Learning Markets - Investing education and trading ideas

by Josethetrader on May 24, 2012

This Trade Was Closed May 24, 2012

IFSIA hit my stop loss which was at 12.40. May need to look at my stop loss and give the stocks a little more room, but as a trader I can tolerate small losses. I usually have a few shorts and longs that I look at and choose one. This week I have been making poor choices as the others on my list seem to fair well (KMI – short, and BTA – long). If any of you kind folks would like to help me with these decisions I would be grateful. Thanks.

This Trade Was Updated May 24, 2012

Looks like my tight stop-loss just got triggered. I will see where IFSIA goes tomorow, but unfortunately its trades like this that have me continually questioning my exit strategy. As my 5 y/o son likes to say “Crackers!” (I think he got that from a show on Disney Jr.)

Original Trade Post:

IFSIA had a significant volume spike, closed above open, and may bounce off its 200 day moving average. Looks to be in a wedge pattern. Initial stop at 12.40 (2.5%, usual for me is 2%). Again, still working on my exit. If anyone has some further insight on the technicals of this stock, your advice would be greatly appreciated.

Trade Details:

The Ticker: IFSIA
The Trade: Buy at $12.72
Target Price: $13.50

Trade Opened: May 24, 2012
Trade Modified:May 24, 2012
Trade Closed: May 24, 2012

Chart courtesy Finviz. Click to open in larger window.

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This is not investment advice. Learning Markets, LLC is not responsible for errors or omissions. Please be sure to read our disclaimer.

Joe Z

My opinion, Your system is fine, but would work better in a trending market. I feel we are in a range, with bias to the down side.
- josethetrader
  
  Joe, thanks for the insight and I agree with that fact that we are range bound. Please indulge me and I will lay out my rationale as to the system I have been trying to put together and why I believe it might work in any market. This is my last day of school (no students, yay, seniors can be tough) so I have lots of time right now to talk about the markets. Please be brutally honest in your (anyone else as well) assessment.
  
  So, when I started looking for a system, I kept reading over and over that you want to go with the trend, “the trend is your friend”, which I completely agree with. I aslo read that the markets were in a trend only about 30% of the time (not sure if this is true, but statistically makes sense). I told myself, if I could just trade the individual stock and not worry about the markets I should be able to improve my odds of success.
  
  Here goes:
  
  SCAN: So to pick a stock I use the following parameters
  1. Price > $10 – not big on the volatility of lower priced stocks, like to be around $20 +/- $10
  2. open > close for longs, close > open for shorts – want to increase my odds for follow thru
  3. adx (14) < 25 (may change to 20) – so I am looking for stocks not necessarily trending…I know that the few stocks I put in the last couple of days seem as they were trending, but I will give you a list of the stocks I traded over the last month and you can let me know your thoughts
  4. 20<rsi(5)rsi(5)>40 for short – so don’t want oversold or overbought
  5. volume > 300K
  6. volume > 2* average last 20 days – this is the parameter that seemed to make my picks much more successful. I think it helps allow me to trade just the stock and not try to worry so much about the market. Volume spiked for some reason (earnings, etc.) so I want to trade on that.
  
  ENTRY: Put my orders (stop-limit) just above the high (long) or just below the (low). I feel this helps me get into stocks going in my favor. I had been experimenting with changing that to reduce risk (using close, etc.), but kept getting in stocks and then they went the other way
  
  EXIT: Again, this part of my system is keeping me up at night (along with my dogs and 5 y/o). b/c of the volatility of markets in general I wanted to get in and out of stocks quickly. I know this drives up my commission fees but If my winning % is high that should be ok. So I shoot for 3-5% targets so that if the stock is going to go in my favor it does, if not I have a tight stop and get out. Work in progress.
  
  I was going to post some trades again today but didn’t want anyone to think to poorly of me, haha
  today I have a short order for WMB entry at 30.67, my long (ICUI) kicked in at 51.80
  
  Here are some recent successes and losses, please evaluate and let me know what you think:
  
  Successes: ALR (short 5/1, entry – 23.50, out 22.25); ONE (long 5/2, entry – 15.45, out – 16.00); GEOY (short 5/7, entry – 24.05, out – 22.80); IOC (long 5/15, entry – 54.75, out 58); CTRP ( short 5/18, entry – 20.75, out – 19.55)
  
  Losses: ICE (long 5/3, entry – 129.10, out 125.75); AIG (long 5/8, entry – 32, out -31.40 ); QUAD (short 5/11 , entry – 13.10, out – 13.44); JBT (long 5/16, entry – 15.55, out 15.22)
  
