’m doing is called so I can start doing word searches and buying books.

    Here’s what I’m doing: I’m looking for “panic” stocks – stuff that’s had a big recent fall, or a big recent rise, preferably both (BTA was the one I first noticed, for example, though post-dividend it hasn’t come back to my pattern, and I’ve since learned the difficulties of low volume). Doesn’t matter if they’re going up or down overall at the moment, though.

    For some of these, there are shares that pretty consistently (say, around 75% of the time) rise 2% or more during the day *after the open*, and, on those occasions they don’t make that 2%, open at their high (so all-or-nothing). Even shares in freefall are looking to rise, pretty often, and take an hour to realise they don’t have legs. People looking for the bottom, I guess.

    So the basic strategy is to buy at the open, sell at what I think they’ll safely reach (within an hour or so), and at the same time NOT buy when I see they’re going to fall from the open.

    Finding trades: I’m using absolutely dodgy tools, embarrassing really. I know that – this was just “experiment week” (twice). So to find shares I like, I’m looking at a Commsec OLHC chart (? – the one with a bar and two dots) at two months timeframe, and seeing how many of the little open-price dots are a good chunk below the top of the range line.

    I’d like to go into past intraday data, but I don’t have access to that yet – so I’m making big assumptions on when that high is reached (I want to be out by 11:30am at the latest). I try to watch the current intraday stuff for a few days, but yeah, big assumptions. And I find them by looking at shares pretty much at random. God, it makes me a bit embarrassed to write this. I know I’m using a rock to do surgery here.

    Trading: deciding to back out of the open (ie decide it’ll fall) or deciding when to sell is based on the DOM (again, on Commsec, mashing “get quote” every few seconds, and tabbing through the different stocks I’m watching. *shame*). I can see big blockades on the sell or buy, and can count sellers / shares close to the price to get a feel for which way it’ll move (eg: those guys piled up there expect the price to rise, and there aren’t many sellers until X, so I think they’ll come up, and after X there’s a lot of clear space to Y, so if it breaks through that, then... etc).

    I’m also watching how many sellers / shares are jumping in (the number of each being less relevant than how it changes – are sellers drying up? Are buyers piling on?), and paying close attention to the dog bastards (I kid, I kid) who are feeding slowly into a price to dump shares into a clump of buyers without turning up on the DOM and scaring honest folk like me. :p (DOM being that side-by-side list of sellers and buyers, with 10 (?) price levels showing number of shares and sellers at each price – does everyone call it a DOM, or is that just Commsec? Sorry if I’m being confusing).

    Anyway, so far my entries have been perfect (I have never hopped-on to a faller-from-the-open yet), but my exits are a lot harder (obviously I’ve missed a fair bit of rise now and then, though that’s to be expected, but also have held on too long and fallen too fast and made a loss. I’ve never gone past my arbitrary stoploss of 1.5%, so that’s something, but knowing the difference between a price stopping breath and actually keeling over dead is something that I haven’t gotten the hang of yet).

    Overall it’s been profitable – perhaps TOO profitable, since I earned more in those 20 hours (starting at about 9am to read stuff, then trading ‘till 11 on average) than I make at work in 75 hours of regular employment, and that surely can’t be sustainable(both weeks I made 6%, FFS – I know that won’t continue). So now I’m worried I’ll get too cocky...

    Going on from here: my most obvious problem was Commsec. I was paying a bloody awful 0.3% each way, and that ended up taking a big chunk of my profits. The other issue was slow-ass orders, which made me suffer a few times. Oh, and I couldn’t research squat – I need to be able to do a search for more targets, and track them better.

    That’s easy to correct: I’m going to get IB and spend a couple of months paper trading to get the hang of it and to get some better numbers on what I can expect, plus invest in some more / bigger monitors (I’m on a laptop at present).

    I also made some terrible trades while the baby was climbing my leg and bashing the keyboard, with my worst loss coming when he needed a nappy change right after his keyboard-smacking had (unknown to me) triggered a trade I’d set up. Came back 5 minutes later to find an "at market" order I hadn’t intended to go in had bought and then spent the whole bum-wiping period falling. That sucked. From February the kids are in childcare in the mornings, so that’s that one fixed...

    I’ve also read a bit about resistance levels around here, so I’m starting to use that as a second-opinion on how the DOM is moving (not trading now, just watching while I get my gear in order). Got a ways to go there, of course.

    Anyway, there it is.

    What’s that called? Is there anything obvious I’m doing wrong?

