Market chat

[Naz]

Hi Hughmac thanks for the reply and for letting me know why people use spread betting.

I'm always interested why people do certain things in the market and related to the market because i think by trying to understand human psychology gives traders an edge over the herd.

I've always been interested in peoples response when i show them Nasdaq level 2 against price action on a graph.How to read its mood and feel the stock.Nothing at all will be showing on a graph but within a very short time we'll be able to understand the forces controling the stock.

Then i turn to them and say you now undersatnd what this stock is going to do but you havent used any t/a, all your info was on the screen!

The next fact is that if you understand what is realy happening in the stock then you will understand,before any graph shows it when the mood has changed and we are about to move in a certain direction.Direct access lets you take your position in the blink of an eye and therefore your stop can be placed in an area which gives you little risk.

If you then look at the bigger picture on a graph you will be able to see where t/a players who need price confirmation that something has happened will want to join the move.By the time they join the move your position is healthly in profit.For them they need wide stops to make it work.You have managed to join this move with a teeny stop because of better information and execution technology.

For them the stock has got to make a larger move to cover their plan and possibly a large spread from a spread betting firm.You could now possibly sell half your position with a profit and move your stop to break even.You are in profit and a no loose situation.They've just entered.

If the stock dosnt run as its supposed to and pulls back you can close out knowing that your overall move has netted you a profit.They will have to close out with a small loss but also a loss based on the spread that they've had to pay.

Do this numerous times and you can keep banking small profits but they will get hurt.When the final big push comes you will still be happy in taking the move because its been making you small profits but human psychology will keep the t/a player out initialy because he's been taking losses tying to get in.As your happy riding the wave the t/a player now sees he was right and enters the trade to late ie. he chases the stock.

You see on the screen that the Market makers are dumping stock on the late players so you exit the stock,because you can see whats happening but they cant.Suprise,suprise the stock pulls back,the late players that dont have large stops panic and sell.You can see on your screen that the same market makers who sold to the late players are now buyers so you buy back in as well.That was just a pull back in an uptrend.

You are lucky because your screen shows you what is happening in the stock.The market makers are using human psychology to move the stock and you are privy to whats happening!

(By the way guys this is just a light hearted example meant to show how peoples skills could maybe taken a little further with Nasdaq level 2 direct access.i certainly dont want to upset all the t/a guys on the board,because i used to be one myself.).............................Until i found something better

Actualy i think it shows how potent it is if you combine both styles together.For instance you might think youve just seen perfect resistance on a stock chart but you dont know if its going break out or not.your long term indicators might indicate that this is not so.But if you switch into trading your stock on the Naz lev 2 screen you'll see what is realy happening in real time and steal a march on all the players that need to see the brakeout on the graph before they trade.You'll also see a fake before anyone else does.I reckon that NL2 is the best indicator t/a never had.

 

[Hughmac]

Naz

thank you! very usefull response as per usual! One aspect of spreadbetting is that you can start of with small amounts of money while you learn the markets. This is what I have done and will use that experience when I am ready to "invest" larger amounts in a few months time. Paper trading is fine but trading real time is much different when there is real money involved.

I have spent a lot of time sitting on my hands not able to make a decision on the footse direction until it was to late!
Bearing in mind that the market only moves up, down or sideways this was an important hurdle for me to overcome and I had to be prepared to take a loss if I got it wrong (frequently)

Spreabetting has been very useful in gaining "mental toughness" to run with my decisions even although the market may have moved against me after I had placed my bet.

I think that anyone expeienced in trading the markets quickly forgets what its like for beginners just starting out. The learning curve is steep! The methods described within these posts come accross as being highly technical and dificult to set up as well as requiring a relativly (re spreadbetting) high mount of capital to begin with.

Your responses have encouaged me to take the time to investigate further, many thanks to youself and other posters on this site for the info.

cheers

Hugh

 

[Naz]

Hughmac, thanks for reminding us about beginners starting out.I think a lot of us realise that there is a lot of information out there.The beginner has an unenviable job of sorting through it,tying it out,changing their minds,going down blind alleys until they eventualy give up or find a style that suits their personality.

With lots of different traders on this board it gives a broad view of different styles.I have always been an aggressive trader and wanted to see exactly what is happening NOW! I want to trade right there with the market makers,i want my trade taken in an instant,i want the best price,i want to see the possible direction of the market first.I want to pay as little as possible for my trades.I want to trade on a level playing field with the market makers,not ripped off paying their spreads.
Finaly i want to trade a market that the world follows and be a leader not a follower.Thats why i trade Nasdaq level 2 direct access.

Some of you might decide you want to try it as well (and if you contact me i will be happy help) but i fully realise that some people are quite happy taking a slower view of things and for them technical analysis or the Warren Buffet style of trading may be one way to trade.

