Trading the First Hour
Stockscores.com Perspectives for the week ending December 13, 2013
In this week's issue:
Stockscores Market Minutes Video
Most hot stocks start their move in the first hour of the day. This week's Market Minutes shows you the processes I use to find them. Plus, my regular weekly market analysis.View the video by clicking here.
Free access to Tyler's Live Trading Chat Room next week
From Monday to Thursday next week, all subscribers to the Tradescores Alerts newsletter and Pro members of Stockscores.com will get free access to the Stockscores.com live trading room where I will go through my trading hunting processes for the first hour and a half.
Here is what you need to know to participate.
If you are a Pro member on Stockscores.com:
Log in to Stockscores.com
Go to the Discussion tab, select Live Trading Room and click on Pop Up Login. You will be in the chat room
If you are a Disnat client:
Log in to your trading platform and click on the Disnat link, either under Tools in the software or from Research on the web based platform.
Log in to the Stockscores window that comes up
Go to the Discussion tab, select Live Trading Room and click on Pop Up Login. You will be in the chat room
If you are a subscriber of Tradescores Alerts but not a Pro member on Stockscores.com or a Disnat cient:
Send an email request to tylerb@stockscores.com before Saturday at midnight requesting access to the chat room
We will manually provide you access to the chat room for next week
Log in to Stockscores.com
Go to the Discussion tab, select Live Trading Room and click on Pop Up Login. You will be in the chat room
The chat will start Monday morning at the open of trading. This is a simple text chat where I will post my comments and any trades I make. If you have never joined in our chat room before, I recommend you just watch without posting comments initially until you get a feel for how the chat room works.
My aim is to find trades and provide useful information for those in the chat room and not spend a lot of time providing technical support on how to use the chat. If you are having trouble getting in or understanding how the chat works, please send me an email and I will answer when I am able.
Keep in mind that I am not licensed to provide investment advice so treat the chat room as educational but don't take any trades unless you believe in them and are comfortable with the risk.
When I post a trading idea, I will state the stock symbol and the strategy I am applying. I will not post where stops go because it would be bad if everyone entered an automate stop at the same price, causing the stock to rapidly fall. I do not recommend using a hard stop loss for this reason. If the stock breaks down, I will advise when I sell it. Remember that there is a big difference between trading on my own and having a crowd of people following me so be smart and take responsibility for your own trading decisions.
Looking for trades and posting useful comments are my priorities. I will answer questions when I am able but don't take it personally if I ignore your question for a while.
I don't control how many opportunities the market gives us so there may be days that are pretty boring and others that have lots to do. If you miss a day or portion of a day, you can see what has been said by reading the historical chat log, also available from the Discussion menu on Stockscores.com.
I hope you enjoy this week's Live Trading Room chat and find it educational and valuable.
The First Hour - My Process
80% of my trades are found in the first hour and a half of the trading day. For me, 6:30 - 8:00 Pacific Time is money making time, the rest of the day is mostly spent looking for exit signals that come on my holdings.
The strategies I use are not overly complex, I can write down the rules in just a few sentences. It took a lot of time and research to arrive at those rules but they are easy to understand and make a lot of sense to those I teach them to.
The challenge is in the execution. The processes require discipline and focus. Like any skill, there is no replacement for the practice time it takes to get good at something. In anticipation of the free Live Trading Room chat that I am doing next week for our Stockscores Pro and Tradescores Alerts members, I want to give an overview of the processes I go through during the first hour of each trading day.
The most important thing that I look for is abnormal trading activity because the great majority of all market beating stocks start their move by trading with abnormal volume and price action. I have created indicators that seek out abnormal activity using statistical analysis. These indicators are available using delayed market data on the Stockscores Market Scan or in real time for students of my Active Trader program using Tradestation.
PreMarket
Before the market opens, I will do a check of the premarket gainers, eliminating any of the movers from my watch list that are not trading fairly active in premarket trading. Since there is much less liquidity in the premarket, I ignore stocks unless they are trading with enough volume to indicate that the price action is based on something important.
9:32 - 10:00 ET
I start looking for stocks that meet the requirements of my Worm strategy. This is a very simple strategy that is difficult to execute because it is so time sensitive. You have to be able to work quickly and with a lot of focus to catch the movers as early as possible. 2 minutes can be an eternity with this strategy.
9:40 - 11:00ET
Seek out stocks meeting my Simple Swing strategy, running the process I use to find these every 13 minutes. This strategy is much less time sensitive than the Worm but it still requires the fast inspection of the charts. I find that I have to look through about 20 charts on the first run through this process so the ability to read chart patterns has to strong to do this quickly enough. Nothing that practice can't achieve.
9:45 - 11:00ET
Right after I do my Simple Swing searches, I complete the process to build my day trading watch list. These are the stocks that are trading very abnormally and the ones that I want to watch for entry signals from the 2 minute charts. My watch list creation process takes a couple of minutes, leaving 10 - 30 stocks to monitor for Intraday Pull Back Play stocks and the Superhero strategy stocks. Most of the Intraday Pull Backs happen in the first hour and a half but Superheroes can come throughout the day. However, the watch list does not change much after the first hour so I only repeat the process about once an hour through the rest of the trading day.
By 11:00, I will typically have between 2 and 6 trades open. The rest of the day is spent waiting for an exit signal applying the rules of my Reward for Risk exit strategy. With mobile technology like smart phones and iPads, I can leave my screens for a while and not miss anything too important. If it is an active day, I will stay focused on the market but on a slower day, I will often run errands while I keep an eye on my holding using my cell phone.
The key to success is having simple and repeatable processes that are practiced enough times to be second nature. A fast moving market can put a good deal of stress on decision making, turning a pretty simple decision in to one that can be confusing and laden with mistakes. A well-defined process minimizes those mistakes.
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Most of the strong moving stocks start their move in the first hour. That makes a morning Market Scan a worthwhile endeavor for the more active trader who has the time to run this market scan starting about 30 minutes after the open and repeating it a few times until about an hour after the open. Here is how I set up the Stockscores Market Scan:
Gain/Loss > 3% over the past 1 days
15 Day Resistance = Breakout
Abnormal Volume = Abnormal Volume
Number of Trades > 1000
I then inspect the one month intraday charts for stocks breaking from good chart patterns. I prefer stocks that have not made big gap ups on the open as they often see profit taking before they try to go higher.
The Stockscores Market Scan will find the strong stocks but because it is using delayed data, you will be slower to find them than I am able to do using Tradestation and the indicators I have developed for this. My Active Trader students receive these indicators and instruction on how to use Tradestation to find these early.
Here are the charts of the two stocks that I found in the first hour this Friday using this strategy, allowing me to get in to them before much of their daily move had happened.
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1. SB
The shipping stocks were all hot on Friday and SB was one of the most active and top performers. Getting in early allowed me (and the readers of Tradescores Alerts) to improve the reward for risk since our entry is closer to support and farther away from resistance.
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2. YRCW
YRCW is breaking higher from a rising bottom after a recent break of the downward trend line. Good chance it pulls back in the short term but longer term this looks like a long term downward trend reversal. Support at $9.50.
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References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
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