1. Course description
Course for trading SMB Capital is focused on intraday trade stocks on the us market. Deytreydinga strategy is based on the analysis and active selection of shares, technical analysis, tape reading and risk management. If you trade other markets, anyway, in this course you will be able to find useful tips on technical analysis, management position, risk. This article explores intraday trading strategies, basic models and trading tools.
Courses from SMB Capital, will give, of course, more knowledge and skills. They suggest communicating with successful traders, analysis of your trade, the use of specialized software from SMB etc. But the courses should go, when you are sure, what do you want to trade in this market and in that style. The article provides a working strategy, once you, you will be able to understand, if the American stock market and this style of intraday trading.
2. Active selection of shares
Search and active selection of shares (or, as they are called in SMB, "stock in the game") – the Foundation, on which to build the strategy. The quality of your trading will greatly depend on the quality of the chosen stock. The trading of such shares has several advantages:
— "the game" can make a strong unidirectional motion and form a clear formation;
— price movement in these shares over the net, with less "noise" due to the presence of large players and smaller impact of robots;
— with an increase in volume in the active shares increased volatility and, accordingly, opportunity to earn money, because. increases the potential traffic. If the stock is news, she can move in 2 times more ATR;
— the action in the game (especially in the season report) can give 2-3 entry points during the day with a good risk-reward ratio. For example, even if you missed the first strong movement, after a rollback you can go with the trend, and we can expect a second, about the same size movement, as the first;
— shares opportunities for making momentum trades, which can give significant profits in a short time;
— large liquidity gives you the opportunity to go to the tool major. The increased volume, in addition, suggests, what the real news. Increased volume is an additional signal, who says, what action can be trusted;
in stock, where there were large players, easier to read the tape and to look on the tape confirming signals for entry;
— big news in "the game" acts as a signal to enter, which increases your advantage in the transaction, in such trades you take a position with a large volume.
We must not forget, "stock in the game" have their "shelf life". If the offer is active for a week, its movement can be dirty, fuzzy. Interesting actions you need to search constantly and regularly update sheet traded securities. Can, of course, to concentrate on trading stock companies, which are currently the center of attention (for example, Apple, Tesla), and, using 1-2 trading models, consistently earn on them, but on market day you can find the paper much better, their schedules will be less noisy, with clearer ideas and a great risk reward ratio.
What are the qualities of a "stock in the game"? The action in the game is action, in which something happened, which is not expected, that is different from the earlier forecasts.
Active promotions can be found among the papers, which:
— the income or the revenue forecast was worse or better than expected;
profit was more or less planned. There has been a change of the company's forecast profit for the next quarter or year (it is important, when the forecast differs from the consensus of analysts). The news was released about the change in margin;
— news, which led to the decline or growth, turned out to be exaggerated or incorrect;
— strong changes in trading volume. You can watch the action with greatly increased volume for the previous day or during the trading session;
— increased volume of trading on pre-market or after the close of the main trading session;
— a significant change in postmarket and premarket. Very good signal to buy, especially in the season report, is, the price of a stock rises to postmarket (for example, after the report), the pre-and rises even higher. This is a very good pattern on long levels post- or premarket;
— highly fallen or grown stock, in whom it is possible to expect a technical retracement;
— the rumors about the purchase of the company. When such rumors are also worth watching for the shares of companies from the same sector;
investigation, courts against the company;
— high short interest (more 20%);
— stock, prices which are updated Hai. Stock, which long stood in the range, and rates are now ready to upgrade to hi / lo;
— the release of a new product, which was not expected. You need to understand, that some news or company information can't be accurately evaluated. You may need more time, to news affected the share price. For example, if the product is new, it is not exactly known how successful and profitable it will be;
the change in the market share of the company;
— the transition in testing of drugs in "phase 2" or "phase 3" ("phase 3" is more important) at pharmaceutical or biotech companies;
— upgrade evaluation by analysts of banks and second tier. More than one upgrade in the campaign;
company goes for an IPO. You need to watch the estimated value of stock and how paper behaves around this price in early trading. The action is not limited and may well increase, much more, than you think;
Of stock selection on filters, news there are a large number of resources. Finviz, Yahoo finance, Russian Stock-watcher. There are resources, where you can see the prices postmarket, for example, nasdaq.com, thestockmarketwatch.com. SMB for relatively little money provides access to its SMB Scanner. Trade need not be wasted on a lot of stock. You need to select 1-3 paper for the day and concentrate on a single good deal, then the next.
