Day trading systems


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Big moves with little volume :

There is something that you should consider. When a small stock go up quickly ( more than 6% ) with low volume, you have to sell this stock, in fact this big move come probably because the big spread or the amount of shares avaible for sale at that time ( illiquid stocks )
Generaly if a stock move with big volume, it means that alot of people bought the stock or a big player bought a large quantity of shares. In both case more money than usual make the stock move.
Why these people are buying the stock ?
Certainly because they know something about the stock that you don't know or they think strongly for some reason that the stock will move, so they buy a large quantity of share.
If stock move with little volume (small illiquid stock) , its because one or few persons has bought the stock, these persons are bullish for the stock, but because they are few they maybe don't have reason and because of big move other persons will be interested in selling the stock after this big profit , that's why the stock will probably goes down.


Uptick Rule :

The uptick rule come when you short a stock, its used to prevent stock to go down quickly and deeply.
An uptick is when the inside bid is raised by a cent, and its necessary to have an uptick in order to your short
selling order to be executed.
When you put a market order to sell a stock, you need an uptick to be executed. If this don't happen and the stock
continue to fall, and fall again and after 2% down an uptick occur, you will be executed at that price (2% of slippage, that's alot).
Now to prevent from that, you need to put a limit order , you will be filled or not at this price but in that case slippage won't occur.
Last note : some offshore brocker let you short stocks without this uptick rule which give you a very big advantage.
Don't forget that down trend are more quickly that up trend.
With that uptick rule you will either miss big moves because limit order or loose money because big slippage.
We prefere to miss big moves instead of loose money so its better to choose limit order when short selling, or to have the advantage of trading without this uptick like market makers and specialists, choose an offshore broker (not all offer that).

Using stop order :

Using stop is very important. When entering a buy (sell) order, you must know the price of the closest support (resistance) and place your stop order a few tick below (above) it. You can use a stop limit or stop market.
A stop will be triggered when the stock price goes below the stop price (When being long).
When using a stop limit you define a price for selling the stock so you are not sure that you will be filled, especially when the market go down quickly.
Conclusion : When you are aways from your computer, its better to put a stop market.