JMJAtlanta

Summer Slow-Down Strategies

2010-08-18T05:39:00.002-05:00

The last of the Summer is here. That means low volumes and snappy price action in the high beta names. It also means I cut my transaction size down. Way down.

These days are not good for making steady money. Yes, you can still make money. But trying to figure out which direction a stock or index is going to go is often guesswork.

So why play? To sharpen your game. To focus on risk and make sure you are in the information flow when this summer ends and volume returns.

Push yourself to examine each trade. Look for ways to put on less risk. Tighter stops is probably not the answer.

Why can't I balance my checking account?

2010-08-16T12:39:00.007-05:00

With the advent of 24 hour access to your bank account statistics and electronic bill payment, I am finding there is now a generation of people who know little about how checks work. In addition, there are those who have never bothered to understand such matters. Occasionally, a recent divorcee, widow or widower exclaims that their former mate took care of such matters.

My advice to those who find themselves in such a situation is to learn. But you don't have to learn it all at once. Take your time to understand. Conquer the tasks necessary for the moment, and spend some time learning as you go.

Often, the misunderstanding comes in because checks are not instant. Some find it surprising that calling your bank for the balance in your account is not enough. Below is a list of items for you to think about.

Keep track of anything that affects your checking account.
- Receipts
- Checks you write
- Items you deposit
- Items that automatically add or subtract money from your account.

Get your bank statement mailed to you each month. Some banks allow you to not receive your bank statement, or get it via the Internet. My advice is to not use this feature until you are comfortable with keeping up with your finances.

Use a checkbook register. Start with the one that often comes with your checks. Software is available that makes certain tasks easy, but learning how to do it manually will aid the learning process.

Balance your records with the bank statement as soon as it comes. This is a time consuming task at first, but a very important one. No one is going to be more concerned about your money than you are. Take the time.

No time for such things? Find the time! Hiring someone to do it for you is great if you can afford it, but how will you know if it is done right? You can do it! Find a trusted friend that you know keeps their own finances in order.

Don't get blinded by frustration. In a few short months, you'll be confident that you know what you're doing. Until then, be patient with yourself.

Can pollen help predict the markets?

2010-06-25T07:14:00.004-05:00

I like numbers. That is why I chose the careers and hobbies I've pursued. There are a lot of numbers in aviation, electronics, amateur radio, software engineering and finance.

After decades of being out of school, I have a renewed interest in studying higher math. My casual reading had me stumble upon some of the mathematics around stock options. The study of volatility, calculating "the Greeks" an such had me wind down a deep tunnel.

The Black-Scholes model is quite a model. As I began to tear it apart, I found the formula commonly referred to as "Brownian motion."

As the story goes, Mr. Brown would drop pollen in the center of a body of water, and calculate the relationship of the pollen spreading across the surface, and the amount of time it took to do so. Can you imagine getting paid to count pollen specks on the surface of a cup of water? The joys of academia.

What is interesting is how such a formula relates to markets, and especially options.

Would you expect a spec pollen to land in the middle of a still bowl of water and immediately head to the edge closest to the Right? Not without some external force pushing or drawing it.

Likewise, would you expect a share of stock that you purchase at $25 to immediately hit $50? Not without some external force pushing or drawing it.

Now we add in a time factor. If in previous experiments with your pollen and bowl, you found that over a 10 minute period, there was a 50% chance that speck was within a circle 1" in diameter, that's information that will help you predict the whereabouts 20 minutes from now.

If in previous purchases of this stock, you noticed that within a 1 day period, there was a 50% chance that the stock was within a $0.50 range, that would help you calculate where the stock could be 2 days from now.

Do you see where this is going? So yes. Pollen can help to predict financial markets.

A Trading Scorecard

2010-02-04T21:08:00.002-05:00

There are plenty of methods of keeping score in trading. Of course, the most popular is the movement of your account balance. You cannot argue with results. However, the scoreboard does not tell the whole story.

In the middle of the game, it would be difficult to be a coach and a player. A player must be focused on the mechanics and the opponents. This leaves little or no time to note areas of improvement.

Just as a good sports coach may watch video of a game recently played, traders need to have a way of looking into the recent past and looking at where improvements can be made. Such an evaluation should be granular enough to pick out areas needing improvement, and assist in finding patterns that can be adjusted to lead to improvements.

Of course, balance is also required. Get too granular early in a trader's career, and they will feel bogged down in the details. Don Miller had what I feel is an excellent scorecard. While he does not use it any longer, I have archived it here.

With several weeks of such scorecards and a trading journal, a coach can look back and find things that can be worked on. Tasks can be prioritized. Goals can be set. Future posts will break these things down in more detail.

Bandwidth

2009-12-29T07:49:00.003-05:00

As an intraday trader, I am quickly overloaded each day with information. As the open nears, information begins to flow too quickly to keep up. Learning to filter information quickly is a skill that takes a long time to master.

An analogy I am familiar with is flying airplanes on instruments. When you go for training, you are overwhelmed with the task at hand for most of the course (I was overwhelmed for probably 90% of the course). You are what is called "behind the aircraft." As if to say the aircraft is flying, and spitting out information that hopefully you can interpret fast enough to make adjustments before the airplane stops flying.

As you proceed through the course, your skill and "muscle memory" start to work for you. You slowly catch up to the airplane. You read an instrument and seemingly unconsciously read, interpret, and react without much thought. This frees the mind to focus on the next task, or an interrupting call from air traffic control, or some other situation that may appear.

When you finally get it, you wonder why the last flights were so difficult.

All that is to say this...

It takes time to get into the information flow. It takes time to learn what to filter. It takes time to learn what to record in your brain, write on your notepad, or throw away. Frustration can set in, but it won't help.

Keep a quiet mind. Focus on what you know you have to. In my case, I need to keep track of price levels in the stocks / futures I plan to trade. I need to know about economic releases that will be showing up during the day. I need to know my emergency exits when I'm in a trade.

When I first started, it was hard to know the mechanics of my platform and how to use it. Soon afterward, it was second nature. I knew what each hotkey did for me. I customized the layout for my style of trading. I knew where to get obscure information if I was doing some research. It became second nature. Now I don't think about it. I simply do it. That freed my mind for other things.

At the beginning, information was dropped because of bandwidth. I simply did not have the mental capacity to listen, interpret, and react. I was sometimes frustrated. Today, I still drop a lot of information. It is simply impossible to keep up with everything. But my ears and eyes are trained to pick up on most of the important things.

If you are struggling with this, please remember. Keep a quiet mind. Don't try to take it all in. Focus on what you have to. Take your time. It is required.

Stay organized

2009-10-23T05:44:00.001-05:00

I am beginning to work on a project called Tradebook. I am hoping to build (with the help of the open source community) a website where people can journal their trades in order to track progress.

It will initially be tuned to how I journal, bu I hope to design it well enough to where it can be tuned easily enough.

I don't have any long-term hopes for the project, beyond helping the community and having the community help me.

I currently keep a paper journal, a blog, and a workbook of spreadsheets. This project will hopefully help me organize all these into one.

Visualization as a change tool

2009-10-22T05:54:00.001-05:00

Dr. Brett and SMB Capital talk a lot about using visualization to stop bad habits and reinforce good ones. This technique works well for me and I use it often.

This is a technique that I first read about in Anthony Robins' book Awaken the Giant Within. Research in Neuro-associative Programming explains why we think it works. While interesting to delve into, it is not necessary to know how it works, bu how to make it work.

Implementing change is hard. It takes effort. In my experience, those that put forth effort to experience change have a happy, fulfilling life. That's what it is all about, right?

Work on making one change using visualization correctly. I think you'll be amazed. Need motivation? Pick up Mr. Robbins' book.

Infrastructure

2009-10-15T06:34:00.001-05:00

Nothing will break your concentration more than having trouble with your data. Network connections going down, platforms locking up, newsfeeds on the fritz. Ahh, the life of a trader.

We can do some thing to help out, but sometimes it is out of our control. But by being prepared we can lower the cost and be back running in the shortest possible time.

Do you know the number to call in order to close your trade if your pc decides to let the smoke out of it's chips? Do you know what questions your broker will ask, and do you have that information handy?

Bad things happen. Stay calm. Stay focused. It is just one more bump in the road. Our success may be caused by being at the right place at the right time. But it just may be caused by clawing out of adversity and wiping the dirt off our shoulders.

Grinding it out

2009-10-14T05:44:00.001-05:00

Sometimes you feel that you aren't progressing. You feel that you have hit a level that you can't surpass. What do you do?

Avoid discouragement. With hard work, you will get to the next level.

Evaluate. If you continue doing what you are doing, won't you still be learning? No one has been exposed to all situations, as they have not all happened yet. Staying the course may be what is needed to succeed.

Avoid boredom. Is boredom the problem? If so, you are not learning at your optimum. Increasing the challenge may help. Setting measurable goals at a difficult but not impossible level reduces boredom and can push your trading to new heights.

Keep your journal up to date. Log your trading as well as your emotions. When reviewing your journal, you will be looking for patterns, not necessarily encouragement. So do not be afraid of criticizing your trading.

Can I do this?

2009-09-03T05:33:00.001-05:00

As a young adult, I picked up Anthony Robbins' book "Awaken the Giant Within." This book fits many of the other self-help stereotype publications, I'm sure. But this one I credit with pushing me beyond the norm.

Being a trader requires more than an emotional "rah-rah you can do it" attitude. Trading requires skill, dexterity, fortitude, and more personal drive than most careers out there.

My goal in trading is to be the best trader in the world. I have no delusions that this will not take time. I must work at elite levels of performance for a long time simply to break even.

Why try? Wrong question. My question is "why take on anything that takes so much time and energy without the goal of being the best?"

Here's another thought. What happens if I never reach my goal? I will have learned a lot ( I already have! ), I will improved myself ( I already have!), and I will take my strong energy and know-how into my next project.

I don't call that failure. I call that a successful adventure!

So, can I do this? I don't know. But I will push myself so that if I fail, I will know it is beyond my abilities. If I succeed, I know I am competing at peak levels of performance.

