Thursday, August 6, 2009

Trading Plan Found on Web

A Day In the Life of a Trader

This is an EXAMPLE of how one trader spends his day. You must use a routine that is tailored to your trading style, schedule, and mind set.

Post/Pre-market Analysis

1. Reboot computer to clear memory, restart trading platform software.
2. Double-check cell phone charged (with trade desk on speed-dial).
3. Check daily charts of major indices for major S/R levels nearby. Mark any new levels on the charts (DJIA, SPX, COMP).
4. Check
1. Economic Calendar- What announcements today, especially during market hours?
2. Market Snapshot / Stock Market Update – Asian and European markets, futures
3. Market Snapshot – Page One (market-moving stories

5. Check
1. Pre-Market Indicator
2. Pre-Market Heat Map

6. Check

a. Tools and Maps / Map of the Market

7. Check other favorite web sites ______________________

8. From the above, determine a probable market direction for the morning.

Market Open

1. Check charts of DJIA, SPX, NDX for gaps and first few minutes’ direction.
2. Scan for gaps in same direction as market gapped (or initial market direction).
3. From gapping stock list, review each chart and determine if a candidate. Make a sub-watchlist #1 of gap candidates
4. Between 9:30 and 10:00, check the stocks on the gap watchlist. For each one:
1. Switch chart to daily view, 6 months. Draw in S/R lines near the current price. Note the direction of price – up or down.
2. Switch to 60-minute, 10-day view. Draw in S/R lines near the current price.
3. Switch to 5-minute, 2-day view. Draw in S/R lines near the current price.

5. If not yet 10:00 AM, start the same process as in 4. above on the entire stock list.

10:00 ET – Gap Time

6. Click through gap watchlist, whose charts now have S/R lines drawn, using 5-minute 2-day chart. For each one:
1. Check current price against nearest S/R. Consider for a “gap and go” if:

1. there is no significant S/R in the way.
2. volume is much higher than normal.
3. price has filled less than half of the opening gap.
4. 10:00 reversal doesn’t significantly reverse – just a wobble, if anything.
5. price, 8, 13, and 21-period EMA’s are all aligned.
6. Market is not moving against gap direction.
7. If all OK, enter trade and use 8-period EMA as stop (or use 1.5 ATR trailing stop).
8. If stock fails test for a gap-an-go, consider for a gap fade instead. If a good fade candidate, enter trade and place stop on other side of nearest S/R, but at least 1 ATR away from entry price.

After the Gap

When finished managing gap trades, begin regular daily routine:

7. Check stocks identified in step #5 above for trade setups. Look for stocks near one S/R level and far from the next one. For each one found:
1. Consider buying or shorting breakouts ONLY if the market is running strongly in the same direction.
2. Otherwise consider buying dips into upward reversals at support, or shorting rallies into downward reversals at resistance.
3. If a good candidate, check other factors:

1. Volume in “my” direction, especially on long trades.
2. Trade direction same as current market direction.
3. Indicator confirmation (MACD, Stochastics, RSI or CCI, ADX)
4. If all OK enter the trade, with a stop on the other side of nearest S/R, but at least one ATR from entry price.
5. Use money management stops to protect profits once profit = 1X initial risk. Don’t let a winner become a loser.
6. Take profits when target is reached (consider partial, with trailing stop on rest).

8. Finish scanning through entire stock list for step #4. Put new candidates found into watchlist #2.

9. Continue scanning through watchlist #2 for the rest of the day, following the steps listed under #7. Rinse and repeat.

Other Notes:

Chart Setup:

1. 15-minute, 10-day for scanning and planning; 5-min 2-day for trading.
2. 3 EMA’s (8/13/21 for gap trades, 13/21/34 for others)
3. Bollinger Bands (20 pma, 2 SD)
4. Volume (with MA)
5. ADX (use default 14/14/14, or 8/13/13 if available)
6. One momentum indicator – MACD (12/26/9), CCI (20), RSI(14) or Stochastics (14-3-3).


1. Similar to OTA layout
2. 4 charts, all 5-min, 2-day – DJIA, SPX, COMP, QQQQ
3. 4 charts, linked to Level II (stock being traded) – 5, 15, 60-minute, daily
4. Open Orders and Open Positions windows.

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