Hello there, I've been stock trading for many years as a hobby. I recently attempted to nail down futures trading but couldn't get a good feel for the 24 hour trading. So, I am refocusing on stock trading and I am using this journal to help me hone in on what works and what doesn't.
This introductory post will be updated as I learn more. I will be revising my rules over time, trying to build a method that allows me to integrate trading with my day job.
June 15: Commence Phase 3 of the process.
June 3: Commence Phase 2 of the process.
May 27:
Rude awakening day....this was the session where I was whipsawed out of my miners stocks. This session will solidify my approach to analyzing trade ideas, how to keep sized properly to avoid excessive drawdowns, and how and when to take profits.
In the first two trading weeks it has become clear that I have three types of trades:
Positional: these are medium to long term trade ideas based on daily/weekly setups and target trend following
Swing: these are ideas based on intraday conditions and target rally continuation
Idiosyncratic: these are hedging ideas and other unique opportunities
Making this distinction is going to be helpful in understanding how to manage the trades going forward. I have always struggled with how to manage winners and set stops. By categorizing trades at the outset of a new position, I will be able to consistently manage stop selection and profit taking.
May 14 Original Post:
Key Points for my Method:
The "trick" to stock trading for me has been 1) deciding when to trade AND 2) what to trade.
When I get these two factors right in a session, I am more easily able to overcome my biggest fear about stock swing trading: overnight risk. This is my #1 worry and biggest hurdle to making large gains. It has taken me a lifetime to learn how to get into a stock and hold a position overnight. I still struggle with this but I am getting to a point where I can be more consistent.
I have three strategies for managing overnight risk:
1) Conviction trade: Use aggressive positioning for rally continuation. Build an oversized trade during a session and take partial profits to account for overnight risk (essentially embed a day trade in the initial stage of the swing trade)
2) Positional trade: Scaling in over multiple sessions using a money management technique to allocate risk in portions.
3) Positional covered trade : Sell covered call on part of the position when the premiums are rich
What to trade and When to trade:
Conviction trades are initiated only when market conditions are in a daily bullish trend and bullish intraday internals. Specific stocks must also have daily bullish setups and will be selected based on intraday strength and volume.
Positional trades will be taken when broad market conditions are neutral to bullish. These types of trades are built over time and will not be the focus of this journal, although I will include them as they arise.
How I find stocks:
After years of trying all kinds of screening methods, I have narrowed it down to the following:
I keep an eye on the sectors in the market and how they are trading relative to the broad market. I have a mental list of what the broad sectors are doing: Semi's, Biotech, Gold, Financials, Bitcoin, Small Caps, FANG etc...
I use a set of broad market charts to monitor weekly and daily trends. For swing trading, all that really matters is the daily trend of the US stock market. When the US stock market is bullish on the daily chart, then I watch for sessions where the small caps (IWM) are above VWAP and VIXY is below VWAP. That is a bullish market condition, and from there I start to hunt for trades. I use IBs US Movers screen to find liquid stocks that are making big moves, and I'll start to chart stocks from sectors that I know are leading the broad market.
I also have developed a proprietary indicator that smooths RTY, NQ, ES futures in to one price. I use this to guage the trend for the US stock market and look for moves out of …