    Is this all just a really bad idea? Like, a classic blunder or something?

    Thank you to anyone who read all of that...

    Disclaimer: in case it's not abundantly obvious, I'm a newbie and don't know a god damn thing. Anyone taking my advice is insane and will lose all their money.
     
  2. nulla nulla

    nulla nulla Positive Expectancy

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    "dodgy day trading system" sounds like a good name for it. I don't think you are going to be able to sell the idea to others though. Good luck.
     
  3. yonnie

    yonnie

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    dont listen to all the naysayers; mostly they are losers.

    would it be called tape reading??

    and no, you wont learn from reading books...........just get your tools, heaps of experience paper trading and go over your trades in the weekend to see what you did right and what went wrong. Then when you feel confident, place some small bets and take it from there slooooowly. I`m sure you`ll get the feel for the shares and make bucket loads of money if you`ll work really really hard and be patient.:)
     
  4. lukeaye

    lukeaye

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    Can i just say, There is no basic, successful buy open sell close system that works. Either your drawdown ends up being to large or the sp just doesnt work that way.

    There is defenintely merrit in trading the open of a market however.
    I studied CSL and followed its open very closely and found a few behavioural characteristics in the share. I was able to profit from it quite well. But having a day job makes it impossible for me to do this.

    Each equity will have its own behavioural attributes, because the people who trade them will each have different systems. It can be done.
     
  5. SmellyTerror

    SmellyTerror

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    Uh, thanks for the replies.

    First, Nulla, I'm not trying to sell it to anyone. Where on earth did you get that idea? I assume this "system" is something other people do, since someone like me with no experience, no software and terrible brokerage can make money doing it (if briefly). It SEEMS really obvious. That implies it's got a name, even if it's to say "don't do that".

    For the record, I posted this in the Beginners Lounge, but a mod moved it here (which is fair enough, given the subject). Just noting that I'm after help-the-newbie responses, not suspicion or snark.

    Second, Luke, I'm not selling on the close, I'm out in the first hour or so. So is that what you mean by "There is defenintely merrit in trading the open of a market"? Is that what I'm doing, then? I'll do some searches for "trading the open" and see what I get. Thanks.

    Third, thanks yonnie, though I'm very happy to hear from naysayers. I'd rather hear about a common mistake or trap before I spend a couple of months to learn it's stupid myself.

    I'm going to paper now to get a better feel for what I can expect long term, but when I went into "experiment weeks" I wanted to put real money, painful money, in there to see how that natural panic response would affect what I was doing. And I learned some good lessons, which will really help as I go into systematising this a bit. I know, deep down, that I'll mentally fudge paper results - "nah, I wouldn't have done that if it was real money". Well, I put real money in, and real money kept me honest.

    But yeah, paper trading now for a while, then small amounts after that.
     
  6. skc

    skc Goldmember

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    Sorry I have no name for your trading system. In fact many day trading books would say avoid the first 2 hours of trading as prices are volatile and that the open price is often printed by the amateurs. But, for this same reason you can have the best trades if you are on the right side.

    If you have studied past behaviour and found the method to work... then why do you need confirmation from some book? Your PnL and your trade statistics will be your confirmation.

    Using the refresh button for your style of trading is like bringing a nail clipper to a gun fight... your chance of winning and further skill development will be better if you upgrade your tools. You can try Bourse Data or Spark for free, full, dynamic DOM. Or a webiress platform from a CFD provider will also do the trick.

    Instead of paying OTT brokerage to Comsec, you are better off trading with a CFD provider. Just make sure you use a DMA provider and enter stop loss the same time as you enter the trade, and keep your position size exactly the same as you would with Comsec. Plenty of threads around here about CFD so do some reading.

    Good luck.
     
  7. shortlist

    shortlist

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    skc - you enter a position of $5000 with Commsec, which is $5000 worth of stock - if you switch to a CFD provider for cheaper brokerage and you put $5000 down on a position they're going to buy $50,000 worth of stock with it, are they not? Is the answer to buy $500 worth of stock with the CFD, they will in turn purchase $5000 worth of stock with it and voila - you have retained the same position size as with Commsec, but got the cheaper brokerage?

    How wrong am I on this - veryt probably, but look forward to your reply.
     
  8. skc

    skc Goldmember

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    Typically "position" refers to the exposure size, not how much money you need to put down. Of course I am not advocating a beginner to go nuts with 10x leverage...
     
