A Little More Q & A
I thought I’d answer these questions on the site since I get asked some of these often…
Mike, if there is a better method for me to ask you these questions, please let me know. You may choose not to answer any or all of them or not reply to this email at all. That would be fine with me. I understand that some questions may be personal and that you are too busy to read every piece of email you receive. But, here goes:
This method is fine. I guess I need to make a master article that can point people to a lot of these answers, many of which are ‘buried’ in the archives.
I read your “Tools of the Trade – How I Work” post. You are a better man than me to give so much of your time to explain to others with such depth. However, based on that post, I have a few questions.
4 is a few, 10 is ’several’! 
Q1. It appears that you scan dozens, if not hundreds, of stocks/scenarios real-time during the day. How many different stocks do you trade in an average day?
A: As I’ve written before, average is tough to say because my trades tend to come in bunches. On days that I actually trade, the average is probably 3. The numbers in my day trading results post may give you some insight as well.
Q2. If you enter a position on one of your scanned stocks, how do you (if you do at all) assess it so quickly? For example, do you not look for intraday trends, support and resistance, volatility?
A: I guess I’m just quick like that. The scanners are setup so that I can just double-click on a ticker and the chart gets loaded into CyberTrader. I look at the intraday trend and, if it looks promising, then I look at the daily chart to make sure there’s nothing there that’s problematic. For example, I don’t want to jump into something that’s already extended on the daily or approaching obvious support (for shorts) / resistance (for longs). That process usually doesn’t take more than 5 seconds per stock.
Q3. Why do you use eSignal when CyberTrader (presumably) offers that same information?
A: Good questions. Until last year I used CyberTrader’s CyberX platform, which only allowed you to see one chart at a time. So eSignal was a necessity if I wanted to see multiple charts.
I hadn’t really thought about it until today but I guess I could do away with eSignal since CyberTrader’s Pro platform allows me to display many charts. I would miss the new high/low of the day alerts though, which I can’t do with CyberTrader. Also, Cyber won’t allow me to set an alert for negative values of $TICK. I’ll have to think about if those things are worth the $120/month that I’m paying for eSignal. Maybe I can get the same info another way…
Q4. Why do you use several different real-time scanners? Is one not enough? Shouldn’t the scanner within your primary trading software (CyberTrader) suffice? If so, is CT lacking more than what appears on the surface?
A: The scanners are very different. CyberTrader’s is a more traditional scanner in that it’s really *just* a filter on price, volume, etc. Trade-Ideas does real-time pattern recognition/analysis. Traditional scanners aren’t able to tell you if a stock just made a NR7 or broke down from it’s opening range, etc. You should take a look at the kind of alerts that Trade-Ideas has and/or watch the box below:
On a given day I may see many of the same stocks on both scanners. But while a percentage gainer might show up on CyberTrader’s scanner early in the day and possibly stay there all day it would show up many times throughout the day on Trade-Ideas as the stock traces out various patterns.
Q5. Apparently you subscribe to all these different services, many of which appear to be duplicate services? If so, what are your total monthly fees?
Let’s see:
Trade-Ideas is $45
Briefing.com is $24.95
TeleChart is $29.99
eSignal is $119
Total = too damn much $218.94
Q6. How many trades do you make per day on average (I’m sure that during this period of extreme market volatility that that number is probably higher than normal)
A: I guess this question is slightly different than the one above (Q1) but my answer is the same, probably about 3.
Q7. What is the ratio of your winning:losing trades?
A: Pretty much the same as what’s in my day trading results post. Right now my win rate 45.71% for all my trades since I started day trading in June 2005.
Q8. What is a typical dollar profit from a single trade that satisfies you?
A: Tough to say. I guess that depends on what ’satisfies me’ means. If you mean is there a certain amount which, if hit, I’d exit the trade then there’s no amount that satisfies me. As I wrote in (guess where) my trading results post I’d be thrilled to average 1% per day. That could come from one trade or 5 trades.
Q9. How many losing days do you average per month?
A: 5.8333333333
Q10. You obviously have a great system that works for you. Do you think you have fully evolved at this point or are you still tweaking your system/style?
A: I’m still looking to improve and add some different setups for range-bound markets.
This post has 23 comments
June 28th, 2006
I use Trade Ideas to point out new HOD and LOD for stocks I care about (though my platform also indicates new highs and lows on my quote-lists). I also watch the TICKs, but I do that via real-time quotes that I can glance at. I’m surprised cyber won’t let you set an alert like that.
June 28th, 2006
Trader Mike,
Just wanted to drop a quick note to tell you what a great job you do! I’ve been checking in on your site for about a year now and you absolutely have a wealth of information here. Great work! People like you are an invaluable resource for newer traders to learn from.
Question 8 brought up an issue I seem to struggle with from time to time. That is the question of hitting a certain profit level… Do you have a profit level at which, if hit, you will stop trading for the day? Let’s say that level is 1% - if you hit that by say noon, would you decide to quit trading, or do you take the next good setup if it comes along with reduced size or trade as usual?
Conversely, how about losses? If you lose say 1% on a bad run of trades in a day, do you consider taking the day off? Or again, do you take the next good setup and reduce size or trade as normal despite the run of bad trades?
June 28th, 2006
Hi Mike,
I just want to clarify seomthing about your day trading results post. With 1R = “initial dollar risk on any given trade” - so when you claimed 100R does that mean you multiplied your initial capital by 100?
Because the way that I understand it is if you risked say $1 and so accept a 100% loss on that one dollar invested. But if you double that dollar then now you are sitting on 2R?
Am I totally off track? Did I miss a previous post?
Q1> The risk of trading too often = overtrading. I guess it depends on your trading style and what you are comfortable with.
Q2> I guess you can say that after trading for so long, perhaps just like driving, trading has become second nature.
June 28th, 2006
Idempotent - I’m pretty sure Cyber has a new high/new low feature but they don’t have the capability to play audio alerts each time that fires. I’ve gotten used to those sounds and I don’t want to have to stare at a list all dy long to get the same info.
As for $TICK, I was surprised too. But the only way to set alerts in Cyber is on the bid, ask, last trade, etc. They don’t allow negative values on those alerts so setting an alert for $TICK = -1000 isn’t possible. Or at least I don’t know how to do it.
June 28th, 2006
mcchief - no, I don’t have any specific levels in which I’d stop trading for the day. Rememebr that I’m usually trying to enter all my positions by noon and trying to hold on until the close. If my P&L starts to ramp up it’s usually b/c I’m letting my profits run. I do take partial profits at certain points, as I’ve discussed many times but I wouldn’t quit for the day and close all my trades just b/c my P&L reached some level.
My answer is pretty much the same for losses, except that if I stepped in front of a reversal and got stopped out on everything real quick I’d probably quit for the day regardless of how much I’d lost. What’s more typical is that the losses would build up as the day progressed and then It would be past noon, when I don’t like to enter trades. I also probably wouldn’t be in the mood to trade any more.
June 28th, 2006
Marco, in that post I said “My actual monetary gain was 46%…” If my R value was 1% of my capital and I withdrew my profits then 100R woiuld equal doubling my money. But as I stated in that post, my R value was smaller than 1%.
I think you may be confusing amount risked with my actual position size. I can have a $100,000 position but only have $500 (or less) at risk. Meaning that if I got stopped out I’d lose $500. If, on my next trade, which happened to also be on a $100,000 position, I made $1,000 (2R) then I’d be up $500 (1R) for those two trades.
For those trades combined I had $1,000 at RISK, not $200,000.
June 28th, 2006
Hi Mike
I really enjoy your site. I trade a basket of stocks which include CELG, BIIB, CRDN, GILD, GENZ, KLAC, SEPR, Mostly Bioteck Stocks, I use the Nasdaq ($compq) chart on 5 minute to tell me dirction and when it is time to trade and have been having good success …because they mirror each other…I value your insight and was wondering your thoughts on my trading style usually trade 5 minute chart for setup and 1 minute to pinpoint entry… thanks
Jim
June 28th, 2006
Thanks Mike for the clarification. I did read that post again - twice to make sure and I think now I understand the concept. I haven’t been introduced to the concept before, but it is an interesting way to measure trading progress. I have an equity curve system to benchmark my trading - but I think this method would be a better measure of trading skill as the benchmark is risk against an equity curve which simply shows capital vs. time.
June 28th, 2006
TraderMike,
I have a question based on Q1, 2, and 6: You say you only make about 3 trades per day (round-trips assumed) based on as many different stocks. You further say that you prefer to be in your positions by Noon and then try to hang on through the rest of the day. So, then why use the real-time scanners?
IOW, what percentage of your trades come from any one of those scanners as opposed to your own overnight research?
Kudos to you for being able to assess a intraday and daily charts in 5 seconds (Q2). It takes me much longer. The idea of making such few trades in a day is intriguing to me. However, it’s hard for me to imagine how that can be done from a real-time scanned stock. I traded scanned stocks, but their current trend typically does not last for longer than minutes, certainly not hours. Perhaps I’m making those trades based on wrong scan criteria. What scan criteria for you merits a trade?
June 28th, 2006
don’t forget your stockcharts.com subscription to add to the monthly service cost
June 28th, 2006
Mike,
Thanks for the answer. Makes sense, as the goal is to always to let the profits run. I appreciate your time!
June 28th, 2006
Stockman222, I would be surprised if TraderMike has a stockcharts.com subscription. The charts he posts here can be had for free. Their subcription service doesn’t Mike anything more than what he already has. But then, I thought he was already duplicating services. I guess everything has its value to each person.
June 28th, 2006
For example, Trade Ideas just showed that FSL broke its intraday trading range on the downside. This is great info. However, upon checking its 10-day intraday and daily charts (it took me at least 20 seconds — I need to improve on that
, I see that it has reached triple support — 200dma, its downward trendline, and its recent major low. Furthermore, by the time I brought up the stock for trade, the breakout was over and was then pulling back.
Now, what this does do is offer a stock to monitor for the rest of the day and certainly tomorrow, but, it makes for a bad trade for the moment, which is why I wonder what the value is of real-time scans, especially those that require an additional subscription.
June 28th, 2006
Jocko,
I use a real-time scanner to find setups. I don’t know what else to say about it. Trade-ideas costs $45 dollars/month. If it finds one good trade per month then it easily pays for itself. I use a scanner because I’m not in a room full of traders who are calling out stocks that are moving. I don’t know how else I would find stocks that ar emoving without a scanner.
You sound like you’re a scalper. I’m trading off of fifteen minute charts. So a penny here or a penny there doesn’t mean much to me. Maybe if you’re looking for micro moves a scanner isn’t of much use to you. I find it invaluable.
Also keep in mind that I’m running a business here. This isn’t a hobby. $200/month in overhead to run a business is peanuts.
I covered the scan alerts/criteria I use in the Tools of the Trade post.
Re: the FSL alert you mentioned — keep in mind that you’re seeing a tiny portion of what Trade-Ideas kicks out and that the window on this page only refreshes every 30 seconds. But, yeah, depending on how you’ve configured your alerts window some percentage of the stocks will not be presenting good setups. Ideally, you’d configure the alerts to only kick out stocks that met your trading style/time frame.
For FSL, I just double-clicked on the ticker to load it into Cybertrader. Cyber loaded FSL into two charts, a 15 min and a daily. First that that popped out to me was that it’s already bounced off of its 200-day moving average today and that there’s a candlestick from 2 weeks ago wich is defining support in this area which also bounced off of the 200-day . That’s all I needed to see to say ‘next’.
I don’t have data on where I initially saw a stock that I may have traded. I don’t do much overnight research any more. Probably less than 5% of my trades come from the once or twice a week that I run my swing trade scans. Of the rest, probably 75% come from the scanners and the rest are from the gappers list in the morning, which also show up on my scanners.
June 28th, 2006
Stockman,
I only use the free version/level of StockCharts.com
June 28th, 2006
Speaking of DT being a business…what is your opinion on structuring your business legally for those of us that want to eventually be full time DT? Is there a benefit of some type of incorparation…I am more concerened with saving some $ on taxes.
SD Trader
June 28th, 2006
Hey TraderMike-
I too am a tradermike, but obviously not THE tradermike. Ha! Anyway, I have enjoyed reading your blog thoroughly and had a question or 2 of my own. Forgive me if these have been asked already but I was wondering why you switched from swing trading to day trading? It appears to me that my style is very similar to yours, yet I am trying to go from day trading to swing trading. I was wondering if we both have a case of “the grass is always greener” syndrome, or if there is a specific reason you chose to go to day trading.
Also, I was attempting to take a look at the scans you use for TC2000 as I am also a user for comparison purposes but I don’t seem to be able to download them. Let me preface by saying that I am not very computer proficient, which may be the cause of my inability to view them. Any help would be appreciated.
Thanks for your time and keep up the good work with your blog, which is inspiring for many traders out there.
June 28th, 2006
SD,
There are pros & cons to either way. I chose not to incorporate but I may go that route some day. It just depends on a person’s situation. Ted Tesser’s book does a good job of explaining all the options.
June 28th, 2006
hilojack,
Why not do both? There are situations where daytrading is ideal and there are situations where swingtrading is ideal. Often, the ideal situations are simultaneous, although not at this moment, IMO. During market uncertainty, such as primary and intermediate trend reversals, I would not dare swingtrade.
I have a daytrading account, which I just re-started after an extended period of rest, and I have an account I use for swingtrading. I don’t have an account for long-term trading — I don’t agree with the “Buy and Hold” concept. I do have an IRA, which I essentially swing trade long positions during bull markets.
My plan is to maintain a static equity in my daytrade account that will overflow into my swingtrade account. When that account becomes to big to maintain a few positions (I can’t wait), then I the excess will overflow into other investment opportunities.
To me (and this is just MY way as there are a million ways to skin a cat), the main difference between swingtrading and daytrading is the timeframe. A trend is a trend whether it be intraday, daily, or weekly. And, my swingtrade research helps determine which stocks I focus on for daytrading.
During such periods of market uncertainty, such as these past couple of months, my swingtrade account is 100% cash (except for a few short and long positions here and there.
Perhaps I’m missing something. I’m always open for enlightenment and try to understand alternative methods. But, why would these two styles be mutually exclusive?
June 28th, 2006
Ok, I gathered you had a paid subscription by the way the comments were added to the charts.
By the way, I love your website. It’s chock full of great info and analysis. I check in often. Looking forward to reading your interview.
June 29th, 2006
TM-
thanks for the response. I don’t feel either are mutually exclusive and I still do both as well, but I find that I end up botching (getting out too early) a perfectly good swing trade because I am looking to take a profit or be flat at the end of the day. The other problem I have with daytrading is trying to find “the perfect entry”. By this I mean getting in at the point where my expected reward to risk is at least 3:1, while trying to find a proper place to put a stop and trying to get a decent fill– without missing the move! To me, it is much easier to say I think this stock will be up 2 points sometime in the next 3-5 days than to say the stock HAS to be up at least .50 TODAY to make the trade fit my reward to risk parameters. I also find that stocks that are in the news (such as those featured in briefing) are more of a momentum play than anything and can be very choppy. I tend to get stopped out more often than not during this sort of frenzied action.
I think that sideways or lateral trending markets (directionally uncertain) are the BEST environment for swing trading as it allows you to play both the long and the short side of the market within the range, which acts as natural support and resistence. Basically, I look at the slope of the bollinger bands. If the bands are sideways and parallel to one another (not turning up or down) I’m looking to buy the bottom of the band and sell the top. Stochs to confirm the move are even better. If the stock near the bottom of the band opens higher than the previous days low, I’m long, with my stop just below the previous days low. I’m looking to get out of a portion of the position at middleband and hope for a pullback to repurchase those shares. Then, I’m looking for the stock to breakthrough the middle band and eventually reach the upperband. Opposite for the shorts. (just like channelingstocks.com LOL) Thats it.
For example, today I just closed out my long positions in a few oil stocks (before fed meeting). The stocks have reached the top of the BB and hit my target prices. Now I am looking for short entries. I know, shorting oil during the summer may not be the wisest move but I plan on seeing how tommorrows action pans out. Tommorrow will be a very interesting day as it is the last day of the 2nd quarter and mid year results are due in. Could see some window dressing. In addition, fed meeting is soon and friday before a holiday weekend.
In summation, most of the successful daytraders I know are scalpers, who grind out their money and trade a large amount of shares. Trust me when I say that scalping is hard work. Attempting to catch intraday moves based on technical analysis is also difficult as it is difficult to catch good entry points to limit ones risk especially in stocks that are in the news or hit a filter. This requires extreme patience and discipline and the ability to walk away when one misses the move. After a while, it becomes even harder to not chase the stock as it keeps moving away from you (in the direction you had hoped). Specialists are extremely adept at knowing where short-term support and resistence is based on their knowledge from their book. They run stops, front-run (see the post on trying to get short NYSE stocks)and don’t always give fair fills. And wild gyrations on NASDAQ due to program trading can shake out even the most disciplined traders. This is why I am attempting to move from day to swing trading, to basically avoid the intraday noise. Sorry for the lengthy post and I hope this helps.
Also TM, do you think it would be possible to be able to view your TC2000 scans in MS Word format? When I tried to download from your server, my system said I didn’t have the required software to view and did not offer me an alternative. Thanks again and happy trading!
June 29th, 2006
hilojack, your post was a great read for me. More of it would have actually been better
Yes, I scalp. As difficult as it is, I find it easier than alternative daytrade methods. I mean, as long as a stock doesn’t breach its intraday trendline (along with other factors), I just as well leave the position open. If I entered at 10AM and close it at 4PM, that would be great. But, apparently I haven’t found stocks without volatility yet still have good liquidity and movement. Actually, I haven’t reviewed all of TM’s concept yet. I do intend to do so. But, as for now, scalping works for me especially with multiplicity (my avg gain per round trip * round trip trades per day = mo money!)
Nevertheless, I still have lots of catching up to do. BTW, I know few people prefer to discuss gains in terms of actual dollar amounts, but I have a question for everybody:
Do you know a daytrader that makes more annually than you? If so, how much does (or has) he earn annually? Don’t include yourself. That way, nobody has to spill their business publically.
July 6th, 2006
hilojack,
I’m not sure that the scans will be much use if you don’t have TeleChart. You could try opening the file in a text editor like notepad but I’m not sure if it would be human-readable.