So with that in mind, and because so many people on the thread were interested in my mention of an island reversal i've included some Japanese cndlestick reversal patterns.


EVENING STAR.
A major top reversal pattern formed by three candlesticks.The first is a tall white body, the second is a small real body (white or black) which gaps higher to form a star,the third is a black candlestick which closes well into the first sessions white real body.

EVENING DOJI STAR
The same as the evening star except that the middle candlestick (ie the star protion) is a doji instead of a small real body.because there is a doji in this pattern it is considered more bearish than the regular evening star.

HAMMER
An important bottoming candlestick line.The hammer and the hanging man are both the same line,that is small real body (white or black)at the top of the sessions range and a very long lower shadow( line) with little or no upper shadow above the body.When this line appears during a downtrend it becomes a bullish hammer.For a classic hammer the lower shadow(line) should be twice the hight of the real body.

HANGING MAN
An important top reversal.the hanging man and the hammer are both the same type of candlestickline(ie ,a small real body ,white or black),with little or no upper shadow(line),at the top of the session's range and a very long lower shadow).But when this line appears in during an uptrend, it becomes a bearish hanging man.It signifies the market has become more vunerable,but there should be bearish confirmation in the next session (ie, a black candlestick session with a lower close or weaker open) to signal a top. In principle ,the hanging man's lower body should be two or three times the hight of the real body.

 

[Naz]

The great thing about the Nasdaq is the ability to trade before the market opens and after it closes.This is extremely handy if a company comes out with results half an hour after the close and allows you to take a position to benefit from the open the next day.Like JNPR a couple weeks ago.

Some graphics packages adjust their graphs so that you can see the pre market and post market trading.

Trading pre market can be a little tough because the liquidity is not there.Unless there is some news moving the stock and then you cant distinguish it from normal trading.ie JNPR with its results.

Someone was with me recently and mentioned a stock,i opened the level 2 screen and with a quick glance at the players started trading it.Did i have a chart? no.Did i know what the company did, its EPS, book to bill ratio or any other figures? no.All the info you need is on the screen and then just apply trading principals to your trades.

Many times your screen will go bonkers and you say to yourself.Somethings happened i dont know what it is but heck i dont need to know, the action is right here infront of me so lets trade it.Then when the news comes out on the TV you say to yourself so thats what all that fuss was about on my screens.

If you put all this together you dont have to be a short term trader to benefit but what you do need is the edge over everyone else.When JNPR came out with its results you could trade it immediately post market on your screens.When it opened the next day it opened as a gap up on all daily traders screens.But level 2 players had traded in that gap after hours.They'd watched the stock until the close and then when the market shut carried on looking at it.

So the following day when it started trading pre market they knew exactly how that stock had felt after hours and then pre market.When the normal folk came along on the market open level 2 traders knew exactly how strong that stock was when everyone else just saw an up gap on their graphs.

Based on this knowledge and how the stock continued to trade, the level 2 trader could then take a longer view and take a position.The stock then rose 30% in the next 9 days.

A Nasdaq level 2 screen as well as having quick executions with direct access will tell you information before the crowd. This puts you ahead of the game and allows you to make trading decisions over many time frames not just a few minutes.

Recently i pulled up a level 2 Nasdaq screen for a t/a trader and showed the trader the story of the stock as it was.Nothing fast was happening.But i showed him exactly what the players were doing how they were controliing the stock,what was happening and where we were going to go.

We then looked at the intraday graph and it was trading sideways and showed us nothing!We both laughed.

(Of course all this information is a personal view for interest on the thread.I'm sure that there are people out there who have got their own views.It would be nice if they shared them with us)

 

[Hughmac]

Naz Hi

im sure your posts are generating a lot of interest esp among newbies like myself.

I would certainly like to know details of the software or brokers that you use and how much money is required to open an account etc

If you have allready posted this inffo then please point me to the thread.

thanks

Hugh

 

[Naz]

Hugh,nice to hear from you again.

There are a number different styles of level 2 trading screens which suit different types of trading.I have at many times had two accounts with two different types of level 2 screens.The mininimum amount to trade is $25,000 but again i know two companies who will take people suitably trained and let them open accounts with a minimum $2,500.

The next point is that you should not start by opening an account you should train yourself first.This involves using some software that costs $80/month.Only when you can demonstrate that you have moved to the next level should you even think about opening an account.

Once you open an account you must trade certain stocks in a certain manner.Only when you have mastered this do you move on to the next level.To many people jump in at the deep end fail.I have seen this to many times with people who think they can trade and go to far to fast with level 2 and fail.It costs them money in failed trades and of course like a bad workman they blame their tools.This is why i dont mind helping people learn.

