These Are Some Of My Favorite Trades
Gap & Crap = Mix It Up
Traders who have been around for a few years know
how annoying it is when the market gaps higher then moves sideways. Yesterday
early on that was the case. Given the premise of HVT, we need to buy stocks on
pull-backs or sell short rallies. Pull-backs in a Gap & Crap market are few and
far between. However, if you are willing to deviate just a bit from the standard
game plan, not only in a G&C market but in any market, you can find some
nuggets.
Fade the Gap
trades are one of my favorite and most robust trades, yes they buck the trend,
but like a stretched rubber band, they inevitably snap back. There are some
basic characteristics you should identify, then from there employ some old
fashioned tape reading skills to pick the entry (no, there are no books on tape
reading). Look at stocks like DIS yesterday:
– The sell-off or rally must be
sharp and “emotional”, and orderly move will typically not have a sharp
counter-trend move
– Stochastic on both 1 and
5-minute charts must be turning or on the verge of turning up
– Consolidation period, could be
2-3 minutes or as long as 10 minutes. The longer the consolidation, the less
robust the “bounce” is
– Indication that some bids have
come in and that offers are being taken after a consolidation
^next^
FX
Well, every trade is easy
in hindsight. I went long the EUR
yesterday afternoon, I like the chart
pattern and more importantly, it looked as though the dollar was on the verge of
testing the 52 week lows again. The trade did play out very well into the early
hours of this morning, and then reversed hard. I have not been stopped out of
the trade, but what was once a nice profit, is now a small loser. Was this
avoidable?
Well, first of all, one cannot
trade 24 hours a day, so an exit towards the highs was more a function if you
were suffering from insomnia or not. If I was up, yes, I likely would have
scaled out of some. However, the premise for FX trading is for each trade to be
a Swing Trade. Sometimes we can be our own worst enemy by micro-managing
a trade. Equity swings are a by-product as we push the time frame out on our
trades.
I am playing this EUR for a big
move as the dollar breaks to new lows, if in the meantime I go on a roller
coaster ride, so be it. I want to be in position if and when the move plays
out.
As always, feel free to send me
your comments and questions.