Lazyness = No Progress

2009-09-02T05:27:00.002-05:00

I've been plugging along. Life has been busy and I haven't been concentrating as hard as usual on my trading. It has been showing in my results.

My solution is to get back on a schedule of deadlines. I seem to do better that way.

Yesterday I attacked AIG. And it was easy to trade for most of the day. I couldn't rea much from the tape, except where the volume was. It was not helpful for finding direction.

The chart patterns, however, were telling. Bear flags, descending triangles abounded. I was stopped out a few times. I was scared out of my position a few times. I feel I traded well, for the most part.

My biggest challenge yesterday was confidence. AIG was the easiest stock to read, but I was always second-guessing my setups. I can get out with a small loss. Why am I worried? I shouldn't be trying to be right, I should be trusting my setups.

Today is "setup Wednesday." Be thinking about what worked, and why I spent so much time building my setup rules. Don't think while in battle. Execute the plan!

Earnings season peaking

2009-07-23T06:46:00.003-05:00

Earnings season is in full force. In addition to my usual suspects, I'll be looking for movement in FITB, HBAN, PNC

POT released their earnings too.

Futures are fractionally up so far this morning.

Morning Briefing

2009-07-21T06:25:00.007-05:00

Indexes:
S&P 500 Daily
NASDAQ Composite Daily
Dow 30 Industrials Daily

Sectors:
FinViz.com Heatmap from yesterday (2009-07-20)

Economic / Earnings reports:
Nothing big on the economic calendar today
Plenty on the earnings calendar, especially tonight.

Opinion:
This rally has run out of steam. So does it pause for a rest, or fall backward? The price action the next few days should (hopefully) tell us.

If the market moves forward, I will have severely underestimated the strength of this rally. Watch the volume. A move forward on low volume may easily be reversed.

BAC starting on the 15th, diverged from the upward slope of the S&P 500. The other banks seem to be keeping up with it. BAC may be the one to short should the market fall.

Recover!

2009-07-17T05:37:00.003-05:00

As I was going through my Private Pilot training, there was an exercise to simulate getting disoriented while in a cloud.

With goggles on that prevent the ability to look outside, the instructor puts the plane in an unusual attitude. The student has his head down, unable to follow what the instructor is doing. Once the student's head is totally confused, the instructor releases the controls and says "Recover!"

Based on a small group of instruments, the student must get the plane back to straight and level flight. This of course needs to be done as quickly as possible.

What does this have to do with trading? I can think of several. This morning was a good example of one.

My morning routine was interrupted by something that had to get done. I got it out of the way, but it left me no time to complete one of my important tasks. This leaves me disoriented. "Recover!"

I must look at my small group of instruments, quickly asses the situation, reprioritize, and get oriented. I may not do as well as if the disorienting condition never occured, but I'll still get my day done.

When flying, you don't want to give up on a situation. You fly the airplane into the ground if you have to, but you always fly the airplane. With practice, a pilot can handle even the most complicated emergencies.

In trading, always keep control of your account. Practice emergency situations. Be ready to improvize if necessary. Never give up. Flying it into the ground is much better than letting go of the controls and closing your eyes.

Healthy habits

2009-07-16T05:46:00.001-05:00

My trading relies on discipline. What helps me stay disciplined is to keep a healthy routine of diet and exercise.

I work out at 5am. It is hard to get up at 4:30. But by the time I am done, I am in the right frame of mind for trading. These aren't light workouts. They are short (45 minutes), but intense.

I have also changed my eating habits. I have severely cut my intake of sugar, and am trying to get more of my protein from vegetables instead of meat (that is hard for me).

Does this help my trading? I think of it this way. The traders I compete with are alert, strong, and know more than I do. If I want to compete with them, I must have a higher level of alertness, strength, and maturity.

Thinking this way pushes me to do better. I'll always strive to bring my best game if I think of who I am against and who I want to be.

Finding like-minded traders

2009-07-09T09:29:00.003-05:00

After doing some thinking on puting together a morning meeting, I realized I missed an entire option. Perhaps I should be looking for a group of like-minded traders that is already established. I should poke around the Internet and attempt to see what I can find.

My trading style is intraday, looking for the stocks in my watch-list that are moving and showing reliable chart patterns or a readable tape. I also trade commodity and index futures, but that has not been my focus lately.

I am not interested currently in joining a proprietary trading firm, but I am interested in trading groups that match my style and have (or are looking for) structured dissemination of information before the open.

Like-Mindedness

2009-07-09T08:17:00.002-05:00

I enjoy daytrading. It has become an ultimate quest for me. While I enjoy talking to others about it, I am very carefull. I am tired of answering the questions most people ask. Is the market/economy going up or down? Should I move my cash into / out of the market? And so on.

My answer is "how should I know?"

But if I am with traders like myself, I don't mind sharing. If you are like me, you listen to others and make your own trades. Take my opinions and throw them away. Fade them for all I care. We're traders. We pull the trigger on our own accounts.

I have a routine that helps me frame my day. If I don't do the routine, I am uncomfortable throughout the day. I feel as if I'm behind the curve.

I have been working on this routine for years, and it is still in a state of adjustment. It probably always will be. It is work, although I'd be happy to share it with other traders that share my strategies if two major risks were mitigated.

It doesn't take a large effort to take my scribbles and disseminate it to those that find it useful.
There is a way for other like-minded traders to share their thoughts.

On point 1. It doesn't make sense (or cents) for me to concentrate on anything other than my trading unless I get value back out of it. The amount of that value should be proportionate to the value I put into it (or greater).

Point 2 relates closely to point 1. I don't want to have to sift through people talking about the details of things that don't apply to my style of trading. A large piece of information about the correlation of the DAX to the EUR/USD may interest me on a Sunday evening, but not Monday at 9am. However, someone proving how they found that the solars did not correlate well to oil futures yesterday afternoon may be of interest to me.

So how do I mitigate these issues so everyone involved finds it worth it to read (or hear, or whatever) as well as contribute? I don't know. I haven't sorted that out yet. But I'm working on it.

The job of your financial analyst

2009-07-08T06:00:00.003-05:00

Your analyst's job is to make you money. Is that happening? Should you work to improve the results, or fire the analyst?

You don't have an analyst you say? Sure you do. You just might not know it.

If you read opinion columns about the market, you have an analyst. This analyst is paid by you. You buy the newspaper or magazine, or enable the sale of ads on a website. If the analyst makes a correct prediction, he is praised and heralded a god. He shows the world his investing prowess. More ads are sold in the author's newspaper, magazine, or website. If he is wrong, it is swept under the rug without another thought.

Should you read opinions? Perhaps. We do not trade in isolation. If this analyst strikes a chord with the investing public, it may be wise to ride their wave. They are helping to push the market. The wave does not go on forever. It eventually hits the shore and reverses.

I read market opinions. I take them for what they are. Someone who gets paid to express their opinion has an interest in being right, but will probably still have a job if they're wrong. It is kind of like the weatherman at your local station.

If you make your own investing decisions, you have analysts. Listen to the opinions of others, but employ only the best. Invest in your favorite analyst, yourself. If you are not the best analyst, work hard at getting better. The ultimate decision on what to do with your money should be yours. You keep yourself employed by getting it right. No ulterior motives there.

Hey! You are your own employee of the month!

Strong Routines

2009-05-27T07:41:00.004-05:00

I am making a new routine to assist me in trading. I catch myself having "themes" for the week. I'll work on a problem consistently for days or weeks, letting other things slide.

Big problems need to be worked on. But not at the expense of concentration on the rest of my trading. So, I'm dedicating each weekday to put emphasis on one area.

Monday Mechanics - Has a nice ring to it, eh? That's the main reason I dedicated Monday to working on such tasks as order entry, trade management, position sizing, etc.
Tuesday Research and Data - Paperwork is time consuming. Tuesdays are good days to catch up. Blogging, trading journal, researching my picks a little deeper, and look at my P&L reports to make sure I'm keeping tabs on what the market is doing, and how I am doing.
Wednesday Setups - Look at existing setups, research new ones, dust off ones I haven't looked at in a while and see if the market fits.
Thursday Psychology - Work on a psychology subject that has come up recently, or review a new subject that I may wish to apply to my trading.
Friday Review and Moving Forward - Review the past week. Find and document areas needing improvement. Look at ways to accellerate learning and comprehension.

Such a schedule will keep me busy. If I don't get as far as I wish, there will be next week. I may run across a problem on the wrong day. Note it, and read the note on the right day.

These items should not be thought about during the day. Instead, work on them before and after. If I have time at lunch, I'll look at them then.

The weekends are a time for reflection and renewal. I will not dwell on trading those days. I will attempt to keep up with this schedule for a few weeks, and see how it goes.

Making small size a strength

2009-05-22T06:18:00.004-05:00

What makes traders better than institutions? How can we compete? Our size is in many ways our weakness. But it also has advantages. We must exploit any advantage we can to be successful.

Our size gives us flexibility. Moving in and out of a market can take seconds. It takes bigger organizations much longer.

Time spent exposing ourselves to other markets early in our careers can be a big boost here. When we take the time to find our niche, we learn about bonds, futures, emerging markets, currency, equities, etc. The relationships between these markets are complex, and take time to learn.

Fast-forward a few years and we're in a dull market. Let us say we're trading index futures. But things are jumping over in metals. Can we participate? Sure, with small size. We may make only pocket change. We may lose a little. But the experience may pay big dividends down the road.

Make the jump with me a few years further. Indexes are doing okay, but metals are breaking out of a long consolidation. Are we afraid to take a look? Probably not. We've traded there before. We know the rules. Nothing prevents us from taking a few things off the plate of some institution.

We can do this because we're flexible. Our size is a benefit. Don't be afraid to use it.

Who is watching my money?

2009-05-11T11:26:00.002-05:00

I am solely responsible for my money, my trading, and my investments. I can fall victim to fraudsters, but I do my research, and have avoided anything major happening to my money.

In the past year, there has been plenty of finger-pointing going on. Who caused the meltdown? Why did the stress test rules change at the request of the banks? Each day there seems to be more yelling and blaming. This will go on and on ad nauseum.

There was plenty of money sloshing around Wall Street. Some of it was yours and mine. Ask yourself who put it there. In my case, I put it there. I put some 401(k) money in the hands of mutual fund managers that may or may not have been paying attention to the systemic risks of the street. Can some of the blame be placed on their shoulders? Sure. Can all of it? No.

I spend a lot of time researching my financial options. But I realize that some may not have the time to research and learn what to look for. What then? I encourage you to look at your bigger picture. Look at your options at a high level. There is no one answer. But in my opinion, the person who has all the answers as to what is right for you is you. Be a smart consumer, and you'll be an excellent trader.

Wall Street without college

2009-04-30T14:15:00.006-05:00

Q: How important is schooling if I'm interested in a career as a trader?

A: Doing good in school is an indication that you will do good in the markets. Even if you're trading only your own account, a solid education will give you an edge.

Attaining a job on Wall Street requires unusual skill, being adept at the interviewing process, and a proven record of doing well at an Ivy League University.

Attending a high end school is an advantage. A graduate has advantages that the rest do not. Internships, alumni, and the reputation of the school ride on the resume of the applicant.

Q: What if I don't have such? Is there any way to get around this limitation?

A: Yes. But do not think it will be easy. You will still pay for your education, and it will not be cheap. If you are dedicated and unwavering in attaining your goal, you do have a chance to succeed.

Payment for your education comes in the form of reduced salaries, taking personal time to study, and working low paying jobs simply to gain exposure to position you wish to pursue.

Q: What do I study?

A: That depends very much on what you wish to pursue.

Many positions require extremely strong mathematics skills. Some are former physics and engineering majors that do well in the markets.

Many positions are tuned to someone with a strong economics background. Economics also has strong ties to psychology.

Q: How do I get my resume looked at without an education?

A: Your work history is more important than your education. Work hard to attain work in banking or trading. Do your very best while there, and make progress within the organization. Document your achievements.

The eventuality of all this effort is the attainment of your goal. At the end of your journey, you may find yourself working for a big Wall Street name. Or perhaps you may be an entrepreneur. Regardless, well placed efforts lead to results.

Would you hire you?

Working Smarter

2009-04-29T12:56:00.002-05:00

I am in the process of automating the usual tasks I do each day. I pull down end-of-day data, journal my trades and my thoughts, etc.

Some of these tasks can be automated. Some can not. While I can't expect automation to journal my thoughts on a trade, I can pull down the data on trades recorded by my broker.

Then there is the question of buy versus build. I can subscribe to or purchase software to do some of this automation for me. Will it do what I want? Is it better to have data stored in one place? Why is storing the data important? Which data should be stored in detail, and which should be summarized?

There is plenty to think about. It is a good thing I have a software development background. The goal is to free my mind to think about the aspects of my trading that need work. But I must also balance the fact that gathering numbers and processing my spreadsheets manually has some benefits that are difficult to quantify. Decisions... Decisions...

Sustaining Change

2009-04-17T05:44:00.001-05:00

Dr. Brett's new book is awesome. The first chapter was very timely for me. It is on change. More importantly, it teaches ways to sustain change.

I constantly have goals. Often I achieve them. But this new level is short-lived. I soon revert back to the way I was.

One of the suggestions is add an "or else" to your goals to change. I will spend the weekend thinking of next week's change related goal. I will attach an "or else" to it. I'll see how it goes.

Revenge Trading

2009-01-16T07:18:00.008-05:00

"I'm going to get my gun back."
- Kay, Men In Black

Revenge trading is bad. Revenge can feel good, though. The best way to accomplish revenge is to plan carefully, and execute flawlessly.

A well thought out and tested plan is the best way to take revenge on the market. Sticking to the plan will make you more money than going off on your own. It has proven itself. The results are measurable. Execute it as if the loss you just took never happened. At the end of the day, week, month, or year, your statement will prove you got your revenge.

The two worst things you can do here are to trade with an unproven plan or quit altogether.

Trading with an unproven plan may work. But the chances are very, very small. Trading without a plan is worse. Even if trading without a plan works, how will you measure its effectiveness? It would be very difficult to measure "gut feel".

Quitting is an option, but guarantees your loss. You may have this as your only option. If that is true, chances are that money management is to blame. If you are dedicated to the game, paper trade, save your stake, and try again. Otherwise, you are a casualty of the Wall street system.

We all take our lumps. Some leave the ring and go to other things. Others leave the ring and come back with more experience. Still others stay in the ring and slug it out. Which one are you?

Revenge trading is a bad idea. Getting your revenge is a great idea. Do it with a plan. Use good money management to weather the lean times. Keep your mind focused on the future, not the past. Grind out great trades. Some trades will be winners, others will be losers. In the end, revenge is sweet.

Trading is hard work.

2009-01-08T20:59:00.004-05:00

Day trading can be hard work. Push through the mound of data gathered while the market was opened. Look for edges for the next day.

Market themes are appearing and fading. It pays to look at broad themes, even when you're trading the time and sales window. Spend time backing away from the micro view to take in the bigger picture. After hours, of course!

Formulate a plan. Formulate a backup plan. Sweat the open. Grind through lunch. Sweat the close. Lather, rinse, repeat.

On top of all this, you must work against yourself. Should I be biased one way or another? Is this feeling in my gut something the market is telling me, or something I heard on the radio?

Throw in reviews of the trade journal and money management rules and yes, there is a lot of work.

It does have a great benefits package, though.

What should I be doing?

2009-01-01T21:39:00.003-05:00

From the Trader's Almanac:

The real difference between men is energy. A strong will, a settled purpose, and invincible determination, can accomplish almost anything, and in this lies the distinction between great men and little men. - Buckminster Fuller

What is going to make you improve as a trader? The items mentioned in the above quote are what should be providing the motivation. But motivation requires direction in order to be the most useful.

You have determined that you are willing to do what it takes to be the best trader ever. What is going to springboard you to the next step?

Perhaps you are just starting out. You read everything you can get your hands on. You are still trying to find your niche. It may be discouraging at times. This part of the process can be frustrating. You may learn that certain avenues of trading aren't enjoyable to you. Take your resolution and look down the next avenue. Wasted time? Not necessarily. You have probably taken home a few nuggets of information that will help in the future.
Are you in a rough patch in your trading? Take a look back in your journal. Focus on where you have been and where you are. Look for items that have changed. Is it the way you are trading? Do the market conditions favor the method you use?
Perhaps you have done well, but cannot seem to get to the next level. There seems to be a cap on your abilities. Take a step back. Often some self examination and a renewed effort push you past your plateau.

There are solutions for most issues traders face. Most problems have been encountered before. Spend the time and energy looking at others who have cut similar trails. This can save time and energy in the long run.

No replacement for experience

2008-12-29T17:33:00.003-05:00

A recent post by Dr. Brett points to something I've found very true. While going through the typical methods to gain knowledge about how to trade, there is a major necessity that cannot be taught by the authors, mentors, and seminar presenters.

Bombarded with so many conflicting rules and suggestions, it is hard to imagine which ones are correct. The truth is, most are correct, and they do not conflict. They simply need to be selectively applied.

Take for example those who say you should only take on a risk if the reward is three times the risk. That is true for some trades, and I use it on some of my strategies. It simply doesn't work for other setups. Does that mean the rule is wrong? No. Does it mean the setup is wrong? No. It means that the rule doesn't always apply.

This is one example where popular wisdom needs to be taken with a grain of salt. Such nuances must be figured out and selectively applied. How do you learn which rules apply to which situations? Experience.

A new trader must stay in the game as long as possible. The more market exposure one receives, the more the setups, rules, and market movements are internalized. Implicit learning takes time.

Protecting capital is the first requirement. Otherwise, you won't stay in the game long enough to learn how to play.

Avoiding Deer in Headlights trading

2008-12-23T10:36:00.005-05:00

Trading can take an extreme amount of willpower. Some of that willpower is misplaced. Trying to inflict your will upon the market is not advised.

Attempting to fix that repeated mistake can take a lot of willpower. We beat ourselves up over it. We attempt to reason with ourselves. We are saddened when it appears again. Personally, I think such actions are good. I want to beat myself up over a mistake. I need to learn from my mistakes.

Making a mistake a second time is bad, but not unforgivable. I strive to make the mistake memorable. I do not want to get depressed, however. Mistakes will happen. They hurt. Acknowledging the mistake and attempting to fix it will make you a better trader.

Sometimes a mistake is not forseen. The environment (the market) may do something we did not expect. That is often when the "fight or flee" reflex kicks in.

The fight or flee reflex is viewed as natural. It can sometimes seem to happen without thinking. Don't think it can't be fixed.

If we plan for such circumstances, this reflex goes away. Here's an example:

When learning to fly a multi-engine airplane, one engine can stop, which can quickly cause the airplane to be uncontrollable. Certain things must happen very quickly in order for the flight to be a success. If you practice enough, the procedures for handling the problem become just like a reflex. You do it without thinking. The problem is taken care of in the quickest and best way possible. The pilot can now make smart decisions on what should happen next.

How can traders accomplish the same training? Train yourself for the worse scenarios you can think of. Have procedures that dictate what to do. Think and practice those procedures in a safe environment.

What happens if you lose the normal connection to your broker? What happens if your broker's platform suffers a disruption? What happens if you place an order incorrectly? What happens when you find you left a trade in the portfolio you thought you closed? Don't get caught like a deer in headlights. Execute the procedure you trained for. Damage may happen, but containment may be possible.

An example of Poor Aeronautical Decision Making

The emergency procedures should be part of your business plan. If they are not, put them in ASAP.

Running my trading business

2008-12-19T12:34:00.002-05:00

The trading business isn't all about trading, unfortunately. What about things I like to call infrastructure?

Insurance: What do I need? Can I get a better price?

Monthly fees for services: Do I need these services? Do they make me money? Is there a better vendor?

Cashflow: Could some of my money be put in a safe place that earns better returns? I use a lot of cash for short periods of time. The rest of the time, it sits as dry powder. Liquidity is of course a big concern here, but some time should be spent looking around.

Brokerage: Am I getting the best deal?

Software: Could I buy/build software that makes trading easier or more acurate?

These are some of the things to consider as the 2009 business plan comes together.

Year in review - 2008

2008-12-05T07:05:00.003-05:00

Well, soon all of the "Best of" and "Worst of" articles will be making the covers of all the different magazines.

This was a great year for me. I had plenty of rough times, but in all, I grew quite a bit. My business plan for 2008 was quite different compared to 2007. I don't think it will change much in 2009.

I am going to be trying new things. I have new goals, a few new strategies to explore, etc. So my trading will progress, but I don't think my style of trading will change as drastically as the changes made this year.

December is a great month to reflect and then plan. I'll be reflecting for a few days as I gather my thoughts. I'll then set my goals, and write my new business plan.

After reading or hearing of a different way to trade, I...

2008-09-27T06:33:00.000-05:00

I am constantly reading. I often hear others' setups, and wonder if they work. Here's what should be done.

First, do not let what was said affect my trading. My setups have been proven through my own testing. Keep going regardless of how strong I feel this new setup or change to an existing setup would benefit me.

Next, gather the details of the setup. Write rules around it. Attempt to find out why it works. This will help determine when it works.

Begin testing it. Gather as much data as possible. Keep testing until the setup is both easy to execute and proven profitable. Don't trade live until the metrics have been gathered and execution is natural.

It may not meet my standards. It simply not be my style. Shelve it. Make sure to keep the details, in case I want to dust it off again.

After losing an impulse trade, I...

2008-09-26T06:30:00.000-05:00

Impulse trades happen. I have the overwhelming feeling that something will play out, and boom, it usually doesn't. The impulse trades have to stop if success is to be achieved.

Once the steps are followed, forgiveness must take place. Once back on track, I must no longer dwell on what was. Keep the goal in mind. Imagine myself being successful. I am a good trader, and I follow my rules. My results show this.

After winning an impulse trade, I...

2008-09-25T06:29:00.000-05:00

So, I broke my rules and got away with it. You sly guy. But guess what? You'll probably pay for that.

Breaking rules is no way to win. I will win the battle, but lose the war. A disciplined trader stays in the game. If I get undisciplined, the odds are very lopsided. I may win big, but I will eventually lose big. I will probably go down in flames.

I plan on trading for a long time. If I don't want to struggle, I must maintain discipline.

After a home run trade, I...

2008-09-24T06:58:00.000-05:00

Occasionally, I hit a home run. Opportunities appear where the risk/reward is very good, and it all works out. However, this can cause psychological changes that may cause problems soon after.

If the home run was hit by breaking rules, this is especially dangerous. The win says I can break my rules and come out on top. What it should say is that it easily could have gone the other way. You can't stay on top by always swinging for the fences.

If the home run was hit within the rules, problems can still appear. Hitting the occasional home run is okay. Do not let it change my focus. My focus is on consistency. Bank the money, but don't start waiting for the home run pitches and missing the easy ones. Get back to business.

If it pushes me through the monthly goal line, good. Enjoy. Try to finish the month even stronger. Remember next month starts over.

Remember. Don't let home runs change my attitude. By all means take the home run pitches if it meets my criteria. But business as usual afterward.

When my monthly P&L goes red I...

2008-09-23T06:46:00.000-05:00

Working hard several days or weeks to "give it all back" is hard. My psychology changes when that happens. Sometimes, I get determined. Other times, I get trigger shy. Here are some things to think about.

Step back and review. Has anything about me changed? Am I being diligent in my trading, and giving it attention?

Has the market changed? Is the catalyst disappearing or perhaps a new catalyst emerging?

Perhaps this is a temporary thing. My setups have worked. I trust them. Stay on task, and remain disciplined. Discipline builds the account. Do not revenge trade.

When I lose a big chunk of money I...

2008-09-22T08:50:00.001-05:00

What happens when I hit a slump? Perhaps I am dealt a few days in a row of losses. What happens?

I should step back and evaluate. If I'm in the middle of the trading day, perhaps I should take the rest of the day to take a good look at myself, my trading, and the markets.

Am I feeling okay? Am I emotional about something? Perhaps there is something going on in my life that is affecting my trading. Am I not feeling well?

What about my trading? Did I change something that is causing me to change my view of the markets? Am I starting my day the same way I always have?

Did the market change? Perhaps my style of trading fits a different market. What changed? How do I know it changed? What metrics can I use to spot such a change in the future?

I should say encouraging things to myself. I will get back on track. I am a good trader. I see myself as successful. I must learn as much as I can about the situation I am in. This will help me reverse the trend, and spot such problems earlier.

Before changing a setup's plan

2008-09-19T06:50:00.000-05:00

Consider these things before changing a plan.

Why am I changing the plan? Is there something wrong with it?

Is it that the current setup disagrees with something I've heard and now (perhaps temporarily) believe? There are many ways to make money trading. My trading is no doubt different than most, and the same as some. So listening to the rules (setup, money management, psychology, etc.) of someone else is not enough for me to change my rules.

Is the new rule or the change of an existing rule logical and well defined? It should have parameters on when and how to use it. It should be noted (if possible) why it improves the plan.

Is it tested? Have I gone back and seen an improvement if I had implemented this change over a large sample set?

Am I able to implement it? Does it fit my personality to follow this rule?

When I fail to follow my setup's plan, I...

2008-09-18T13:26:00.004-05:00

in this series of posts, I hope to provide some "procedures" to follow when something happens. Review these things when they occur.

I consider myself a disciplined trader. I'm able to follow a plan because I have confidence it is in my financial best interest to do so. I have a different ruleset for each of my trading setups, and strive to follow that plan.

However, I at times think I am smarter than my plan. It is not that I consciously think that I should change my plan. It is that when I'm in a trade, I'd hate to have a stop order get hit, only to see the original plan work out. I hate that big-time. So I think that if I just adjusted my plan this way... Moved the stop to here to give it some breathing room... Moved my stop to break-even early...

Sometimes such things work. In my experience, they work rarely. And when they do work, they encourage me to break my rules next time. Then I'm worse off than when I started.

So, when I fail to follow the rules I have dictated in a setup's plan, here is what I should do.

Do not trade until this post is read.

Take a look at the "impulse" column of my spreadsheet. The total of that column is red. Do I know why? Because breaking rules costs money.

Gutsy traders break their rules and hit home runs. They may win the game. They seldom win the series. I do not have money earmarked for impulse trades. My money is for profitable trading only. No gambling.

There is always room for improvement

2008-07-16T19:11:00.002-05:00

The quiz here is a good reminder of all the avenues we need to check while looking for places to improve.

Thanks to Trader Mike for the link.

How to improve

2008-07-15T21:45:00.002-05:00

Some basic steps to improve trading, that have little to do with trading:

Diet - Your physical and mental health must be in top condition before taking on the rigors of trading. Being sick means no trading. Your diet has a major influence on such health areas.
Exercise - Not only does it keep you from getting ill, exercise gets your mind going, and provides energy. You may be thinking of trading while you exercise, you may not. I find that I contemplate many things inside and outside the trading realm while working out.
Have a daily routine - By (almost) everything having a scheduled time, it makes sure things are kept in balance. In addition, it keeps things from falling through the cracks. Be sure to schedule time to relax and "chill."

Self-Mentoring

2008-03-18T16:11:00.002-05:00

Traderfeed has always been a great blog. Lately, he's been talking about self-mentoring. Do you need a mentor or coach?

My own answer is "sometimes." I do well with my journaling, reviews, and setups. I sometimes find problems with the way I'm trading, and have to kick myself to put me back on the "straight and narrow."

It would be nice to bounce ideas or problems off someone. Being "remote" has its disadvantages. In the recent past, Dr. Brett has talked about a forum for such activities. But in my experience, such forums do not work.

For self-mentoring to work, you need metrics. Be disciplined about gathering such data.

For group mentoring to work, all must be givers as well as takers. All must also have similar goals, or at least realize there is more than one way to approach the markets.

For hiring a personal mentor, my advice would be to ask around, and find out who others have had success with. I have never hired one, although that probably won't be true forever.

Why do I want that outcome?

2008-03-16T18:24:00.002-05:00

I may know what I want, but have I realy thought about why I want it? What is the purpose?

Most want to be rich. But why? Riches doesn't necessarily bring happiness. Happy people are happy. Happy poor people are happy. Happy rich people are happy. Is a poor unhappy person immediately happy when they get an unexpected winfall? Perhaps sometimes, but I'd venture to say the majority, while happy initially, end up being unhappy again.

So, why do I want what I want? Is it for self gratification? Is it to help others? In my case it runs the spectrum.

I enjoy the feeling of being successful at something, even if noone knows about it. I enjoy helping ones who appreciate a helping hand, and can put my generosity to good use. And there are many reasons in between that make my goals ones that I realy want to achieve.

What do I want my outcome to be?

2008-03-13T18:09:00.005-05:00

Here's a question to ponder. It at first seems easy, but you have to scratch a bit.

What are my goals for this? What do I expect to achieve? Do I think it is attainable?

Conscious thought may not agree with the actions taken when trading. Confidence gets shaken when a trade is in the red and even when in the black. Hard decisions must be made before, during, and after market hours. Does my actions agree with my convictions? If not, why?

Why do I trade?

2008-03-12T20:32:00.002-05:00

I believe that to be a success at this difficult career, I must have a firm answer for several questions. One of the biggest is "why?"

Trading tests my resolve to trade. Every emotion imaginable comes out and shows up in the results. People like TraderFeed remind me that emotions need to be kept in check, but not ignored.

Trading is difficult. There is a deluge of information that hits the market 24/7. I must filter this information into my trades. In the end, a decision must be made. Does the trigger get pulled? Is the math right? Is the order entered correctly? Is what I'm seeing accurate? How are my emotions? Is my stop loss at the right spot? Where is support/resistance? Why did it just tick like that?