3. Technical analysis
You need to understand, what works in trading complex instruments and signals. Stable profitable trading consists of the correct selection of shares, analysis news, technical analysis, to read the tape, risk management. One technical analysis is not enough for successful trading. According to the teachers of SMB Capital, no indicators, oscillators, candlestick, a graphical model does not give a statistical advantage. Many trading models, described in the books, the seminars, look good only on history. On history you can find confirmation of any models, but in practice, at the right edge of the chart, the situation is quite different. But there are universal principles, which work and which are the same for different markets and different timeframes. These principles according to SMB the following:
the markets are in a trending phase, phase range and the transition from one phase to another;
trend, most likely, continue, the end;
— trend may end in several ways. This can be accelerated vertical motion, smooth slow parabolic curve with multiple peaks, or price stops and konsolidiruyutsya in the channel;
— if the price quickly moves away from level, the level, most likely, will be withheld, and if the price konsolidiruyutsya some time around, the level can be broken. Pay attention to calm the market near important levels. This may mean preparing for a breakthrough.
In technical analysis, it is important to determine, in what state (trend or range) is the market. You need to choose the right model to enter, because. model, working in a trending market, do not work in ranges. In General, trading all four scenarios of the price movement:
— if support or resistance breaks in the trend, the trend continues;
— if support or resistance is held in the trend, the trend ends;
— in the trading range support or resistance is held;
— in the trading range support or resistance is break;
In practice, unfortunately, harder. Can be false breakouts, offset trading ranges, when the level breaks, but only in order, to extend the range (this can be further read in the article about strategy Maitreya). It is not easy to distinguish the offset of the range or expansion of the channel and beginning of a new trend. Trading ranges seems easy just looking, again, on the price history.
Courses SMB Capital suggest to look for trends and follow the trends is the most simple and secure transaction. At the point the potential beginning of a trend can first try a quick momentum trade, the second entry point may be after the formation of the first pullback in the trend direction. In my experience, trade with the trend after the first pullback is the most reliable model.If there is news, the second movement after a pullback may be in the action just as big, as the first.
Trade model "after the pullback with the trend" is much safer, than, for example, try to do counter-trend trades after a sharp vertical movements. In such movements there are two risks. The trend may continue against your position or the trend will enter a phase of range, and your position will be inside the channel. If you trade a broken trend, there is no need to rush and try to be the first. Wait for confirmation in the form of savings, retention levels. Avoid counter-trend trades in a trending market. Also avoid trading in channels, where there is the potential for price movement. At the beginning of their education concentrate on skills of discernment of trend and channel, learn first to execute trades with the trend.
The seminar as technical analysis tools learn to use the most simple things. Net graph, horizontal levels, trend lines, volume histogram. But there are subtleties in using them. Switch start with higher time frames, weekly, daily charts. Important horizontal levels and trend lines transferred from higher timeframes on the younger. These senior, important levels used within the day. Intraday charts are used 1 min, 5 minutes, 15 minutes, the timeframe varies within the day. This is an important point, we will discuss in more detail below.
Important levels of higher time frames are considered to be Hai, places, which began a strong movement, border gepov. This is similar to the approach And. The gerchik, about which I wrote in the article "Rate of the active trader. An overview of the workshop Alexander Gerchik" and "trading from A to z with Alexander Gerchik for 60 days. Course overview". Additionally, read about the important levels in these articles. On the daily charts look, to what extent has risen or fell. How intense was the rise and fall. Above or below the level of the closed day. The opening point, the closure of the relatively strong levels is very important.
As an example, consider the chart of AAPL:
Level 170 was the border HEPA, from him several times begun a strong movement. When it approaches this level on a smaller timeframe we can see, the price quickly bounces off him:
Good signal, if the price departs from the level on increased volume. In the example we do not see too high of volume, perhaps due to the dining time. Seen, that price is a bit does not reach 170. To levels must be treated as ranges, need to watch, how the price behaves around the.
