Foggy Trader

Good for a chuckle

2011-11-03T12:41:00.003-04:00

From the New Yorker...

Traders Expo Las Vegas

2009-11-01T11:15:00.001-05:00

Anyone going to be at the TE in LV later this Month. If so, let me know and let's say hello to each other....face-to-face.

Monday Watch List

2009-11-01T10:50:00.003-05:00

Working on thoughts...

1. I am looking for a rebound on Monday Morning, which might not last though.
2. I view the short term trend as down.
3. I would not bank on the above so I would not hold over Monday night.
4. Read my "Rules of the Road" if you haven't already. http://at-stk.blogspot.com/2009/10/morning-stock-watch-list.html

Stock pick of week (ha ha)...

NVTL for a rebound (interesting article in Barron on it). What I would like to see is a further down at the open, then up, then a higher low. Or if it gaps up, a consolidation and then a break above the daily VWAP.

Possible plays for further down:

WTR, ARNA, CAB, NRG, STX, SAH, JOE, TCB, UBS, USG (note #1 above as a caution, since if we do rebound, further shorting on these, looking for a follow through would be more risky...at best might be very short lived.

Possible better short: WYNN (maybe other casinos), GS

Best of the Bullish (gee there actually are some!):
DEO, MXB, SYMC

Others:
BARE, EL, K

Wednesday...redux

2009-10-28T22:20:00.002-04:00

Didn't post on Wednesday, everything I saw was a short (though the Inverse ETF's are technically longs). So I traded short today and several Inverse ETF's. Decent day but it was a tough one for me to get the right size position and handle the stops appropriate to the volatility. We will see what Thursday brings. Tweet me if you want to dialog on Thursday...or anytime

Tuesday Watch

2009-10-27T08:46:00.002-04:00

Sorry for no post yesterday.

For today...

UA (Earnings Today)
GSIC >21.15
RSH >18.35 or PB to about 18.10 with very tight stop

And....NXTH is still doing it's thing but big cautions here.

Also a ride worth considering might be MELA.

Friday Watch List

2009-10-23T08:14:00.002-04:00

Well the whole day will depend on if the mkt chops or what ever, so these watches are Longs and need even more caution if the mkt is down trending.

ACF >19.05
ICLR >26.25
LH >71.45
ARTG >4.05

Thursday Watch List

2009-10-21T20:59:00.003-04:00

Short:

SHW <5810 or 5800'ish. Quad Breakdown on PF. If a swing trade, T1=54, T2=52 and ST=61 (worst case)or 59.50.

Sorry for this late update...

Longs:
PNK
NXTH
SFSF

Wednesday Watch List

2009-10-21T08:26:00.002-04:00

For Wednesday 10/21:

RAI >50.05
TV >20.10
IEX >30.50

Also watching WMT and CAAS

Tuesday Watch List

2009-10-20T08:28:00.002-04:00

ATLS >31.60
BEN >112.20
CBS >13.80
CCI >34.55
CYT >39.60 (again today, above HOD yesterday)
PQ >8.10

Monday Watch List

2009-10-18T20:12:00.003-04:00

The watch list for Monday is:

CYT > 38.60 ST=38.11
BCSI > 25.10 Tgt=27 ST=24.83
HK > 29.05 ST= 27.89
BWLD >42.80 Tgt=44.50

Be sure to read the "Rules of the Road" in the post following. Link is:

http://at-stk.blogspot.com/2009/10/morning-stock-watch-list.html

Morning Stock Watch List

2009-10-18T10:24:00.003-04:00

I will be periodically (starting this week) posting a "Morning Stock Watch List". In this post I want to explain a few "ground rules", so to speak.

And....please...if you are going to use any of these as trades: (1) do so at your own risk, (2) please let me know that you are even looking at them (otherwise I won't know that the time/effort is worthwhile); (3) engage in some dialog with me on them, now and then. Discuss intraday on Twitter (Tweet me at John_NY; or if you don't have a Twitter account you can Direct Message me with a text message from your phone: To: 40404 , Begin the text with "D John_NY". Give me an email contact for you in the message and the stock that you are interested in, otherwise I won't know how to dialog with you.

