This Really Says All You Need To Know About Today

Here are two charts that I keep at the bottom of my trading screen. Like the title of this post states, they pretty much tell you everything that you need to know about today. They're pretty self explanatory. All I can say is that fortunately, I was out of all my longs and short going into today.We'll have to watch and see what tomorrow's reaction to today's trading will be. Have a good night.

TLT

NYSE Up Volume vs. Down Volume: getting a heads up on the crowd

Today has been pretty typical of trading days lately. We had the early morning sell off that found support and then the markets headed higher. At the time of this post, there's still about 25 minutes left until the close so anything could still happen...but the path of least resistance is up.

One way to get a heads up that the selling dried up (i.e. get out of shorts) and then that buying was coming into the market was to monitor the NYSE Up Volume v. Down Volume. I keep a 1 minute chart of the up volume plotted against the down volume. Here's the chart with some annotations of what the crowd was probably thinking at the various times of the day today:As you can see, the day started out with a very bearish reading. Lately, sell offs have been swift but short, as buying keeps coming into the market when it shows red. For that reason alone, short sales are quick momentum trades at best..unless there is something very stock specific going on (see daily charts of MON, PFE, MRK for examples).

Then around early afternoon, the up volume started catching up with the down volume...definitely better cover those shorts at this point. Then up volume overtook down volume and we're off to the races. This has been pretty typical lately, probably because there is a lot of scared trading on both ends. People are watching their stocks go up and are getting nervous, selling quickly when the market shows any signs of selling off and then those same people see buying come in and are afraid to miss the move higher. This makes for some excellent day trading (ride the tide and hop off quickly) and good swing trading (fade the extremes) as well. Check out the up volume vs. down volume if you get a chance...it can be very helpful for timing entries and exits.

TLT

My Trading Screens

I was asked recently about what I keep on my computer screens while trading and I thought that this would make a good post. These are the 3 screens that I keep up while day trading...I don't think this much is required all at once while trading in longer time frames (in fact, some day traders keep less than this on their screens while trading and would hate this much clutter). This is what works for me. It may change in the future, but I've kept this general setup for a little while now and have only changed minor things like changing my Up Volume v. Down Volume chart from lightspeed to thinkorswim, etc. (see below).

Screen Number 1: The Broker Software
As you can see above, this is my broker screen. This is all information that is provided by Light Speed Trading (my day trading broker). It is fully customizable and this is what I happen to be using right now. Some key points are the watchlists, the level 2 quotes in the lower left hand corner (which is where I also enter orders with hot keys), a 5 and 15 minute chart of whatever stock that I have pulled up in the level 2 box and a ticker alert in the top right hand corner (which wasn't working yesterday for some reason) that shows new highs and lows for stocks that I have entered into an alert list.

Screen Number 2: Trading ScreenThis screen is my actual trading screen. I use it to monitor the stocks that I'm trading or looking to trade. These charts are through thinkorswim's program...a very snazzy platform, especially for a retail program. I used to have eSignal, but the firm I trade with quit paying for it so I figured I'd try thinkorswim for a bit. So far its working pretty well. On the picture above, I have numbered my different chart windows and given a brief description or name for each chart. The most important thing about this screen is that charts 1-5 are linked, meaning that when a symbol is entered in one, it gets pulled up in all of the charts. I have these 5 charts setup to show me the multiple time frames that I use for trading.

A couple of other important things in this screen are the TICK chart, the VIX chart and the NYSE Advancers v. Decliners and the NYSE Advancing Volume v. Declining Volume. Then I've got two windows that I keep 15 minute charts of either ETFs (spy, qqqq, xlf, etc.) or sometimes I'll also keep a chart of a stock that I'm constantly watching (either to trade or to help manage my current trade). One last thing that I want to point out is that the 5 and 1 minute charts are small, the smallest on the screen. That's because I only use the 1 minute for exiting a piece of a trade and the five minute for pulling the trigger once there's a setup on the higher time frames. You can go crazy watching 5 and 1 minute charts for entries.

Screen Number 3: Futures and Forex Screen I keep this screen up at all times while trading. On it I have 15 minute charts of the ES futures contract (S&P emini), the NQ (Nasdaq 100) and the YM (the mini dow jones). I monitor these three markets to give me confirmation on break outs and just to keep an eye on the overall market. I also have down in the bottom left corner, a 15 minute chart of gold (YG). This is used the most when I'm trading a gold stock. Next to it is a 15 minute chart of the Eur/Usd pair as it's always good to know what this currency pair is doing. And finally, I keep the 30 year bond contract up in the bottom right hand. This isn't always up though, sometimes I'll put up oil or natural gas if I'm trading a stock that is involved with one of those commodities.

