Archive through November 07, 2007

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pse

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Post Number: 5
Registered: 10-2007

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Wednesday, October 31, 2007 - 11:05 pm:

My Most Successful Trading Strategy – $5k into $60k in 12 months.

Of all the trading strategies I employ, trading news has by far been the most lucrative, the most reliable, the least labour intensive, and the most enjoyable.

The strategy is simple. I keep my eye on a live news feed, read those price sensitive news articles with the “suitable” headings and trade if the set-up is excellent re market interest, market depth, potency of the news item, stock is less than $1.50 (the cheaper the better) etc. A good portion of determining what news items to read and then trade (and what not to trade) is unravelled mostly by experience. But any one with the patience can easily learn.

This style of trading is very much about letting trades come to me rather than me hunting them down. I much prefer switching my computer on in the morning and seeing what unfolds rather than spending hours hunting down a technically based trade. Whilst I do tech. based trading, I prefer my trades to have more than the technicals giving them reason to go in the direction I am anticipating. When a stock is driven by a great news story it has every reason, and “very” rarely disappoints.

The down side to news trading is that you can wait weeks for that high probability opportunity to eventuate. So it can be boring, generating the sense that you are unproductive and the temptation to overtrade. But if you can override this and sit it out, then as the figures below show, you don’t have to do anything else if you don’t want to. [by the way, I think overtrading is a significant factor in the downfall of many a trader]

Some recent news driven trades (I traded PRR and IMI, but missed the others due to my attention being diverted by less profitable tech. trades):

Using a modest $5000 for each news driven trade the profit is as follows:

WGP (11/10) +223% increase in 2 days = $11,150 profit (on top of $5000)
IRM (8/10) +300% increase in 1 day = $15,000 profit (on top of $5000)
ELK (5/10) +137% increase in 2 days = $6,850 profit (on top of $5000)
PRR (14/8) +357% increase in 2 days = $17,850 profit (on top of $5000)
IMI (27/7) +125% increase in 4 days = $6,250 profit (on top of $5000)

These examples show the best case scenario, ie. opening a position as soon as the news is released (which is not hard to do if you are watching a live news feed) and closing at the high of the news driven rally (which is a little trickier; although from my experience trading news driven rallies there are some signals which tell you the high is approaching).

That said, even if you only achieved 50% of the total profit achievable as detailed, you would still turn your modest trading capital of $5000 into $33,550 in just 3 months; a 571% increase on the original trading capital.

The other advantage of trading news driven rallies on the cheapies is that they have the habit of plummeting on day 2 or 3. I’ve recently opened an account with a provider who allows me to short any stock for a day including the obscure ones. I can organise this in a matter of minutes. If you trade the cheapies propelled by news you begin to work out the pattern and so can take advantage of the almost inevitable plummet as the very nasty profit-take sets in motion. They can be brutal, but only if you haven’t worked out how to take advantage.

Another dimension to trading news is to pyramid the position. Profits mount so rapidly when you enter suitable news driven trades that you can safely and comfortable pyramid your position, increasing profit. (I prefer to add only one additional position to my original position).

All of this might sound wild and unachievable. But from “my real trading experience” it is very achievable, and achievable by anyone who takes the time to learn the art of trading news.

You might think I am pulling your leg re the profits made trading news and the ease with which it can be done once you apply yourself to learning the art. No need to take my word for it, investigate it yourself. You will come to understand that what I am saying is true.

After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this:
It never was my thinking that made the big money for me.
It was always my sitting. Got that? My sitting tight!
– Jesse Livermore

dug

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Post Number: 2494
Registered: 07-2005

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Votes: 0


Thursday, November 01, 2007 - 09:02 am:

welcome pse.that's a really interesting method worth exploring.
you of course realise that "Orthodox" TA suggests the news is already seeable,built into a chart.The theory being that All news has leaked prior to the Actual Announcement etc.

Can I assume you use Blow OFF,excess Volume calculations to determine a Top?
I'm really interested in you pursuing this Topic,hope you're not on Time Delay.If you are? mention it and we'll attempt to get it lifted.

I'm also interested in this broker you mention that allows shorting on obscure shares.Some examples?Price of shares/Market Cap limits?

