My approach to entering and exiting a position (4-2-2010)

(EDIT note: Since I am no longer always going long, I realized that I needed to change the title after I posted.)

This is the second iteration of my approach to buying stocks. (For purposes of comparison, you can check out the first version here (entry), or here (exit).)

This might be a little presumptuous, but over the Easter weekend break I thought it would be good to try and spell this out. I am making some major changes in my approach to trading, and I think formalizing the changes is a good exercise. (Much of this is my interpretation of FNG's approach, the basis of which may be found here.)

As is evident in my personal and publically available win/loss record, this is by no means a recommendation of what to do.

Principal 1:

The market is always moving. Some of the moves are small, and some of the moves are big. Market movement cannot be predicted, but it can be recognized, and it can be followed.

Short and simple - not to imply that this is easy to implement. By no means. When it comes to the stock market I am my own worse enemy.

Practical application:

I am using several platforms at the moment: StrategyDesk (SD), Ninja Trader (NT), and Trader Work Station (TWS). (This is somewhat tedious and I hope to get things slimmed down.) At this point:

SD is used for Level 1 screens. Once a week I filter all of the NASDAQ and NYSE for minimum criteria (30-day EMA daily volume >= 500000, and last close >= $5) and paste these results into a daily screener that checks for daily high and low spread (the larger the intra-day movement, the higher the probability of capturing some) and daily volume. The screener highlights new daily highs and lows and acceptable bid/ask spreads and is sorted by day's volume / daily 30-day EMA volume. I link a 5-minute chart to the screener for candidate screening.

If the candidate looks good, I move it to NT's market analyzer which is linked to two charts. The market analyzer serves to keep track of candidates, allowing for quick reviews. One of the charts is a 5 minute candle and volume chart (with FNG's recommended 17 and 7 period EMAs) and the second is a 4 period TEMA based Heiken-Ashi displayed on a 3 minute interval. The Heiken-Ashi aids in establishing trends and changes in trends. If you are keeping track, this is in lieu of FNG's 15 minute candle (and the only reason I am still clinging to NT... the jury is still out on this). I also track QQQQ on two NT charts, same 5 minute and 3 minute setup.

When the market is moving, the screener and QQQQ chart let me know about it. QQQQ seems to start the move, and new highs/lows light up in confirmation.

TWS is only used to enter and exit orders. Orders are placed at market (with no confirmation) by clicking on the current inside bid and ask in 500 share lots. (Note to self: ALWAYS check to make sure I am clicking on the correct side of the entry.)  Exits are accomplished with a ctrl+left click on the position column (confirmation required).

Seeing as this is still relatively new, I expect the practical application to change a lot. But this should be a closer representation of what I am doing for the time being.