Brucef in the trading room had some questions on the above rules so I've posted a copy below so everyone could benefit from his questions:
At 05:20 PM 7/1/2009, you wrote:
#2 Don't go against the 89 tick for entry ever!
(Alex uses 89 tick HA bars. you mean to only trade in the direction of the COLOR of the HA bar or also look for confirmation using MA or stoch on the 89 tick ?)
The HA bars are covered on #3. This means the 89 tick stochastic. Ie: Don't short on low stochastic readings or go long on high readings.
#3 Use blue/red heikin ashi for pin point entry
(You are referring to the 89 tick chart in #2 above or a different chart ? Also for 'pin-point' entry do you wait for a new bar to open on the 89 tick or some other indicator of exactly when to get it ?)
The only chart we use the HA on is the 89 tick. Yes referring to that.
#4 Don't fight 3min stochastic unless your in a strong trend day (adds +/- 2000)
(So you are suggesting to trade in the direction of the 3 min stoch meaning only trade long when stoch is oversold and only trade short when overbought. My chart has lines at 80 and 20. Do both lines have to agree or only the 1 leading ? Also do you look for > 20 but < 80 on longs and <80
but > 20 on shorts or will still take them if other technicals support even if long > 80 and short < 20 ?)
Yes you have this one right already with out any further comments from me. The 80 and 20 bands are good rules. The trigger already has this built in. This is more of a rule for oscillation day and not strong trend days.
#5 Always have your stop in mind. If trigger stop is over 50 then be cautious
(I always take buzzer trades with 7 tick target, 20 tick stop for 1 car unless otherwise recommended by alex. When I get to 2 contracts I will take profit at +11 on 2nd car and move stop up as advised by alex. I know that I will learn more as I spend more time in the room but FOR NOW, I just need to get profitable consistently using the basics)
Thats fine for learning purposes but pro traders always vary their steps depending on near by support and resistance, the ATR and what type of day we are in. If your 20 point stop fell right on a PIVOT support then I'd move it 5 ticks under that pivot (if you were long) because we know thats a bounce point and the market may jump there. You'd be mad if you were stopped out on the pivot and then it held support and ramped up. Adding a little common sense to trading based on things like this is why Alex doesn't believe in 'BLACK BOX' systems. They wouldn't ever do this type of thing.
#6 Trade in the direction of the major 60min/15min trend (if its not a chop day)
If CHOP day atleast take 89tick entry in direction of adds/filters/drift
(How do you define the trend ? We talked about it today a bit using
I use the same method Alex uses so we are on the same page. Read this post on how we define the 15/60 trend: http://puretick.com/BB2/viewtopic.php?t=383
(Alex uses ATR on 3 min chart and has suggested to set stop at 2 x ATR. Is this what you use ATR when stop is too big ?
I actually use the Trigger stop program which is the same thing really. It's an ATR of the last 10 bars on a 3 minute chart. But if you don't have that program then using a 2x ATR is fine. If you have a huge ATR then you know a 20 pt stop will probably be blown away.
Also do you have a guideline for low volume to avoid trading ?
No but I just look at the previous volume and volume moving average and see if its sideways up or moving down sharply.
Not sure about 'ticks' ?
TICKS are a market internals indicator (like the advance declines) It's the number of stocks trading on an uptick minus the number of stocks trading on a downtick. High readings are bullish, negative readings are bearish. Usually look at them and see where they have been. Sort of like stochastic. Normally enter a long on low ticks and short on high ticks. If they have been in the negative region all day I will have more of a short bias.
PIT NOISE: I personally prefer avoiding more noise or distractions unless it is a compelling enough reason to have it so that I can listen and pay closer attention to the room and Alex and what traders are typing in. )
While your learning you can bypass this for now.Maybe add it later. If your seeing a break out take place and the pit audio is LOW then you may not take it. If you hear screaming and roaring from the pit then I'd jump on board. It helps me but to each his own.
#9 Be aware of pivots, bid/ask volume(look for divergence),block tape and nearby s&r areas
Volume indicator ? If so where can I find it ?
I know Ninja and eSignal have it but just watching the tape is the same thing. Its a graphical display of trades done at the bid/ask and in between. Its not 100% required.
I have no idea what 'block tape' means ? Please explain.
You may wish to watch Alex's videos on tape. A block trade is just a trade over 10 contracts big.
I understand S&R levels and how to use them. S&R levels can be based on the pivot as well as recent price activity. Do you mean
both and if so what chart and source do you use for S&R levels ?
That is a long subject. Support can be a double bottom, pivot, major moving average, important sticky price area, previous days high or low etc etc etc etc. Ie:I wouldn't SHORT 5 ticks above a major overlapping support area. It has a greater chance of bouncing.
#10 Be aware of the ES charts and it's important areas
(What timeframe would you watch the ES on and what do you mean by important areas ?
5 minute time frame on the ES. I don't 'switch' back and forth. I have everything on the monitor at one time. I have 3 monitors but it would all fit on 2. One is pushing it unless its a 19" or wide screen.
#11 Be aware of the 15 minute moving averages which we use as dynamic support and resistance
(I have the 5 and 20 SMA's on my 15m chart. This is one of those things that does not come up very often and could be used
as additional confirmation when everything else is signaling a trade. Today we had confluence between the 20 MA and 38% fib
but would not have taken the trade for that reason itself.
Alex does not use fib levels very often at all if you notice. There are various levels, newer traders don't ever know which ones to pick. It confuses the heck out of most of them. They are great when they work but they often don't. I never draw them myself so I try not to comment on fib related trades.
You can only use so many indicators. Just don't over load your self.
See you in the room in the AM!
Caj
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