Pre-Market Preparations
**********************************************
[12:35] <Chris>  Today I wanted to go over the pre-market preparation
process as I've had a few questions on what exactly we are doing.
[12:35] <Chris>  Let's first define our style and how our premarket prep
supports this style.
[12:36] <Chris>  If you go through our RT Workbook, you will see 6
principles of tape reading and 3 trading scenarios that define the general
basis for our methods.
[12:36] <Chris>  We define Tape Reading as our method of trading, the
language of price and volume.
[12:37] <Chris>  We trade what we see, not what we think, a phrase that
Threei gave as a motto for this style as far back as 1998.
[12:37] <Chris>  We exist in the moment, trade in the moment.
[12:38] <Chris>  We are watching indications of price and volume to alert
us to setups based on such things as pullbacks, breakouts, breakdowns,
trading within the range, etc.
[12:39] <Chris>  Because we exist and trade in the moment, we do not have
predictions, expectations that are based on thoughts or opinions.
[12:40] <Chris>  I do not wish to sound negative..but the question I saw
earlier was about market direction after lunch.
[12:40] <Chris>  This is a good example of thoughts that we do not concern
ourselves with, and again, I say this in sincerity.
[12:40] <Chris>  Mainly we do not concern ourselves with such information
because for every trader that says we are moving higher, there is an
opposite, we are moving lower.
[12:41] <Chris>  In essence, you are stuck listening to opinions, which
have little to do with market action.
[12:41] <Chris>  How many people did we see last week, so bearish, turn
bullish on Wednesday, only to see us back to where we are today?
[12:42] <Chris>  I wasn't bearish or bullish last week either way...no
predictions, no expectations and exposure to the market remained safe.
[12:42] <Chris>  We come to the market each morning with the same
observations.
[12:43] <Chris>  We take small glimpses of market action from day to day
just to try and get market sentiment, but not to base opinions on intraday
moves within our issues on our focus lists for the open and throughout the
days.
[12:44] <Chris>  Our indicators aren't stock specific..we mainly watch
futures for indications of broader trends.
[12:45] <Chris>  If we find within a basket of stocks there is some follow
to futures, we may wish to trade from futures trends.
[12:46] <Chris>  As we come to wake up each morning, with hints of general
market sentiment..we want to create a focus list for the open.
[12:46] <Chris>  Our style is separate from those that use night time to
prepare.
[12:46] <Chris>  TA analysts that spend time at night generally go through
charts, spotting trends in stocks/sectors/the market.
[12:47] <Chris>  Again, our room will refuse to negate this style of
research as we believe it to be very good way to prepare for the next
day..it simply doesn't have much of it's place in tape reading.
[12:47] <Chris>  In this case, my nights are free and my activity is more
spent during the premarket session.
[12:48] <Chris>  Each morning I wake up around 7:30 a.m. EST and begin to
scan news.
[12:48] <Chris>  This is the first case where we begin to create our watch
list for the morning.
[12:48] <Chris>  On my level 1 screen, I have my large cap basket of
stocks as well as a few stocks left over from the previous day of trading
that I find interesting to keep an eye on.
[12:49] <Chris>  From the time I turn on the news, I begin to add stocks
of interest to the Level 1 screen.
[12:49] <Chris>  I will watch to see if news creates any kind of interest
either in reasonable volume or in a gap price.
[12:49] <Chris>  gaps up or down are viable candidates.
[12:50] <Chris>  Usually about 8:00 EST, I have a fair enough amount of
news candidates that I can begin to monitor the scanners for the same type
of activity.
[12:50] <Chris>  We are looking for stocks with volume/gaps up and down to
some extremes.
[12:50] <Chris>  I don't wish to care about stocks gapping up 1/16..even
if it is PSIX :)
[12:51] <Chris>  Taken together, each morning we have an activity that is
devoted to ascertaining activity stocks found on the scanners and from
news and trying to associate news to the event to get a grip on why the
stock may be behaving the way it is.
