Stock Trading Strategies, Tips & Software | Stock DayTrading and Swing Trading Risk Reward Risk Worksheets User Doc

Contents

Introduction
    Uptrend
    Downtrend
Installation
Operation
    Uptrend
    Downtrend
Things You Probably Know, but...
Exiting the Program
Uninstalling
Additional Daytrading and Swing Trading Information Sources

These two programs are for day traders and swing traders of stocks, ETFs, and options.  They provide a convenient way to calculate risk, reward, and the risk/reward ratio depending on the buy or sell prices, target prices, and stop-loss prices you determine from your analysis of stock price charts.  They then allow you to determine appropriate order sizes depending on your account size and risk tolerance.

The programs are particularly useful in conjunction with the daytrading and swing trading methods of Oliver Velez and Tony Oz.  It is not the purpose of this document to detail the use of the these programs in actual trading.  For that, you should get copies of various CDs, DVDs, or books, such as you will find at Additional Daytrading and Swing Trading Information Sources

One program is for use when you are looking to buy after a dip in an uptrend.  That will usually be after a black candlestick (or filled candle or red candle) shows.  The buy setup trigger would then be when the price gets above a specified point on that previous black candle, e.g., the previous open or high.
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Screenshot - UPTREND - Buy after dip
Note: The illustration is for educational purposes only,
and does not necessarily represent an actual trade.

Click for larger image

The other program is for use when you are looking to sell after a rally in a downtrend.  That will usually be after a white candlestick (or open candle or green candle) shows.  The sell setup trigger would then be when the price gets below a specified point on that previous white candle, e.g., the previous open or low.
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Screenshot - DOWNTREND - Sell after rally
Note: The illustration is for educational purposes only,
and does not necessarily represent an actual trade.

Click for larger image

Installation is direct and simple.  There are no buggy "install" and "uninstall" programs to deal with.  Installation does not screw around with the Windows Registry.  (Whoever approved that concept at Microsucks ought to be shot.)  Basic computer literacy is assumed here.  If this installation is too complicated for you, then maybe you should not continue to consider stock and/or options trading as a possible vocation or avocation.

To install the programs, you, yourself, simply create a directory (folder), wherever you want, named as you want, and copy or move the downloaded files into it.  You can then run the programs starting from Windows Explorer (NOT Internet Explorer).  You could also set up shortcuts on your Windows Desktop by right-clicking on the .exe files listings in Windows Explorer, then clicking on "Create Shortcut".  Drag the shortcuts to the Desktop, then delete the shortcut copies in the Windows Explorer folder.

The discussion that follows will make more sense if you have copies of the programs themselves. ORDER NOW! - Only $15 In the meantime, here are links to example screenshots. UPTREND - Buy after dip - screenshot DOWNTREND - Sell after rally - screenshot

Operation

Both Risk/Reward Worksheet Programs run similarly.  When you start up one of the programs, you will get a simple multi-colored screen.  There are three areas outlined.  The large upper main area is for entering prices and displaying the results of the reward/risk calculations.  The smaller lower right area is for calculating the risk/reward and margin required for a given number of shares after a calculation is done in the main area.  Each of those two areas has its own command button.  The lower left area contains three common command buttons.

After the program starts, the pink colored text boxes (with the exception of one at the lower right) will be pre-populated with example prices.  Clicking on the "Calculate Reward/Risk Ratio" button will calculate and display results for those prices in the white boxes.

You may fill in the light blue boxes for Day, Date, Stock Name, and Stock Symbol or not, as you wish.  If you are going to print off a copy of the form by clicking the lower left "Print Form" button, I suggest you fill them in.

To use your own price numbers, click on the "Clear" button at the bottom to clear all the price fields on the left part of the form.  That will also clear the results of the previous calculation.  Then enter in your own price numbers.  All eight price fields MUST be filled in correctly before calculating using the "Calculate Reward/Risk Ratio" button.

Missing numbers or numbers not in correct relationship with other numbers will trigger error or warning messages.  Error messages must be attended to before reward-risk ratio calculations can proceed.  Warning messages will not stop the risk/reward ratio calculations from proceeding, but you should carefully scrutinze the results.

Note:  If you get an error regarding a missing .dll file when you attempt to run the program, you will need to get that .dll file.  The file is MSVBVM50.DLL, which is necessary to run this and some other Visual Basic programs.  You could get it from who knows where on the Microsucks site.  It will be easier to get it from my web site.  You can get it there in two ways: The .dll file itself (1,334,032 bytes): http://www.bean-d.com/download/msvbvm50.dll A zip file (682,820 bytes): http://www.bean-d.com/download/vb_run.zip Save whichever file you download in the same directory in which you placed the programs.  If you have downloaded the zip file, unzip it in that directory to extract the .dll file.

The UPTREND - Buy After Dip Program

This program is used when the stock has been in an uptrend and has recently made a higher high.  Following that high, there have have been three or more down bars, the high of each lower than the preceding bar.  Black bars are preferred.  After these three down bars, we are looking for the stock to go up past the level of the high of the last down bar.  In the example given in the illustration, the entry is then "today" as soon as the price goes higher than the high of "yesterday". 

You may want to get the screenshot here and print it out for reference.

Also, this discussion is a VERY abbreviated version of parts of Oliver Velez' and others', such as Tony Oz, day trading and swing trading methods.  Click for a sampling of related day trading and swing trading courses, DVDs, and books

"Yesterday's" high in the example is $10.35, so the entry is shown as $10.37.  Some might make that $10.41 or $10.42, to better make sure that the stock really has turned, as indicated by making it past the "round number" of $10.40.  To avoid paying too much when the entry buy stop is hit, a limit is also placed -- a Stop-Limit Order.  The limit of $10.50 in the example is higher than I would use.  Just a couple to a few cents above the stop price.

The target price is the price at that most recent high just before those down bars and your possible entry.

As soon as -- if -- your stop limit order to buy is filled, you need to set a stop loss order (sell stop order).  That should be a few cents below "yesterday's" low of $9.83 or "today's" low, whichever is lower.  Again, you may want to avoid getting stopped out by a fluctuation, and so you may want to place the stop below the "round number" of $9.80, making the stop $9.79 instead of $9.82 or $9.81.

Mental stop or placing the stop in advance with your broker?  You takes your chances either way.  One guru (I am not a guru) suggests that you could put stops with a broker for NYSE stocks, but use only mental stops with NASDAQ stocks.  I can't help in this area.  I've kicked myself both ways.

The DOWNTREND - Sell After Rally Program

This program is used when the stock has been in an downtrend and has recently made a lower low.  Following that low, there have have been three or more up bars, the low of each higher than the preceding bar.  White bars are preferred.  After these three up bars, we are looking for the stock to go down past the level of the low of the last up bar.  In the example given in the illustration, the entry is then "today" as soon as the price goes lower than the low of "yesterday". 

You may want to get the screenshot here and print it out for reference.

Also, this discussion is a VERY abbreviated version of parts of Oliver Velez' and others', such as Tony Oz, day trading and swing trading methods.  Click for a sampling of related day trading and swing trading courses, DVDs, and books

"Yesterday's" low in the example is $17.75, so the entry is shown as $17.72.  Some might make that $17.69 or $17.68, to better make sure that the stock really has turned, as indicated by making it past the "round number" of $17.70.  To avoid getting too little when the entry sell stop is hit, a limit is also placed -- a Stop-Limit Order.  The limit of $17.60 in the example is lower than I would use.  Just a couple to a few cents below the stop price.

The target price is the price at that most recent low just before those up bars and your possible entry.

As soon as -- if -- your stop limit order to sell is filled, you need to set a stop loss order (buy stop order).  That should be a few cents above "yesterday's" high of $18.36 or "today's" high, whichever is higher.  Again, you may want to avoid getting stopped out by a fluctuation, and so you may want to place the stop above the "round number" of $18.40, making the stop $18.41 or so.

Mental stop or placing the stop in advance with your broker?  You takes your chances either way.  One guru (I am not a guru) suggests that you could put stops with a broker for NYSE stocks, but use only mental stops with NASDAQ stocks.  I can't help in this area.  I've kicked myself both ways.

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STOCK  AND  ETF  INVESTORS  -- Discover the guaranteed 'secret' to REALLY Buying Low and Selling High. ** Core Position Trading **

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Things You Probably Already Know --
But Just In Case...

Margin

About the "margin" values shown:  The figures shown correspond to the value of the stock -- shares times price -- assuming entry at the entry prices shown for the corresponding number of shares.  Remember that if you are long and the price of the stock goes against you (down), or if you are short, and the price of the stock goes against you (up), your value will go down.  That could trigger the infamous "margin call" unless your account is sufficiently funded. 

Market Orders

Do NOT use Market Orders for your orders, except in very special circumstances.  The order of preference in using orders, depending on the circumstances, is Limit Orders, Stop Limit Orders, Stop Orders.  By using Market Orders, you are saying to the market maker or specialist, "Do me! Have your way with me!"

Stop Orders

Keep in mind that Stop Orders become Market Orders as soon as the Stop Price is hit.  So there is slippage risk in gap or fast-moving markets.  Stop Limit orders do offer some price protection, but then your order may not be filled.  That is a good thing when trying to enter a position, but not when trying to exit.

Exiting the Program

To exit the program, simply click on "Exit" button on the bottom of the form, or on the "File | Exit" menu selection.

Uninstalling

If you want to keep the .dll file for running this and/or some other Visual Basic programs later, move MSVBVM50.dll to the Windows System directory, usually C:\Windows\System.

To uninstall the Swing Trading Buy-Sell Worksheet Programs, simply delete the subdirectory and files.  Also delete the corresponding Windows Desktop shortcuts if you created any.

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Additional DayTrading and Swing Trading
Information Sources

Glossary of Stock and Options Trading Terms

Core Position Trading
  AIM Stock Buy & Sell Calculator

Technical Analysis
  Risk/Reward Calculator User Doc

Stocks and ETFs
  Stop, Limit, Stop Limit Orders

Stock Options
  Options - The Very Basics
  Options Premium Intrinsic & Time Value

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