Thursday, December 31, 2009

Trading Desk

Trading Desk

What do you have on your trading desk? Are you organized or even care about your trading desk and staying organized, i mean it is your money making machine.
I know when i first started trading and getting highly involved in the market i was always curious as to others trading desk’s setup and the equipment that was used.
Well just in case you are wondering, here i give you details of my setup and what i have on my desk.

I have a pretty basic desk setup, i am very organized with a pretty powerful computer.

computer I use:
Duel 19in wide screen monitors
Amd Quad core cpu
4 gigs of ram
Windows Vista Ultimate 64-bit  
1terabyte hard drive

Internet Connection:
I use a direct(wired)connection to the internet.
I do not advise going wireless when trading due to being vulnerable for drop connections or a weak signal.

I keep my laptop by my side for a back up, just in case my main computer fails for some reason.

Trading Software:
My Platform setup:
i have my futures, live news feed, intraday chart, level2, time and sales all running on my TOS platform at once. I also have a browser going with yahoo finance open, and StockTwits.

Desk Elements:
calculator- I use a basic calculator for quick calculations, determine cost of a trade subtracting commission or general use, i find it very useful.
Note book-A simple cheap notebook is always handy for jotting down notes and ideas or, keeping a trading journal and tracking your trades.
Sometimes i have CNBC in the background(for breaking news/entertainment i don’t take advice from those talking heads :) ), and sometimes i have music on.

Posted below is a quick picture of my desk.


Sunday, December 27, 2009

6 SPDRs You Should NOT Be Afraid Of!

6 SPDRs You Should NOT Be Afraid Of!

I use and follow these specific sector ETF SPDR’s when trading and investing.

Financials SPDR(XLF)
A wide array of diversified financial service firms are featured in this sector with business lines ranging from investment management to commercial and investment banking. Among the companies included in the Index are JPMorgan Chase, Wells Fargo, and BankAmerica Corp.

Energy SPDR(XLE)
Energy companies in this Index primarily develop and produce crude oil and natural gas, and provide drilling and other energy-related services. Leaders in the group include ExxonMobil Corp., Chevron Corp, and ConocoPhillips.

Health Care SPDR(XLV)
Companies in this sector primarily include health care equipment and supplies, health care providers and services, biotechnology, and pharmaceuticals industries. Pfizer Inc., Johnson & Johnson, and Abbott Labs are included in this sector’s mix.

Technology SPDR(XLK)
Stocks primarily covering products developed by internet software and service companies, IT consulting services, semiconductor equipment and products, computers and peripherals, diversified telecommunication services and wireless telecommunication services are included in this Index. Components include Microsoft Corp., AT&T, International Business Machines Corp., and Cisco.

Utilities SPDR(XLU)
The Utilities Index primarily provides companies involved in water and electrical power and natural gas distribution industries. The component companies include Excelon Corp., Southern Co., and Dominion Resources Inc.

Consumer Discretionary SPDR(XLY)
Industries such as automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media, and retailing are primarily represented in this group. The Index includes McDonald’s, Walt Disney Co., and Comcast.

resource here

Wednesday, December 23, 2009

Is the pattern day trader rule hindering your trading?

Is the pattern day trader rule hindering your trading?

For those of us that either start with a small broker account or just have less than $25k in your broker account, are subject to this rule. First what is a pattern day trader, pattern day trader is defined in Exchange Rule 431 (Margin Requirement) as any customer who executes 3 or more round-trip day trades within any 5 successive business days. A round trip means if you buy a stock and then sell that stock in the same trading day is considered one day trade or one round trip. You are given 3 of these day trades for every 5 business days. If your account is greater than $25k, than you don’t have anything to worry about.

What is the purpose of this rule?
This rule came into effect February 27, 2001, by the Securities and Exchange Commission (SEC). The purpose of this rule is to basically protect the small investor or trader from totally being ignorant in the market and being eaten alive by professional traders. I can see this rule being useful for an individual who is just starting in the game of trading (yes I think it is one big game) and slows down that persons losses and prohibits him from losing a lot in a short period of time.

Now for those of us that have been trading for some time and have gained quite a bit of experience in the market and are not totally ignorant when it comes to investing but has less than $25k in our accounts, this rule just slows our progress in building a bigger account and breaking out of this rule.

Now for the good stuff!
I talked to my broker and asked if i could open up a second account with them, and in doing so would I still be subject to the PDT rule for both accounts combined. For example, if i used my 3 day trades in one account and switched over to my other account would I have 3 trades for that account or would I have 3 day trades for both accounts together. Well come to find out, opening that second account does in fact gain you 3 extra day trades. So if you only have $10K to start your investing or trading account you could split that into two accounts and now you have 6 day trades for every 5 business days, now that is pretty cool! Well of course you could open more and have more day trades but then you are pushing it, 6 day trades for one week is plenty IMO.