[12:51] <Chris>  I say "may" because as you have read in our material,
there is a dual reality to stock action and news.
[12:52] <Chris>  Plenty of times we have good news stocks gapping down.
[12:52] <Chris>  Our task as traders is not to figure out why this is
happening..but rather trade in the moment and read the price/volume action
for possible setups.
[12:53] <Chris>  In this manner, the news does not much matter to us after
we have derived it for a stock's interest.
[12:53] <Chris>  During the premarket session, we have now gathered our
news/activity stocks both from the news listings and the scanners to put
on our Level 1 screen.
[12:54] <Chris>  Notice we have no expectations derived for the open and
no opinions about market direction that will dictate any intraday trading.
[12:54] <Chris>  This is normally where questions begin to come about.
[12:54] <Chris>  Many traders are used to having some sort of broader
trend indications so they know whether to go long or short.
[12:55] <Chris>  We don't utilize this methodology to a great degreee and
today was a great example.
[12:55] <Chris>  We had SCMR, KLAC, and a few other stocks making new
highs in the face of a weaker broader trend.
[12:56] <Chris>  Of course we do have knowledge of the broader trend, but
it will not dictate individual trades in a way that "if the market is
selling, I won't go long" 100% of the time.
[12:57] <Chris>  Each morning we will give you our initial impressions
about market activity, whether or not we have an active market and what
kinds of plays have been working best.
[12:57] <Chris>  Not so much, I think the market will go up and down.
[12:58] <Chris>  An example would be:
[12:58] <Chris>  [09:03] <Threei> first impressions: quiet morning,
nothing earth shattering. We might get good trading day with calm
reasonable stock specific movements.
[12:59] <Chris>  Hopefully by reading the majority of our site
material..we are moving past predictions and basing trades on predictions.
[12:59] <Chris>  We are moving closer to reality of situations, to
responding to setups as they occur.
[12:59] <Chris>  Now that we have a list of candidates on our Level 1
screen, usually near 9:00 a.m. EST, we begin our last phase of the
premarket session.
[13:00] <Chris>  This is the period in which we begin to bring our
candidates from our Level 1 screen to our Level 2 screen.
[13:00] <Chris>  We use Level 2 screen for several reasons:
[13:00] <Chris>  1. Risk evaluation
[13:00] <Chris>  2. Premarket support/resistance levls
[13:01] <Chris>  3. Gaining if/then scenarios
[13:01] <Chris>  4. Decide on stocks to focus on for the open
[13:01] <Chris>  1. Risk evaluation
[13:01] <Chris>  We decide on risk evaluation the same way we do in
Threei's weekly Friday Stock Execution classes.
[13:02] <Chris>  We want to find stocks that have reasonably tight levels
in spread and good sizes at those levels.
[13:02] <Chris>  Stocks with wider spreads or small sizes at each level
tend to be jumpy and harder to read on price/volume language.
[13:02] <Chris>  If we can find 3 to 5 moderate risk stocks for the open,
then we have a good base to start from.
[13:03] <Chris>  2. Premarket support/resistance levels
[13:03] <Chris>  This is where I begin to watch for areas of interest and
what I normally want to base my if/then scenario's on.
[13:03] <Chris>  pivot points
[13:04] <Chris>  If x stock comes down to x area from the open, then I
will look for a reversal
[13:04] <Chris>  If x stock continues to see resistance at x level, I will
then short wit a stop at that resistance level.
[13:04] <Chris>  these are if/then scenario examples
[13:05] <Chris>  and bring some sort of structure into the chaos at the
open
[13:05] <Chris>  notice still, I am not adding much about broader trend
expectations that are just opinions in premarket anyway
[13:05] <Chris>  4. Decide on stocks to focus on for the open
[13:06] <Chris>  I usuaally have about 10 to 15 stocks on my level 1
screen at the open for general viewing.
