I closed out my position in MBT.....
Read Full Post.....
1. Why did I take this trade?
Because the stock was showing all the signs of a classic breakout pattern.
2. What was the initial stop?
Initial stop was 49.81, then moved up to breakeven @50.13.
3. Why did you exit where you did?
Because I have no clue what is going to happen next week. And, markets are now closed on both Monday AND Tuesday, so 4 days is a long time to hold a position in which I am not overly familiar with its chart behaviour.
4. Is there anything you would do differently?
Yes, sell into the gap up. MBT gapped up yesterday AND today, and both times, the gap closed. Market was losing momentum, so I could have been quicker to recognize that the previous congestion @50.5 has not been resolved.
In retrospect, the setup was not the absolute best - the breakout above 49 did not have the overwhelming volume explosion to move it above the congestion line. That would have made the trade easier to manage.
Friday, December 29, 2006
Closed out MBT swing trade
Wednesday, December 27, 2006
MBT
I Bought MBT ....
Read Full Post.....
I wasn't watching this stock when it gapped up this morning, so I missed the first opportunity to buy @49.75. Fortunately, it was a true breakout, and it offered me a second opportunity to enter a position. I'm finding it slightly difficult to ignore my bearish bias for next week. Nonetheless, I plan to hold on to this stock for as long as it will allow me. Stop @breakeven for now.
Sunday, December 24, 2006
Renovating
summary
I am renovating my blog.....
Read More
Please excuse the noise and shuffling going on around you. In the mean time, chew on the chart of CTRP, it looks like a pullback might be setting up...
Saturday, December 23, 2006
Top 5 Signs of a Market Top
I usually avoid making any sort of a prediction about the market, so consider this more as entertainment than anything else.
1. The market responds to RIMM's better than expected Q3 earnings and Q4 guidance by taking the stock down to end up down -(2.7)%
2. The BPCOMPQ indicates a market top.
3. The TickerSense poll has reported the least bearish result ever.
4. The VIX broke above its 50d EMA for the 2nd time in the past 4 weeks.
5. The number of stocks closing at all-time lows is quickly approaching an all-time low.
A Little (Trading) Personality Goes a Long Way
In the course of thinking about my recent trading mistakes, I went back to re-confirm my MBTI personality type. According to the MBTI system, I am a 66% INTP and 33% INFP (which explains why I've always wanted to meet Princess Diana). I score very low on Conscientiousness and high on Introvertism, and Openness. I score marginally higher on pragmatism.
In terms of trading, this has the following implications.
My thoughts, decisions, and actions are oriented towards a perceptive style of approach. This explains why I have difficulty following a hardcoded and structured set of trading rules. So like the WilyTrader, I must commit to being more vigilant at staying organized, and following my set of trading rules.
I seek to understand the world around me through through patterns and seeing the possibilities. This means that recognizing the high probability chart patterns comes natural to me. I am also comfortable with a changing market environment, where one strategy works one day, but another trading strategy should be used in the next day.
I make judgements and conclusions with an attachment to to some subjective like or dislike. This could explain why important trading attributes like Patience and self-discipline are more difficult for me to master.
WilyTrader indicates that the quick thinking, variety seeking, and intuitive yet flexible personality type would be better suited to short, short term trading like daytrading. I've never really thought about it that way before, but now that I have, it seems to make sense to me.
So now that I've gotten yet another dose of self-awareness, I am already cooking up ideas on how to work with my strengths (as opposed to not using them at all), and improve upon my not so strong areas.
Friday, December 22, 2006
Confession
Ok. I need to get this off my chest so that I can move on.
Yesterday, I traded ER2. And not just small trades, I made big bets, bigger than I could afford to risk. I wound up losing quite a bit of money (for me anyways, that's a lot). A one point loss on one ER2H7 contract means nothing, but a one point loss on 6 contracts means scalding pain. This was sickening because I should have known better to control my risk.
Yesterday, I didn't want to post because I just didn't know how to explain it to this journal. It's embarrassing to keep having to say I feel embarrassed at making another embarrassing mistake like this. It took me most of this month of building up those profits, and the majority of it was all erased in two days. I wanted to go throw some rocks, and then hide under a rock.
To make matters worse, I feel like I have disappointed the gift giver. The worse part is that I can't even say I'll promise never to indulge in this sort of stupidness again, because I understand myself enough to know that I currently do not have the capacity to make this kind of an unrealistic promise. And I hate saying, "sorry, I'll try harder next time". Sorry? What does being sorry get you? Saying sorry will not help to recover the lost profits. And try? What do you mean "try"? Try is like doing something without the committment. It's like writing cheques when the bank account is in overdaft. Do it, or do not do it. There is no try.
So, all I can do is get this off my chest so that I will feel less bad about myself, which will enable me to move on. The funny thing is that, after I went through the "hiding under a rock" phase, I woke up today feeling motivated - it's as if my determination and resolve has been magically restored. I don't know how to explain that either - maybe it was from cooking watercress soup (recipe is a little bit similar to this, but mine was more traditional), maybe it was from playing with my daughter, maybe it was from thinking about income producing assets, or trying to convince traderZBS not to give up his trading career (now there's a guy who could use some encouragement). Who knows.
Nonetheless, to mitigate the damaging effects of the stupid side of me, my plan is as follows:
a) smaller position sizes until I am back in the habit of managing my risk. I find that I think and act better with smaller position sizes - there's no "trade the profit" playing in my head, because the profit (or the loss) will be peanuts. I hate to say the H-word, but hopefully in the future, I will learn to use bigger position sizes more carefully.
b) trade less often - do more "virtual" trading while I wait for the real juicy setups to come to me.
c) talk to myself more - sounds corny, but every time I stop reciting my trading rules to myself, I start doing stupid things......
d) don't take the trade unless I am certain that I am willing to sell for a small loss.
Anyways, I'm aware that I have been overly obsessed with trading futures this past couple of days. I think I need to do this in order to get it out of my system. I actually feel better today, more controlled, and mentally focused. Once the market volume re-appears in Jan/07, I will get back into the regular routine of trading stocks and options.
Learning More About the Russell 2000 Futures
I the better part of today on identifying more "virtual" trades on the Russell 2000 futures (ER2H7). I did not make any of the following trades. The low(er) risk entries, circled in red, and higher risk entries (circled in pink) were identified after it had happened, although in some cases, I identified it within seconds after it occurred.
I used the following techniques to highlight the low(er) risk entries:
a) TICK extremes
b) S/R (support & resistance) lines
c) trendlines - 9d EMA and manually drawn
d) hammer reversal pattern
e) YM, ES, NQ, & ER2H7 charts in the 15-min timeframe.
I think what makes trading ER2 so difficult is that any one of the above techniques can, and did stop working at any time. The afternoon session seemed pretty random to me at one point. In my opinion, this also prevents many from getting into the game, because people in general like to stick with the "bread and butter", "tried and true", and that which is "reliable."
That said however, ER2 still intrigues me. There's a couple more things that I want to try out. Next step in the exercise is to see how many of these entries I can identify in real-time, or just seconds before it happens.
Does anyone know where I can find historical intraday charts of ER2?
Wednesday, December 20, 2006
Learning about the Russell 2000 Futures
The following chart identifies spots where a trade could have been made on ER2 today. I did not make these trades, but want to remember this for next time, especially to see if these techniques are reliable or not.
I've rated the afternoon short as the best play of the day because the morning long play was a bit riskier, and less clean (could have gotten stopped out on the 5th bar low). Not sure how reliable/reproducible these "virtual" trades are, comments are welcome.
BIDU - Nice try, Here's your consolation prize
Bidu tried to suck me into an options swing play today...... But this was one of those ones where you just had to let it go in order to see how it would behave.
I was considering chasing that breakout, because volume looked decent at that point. But I've seen breakouts fail, so I had to be cautious (once bitten, twice shy). Turns out my cautious side saved my rump roast. Nice try BIDU, you'll need to come up with a better trick next time !
Tuesday, December 19, 2006
Swing Update - CTRP
I mentioned back here that I took a trade in CTRP. Well, here is how the trade turned out.
1. Why did I take this trade?
Because the stock was showing all the signs of a classic breakout pattern.
2. What was the initial stop?
1% below my entry price of 60.13.
3. Why did you exit where you did?
Because I was micromanaging my trade. In my opinion, CTRP has at least one more good up day in it.
4. Is there anything you would do differently?
Yes, keep my stop back at yesterday's intraday base @62.70.
Elements of a Good Swing
In my previous post, Anonymous learner asked about my criteria for a good swing trade.
"You mentioned you couldn't find any decent swing setup. How do you usually look for such swing setup? And in your opinion, what kind of criteria fulfilled would you consider it to be decent? Thx Learner."
After studying some of the charts of the various trades that I have made recently, I can't say that I have a bulletproof, repeatable method for swing trading.
I started out "re-learning" how to swing trade by studying the examples of those traders who do it better than me. The Market Speculator, Dummy Spot, Dave Landry, AlphaTrends, RealTimeTrader, and TAZ Swing Trader, these were my "mentors" that I read (and still do read) regularly (links at the right sidebar). Please note that even within swing trading everyone has their own style. For instance, AlphaTrend's style is different from Dave Landry's style, and neither is better than the other. Some traders like to focus and follow one specific style, but as you might have noticed by now, I like an open, flexible, style. I would study the charts they provided, or the trades that they listed, and internalize what made their trades work out well. So now, when I look for a good swing setup, I kind of use the following routine:
1. Begin with the End in Mind.
This habit of highly effective people sounds a bit hokey for trading, but once you think about it, it really makes sense. Good trading begins with good habits. Have a pre-defined set of trading rules. (How successfully you abide by them is a totally separate issue). Make a log of all (or at least most) trades for later review. Plan and prepare ahead of time for each morning's trading session.
2. Look at multiple sources for the potential swing candidates.
Daytrading candidates also make for potentially good swing candidates, so I don't discriminate.
For me, I use the HCPG newsletter, Richard's new 3o-day high list, Alan Farley's picks, Brian Shannon's nightly videos, my previous trades (which I typically keep on my watchlist for a few days anyways), my own custom-cooked up new 52-wk highs scan from msn moneyCentral, and some microcap picks from stockChart.com's high volume gainer scan. If you surf through enough stock trading blogs, you will find plenty of ideas for swing trading candidates. More often than not, I am not able to go through all of my sources. I usually wind up with too many candidates and I have to start culling the list. I cull the list by looking at RSI, MACD, MA trendlines, chart patterns, and the "cleanliness" of the daily chart. Time permitting, I also look at the 10day hourly chart.
3. Evaluate the setup
About a half hour before market open (if I can wake up that early!) or the night before, I usually enter the stocks into my trading account's watchlist, and start pulling up charts for most of the stocks in my watchlist. I look at support and resistance levels. The videos from AlphaTrends do a pretty darned good job of educating guys like me on how/where to draw the support/resistance levels. After watching those videos a few times, I got the hang of it, and after that, I started coming up with the support/resistance levels without using the video. Once I have the resistance/support levels, I enter it in the form of an alert in my watchlist of stocks. Then I just sit back around and wait for the alert to go off (usually I pre-occupy myself with taking a nap, eating, or surfing, or once my wife made me do some house chores......). Often I will bring up onto my screen the real-time streaming charts of some of the stocks on my watchlist, esp. the ones where I know I should be stalking the stock.
4. The Key Decisions
If an alert goes off, I have to do the following quick:
a) pull up a chart of the stock in question (if it is not already up)
b) look at the behaviour prior to setting off the alert - was it clean or choppy?
c) look at the overall directional movement - price spike, breakout, fakeout, general trend up, or something else?
The key here is to understand what the chart is telling me that it is doing, instead of me trying to predict what the chart will do.
d) does it match one of the high probability patterns ?
e) is there volume?
f) where is the stop loss going to be?
I used to work out the stop loss levels on a spreadsheet prior to taking each trade, but I found that to be a bit cumbersome and slowing me down, so now I make a mental stop. This of course, has its drawbacks, so I will be going back to entering in a hard stop until I have the mental part of my trading back to a level that I expect of myself.
So, that covers most of the basics of how I find my swing setups.
Now, to the other part of your question - what makes a stock a good swing trading candidate? I'm probably far from being an expert in this area, but here's my thought process:
1. Market environment. Though there are exceptions, but in general, I look for long candidates in an uptrending market/sector, and short candidates in a downtrending market/sector. Now that we are in a trendless market, the charts better good, with a capital G. Clean, not choppy, no fake-outs, mini-spikes that reverse, etc.
2. Volume. Without volume, most of the high probability chart patterns become higher risk plays. The presence of volume more often than not leads to continuation moves.
3. Clear and definitive Trend.
You don't want to select a stock whose 10/20/50d MA's are crossing each other all over the place. Once a stock is clearly moving in a certain direction, it will tend to continue on in that direction. Trendlines help to identify where the buyers are hiding, and where the stock could be headed.
4. Past Experience.
Experience is the best teacher. Once I have made enough profitable swing trades, I learned to recognize what made it a success. On the flip side, once I have made enough unprofitable trades, I learned what made it a failure and what to avoid in the future.
I will create a new category, "swing", to identify my true swing trades (as opposed to hourly scalps that I have no intention of holding for longer than a day or two).
Daytrading Russell 2000 Futures
Today I started my morning routine as usual - set my alerts, and bring up the charts on some items of interest to draw out more support/resistance levels. Once the market started, I was left sitting there waiting - waiting for something to go off. Eventually, I had short alerts go off on CROX and MDC. However, I wanted to know what the tone of this market was, so I just let both of them go through my alert price without making any trade. Sure enough, within a few minutes, both stocks bounced back above the alert price. I also had short alerts on BOT and AMR, but those two bounced back up as well. So today's gap down was met with support from the "buy the dippers", and the gaps from all 4 indicies (Russell 2k, SP500, Dow and Nasdaq) were eventually filled.
I looked at the usual suspects (AKAM, AAPL, BIDU, RIMM, GOOG) for any possible options play, but most of them looked like they wanted to fill the gap and no more (except maybe AKAM, but I wasn't prepared to daytrade AKAM calls). Today looked like a day strictly for daytrading, and not swing trading. I couldn't find any decent swing setups.
So, before long, my attention wandered over to the futures. I mentioned before that I tried a futures trade to get my feet wet. Today, I did more than just that, I became fully immersed.
I also had a couple more scalps that I could not fit into the chart above. I also took a few scalps at the Nasdaq futures (NQ), but found myself more comfortable with the Russell 2k futures (ER2).
Clearly I overtraded. However, I began to get into the rhythm of ER2's price patterns and behaviour, and it turned out to be profitable (4 losses, 9 winners), so I can't say that the overtrading was all bad. In fact, I had a mini-win streak going at one point, and that certainly felt good.
A few notes:
- The four horizontal lines helped me a lot to identify support/resistance zones. They were not all drawn at the same time. The top one was drawn @10AM, the next one down was drawn @11AM, the bottom one was drawn @1145AM, and the last one was drawn @1230PM (times used are according to the chart).
- The 9/19 EMA trendline also helped to identify the directional movements
- I also had a 5min. chart of ER2 that I was looking at at the same time, overlaid with the actual Russell2K Index to help me identify potential congestion and mini-reversal points. I also had charts of the EMini-Dow, and the E-Mini Nasdaq up. Even then, it was still hard to identify reversals.
- At certain times, what used to work no longer worked - support was breached and then came back up, resistance was broken and then came back down, there were no NR dummy bars, trendlines were no longer reliable, etc. Sometimes, the anti-trend play would work, and sometimes it would not work. You had to be quick to adapt to what was working.
- The red circles identify what I felt were the higher-probability, lower risk play. There were only 2 high-probability trades for the whole day - first one was a short on the failure to break above the 19d EMA line (short @787.30). 783.50 was identified as the place to cover the trade, but after thinking about it, it would have been more realistic to cover on the break above that candle, which was 784.60-ish. The next decent play was the break above 787.80, close @791.
I'm actually not sure if I will regularly trade the ER2, I will have to think about it overnight.
Thank-You.
Yes, it was quite the painful ride that MIKR put me through. In the short time that I've written in this journal, I've gone from the thrill of victory,
to the agony of defeat.
Fortunately, tomorrow is a brand new day. The challenge now is to put that painful experience behind me quickly enough so that I can become focused and mentally sharp for tomorrow's market open. 
While I was attempting to pick myself up off the mat, something unusual happened tonight. I received a sincere and kind gesture of not sympathy, but empathy from someone within this stock blogging community. The kind gesture that I received came in the form of a gift. In all honesty, I have underestimated how much we are connected to each other (in a community sense). Sometimes I feel disconnected from this community. But regardless of what I feel, the fact that I chose to make this trading journal public meant that some part of me wanted to reach out, connect, and hopefully have an impact (on someone). This "want" came to pass, only not in the way that I had expected, but obviously better than what I had imagined. There is always a part of me that is somewhat uneasy about accepting gifts because when I was growing up, I was instilled with a "repayment" mentality in the sense that any act of kindness or gift received must be repaid back in full. So when I received this "I feel your pain" act of kindness, my first thought naturally was to think about how can this gift be repaid (like providing more website traffic, referrals, praise, etc). However, what I have learned after I grew up is that this repayment mentality actually defeats the whole purpose behind the act of kindness. A true act of kindness or gift giving asks for nothing in return. So I will just accept this gift with the deepest heartfelt, gratitude.
The great Yoda once said, "Do, or do not. There is no try."
There is nothing like receiving an act of kindness to motivate me to do better, to be a better trader to the point where I can pass along to someone else the same kindness that I have received today. To the giver - Thanks again.
Monday, December 18, 2006
mikr
This one hurt.
I will probably have to limit my US trades until I can recover the losses suffered on this trade.
I also tried trading the Russell 2000 Futures today. Certainly no easy money to be made there. Lost a couple hundred dollars.
RIMM call option trade
This trade in RIMM options was from last week. Should have sold sooner - as soon as RIMM broke below the 10 candle EMA line. This victory would have felt much better if it weren't for the botched up BIDU options trade.
Note that the sell volume into Friday's close did not follow through today - this adds to the argument that RIMM is in a strong short term uptrend. However, we now have stacked gaps - two unfilled gap ups in a row, never a good sign.
BIDU call options trade
This BIDU options trade was from last week.
All it took was a momentary lapse of concentration and focus. My head started getting filled up with a lot of noise, but still, I should have honoured my stop loss.
Sunday, December 17, 2006
Ideas for the Week of Dec 17, 2006
Trading might be a bit lighter this week as the traders, brokers and institutions wind down for the holiday break. This means the possibility of lighter volumes, which typically means increased swings - up or down. In addition to the typical selections from the HCP newsletter, watchlist from MoveTheMarkets.com, Alan Farley's website, here are some additional ideas that I will be watching this week.......
spwr - the big run on this midCap was made back in Oct. and Nov. Not sure if it has another run in its tank, but the 40 level is the one to watch.
dlia - this is a smallCap with a well defined resistance level @ 11.55.
epix - possible U-Turn reversal if it can break above 7.5. As always, volume needs to show up.
The remaining ideas are microCaps trading on the TSX or the TSX venture.
qvc.v - light volumed microcap, drifting upwards.
sxc .to - good chart, possible continuation move if it can stay above 23
tth.to - possible U-Turn reversal, $1.60 is the level to watch
axx.to - possible continuation move, $4.00 is the level to watch.
ntb.v - rumoured to be an acquisition target, possible pullback pattern play
wgi.to - microCap gold, selling and distribution from sellers who wanted to cash in on their recent IPO has ended, looks like it is entering accumulation phase. Not really correlated with the movement of gold prices, which is interesting in itself.
Saturday, December 16, 2006
More internet intermission
My broker does not provide access on the weekends to my account transactions , so I will not be able to provide updates of my options trades until Monday.
In the meantime, I have collected some interesting stuff off the internet. Enjoy.
This picture of the US Dollar says it all.
Ugly's ATS has evolved from a life of servitude to a life of lordship - it is now hiring humans. For those interested in having a computer become your employer, please apply within.
If you are actively hacking an MS Vista virus, or considering to do so, at least get paid for your efforts.
One could waste most of the whole day looking at these cool pics.
On the more serious side, here are some resume tips that I will be using in my job search. I've got another interview next week, so my postings might be more sporadic.
.
Friday, December 15, 2006
Trading is Like the Grouse Grind
There's a hiking trail in our city which has been nicknamed as Mother Nature's stairMaster. It's called the Grouse Grind, and it is an unrelenting, unforgiving, 2.9 km uphill climb to the top. Most hiking trails have many flat spots where you can catch your breath as you hike your way, but this Grouse Grind is clearly not one of them - it is a continual uphill slope, there are no resting spots. There is actually one section of the Grind where it is so steep that it is a good idea to climb up using all four limbs.
Back in the good old days when I was young, and in much better shape, I would regularly go to conquer the Grouse Grind. I remember there was one summer where I would go at least twice per week, because I had bought this season's pass for the gondola ride back down to the base, and since I've invested some money into this exercise, I just **had** to do the Grouse Grind in order to recover my investment.
In that summer, I remember that one of my best times ever was 47 minutes to complete the Grouse Grind. I would be sweating so much that even my nose would start sweating, and collapsed from exhaustion once I made it to the top. But it was a very satisfying feeling of accomplishment to know that I had conquered the Grind.
In his book "Trade Your Way to Financial Freedom", Van K. Tharp deconstructed the most important components to successful trading as follows:
- Trading System - 10%
- Money mgmt / position sizing - 30%
- Psychology - 60%
- 10% Trading System and market/sector/chart analysis
- 30% Money management
- 20% Patience
- 20% Emotional control (emotionally detachment and objectivity about your trade)
- 20% Discipline (acceptance, hard work, working hard, persistence and willpower)
I used to think that it was hard to find the high probability patterns and setups. Now what I've learned is that it isn't that difficult. The harder part is acquiring enough patience to wait for those patterns to come to you.
I used to think that the key to success in trading is finding the Holy Grail - the one system/methodology that will bring me never-ending truckloads of profit. There is a Holy Grail alright - but what the market is teaching me now is that the true Holy Grail is mastering the psychological part of trading. Indeed, it is a challenge in itself to be consistently patient and emotionally detached from my trading positions, accepting responsibility for my own actions, putting in the hard work to continually look for the low risk setups, and to be persistent in learning new tactics and approaches to trading, to be vigilant in avoiding mistakes but more importantly, to learn from my own mistakes once I do make them, and to be constantly remaining alert and focused on the trade, and the setup. For me, this is hard mental work, and sometimes the mental work is, or seems to be as hard, if not harder, than physically climbing a 2km flight of stairs like the Grouse Grind.
But it can only be conquered by not letting that 2km flight of stairs defeat you in the first place. I've read from Van K. Tharp's book that someone once claimed that the market creates victims. It does seem easy to draw that conclusion when you hear stories like the Amaranth Hedge Fund blowing up. In reality however, the market didn't create the victim, the victim created the victim scenarios for themselves.
So like the Grouse Grind, this game of trading is tough, but what I'm really saying is that mastering Patience, emotional control, and self-discipline is tough. But it can be done, because I've observed on numerous occasions that when I follow my rules, I make better decisions, and my losses are small and greatly exceeded by my wins. To those who have mastered the psychological aspect of trading go the rewards of consistent profits.
Thursday, December 14, 2006
Thursday's Review
Today I saw a few of my picks from yesterday take off (eg. BWR, BLE), and a couple others on my watchlist run away from me (eg. STEC, ININ), but I didn't chase. HBM.to was above the 24 level for a good 12 minutes this morning, but I did not close out my position until later in the afternoon. When it became clear (about 2.5 hrs later) that it will not challenge the 24 level again, I finally sold (@23.42), and for some reason, I started obsessing with that "coulda, woulda, shoulda" scenario.
I also made 4 option purchases. I'm sitting on a decent profit on my RIMM calls, but unfortunately, they have been almost cancelled out by my current loss on BIDU calls.
With BIDU, I just wasn't decisive enough to cut my losses (I think the thought of leaving so much profits on the table with the HBM trade was still agitating my mind), and after that, I was discouraged and lost my mental focus and decided not to trade for the rest of the session.
I will post charts of my option trades once I have closed them out.
A couple of continuing problems that I need to work on include:
a) how to add to my position. I haven't been vigilant during the trading session to draw out support/resistance levels. I will need to get back into the habit of doing this again, so then I will know when to add to my positions.
b) honour my stop loss. Basically I didn't obey my mental stop on BIDU, and that costed me.
In the mean time, I spruced up this blog to keep myself busy. I think I will need to go back to entering hard stops again.
Overall, a profitable day, but still plenty of room to improve upon in regards to my performance.
Wednesday, December 13, 2006
Sector Watch for tomorrow
Uranium: Energy Metals (EMU on NYSE), Fronteer (FRG.to), Tournigan Gold (TVC.to).
Silver: SLW, SSRI, ECU.v, SVM.to
Microcap Miners: ble.to, bwr.to, rok.v
How to Double Your Money in 60 Days or Less
Stocks that double in a short period of time are out there.
It's not just the Canadian stocks, there are American stocks out there as well that net approximately 2-baggers in a short period of time.
As indicated by these pictures, the way to make serious profits with stocks is to swing trade them.
Other examples include IAAC, and AKAM. The commonality here is that all of these stocks were/are momentum stocks on multi-month run-ups (okay, maybe the first chart on Wi-Lan was a bad example). My secret Holy Grail has always been to know when to jump onto these momo trains during their multi-month run-ups, and to know when it is time to get off the train.
Tyro also mentions swing trading as a viable source of income, which I am also seeking.
Unfortunately, in each of the above 4 charts, I can easily see places where a trader like me would be scared out/stopped out/chopped out of my position. The real crux of the problem is to find a swing trading method that minimizes the risk - or at least enables me to not to get scared out/stopped out/chopped out of these momentum stocks.
In theory, I think my Trading Rules cover the same general attributes that Dan Fitzpatrick talks about here. However, I haven't consciously focused on applying them to swing trading - the true swing trading that can be relied upon as income.
My trading style in the past couple of months have been short term - I view myself as a scalper of sorts but operating in the hourly timeframe. A lot of my trades haven't lasted more than 3 days. I can see what my trading approach is, and it's probably not the way to make some serious income in a short period of time.
Like Tyro, I will start experimenting (again) with swing trading (for serious profits) in the next few days:
- playing the pullback pattern under various situations
- using wider stops (which also means smaller position size)
- relying less on the intraday chart, and more on the daily charts.
- re-review some swing trading websites
- study many more swing trading examples.
- separating out daytrades from swing trades
Wednesday's Results
I'm pretty happy that I followed all of my rules today. The biggest one was that I did not lose patience while waiting for a good setup to occur. I honoured my planned exit points when I scalped SU. I resisted the urge to revenge trade, or to chase a breakout. Good stuff, now all I need to do is continue the same positive behaviours for tomorrow, and the next day, and the next day after that, etc.......
Luckily, I don't set any rules that I already know are unrealistic for me at this stage (like always be consistent !!).
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The Power of MicroCap Wednesdays
Got back into some Microcaps today.
First one was Altius Minerals (ALS.v):
In this case, ALS is not a disease, but a junior uranium explorer that is turning itself into a merchant banker for other junior explorers. Paul Van Eden, a newsletter writer and portfolio manager, is head over heels in love with this stock. He claims that this is one of those stocks that you can buy and hold forever.
Riiiiiiiight..... If he loves it so much, he should be glad to buy it from me for .... $18? I mean, after all, if you are comfortable to hold it forever, it just might hit $18 one day. Unfortunately, today is not that day.
I bought Altius Minerals (ALS) when I saw the bullish flag on the daily chart, and volume was picking up and setting up to break to new highs. I plan to hold this for a swing, market conditions permitting.
Next one was Energy Metals (EMU on the NYSE, EMC on the TSX):
Volume was also decent looking, so I jumped in @9.16. My thesis is a play of the pullback pattern. If it doesn't break back above the 20d EMA, I will probably bail.
And last but not least, there is HudBay Minerals (HBM):
I bought my first position in HBM on the break above 22. 22 is one of those round numbers and stocks tend to have an affinity for round numbers (ie. resistance/support tends to be at a round number, as opposed to something like 22.37 being a support level). The next position was on the break above 22.5, another pseudo-round number.
HBM looks to me like it is on the verge of completing a U-Turn reversal pattern. Volume will be the deciding factor, but so far so good.
Tuesday, December 12, 2006
Tuesday's Results
I woke up late (again), and today for some reason, I wasn't mentally focused. Definitely noticed that I was not as focused as yesterday.
I had a list of stocks that I usually review in the morning and select the ones with the nice setups, but for some reason, I didn't put in the time to go through reviewing everything. So, I had a half finished review, and not too many alerts entered. Of course, none of my alerts went off today either. And as the morning wore on, I eventually ran out of things to do, and naturally started watching the market, even though I saw no decent setups.
This went on for most of the morning, and after a while, a bit of boredom and frustration set in. So, I took some trades which did not have any decent setups. It's almost like a guaranteed formula - take a trade with no setup, and pay your money to the market.
One little (somewhat embarrassing) confession to make. I've started talking to myself - not in a crazy, deluded way, but instead, I've been reciting my rules out loud, repeatedly telling myself to wait for the chart to tell me what it is doing and don't chase, but look for the high probability patterns, etc.. I did this on Thursday and yesterday (Monday). Strangely enough, I did not recite my rules out loud repeatedly on Friday (when I revenge traded RIMM), and just didn't feel like doing it today. Hmmm...... I wonder if there is a pattern to this. I guess what I'm saying is that it doesn't hurt to talk to myself more often !
So, I performed poorly today, but I know why I peformed poorly. It's important for me to stay mentally focused - there's no point in trading when I'm not alert and sharp, it will just rob me of profits and equity.
Studying the RIMM Puts
Last Thursday, RIMM Dec06 120 Puts pretty much doubled in value when RIMM dropped down by around 3.0%. Today however, the same RIMM Puts were not moving as much, even though the underlying still dropped almost 2.5%. Now, I think that today's relatively benign movement in the Puts compared with last Thursday is due to Theta, but I'm not confident that that is the complete picture/answer. Perhaps someone could explain/confirm this to me - Is today's lack of a big move in the RUPXD Puts due to Theta, or is there a better explanation ?
There were a couple other things that I noticed, which I am recording here so that I can act upon it the next time this occurs.
a) RIMM's downward move last Thursday was clean and well-behaved. There was no chopping around the opening Range candle. The morning pullback did not violate any resistance levels, and neither did the afternoon pullback. Both pullbacks were on light volume. The selling resumed after each pullback.
b) The 10 candle EMA was never violated - persistend downtrend.
c) RIMM closed near the LoD on increased selling.
d) RIMM formed a weak, intraday double bottom @130. This support level was also broken without too much choppiness.
I was actually watching RIMM for the past few days, but didn't have the presence of mind to work out support/resistance levels and set alerts at key levels. If I had done that, I would have had the presence of mind to purchase some Puts.
RIMM Put option trade
On Monday, I found a good spot to buy some RIMM Puts:
I bought these puts just before I made the trade on GROW.
Here is how the RIMM put option trade turned out:
Obviously I have to work some more on my exit strategy. Not really trying to use this as an excuse, but I didn't feel as sharp and mentally focused as yesterday.
Monday, December 11, 2006
Cool Videos
This is a great montage of Alexander the Great, who plays left wing for the Washington Capitals.
I think the following video could be a very good way to start off my trading day.....
...
Income Producing Assets
Earn a dividend yield 8% or more with these companies :
Southern Peru Copper (PCU): Yield=9.8%, IBD Rating = 98, MSN StockScouter Rating=9
MGC Capital (MCGC): Yield =8.3%, IBD Rating = 91, MSN StockScouter Rating=8
American Capital Strategies (ACAS): Yield = 7.8%, IBD Rating = 97, MSN StockScouter Rating=8
Capital Source (CSE): Yield=7.8%, IBD Rating = 92, MSN StockScouter Rating=8
The charts on all 4 of these stocks look pretty good as well. They all have the potential to provide a stream of passive income for those who purchase these stocks.
Monday's Review
Today I got back into the habit of setting my alerts, and doing something else to keep busy while I waited for the alerts to go off. This has worked for me well in the past, and I see no reason to change this part of my routine.
I didn't really notice any distinction between the morning and afternoon session today, nor did I try to force any trades to happen in the afternoon session. I also didn't notice any noon-ish pullback.
I did get the sense that I may have been overtrading again today, but I saw very few trades go against me, and most of the positions that I had were working out well. I saw no reason to stop trading just because I ***thought*** I was overtrading. I did not revenge trade today, but it was probably more because the market did not present an opportunity for me to revenge trade. It was as if the market was being generous to me today.
All in all, I felt good about how I handled today's trading. I suppose getting back into profitable performance has a lot to do with that.......
Just Another Magnanimous Monday
"When you ain't got no money, you gotta get an attitude."
-Richard Pryor (1940-2005).
I woke up late, after market opened, but as soon as I got to my senses, I got busy immediately and made many trades today. I will post charts of the interesting ones. First up is NRPH:
NRPH was one of two HCPG newsletter picks that I traded today. NRPH showed all the signs of a U-Turn reversal pattern. However, there was no sustained volume to push it above the resistance @58, hence the failure and drop back down. It would have been a good daytrade nonetheless if one was alert enough to get in on the break above 56.50 - good for at least a buck scalp.
Next up is Vonage:
I found VG from some Yahoo! Finance blurb about the growth of VoIP . The daily chart looked good, so I decided to enter a position when it broke above 7.17. There was an attempt to flush out some stops in the afternoon session, but there was no volume selling behind that move, so I stayed in. Unfortunately, today's gap up never filled, so I will need to tighten my stops. For tomorrow, I am looking for VG to stay above 7.25 on some decent volume (something like what we saw today would be nice), otherwise I will consider selling.
Next trade was GROW:
I've traded in and out of GROW as it ran its way up to a double in the past two months. I'm not even sure how long GROW will allow me to stay in it, my stop is still at 59.75, and even that is up for debate.
Not long after this, I bought some RIMM Puts @5.2. I will post a chart as soon as I close out my puts position.
My last trade for today was Ctrip:
Ctrip.com was another HCPG newsletter pick. It kept going up and up, so I decided to keep it for a swing trade.
At this point, the following happened to me:
I ran out of capital to buy additional positions !! So, I missed out on these great buys:
Unlike NRPH, the U-Turn Reversal in OMTR succeeded because there was volume to push past resistance @13.61. It did get a bit choppy in the last half hour of the afternoon session, but it still managed to close less than half of an ATR away from the HoD.
The other one that was in my scans was BRLC:
It was hard to watch BRLC leave the station without me.......
Friday, December 08, 2006
Deconstructing my RIMM puts option trade
At the request of CalTrader, I will post the results of my RIMM puts trade that I mentioned on Thursday. Too bad he didn't post his warning about the head fake today before my failed attempts to scalp RIMM in the afternoon. Anyways, here is how my RIMM puts trade turned out:
RIMM was smacked with a broker downgrade, plus the overall market was in a bearish mood on Thursday morning. Perfect recipe for buying puts. I watched RIMM perform an "inverse" breakout - it kept going down and down, and when it paused just after 10am EST, I saw the opportunity to take a shot at some puts. Entered the first position when the selloff resumed just after 1015am EST.
Why did I choose the Jan07 130 Puts? No particular reason, my gut feeling was that RIMM was within reach of the 130 strike price. As it turned out, the 20d ATR was $4, so my gut feel was correct.
Why did I decide to hold overnight? Because RIMM closed pretty much at its LoD on Thursday. Plus there was increased selling into the close.
Why did I sell where I did? Hmmm.... how should I answer this.... stock gaps down to open, bounces around, and is threatening to fill the gap. I don't know about you, but the Theta is ticking on my puts position, and I didn't want to stick around to find out whether the gap would fill or not. The LoD could just have easily occurred in the afternoon instead of in the morning.
Overall, I was happy with how I handled the trade.
Friday's Results
Well, all I can say is I'm glad today's session is over.
Yup, I really made my broker rich today from all that overtrading. I was actually doing well in the morning session. In the morning, I had my alerts entered into the stocks on my watchlists, and was keeping myself busy surfing, and snacking, etc. while I waited for the alerts to trigger. One of them triggered in the morning, I made the trade, and booked a profit. I felt I was in a somewhat comfortable routine.
However in the afternoon, things deteriorated. 
I wasn't actually itching for some action (the morning session went relatively slow). However, I tried daytrading RIMM, and got too overconfident with the initial win that I had. That started me down the slippery slope, and I eventually lost over $130 on it. The monetary loss itself was not damaging, what was way more demoralizing was how I kept trying to revenge trade RIMM for a series of losses. I don't know why I got away from my morning routine, which was working. Blechh.... When I finally capitulated, I was actually glad to see the close of the market session.
Today's gains were attributed solely to the RIMM puts that I bought yesterday and sold this morning @10.00. I clearly would have done better to call it a day after closing out the puts. I never added to my profits from the puts, but actually reduced my profit for the day after that.
So for this whole week, I haven't had much success in the afternoon trading. I will need to think about how I can approach the afternoon session differently.
Thursday, December 07, 2006
Thursday's Results
This week has gone by fast for me.
Anyways, I had accumulated a few positions this week, but today, I couldn't hit the sell button fast enough, and basically closed every one of my trades. None of them looked even close to being able to challenge yesterday's HoD's. I had also set up 7 alerts yesterday night in preparation for today. However, none of them went off - another sign that the market was topping out. The funny thing was that the S&P Futures pointed to a +ve open this morning, but I've learned not be fooled by that false signal.
When I was done selling off my prior positions, I was looking for something to short. RIMM had been hit with a broker downgrade pre-market, and given the bearish tone of the market thus far, I decided to take a shot at some RIMM puts:
Today's losses were attributed to the combination of not being able to get rid of my prior positions fast enough (I was hesitating with a couple of them), getting smacked around by the BIDU puts, and trying to predict the end of the pullback in Wi-Lan.
I did pick up 2 gold positions in the late afternoon (KRY and FRG), they seem less volatile than these tech stocks !
The BIDU saga continues
Yesterday I bought some BIDU calls @7.3. Here is how it turned out:
The chart on the top is a chart of BIDU Jan07 120 Puts. The chart on the bottom is BIDU itself. Both charts are 1d/15min timeframe. The biggest peculiar behaviour that I noticed on the chart of the puts today was this: that the options over-exaggerate the move of underlying. The opening downward thrust to 121.6 in BIDU underlying stock caused a spike up of the puts to 9.0. However, when BIDU tested the 121.6-ish level later in the afternoon, the puts were not at same level as the morning's high.
When BIDU started drifting back up at around 1230pm EST, it wasn't clear what the direction would be. I had the right idea with buying the puts - the initial position that I bought was was rather small, and more intended to "test the waters." Unfortunately, I got too agressive too soon. Had I waited longer before making the second purchase of the puts (like at 12:45p EST), I would not have capitulated and instead, would likely still be holding onto them now. This is yet another variation of how my lack of patience affects my trading. The mistake I made was magnified by the large position size that I eventually took on.
So in summary, my lesson of the day: buying a half position in a stock is a good idea, but WAIT for confirmation before buying the second half of your position.
Wednesday, December 06, 2006
Wednesday's Results
Despite getting smacked around by BIDU yesterday, I jumped back in today. I mentioned before that I planned not to buy calls within the first 15min. of market open. So then why did I break away from that plan? Because the bid/ask on the options were not jumping around and misbehaving like how I have seen so many times. The setup looked decent - it broke above yesterday's HoD and the resistance level @122, and the 10 candle EMA was intact. So, I decided to take another crack at it.
So why did I not heed the warning when the 10candle EMA was violated? This is where the mind games began. I was becoming wary of my tendency to overtrade too much lately, so I was looking for ways to rationalize the desire to continue to hold onto this one. BIDU still looks strong on the daily chart, and I am beginning to get a good feel of how it behaves, so we'll just have to see how it goes.
I bought UARM based on the HighChartPatterns (HCP) newsletter. I was a little late to the party, but saw that the stock was not showing signs of failing the breakout. So I decided to go for it. Volume picked up and was sustained for the whole time after the breakout.
I also bought NTRI@73.75 for my wife's retirement account based on the HCP newsletter recommendation.
Overall, I felt that I did well today, not overtrading, and starting to become (just a little) more patient with the setups. Including today, I've had a mini-streak of 3 consecutive days of profits (see the performance webpage at the right sidebar). Monday's gains were attributed to Wi-Lan, as were much of Tuesday's gains. Today's gains are attributed to BIDU calls. I probably would have done even better if I didn't indulge in some (failed) scalps of SU on the TSX. Realistically speaking, I do expect this win streak to come to an end very soon, but at the same time, I feel more motivated now to prove that this is not a fluke.
ClockWork
Well, today's market pullback came again, as surely as the sun rises from the east and sets in the west. Yesterday, we saw the pullback occur a bit early (1120A), and today, it was a little behind schedule (I'd say it started just before 130P), but it did happen.
Stocks that I'm watching - GROW, IAAC, BIDU, ATI, they all pulled back in unison, it still surprises me every time how synchronized this is.
I may try to play the noon-ish pullback tomorrow as an experiment, we'll see how it goes.
One other pattern that I'm seeing is that I can't seem to find any decent setups in the afternoon trading session. I wonder if afternoon trading is that hard or is it just me...... hmmmm........
I also made a couple decent trades from the High ChartPatterns newsletter. That should be able to cover this month's subscription, and then some. Will post some charts later on today.
And how about that BIDU? All I can say is that I feel fortunate that I can quickly erase the pain of yesterday's mistakes, and still jump back in today. Will have a chart on this sucker later on as well.
Mega Uranium Technicals
I traded Mega Uranium over a month ago, and it was based purely on the technicals. Since then, this uranium stock has basically gone sideways - the momentum is gone, dried up from this stock.
This past monday, someone with big blocks of shares (hedge funds? Institutions?) decided to exit their position in MGA. That has left the stock in a precarious position.
I currently do not own MGA, and would not be interested in any position until I see some sort of trend develop.
You Want Base and Explode ??
The Base and Explode pattern is for real, and I could almost argue that it is the best daytrading pattern out there bar none. Probably a top 5 swing trading pattern in my mind.
The only problem is finding those low volume, already trending, narrow range stocks and actively stalking it before the explosion occurs.
I was not able to catch today's explosion in NMGC, but boy oh boy, do I wish I was watching it yesterday. Buying the break above 5.4 was the way to play this stock this morning. Note the volume spike occurring in the second candle. 5.70 would also have made a good second entry, although it may not meet the reward criteria for some traders.