There you have it. Three screens that give me a lot of information with a quick glance.

Hope everyone is having a great week trading so far.

TLT

Recognizing a Range Bound Market: Key to avoiding the Chop

After the first hour of trading, it is clear that today is a range bound market with a high likelihood of chopping up anyone who attempts to trade it (unless your trading method is geared specifically for this type of market). I've made only one trade this morning, only because there is nothing to do right now. I've got JPM on my radar as a long and GG on my shortlist, it's just a matter of them properly setting up for the trade.

So instead of trying to trade and getting chopped up I thought I'd post about how I attempt to recognize these types of day. Learning how to recognize this type of poor trading environment and keeping myself out of the market when it's like this (sometimes that's the hard part) has positively affected my P&L way more than anything else. You can make some killer trades when conditions are good but it's all for nothing if you just end up giving all your profits back when the chop fest begins.

Ok, here's what I'm looking at this morning:So that's a pic of a choppy market that is likely going to continue to be range bound. On a good trading day, you want to see the opposite. The watchlist should be mostly one color. The line charts for the advancers/decliners, up volume/down volume, and VIX/SPY should all show the lines heading in opposite directions to indicate a trending market. Today they're just crossing back and forth over each other...a sign to go post on the blog instead of trading.

Another indicator that helps is the NYSE TICK. This indicator shows the NYSE stocks that are making upticks vs. downticks. Readings between -400 and +400 are generally considered neutral. Everyone has their own take on how to use the tick and what levels are important. I look at +-1000, 800, and 500. The other thing I do is keep an eye on whether the majority of the ticks are in the positive or negative zone. Having a moving average helps as well. Here's a chart of today's 2m tick chart:As you can see, today's tick chart has been all over the place. That's all I've got for now, hope everyone had a good weekend.

TLT

***Update***
The market literally broke down right when I hit the post button to publish this post. I was able to catch a piece of the GG short that I had planned (short below 39 with a profit target at 38.50). Unfortunately there is not much follow through for shorts right now as the market has been in an uptrend lately. Thankfully I grabbed a piece of the sell off, I just thought it was funny that the market sold right as I published the post about the market not doing anything.

How to Recognize Intra-Day Buying Orderflow: My 1,2,3 Internals

As I'm typing this (roughly 11:00 a.m. central time) I'm watching what appears to be the end of a great short term buying opportunity. It could push higher, but the initial momentum is definitely over for now. This was one of the best upmoves I've seen in at least a week. Fortunately, I was able to recognize that I needed to be long and was able to catch a piece of the move, although I left a little on the table because booking profits lately has been very difficult due to the choppiness of the market.

How did I recognize the intra-day buying order flow? The big signal was the market internals. There are several things I monitor at all times while day trading and these are the big 3 (note that I didn't include the cumulative tick in this list...i always watch the tick as well but it's more common so I'll leave that alone for now). The big 3 are: 1) Advancers vs. Decliners, 2) Up Volume v. Down Volume, 3) the Vix vs. SPY. I plot all of these with intra-day line charts. Here's a screen shot from just little while ago:As you can see from the above pic, it was time to be long. In 1, the advance line was way above the decline and they were heading in opposite directions (bullish), in 2 the up volume was above the down volume and they were heading in opposite directions (bullish), and in 3, the Vix was maxed at the very bottom of the chart and the SPY was at the top (very bullish). When I see the 3 internals cross and start heading in opposite directions, I know to be ready to trade. On choppy days that are hard to trade, you'll see these cross back and forth several times...a sign that it's very choppy and you have to have low expectations of follow through if you trade at all.

Today I saw buying pick up and the internals got bullish and I knew it was time to stop shorting financials, which was chopping me around a little, and look at my list of potential longs. My big long of the day was NVDA. NVDA had awesome relative strength this morning as it was able to hold a gap up and then continue higher even as the market was heading lower. A stock with that kind of strength has the potential to pop if the market starts heading higher and that's what it did. All-in-all, it's been a good day and now I'm just going to sit back and watch for the rest of the day.

I hope everyone is having a profitable week/month so far and I'll be back with another post soon.

TLT