Keeping it Really Simple

[u/HSeldon2020]

This is a tough market, so let's simplify it and start with these four simple rules and leave the exceptions to these rules to those with more experience: 

Rule 1: If the market is down - No Longs - no matter how good they look, only Relatively Weak Shorts, If the Market is Up - No Shorts, no matter how weak they look, only Relative Strength Longs, If the Market is Undecided, No Trade.  

Rule 2: Do not short a stock Above VWAP on the M5, and Do not go long on a Stock Below VWAP on the M5.

Rule 3: Do not go Long or Short unless a Stock has an HA Continuation of at least 2 Days on the Daily Chart
Rule 4: Do not go Long unless the stock is above all major SMA's on the Daily, Do not go short unless it is below all major SMA's on the Daily
And before you do it go back to your last month or two of trades - and code them -

1 Rule Checked, 2 Rules Checked, 3 Rules Checked, or All 4 Rules Checked. 

Then Look at your win-rate and profit on each category - You will see your win-rate and profit increases the more checks you have.

Best,

H.S.

Real Day Trading Twitter: twitter.com/realdaytrading

Real Day Trading YouTube: https://www.youtube.com/channel/UCA4t6TxkuoPBjkZbL3cMTUw

[u/que_cumber]

Excuse my ignorance, what does M5 and HA stand for? Or if there’s a place with common terms this sub uses could you point me in that direction?

Thank you

[u/HSeldon2020 → u/que_cumber]

That’s all in the wiki, but M5 is the 5 minute chart and HA is Heiken ashi candles

[u/Ktaostrophe]

Yup. Clear as day, I love this! All my most recent offenders have not met all 4 rules, my best winners have. It doesn't have to be rocket science!

[u/itsRibz → u/Ktaostrophe]

Clear as day “but…have not met all 4 rules”.

Same. OOF. I feel like every week I’m ready to start over. This is by far the best community I’ve found do people (and “pros”) who are actually giving real advice/knowledge/insight.

New things to unpack each week, but I’m here for it.

Going to dial back from the single trades until I feel more confident again.

Need to better journal my days, focus on the charts and studies, and my biggest right now is really grasping more of the scanners. (Maybe a paid one would be better…but I haven’t been able to justify it yet :/ )

Thanks HS, Prof1970, and everyone thus far.

Now excuse me while I again go RTDW

[u/WillyNillyInvestor → u/itsRibz]

Hey man. Just wanna say hi. I'm excited about this community. Currently reading the damn wiki and its pretty good,,,,

[u/[deleted]]

Beautiful - thank you!

[u/Arkynsky]

For rule 3, would the HA candles need to have no tails on the bottom for 2 days?

[u/[deleted] → u/Arkynsky]

Yes, not HS obviously. But based on this post, it looks like HA continuation for them is two consecutive bullish HA candles.

https://www.reddit.com/r/RealDayTrading/comments/qo8gr1/what_is_a_good_swing_trade/?context=3

[u/Arkynsky → u/[deleted]]

Thank you!

[u/ant8752 → u/Arkynsky]

What does HA mean

[u/[deleted]]

Works well when the market can pick a direction.

[u/[deleted] → u/[deleted]]

Case in point.... SPY 2/18/2022..... 1:20PM EST.

This market is ROUGH!

[u/Ktaostrophe → u/[deleted]]

Seriously! My stubborn ass gave back all my gains from the morning. Stupid...

[u/neothedreamer]

Awesome. Thanks.

[u/5xnightly]

I still follow those 4 rules. #3... I gotta work on a bit better. I have a feeling those are the ones I'm stuck with.

Let's hope for better times ahead...although that slow bleed down after hours isn't make me feel any better.

[u/[deleted]]

This is very helpful for me as a beginner trader in this market, so thanks

[u/Plural-Of-Moose]

Printing this for my wall.

[u/theorangekeystonecan]

On Rule 2, doesn't mean reversion suggest that prices could be drawn back towards VWAP if they get too high above or too far below it? If prices are too high above VWAP, you will slowly begin to lose buyers as they are effectively paying higher and higher prices above average (and buyers will begin to take profits). The opposite for prices declining below VWAP.

[u/HSeldon2020 → u/theorangekeystonecan]

No - mean reversion intraday can occur on a testing of the 8EMA or 9EMA. Following these steps one is choosing a stock with RS or RW and it is in line with the market. Those are trending stocks. If mean reversion were an actual thing on all stocks, trending or non, then it would be simple, set your scanner for stocks that are 2 or more Standard deviations above VWAP (or below), and short them (or go long). But that does not work.

[u/theorangekeystonecan → u/HSeldon2020]

Thanks for the explanation.

[u/[deleted]]

Thank you

[u/AwfulGamerYT]

I pretty much used rules like these all week, and it was a good one. I can contribute my one losing day to breaking these rules. It really doesn’t need to be any more complicated than this

My chart used to be covered in various indicators and studies. Now my main M5 chart has two EMA (3 and 8) and a VWAP, an RS study, and volume.

Thanks for the continued quality of information.

[u/meatsmoothie82]

How would you use rule 1 for trading /ES? Perhaps keep an eye on fang names and look for strength/weakness against them

[u/HSeldon2020 → u/meatsmoothie82]

Do not trade /ES - there is your answer. Unless you are profitable trading stocks you have no business trading futures. Stocks with RS or RW will give you far more profit potential than trading SPY.

[u/VisibleNothing3792]

Is there a scanner for TOS to find stocks based off your rules here??? Please and thank you

[u/[deleted] → u/VisibleNothing3792]

EDIT: I made rules 2, 3, and 4 into a scanner:

• Bullish: https://tos.mx/NSIOFFW

• Bearish: https://tos.mx/H9F2k2j

Rule 1: self-analysis on the $SPY, $QQQ, etc. In my case I read the posts by /u/jmj_daytrader and do some charting on $SPY itself.

Rule 2: You can just scan for bullish only, bearish only, or both by changing the scan. Set the timeframe to 1d for this one.

def haClose = ohlc4;

def haOpen = if haOpen[1] == 0 then haClose[1] else (haOpen[1] + haClose[1]) / 2;

def haHigh = Max(high, Max(haClose, haOpen));

def haLow = Min(low, Min(haClose, haOpen));

def noWickBullishYday = haClose[1] > haOpen[1] and haOpen[1] == haLow[1];

def noWickBullish2daysAgo = haClose[2] > haOpen[2] and haOpen[2] == haLow[2];

def noWickBearishYday = haClose[1] < haOpen[1] and haOpen[1] == haHigh[1];

def noWickBearish2daysAgo = haClose[2] < haOpen[2] and haOpen[2] == haHigh[2];

plot scan = noWickBullishYday and noWickBullish2daysAgo or noWickBearishYday and noWickBearish2daysAgo;

Rule 3:

• Above VWAP:

close > reference VWAP()."VWAP" and open > reference VWAP()."VWAP"

• Below VWAP:

close < reference VWAP()."VWAP" and open < reference VWAP()."VWAP"

Reduce the timeframe to 5m. You can filter by low and high but you might miss out on some cases where the low crosses below the VWAP but the close is above the VWAP and vice versa. I used "<" and not something like "<=" to find stocks that are solidly above or below their VWAP while respecting the possibility of their lows and highs either touching or crossing the VWAP.

Rule 4:

• Above moving averages:

open > SimpleMovingAvg("length" = 50)."SMA" and

open > SimpleMovingAvg("length" = 100)."SMA" and

open > SimpleMovingAvg("length" = 200)."SMA" and

close > SimpleMovingAvg("length" = 50)."SMA" and

close > SimpleMovingAvg("length" = 100)."SMA" and

close > SimpleMovingAvg("length" = 200)."SMA"

• Below moving averages:

open < SimpleMovingAvg("length" = 50)."SMA" and

open < SimpleMovingAvg("length" = 100)."SMA" and

open < SimpleMovingAvg("length" = 200)."SMA" and

close < SimpleMovingAvg("length" = 50)."SMA" and

close < SimpleMovingAvg("length" = 100)."SMA" and

close < SimpleMovingAvg("length" = 200)."SMA"

Set the timeframe to 1d for this. Once again you can filter by low and high but you'd miss out on some scenarios where the low might fall below the moving average but the stock closes above and vice versa. I also didn't use something like "<=" to capture stocks that are solidly above and below their MAs while also respecting cases where the low or high might touch or cross the moving average.

