This is my first real blog post, and despite it’s clickbait title, this isn’t a posting where I spit out all my knowledge on a subject and you reap the rewards of my hard work.  No, this is an early stage development in my quest to gain an edge over other traders.  I have come to realize that watching DVD’s, training videos, reading books and playing the market every day is not enough in my need to gain knowledge over the markets and recognizing solid trade setups that give me the best risk/reward ratio.  For this I need to get analytical.  I have noticed that traders like Tim Grittani and Steven Dux talk about using excel spreadsheets to track different stock setups, or they have calculated statistical probabilities that certain setups will work.  Considering both these guys pull in some major money every month, I feel I need to get on this track in order to accelerate my winning percentages and increase my overall returns. 

With that said, there are many trade setups that I could focus on but for my first one I want to look at “First Green Day OTC Overnight Plays”.  This is one of Tim Sykes’ top 2 patterns he looks for (as of this writing) and I felt this setup has a good number of manageable variables that I can use to create a data spreadsheet.  I still have not figured out how I will set up the variables in the spreadsheet, but the overall outcome I want from the data is to know what percentage of FGD OTC Overnight Plays open the next morning in a gap up, a gap down, a morning spike or a morning panic.  These 4 scenarios may require 4 different equations to calculate, but the idea is to input the raw data, set up the equations and let the computer do the number crunching.

I know this is a lot to ask and it will likely take a lot of time and research to pour through hundreds of FGD OTC trades that have occurred within the last few months.  However, if I can come up with some sort of data that determines weather a play has a 70% statistical probability of ending favorably or a 30% chance, I can determine if I should, 1) enter the trade, 2) take a large or small position, and 3) sell a portion (or all) before the close or let it ride until the open of the next day.

Here are some factors I am considering when looking at the stocks for the raw data:

-          What was the % gain on the day

-          What was the volume increase over the 30 day average

-          What was the longer term chart pattern leading to the FGD event

o       Side trend

o       Down trend

o       Choppy

-          What was the intraday chart pattern

o       Morning spike holding gains

o       Mid-day spike

o       Gradual uptrend

-          Was this a P.R event, sympathy play or part of an overall sector rising

-          How did the stock close

o       Closed on new highs

§         If so, what was the percentage gained over mid-day consolidation

o       Side trended in to close

§         If so, what % of gains were held from day’s high

o       Closed on a downtrend

§         If so, what % of gains were lost from mid-day consolidation

-          What was the next morning’s open

o       Gap up %

o       Gap Down %

o       Morning spike %

o       Morning panic %

 

I know this is a lot of variables to manage and, quite frankly, quantifying some of them in to an excel spreadsheet to spit out a number may be impossible.  But this is the challenge I am looking to take on because I believe this is a way to take my education to a new level.  I have learned a lot so far with the hundreds of hours of DVD’s and video lessons from Tim Sykes, the 5 months of watching the markets every day, the endless hours of researching watch lists to chart support and resistance lines, and the few books I have read.  Unfortunately, this has only led me to a small amount of earnings and a win/loss record under 33%.  That’s not to say my current education has failed me, but I believe it is only the tip of the iceberg and additional education is required to move me forward.