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My Day Trading Strategy:

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zigzagman

Posted: Sunday, November 02, 2008 5:56:18 PM

Rank: Advanced Member

Joined: 8/14/2008
Posts: 314
Location: Memphis

racer,

I know there are as many strategies for Day Trading as there are day traders. I found what works for me after many years of studying the market and refining which Technical Indicators work best for me.

Would you believe when I first started Day Trading I used every TI on the chart below? Then I realized that some of them were lagging indicators and some of them weren't necessary for Day Trading at all, so I looked for the ones that would give buy and sell signals before a move.

I like to keep things simple by only trading my favorite stocks that I've been watching for many years. The exception to this rule is when I find a new playmate like I did in TSO last month. I don't do Futures, Currency, or ETF's. And not because I'm afraid of learning something new. I stick to what I know best, and I try to find ways how to do it better every day.

And as far as the "discipline" you applaud goes, I had to learn that the hard way. As I'm sure most new Day Traders must also, or fail. My first couple of years were pretty tough, and I learned the hard way that when you don't get out of every trade when you are $100. down on a 1000 share trade, you can be down over a thousand dollars in a very short period of time.

I also learned that cost averaging down has to be the stupidest thing you can do at that point. Sometimes it works and you can get back to breakeven fairly quickly and maybe even escape with a profit, but the times it goes against you can be extremely painful to the pocketbook. Needless to say, I never have to employ that strategy any more to try to get me out of a bind I've gotten myself into, and I recommend to other Day Traders to never cost average down on a trade that's gone bad because your exit strategy is faulty.

Once I learned that lesson well, my winning streak was on a roll. Two years ago, I was Day Trading full time about 25 times a week. Here is an example from my Excel worksheet for one week's period that shows my win to loss ratio. Every one of these trades were quick scalps that took less than 10-15 minutes from beginning to end:

As you can see from this example of one week of my Day Trades,

I had 13 winning trades that add up to $1786.27

and 5 losing trades for $523.04

(with only one exceeding the minus $100. rule because it was falling so fast, by the time my sell order executed it had fallen another four cents.)

THAT ADDS UP TO A NET WEEKLY INCOME OF $1263.23!
That used to be a decent average weekly income for me when I finally figured my strategy out, but a week with a net gain of $2,000. wasn't unusual.
___________________________________________________________________________________

I found a better chart that doesn't look all washed out to show how my Day Trading strategy works using only Bollinger Bands, the CCI, Stochastics, and Volume. Here is a five minute chart of AKAM that I remember actually trading that day about two years ago. I made a few thousand dollars during the time frame of this chart.

The trick to Day Trading is to find a very volatile stock that can move a dollar or more from the lower Bollinger Band to the upper one and back quickly.

First, lets identify the three indicators I mentioned above:

* The Bollinger Bands are at the very top and consist of two red lines than enclose the candlesticks and moving averages.

* The CCI has two blue horizontal lines marked -200 and +200 with another blue line passing up and down through the horizontal lines, which is the signal line.

* Stochastics are the two purple lines near the bottom. There is a fast line and a slow line, and when the fast line crosses up or down through the slow line those are the Buy and Sell Signals

* Volume is at the very bottom.

There are four perfect entries during this 1.5 day chart where just about all of the indicators agree with each other and signal a BUY to go Long. As you can see, this stock is stuck in a trading range that during the time frame on this chart is showing UNCH. There is no real trend, so it's smart to just play the volatility.

Just before 2pm on day one.
At 10am on day two.
At 12:30 on day two.
At 2:15 on day two.

That's because:

*The PPS had broken below the lower Bollinger Band.

*The CCI had dipped below the -200 line and bounced back up through it, which is my most important BUY signal.

*Stochastics were showing very oversold below 20 and bounced up sharply after hitting that point, with the fast line crossing up through the slow line, which is my second most important and confirming BUY signal.

If the PPS can break up through the middle Bollinger Band (not shown on this chart, so you have to imagine it), it will usually head up to touch the upper Bollinger Band where you TAKE YOUR PROFITS as soon as it gets there while the Volume is still peaking.

Notice on this chart that the periods of highest volume happen when the PPS hits the upper Bollinger Band. That's because the people that bought at the lower Bollinger Band are bailing out and taking profits, and then selling short to ride the PPS from the upper Bollinger Band back down to the lower one.

Look at the trade on the first day from just before 2pm to just after 3pm. You buy 1000 shares at the lower Bollinger Band at 30.00 and sell it about 75 minutes later close to 31.00 You just made almost a thousand dollars in just over an hour!

The same thing happened between 10:30-11:30am on the second day, if you had bought at $30.20 and sold at $31.20 an hour later.