So now if you used up your 3 day trades half way through the week, and you bought into another stock you then have to hold that overnight regardless if it tanks on you. With this option you could use your 3 day trades, then with a click of a mouse switch to your second account and now you have 3 fresh day trades to use.

Hopefully this will help those seeking an alternative route around this rule.

If interested in learning more about day trading in general i suggest A Beginner’s Guide to Day Trading Online (2nd edition)

Monday, December 21, 2009

Methods And Indicators Used When Looking For A Swing Trade

Methods And Indicators Used When Looking For A Swing Trade!

I don’t know about you, but when i look for potential plays in the market i want to find them fast and easy without having to do much digging around and analyzing a stock in to much detail. I will point out a few methods and indicators I use in order to cut the process of finding plays in half. Keep in mind this is how I look for Swing trades. 

Swing trade in other words means holding a stock for more than one day, usually ranging from 3-5 days or longer, making profits in a short period of time while maximizing the potential in profits over a few days weather you go long or short.

Lets get right to it!

First, how do we find company’s with a nice chart pattern that is setting up for a nice short or long swing trade?
I start by going to FinViz website, and use there custom stock scan tool. I then click on the create custom scan, and enter in the data criteria I am looking for. I will start with entering in a price range, since i have a small account and a risk taker I will scan for $5-$10 stocks, you can also enter in a percent gain for stocks to, something like 1-10% gain for that day. Enter the volume range as well, we don’t want to trade an illiquid stock that would be hard to get in and out of. I usually enter in something like, grater than 1mil shares traded in a day. Now for this scan tool you can enter in other data for a more refined search but I don’t use them, I will just find plays and use charts to get my own opinion on chart patterns.

Now I do sometimes set the check boxes above the price, to get some better search results so i don’t have a list of 100+ stocks i have to scan threw and research.
After you enter in the data you wish to search stocks on based on your input, you will see a list on the right side with all the stocks that meet the criteria entered.

As soon as I get my list, I open up my charting software(I use ThinkorSwim) and I will enter in the ticker and get a quick glance at the chart. After I narrow my list down based on chart patterns of the stocks I will use some basic fundamental analysis for each stock to validate it is a good company, more on that in a bit.

Indicators I use with my charting software to determine a good swing are, moving averages, volume, the ADX indicator, MACD, and support and resistance areas.

Moving averages, I use the MA(4),EMA(9),EMA(200), 4 day, 9day, and 200 day moving averages all with different color lines for better chart reading.

If you are unfamiliar with moving averages i suggest reading about them here.
Now, the only thing I use moving averages for is when I see them cross either up or down signaling a change in the trend. I use the 4 and 9 day moving averages for this, because they are closer together and will give me faster signal than a 20 and 50 day moving average signal would.

I have provided and image that gives and example of the MA crossing with a upward trend following,
notice my chart settings, its exactly what i use. click it to enlarge it.

The volume is another good indicator, now we did set a criteria for our stock search that has the specified volume in it. But when glancing at a chart, you can notice if volume is beginning to fade or steadily increasing both would also factor in when deciding to go long or short.

Average directional index (ADX) is one of my favorite indicators, this thing will help you determine if the stock is trending in one direction or consolidating and just trading sideways (Boring!). I have my ADX set on 14 days, which also will give me a shorter time frame and a faster trending signal. I will get short and to the point, if the signal line for the ADX is above 20 then it is trending, if it is below then it usually means it is trading sideways. We want a stock that is trending and not just siting sideways, so we can gain profits on the up or down side.

The indicators I mentioned i use as a check list. When I type the ticker into my charting software, I look at the chart, check to see if the moving averages are crossing(up or to the down side), i look at my ADX and see if the stock is trending or approaching a the 20 mark validating a trend. I check out the MACD and determine if that signal line is crossing the MACD line and is above the 0 mark, then i check out the volume, determine if it is fading or increasing, I then do some basic fundamental analysis and check for upcoming events for that stock or and PR that have come out that could determine the future price action for the stock. If all is good i add this stock to my watch list, and i also write down an entry and exit price that i would like to get before i enter in the trade. If i am going long on a swing trade my indicator to sell is when i see those moving averages cross to the down side, and with this setup of the moving averages it is usually 3 down days that will make them cross.
Note, i use yearly and 3 month charts when looking for chart patterns necessary for a swing trade.

recommended books:
The Swing Traders Bible: Strategies to Profit from Market Volatility (Wiley Trading)
This book is very good and well written with lots of chart examples.

Swing Trading For Dummies
yes it is one of those Dummies books but it was very informative and i learned a great deal about swing trading.