  9. shortlist

    shortlist

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    THanks skc - I am trying to work out how to use a cfd provider for other reasons than leverage - and use them ewithout using any of their leverage - is this possible or is it set up so you have to use leverage?
     
  10. yonnie

    yonnie

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    you dont have to use leverage with a cfd provider as long as you keep the value of the orders within your deposit.:)
     
  11. SmellyTerror

    SmellyTerror

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    Thanks skc.

    The reason I'm looking for a name is just to see what I can find about it. Don't really want to compete with people who know more than me - or miss a classic blunder, as in "trading the open sucks in a lot of newbies, it looks like it'll work, but it's doomed to fail"...

    ...but yeah, so far I've not found much that's useful, and I have to come back to the fact that's it's worked pretty well, and I think I can improve on it.

    Thanks again for the reply. I'll look up CFD providers.
     
  12. MITCH027

    MITCH027

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    a recent tool I found which is free of charge is google finance

    google.com/finance

    It allows you to track intraday price movements both today and in the past

    It is free though the prices are delayed by 20mins or so, but this won't affect you if you're looking for past data

    This will help if you want to track stock volatility

    I am currently experimenting with a similarly dodgey system also with dodgey tools - worked with paper trading but has not really worked out since I started trading with real money (though I haven't lost anything, I haven't made much e.g. 0.1% of my capital base in 1.5 weeks) good luck

    lukeaye, really interesting comment regarding the behaviour characteristics of certain stock - how do you go about testing these characteristics? I strongly believe the market works off speculation/emotion
     
  13. condog

    condog

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    Your doing ok

    First hour and last couple is where most the action is...

    Domestic situation concerns me more then traing strategy....

    Biggest risk to wealth, sanity and most other things is a domestic situation...

    Likely to lose more on that trade if you dont play your cards right then every other combined.....

    Soldier on and keep learning....be brave and ask stupid questions over and over until you learn....

    Oh and change your name cause no ones gunna buy a trading platform from Smelly Terror if you nail it...
     
  14. nulla nulla

    nulla nulla Positive Expectancy

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    It has been several months now, are you still trading the opening (surge/fall) or has your strategy changed with the passage of time?
     
  15. SmellyTerror

    SmellyTerror

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    Nope, I'm being responsible and doing my apprenticeship. Get my old tried-and-true stock picking skillz (seat of the pants stuff - let's wave our hands and call it "discretionary fundamentals" or something) - anyway, taking those old skills and learning some decent TA to refine my entries and exits. It's been fun and interesting and quite effective, though I'm still in the "Fibonacci and EW is a crock of ****" phase that I guess everyone goes through. Shows I'm a newbie, I guess. :rolleyes:

    But as for my "trade the open" stuff, that's waiting on more time. Babies go back to school in February and work should be less insane by then, so I'll have some moments to put into proper system development. No matter how well I did on Experiment Weeks, I want to have some better numbers behind me before I get into this stuff again. I'm hopeful, though.

    Will let y'all know how it goes in 6 months or so.

    Yeah well, if I need to sell it then I didn't nail it. :p
     
  16. nulla nulla

    nulla nulla Positive Expectancy

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    Good luck in 2010. Sounds like your "dodgy day trading system" is a work in progress now, evolving with your learning and increasing experience. I have been looking at RSI (Relative Strength Indicators) and MACD (Moving Averages Convergent & Divergent) in the graphs for the stocks I follow. I don't base my trading arround them but they are a useful tool along with other research etc.
     
  17. Dowdy

    Dowdy

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    Try the dartboard system.

    I was reading the Guinness Book of Records 2009 - a monkey had a dartboard fund and bet 6000 professional brokers in terms of profit.

    He made over 200% profit between 1999 - 2002.

    I think his fund was called monkeydex
     
  18. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    Interesting read here.
     
  19. Wysiwyg

    Wysiwyg Everyone wants money

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    I wonder what the exit criteria were? Two darts in the one hole maybe.
     
  20. DaveMac

    DaveMac

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    Hey SmellyTerror,

    What you've described sounds like an Opening Range Breakout entry, or ORB.

    These were very popular in the mid to late 90's, made famous by Tony Crabel. While his old book now sells for something crazy like $400 on Amazon these days, there are heaps of webites that describe how to trade with ORBs out there for free now, complete with the pros and cons of the method for you to check over.

    From what I've read trading ORBs work best in high volatility markets (similar to what we have now), and less so in low volatility markets (expect many whipsaws).

    Hope this helps :)
     
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