The Shooting Star candlestick that reached out way above the upper BBand would have been a great place to then take a Short position for another eighty cent gain or so...lol

SO YOU SEE, MY DAY TRADING STRATEGY IS REALLY QUITE SIMPLE USING THE FIVE MINUTE CHART:

==================================================================================

* BUY when the PPS is way below the lower Bollinger Band,

When Stochastics say it's very oversold at the zero line and bouncing back up sharply, and the fast line crosses up through the slow line,

And the CCI has crossed down below the -200 line and is crossing back up through it.

==================================================================================

** SELL to take your profits as soon as the PPS hits the upper Bollinger Band.

==================================================================================

*** SELL SHORT when the PPS breaks way up above the upper Bollinger Band,

And Stochastics are totally overbought at the 100 line and turning back down, and the fast line crosses down through the slow line,

The CCI has topped out and starts downticking through the +200 line.

And the Volume is way above average.

==================================================================================

**** BUY TO COVER your Short when it gets to the bottom Bollinger Band.

==================================================================================

***** RINSE AND REPEAT...lol

==================================================================================

The candlestick shape is important at the lower and upper BBands. It should preferably be a bullish "Hammer", or a potentially trend reversing "Doji" at the lower BBand, and a "Doji" or even better is a bearish "Shooting Star" when it gets above the upper BBand.

But it's important to remember that candlesticks were designed primarily to be used when analyzing charts of longer time frames like hourly, daily, weekly, and monthly charts. The do work somewhat for the one and five minute charts, but they really aren't that reliable there.
_____________________________________________________________________________________

I got so confident that my strategy actually worked, that I built a website offering my services as a mentor offering one-on-one private lessons while the market was open in voice-chat sessions using Skype or MSN Messenger:

http://www.market-master.net/daytrade.html

I still give lessons to a limited number of students. If you are interested in taking them, send me a Private Message here, or send me an email.
_____________________________________________________________________________________

I'm interested in learning more about the trading floor you run. Can you explain a bit more about this subject?

Are you hiring good Day Traders that want to work from home?...lol

Happy Trading,
zz

www.stock-market-lessons.com

racer

Posted: Sunday, November 02, 2008 8:06:41 PM

Rank: Newbie

Joined: 11/2/2008
Posts: 7
Location: SC

ZZ,
LOL, you're just a unrepentent scalper. You for sure didn't hold any of those AKAM trades to the upper BB back in 06. I was going to ask you how you determined exit prior to reaching top band or are you just using a TS. I do like your entry system. But as you well know the exit harder than the entry with most systems.

The name of our room is greatstocktrades.com. It uses hotcomm. I would like you to come do class on your system if you'd like. Always looking for new techniques. Most of us came from another room that did a lot of scalping and a lot of them weren't very successful. So I've been spending hours every week getting them to hold at least part of their positions for larger moves. But hard to break old habbits, even if they weren't successful. Normally do class every Sunday evening at 9:30 EST. plus some ad hoc ones during the trading day. Hard to balance west coast and east coast. We're just a small room, I have about a dozen clients. Just started it not long ago and have lost a few to the aforementioned discipline. It's kind of frustrating, as I'm sure you know, that people pay you every month for your expertise and then 2/3 of them go off the reservation and do some crazy things. But we've got a good group, the majority of them fairly new traders, but some experienced. Besides daytrades we also do intermediates( fairly short swings) and I even throw out some long term ideas occassionally as well as some options since that is my true love.

Let me know if you're interested and I'll get you set up as a presenter and you can actually show live charts, etc. Usually I do a brief rundown of major charts and then teach them for about 30 min. on new ideas, revewing setups, etc.

I'm surprised your system didn't sell better. From your postings can tell you're a good teacher. Looks like a fido(fidelity) chart. How do you get it to post in the chat here. I'd like to post some of mine.

Thx,racer

stockman

Posted: Sunday, November 02, 2008 8:30:34 PM

Rank: Advanced Member

Joined: 6/15/2008
Posts: 240

ZZ,

Too complicated. If the market ever gets past the bear, I'll show you another easier way to make more than $1200 a day.

zigzagman

Posted: Sunday, November 02, 2008 9:04:31 PM

Rank: Advanced Member

Joined: 8/14/2008
Posts: 314
Location: Memphis

racer wrote:

racer,

"Just an unrepentant scalper"...LOL, that's ME!

And YES, I do hold until it gets to the upper BBand on the five minute chart. The secret is watching the one minute chart. By the time the PPS gets to the middle BBand on the five minute chart, the PPS is usually AT the upper BBand on the one minute chart and hopefully starts to push it up.