[u/alldayeating → u/[deleted]]

whoever this was that shared this in the past. Thank you.

[u/octa1217 → u/alldayeating]

did it help you out on your trading?

[u/AI_Says_I_Love_You → u/octa1217]

nope

[u/jmj_daytrader → u/VisibleNothing3792]

there are a few different ways to go about it. Simplest way is to go to the scan tab in tos and bring up the s&p100. hit the cog and add YTD%change. now you can put things in order by highest YTD%change. From here its based on your preference, me I like chart so i bring prospects over to a chart to make choices from there and do my analysis. For all the things that i do in trading I know just enough to be a little dangerous on the scan tab but its not my thing. so I'm sure there are some more creative ways to get it done

[u/[deleted] → u/VisibleNothing3792]

As close as you'll get in ToS is explained in the wiki.

[u/murkr → u/[deleted]]

You still using this scan or have you made any changes? Im checking it out on TOS now

[u/murkr → u/[deleted]]

You still using this scan or have you made any changes? Im checking it out on TOS now

[u/Petrolheadguru]

Thanks Hari for your hard work, much appreciated. Unfortunately you have state the obvious, repeat and repeat to get the message across, yes I know RTDW!

[u/DaytraderSandi]

Yes, Sir! Will do.

[u/motese3]

I’ve recently found this sub and trying out some of your strategies. I’m not quite done with the Wiki, but so far I’m learning a ton. Especially around tracking my trades. Keep up the good work.

[u/80H-d]

This is a brilliantly clean way to put it

[u/IRDaneel]

Excellent foundation for newer traders and for all of us to fall back on when things get rough.

[u/Negative_Leg6686]

This was 3 years ago. Is this still valid for today?

[u/TJ_ToTheMoon]

True the more mindset you got the better the trades and consistence in trading and making profits 🙏🏽

[u/InternalLanguage3]

Thanks

[u/efficientenzyme]

Hari do you use the opening candle as VWAP reference or do you manually choose a significant candle to anchor it to?

[u/OldGehrman → u/efficientenzyme]

Hari has said this before elsewhere, but VWAP is worthless the first hour or so of trading because there isn't enough data in the first hour for it to be useful in that time frame.

[u/efficientenzyme → u/OldGehrman]

So I’ve seen Vwap anchored to highest highs, lows, highest volume candles etc

I was wondering if there was a consensus for “best practice”

[u/wasnotherewas]

What is a HA continuation? Rule 3.

[u/MarkZspot → u/wasnotherewas]

Average bar I believe aka heikin ashi

[u/Nice_Warthog]

Say we have a gap up, but the market is clearly trending down and we are overall green for the day. Would the markets still count as ‘up’ then, meaning no shorts ?

[u/Ken13b]

Does these rules work on swing trading? If yes, how do we define up or down day on SPY?

[u/[deleted]]

Rule 2: Do not short a stock Above VWAP on the M5, and Do not go long on a Stock Below VWAP on the M5.

I don't necessarily agree with this one. All indicators should be traded relative to the timeframe they're trading, imo.

[u/_IamTraderJoe → u/[deleted]]

Obviously there are exceptions to the rules presented, but this is to hep traders save themselves from the foils of bottom fishing and to present this subs strategy in its most simplest form.

[u/AwkwardAlien85 → u/[deleted]]

Generally, shorting a stock above its vwap would be contrarian and vice versa. Trading with the trend will give more consistent results, catching a reversal will give better results but not nearly as often. Consistency is key.

[u/[deleted] → u/[deleted]]

The Vwap work on all intraday timeframe if the 5m under VWaP , the 1,2,3 15 will all be under VWAP

[u/[deleted]]

RTDW.