By the way, in this example you can see, how many times can you go to share, if you trade it with the trend. From the opening you can make a momentum-trade duration 5-10 minutes on the penetration level of low premarket, then the point of entry at the first pullback and then the second rollback. Although the example chart AAPL is not very good, it's too noisy and expensive campaign. The best place to enter on the first pullback I noted oval. There is a pullback, then the uptrend is broken. After the scrapping of the formed consolidation, where we are. On the part of the position stop is set for consolidation, and on the part of hi rollback. After a broken trend to look for such consolidation. Now I want to convey the idea of, what is important to trade the trend. Stock, located in the trend, give several points to log per day, especially in the season report.
On the charts, on all time frames, you need to pay attention to range compression and "inside bars", ie. narrow bar, the hi and lo which is inside Haya and Lowe neighboring bars. Often this is the place, the place where price. You need to watch, where the bar closes, reaching for the "inside bar". Example on the daily chart:
Example on 15-minute chart:
On the 15 minute chart there are some important signals. Because. the entry point we look closer to the dinner, we are working with 15 minutes chart. The price is above Hingham premarket (blue arrow), at the upper level of the range open (blue lines). Above the red line is VWAP (Volume Weighted Average Price). This is the only indicator, which was used at the workshop. Broken line a small downward trend (the purple line). Formed a inside bar (indicated by a green arrow). Sunset on the next green bar on the break of the upper level of the range open. Stop under the back or a little lower, on 22.2. We will return to the "inner bars", when we consider the trading model.
4. Trading models
In General terms algorithm and model for trading following. With filters and news of selected stocks, we like the full-time and five-minute chart. On the daily chart should be the range of up to the next levels, a five-minute chart should not be too noisy. Look to the daily chart and note on it and strong levels. Go to the orientation meeting. Note on the five levels from the daily chart. Further note the levels high/low postmarket on the previous day and the levels high/low premarket.
At the opening put minute chart, and at a penetration or retention levels post/premarket possible to try to make a quick momentum trade. Position to keep 5-15 minutes, and, if the price went against you, you should immediately be closed.
After 9:30 go to the 5 minute chart. Then the price can form a range at the opening. These first high and low of the day is also celebrated as the levels. The boundaries of the opening range and levels of post-/premarket important for intraday trading. Look, where these levels are relatively strong daytime level, look, where konsolidiruyutsya price after the formation of the range at the opening. If under range and under strong levels, the action from the top-level consolidation. In the example, the consolidation under the low of the opening range (marked with an oval):
Consolidation may be before the end of the range open. We go on the break of this level, stop set for consolidation.
Unfortunately, clear criteria, how to celebrate the opening range, no. Conventionally high and low range of prices in the time interval 9:30 to, about, 11:00. It is better to consider these levels in the examples. For example, share WMT (Wal-Mart). 25-January 2018 it was a historic high, 26-January, several hours before the opening of the market came the news about the establishment of a joint venture Wal-Mart and Amazon for the Japanese market. A week before the news was an upgrade from Citigroup from "neutral" to "buy" and upgrade prices with 106$ to 117$. Good news, at the premarket price updates high:
In the first 30 minutes in the range there is a small down trend, it breaks (the first green arrow), further price forms a small consolidation at the top of the range around the level. The courses mentioned, the mid range is also an important level. Ie. now consolidation is formed in the upper half of the range, on this level. Buyers control the price. On the daily chart the trend is up, the good news, price above VWAP, is consolidation, that can put a short stop, the beginning of the day, ie. also, you can take the momentum trade. Also look, how does the market in General, the share market is stronger or weaker, as acting leading stocks from the same sector, how does ETF in this industry.
The entry point marked with the second green arrow in the consolidation. Open part of the position, stop for consolidation. Another part is opened at the break of the upper border of the consolidation calculated on a momentum trade, short stop below the upper level of the range open, marked with a purple line. Part of the position, designed for the momentum trade, close, when price slowed down. We took part of the profits, so she closed the risk. Ie. now we can safely keep the remaining positions in the expectation of a big movement. Even if we leave on foot, for this paper we will not get loss.
