Creating stocks in play
Jan 21, 2022Importance of having a STOCKS IN PLAY
How I choose a stock in play to create my watchlist:
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Gap-up or Gap-down by at least 3%.
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Volume of at least 1M actively being traded at the market open.
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With Catalyst preferably
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SPY trending and not range bound
Why is it important to have stocks in play? Having a list of stocks that fits your criteria, just like the one detailed above can help a trader become consistently profitable. Remember, you are only as good as the stocks that you are trading. If you are stuck in a stock that does not have a good order flow, has low liquidity then this means that you are not able to get in and out of the stocks quickly. These kinds of stocks should be avoided, and you should leave these stocks to the HFT’s or computer algorithms that are the only one capable of profiting from these illiquid stocks. Iliquid stocks has huge spreads, and it is very hard for retail traders to make a profit from these stocks since there are no momentum that’s making the stock moves.
Once you have studied your lists of stocks in play via checking the catalysts that’s moving the stocks e.g news, upgrades, etc. Then it is time to plot your levels.
Important levels that you need to place in your charts are the following:
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Pivot points - I used camarilla pivot points.
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Pre market high/pre- market low
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Yesterday's high or low
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Significant level from previous days or weeks that is close to the opening price.
Once you are done with your levels, you will have to write your pre-determined game plan for the day. This will allow you to be very picky with your stocks. I can watch 16 stocks at the open but will only laser focus on a handful of stocks that I would like to capitalize on. Some traders only trade 1 stocks and are able to make a good profit out of it. My strategy involves, having my weak 8 stocks in my left screen and having my strong stocks on the right upper screen. This helps my mind get trained that if they are in the right side of my screen then I should have no business shorting them unless I am in Fade play. On the other hand, if they are on the left side of my screen, I do not have a business of being long in these stocks unless I do a reversal play later in the day. Reversal play for me is only a scalp trade. It will be an in and out trade since for me following the trend e.g being long in a gap up or being short in a gap down is still an easier trade than a reversal or a fade play.
I will be very selective in the stocks that I will watch since I would need to write my game plan on these stocks prior to the open so I will not be in a panic mode once the market opens. I will wait for these stocks to move to my desired entry, and I will not chase these stocks. If I missed my entry, then I will let the stocks move without me. There is no point in FOMO’ing or having a fear of missing out. This is a move for the newbs and a sure way to lose money. Chasing any stocks is not a strategy, chasing a stock result in a poor reward to risk ratio. Wait for the stocks to come to you so you can have an entry with a good reward to risk ratio.
For example, on 01/21/2022. I had 16 stocks in play in my computer screen, but I am only lasered focused on these three stocks namely: $PTON, $BSFC, $NFLX. I will write my game plan at around 0830-0900 before the market opens.
On 01/21/2022 0830
I wrote in my post it:
LONG
PTON – up 4.7 % with possible bounce from all time low 23.91 - with the opening range breakout or ORB setup. Also, I noted that I will be long above 26.71 if this stock is a trending stock. Otherwise, if it is a range stock or between 23.91-26.71 then my entry will be closest to the range with the opposite range as my target.
I also noted that day that I was watching a low float stock that only has < 10 M shares. Low float stocks can move parabolically and can provide a big win rate but also a big loss if you are stuck in the wrong position. This is the reason I placed under my note that I am watching $BSFC since this stock is up 206.8% on premarket. Considering that this is a low float, I will enter with a small position at a pullback with volume and tape confirmation.
For the short side I was only watching one ticker that day $NFLX that received a downgrade from the analyst that day that sends this stock plummeting down. Netflix was down at premarket for 21% and this is part of my play book to the short side. My setup for this trade is opening range breakdown and will go short once it goes lower than its pre-market low. Entry for short at 397.96.
I gained $2517 trading NFLX, gained $165 trading PTON and a loss of $288 on my BSFC trade. Also, one of the stocks that is in my screen is RIVN and the reason I have other stocks that I am watching aside from the one I am currently on, is if these stocks form the pattern and fits my play book then I will capitalize on this stock and trade it. This is what happened when I saw RIVN forming the pattern that is part of my playbook. I took this trade and gained $1101 on this trade.
One of the ways of becoming a good trader is through screen time, journaling and having your own play book. Play book allows a trader to capitalized on the trade that he/she is so used in trading, and it prevents a trader in overtrading since it would be easy not to take the trade if the setup is not part of your play book.
I traded from 0930 to 1200 that day with a net profit of $3462. Also, I was able to do something else with my time. I read a good trading book from 1200-3:00pm when the market is mostly on range bound and watched the market close from 3:00PM-4:00PM to see if there would be some trading setup that I can find for tomorrow’s trading day.
Sometimes, when the market is too quiet during the 12:00-3:00 that will be the time for me to write my journal on my trades and would study my entry, exits, partials and see how I could have improved the trade better. Learning does not stop in trading; it is a continuous process since the market is always changing. We as traders need to adapt and to received what the market is giving us. This makes trading exciting and challenging all at the same time.
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