I turned an empty trading room with 2 traders into a completly full trading room in 3 months when my broker alowed me to offer proper training to new entrants.

So i suggest that you or anyone else thinking of doing it,e-mails me at [email protected] for an off the board chat.

If you look at the "Technical analysis and system trading" section of this board and look at the "Nasdaq level 2 training" thread you will be able to see some comments from someone off this board who i helped last week.

Good luck.You and anyone else now have my e-mail address if you want a friendly chat.

Naz (Alan Rich)

 

[Naz]

I've had a number of e-mails.Thank you.

One of them from an an old trading colleague who's using his level 2 skills to enter positons based on Gann levels.Becuase as mentioned in the previous post Nasdaq level 2 is not all about scalping.It lets you see what is happening before the crowd and gives you ideal entry points for longer term trades that can last hours,days or weeks.Always letting you know how the stock is being supported at different levels as it rises.

Unfortunately because it is such a great short term indicator and execution package many people initialy over trade with it.this is why people should learn it slowly in steps.then they can look at their trading personality and say.I only need to look at it when my stock reach's certain important levels.This might be 1/2 hourly,hourly,daily or maybe weekly.

For instance this week i'm trying to trade stocks that have just broken a round number and take the trade to just under the next round number.Because that is where support and resistance hang out.But i can only truly see it all on my level 2 Nasdaq screen.If i rise to the next round number i want to see what the players are up to.If they're strong i want to stay with the trade.If they're weak i'm out.How i can see if they're strong or weak on a graph beats me.I can only see what happened on a graph after the outcome.

The trouble is that all is not how it seems on the screen and that is why scalpers have such a good understanding of what goes on.Because they have had to make their living by taking small profits on the twists and turns in the market.

This is why some then say.you know what? i can do other forms of trading with this!

So now when it comes to those important levels they look at play with ease,take their trade based on the reading of the screen and manage it with a scalpers precision.Yes they can get out quick because they're skilled at using good execution techniques.Yes they dont mind admiting they're wrong and re entering, or quickly changing thier mind and taking the opposite view on direction because thats what they're used to to.The fact is that they get good entries with little or no spread so it costs them small change to change their minds.

-------------------------------------------

 

[Naz]

I would like to say a million thanks to the people that have looked at this thread and not wanted to leave a post but have taken the trouble to e-mail me.

I always answer every e-mail and i dont care what your questions are i will try and answer them.Yes i know a lot of you view and wonder about things but dont want to post.Now is your chance to air your views and ask your questions in private.

My e-mail is [email protected]

My name .............Alan Rich.............Nasdaq Trader...........call me!

If you want some help or if you think i talk a load of rubbish let me know.

 

[Naz]

I was thinking about a trade i took yesteday where all the information was not at the inside bid and ask it was further down the screen.i was reminded recently when i showed two people a live Nasdaq level 2 screen and said "what do you see"and they said "just a jumble of numbers".So i printed the screen off and started drawing sections and explaining what was happening in each section and why.Once i'd drawn many things on the paper they said "Oh yes we can now see the whole picture."

This is the thing with Nasdaq level 2 many times the story is not up near the action but further down the screen.Such was the case yesterday with EBAY at its high of the day.A story unfolded 35c under the action.It was the reading of this story that alerted me that we werent going to breakout and go any higher but now was the time to close out my long swing trade and go short.Of course after it all happened it showed up on a chart but this was telling the picture before it occured.

The story that played out was correct and the stock fell.When many people initialy learn the screen it helps to use new found knowledge to get to know one or two stocks realy well and practice reading the story unfolding on the screen.Looking at one or two stocks all the time allows the player to take information learnt from the previous day into the current and see how it evolves.

This is why many players just like trading a small number of stocks they know realy well.They become an expert at reading the level 2 screen in those stocks.I'll be back in EBAY on Monday because i picked up so much knowledge about its characteristics i'm going to make good use of it again.

____________________________________________


Something completely different.Does anyone use Gann for finding daily position trades,and if so how do they find its success rate.I'm particularly interested in how good it is when applied to Nasdaq stocks.

 

[Naz]

Jesse Livermore told his son in this quote from a book on his life......

"Paul every stock is like a human being,it has a personality,a distinctive personality.Aggressive,reserved,hyper,high-strung,volatile,boring,direct,logical,predictable.I would study stocks like i would study people;after a while their reactions to certain circumstances become more predictable.

I'm not the first to obsereve this.I know people who have made a lot of money in the stock market by analyzing the personality of the stock and following that personality,reacting to it by buying and selling according to its presonality traits......"


