Wednesday, June 10, 2009

A technique for day-trading spiders

This post is not about insects so if you have landed here by way of a Google search trying to figure out what kind of spider it was that just bit you, well, if you still can read, it's probably harmless. If not, call 911.

This method uses three timing charts, a longer time frame for TREND (I used 120 minutes today) a medium time frame for TRADING and an itsy-bitsy time frame for ADD-ON TRADE.

Today was a good day for this kind of trading, because the TRADING SHORT (21 minute) was on most of the day, while the ADD-ON SHORT (3 minute) provided enough swings to justify its existence.

The chart above is my 120 minute SPY chart. It triggered Short this morning as shown on the chart at 94.94 (fifth bar from the right). Once triggered, I only want to take trades in the direction of this directional signal, SHORT.

The chart above is my 21 minute chart. Look at the beautiful SHORT trade that lasted right up until the final hour of trading today. With both the 120 and 21 minute charts on SELLS all day, it was a good day to be me.

The chart above is my 3 minute chart. I used it today to add on to my Short position when it was in sync with the other two charts, and take the extra position off when it was not. Again, I am only concerned with the red bars, the Sell Signals (and the FBS).

Odds & Ends

*I traded this with SPY puts today, very liquid, once cent spread between bid and ask, easy in easy out. This technique can be used with the SPY itself, it's leveraged bull and bear ETF's or with futures.

*Although I usually use the 120 minute as my main trend indicator, the smaller time frames can vary, usually between 13-34 for the middle time frame and usually between 3-8 for the smallest time frame. I'm too tired to go into detail here, there are reasons but mostly related to common sense and the kind of day the market is having.

*It doesn't always work this well, but it seldom chews you up, so when you have a big trending day, you can really clean up.

*You'll notice the False Bar Stochastic on all time frames. When these line up with the TREND MODELS, it's ALL-IN.

*I use Blue Wave as the timing engine, but it works with other tools, just maybe not as well. In other words, a multi-structured plan like this should work with Market Club Triangles (but you have to figure out your own triangles for intraday periods). A structured multiple moving average system may also work here, but that lag is a killer. The first trading system I ever went public with, circa 1990-92 was very similar, using stochastics on multiple time frames. I called it the Double Stochastic and traded it with credit spreads on OEX options. I think Reagan was President.

Finally, notice how my Forecast Model, the one that is calling for new lows in the markets, did not come into play at all in my trading. I've done this on the Long side many times in the past three months. Forecasting is one thing, Trading is something else entirely.



Anonymous said...

Hey Allan,

The trading stuff is mildly interesting, but a Game 7 in Detroit is totally awesome and much more compelling. Where tf are you about this now that you have led so many of us to the most brutal slapstick ever to be played on planet earth? Enuf said. Joe/NYC

Allan said...

Hi Joe:

Having attended law school in Boston, I know how obnoxious home team fans can be when talking about their local teams. So I have tried to show some restraint, even though a win Friday night will make the Red WIngs the first legendary sports dynasty of the 21th century.


Ubreako said...

What is your view on the USD short term, say 3 months ?

Anonymous said...

If the Penguins win? What happens then? Gary

Anonymous said...

Swine Flu Pandemic to be announced~~~ NNVC Fast Track possibilities?...will this finally be what gets us there? Gary

sgrbear said...

I am interested in obtaining more information on your subjective use of the 13-34 bar chart and what moving avg(s)you apply...I presently use 120min,13 min,3 min..

Anonymous said...


You are our only hope. Save us.


Anonymous said...


I was taking a jog the other day and saw a dead dog by the side of the road. I stopped, looked closer, and saw it was not a dog but a pile of NNVC shares!

Anonymous said...

Something cooking at NNVC land...HOD .68 with a surge of volume...190k+