So, why do I trade? I have my reasons. I have strong convictions that verify the "why" as well as the "how long." Quitting is always an option, but not one that I see myself taking for a very long time.

What I am determined to do this evening: Reflect on why I trade.

What I am determined to do tomorrow: Start tomorrow like I do every day. Take in the information, and apply what I hear, what I learn, and what I know.

Trading Syllabus

2008-01-09T07:31:00.000-05:00

As I review my progress I achieved in 2007, I can honestly say I took large steps forward. What I learned was not always obvious. It took time to internalize what I learned.

Sometimes what I took in did not fit, and was thrown out. Later, I would re-learn that same thing and immediately see why I should use it. Often, I would see why I could not have learned it the first time.

Like it or not, some things take time. Cramming it all into a few days with a seminar wouldn't work for me. In my case, the order I learned it was important. Looking back, if I were to develop a college course, here would have been the optimum layout. Each course would be followed by a lab to apply what was learned.

Equity Mechanics - What you are buying and how. How much you are paying to trade. Expenses for traders. 3 days + lab
Trading Strategies 101 - Styles of trading. A course on the general ideas traders use to make money. A discussion of risks associated with each style would be included. 3 days + lab
Fundamental Analysis - How some investors and mutual fund managers invest their millions. 10 days + lab
Technical Analysis - Shorter-term trading tactics. A discussion on chart patterns, indicators and oscilators. 10 days + lab
Other Markets - A discussion of other exchanges, domestic and foreign. 10 days + lab

From there, the course material would have to branch into the specialist areas. With the above foundation of knowledge, one could back up and go down another path without too much pain.

It would be strongly suggested to start with large timeframes and work towards shorter time frames. Exposure to a wide variety of trading tactics and styles would be the goal.

Fortunately, this is close to how I learned. Unfortunately, this was spread across years.

I purposely left out things like psychology, money management, etc. The goal here is exposure to the mechanics. Delving too deeply into theory would be avoided until deep into specific avenues of study. I spent way too much time attempting to apply popular rules that sound good, but did not work for my trading.

What's your take? I'm looking forward to your comments.

2008 Plan Complete

2008-01-07T07:32:00.000-05:00

It has been a nice vacation. Now I have to GET BACK TO WORK!

My 2008 plan is complete. The insightful posts at Blog for Trading Success has several recent and good points on building a trading plan. John Carter's book "Mastering the Markets" is another good resource on the subject.

But, as Dr. Bret says in his insightful post, now is the time to take that confidence and start working the plan.

Weekend Reading

2007-12-22T20:14:00.000-05:00

Well, the end of the year is here. Hopefully the end-of-the-year rally that started Friday continues on through the first week of January. I'll be vacationing, so it'll have to be there when I get back.

I picked up "Mastering the Trade" last night. I've been ill with a head cold today, so I've been sitting up and reading it when I'm not sleeping.

This is the best book on trading I've seen in a while. Its not another how-to place an order 101 book like many. He cuts out some of the fluff you see in other books, and gets right to what he feels is necessary.

If you're just starting out in TA and stocks, you'll need to read another book first.

If you've been trading equities for a while, and are looking to improve, this book was written for you.

If you're semi-pro, you'll still find some good information in this book.

So many styles

2007-12-17T12:08:00.000-05:00

I've been researching trading styles. They all fall under different categories and beliefs, and I believe there is some merit in all of them. I wanted to list the ones I can think of off the top of my head and see if the list can be added to.

Scalping - playing the bid/ask spread
Tape Reading - where are the big players
Support/Resistance - where are the levels
Candlestick Formations - hammers and dojis
Indicators & Oscillators - CCI, %R, ad infitnum
Rumors - where did you hear that
News- can't talk now. Non farm Payrolls in 20 mins.
Sentiment - a special category of indicators, news

Okay, my brain is dry. I'm sure there are a lot more, but like I said, I'm going off the top of my head here.

What's the name for the guys that look to astrology? I want to say "natural order" but I have to admit that's an avenue I haven't explored. I don't want to offend, so someone tell me the PC name for that style.

I've enjoyed researching the ones I've dug into. I find there are many similarities to social groups. Each group has their zealots. I'm more of a floater. I pick and chose the things I hear from each group, test them, and see if I can see what they're seeing.

I spend the weekend reading Wyckoff's book "The Day Trader's Bible." With the exception of a few sentences, I'd have to say he's a better writer than some I've read. I was suprised to hear his distaste for technical analysis. I think he'd be suprised to see how far it has come. Whether he'd belive it now or not would be interesting.

In each subject I've dug in so far, I find that the more I dig, the more I understand and believe. I find papers and people that show their version of the system works for them. Like I said, I believe there is some truth in all styles. Dig to the point where there is logical resasoning as to why it works. I haven't found one working style yet that didn't have a logical reason why it worked.

My style fits me, and it seems to serve me well. I know why it works, and therefore when it works. I'm in my comfort zone. That doesn't keep me from looking at other ideas. I think it makes me one of those proverbial "well rounded individuals."

But that's my thoughts. Feel free to share yours.

Multiple Strategies

2007-12-14T17:45:00.000-05:00

As time goes on, I find more and more strategies to explore.

I list new strategies, and track the process. I like to document things because when I change any variable, I may have killed the whole thing. By documenting the steps I can go back and tweak to see the results.

Some strategies cannot be back-tested easily. So I forward test them. I give them enough time to hatch. Why do they work? What do I look for? In what kind of market conditions would this work best? Such questions teach me the why and how.

I explore them, test them, and possibly add them to my arsenal. They do not change my plan, but add to it. By the time testing is complete, the new strategy has rules around it. The biggest advantage IMHO is the psychological aspects of doing things this way.

1) I see the setup. I know what to do. No sweat there.
2) I weigh the risk. Is it too risky?
3) I look at the reward. Is the risk-reward not good?
4) I strike. I know what to expect, good and bad.
5) I wait. I have rules on managing the trade, so decisions are not based on emotions.
6) I follow the plan. No moving stops, no waiting to see what the next tick does. I know that my setups have a higher probability of providing a profit rather than a loss.

Such setups provide me with a HUGE psychological boost. I no longer sweat placing a trade. I'm not disappointed when the trade hits the stop. I know that in the long run, I will be profitable. If I see that setup again, and market conditions are aligned, I will take it.

Such things don't come easy. I've found that finding the edges are the most time consuming part of trading. I can scan the markets in no time flat. I can weigh a decision on direction in fractions of a second. A new setup? That takes weeks. And if it didn't I'd have no confidence to trade it.

That's my opinion, what's yours?

In My Opinion

2007-12-14T11:17:00.000-05:00

Asked in a recent comment, I'll give you my setup and opinion...

Interactive Brokers:
Not for the new guy. If you have called your broker recently to ask a question, you aren't going to like IB. I often hear horror stories of customer service.

However, I have rarely needed their customer service. Issues I've had in the past were not very time sensitive, so I used their "trouble ticket" system with good success. It's usually 24 hours for a question, but never longer. The answer has always been complete (no canned reply). I've also used their "chat" feature for quick questions.

Their platform is written in Java, so it runs on platforms that support Java (Windows, Linux, Mac). The UI has it's quirks. It rarely locks up completely, but sometimes gets confused and seems to take a few moments (5 secs) to figure out what to do next.

Their charting is probably 1 notch above basic. No super fancy indicators or drawing tools. I don't use them, so that's fine with me. You do get the popular ones, but nothing exotic. The speed of their servers to provide historical data for charting is below par. It can take 5 to 10 seconds for a chart to appear. Very frustrating if you flip through a good number of charts to find interesting setups.

Their User Interface in Trader Workstation is not intuitive. It is, however, very functional. Once you spend some time with it, you will like it. However, very little of your knowledge will transfer to another broker.

They have no scripting engine within their UI. They do give you a fairly full-featured API to their Trader Workstation. They also provide many ways to use it (socket, dll, etc.). I have used their socket API and their provided source code to assist me with data capture and order entry, and I say it's the ultimate in flexibility.

Limited stock scanning. IB has no scanning beyond some basic scanning built into the UI (i.e. top percentage gainers so far today). They limit the data streams you can get, so don't plan on writing your own scanner based on their feed, unless you scan a limited number of stocks (100 or less).

TD Ameritrade:
I use these guys for their data feed, and limited trading. They're fine for long-term trades. I like keeping some money separate for longer-term strategies. TD Ameritrade is fine for that. I tried an account with E-Trade, and was very unhappy.

Linux:
I have a Linux box with very recent hardware. Intel Quad Core, 2 Gigs of RAM, average dual-head video card, average hard drive. I don't play games, so don't need the high-end video or hard drive performance.

I run Trader Workstation in Linux. My Linux box is dedicated to order entry during market hours. I use Fedora 6, and keep it upgraded with the latest Fedora 6 fixes. I will someday upgrade to the latest Fedora (8 I believe), but nothing is urging me to do so until I need a new feature or fix that doesn't get fixed in Fedora 6.

I don't worry much about viruses or hackers. I have the box locked down pretty tight. I have a firewall for my home network, and a firewall on this box. Traffic in and out of this box is limited to what I say is allowed.

Windows:
I have a Windows XP box that I use for my charting. It is a very basic, dual-head setup. I'll hopefully soon be upgrading the hardware to a quad-head with some decent speed.

I do flip through a lot of charts. Medved QuoteTracker is an excelent (and cheap) program. They were recently purchased by TD Ameritrade, which allows me to get the software for free, as I have an Ameritrade account. You can hook many of the popular data feeds to QuoteTracker. TD Ameritrade's streamer product is what I use, and it works very well.

QuoteTracker allows you to flip through your different watch lists, highlight a stock, and have all the separate QuoteTracker windows change to the selected stock. That is the best feature ever IMHO. It very much fits with my end-of-day scanning requirements.

Having two systems is great. If I lose my Windows box, I can still trade (albeit without fast charting). If I lose my Linux box, I can still trade.

The weakest point of failure is my Internet connection. I'm using Comcast. It has been going through a rough-patch lately, but I've had good results since they replaced my modem.

Synopsis:
In all, using something other than Windows (Linux, Mac) for orders makes me feel better. IB uses encryption across the wire. So if you have a secure box, you can feel fairly confident in security.

I wish QuoteTracker ran in Linux. Then I'd have two Linux boxes. Oh well. I do demo other products, most of which run in Windows, so I guess a Windows box is handy at times.

Thoughts on recent market action...

2007-12-06T20:26:00.000-05:00

Yesterday was a big up day. Good volume too. I was beginning to think this was a good thing. Now, I'm not so sure. The big up day today is looking unsustainable, as the news and uncertainty look to add volatility in the coming weeks. Everyone is waiting for the end of the year rally. It may happen. However this may not be the start. A good drop could happen in the coming days, and a rally may put the early guys in break-even territory. I may buy the dip, but I won't hang on for long.

Markets like this make me realize how flexible you need to be. Scalp when you have to. A trending market is great, but this is not a trending market.

That's my opinion, and I'm sticking to it (until it changes).

The volatility won't go on forever, but it may be here for a good while. Know several strategies, and (more importantly IMHO) know when to use them.

Financial Planning

2007-12-05T21:03:00.000-05:00

http://articles.moneycentral.msn.com/RetirementandWills/CreateaPlan/8ThingsYourFinancialPlannerWontTellYou.aspx?page=2

In the spirit of the above article, I have something to say...

1) I have no qualifications for this job, other than I've been studying many of the subjects out of sheer enjoyment of figuring it out for myself.

2) I have no obligation to put your interests ahead of my own. Because I make no money being your volunteer financial planner, I'd much rather study my situation than work on yours. However, I like to help, and will help when I can. When I can't, I'll tell you.

3) I am being paid the way you think. Because of item 1 above, I'm doing this voluntarily to increase my skills.

4) I will attempt to look at all areas of your finances. I have nothing to sell, and no paycheck to earn.

5) The only products I understand are the ones I've studied. When you ask me a question I'll research to find the answer. If I can't find the answer (or finding the answer would cost me money), I'll tell you. I'll then advise you on what to do next.

6) I can't beat the market. I use my day/swing trades to keep in touch with the market. I have retirement accounts that contain mutual funds that I trust. My trading accounts are for my play money, not any of yours.

7) I won't save you from yourself. I'll recommend how to maintain healthy financial habits. I won't force you to take my advice.

8) I do not have a checkered past. I can think of noone who dislikes me to the point of seeking the assistance of a regulatory board.

That being said, keep sending me your financial planning questions. I'll do the research to try and find the answer. Who knows, perhaps one day I'll do this for a living. For now, I'll keep it an enjoyable hobby.

What I'm working on...

2007-10-26T10:51:00.000-05:00

Swing trading has been in the dumps for the past few weeks. Earnings season is the main cause.

I believe the general theme is that housing stinks, finance is iffy, and everyone wants technology to fall, but it hasn't.

I have been working on perfecting a few of my day trading strategies. They're looking good (and profitable). I'll enjoy getting back to swing trading at some point in the near future. I think a pattern will develop real soon. The end of the year rally is almost upon us.

Picks for 2007-10-17

2007-10-16T21:13:00.000-05:00

I'm not happy with any of these, but posting them anyways. Market too choppy for swing trades...

JOYG
ATVI
SIMG
SMTC - Looks weak, but would be going against the trend.

Trade Review 2007-10-16

2007-10-16T20:53:00.000-05:00

No swing trades worked out. Took 2 scalp trades, both which were badly executed on my part.

Wanted to short CTSH at around 2:19, but instead bought long. Long at 78.40. Sold at 78.37 to correct my mistake.

Shorted LEE at 2:39 at 16.29. Breaking out of long flat base. Had 2 tails earlier in the base. That should have tipped me off that prices below were possibly going to be rejected. Also had a rise earlier above, but came back down. That should have told me there was plenty to keep the price where it was. Shorted anyways. It immediately went back to its base. As the afternoon wore on, it crawled to my stop. Out at 16.37. After being stopped out, it continued up a few cents more before it closed.

To fix: Double-check entries, and set up hot keys for getting in and out of orders. Use stop-limit orders if I want to wait for a move before buying.

Trades for 2007-10-16

2007-10-15T20:52:00.001-05:00

Only 1 potential swing trade tomorrow. WDC has pulled back from its high, but may only be pausing there due to the previous pivot low. I believe this one is a no-trade.

Review of trading 2007-10-15

2007-10-15T20:43:00.000-05:00

AA - 10am reversal. Took trade based on 5min chart. Was supposed to buy above bar, but got in early due to using a limit order instead of a stop limit order. Bought at $38.11 with a stop at $38.08, sold at $38.24 in about 5 mins.

Should have established my plan so as to sell in 2 parts. 1/2 at a $0.10 gain, and 1/2 to ride until it stopped. Would have risked very little, gained on the 1st 1/2 and broke even on 2nd half. I am going to make this part of my plan. This is a low risk/low reward strategy until I polish it up.

Stocks for Monday 2007-10-15

2007-10-14T17:33:00.000-05:00

AA - Buy above $38.54. Stop below $37.82. First target: $40

ATVI - Buy above $23. Stop below $22.63. First target: $23.66. Low R/R

AMKR - Buy above $11.95. Stop below $11.68. First target: 12.50. The actual low for Friday was much lower, so I moved my stop to intra-day support. I think this is a bad idea, so I'll probably not trade this one.

NVDA - Buy above $36.20, Stop below $35.11. First target: 37.70. This is not the highest most recent high. The most recent high is about 10-12 bars back. I think this is a sign that the long uptrend for NVDA is about over. I'll not trade this one.

Trade review: BMC, CTAS

2007-10-14T17:22:00.000-05:00

I bought BMC on 10/2 at $31.55. It went up, around $0.41, and I was anxious to move my stop to BE, which I did. The next day, it hit the stop before continuing higher.

Rule: Follow stop rules. Only move stop to BE after a $0.50 profit on swing trades. Until then, keep stop at low of range or move stop to low of previous day.

I bought CTAS on 10/5 at $37.40. The stop should have been set a bit higher than it was, but I was worried about the round number of $37. It hovered around $37 for a few days, then broke enough below to trigger the stop. I believe I was okay on this one (except for the stop setting, but it was only a few cents), so I'll chalk it up to "you can't win them all."

Stocks for Friday - 2007-10-12

2007-10-11T16:05:00.000-05:00

Only 1 found - AMKR - Low R/R though. Buy above $11.94, Stop below 11.26. First target $12.50

Stocks for Thursday 2007-10-11

2007-10-10T19:05:00.000-05:00

EMN - 3 down, but not a large void to the left
PTV - 3 good bars down, but away from the 20sma
EL - 4 down, approaching 20 (would like to see it a bit closer)
SNA - 5 dn, between 20 and 40. 20 is up, but 40 is still down. Bottomed at 48.04. Buy above $49. Target $51.49.
AMKR - 3 dn. Near 20, but not on it. bottoming tail. Low R/R
LLTC - 3 dn. Below 20 and 40. 40 is down sloping, 20 is close to flat.
LSI - 3 dn. near 20. Current bar is green. Low priced, and not a big upside.
RFMD - 3 dn, double top, far away from 20. I'd short it before I'd go long. Pass.
KSU - Was a Pristine Stock Play of the Week on a different setup (PBO). Now, it's a PBS. 40 is still going down, but the tail today came real close to the 20. If I were to buy, I'd buy above 33.58, stop below $32.47, target at $34.75 It looks to be a good setup, but not with my current plan. Another down day tomorrow, and then I'd be all over it. I'll probably miss this one and regret the miss, but be happy that I'm working within my plan.

Picks for 2007-10-10

2007-10-09T17:27:00.000-05:00

MAT - 5 dn. Broke through 40sma, but closed above. Upward 20sma. Most recent high is not highest nearby high. Buy above $22.94, Stop below $22.52. Target $24.25

SNA - 4 dn. Broke through 20 and 40, but closed above. Higher highs in Jul and Aug. Buy above $49.61, Stop below $48.25. Target $51

TER - Short - 3 up. Above downward sloping 20sma. Short below $14.08. Stop above $14.36. Target $13.75.

All of these have their faults. I'd shy from SNA. TER has probably the most potential.

Picks for Tuesday 2007-10-09

2007-10-08T21:17:00.000-05:00

JOYG - 3 bars down, strength into close buy above 51.58 stop below51.43 target 53.00
ECL - Messy
ACV - Not most recent high
JNY - Near 20sma. Overlapping a bit, but good looking. Buy above $21.50. Stop at $21.10, Target $22.40
MAT - 4 bars down. Near 200sma. Buy above $23.30, Stop at 22.77, target $24.50
SNA - 3 bars down. Buy above 49.93 stop below 49.32 target $51

Stocks for Monday 2007-10-08

2007-10-07T20:25:00.000-05:00

ACV - Consumer Goods - 4 bar down. Tail touched 20sma. Buy above $24.68, stop $24.40, Target $26.20. Target may be aggressive, as most recent high is not the nearby highest.

JNY - Clothing - 3 bar down. Near 20sma. Buy above $21.84, Stop $21.17, Target $22.43.

HAS - Toys - Bottoming tail, newly turned upward 20sma. Buy above $29.26, Stop $28.50, Target $30.68

MAT - Toys - 3 dn. Buy above $23.42, Stop at $22.89, Target $24.36

MXIM - Short - Short below $29.22, Stop at $29.73, Target $28.15

QLGC - Buy above $13.50, Stop at $13.25, Target $13.97

Filtered list for today

2007-10-05T06:34:00.000-05:00

CTAS - 3 bar pullback. Do not like that it closed near its low. It may take another day. Buy above $37.40, after 2pm. Stop at $36.99. Target $38.40.

QLGC - 3 bar pullback. Another that finished near its low. Buy above $13.60, stop at $13.35. Target $13.99. Wait until after lunch on this one too.

SMTC - 3 bar pullback. A bit far from 20sma. Buy above $20.75, stop at $20.45, target $21.10. Too low risk/reward.

Stocks for Friday 2007-10-05

2007-10-04T19:04:00.000-05:00

I'd say all of these are weak picks Most are 3-5 pullbacks. Non-Farm payrolls tomorrow.

AA
NUE
IP watch for breakout from consolidation
MWV (short, too late to join?)
ACV
CTAS (A lot of overlap)
BC (short) on weekly
WGO Big stop necessary
AKAM (short)
NVDA
QLGC
SMTC (a bit far from 20sma)
TXN

Keep an eye on DOX

Daily schedule

2007-10-04T18:11:00.001-05:00

I culled some great ideas third hand. A post on the Kirk Report mentioned Doug Hirschhorn's column in the Trader Monthly titled "The Write Stuff." Here's a great schedule:

Before market open:

Evaluate your trading from yesterday, and establish your trading rules for today (i.e. Have I been struggling? Should I cut my size until I get my game back?).
Identify the major world events that have occured that may have market implications.
Figure out which economic indicators may have implications on the market.
Create today's motto. Make it brief and positive.
Develop your morning game plan.

Lunchtime:

Evaluate the morning game plan. How did it work? Did you stick to it? A quick retooling may pay off in the 2nd half.
Prepare the afternoon game plan.

Market Close:

Evaluate your afternoon game plan. How did it work? Did you stick to it?
What did I do well today? What could I have done better? Dig deep into self analysis.
List trades that appear to be working, and those that aren't.
Call the market. Is it trending or range bound? Which sectors are in play?
On a scale of 1 to 10, how focused was I?
Am I a better trader today than yesterday? Why? What have I learned? A day without learning is a wasted day.
Which trades should I pay attention to tomorrow?
What is my goal for tomorrow?

Stocks for Wednesday 2007-10-03

2007-10-02T16:18:00.000-05:00

Metals:
NUE - 3 bars down. Near 20sma. Good tail today. Buy above $59, Stop at $58. Target $61

Stocks for Tuesday 2007-10-2

2007-10-01T19:09:00.000-05:00

Software:
BMC - 3 bars down. Bottoming tails. At 20sma. Buy above $31.40, Stop at $31, target $32

Semiconductors:
AMD - 3 bars down. Not perfect, as today's bar has a topping tail. Trend is up, and is at 20sma, so I'll add it to my watch list. Buy above $13.19, with a stop at $13.12. Target $13.80.

Stocks to watch for Friday - 2007-09-28

2007-09-27T17:09:00.000-05:00

Note: Volatility could increase as end of Q3 is here (Window Dressing)

Metals:
AA - Broke away from resistance. Buy above $39, stop at $38.10

Chemicals:
DOW - Consolidating. Buy at $44.30. Stop at $43.40

Hotels:
WYN - Buy after closing above 32.38

Paper:
IP - Consolidating at $36. Buy above $36.10 Stop at $35.62. A little resistance at $36.40

Stocks for Thursday - 2007-09-27

2007-09-26T16:24:00.000-05:00

Mining:
ACI - Rolling over. Definite buy under $32.25. 50SMA at close to $31, but could go to $30. Stop at between $32.60 and $33

Hotels:
MAR - At bottom of upward-sloping channel. $42.80 is bottom. Stop at $42.50, Target $45

Semi:
SMTC - Look for gap down. 15 min rule. Stop in gap.

WDC - Still rising. Buy above $26, stop at $25.50. Target $28.

XLNX - At bottom of channel, but momentum may carry it through support.

Stocks for Tuesday 2007-09-25

2007-09-24T21:29:00.000-05:00

Mining:
ACI - Could be rolling over
NEM - Struggled past $48. Watch for gap up or fall back to support (minor support at 44, 43, 42, 39)

Consumer Goods:
NWL - Watch for flag. Buy if trades above $29.50

General feeling: The market may sit here for a bit, but in the next few weeks, another leg up is a good possibility.

Stocks for Monday 2007-09-24

2007-09-23T20:24:00.000-05:00

Mining:
NEM - May not make it through resistance at $48. Look for short-term weakness. Support near $45

Industrial Metals:
CLF - Made a new high on lower volume. $86/$87 is proving a tough resistance level.
OLN - Strong day on good volume. Resistance at $22.50.

Chemicals:
AVY - Has not participated in stock rally. A higher open is a possible fade, as downward volume is heavy. Support at $55.
ECL - New 52w highs on big volume.
FUL - New all-time highs

Stocks for Friday 2007-09-21

2007-09-20T19:20:00.000-05:00

Review of yesterday's picks:
I believe I did well. 1 no entry, 1 maybe, and 2 good ones.

Overall Market:
I'm looking for a short-term (couple of days) pull-back.

Mining:
NEM - Hit resistance on strong volume. Resistance at $48. If it busts through, ride for a short gain. Use close stops, as it could return to support (former resistance). If it gaps on the open, use the 5 min rule.

Industrial Metals:
CLF - Hitting strong resistance at $85.

OLN - At resistannce, but the weekly looks good. Look for trades above today's high ($21.75).

Software:
ADSK - Keep waiting for it to come down to $48

Semiconductors:
WDC - Watch for trades above $24

Investment and Trading Philosophy

2007-09-20T11:59:00.000-05:00

Once again, Dr. Brett has an excelent post on Investment & Trading Philosophy.

Do I have one? There are plenty out there:

Buy quality blue-chips
Index Investing
Mutual Funds
Hedge Funds
Value Investing
Stock Picking
Technical Analysis
Fundamental Analysis

The book "Stock Market Wizards" points out that many successful traders have their own philosophy. Many of their philosophies are contradictory. How can this be? Once again, I believe psycology is involved. Finding and perfecting your "edge" will pay off.

What is my edge?

Stocks to watch for Thursday

2007-09-19T16:56:00.000-05:00

Software:
ADSK - Broke out of range. Look for test of new support at $48, then buy with a close stop.

SINA - Making new highs

Hardware:
CREE - New 52w highs, broke multi-year downtrend line.

TXN - near bottom of trend

Picks for Thursday

2007-09-12T16:12:00.000-05:00

Industrial Metals:
OLN - Bonds are rated "below investment grade." Price is rolling over. Short below $20.25, Stop at $21.34, TP at $18.

Chemicals:
ROH - Double bottom. Buy limit at $53 (on a pull-back). Stop at $52. TP at $57. Keep tight stops, resistance at $55.

Electronics:
ATVI - Broke through recent top on slightly lower volume. Probably going to continue. Watch it.

THQI - Double bottom. Weekly shows downtrend. Tail.

Semiconductors:
SMTC - New recent highs (52W). Higher volume. Buy above 19, stop at $17. TP at $22.

SNDK - Momentum going into support. Short below $50. Resistance from $49 to $47. TP at $44, Stop at $55. Probably not enough R/R. Would be better if it turned around and became a channel play.

Taken from the NYSE/Euronext blog

2007-09-12T08:28:00.000-05:00

See http://www.nyse.com
07 Sep 1899 -- Bernard M. Baruch became a member of the NYSE.

Baruch (1870-1965), also was a prominent financier, statesman, and adviser to presidents Woodrow Wilson and Franklin D. Roosevelt. I came across a site called BrainyQuote.com that attributes 47 quotes to Baruch, some of them very familiar, all of them witty, provocative or insightful. Here's a sampling; enjoy.

Nobody ever lost money taking a profit.

If all you have is a hammer, everything looks like a nail.

Age is only a number, a cipher for the records. A man can't retire his experience. He must use it. Experience achieves more with less energy and time.

Always do one thing less than you think you can do.

Don't try to buy at the bottom and sell at the top. It can't be done except by liars.

During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think.

Every man has a right to his opinion, but no man has a right to be wrong in his facts.

I made my money by selling too soon.

Millions saw the apple fall, but Newton was the one who asked why.

Most of the successful people I've known are the ones who do more listening than talking.

Never follow the crowd.

No man should think himself a zero, and think he can do nothing about the state of the world.

Only as you do know yourself can your brain serve you as a sharp and efficient tool. Know your own failings, passions, and prejudices so you can separate them from what you see.

The ability to express an idea is well nigh as important as the idea itself.

The greatest blessing of our democracy is freedom. But in the last analysis, our only freedom is the freedom to discipline ourselves.

The main purpose of the stock market is to make fools of as many men as possible.

There are no such things as incurable, there are only things for which man has not found a cure.

There is something about inside information which seems to paralyze a man's reasoning powers.

Two things are bad for the heart - running up stairs and running down people.

Vote for the man who promises least; he'll be the least disappointing.

We can't cross that bridge until we come to it, but I always like to lay down a pontoon ahead of time.

We did not all come over on the same ship, but we are all in the same boat.
We grow neither better or worse as we get old, but more like ourselves.

Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in private and public life have been the consequence of action without thought.

When good news about the market hits the front page of the New York Times, sell.

You can overcome anything if you don't bellyache.

You can talk about capitalism and communism and all that sort of thing, but the important thing is the struggle everybody is engaged in to get better living conditions, and they are not interested too much in government.

The art of living lies not in eliminating but in growing with troubles.

The Indexes

2007-09-10T17:15:00.001-05:00

All three look to be consolidating. The $INDU

The $COMP

The $SPX

The Indexes

2007-09-06T18:50:00.000-05:00

The $INDU, $COMP, and $SPX look good. I'd like to see the nearby support tested one more time, and I'm in.

Here's the $COMP

And the $SPX

Day after Labor Day

2007-09-05T17:32:00.000-05:00

The markets are back in session after the labor day holiday. Yesterday saw gains, but today wiped them out, then some. I'm expecting more downward pressure for the next few days.

The $INDU did not get above the 50ma, and %R is Overbought.

The $COMPQ is above the 50, but is overbought.

The $SPX looks much like the $INDU, except getting little support from the 200.

Get Personal

2007-09-02T20:50:00.000-05:00

I feel beaten up. I have revisited my plan, and renewed my goals. My mind needed a reset.

Done.

Now back to your regularly scheduled program.

Note to self: Deviating from the plan makes it impossible to see if the plan works.