These words uttered years ago by that legendry stock operater are still a fact today.However on the Nasdaq we have one great advantage over Jesse Livermore and that is the Nasdaq level 2 screen that allows us to see how the players operate and hence give that stock a personality.

That is why people who follow one stock day in day out on Nasdaq level 2 can become such good players in that stock.They subconcsciously get to understand the players moves that give the stock its personality.

When you hear someone in your family walk down the stairs,or cough,you can very often pick out who it is without seeing them.because you've heard the same noise over and over again and you instinctvely know who it is.

I tried this once with Ciena and it was uncanny how watching the level 2 screen day after day, the individual players made the stock come alive as if it was a person giving me fantasic entry/exit skills in taking my trades.Infact i felt it was an important skill which needs to be learnt by every aspiring level 2 trader.

However as Livermore said "But beware,not often but sometimes personalities change"So it was when i did this with Ciena.The stock fell into lower price ranges and this kept many players away from trading it and so its personality changed and i moved on.

However i never forget the lessons i learnt fom trading Ciena day after day and like EBAY i was trading on Friday i always end up feeling a stocks personality which is made up of how the players trade the stock.The truth is the stock moves up and down based on their trades.It is their personality and feelings that move the stock.Learn this and your on your way.

 

[Naz]

For t/a guys amongst you.

Sometime ago we were talking about the Naz comp liking fib levels.Well whats brewing up is this.

The Jan high to the September low at 1400 has a fib retracement of 38.2% falling at approx 1963.

The may high to the September low at 1400 has a fib retracement of 61.8% falling at approx 1963.The 50% level would be exactly at the level where the Nasdaq would close this latest gap.

If you take the low of this last weeks leg up starting at 1780 and make the point where the Nasdaq would close the gap the 38.2% retracement,then the 100% move of that line would finish at,you guessed it approx 1963.

So you could argue that if the Nasdaq comp trades down and closes the gap in this next week and makes a higher low then the next move up could be to 1963.

I thought i would let you know so that if anyones interested they could muck around with the fib levels on their graphs and see what they think.

 

[Mr. Charts]

Naz - thanks for all these excellent posts.
Re- CIEN. This is one of my favourite day trading stocks. It has a very good travel range - moving through long distances most days and is one of the most reliable stocks to trade TA. It trends well, breaks out of consolidation patterns and behaves well at Fib levels.
Never fall in love with any stock - but this one is a true friend - putting food on the table for my family week after week ;-)
Richard

 

[Naz]

Well Richard after your reply i think i should definately go back and take another look at Ciena.

Thanks for telling me how its trading with t/a.Imagine how much better it could be traded by putting both styles of trading to work along side each other!

 

[Naz]

Nasdaq level 2 direct access(my favourite subject)always seems to attract its fair share of doubters.I expect lots of people ask their friend and he says OOOOOh! i wouldnt touch that if i were you.Even though he didnt have the slightest idea of how it works.

It was the same years and years ago when i was in the retail motor trade.We would have an absolute gem of a vehicle in stock and some one would look at it,realy like it and his friend would say OOOOOOh! i wouldnt touch that if i were you Jeremy Clarkson said blah blah blah.So they wouldnt purchase it.


It always seems that many people need to feel comfortable in what they do and need the agreement of those around them before making a decision.Perhaps this why the majority of the public always seem to buy the top of the market,when they feel comfortable rather than the bottom when they feel afraid.

 

[Mr. Charts]

Winners form their own opinions, losers listen to others. As far as TA is concerned - and I'm sure you'd agree with your expertise on Nas L2 - trade what you see, not what you think -and certainly NOT what others think.
As for CIEN - another good day so far - long at 20.10, sold at 20.74 for +64 and bought again at 20.60 and still open with stop at 20.50
Richard

 

[RogerM]

Nice opening trade Richard. Looks like Ciena is stuck in a 20.4 to 20.8 trading range now. Close next time it reverses off 20.8?

Regards,

 

[Naz]

Look at that resistance at 21 on Ciena.I can see what is truly going on.The ecn's are all on the ask they're not buyers.

 

[Mr. Charts]

Sold at 20.94 for another +34
May go higher but the chances are decreasing
Thank you yet again, Ciena
Richard

 

[Naz]

Good trading Richard.But i'm still looking at the level 2 screen and i'm catching the feel for every run up and how strong it is.This is the strongest.

 

[Mr. Charts]

Roger, thanks.
Naz, a very interesting final 25 minutes, both in terms of where it went and volume and MOC profit taking. Resistance is up at 22 or so and there will certainly be the chance of a good short play, as you say, if the market does turn down. However, up till now it's been a matter of Keep Your Motor Runnin'.
You can see why I like CIEN ;-)
Enjoy the rest of the evening,
Richard