[13:06] <Chris>  When I first began trading...I had 50 to 60 stocks on two
Level 1 screens
[13:06] <Chris>  impossible to concentrate
[13:07] <Chris>  and became less and less worth my time to try and follow
so many stocks
[13:07] <Chris>  I have narrowed this watch list to 10 to 15 at the open
on the Level 1
[13:07] <Chris>  I will then take anywhere from 3 to 5 on my Level 2 for
stocks I wish to trade at the open.
[13:08] <Chris>  The 3 to 5 that I will watch for the open, on my Level 2,
are my focus stocks and I will do one of two things:
[13:08] <Chris>  1. Define my if/then scenario
[13:08] <Chris>  2. Wait for a range defined to trade from.
[13:09] <Chris>  If I choose 1.
[13:09] <Chris>  [09:27] <Chris> Would like NITE move to near 16 for
interest on an entry
[13:09] <Chris>  near 16 and I'll look for reversal
[13:10] <Chris>  [09:37] <Chris> NITE down to 16 area
[13:10] <Chris>  [09:39] <Chris> next buying on NITE looking for entry
[13:10] <Chris>  [09:39] <Chris> Consider Buying: NITE 15 13/16, stop at
5/8
[13:10] <Chris>  here is a setup defined on my if/then scenario
[13:10] <Chris>  2. Range defined
[13:10] <Chris>  [10:04] <Chris> Long Setup: ARBA 36 3/4 break
[13:11] <Chris>  this is setup defined on range break, eventually NITE
gave nice profit...ARBA cost stop loss
[13:11] <Chris>  But you can see how we are maintaining structure
throughout premarket session to define things for the open of the trading
day.
[13:11] <Chris>  We are not basing things on opinions or predictions each
morning.
[13:12] <Chris>  We are simply gathering activity stocks each morning and
using tape reading to define pivot points for entries and exits throughout
the morning session.
[13:12] <Chris>  To summarize:
[13:12] <Chris>  1. Gather news
[13:12] <Chris>  2. Gather activity stocks from the scanner and try to
relate news
[13:13] <Chris>  3. Put 10 to 15 stocks on the Level 1 screen throughout
the pre-market session
[13:13] <Chris>  4. Around 9:00 EST, begin to place stocks on the Level 2
for risk evaluation, premrket support/resistance, if/then, focus list
[13:14] <Chris>  5. With about 10 minutes to go, get your focus list for
the open on 3 to 5 stocks.
[13:14] <Chris>  6. Develop the plan using either if/then or using a range
[13:14] <Chris>  7. Trade that plan based on the price and volume (tape
reading) is telling you.
[13:15] <Chris>  This allows the trader to clear their mind of useless
predictions, expectations, opinions, etc. that have little place in a
stock market that likes to destroy the majority of trader's opinions.
[13:15] <Chris>  With that, I would like to take anyone's questions.
[13:15] <Chris>  This room is now unmoderated. Everyone may speak again.
[13:15] <Chris>  Send questions to Larisa.Trialers are encouraged to ask.
[13:16] <Chris>  Anyone have any questions?
[13:16] <Larisa>  thank you Chris , no questions that I have
[13:16] <skunk> do you determine a volume spike by # of trades or # of
shares?
[13:16] <Chris>  pace of trading skunk
[13:17] <Chris>  # of trades
[13:17] <skunk> thanks
[13:17] <Larisa>  [13:19] <_maka> can you elavorate on price/volumen
[13:17] <Larisa>  room is open now, maka, you can talk in here
[13:17] <Chris>  price/volume is the basis behind tape reading and the
principles are all in the RT workbook
[13:18] <Chris>  if you do not have the password, pleae let me know and
I'll get yours to you
[13:18] <Chris>  but for example:
[13:18] <Chris>  One principle, capitulation selling leading to upside
reversal
[13:18] <_maka> ok thanks
[13:18] <Chris>  In this principle, stock begins to fall fast in price and
volume begins to increase to a spike
[13:18] <Chris>  this shows us that traders are panicking, selling out of
the stock all at once.
