@mdl060374, I currently trade 1 stock, 1 time frame, day in/day out.
When I first started I traded anything that moved. I had to follow a portfolio of 300 companies for work, so whatever was up or down a lot for the day would attract my attention.
Then I decided to focus on just six stocks: APA, CMI, LH, V, VFC, WHR. I chose those by looking at the S&P 500 and looking in each sector for a name that had a stock price >$100. The primary goal was to decrease trading costs, which for me increased with the number of shares purchased. So I could get $50 of risk with a $100 stock with just 100 shares. With a $10 stock (even more volatile, like BAC), $50 of risk would require 700-800 shares...more commissions.
This set gave me an oil & gas, industrial goods, health care, finance, consumer discretionary, and consumer non-discretionary company. I figured something good or bad would be happening in one of those sectors and drag my names along with it. Or if one name was range bound, another could be moving.
Then looked at ATR, standard deviation of daily returns, average trading volume. But for the size I was looking to trade none of that really mattered.
One thing I didn't appreciate at the time was the bid/ask spread. Wider for the larger stocks. Now once you factor in the number of shares purchased, it equals out. However, what it means is that when they run, the can gap. Whereas with a smaller dollar price, every tick tends to get hit running up or down.
Interesting. Thanks for the response. One thing I have been looking at is beta. There was an article (forgot where I read it) that brought up that beta is sometimes used incorrectly as a measure of risk, but really means correlation with the S&P. The idea is that stocks with betas of under .80 (1 = exact correlation with index, and 0 = direct opposite direction) offer behavior that ideally doesnt get yanked around with the overall market...
Another thing that was brought up recently (I think it was a Don Bright article in SFO)is that with HFT, they often sit .001 below/above the spread so for daytraders, trying to get filled with limit orders presents a new challenge, and the best way to trade was taking offers/hitting bids on tight spreads, and avoiding wider spread issues.
I think that scanning for volumes above 2.5M should take care of this..
Amazing how fast two months seems to go by. I have not been idle. I have over 125 trades to catch up on. But I have not been posting. Now I need to catch up. This is a problem. I get hung up, and then the catch up becomes more work than the hang up and nothing gets done. Just stall.
So I am not going to pause for weekly reviews. Just going to bang through day by day, and will run aggregate stats at the end (which I still need to finish, but will not let that keep me from getting started again). So going to start working on the next entry tonight.
Trade 1 Looked like a valid pullback after break out. Strong open and run up (too much?) Then a retest of yesterday's high and the EMA21, after the second test of yesterday's high I thought I was good to go. I chased the market a little as i flipped from a limit order to a market and lost 7c on my entry. But no follow through the next Resistance. Probably held on to this too long, could have punted at HOY. Others were trapped two as slippage was miserable getting out.
Trade 2 I took as price cleared above the EMA 21. Price had come near a support trend of prior days; I even saw a strong down bar on highish volume rejected. But was too early. Second test was needed. I was done for the day by then.
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Short story is it never happened. So none of the upcoming trades any rules other than a $40 stop loss and two losses shuts the day down.
Here is what I have so far. Rules (always to be honored) and guidelines (strive to do, but discretion will dictate each situation).
Capital at risk
R1. Max risk per trade is $40 (in reality this should translate into $40 +2 commission + $10 slippage for $52 total, which is 25bps of capital)
R2. Max risk outstanding at any time should be $40. If another position is added, open positions' stops should have stops at or beyond break even.
R3. Trading day stops after two full stop losses.
R4. Position size will be 100 shares (stop <$0.40) or 200 shares (stop <$0.20).
R5. 200 shares if ATR5 < 0.20. Some discretion ATR <0.25
R6. No trades when ATR5 > 0.50
G1. If position size of 200 shares then NBBO - order price < 0.10.
R7. Stop cannot be moved to increase initial risk.
R8. Stop cannot be moved to decrease risk until (this is a guideline for Counter Trend and Trading Range trades)
i) a SL/SH has been put in,
ii) I take heat on the trade of at least 1/2 my risk,
iii) price hits R:R of 1:1
G2. Stop should be placed behind a market structure point: EMA21, S/R, or SH/SL