How to use pricing action with a watchlist to time a position from your trading idea

(Last Updated On: September 26, 2014)
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How to use pricing action with a watchlist to time a position from your trading idea

Price action is part of the screening your trading idea. This is used in combination with technical analysis and a watch list to generate good trades from good ideas.

Sorry about the bad typing

You need to monitor watch list spreads of your trading ideas. You use your watchlist to service your gross portfolio exposure. You could update this weekly. You need more trading ideas for higher portfolios.

General rule: Your watch list ideas should have 2.5x the amount of total running positions. You could use the long and short entry with spread as a reference when you add to the watchlist. You can have a reference section when you track the current long price and current short price with current spread. You also get spread % difference against the reference spread. You also track the total # of days or weeks the idea has been added to the watchlist. Because retails traders don’t do this, it is another reason why the mass of them fail. Also track the current spread for a number of weeks like 8.

When committing capital and price action, don’t commit capital to losing ideas which is tracked via your spread % with your referenced spread. You could also track positive price action with the number of weeks your track, This will save you a tonne of money and earn a tonne of money too.

For each trading idea, you need to track the daily data back a number of years if possible. You track charts of each spread for the last one and two years. You do this updating and monitoring process weekly which will add value to your trading. Do this at the end of the trading week like Friday. You will update the EOD data (long and short asset) for the prior week and calculate the spread for your trading idea. Automating this will make life way more easier as compared to doing it manually. Update the chart but also the notice of the difference in spread between the Monday and Friday. Also, you need to update last week on the watch list. YOu also need to update the current price and spread on the watch list as well.

How to commit capital to a good trading idea?

This is when the market tells you an opportunity is opening up. If you are range trading with choppy price action and technicals don’t say much, you could draw a neck line to seek out head shoulder with a boundary of channel lines for the upward and downward range. also look for a decent trend with the spread as well from your chart. The up and down range lines will identify support and resistance in the range pricing action. You could calculate the support and resistance price amounts (i.e. high price in range period). You could do a starting position (or half position) You could apply a stop loss with 10% or 90% of the current price. This becomes your theoritical stop loss price as new support if this was full position. WIth a starter position, you could double the stop loss for let’s 20%. So if the price drops to the new half position stop loss, you could complete the position if you get positive price action.

Another scenario is if the price action goes through the original support level with positive price action, you could buy the other half position if your fundamentals are positive as well. Your average price would become the new stop loss of 10%.

If you put a full position on at the current price, you have a stop loss of 10%. You still need to apply a soft target which need to be realistic. Also compare historically if the pricing action ever traded at the soft target or hard stop loss you set. You could use the history of the spread to see if that is realistic but there are no general rules to apply. Remember the spread could also show all time highs. Also, use your fundamental predisposition to add confirmation.

As retailers don’t have these processes, it is more evidence why they continue to fail. generally.

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Hi i there My name is Bryan Downing. I am part of a company called QuantLabs.Net This is specifically a company with a high profile blog about technology, trading, financial, investment, quant, etc. It posts things on how to do job interviews with large companies like Morgan Stanley, Bloomberg, Citibank, and IBM. It also posts different unique tips and tricks on Java, C++, or C programming. It posts about different techniques in learning about Matlab and building models or strategies. There is a lot here if you are into venturing into the financial world like quant or technical analysis. It also discusses the future generation of trading and programming Specialties: C++, Java, C#, Matlab, quant, models, strategies, technical analysis, linux, windows P.S. I have been known to be the worst typist. Do not be offended by it as I like to bang stuff out and put priorty of what I do over typing. Maybe one day I can get a full time copy editor to help out. Do note I prefer videos as they are much easier to produce so check out my many video at youtube.com/quantlabs