[13:19] <Chris>  Normally this is where selling is exhausted and buyers
step up to buy.
[13:19] <Chris>  What to look for:
[13:19] <Chris>  1. SElling pace slows
[13:19] <Chris>  2. Bid builds
[13:19] <Chris>  This is the point at which we normally enter
[13:19] <Chris>  3. Buying comes in
[13:19] <Chris>  4. Stock begins to climb confirming reversal
[13:20] <Chris>  If stock continues reversal to the upside, we exit 1/2
our lot into strenght
[13:20] <Chris>  and trail stop on remaining
[13:20] <Chris>  If the reversal fails, we take stop at low of that
reversal.
[13:20] <Chris>  We have many examples on the RT site that shows these
price/volume setups under Practical Tape REading classes
[13:20] <_maka> great thanks chris
[13:21] <Chris>  and we do one a week
[13:21] <Chris>  to illustrate the trade using real time calls and
explanations
[13:21] <Chris>  to aid in your understanding of the workbook
[13:21] <Chris>  thanks maka :)
[13:21] <Chris>  can I answer anything more?
[13:22] <Chris>  http://www.realitytrader.com/classes/
[13:22] <_maka> what time do you use 1 , 5 15, min chart and do you use
nasq futures ,trit ,tict ?
[13:22] <Chris>  This is the URL for our Tape Reading Classes for review
[13:22] <Chris>  has chart and explanation for you to follow along
[13:22] <Chris>  maka, Vad and I do not use charts for tape reading in our
case.
[13:23] <Chris>  But please don't take that as a negation of chart using.
[13:23] <Chris>  We use the chart only if we need to know what the stock
has already done in a certain time period before it was brought to our
attention.
[13:23] <Chris>  Such as:
[13:23] <Chris>  Chris, what do you think of ABCD.
[13:23] <Chris>  I will bring up stock on level 2 for risk evaluation
[13:23] <Chris>  and on chart to see what it has done already on the day
[13:23] <Chris>  and then watch from there
[13:24] <Chris>  but our setups aren't based on the chart itself
[13:24] <Chris>  as you know, charts are based on the prints
[13:25] <Chris>  so we are normally entering stocks in pivots as the tape
shows us
[13:25] <Chris>  not waiting 1 minute for the chart to show entry is
reasonable
[13:25] <Chris>  but again, please don't take it as chart negation
[13:26] <Chris>  I know too many successful chart traders to make this
mistake :)
[13:26] <Chris>  I watch Nas futures
[13:26] <Chris>  but I do not watch TRIN or TICK
[13:26] <Chris>  again, not saying that it's not needed in many systems
[13:27] <Chris>  but for our principles of tape reading (that are over 400
years old, nothing new), it's not as much importance
[13:27] <Chris>  does this help?
[13:27] <gecko> Thanks Achor For ARIA
[13:27] <gecko> Anchor
[13:27] <Anchor>  yw:)
[13:27] <Chris>  that was nice Anchor :)
[13:27] <Anchor>  :)
[13:27] <_maka> interesting  great explanetion and looking to see in real
time   thanks
[13:28] <Chris>  sure :)
[13:28] <Chris>  Anything more gang?
[13:28] <Chris>  Feel free to ask
[13:28] <Threei>  great job Chris
[13:28] <vince> great class Chris
[13:28] <Chris>  Okay, let's get back to more of Anchor's news alerts :)
[13:28] <Chris>  Thanks for your attention today.
[13:29] <Chris>  This will be emailed out like all our training sessions.
[13:29] <vince> Anchor is fast today :)
[13:29] <wbs> good class Chris. Thanks!
[13:29] <_maka> very clear class