Tuesday, March 30, 2010
Sunday, March 28, 2010
Wednesday, March 24, 2010
From the Desk of Trade IdeasMarch 24, 2010Dear Brett,I just read your quick post regarding the "traps" the market can play on intraday traders and was inspired to model how a trader might separate real directional moves from mean reversion where stocks rise with momentum but retrace back to their previous levels precipitously.One approach is to start with the assumption that mean reversions are the opportunity and not the trap. As a reliable stock scanning tool for recognizing custom patterns in price, volume, and volatility, Trade-Ideas is ideally suited for finding such moves:Here's a strategy that looks for moves beyond a stock's standard deviation of volatility. It looks for upward thrusts defined as a price move of $0.50 or higher in the last 5 minutes on 250% higher than normal volume for a 5 minute candle in that stock.(Note: to import this into TI PRO copy the link address and paste it into the Collaborate dialog box when you right-click inside any TI PRO Strategy Window)Using the OddsMaker, Trade Ideas' event based backtesting tool, I realize the best way to trade the strategy is to short it and exit under either of 2 conditions: 1. if the stock goes up (against my position) more than $0.50 or 2. after a hold time of 45 minutes. I trade this strategy during the entire market session as opportunities arise.Here's the OddsMaker output from the last 15 days (picture attached). I create an additional measure from the report to evaluate a strategy and the trading plan associated with it: the ratio of the average winning trade over the average losing trade. I like to see at least a 2:1 ratio like I do with these results.The second approach is to find the sustained movers and avoid the traps as you originally intended to define as opportunity.Here's a strategy that looks for moves where stocks are either out performing the Qs or increasingly diverging (upwards) from their VWAP, or the 5-period SMA crosses above the 8-period SMA using 10-minute candles. These alerts are subject to a universe where most notably the NASDAQ and the S&P are both up at least 0.1% over the last 15 minutes and that all opportunities shown are up at least 5% from yesterday's close.Using the OddsMaker I realize the best way to trade the strategy is to go long and exit under either of 2 conditions: 1. if the stock goes down (against my position) more than $0.50 or 2. after a hold time up until 5 minutes before the day's close. Notably I only begin trading this strategy 60 minutes after the open and enter no more trades 60 minutes before the close.Here's the OddsMaker output from the last 15 days (picture attached). One additional measure I create from the report to evaluate a strategy and the trading plan associated with it is the ratio of the average winning trade over the average losing trade. I like to see at least a 2:1 ratio like I do with these results.Feel free to try these strategies in real time. Happy to discuss and refine these with your thoughts!Best regards,David
- Fading an Up Move: http://marketmovers.blogspot.com/2005/10/strategy-session-fading-up-move.html
- Overextended Up Move: http://marketmovers.blogspot.com/2008/10/strategy-session-over-extended-up-move.html
- These Stocks Trade Straight Up from the Open: http://marketmovers.blogspot.com/2009/05/these-stocks-trade-straight-up-from.html
- 10 Trading Principles - Strategy Examples: http://marketmovers.blogspot.com/2007/07/strategy-examples-of-10-trading.html
Thursday, March 18, 2010
Marissa recently created a YouTube video titled "Reducing Latency and Increasing Bandwidth in Your Trading Environment." http://www.trade-ideas.com/VideoHelp/YouTube_Index.html?date=2010-02-19#id36. We've gotten so much response to this, I want to elaborate on a few points.
First, a quick picture will show the path your data takes using HTTP mode vs. a TCP/IP socket. There are more network hops. But more than that, HTTP mode requires your data to be massaged and reformatted. This adds overhead and takes time.
That picture was an ideal case. If you choose to switch between HTTP and the default, high performance mode, that's what you'll see. But if your corporate firewall forces you to use an HTTP connection, it's probably so they can make you to go through their proxy server, as shown below.
The proxy server is another way for the company to monitor what you are doing. It will inspect each message, looking for porn and other things they don't approve of. This proxy server was made for individuals browsing the web one page at a time. It was never designed to support realtime streaming stock alerts. It will get overwhelmed easily. One person monitoring the stock market with Trade-Ideas is like 100 people browsing web pages. You want to avoid the corporate proxy server to maximize performance.
I also want to add a clarification. Marissa pointed to an old video to show how slow HTTP can be sometimes. http://www.trade-ideas.com/VideoHelp/Menu.html?video=Trade-Ideas%20Pro%3A%20Columns%3A%20Charts The stock charts were slow back then for a couple of reasons. That example showed HTTP used in the traditional way. Now Trade-Ideas can provide stock market data much faster, even in HTTP mode. That's because of our proprietary data aggregation and streaming compression technology. That speeds up your internet connection, even when you are forced to use HTTP mode.
A lot of people ask about ping time. As you can see in this picture, pings only give you an ideal picture your speed. They avoid the corporate porn filter and a lot of other things. They are good for measuring ideal network speed, not the actual message traffic. The latency monitor in the Trade-Ideas status bar uses a more accurate measure. We send our test message through the same mechanisms that we use for normal stock alert messages. You need that if you're trying to diagnose any network problems.
At Trade-Ideas we're always striving to make sure you get your stock market alerts as quickly and efficiently as possible. But you might need some help from your IT department. If they ask questions, this page will tell them everything they need to know. http://www.trade-ideas.com/Application/FirewallsAndProxies.html
Thursday, March 04, 2010
Finally understand the market is like the ocean: there's more than one current in motion. There may be calm waters at the surface but tectonic, violent activity on the ocean floor. A stock scanner that can comb the depths of the market and 'ping' all the varied activity makes for a vital, essential tool with which to navigate. See our related articles on this very point: