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Bright Trading Retreat. Trading strategies that I use & the trading rules that govern them. I) Market neutral trading in sectors and market making in “children” stocks. Currently my most productive strategy I have a list of stocks regularly trade and am very familiar with

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Bright trading retreat l.jpg

Bright Trading Retreat

Trading strategies that I use & the trading rules that govern them


I market neutral trading in sectors and market making in children stocks l.jpg
I) Market neutral trading in sectors and market making in “children” stocks

  • Currently my most productive strategy

  • I have a list of stocks regularly trade and am very familiar with

  • Follow the sector ETF, S & P 500, 10 year bonds

  • Trade these “children” securities in each sector with either long or short bias dictated by market and sector trends

  • Hedge positions 50% or more (this changes with my opinion of the direction of the market, and other securities within that sector)


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II) Day Trading “children” stocks

  • Works best in high volume high volatility like 2008

  • I go “Dime Hunting”

  • Watch “children” & stocks on the move and in the news (Banks, Fannie Mae, Tyco, Enron, Internet Bubble)

  • Ratio pair day trading

    • Trade highest correlated pairs with most predictable ranges on range bound days using 5 minute – 60 minute e-Signal charts

  • Tape Reading

    • Watch for internalization, sub penny activity, and black pool trades on the tape for “tells” for short term trades.


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III) Ratio Based Pair Trading “children” stocks

  • Seek highly correlated pairs in e-Signal using day charts. Swing trade positions.

  • Rob Friesen and PairTrader.com

    • Darren’s ratio

  • Accounts for 10 to 20% of my profits

  • Favorite trade set ups

    • Range bound pairs at range high or low with not trend and regular price action

    • Trending pairs: Trade from a position of strength, add to winners, exit losers. (also can be used when trend trading futures, ETF’s, currencies, and other securities)

    • Range bound pair with brief trend: Wait for move to end then enter the trade using recent high or low as a stop loss point.


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IV) Special Edge Trading “children” stocksThen and Now

  • Then

    • Fractions

    • ECN and Exchange arb. Early 2000’s

    • NYSE price improvement strategies early/mid 2000’s

    • Open Book trading (leaning on large bids and offers for short term day trading)

    • Stocks lag futures (follow moves in e-minis buying and selling “children” stocks)


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  • Now “children” stocks

    • Tape based day trading

      • Look for these “tells”: heavy sub penny internalization action and dark pool action selling or buying

    • OO’s & MOC’s (see Don)

    • Stat. arb. charting and programming availability

    • Back test programs

    • Automation

    • Proprietary edges



1 the only constant thing in trading is change l.jpg
1)The only constant thing in trading is change. trading strategies

  • Either adapt to it

  • Overcome it

  • Or get run over by it

    “The dogs bark and the caravan moves on” Ancient Proverb


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2) Be the Casino trading strategies

  • Approach trading like a casino approaches gambling

  • Keep the odds in your favor

  • Coin flip example

  • Play the odds


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3) Look for the highest probability of profit over the highest profit potential

  • You win more baseball games with singles than home runs.


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4)Don’t be a one trick pony highest profit potential

  • Always stay on the lookout for new ideas and strategies


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5. Don’t lose money highest profit potential

  • When a strategy begins to lose money I quickly decrease my trading size.

  • The strategy is now dormant.

  • When a strategy is dormant don’t worry about how much you are making. The goal is to make it profitable again at which point increase your size.


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6) Increase your trading size when making money. highest profit potential

  • When your strategy is consistent start to increase your position size and focus more time finding ways to expand the working strategy.


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7) Focus on what you are good at highest profit potential

  • Howard Gardner’s multiple intelligences.

  • Would you ask Einstein to compose a symphony or Mozart to teach the theory of relativity.


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8) When in doubt get out! highest profit potential

  • Doubt most likely means things are not going as planned or things have changed.

  • Doubt will cloud your decision making

  • You can always get back in when things line up in your favor.


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9)My Trend Trading Rule highest profit potential

  • When trading the trend play with your offense not your defense

  • Add to winning positions and cut losers

  • Don’t pick tops


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Admit mistakes quickly and often highest profit potential

  • Don’t be stubborn

  • Being wrong is part of a winning strategy

  • Have you reached your wrong quota this month?


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11) Always plan for the worse case scenario. highest profit potential

This applies to trading and managing your trading capital.


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12)Don’t step in front of a speeding train. highest profit potential

  • Wait until the train stops and turns around before you climb on board.


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13) Keep it simple highest profit potential

  • The Harvard MBA and the master programmer that had the unfortunate job of trading.



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