Market Open,gotta go. hope to see you post more.
cheers.

"I hear WHAT you say,
BUT I SEE what you DO"

Zelman Cowan 1970 Canetoad!

pse

Member

Post Number: 6
Registered: 10-2007

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Votes: 2


Thursday, November 01, 2007 - 12:27 pm:

hi dug

thank you for the welcome and i'm not on time delay.

quite an establishment this forum re history and activity - it's encouraging!!
i've participated on a number of forums in the past and 2 themes seem to prevail - 1. they are either competitive and hierarchial or 2. they are dead quiet. From a newcomers perspective this forum appears to avoid this. Time will tell!

re your post:

1] i do acknowledge the virtues of TA, after all I use it daily, but I barely use it in relation to trading news, other than quickly sizing up the day chart and attentively watching a 1 minute line chart.

2] Yes it's a blow-off that signals the high for the day as shown on the intraday chart. Prices in the most suitable news driven rallies will come to be driven almost vertically by overly exuberant late-comers desperate to participate in the rally.

When prices go ridiculously vertical this is a sign that probably, in the next say 30 secs, prices will begin a sharp decent. So you need an "at market" exit order ready, sitting on your desktop. It is a highly reliable exit signal.

To go long after this vertical price rise is big trouble. There may be another rally that follows but its high is likely to be lower than the last high. Once this is recognized a short signal is triggered.

I close the short before close of trade because there is a good chance EOD traders will lift the stock again on day 2. Which is why another long position before close can be an astute decision. Having said that, if I consider the first days trade to be well overdone I wont open a new long position.
so my rules are:
a) I always close a long position when prices go ridiculously vertical on the intraday chart
b) I consider a short position as the highs of the intraday rallies become lower
c) I avoid holding a short position overnight when trading news
d) if I have closed a long position due to the blow-off but speculate (towards the close of trade) that tomorrow might see more upward action, then I consider opening a new long position prior to close of trade in anticipation for the next morning's rally.

** it might sound a little confusing, but the most suitable news trades generate about 4 trade opportunities: trade 1. go long when "great" news released; trade 2. pyramid the position once your risk is covered [ie., if your risk is $500 per trade, open the second long trade when you reach $1000 profit and if you believe the trade has more upward momentum]; trade 3. a short trade after the ridiculous vertical ascent; trade 4. a long trade opened before close of day in anticipation of another early morning rally tomorrow.

3] the provider is first prudential (webiress). i've opened an account with them for the main purpose of shorting obscure stocks. first prudential will be better at answering any questions u have about their shorting conditions. ask for matthew or rick, they are both very helpful.

** as i have found trading the "right" sort of news to be high probability trading I am happy to share my understanding with the forum if people are interested - having said that I am not an "expert", just someone learning to trade.

-PSE

adetsec

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Post Number: 22
Registered: 10-2002

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Votes: 0


Thursday, November 01, 2007 - 12:44 pm:

pse (peter)
What a great post. Informative, open and genuine. You will be a great asset to this topic I think and I, for one, will look forward to your future contributions.
You have introduced a new slant, using news, and TA (even though it's subjective) but have coupled the two together very well.
Thanks.

Comments for discussion only. Not to be construed as advice.

dug

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Post Number: 2498
Registered: 07-2005

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Votes: 0


Thursday, November 01, 2007 - 12:58 pm:

there's a bit of negativity by the Establishment against Day Traders,pse.
The experienced say there's a less stressful,profitable way and there's a fear of "newbies" being given the wrong "impression" of Trading but hopefully such cliche responses won't come down on you in Bulk.
You're from Brisso,pse so I'm here to offer my "Protection Services"!

Do you have info on what is a "Wonder" Assay Grade,for example so you can interpret/classify a materials drill result announcement into Hot Goer from HoHum?
or do you just watch the Resume After Trading Halt for your clues?

