One more day of day trading FAZ

Today FAZ was a good vehicle to trade. It remained range bound between plus and minus 2% of the opening price which was about 10% above Friday's close. So, it was a really very risky vehicle to trade for large gains and I went for small gain trades only. I made three round trips. Bought 10000 FAZ at 4.84 and then within 5 minutes sold for 4.86 making $200. Then I tried again at 4.77 but I did not like the trade and immediately placed sell order at 4.77. Then I tried at 4.72 and sold at 4.75 for $300. This gave me a total of $500 minus commissions of $60. While I was doing this silly thing I missed a real good signal to enter at around 4.75 and exit at 5.10. That would have given me a much better return. Well, tomorrow is another day. The best method that has worked for me so far is: (WARNING: Do not just copy this method. It just works with my personality. That is a big part of it. I get nervous when the prices go up rather than become greedy which is what I am supposed to be. I am very fearful when the prices start to go down and I am really really quick at taking a reasonable loss. I will not go beyond 10c loss on any of these trades since I know it will be very hard to make up for larger losses. What I am saying is that everyone has to figure out their own method that would suit their personality. Although I am following these rules, I am not rigid about them and give myself a little bit of flexibility, which would seem to go against what you read in books that one has to be rigidly disciplined. But so far I am positive for the week granted the first day was a really an outsized gain and I have not been able to repeat that performance. Still it has been OK. The best part of this trading for me has been that I do not have to worry about whether we are in a bull market or a bear market. The bad part is that this is a day trading. I think I can limit my trading to between 10:30 to 12:00 and maybe make enough for the day. That is my next goal.)

(For 2 or 3 cent moves use 1-minute chart and for larger moves use 5-minute chart.)

Step 1: Look at the slow stochastics for oversold condition. You know when it is coming. So you don't have to look at the screen all the time, just around the time the stochastics are down.
Step 2: Look at the momentum - make sure it is increasing. If negative then becoming less negative would be an increasing momentum. Must have positive slope.
Step 3: Look at MACD - confirm that it also has a postive slope.
Step 4: Place LIMIT BUY order at the highest price H of the last minute's candle. I tried with the closing price of the last minute's candle and it did not work couple of times. The price ran away from me and gave me a huge opportunity cost.
Step 5: See what you paid for the prices.
Step 6: Place a LIMIT SELL order at H+x, where x is obtained by some reasonable rule - (a) today I just used 1-minute tick spread which was between 2 and 3 cents. (b) A better one is to wait till the stochastics AND the momentum AND the MACD all tell you that the up move is over. On average you get 10 cents on FAZ nowadays in method (b) before retracement starts but along the way there are a lot of back and forth on a 1-minte chart and the Level II ticks will scare you and it is easy to get nervous about losing the gains.

I think step 1 can also come from a breakout point. But, there, one has to act really really fast. I tried to do that today and I couldn't. My limit orders were not filled. So far, my little trades are yielding good enough returns. I learnt to play this game by reading and watching the currency trading - they do it for steps of 0.01 cent, i.e. 1 pip. Entry has to be timed right in the upward momentum changing phase using 1-minute charts. The fluctuation in 1-minute charts is 2 to 4 cents on FAZ and the bid/ask spread is 0.01. So, when you buy, you are immediately 1c behind. The market has to move up 1c before you can breakeven. Therefore, you have to time your trade really very precisely in the increasing positive momentum phase. Probably the risk of losing is quite great unless you stay alert and cut your loss within 5 cents. I think one can trade between 10:30 AM and 1:30 AM with this method. You have to watch the overall market trend and the trend of FAZ or FAS whichever is tranding with the market. You definitely do not want to trade against the broader market. Also one has to make sure the size of the position is large enough that the tiny gains are not given away to the broker. Thanks Max for suggesting Interactive Brokers. I have openned an account there and maybe within 1 or 2 weeks I will be able to trade at a lower cost. Tomorrow I will try to see if I can do more 2 or 3 cent trades. I will try to limit myself to between 10:30 and 12:00 unless I see special circumstance developing. ALWAYS TRADE WITH THE PREVAILING TREND/SENTIMENT OF THE OVERALL MARKET!!!