Tuesday, September 6, 2011

Recap: $TRI - pb2rz and contra trade

One of my favorite trades is the contra trade, aka gap fade, reversal, etc.  I started to write a "recipe" on how to trade these setups, but I started to realize that I still need some more time for research.  However, there is one variation of the contra setup that seems to work well, which I call the [vlco].

VLCO (vwap line cross over) setup.  The high level definition of this contra setup is to wait until the 5ema crosses over the vwap line, wait 4 bars before entry, and start looking for a clean pullback or a consolidation break out.  You are looking to enter the trade in the opposite (contra) direction of the gap opening.  In essence, you will be very happy if the price fills the gap.  More details in the future.

Today in TRI, there was both a "Pullback to the Retracement Zone" [pb2rz] as well as a contra trade.  Here are the trades I took:

TRI - 5min chart, Fibs over opening 25 min range, vwap, 5ema
  1. Sell below 9th bar - [pb2rz] setup, sold at 15th bar for scratch.
    I thought this setup would make a good run, but it didn't even make it to the lows of the day.
  2. Buy above 21st green hammer - [vlco] setup, sold on 24th (11:25) bar.  Exited too early, jumped the gun when a solid red bar appeared on the 24th bar.  However, it didn't even break below the low of the prior bar, so this exit was premature.
  3. Buy above 28th bar - the prior 27th bar was a green hammer, but I missed it.  So when the next bar was a doji and was still a narrow range bar, I entered on the break above the high.  At the time, the high of the day was several cents above $29, so I exited when prices approached that whole number.
TRI 5min 09-06-2011
 * * * * *
Although there were a couple or so trades I took today which I would now consider more of a C grade, I was generally satisfied with my execution today even though I only netted a few dollars in profits.  There were some issues with stock selection (e.g. I need to stay out of choppy stocks), but these are the types of days that I will need to work on finding a way to patiently grind it, or just sit it out. 

Ultimately, one of my trading goals is to be able to quickly identify the type of trading day early in the session, and then utilize the trading methods that best suit that particular market condition.  But first, I need to crawl before I run, so I will need to master a few setups first as I identified in my trading plan a couple weeks ago. 

I want to learn to identify and act instinctively on a few key setups so that I can literally trade them in my sleep.When a solid setup occurs, I don't ever want to be in a situation where I freeze and not take the trade.  Even if I'm down for the day near my daily account limit down, or perhaps there are some very unusual market activities taking place, if a good setup presents itself, I will quickly and swiftly execute the order.

1 comment:

Grove Under said...

One very important point I forgot to add was that there was a classic 1-2-3 bottom formation.

A break above $28.50, which was the point #2, indicated confirmation that the formation was valid, and that prices will likely continue higher.