This will cause the PPS to break above the middle BBand on the five minute chart, and when that happens it will usually head on up to the upper BBand.

When the candles are pushing the upper BBand up on the one minute chart, I look for the PPS to stay above the 15MA and the 5MA to stay above the 15MA for the uptrend to continue.

I also use the CCI on the one minute chart to show when the trend is about to be broken. That happens when the CCI crosses down through the upper horizontal line. Stochastic will remain overbought and moving horizontally near the 100 line for a long time as the PPS pushes the upper BBand up. When it finally starts to drop, and it drops below the lowest level of support (usually around the 80 line) is another signal the uptrend is about to end.

By that time however, the PPS has usually hit the upper BBand on the five minute chart, and Stochastics are at the 100 line. That's when I Sell and start looking to go Short if the CCI crosses down through the upper horizontal line on the five minute chart, and Stochastics fast line crossed down through the slow line.

You can tell if the PPS will be able to break the resistance at the middle BBand on the five minute chart two ways. You know it won't happen when Stochastics get turned back at the 50 line. The other is when the CCI gets turned back at the zero line. If Stochastics can push up past the 50 line solidly, and the CCI moves up past the zero line towards the upper horizontal line, you can be almost assured it will make it to the upper BBand.

And yes, my charts are from the Fidelity Active Trader Pro platform. I have tried nearly every trading platform out there, and the FATPro charts are without a doubt the very best I've ever used.

On my four monitor set-up, I use a combination of the Scottrader and the FATPro screens. I like Fidelity's charts and Level 2 windows, but I don't like the way the Time & Sales and watch list look. So I use Scottrader's T&S and watch list, because when the bid or ask go up or down the colors change from green to red. Also, when a new high or low of the day is set the color it shows is yellow, which really grabs your attention.

Here is a blurry screenshot of my four monitor set-up that has two watchlists, four Level 2 windows, eight Time & Sales windows, and two Scottrader one minute charts of the Dow and Nasdaq.

There are four FATPro charts with all of the Technical Indicators I use, in four different time frames for the stock I am currently Day Trading. One minute, five minute, fifteen minute, and hourly:

______________________________________________________________________________________________

I checked out your website and it looks really good, and I wish you luck with your new business venture.

What is "hotcomm"? Is that like gotomeeting.net or something similar where what's happening on my screen shows up on yours?

I am very interested in becoming a presenter. Let me know how to get started. It's something I've always been interested in. Teaching others how to become more successful traders. You can send me a Private Message here and I'll give you my email address and/or phone number and so we can discuss this further.

My private lessons were a huge success. I was getting people signing up like crazy for a while at $1500. a pop for the 50 hour plan, and it actually became overwhelming at one point. I did nothing else but teach Day Trading for a couple of years, and I was having a hard time scheduling them all in. It was my E-book that didn't take off like I was hoping it would.
_______________________________________________________________________________________________

To post a chart in these forums, you have to host them on an image hosting website first.

I use photobucket.com as my image hosting site. It is a free site that allows you to host an unlimited number of images, and you can create different folders for different subjects. You do need to register with them if you want to use the folder option where you can always look at everything you've saved. I've tried many other image hosting websites, and photobucket.com is the most reliable of them all.

Once you have uploaded an image to one of your folders, it gives you a choice of four URL's to use below the image. The one you want to copy is called "IMG Code". Just copy it, and then paste it into the body of your post on any forum where you want it.

I look forward to hearing from you.

Happy Trading,
zz

www.stock-market-lessons.com

zigzagman

Posted: Sunday, November 02, 2008 9:27:34 PM

Rank: Advanced Member

Joined: 8/14/2008
Posts: 314
Location: Memphis

stockman wrote:

ZZ,

Too complicated. If the market ever gets past the bear, I'll show you another easier way to make more than $1200 a day.

OK! STOCKMAN...LET'S DO IT!...

Now you've got my interest...lol

When do we start?...

I guess I have to dig the BIG gun out of the closet and shoot me a BEAR!

Now that would make for some...

REALLY Happy Trading,
zz

www.stock-market-lessons.com

wilfee@yahoo.com

Posted: Sunday, November 02, 2008 11:59:32 PM

Rank: Advanced Member

Joined: 7/14/2008
Posts: 34
Location: California

Guys...You'll do great work...really stimulating write ups...i am learning every day...lets bank some real dough this week.........Adam

Simple Living High Thinking

zigzagman

Posted: Tuesday, November 04, 2008 1:12:56 PM

Rank: Advanced Member

Joined: 8/14/2008
Posts: 314
Location: Memphis

I did a quick Day Trade (scalp) just after the opening bell today, and made $250. in about 20 minutes.

