April 25, 2011
- in Uncategorized by schooloftrade
Run the stops for day trading profit or avoid a big loss
– How do we know when stops are being run, instead of a REAL move?
o Traders can be very CONSISTANTLY predictable with where they place their stops
o Example: Long position open, my stop will be placed below support.
o Example: Short Position open, my stop will be placed above resistance
o We know where the stops are placed by traders
o We now need to find the MOST OBVIOUS areas for this on our charts.
o 34range, find the highs and the lows
– USING A SLOWER TIMEFRAME we look for the most obvious price patterns
o Channels
o Wedges
o Sideways range
o And we think to ourselves “where would the best trades be on this chart?”
o Then think….where would I place my stop?
o And THAT is where you need to look for the stops being run.
– EXAMPLE:
o We get long from the lows, we place our stop at the swing low support
o When price comes down and stops me out, it fires off a short trade
o This short trade shows up on my tape (T&S) in the SAME COLOR and DISPOSITION as a true short position.
o So how do we know which is which?
o THERE IS NO WAY TO TELL from reading the TAPE
o Timing is everything!!!
o If we see big sellers 4-5 ticks above where the stop would be, and we see increasing speed, momentum overbought, this tells us the sellers are in control, and that the stops will only HELP US
– Does the BIG MONEY ever conceal their intentions? Break up into smaller orders?
o They do this ALL THE TIME
o Telegraphing is very common = when you see a LARGE order on your DOM (not the tape) and then its quickly removed.
o Does the speed of these orders make a difference?
o Speed is the main component in a price reversal
o As prices rise, im looking for speed to slow down, and then sellers enter the market. When momentum gets over-bought and curls down I then enter the trade.
– Why don’t we use VAH and VAL levels as support and resistance
o I don’t trust levels that I don’t know very well (calculation)
o Too much activity around those areas
o To use these levels effectively you need to use a very wide stop
o The levels are different from one trader to the next.