Watch List for 2007-08-16

2007-08-15T19:36:00.000-05:00

Wow, I can't believe I'm going to say this, but YHOO is a beauty of a double-bottom on the weekly chart. Buy as close to $22.44 as you can, with a close stop, say $22.

Watch List for 2007-07-20

2007-07-19T20:40:00.001-05:00

Durable Goods
BGG

Software
YHOO - Short on any rise

Semiconductors
ADI - Long above $38.75 after 10am, stop at $37.84, target $39.90. Earnings 8/21
AMKR - Down on strong market, good volume. At 50sma. Watch for strong move below today's close ($14.96)
CREE - Buy below $28.50, stop at $28. Target $30. Up on weekly, down on daily.
CY - reported record earnings, bullish tail. Watch for trades above $25.50

Watch list for 2007-7-13

2007-07-12T21:11:00.000-05:00

Metals
OLN - Broke to new high. Buy above $22.15, stop at 21.60. Target $23. Slow mover

Watch List for 2007-07-11

2007-07-10T20:52:00.000-05:00

Indexes:
DJI bounced off resistance of 13700, but has support at 13200
COMP dropped from yesterday's all-time high of 2672.59. Support at 2626 and again at 2562.
SPX support at 1484
RUT support at 820

Mining
NEM - pulling back.

Watch list for 2007-07-10

2007-07-10T05:37:00.000-05:00

Chemicals
OMG - At support. Watch for trades above $55.50 or below $51

Semiconductors
NVLS - Watch for trades above $29.60, stop at $28.60, target $31. Not enough r/r

While I believe the market is going higher, I cannot find any strong candidates. Today is a day to sit back and watch, for me at least.

Watch List for 2007-07-02

2007-07-01T09:15:00.000-05:00

Mining
ACI - Bounced off support. Watch for trades above $35.10. Volatility requres a wide stop. $34.10 is the narrowest. First resistance around $37. Target of $38. High volume before and at turn-around. Low volume the last 2 days. This one is iffy. Weekly chart shows a downtrend since end of May. Volume picking up may be the determining factor of if this support will hold.

NEM is in the same boat as ACI. Charts very similar. Commodity prices will deeply affect where these stocks go from here.

Industrial Metals
AA - Look for a developing right shoulder on the daily chart. It doesn't show up on the weekly chart, so it's a weak pattern.

Chemicals
FUL - New 52 week highs, now pulled back to support on low volume. Buy above $30.40, with stop at $29.60. Clear air above, so difficult to pick a target. I'd say tighten stops around $34.

Hotels
HLT - At support, but with higher volume, and downward pressure.

MAR - Broke support. Up days have low volume. watch for further downward pressure.

Semiconductors
CREE - Weekly chart up, daily chart down. Watch for trades above $26.39. Stop at $25.47. Target $28. Volume of uptrend higher than volume of down days.

Successful trading requires a full time commitment

2007-06-28T07:37:00.000-05:00

Can you become an expert by trading once per week? What about only working on trades in the evenings, due to your schedule?

I do not like words like always or never. But let's think about this.

Can you compete with others in the business? Professional firms have research teams, economists, technicians, and analysts on their staff. Your few hours of research will probably not be as thorough as these firms.

So, what is a working man to do? Make a full-time commitment. Schedule your day so you can immerse yourself in the trading world. Realize the limitations of trading this way. Find ways around those limitations.

You will probably not learn as fast as those who are in the markets full-time. But dedication may pay off.

If you are just starting on your quest, spend some time right now learning how to learn. Start with learning about primacy (be careful of learning the wrong way). Devote your time to the study of the markets, money management, and trader psychology.

Self-Confidence

2007-06-27T06:04:00.000-05:00

Great traders develop, then sustain a high level of self-confidence.

In order to compete, you must be able to execute trades without hesitation. Self confidence is a must. How do you gain this?

Comfort with your trading methodology is a large part of this. Do you know why your method works? Do you know your methods give you a strong edge?

A good education on your market and your method also helps. Know the ins and outs of everything that can change the prices of your trades.

Your psycology is a big part of your trading. Some say it is the biggest part. You won't master the psycology of the markets if you don't master yourself. Trading takes a psycological, mental, and physical toll on you. Do you have the strength? Staying strong physically and mentally can sharpen your edge.

Watch List for 2007-06-26

2007-06-26T05:29:00.000-05:00

Clothing:

COH - Retesting the $45 support line. More support at just below $44. Down day yesterday, but on low volume. I'm expecting a jump up within the next 2 or 3 days. Weekly chart shows below its 10sma (50 daily), and approaching the 40sma (200 daily).

Buy with a trailing buy stop, but don't buy below $45. A target of $52 seems very attainable, and gives a 3.5 R/R.
Yes, I know I should have labeled it resistance-turned-support line, but I don't have time to change it.

CTAS is bumping its upward trend line on the daily chart. It is below its 200 day, but above its 50 day sma. Buy with a trailing buy stop. Initial stop at $38.70, Target of $40.53. This gives a 3.4 r/r.

Every Great Trader has a Specific "Edge"

2007-06-25T06:23:00.000-05:00

Your edge is one of the most important part of your trading life. Do you know all about it? Why does it work? When are conditions good for your edge? When do you have to be more careful? Are there times it cannot be used?

Here are a few helpful links discussing your "edge."

http://www.thekirkreport.com/2005/04/find_your_edge.html
http://www.thestreet.com/p/rmoney/theswingshift/10209421.html

Integrate Market Concepts and Trading Methods

2007-06-22T06:03:00.000-05:00

It is imperative to formulate a trading philosophy which integrates market concepts and trading methods.

What goes into your trading plan must include how you are going to measure the market, as well as how you will take advantage of that knowledge.

How will you determine bearish sentiment? How do you know when it changes to bullish, or sideways?

For each strategy in your plan, how will it work in a bull market? What about a bear or sideways market?

It takes time for a trader to succeed.

2007-06-21T06:12:00.000-05:00

A question often asked is "how much can I make as a trader?" A more appropriate question is "how long will it take before I stop losing money?" Often, the answer to this question lies in the time you spend studying the market, your trades, and yourself.

How much time do you have each day for the markets? How long are you willing to practice before becoming a professional? Some reach that status in 6 months. Others take 7 years. Most never make it.

Do you think you can conquer the markets and yourself in 6 months? I say "Go for it!" However, be prepared for it to take a lot longer. How can you minimize this time?

Find a mentor that is a good teacher, a good trader, and agrees with your trading style.
Stay organized. Keep a detailed trading journal.
Review the markets, your strategy, and your journal constantly.

Great Traders are Flexible and Resilient

2007-06-20T06:03:00.000-05:00

Flexible - Capable of being changed; readily bent without breaking

Flexibility is required. Different markets have different qualities. The same market displays different qualities over time. How do you deal with that? Such changes must be built in to your plan. You must also have ways of detecting such changes.

Resilient - recovering readily from adversity; ability to return to normal after a disturbance

Having a drawdown is inevitable. Can you handle it? How much do you have at risk right now? Would you be able to stomach the loss if a catastrophy shook the market tomorrow? Such questions make us realize we must be constantly evaluating our emotions, in order to be successful.

Persistence often separates winners from losers

2007-06-19T05:31:00.000-05:00

You've tried, but you've blown through your nest egg. Now what? You quit.

Or do you? Remember when you started? Remember how excited you were? You said you wanted to be a trader as a career. Now you're giving up. Let's point out a few things you may need to improve on, then we'll start again.

You've tried:

Were you doing everything right? Probably not. How do I know? Because you're a novice. Novices make mistakes. It's part of learning. Some traders say they make money because they corrected their mistakes. That means the reason they're making money is because they made mistakes, not because they didn't make them!

Did you journal your trades so they can be reviewed? Is there enough information there to glean some objective statistics? Were your trades too big? Was the risk too big or too small? Do you have enough trades to make such a determination? Was it the system you were using, or was it your bending of your system's rules?

but you've blown through your nest egg:

Does that mean that you'll never get your nest egg back? Probably not. Driven people find ways. They save enough to get back in, and try it again. Often, they fail again, but learn some more.

Would adjustments to your money management strategy prevent this from happening again?

Now what:

So, what will it be? Can you continue to study the markets, and practice without money? Yes! Paper trade. Prove your system. Work out your rules for yourself and the markets.

Persistence is required. You didn't think this would be easy, would you?

Your trading style should match your personality

2007-06-14T11:09:00.000-05:00

The second rule in the list says the trading style should match your personality. What does this mean?

Are you an agressive person, competative, who likes fast moves? Does that match up well to being a buy-and-hold investor?

Are you lazy, don't like too many numbers, and don't want to pay attention to each heartbeat of the market? Should you consider daytrading?

What if you're in-between? You don't mind keeping a finger on the pulse, but can't be locked in front of your screen from open to close. There's a spot for you too.

Watch List for 2007-06-14

2007-06-14T05:01:00.000-05:00

Packaging
PTV - up on higher volume. $32.40. Support at $31.60 (3 days ago) or $30.50. Target is $36. Would like to see it closer to $31

Review of Wednesday
WWW is doing okay. It's not moving up very fast. Not moving down. Of course, now that I say that... :)

There is no single "truth."

2007-06-13T06:58:00.000-05:00

I'd like to go over my thoughts on the 15 items in the list posted yesterday. The first item is that there is no single "truth." I am a strong beliver in this.

Just read "Market Wizards" to get a feel for how many ideas are out there. As for myself, I have examined (or are continuing to examine) systems from William O'Neil, Jack Hershey, and Alexander Elder. I have gleaned (and are continuing to glean) how each one has found their "edge."

Those who have spent little time researching look to get up to speed very quickly. They often chase one idea that was successful for someone else. They are at the first level of the "Four Levels of Knowledge."

You don't know what you don't know.
You know what you don't know.
You don't know what you know.
You know what you know. (NOTE: Some switch #3 and #4)

Your trading system has to be your own, even if it is based in whole or in part on someone else's work. It has to be internalized, or matched to your personality.

Good scalpers make money. As do daytraders, swing traders, position traders, and investors. Therefore, there is no single "truth."