"I hear WHAT you say,
BUT I SEE what you DO"

Zelman Cowan 1970 Canetoad!

pse

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Post Number: 7
Registered: 10-2007

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Votes: 0


Thursday, November 01, 2007 - 01:42 pm:

hopefully the community will embrace me warmly, but should they decide not to, your protective services may need to be employed

re interpreting material drill results:

In most cases I have no idea what the drill results actually mean in lay persons terms. But that never seems to thwart the strategy because;

If you are reading a news item and it is not obvious to you what the big deal is, then chances are there isn’t one and chances are the other readers out there are having the same experience as you. So, quite simply, don’t try to make something where there is nothing. If what you are reading doesn’t make you sit up with interest and take note then the market also is unlikely to be excited.

For example, I recently traded ADY. ADY released some news that it had discovered 400 years worth of potash and 1.5 million tones of lithium. The lithium alone was said to be worth $45 billion dollars. When I read that it grabbed my attention, I didn’t have to work out what the big deal was, it was obvious to me and as it turned out, it was obvious to everyone else. ADY gapped from 40 cents to open at 45.5 cents and the next day reached 67 cents, a 67% increase.

A word of warning about trading news disseminated by the materials sector. Companies from the materials sector often put out news that begins with, “Company XYZ are pleased to advise the shareholders . . .”, followed by a complexity of numbers, percentages and minerals. For most readers these numbers and the obscure explanations that come with them may as well be written in hieroglyphics. So even if a company is pleased to be telling you something, tread very carefully if you don’t understand exactly what it is they are pleased about. In the case of ADY above, the scientific was also put in lay-persons terms. I knew what 400 years meant and that $45 billion was a lot of money. If a company really wants you to know something then they are likely to spell it out for you. If they haven’t done that, be suspicious.

If I am unsure about the trade then I step back and watch what happens. If this trade is going to take off because of the news release then it is likely to do so either straight away or at least within the first couple of hours. The market depth is also an indicator. But be careful of news driven stocks whose indicative open is a significantly exaggerated increase on the last trade. Such enormous gaps can end up being the high of the day.

If you do begin to work on trading news then chances are at the start you will see potential news trades everywhere. When you develop the skill of sifting the "wheat from the chaff", you will come to realise that the best news driven trades are rare, perhaps 1 a month on average.

Hope this helps.

dug

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Post Number: 2500
Registered: 07-2005

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Votes: 0


Thursday, November 01, 2007 - 04:43 pm:

So from the ADY example you're looking for Spectacular Claims in your News,pse?
The Wilder the Spin get's you agitated or at least IN.

You must really miss the Old Days before this "style" got regulated about a year ago,do you remember?
An example was a Bio Company,Citrus was in it's name,they were working on concentratic citric acid for medicinal use.
One day they Announced a "BreakThru" with a claim their "product" had passed some "tests" and proved to have destroyed Viruses/Germs/Bugs that caused everything from Aids to Common Cold.In labrotary[labotomy?] conditions.

Oh it ROCKETED on the News,and you pse may well have caught a ride in a day BUT it was all hoooey,rubbish,false science because any acid like Sulphuric if concentrated enough kills all these nasties but it purely is Not Safe for Humans to bathe in Acid!!
Any acid.
so the Dills who were comparing Citric Acid to what burns ones mouth eating an Orange?AND who held or bought the share and didn't sell this particular day?
well,they got BURNT.
think this company soon de-listed subsequently and the dills got an expensive learning about what Concentrated means.

cheers.until tomorrow.

"I hear WHAT you say,
BUT I SEE what you DO"

Zelman Cowan 1970 Canetoad!

rockon

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Post Number: 227
Registered: 08-2003

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Votes: 0


Thursday, November 01, 2007 - 07:29 pm:

Hello PSE,

Although nowhere near as scientific or refined as your system, I agree that there is plenty of money to be made from announcements.My whole trading life revolves around simplicity and not "maximising" returns is one of the things I forfeit in order to keep things simple and on a budget.

My "news feed" consists of a second computer screen, with the ASX announcement page getting refreshed by my finger every couple of minutes.Anything that looks like it may cause a bit of excitement and I go straight to the market depth and look to see if the buy orders are building.There is usually five minutes or so from when the announcement is released to the re commencement of trading.I then open two new tabs on the screen, one Buy at market, one Sell at market.I then keep a close eye on the depth, watching for excessive sell orders appearing.