In the afternoon decreases the volume, on the market more robots, and, not to trade in the noise, you need to go to 15 minutes. In 12:00 in WMT, go on 15-minute chart:
On the chart there is a reduction, which looks like a rollback. Further, the trend breaks down, there is a narrow bar, price above the opening range, above VWAP, and when the price moves above the narrow bar we go. Because. it's the middle of the day, the volatility subsides, the risk of, that in the afternoon the price will move in the range, increases. Stop turns more due to the use of 15 minutes chart. To the risk in dollars for the position was adequate, the volume of transactions at this time lower. The volume in transactions during lunch time is 50% the volume of the morning trades. Lower volume you need to trade premarket.
Courses taught, that when you trading you have to use different timeframes. With 9:30 to 10:00 traded by minute schedule, with 10:00 to 12:00 at the five-minute, with 12:00 to 14:00 for 15 minutes, and after 14:00 moving again 5 minutes and trade on it before the closure.
Once again I would like to say about the importance of levels postmarket and premarket. Work with these levels based trading model, which works especially well in the season report. Let us examine this model on the example of INTC stock (Intel Corporation). After a good quarterly report 25 January 2018 the action rose to postmarket and continued growth on premarket 26th January. Profit rose more, than expected, increased revenue, sales of computers in the U.S. more, than expected, because of the significant growth of data centers. On postmarket the price broke the high for the year (ie. we above the strong level of the daily chart) and is at maximum for the last 17 years.
Share you can already buy the pre, from Haya postmarket, as well as to trade the open like a momentum trade on a break out Haya premarket. Then there is a good point to enter on the trend continuation after small pullback to the level of Haya premarket:
The model would be even stronger, if the price of the pre would not come under the level of Haya postmarket.
Out of position is parts. If we go with the trend after a pullback, the part can be closed when the price breaks through the previous Haya (we are closing part of the risk), and the remaining position hold, until it breaks the trend.
The existence of a pullback in a trend is a good signal. Share volume rose, then volume started to decline, does a rollback. Further downtrend is broken, and the price goes up again. This means, what people are willing to buy more. But if, after growth, there is no rollback, but there is a long horizontal consolidation (especially after 10:00), it might mean, that sellers could take control of the action.
Some more worth saying about momentum trades. This is usually the morning to trade 10:00. First 15-20 minutes from the opening or in the middle of the day, when got some news. The same model works differently in the morning and in the afternoon. Clear, what is the probability of a successful momentum trade from the opening above, than lunch. We sell momentum, when there is news, there is a level on the higher timeframes, that is, there is a level of the opening range. For example, action RHT 26.01.2018:
24-January in stocks was news – upgrade of analysts with a buy recommendation. 25-th event was raised, updated high for the last 18 years. The pre-26, the price was trading around Haya. At the opening of the price falls in the first 15 minutes out of range, punching important level. If after breaking there is a strong movement, you must sell the entire position.
Momentum can be broken trend, can be day, if there is a great volume and news. If the momentum trade in the morning we took a nice movement, you can try to close half the position, and then after a pullback or consolidation to add to positions in expectation of a big trend move.
In conclusion, I would like to say about the assessment of transactions. Each transaction, before you commit, is evaluated with points. The presence of the model — one point, indexes in your face is another, the key stocks in your sector are moving in your direction — another, strong level, there is potential for movement, there is increased volume and, accordingly, increased volatility, large buyers/sellers on the ribbon, news, good time of day to trade, the price is above or below VWAP, ETF sector etc. Signals that strengthen or weaken the position. Depends on transaction volume. In strong trades more volume and exposure (in dollars for the position), and weak in less. If we are in the position and the number of points increases, then you can try to increase the volume, but if the number of points decreases, position start to decrease.
The plan for the transaction you need to be made before bidding. It should be clear, from a strong level of go (this price and need to wait), where it will stop, to what level can the price go. The plan should be made prior to bidding, because. are you still in a calm state. During the auction your psychological state is already changed, and you're not always able to adequately assess the situation. When you trade according to plan, your psychological state is more stable.
5. Reading tape
Reading the tape is no less important tool than the same tehnoanalit. Actually, the tape is the same graph, only the smallest timeframe. On the ribbon, you can see, how is the schedule. Who is stronger, how are the volumes at a certain price level, as hold or break levels, how aggressive buyers and sellers.
For a good deal we need news, clear chart pattern, which gives the entry point with the ratio risk/profit at least 1:3, confirmation and login on the ribbon. News, technical analysis and tape – it related stuff. After the news (especially in the season report) appear large amounts, major players. The event is becoming less noisy, more trend. When you have big players, begins to subside the activity of the robots, it becomes easier to read the tape and look for her confirmation. The pre also can and should watch tape, because. the pre -, on the contrary, robots disabled due to low trading volume.
The tape you need to look at reversal points, breakouts, in places, where the action is slowed down. On the ribbon, you will quickly see that this breakout was real or false. When making momentum trades, when trading with open (at least the first 20 minutes from the start of the session) tape is the primary tool. Paradoxically, the tape easier to read, when there is volume, and when it's fast, but not in lunch, when the stock is not moving. At the opening, when there is a rapid movement, the tape helps control the risk. After HEPA the tape also helps to understand, who is in control in the action.
In analyzing the tapes we have to look at:
1. Prints the bid, prints the ask.
If you see the prints at the bid and then prices are lowered is a sign of weakness. If the prints are the ask and prices rise, it is a sign of strength. Constantly passing the prints on offer is a signal, that someone actually wants to buy this share. You need to watch, what action does then. If you see a large number of prints the bid, and bid is kept, the volume on it is updated, it is a great buyer, we can buy also. Also watch the highlights of the analysis of such large buyers/sellers, after this campaign is to start a strong movement. See, prints what size assorted big sellers/buyers.
If we see on tape a lot of deals for bidam and offers, and then the price goes down, it means that this place sold, and sellers won. On the tape you can learn, what price range is controlled by the action of buyers and sellers. Whether then the action above or below that range. As on the chart, we look at the levels, which are held, and on the tape we're watching, at what price her hold. If we see red prints, and then the price goes up, this is a strong situation, buyers won. If, for example, go red prints, price lowered, and then comes back to the same price, it is very good to buy. If on tape, we see lower volumes in the prints for a certain price, it may be shot.
2. Large print at a certain price.
If you see a print with a large volume, it is institutional buying. You need to remember these prices and observe, what happens next around this price, above or below paper trading, which way are the prints.
3. Large print, and then the large print above.
On the ribbon, you see a print with a large volume, then again print at higher prices. It shows, what institutional players are willing to pay higher prices. The action can rise above. This signal is particularly useful for determining the pivot point. For example, the campaign falls, and you see a big print, and then another great print at a higher prices.
4. Changing the belt speed
For example, ribbon prints on offer, then the tape speed is accelerated, it prints on the proposal faster. This could be a bullish signal, someone wants to fulfill a large purchase order. Or, for example, you see slow prints on offer, but lowering prices at these prices, buy instantly. This may be the signal strength. If the tape slows down the speed of prints or you see, in the ribbon, the speed of the, it might mean, that action "not in game" and you need to find another instrument to trade.
5. The volume at a certain price
Watch prints, to determine, what volume was traded at a certain price. When you see unusually high volume, traded at a certain price, this price is becoming an important intraday level. We are trading from these levels. The more volume was traded at a certain price, the more traffic you can expect, when the campaign will deviate from these prices.
6. Risk management
First you need to determine the loss limit for the day. The amount of losses set in dollars. From it is the amount in the transaction. The transaction, depending on the quality of the input, divided into three categories. Category A – this is the best deal in accordance with your model and the complex signals in your direction. Categorization depending on the number of signals you have to do yourself, based on your style and trading strategy. Depending on the category of changing the size of the risk, you can take in the transaction:
A trade 25-30% from the loss limit for the day.
B trade 15%.
C trade less 10% from the loss limit.
The risk is also regulated by stops at different levels, opening and closing positions of the parts. If your position is in positive territory, you can close part, thereby close the risk in the transaction, then the rest of the risk-free position is already trying to hatch a large trend movement.
I hope, this article was interesting to you and you found it useful tools.
The original article: https://tradinglab.tech/trading/obzor-kursa-po-dejtrejdingu-ot-smb-capital.html
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