The Ground Rules...

THESE ARE ALMOST ALWAYS CONTINUATION PLAYS FROM THE STRENGTH OF THE PREVIOUS DAY. They are always intended as Day Trades, at least in the present market. That is not to say that I don't hold overnight sometimes, though it will usually be for only part of the original position.

1. I am only posting Longs (at this this time).
2. I may give Trigger levels (I always have them)
3. I may give Stop and/or Targets. I always have them, but Stops are always worst case determined before the opening of the day, so they almost always get adjusted.
4. If a Stop is given and is more than 1%, I will use 1% or at most 2% on a low priced stock.
5. All the usual thoughts about don't take a breakout at the open, be careful about gaps, etc, etc. When I take (how long I will wait after open) often depends on how the markets open.
6. I will be very cautious about taking the first hit of a trigger IF the trigger price is close to either R1 or R2 of the daily pivots (stocks tend to stall at/near pivots.
7. I will take partial or full profit at/near R1 or R2 if we are stalling there, and will always (if I am diligent) raise the stop to reflect the stall.
8. After a move through R1 or R2, I will use (close to) just below R1 or R2 as the stop.
9. All rules are made to be liberally interpreted and followed or not as the stock movements seem to dictate. Loss management is key!

Check this out -- Star Chart

2009-10-04T13:08:00.001-04:00

Check out this free download. Interactive star charts, labeled and more, from any location, any time. www.stellarium.org

Chart Update

2009-09-30T16:26:00.002-04:00

Interesting that the averages held at or above the trendlines that I posted on Friday. So I am wondering if my interpretation will hold and that we will go back up towards the top of the channel. Of course the alternative interpretation is that these trendlines are not correct but that we were in a horizontal consolidation and that yesterday and today indicated a breakdown. I wish I were 100% cash right here, but if the trendlines are OK, then I should be OK. Tomorrow or Friday will tell the Tale of Two Mondays.

2009-09-25T16:21:00.005-04:00

Here are some charts as of the close of today (Friday) showing daily bars. I have put in some trend lines which are different from the bullish flags which most people I have seen have drawn. These channels suggest that we did not have a breakout from a bullish flag recently and suggests that we may have hit the top of the channel and have nearly corrected back to the channel support.

Trends, resistance, support and other levels are often in the eyes of the beholder. So this is just an alternative which might be suggestive of a trading strategy and might also account for the recent sell off in a less "negative" way. Of course if the recent sell off is being taken as the beginning of a 10% or so correction, then these charts suggest that a lot of people who are going to short on the way down are going to be burned. Not an unusual thing for the market to do.

Back in the Swing, maybe

2009-09-17T13:59:00.003-04:00

Been away...not posting here or much on Twitter. Travelling a lot over the summer and seems that followers and tweeters are silent (or were over the summer).

Decent summer trading, slow and not great $, but honed the trading skills...mostly day trading. Just didn't trust holding, too much up one day, down the next, and low volume.

Well... things are picking up. In particular the ETFs seem to be coming back into their own. I've been trading a little FAS recently and looking at some of the others (particularly the commodity ETFs). They are better trade vehicles when there is uncertainty and nervousness (i.e. volatility). Lately this has been around and intraday charts are showing short term technical setups.

Watch List for Tuesday 7/21

2009-07-20T23:03:00.003-04:00

A lot of stocks....these are all momentum plays, so market direction is important. The number of stocks is silly, but if the market goes up these may go nicely, so a few of them.... but if they trigger and do not follow through with volume and price, I would exit and go into something else, since there are so many possibilities. And....if the market is not trending up, then I would be very cautious on any of these.

AN >18.75
BRCM >28.10
KSS >48.55
MXIM >17.85
SNDA > 60.30
STAR >26.20
TWX >27.65

and one short...

VXX <64.70

Some others on list:
ASML
AVP
CMI
FFIV
ITW
INFY
IBI
LBTYA
LZ
PWRD
ROK
STEC
TEN

A Must Read About the Ecomony

2009-06-14T10:20:00.003-04:00

An most interesting discussion of the lead up to the financial situation, perhaps with implications (or at least food for thought) for the future. From the New Yorker May 18, 2009 "The Death of Kings)

Here is the abstract, I will try to post the entire article, but if you are a subscriber you can get it online. Or send me your email and I will send you a copy (from here, if you know how, or twiiter dm me).

