Monday, August 18, 2008

Q&A

T writes -

I’ve been following your blog for quite some time and I must say it’s great … next to TraderX’s blog (which doesn’t run anymore unfortunately) it’s the best out there. Keep up the great work.

Q. Nevertheless, I have some questions that I wanted to ask you regarding your trading style. How do you judge what stocks you play during the day. Do you have a general watchlist of momentum stocks, do you screen for stocks every morning before the market opens (like TraderX with the gappers), what is it?

A. I prefer to trade NASDAQ stocks because computerized trading is more orderly and level II allows for greater visibility of market depth. I usually have a short focus list of stocks to watch from my own watch list and from HighChartPatterns newsletter of B&B setups. I screen for gappers every morning using several sources but primarily Trade-Ideas scanner, IB scans, and Briefing.com.

Q. What time frame do you mainly trade? What is your favorite setup? And how do you judge when to take your partial and when to get out with the rest? Last question ;-) … how do you judge where you put your stop loss and do you trail it?


A. I use four time frames daily, 15 min. 5 (3) and 1 min. - and hopefully everything gels. I prefer the 15 min. time frame which generally allows for more room to run. If I see a nice setup on the 15 min. I still want to make sure it fits with the higher and lower time frames. I manage the entry on the lowest time frame because that is the most critical part of the trade. My favorite setup is base & break which comes in many forms including a gapper momentum play that sets up with NRIB (NR7) or C&H or 3 PP B&B. For chart patterns I usually have a measured move target of 100%, but take a partial after 3 consecutive wide bars in my direction. Otherwise, I look for support/resistance levels to partial out. For gappers, I will exit in full the standard 38% Fib. extension (Trader-X style) if I get into a stock that has a wide spread or stalls midway to the initial target (AMED from Friday is a good example). If the gapper moves quickly out of the base with good volume and a tight bid and ask, I will partial out in the usual manner. Normally, I place my initial stop at previous bar high/low on 15 minute chart, but if price stalls on the BO and prints a reversal candle right out of the gate, I tighten the leash. See example of PG from Friday.

Thanks a lot for sharing your expertise!


4 comments:

TraderLK said...

Jamie:

I want to thank you also.

If you have anothe rmoment for some questions.....

Do you pre-set your order(s) and/or initial stop(s) and wait for them to be triggered or do you use market orders?

Do you use a lower time frame to time the exit?

What criterion do you use to pick your day's focus list from your various watch lists? How many on the days focus list? Do you prefer to do one stock at a time or to have multiple trades active at the same time?

Again my thanks and admiration,

Lawrence

Jamie said...

Thanks Lawrence,

I use buy/sell stop orders but I set them just minutes before the expected trigger.

I use 1 minute for exits on stocks that stall or fail like PG. For AMED I used 15 min. and level II in final moments to try and squeeze a bit more out of the trade.

The focus list is usually based on daily charts. Mainly looking for B&B, chart patterns such as flags, NRIBs, trendlines, support/resistance, and gap extensions or fills. For example tomorrow I'm looking at B&B - LEH 15, AKS 50 and FMCN 30, DRYS 80 or failure to hold support 75. NVDA 2 IBs, RIMM testing trendline and base at $125, and ELN which made nice move on Friday has retraced 38% of last leg up and I'm looking for move towards a gap fill, plus I have the HCPG trading list.

I prefer if one trade triggers at a time, but manage multiple active trades. I often trade Eminis as well as stocks. Today, I was short both ES and NQ.

Formerly ADD Trader said...

Hi Jamie,

Re: Trade Management.

I assume you size your position by taking your max risk amount, and dividing it by the entry/exit spread. But if you manage the entry so closely (on the 1 min), is your max loss amount mostly theoretical? Or put another way, do you ever hit your max risk amount on a trade?

Thanks
Formerly ADD Trader

Jamie said...

Hi Formerly ADD,

Yeah, of course. Many stocks move very fast on failed breakouts, it's inevitable. But if it moves slowly and it's obvious, then I will save myself from a bigger loss.