If all looks like it will shoot forward, once trading re commences, the Buy at market tab which is already filled out, is hit.My "real time" market feed consists of constantly hitting the refresh button.As soon as prices start to fall and the sell side starts to increase, then the Sell at market tab (which is already filled out) is hit.This might sound a bit rough and ready but it is surprising how close to the top one can exit at just by watching all this.

The strategy for me is to jump in, grab one or two handfulls of cash and jump out again.Sometimes I exit way too early and sometimes it fizzles out with huge sell orders swamping the boat but that is what I forfeit in order to keep it simple.I don't do enough of these to warrant "real" live tools, but the successful trades more than cover the fizzers.

The biggest downside to this is the brain strain. Just keeping an eye on the announcements can become boring but once committed, it's pretty full on for however long it takes, which leaves you feeling really drained,hence my decision not to do too many of these in order to maintain my sanity.

The good part is that nearly all these frenzied moves dont last all that long.My shortest time in was about twenty minutes for about fourty percent return and some have been hours for about the same return or more.

Not trying to steal your thunder PSE, just trying to show that a cat can be skinned in many ways.... plus I wasn't sure if people would laugh on reading my system description.

Regards and Welcome to the forum.....Mick

captain_chaza

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Post Number: 2805
Registered: 02-2003

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Thursday, November 01, 2007 - 07:34 pm:

Welcome aboard Officer PSE

I am gob-smacked!!

You will always be welcome in Melbourne when you prove to me this can be done in ~ real time and in all Sea and Wind conditions

An old sailor once told me his secret tack was to Buy in Bull markets on any report and sell any news in Bear markets

and he said
"There is no need to even read the palaver"

"So strong is the overall Sea and Weather conditions at times" he added

I am looking forward to see how you go in say a 10 minute delayed time!
If you are prepared to accept this challenge

After that time I consider it "Hindsight"

Salute and Gods' speed

PS: No bad feelings if you decide not to take the pressure

This Captain wasn't born Yesterday and only says what he thinks

"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.

"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893

"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897

pse

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Post Number: 8
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Thursday, November 01, 2007 - 07:39 pm:

that's an interesting story dug. there's not a lot a trader can do if the day after the "spectacular" news release, the stock goes into a trading halt and then the company announces it told a porkey-pie. having said that, common sense is a hallmark of trading success.

the news items which seem to stir the market the best are "discovery" related (and mergers, but I dont trade those)- often emanating from resources and medicine. the importance of the discovery detailed in the news item is usually obvious to the reader - no figuring out required!

the news reports for the trades detailed in the first post will give you an idea of the types of news items that get the crowd excited.

another excellent one that I had the good fortune to stumble across and worth reading is INP. on 1/10 it shot from .395c to a high of 1.97 in one day, a massive 400% increase.

(Message edited by pse on November 01, 2007)

pse

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Post Number: 9
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Thursday, November 01, 2007 - 08:13 pm:

hi mick and captain
thanks for the look in at your approach to trading news mick. do u use a live chart? - i find a 1 minute line chart as well as market depth, essential to my success with this style of trading.

captain,
i'm surprised u are gob-smacked. this is not "elliot wave theory" and i'm not a trading savant. any one can take advantage of news trades if they take the time to work it out, trading news is simplicity! certainly it is easy to get in at the right time and more difficult to get out at the peak. i am not suggesting i easily get out at the top, but there are certainly some indicators that the top is nigh.

however, a key to making progress with trading news is to work out what is and isnt trade worthy - that takes street smarts.

please explain your challenge.

dug

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Post Number: 2501
Registered: 07-2005

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Friday, November 02, 2007 - 08:49 am:

pse,
as well as protection,i offer a interpretation service.
Think the Captain wants you to take one of your trades of news and within 10mins[real time],post your buy and sell on it.
Chuckles is a stickler for honesty but more berates any and all as Liars! compared to him.It's some personality fault he demands we indulge him in because,well,he's proved himself as d'GREATEST.
In what exactly is open to debate!
Anyhow,that's the Challenge.

----------------------------------------------------------
Will go thru your Trades mentioned in your first post,pse and try and divine some insight into the News that generates such percent returns.I realise you weren't in them all.
cheers.

"I hear WHAT you say,
BUT I SEE what you DO"

Zelman Cowan 1970 Canetoad!

coyotte

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Registered: 12-2002

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