For the past couple of days I’ve only been trading off the new highs indicator. This real time information is updated constantly throughout the day, listing price and # of times a new high is made. I posted a picture of it here http://fearandgreedtrader.blogspot.com/2009/07/momentum-indicator.html#links
Anyway I was looking to put another arrow in my quiver to counteract the HFT bs that is going on this days. Trading stocks that are constantly making new highs seemed to me a good way not to get caught in whipsaw action. It’s worked good the past couple of day and today really paid off.
Today I traded :
RL
AIB
LNCR
PCLN
USG
ATPG
AMED
RVBD
If you take a look at the charts they are all similar and constantly moving higher. No shakeouts or messing about. Small spread and big volumes mean it’s easy to move in or out and not get screwed.
You don't have any patterns to figure out. It's making new highs. End of story. That's the side of the trade you want to be on
Not falling in love with any favourite stocks is the key. Just view the symbols as a vehicle to make money and discard them when they run out of gas.
Remember also that when a stock is making new highs or new lows, it is never too late to get into it when it is in play. The fact that it keeps making new highs or lows means it still has momentum and that is the only thing that matters.
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13 comments:
Excellent advice! Good to see you're back from your break :)
How do you differentiate the fakeouts from the big runners? By how often they appear on the HOD list? Most of the ones on your list ran pretty big today.
I've been switching to momo trading the higher priced stocks. I used to trade the lower priced ones, but they can be too illiquid and do funky things and sometimes have bad spreads.
However, I'm wondering how you recognize which is a good momo candidate. For example, I traded MA today which was a great momo trader. However, some others, like SPG and POT, ended up pretty choppy. I ended up eating away most of my MA gains by getting caught in the chop with a bunch of small losses on these others.
Good to see you back Scott! When you check your HOD list, have you set any filters to limit out stocks with too little volume/too low price? Also, when you see a stock show off a few HOD ticks, how long do you wait for confirmation to trade? Or do you just enter and set a stop?
i'll tell you when to get out if you tell me how to get in, which high is the trigger, the third , sixth , ninth, or tenth HOD?
Is the indicator showing how many times a stock has made a new high of day? RVBD and AMED are not close to their 52 week highs, so I am confused on what you mean by "playing the new highs indicator". What kind of high?
sia: the new high is the new high of the DAY, read all the links, all there! the problem is which high of the day statistically is the best to enter !
it's highs/lows of the day, which these days are frequently hitting new 52 week highs.
yesterday the high flyers were making their #700th or so new highs later in the day so its more of the constant upward movement I key in on.
i start my day 1 hour after the open so most of the time trend is already evident and so I never see #1 new high of the day.
I never know what a stock will do in the future but if it is constantly hitting new highs that means to me that the buyers are in control and I want to be on their side.Weeding the fakeouts from the big runners is a matter of playing the probabilities. A vague answer I know but the market can't be predidcted. you've seen yesterday how so many strong stocks just keep on going and going. It's a matter of just going with the flow, get in and set a stop.
Scott, I know another excellent professional trader who also usually waits out the first hour. Have you written any post specifically on this point of waiting out the first hour, and why you choose to wait? My reason would be to gain more information from the market that can aid decision-making, but would like to hear if you have any insights on the topic.
Thanks!
Starting an hour after the market opens has more to do with me wanting to sleep that extra hour and be fresher. Here on the west coast the open is at 6;30 am , so getting up at 5;30 or 6 am is way to frickin early. Though I did a couple times last fall when the markets were crashing so as to take advantage of those conditions.
An added bonus of a late start is that trends are already formed and there is good momo an hour after the open.
Scott,
Thank you for your answers.
By the way, I did try watching the HOD list today for stocks that hit it multiple times. I caught BAX that way...played it twice for a gain then lost on my 3rd try on its failed breakout above 59 mid-day. I also caught AIB and HMIN that way. However, I made a mistake with HAWK...spread was good when I entered but didn't pay attention to the low overall volume. Bid dropped way down on me, while the ask stayed the same....ask began to walk down and I was forced to take a bigger loss than normal.
whether this works or not- will see. perhaps use the MA7 as an entry, then track HODS, use the MA7 as a beginning for a scan , then track HODs. ill try to set up on Strategy Desk. I imagine large gap ups should be eliminated from consideration.
If anyone uses tradestation here is code to use in RadarScreen to find new lows/highs. Note: it actually calcs # highs - # lows made during the day, so it captures both rising and falling stocks.
vars: highCount(0), lowCount(0), length(0), plotValue(0), highestHigh(0), lowestLow(10000);
If Date <> Date[1] then begin
highCount = 0;
lowCount = 0;
length = 0;
highestHigh = 0;
lowestLow = 10000;
end;
if High > highestHigh then begin
highCount = highCount + 1;
highestHigh = high;
Alert("New High");
end;
if Low < lowestLow then begin
lowCount = lowCount + 1;
lowestLow = low;
Alert("New Low");
end;
plotValue = highCount - lowCount;
Plot1(plotValue, "H/L Count");
if(plotValue > 0) then
SetPlotColor(1, Green)
else if(plotValue < 0) then
SetPlotColor(1, Red)
else SetPlotColor(1, White);
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