Support is working, if you’re a daytrader

  • Posted by
  • on October 14th, 2012

 

We’ve often said that one of the most important things in trading is to know your time-frame.  What is more sad than to watch a day-trader get into a position, not honor his stop, and then treat it as a swing/investment because he doesn’t want to book the loss?

We were mostly buying this week, in a down week, and yet had a great week.   As we wrote earlier this week, this is the type of market that we shine in– we are strongest in volatile markets, and struggle more in melt-up trending markets.  Probably the opposite of most trend swing traders.   The reason?  Time-frame.

Support worked great this week– as long as you didn’t overstay your welcome.   Let’s take a look at the three ideas we gave out this week for free on the stream and of course our newsletter had even a better streak.    The first was AAPL — we wrote that didn’t think it would get to 620 (it was too watched) but that it was over the Bollinger Band and was ready to reverse.   Next day the bears couldn’t quite take it to 620 before it gave a great hammer and rallied for the day and  gap ups for next two days before finally fading.

 

The second freebie was $SPY 143-143.17.  We were pretty adamant on this one and posted 5 x within an hour how it pays to buy the close on support (the good old days of intraday hammer are more scarce now).    We also posted our entry at 143.17 near the close.  The next morning came our reward for buying support– a gap up.   We wrote that  “If you followed us in yesterday on 143.17 long $SPY tweet and share our time frame, then take some off here for a point, and trail rest”.  That coincided with the high of the day as the market faded into the close.    So AAPL bounce lasted almost 2 days.  SPY was good for a quick over-nighter 1 point trade to sell into open.    Bounce time-frames getting shorter.

Our last freebie of the week on StockTwits was the post on Thursday  that we would be buyers of $HFC sub-37 (and in newsletter more detailed explanation and alert of 36.8-36.95).   The low was 36.86 for a quick 1 point  rally before fading a bit into the close.   This time bounce was intraday– however several stocks in the sector hit support and we decided to swing partial to see if we can get more of a ride on this bounce, especially since we have a bit of a safety cushion.  2 days, 1 day, and then intraday?

Buying support is one of our most successful strategies; we ever prefer it to buying breakouts.   We’ve been trading for 15 years and the only clear thing we can point to is that it’s becoming consistently more difficult to earn a living as a day-trader/swing-trader.   Difficult, but completely doable.  We gave the stream 3 ideas this week, and all 3 worked.  If we had not adapted and increased the size of our tool-box (from being straight out break-out, trend traders) we would have blown out years ago.    Stay sharp, stay nimble, and stay in the game.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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