Tuesday, December 05, 2006
My Review of SnagIt
I have been using TechSmith's free trial version of SnagIt for the past 30 days. Since the free trial is ending tomorrow, I need to decide whether it is worth for me to shell out $40USD to buy this product.
What is SnagIt? Well, when you strip away all its bells and whistles, it is basically the "PrntScrn" key and MS Paint wrapped into a 3rd Party Windows Application.
When I first posted charts to this blog, I was using MS Paint and "PrntScreen" key. However, MS Paint is not the best program to use to annotate charts. It is cumbersome and inconvenient to annotate charts with MS Paint, even StockChart's chart annotation tool does a much better job. Of course, I can't fault Bill Gates for this, since MS Paint is very generic by design in order to accomodate the wide range of end uses.
I first came across SnagIt from WilyTrader. Then I tried searching CNET for any image editors that was comparable to SnagIt. There were literally hundreds to choose from, and the thought of downloading and installing 50 or 60 image editors just to compare them to SnagIt was not a very appealing idea for me.
I'm currently using SnagIt for the ScreenCapture, and the image editing. If I were posting mostly daily charts, I would be able to get by with using StockCharts' annotation tool. However, StockCharts does not provide intraday charts for free. And since I often post intraday charts, and I'm not yet ready to pay $20 or $30/month for StockCharts's premium services, I am drawn back to the same viable option - SnagIt.
I recently discovered that SnagIt also has a FF2.0 extension, so that is probably the deciding factor - I will be shelling out $40 for a copy of SnagIt.
Tuesday's Results
I was pretty active in the morning. However, in the afternoon, I was looking around but couldn't find any good setups to trade in the afternoon session (except for maybe BIDU late day, but I was still licking my wounds from my botched BIDU calls).
And, it also looks like with the exception of BIDU, the usual momo stocks (GOOG, AAPL, AKAM, etc.) have all decided to take a rest and go nowhere.
Exited my GOOG calls for a $0.50 loss, AKAM calls were exited also @0.50 loss. Still holding my ATI calls. Actually made money on my BIDU calls, but I know I made some mistakes there.
All in all, I would classify today as a bunch of trading mistakes (GROW, BIDU) swept under the carpet of the very profitable Wi-Lan trade. It wasn't until when I made that second trade in Wi-Lan did I realize that I should be trading the chart. I'm not even sure how/why I got into the habit of watching the ticker and not the chart. Bleechh......
BIDU call options trade - again
I traded some BIDU call options and here is how it turned out:
The list of mistakes made here are so many that I am amazed that my butt was saved by that timely announcement of BIDU planning to enter the Japan market.
First mistake was entering below yesterday's OR high - there was no volume this time, and therefore no reason to enter this trade. Even the break of the OR high was on low volume - another warning sign to stay on the sidelines. But I ignored them and entered anyways.
Why didn't I sell when it dropped right around noon? Probably because I had it in my head somewhere that this was just a normal pullback.
Why did I sell it at today's opening candle? I got too emotional, and bailed at the first sign of what I thought would be a gap fill (of course, there was none). The call bid/ask was jumping around alot in the opening 15min, so I didn't get a good fill on my exit.
Being a glutton for punishment, I decided to play this morning's pullback, but of course, I wasn't patient enough to wait for the break above the OR high. Plus again, there was no volume to back up the pullback reversal, so this second trade should never have been made. At least I had enough sense to keep my losses small - that was probably the only good thing that I did. The thought of revenge trading BIDU did cross my mind, at which point I basically deleted the ticker and went to walk around the house to clear my head.
Deconstructing my GROW trade
Here is how my GROW trade turned out:
As pointed out by SimplyOptions, I bought GROW before the break of the OR high, which I admit was higher risk (because it could and often does, just reverse at the level of the OR high). The reason that I did that was because I noticed that the volume started to pick up, and the bid was starting to move up as well. Compare this with a lower risk entry (copied from the Dec 04/06 edition of the HighChartPattern newsletter, with their permission of course):
My purchase was one of those candlesticks before the break above the yellow line (@51.31). Yes, it would have been lower risk to wait for the break above 51.5, and yes, it would have been better to be just a little bit more patient, but I'm not going to beat myself up over that.
I will say, though that I clearly did not have an exit strategy with GROW, and I'd much rather beat myself up over this instead - LOL!
I sold today @57.53 but again, I had the bad habit of watching just the ticker instead of trading the chart. Had I been watching the chart instead , and pasting up a moving avg line (2 clicks of the mouse on the IB TWS), I could have easily and realistically extracted another $1.40 from this trade (the MA would indicate a sell just below $59). An extra $1.40 of profit was left on the table - that sucks !!
Trade the Chart and not the Ticker !!
Wi-Lan update
I posted about my Wi-Lan trade yesterday. Here is how it turned out (1d/5min chart):
Although exiting and then re-entering back into the same stock in the same day could be considered a screwup, I did feel that this one was tough to hold onto as the morning session wore on. As usual, volume dried up as the morning wore on.
What I did go back to doing was trading the chart. Because I have been watching the ticker more and more, I started "forgetting" to do that in the past few days, and now that I'm back into doing it (looking at my position from a 5/15min. chart), boy does it make a difference ! Right away, I could see where I should exit my new position in WIN, and where a possible re-entry would be.
Lesson of the day:
Trade the chart, not the profit.
Trade the chart, not the ticker.
Monday, December 04, 2006
Today's results
I made 4 option trades and 1 stock trade today. The one stock trade was a re-entry of GROW:
In retrospect, I should have picked up GROW in my retirement account and just let it ride. Oh well, at least I have made a couple of decent trades off this latest momo run in GROW.
I also made 4 option purchases today, one of which I already talked about here. The other 3 option purchases were: BIDU, ATI, and GOOG. Hopefully, I will have time to post charts on those trades once I close them.
So even discounting my big win in the Wi-Lan trade (which closed today @4.4, whoo-Hoo!), and my screw up of the AKAM call option trade (luckily it was a small position), all in all, it was still a good day.
To keep things simple, I will be posting just my PnL and #OptionTrades and #StockTrades to the performance spreadsheet (see link to the right).
NetVibes Me!
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