A Scalp on QQQQ

These past two weeks in the stock market, has not afforded me with really any swing-trade opportunities that I can take hold of either long or short. The market is way oversold, which would be foolish of me to initiate any new positions in that type of scenario, and the market’s long-term trend that was established back in March ’09 has had some serious damage done to it. As a result I am unable to trade in either direction at the moment.

Once the market can work off some of these oversold conditions, I will start initiating some new short positions. In the mean time however, I have been looking for some nice intraday, high-probability, trade setups. On Monday I got just that opportunity in PowerShares QQQ (QQQQ), which replicates the returns of the Nasdaq. After a steep sell-off on Friday, January 22, the market was primed for a bounce of some kind after wallowing the previous week in oversold conditions.

As the market opened, it gapped way up, which would be foolish for me to initiate any trade at that point, besides, one of my rules of trading is that I don’t trade in that first 30 minutes, preferably the first hour. My approach here was to wait for the gap to fade its opening price, and come back down near the previous day’s closing price – which it did. I believe the previous day’s closing price was about 44.14, and I basically initiated a position at 44.23.

Click Here to Read the Rest of the Article…

I placed my stop at 43.96 – you can’t see it on the chart, because it came from a long-term support level fond on the daily charts. Equally as important  was where I would place my target price to take my gains and get out all together. I had seen in the early morning, where the index had some trouble busting through a resistance level, and as a result, took that as my clue for where to get out, so then, with this trade, I had a target price of 44.49 and looking for a percentage gain of about 0.6% on the day. It doesn’t sound like much, but because it was an intraday trade, I placed almost half of my portfolio on the trade; there was no way I would hold this position overnight, so I was safe in placing this much of my capital on one position.

Now the size of my position is dictated by how tight my stop-loss is, and since it was a little more than half a percent, I am able to put more on the position, and on this trade I was willing to risk 0.3% of my portfolio value in total losses – not much hardly (this is not the same thing as the size of my position just how much I am willing to lose on the trade).

In the end, and in the mid-afternoon my price was hit, and walked out with a little more cash than what I started with.

Two-Day Intraday Chart of the Nasdaq QQQQ using 10 minute candles.