THE DEATH OF KINGS
Notes from a meltdown.
Nick Paumgarten, Annals of Finance, “The Death of Kings,” The New Yorker, May 18, 2009, p. 40

ABSTRACT: ANNALS OF FINANCE about the financial meltdown as seen from the offices of
bankers, hedge-fund managers, analysts, and others in the financial sector. Most people may now recall a moment of clarity, an inkling of doom. A private-equity executive the writer talked to said that he sensed the jig was up when his cleaning woman took out a subprime loan to buy a house in Virginia. A big-wheel hedge-fund manager had his epiphany at a Goldman Sachs hedge-fund conference during which he found himself questioning the rapid accumulation of dynastic wealth by the people in the room. The final sign, the big wheel felt, was the opening ceremony of the Beijing Olympics, which cost an estimated three hundred million dollars. A month later, Lehman Brothers collapsed. Some who foresaw the implosion underestimated its power and duration. Writer notes that the event does not yet have a name. It is variously called the global financial meltdown, the financial crisis, the credit crisis, the recession, the great recession, the disaster, the panic, or the bust. This thing is all-pervading, evolving and ongoing, history-altering yet in many respects banal. Considers several analogies for the crisis, including a war, a natural disaster, and radiation. The potential for catastrophe was clear to see, for all who had eyes to see it. For financial-industry executives to claim ignorance or helplessness is to admit negligence or to tell a lie. What’s most vexing is that those who saw trouble didn’t do more to stop it. The crisis is the culmination of events and trends reaching back, depending on your perspective, four, seven, seventeen, twentytwo, twenty-seven, thirty-eight, sixty-five, or a hundred and two years. The causes are technological, mathematical, cultural, demographic, financial, behavioral, legal and political. Writer interviews Colin Negrych, an adviser who has some of the most venerated investors in the world among his clients. Tells about Negrych’s career path and his opinions on the current crisis. Negrych believes that there is a commercial-financial complex, analogous to the military-industrial complex, which promotes borrowing and spending, and spins indebtedness into fool’s gold. Discusses the consolidation and transformation of the financial industry over the last four decades: the growth of investment banking, the development of derivatives, the increasing use of leverage, and the securitization of debt. Writer interviews Simon Mikhailovich, an investment-fund manager. Discusses the role of ratings agencies and collateralized debt obligations (C.D.O.s) in the collapse. A debate has roughly formed between those who blame the meltdown on the system, rigged up over the years and decades, and those who vilify the people who most egregiously exploited the flaws in that system. Both sides may be in agreement that, in the end, human nature is to blame. Mentions Margaret Atwood’s book “Payback: Debt and the Shadow Side of Wealth.” Writer interviews economist Bruce Greenwald. Discusses the 1944 Bretton Woods conference and its influence on the world’s economic system. Describes how those who once worked on Wall Street are coping with loss of income and unemployment.

Dolldrums

2009-06-11T20:49:00.002-04:00

Well, my office move is coming along. Divesting of a lot of stuff, just gave away a lot of furniture to a non-profit....doing what I can do to help others and not put stuff in the landfills.

Speaking of Landfills, there is a great company on Long Island (for those of you in the NYC area) called E-Scrap. They take anything (and I mean anything) that is "electrical". Old computers, wires, microwaves, monitors, disks, cables, steel, etc.....they grind it up, sort it and recycle the stuff. And it's FREE (well maybe a pickup charge). Much better way to go than throwing things away. E-Scrap, talk to Matt Skidell and tell where you got the lead (Jon from ATech/Adaptive).

I wish the market could be recycled. The best that I can say is that I've been learning a large dose of caution and holding neutral (i.e. net almost exactly zero) for the last week.

