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to which price keeps returning.
The main idea behind Market Profile is that
market profiles have three basic variations: the
normal day profile, the trending day profile and
the non-trending day profile. The idealized
normal day profile forms the familiar bell-shaped
curve, with most of the trading falling in the
fatter middle range (the "value area"), with a
smaller amount of activity at the extremes of the
day's range (70% of profiles fall into this
category). In the trending day, the value area will
appear at one end of the range. Non-trending
days do not exhibit a predominant value area.
When a trader sees a normal day profile forming, for example, he can sell when price
moves above the value area and buy when price dips below it. Market Profile is useful in
determining the perceived value of a market on a given day and gives the day-trader a
method to evaluate the trading landscape he is in.
Another idea is to look at inter-market relationships. Floor traders especially look at
tick-by-tick movements in cash and correlated markets, buying or selling when they feel
price is out of line with these barometers. The influence of each tick in the T-bonds on the
S&P 500 can be very strong on a short-term basis.
Risk control, money management principles and common-sense trading are just as
important for day-traders as they are for large-position traders. Take your losses, don't
average trades, don't add on to losers and don't overtrade. Just because you're a day-trader
doesn't mean you have to trade every day. Wait for good opportunities. Tomorrow's
another day.
Pivot profits
William Greenspan is a day-trader who practices what he preaches. In addition to trading,
he runs a day-trading strategy school called Commodity Traders Boot Camp Ltd. in
Chicago. One of his cardinal rules: "Make 10 points on a million trades -- not a million
points on 10 trades." One method he uses successfully is called the pivot technique.
The basic pivot approach involves trading with support and resistance levels derived from
the previous day's high, low and closing prices. The idea is to sell when price violates these
levels in a break and buy when price pushes through them on the upside. Here are the
formulas:
1. (H + L + C) / 3 = P Where:
2. 2P - L = R1 P = Pivot, H = High,
3. 2P - H = S1 L = Low, C = Close
4. (P - S1) + R1 = R2 R1 = Resistance level 1
5. P - (R1 - S1) = S2 S1 = Support level 1
R2 = Resistance level 2
S2 = Support level 2
Because former resistance becomes future support and vice versa, these levels provide key
stop-loss levels. For example, if you sold when the market broke through support level 1,
you immediately would place your stop at or just above the support level 1 price. If the
market reverses, you're out quickly with a small loss. If price continues to drop, you can
follow the market with a trailing stop.
Pivot points
Although these levels sometimes will provide valid
support and resistance levels throughout a trading day,
their significance diminishes as they are repeatedly
violated. The first penetration is the most important.
You also can use the opening range prices and the weekly
highs and lows as support and resistance levels.
Mark Etzkorn is a Chicago-based financial writer, researcher and trader.
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What you need for day-trading speed
What you need for
day-trading speed
Day-traders aren't much different from position traders in what
they need to do their business well -- information on which to base
a decision, price quotes to determine when to act, a way to analyze
this data to turn it into a trading plan and a broker to put that plan
into action.
Day-traders just need more of it; they need it faster; they need it
more reliably. The magnitude of fluctuations in markets viable for
day-trading requires that day-traders deal with changes quickly if
they hope to survive.
Unless you're a floor trader, you will need at least a 486/66 MHz PC with 16MB of RAM
running a Windows operating system, but most recommend a Pentium with 32MB of
RAM and a one-gigabyte hard drive. Macintosh owners will find the field of real-time
products to be pretty slim.
From there you have a number of choices for getting real-time prices, information and
analysis. You can buy comprehensive turnkey packages or combine programs specializing
in certain features. You also must decide which features you need, such as news, specific
trading ideas or stocks and options data in addition to futures. At a minimum, you probably
will pay for three things:
* Data feed -- Price quotes must be fast, accurate and reliable. Keep in mind you will
make two payments for real-time data: exchange fees and vendor charges. Depending on
your situation, delivery can be by dedicated phone line, satellite dish or cable. The number
of exchanges or means of delivery will affect your data costs.
* Analysis -- Whether you want to analyze markets yourself or take trading
recommendations from another, you will be paying someone who has programmed the
analytical studies or the trading system or has made it possible for you to develop your
own.
* Information -- News services are included in some real-time packages, or news or
advisory services may be available as add-on features. While price data and some means to
analyze it may be more essential for the day-trader, it's nice to have event news and
insights, too, unless you have trading system software that does everything for you.
Futures' 1997 SourceBook lists 154 firms as suppliers of electronic
price quotes, 234 providers of charting or technical analysis
software, nearly 300 trading system vendors, 45 news services and
numerous advisory services or other information sources.
The following is a sample of what is available from a few major
providers of real-time products and services for day-traders. Readers
also should refer to Futures' 1996 Guide to Computerized Trading
for more information about real-time products.
For a larger list of firms in these categories and hot links to those
with Web sites, check Futures' Web site
(http://www.futuresmag.com/aboutfm/fosites3.html).
Data sources Signal from Data Broadcasting Corp.
(http://www.dbc.com, 800-826-0098) is one example of a data vendor that offers real-time
quotes on all futures, stocks, options, cash and international markets for traders interested
in investment areas beyond futures.
Signal does not offer analytical studies, although company officials say many are coming
with the next release. It does include DBC Newsroom, which gives news, commentary and
analysis. Among programs that use the Signal data stream are TradeStation, MetaStock, [ Pobierz całość w formacie PDF ]