Q&A

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Since You Asked

Confused about some aspect of trading? Professionaltrader Don Bright of Bright Trading (www.stocktrading.com), an equity tradingcorporation, answers a few of your questions.

Don Bright of Bright Trading

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MARKET MOVEMENTS

Lately, when I place trades, I have noticed a market moving favorablyin my direction before my stop is placed in the emini NASDAQ. After I placemy stop, almost immediately, prices reverse to where I placed the stop.Sometimes they go further -- I feel justified! More often than not, pricesreverse on me again after I am out of position, continuing in the directionI was originally. When this happens several consecutive times, I step aside,often missing a big move. Can my opponents see my stop when trading Globexeminis?--Mh

No, but most traders rarely use hard stops, preferring to use alertsto check market conditions before closing a trade. Stops are designed morefor those who cannot engage themselves in watching their positions intraday.However, in the case of retail brokers, they may hold the stop order in-house(especially on equities), and that can be problematic.

SECTOR PLAYS

I recall reading what you do once you're done with opening-onlyplays (OPGs) for the day, that you like to make sector plays in your "children"stocks for the mid-morning. However, I can't dig up any more details. Anychance you could outline the basics of what you are doing with this strategy?--CBuster

Sure, glad to refresh your memory. After we play the opening-only strategy,we teach to look at the "peers" of the "children" stocks to quickly evaluatethe relative strength within the group.

Let's back up a second first. On the opening, let's say I got filledon a pharmaceutical stock, a home stock, and a food stock. After my automatedprogram sends retracement orders for half the shares (allowing me to tape-readthe market before exiting the balance), I pull up a couple of peers foreach stock. This way, I can quickly see if the stock I have a positionin is stronger or weaker than its peers. Rather than just pull up an index,I prefer seeing the most similar within the group.

Now, after I am done trading the actual opening only, and sometimeseven during that initial time frame, I will check for stock-specific andsector-specific news that might affect one or all of the stocks. At thispoint I can easily determine the relative strength of each stock to eachother, the sector, and the overall market. Once I have that determined,I can look for good entry points based on my other criteria (pivot pointson futures, Prem/Disc to fair value, depth of book, volatility "Bright"bands, and general market conditions. Long or short, it's always betterto be long the stronger stocks, and to short the weaker stocks as the marketdictates.

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E-mail your questions for Bright to Editor@Traders.com, with the subject line direct to "Don Bright Question."

Originally published in the July 2008 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2008, Technical Analysis, Inc.

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