  May have made an error in there somewhere, but hopefully you get the picture
  
  Sorry for such a long response, and I hope I am not being too presumptious by putting this out there, but any suggestions would be greatly appreciated. Thanks
  
  I teach math, so my grammar is awful…
  - Joe Z
    
    I am no expert in any way. A couple of things I have had no luck with. Stocks tradeing less than 500 K. My entry and exit would be the HI and Low for the day. I watched IFSIA yesterday and saw this play right out. I set my stops in this way. On longs( 1 ATR +10% of ATR below yesterdays low) For IFSIA on 5/23 that would be ATR- .58 + .06 = .64 below that daily low of 12.13. My stop would be at 11.49 I then move it up the next day .64 below that days low. Shorts are just the reverse. You can test this method on some of your positions past and present to see if it works for you
    - josethetrader
      
      Joe, could you exlplain what you mean by “My entry and exit would be the HI and Low for the day. I watched IFSIA yesterday and saw this play right out.” Forgive my ignorance.
      
      Also, I had toyed with using ATR for a stop loss but had a hard time with how far the stop is from the entry. I think it is just my nature to cut my losses quickly, which I know increases my probability of getting stopped out. Have you had good success with that stop loss method and how long do you usually stay in a position? Thanks Joe.
      - Joe Z
        
        You’re Entry 12.72 was hit in the first 15 min. Hi of 12.79 You re Stop hit at $12.40. Low of day 12.39. Look at 15 min chart, the stock did not spend very much time at either spot. I find on low volume stocks the market maker gets the price where he needs to, to fill orders. I like 500 K min. vol I use ATR method on swing trades 1 day to a couple of weeks. I have had sucess, but have found no perfect system. Check it against some of your trades, and see if it would have helped.
      - josethetrader
        
        Thanks Joe I will check that out and don’t have a lot of experience looking at other time intervals other than the daily chart, but need too. Take care
    - josethetrader
      
      Joe,
      
      I have a long position open in ICUI (picked up today), so with your calculations you would place the stop at 50.61 (51.67 – 1.1*0.96)? The 0.96 is the ATR(14), correct?
      
      2% is at 51.73 for me…I will take your advice and use my previous pics to check and see how this works with my profit level. I assume you recalculate everyday with the new ATR? Thanks.
      - Joe Z
        
        Yes, my stop would be 50.61 And I move mine up the next trading day based on the low of the day, maintaining the 1.06 gap. But again I caution you on a very low Volume stock. My stops have not worked as well.
      - josethetrader
        
        Thank again Joe…so do you only have this trailing stop on you trades? Do you use a target price to get out? Most ideas I have read about say that just using a trailing stop is the best approach. I have done quite a bit of manual backtesting (not as good as with simulators) and the stocks I choose don’t seem to do as well when I don’t have a target set. I think what I will do is give the inital stop a little more leeway and put it at the previous day low or 4% whichever is closer to the entry and then trail the stop using previous day lows. I will continue posting some picks on this site and see where it goes. I appreciate your feedback and hope to continue to get this type of feedback in the future. However, if you have a second, any thoughts on stochastics? I checked them out on some of my past picks and really like the results with regards to helping me pick stocks to enter. Thanks.
      - Joe Z
        
        Jose, I use this stop on any trade I think has potential to go in one direction. This stop gives my trade some room and time to work. Currently my targets are any profits realized in a short time frame. Also I will close a trade before it hits my stop, if I don’t like something. I do use Stochastics. I use Daily and Weekly. Learned this method from a site called Phills Gang. Good luck
      - josethetrader
        
        Thanks, I need to go back and take a look at my trades with regards to volume. It seems that the trades with the larger volumes pretty much move with the market unless there is some news.
John Jagerson

I don’t have a lot of comments about your entry – looks good to me. But I was curious about how you picked it. Is this just a pure technical play or did you consider other housing-related stocks yesterday for entries? For example, why this one over HD or TOL or something?
- josethetrader
  
  John, yes this is purely a technical trade. In the future I will start looking at fundamentals and use them to help strengthen my stock choice. This week has been a little rough for my system, and I am still not square with my exit strategy. I teach high school statistics so I am more comfortable with technical trading. As a matter of fact, it was a student that turned me on to the market. I will never forget that guy! I do have a list of my picks over the last several months if you are intersted and can spare the time. Thanks!

IFSIA, long

IFSIA, long

Original Trade Post:

Trade Details: