Michelle B submits:
Having read a few comments at trading blogs---OK, I have read zillions---I have encountered more often than not, a frenzied, harried, stressful approach to time when one is trading. Some feel the demonic pressure crushing them as soon as the market opens; others feel enervated by its demands needling and pinpricking them throughout the trading day. Regard time, instead, as a wonderful and gracious friend, accommodating your need to focus and execute successful trades.
Specifically, I rely upon my friend, time, in three concrete ways:
I. Using Time frames
All time frames are useful and valuable--monthly, weekly, daily, hourly, thirty minute, fifteen minute, five minute, and last, but not least, one minute. My motto is: Fondle your candles. I look at my candlesticks lovingly and with great attention to details, sucking out the last bit of information they can give me. Certainly a graphic way of stating my point, but candlesticks of different time frames are worth the time upon which to ponder. Ah, time. We got it, so we need to use it well. And there they are, our helpful friends, all lined up, willing to protect our capital like dutiful soldiers, but we are too busy squandering time by not focusing and being distracted by all the action.
Often, time is used to oversee too many candidates or it is used to mind too many trades, so it is easier to just focus on one or two time frames, therefore resulting in the missing of much information. Some traders regard the one minute as dangerous, stimulating them to act foolish and blinding them to the smoother pattern of longer time frames. Others regard the longer time frames as concealing more pertinent details that only the shorter time frames can reveal. The disadvantages of one time frame is countered by the advantages of another, so using them all is truly taking advantage of those little bundles of time, with their high-quality content. In addition, looking at many time frames, will allow the beginner trader to learn the workings of the market. Checking out many time frames does not mean that you violate either your trading methodology or risk parameters.
II. Identifying, preparing for, and focusing on special time periods in the trading day
Already having discussed POT, I will address several other special times in the trading day.
1) 9:30 AM ET to 10:45 is a time of high volume, where usually a trend happens after a breakout in the opening range or consolidation.
2) 10:45 AM ET to Noon ET is when, following whatever trend that happened after the open, price will often consolidate during this time period on low to moderate volume.
3) Noon to 1:30 PM ET is when slow and steady trend continuing or reversals can happen on low to moderate volume.
4) 1:30 PM ET is when abrupt and pronounced continuation of trending or reversal on high volume can happen.
5) 2 PM ET (better known as POT) is also when abrupt and pronounced continuation of trending or reversal on high volume can happen.
6) 3 PM ET is yet again a possible time for either a high-volumed, abrupt, and pronounced continuation of trending or reversal happening.
7) 3:30 PM ET, yup, you guessed it, this particularly tricky time can trigger a very abrupt trend continuation or reversal on high volume.
III. Awareness of economic/seasonal events
It is important to know not only when earning releases are due, but also economic reports, options expirations, end of month and quarter, holidays, and seasonal times like the usual low-volume summertime.
Time is like beauty, in the sense how it can be interpreted differently in the eyes of the beholder. The above information was gleaned from actually trading the market over years. Each trader need to take the basic information and apply it to her/himself in order to make it their own so it will work equally well for them.
I agree, one of my favorite things is watching eagles sitting in a tree watching and waiting very patiently, for the exact right time to make a move.This is how they get fed. A person can learn very much from watching how nature works.
I find this approach to trading much more productive than the psycho-frantic approach.
Joseph, thanks for your insightful and metaphorically pleasing comment.
Michelle,
I found your writing to be true and captivating. You really ought to have your own blog.
Thank you, Dori, for your positive feedback. Perhaps, I will someday create my own blog, but at present, I prefer to contribute to Michael's.
Great article. As I have traded more, I find all the things you say to be pertinent. Unfortunately, I have paid my tuition though small losses (fortunately). Thanks for the insight.
LP, Thank you for your comment. Keeping losses small will allow you to continue to learn. BTW, my article on capitulation should be ready for Monday.
I agree with Joseph, following the natural way. The analogue I use is the spider - take trading ideas and set your traps with the longest time frame possible. Check things out on a regular basis, be patient, and let the market come to you.
Bryan, thanks for your comment. I often regard my patient stalking for the best entry in a trade akin to sitting in a boat on a placid lake, with a fishing line trawling in the water. Once the fish is successfully baited, then I become focused on reeling it in.
It would be interesting if other readers shared their 'natural' metaphors for being patient/decisive in their trading.
Since I wouldn't describe my trading style as patient, I'll have to go for another type of metaphor. Killer bees.
I may focus on a stock as a candidate to trade but instead of sitting patiently, I normally swarm the stock with order after order. I get in and out hopefully keeping my losses small. At some point, the stock moves in my favor and I move in for the kill, with a barrage of orders that aim to maximize my gains.
So, just like the victim of a killer bee attack can never know which bee sting is the one that finally does him in, so it is with my trading. I never really know what order will be my first order that sticks... I make educated guesses about timing and slowly but steadily test my victim with stings. Eventually, one of them works and I land a winner.
Clearly, this analogy loses to that of fondling and sucking the candlesticks dry, but I did my dinosaur best.
Thanks for the posts, Michelle.
Dinosaur Trader, I think your dinosaur best is pretty darn good, and can certainly 'hold a candle' to my analogy.
I see from your blog that you are another trader that does the NYSE. I want to trade NYSE stocks more than I do so I will see if I can pick up some info from you.
And you are very welcome.