TSO gapped up about thirty cents at the open, and then formed a symmetrical triangle. The Bollinger Bands squeezed together real tight, which means a big move one way or the other was about to happen.

Because it had consolidated for half an hour, the five minute chart wasn't going to be any help so I only used the one minute chart for this trade.

You can see the perfect symmetrical triangle it formed on the five minute chart not long after the opening bell, and then the Volume started to increase which is a good time to get in:

_____________________________________________________________________________________

The Buy signal came when the CCI dipped below the lower horizontal line and then crossed back up through it and started to uptick sharply at 10:14am.

Stochastics were near the zero line at totally Oversold, and the fast line crossed up through the slow line.

The Parabolic SAR showed up below the candlesticks, and a green Volume spike showed up at the 10:18am so I was sure it would go up.

The three 'money' indicators above the CCI (Chaikin Money Flow, On Balance Volume, and Accumulation/Distribution) all started to uptick sharply too, which also verified the trade was going to be a good one.

The resistance level at the end of the consolidation was at $10.05 and that's where I entered with 1000 shares.

I stayed in the trade as long as the PPS stayed above the yellow 5MA. As soon as it closed below it at 10:39am I was out because:

The CCI crossed back down through the upper horizontal line.

Stochastics had been running flat at the 100 line and Overbought for a long time, and it broke down through the 80 line which was it's last level of support.

The Parabolic SAR showed up above the candlesticks the minute I sold.

Volume had reached a peak just as it topped out as the Day Traders took profits like I did at $10.32
_____________________________________________________________________________________

Happy Trading,
zz

www.stock-market-lessons.com

wilfee@yahoo.com

Posted: Tuesday, November 04, 2008 2:02:57 PM

Rank: Advanced Member

Joined: 7/14/2008
Posts: 34
Location: California

Perfect... Applause

. Thanks.

Simple Living High Thinking

zigzagman

Posted: Wednesday, November 05, 2008 12:21:38 PM

Rank: Advanced Member

Joined: 8/14/2008
Posts: 314
Location: Memphis

Here is my one Day Trade for today. I'm done for the day after netting about $600. in only 45 minutes.
___________________________________________________________________________________

My entry was mostly based on the five minute chart, as I like to buy after the PPS drops below the lower Bollinger Band.
TSO dropped over fifty cents in the pre-market session like it usually does, because the Futures were down over 100 points.

I entered because the CCI opened the session below the -100 line on the five minute chart,
and started to uptick nicely to cross up over that line.

That's when I bought 1000 shares @ $10.30 at 9:50am.
(in part because the double-bottom chart pattern on the one minute chart was breaking out).

Stochastics were totally oversold at the zero line and the fast line crossed up through the slow line on the five minute chart.
___________________________________________________________________________________

I held onto the trade until 10:35am because the PPS hadn't closed below the 15MA on the one minute chart,
or below the 5MA on the five minute chart.

I sold at $10.90 because:

The PPS closed below both of those Moving Averages at about the same time on both charts.

The CCI was crossing down through the +100 line on the five minute chart.

The doji candlestick on the five minute chart signaled the reversal five minutes before it happened,
and the OBV and A/D lines both started to downtick even before the doji was formed.

The Volume on the one minute chart went sky high, which usually means profit taking like I did.
___________________________________________________________________________________

I could have gone Short as soon as I sold, but I'd had enough fun for one day.
TSO dropped from just over $11.00 straight down to $10.45 after I sold.
It's now trading at $10.30

Happy Trading,
zz

www.stock-market-lessons.com

zigzagman

Posted: Thursday, November 06, 2008 12:44:28 AM

Rank: Advanced Member

Joined: 8/14/2008
Posts: 314
Location: Memphis

Here is a trade based mostly upon the theory of support and resistance, and chart patterns. TSO moves with the $INDU chart for the most part, and that's important to know because at 3pm today the Dow started selling off in earnest. TSO followed suit along with it like it usually does.

At 1:45pm TSO set up a level of support at $10.08 and then moved up about .30 and set a small double-top chart pattern with the neckline at $10.21 When it came back down and broke below that level of support at 2:50pm, the selling heated up, and the first red Volume spike was an early warning signal something big was about to happen.

In 40 minutes, it fell over .80 and Shorting it with 1000 shares would have netted at least $800.

This one was really a no brainer. The chart pattern on the day was a double-top, and the CCI gave a sell signal by dropping below the upper horizontal line at 2:00pm. Unfortunately, I had to take my dad to the doctor when this was going on or I would have been in on this one.

Happy Trading,
zz

www.stock-market-lessons.com

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