I went to a "class" by CBOE on Options. It was not a basic class. Taught by John Bittman (with help from Randy Fredericks of Schwab). I learned a lot. They are both outstanding. They (or at least John) does 6 classes a year around the country. Randy does great seminars at the Traders Expo and Schwabs Active Trader Workshops. And they are free....and in this case free does not mean that you get what you pay for. Even if you don't trade options (which I don't) boy do you learn a lot which translates into stock trading strategies.

One thing to be on the look out (according to John Bittman) is that the relationship of Intrinsic Value of the Index Options to the Historical Value suggests that we are in for a down leg. No time frame as to when but watch those support lines.

Finally......if you follow me here or on Twitter, PLEASE drop me a note via twitter or via a comment here....let me know if any of this is worthwhile to you. There are hundreds of people following me on twitter. I get a couple of new people per day. I have no idea why they bother, but I'd like to.

And another finally, in my little circle on twitter, discussion among us non-pros has pretty much dried up now that AlphaTrends and UpsideTrader went to premium (or maybe it's just a coincidence). I'd really love to engage in some spirited interchange among some of us non-pros. Not only do I learn but it really helps these slow volume doldrum days pass much more interestingly.

Back in the Saddle ??

2009-06-05T15:30:00.004-04:00

Been moving offices, has kept me out of the loop a bit, trading too much and not doing too well (not following closely enough). Started the month with a bang and then a fast fizzle.

Today...interesting day, and profitable if I don't blow it yet in the remaining 30 minutes.

What I saw in premarket was that SPY was up to R1, then when the 8:30 news hit it gaped up to well over R2. It then faded back to R2 and down to R1. So what did I do at the market open ... nothing. Many things triggered but I did not take.

I kept my eye on SPY. Of course it went back up to near it's premarket high and FAS did also. So, I bought FAZ at the premarket low +3. I rode it for +16. Exited and reentered with a tight trailing stop (manually adjusted) and took another +2. Since I did not trust anything I traded 1/2 of my normal amount. I'm pleased with the strategy today. Yesterday I was oblivious to the likely turn around at the premarket high and the gap, and got "killed"...not in $ so much as in confidence since I was long 4 positions and took small losses in all. Post market thinking let to today.

I also took a small position in TBT (playing the breakdown of TLT which I could not short). And a small CIG long. Both were profitable. But I was very conservative on share size so the actual $ was not great.

But....smile....I was 5 for 5 on a another very slow day.

I'm glad that it's the weekend so that the feeling of confidence re-awakened will abate and I will not do too many stupid things next week.

Chop Chop and I don't mean chopsticks

2009-05-19T23:36:00.002-04:00

Well day two of being back from LV and the market is just a chopped salad. Yesterday it behaved nicely and I made some $. Today I was 50/50, and net small loss. Both days did not see any volume in the lunch time window and the 3:00 bell was invisible. Most unusual to me. Sell off today was unconvincing enough that I didn't trade it. Probably just felt that since my magic crystal was off today, I didn't trust trading it. I was eying SDS, and that would have been a nice end of day trade.

All said, I hate to sit on my hands and today would have been one to sit out for me. Better luck or skill tomorrow. I'm looking forward to another low volume, boring day.

For the speculative in the ranks, you might want to look at MELA with a core position for a few months and short time frame trades (few days or so) purchases on pull backs. But I would not go short this stock. If you do decide to play it, let me know via Twitter. I'd like to know who is in the swimming pool with me roasting.

Back in the Saddle

2009-05-18T22:40:00.002-04:00

Back in the saddle after some R&R at the poolside in HOT Las Vegas.....and a WONDERFUL dinner at the Mesa Grill.

Today (Monday) was an interesting day, to say the least. The volume was zilch (until the last few minutes when I had already left for a meeting).

But the poor volume meant that I could do some quick hit trades in the leveraged ETFs between very narrow support/resistance. So it was a good day.....but "boring". And the poor volume meant that everything seemed to be very volatile (the 3 min bars were a large portion of the trading range).

All that said, we did finish strong. But as others with more knowledge have said already, the very poor volume today (on over the last few days) makes the continued strength suspect.

My strategy: trading range on the major averages, so quick hit positioning.

Hope to see you on Twit, I should start Tweeting again.

Reflections on Managing Losses

2009-05-07T20:29:00.003-04:00

Reflections on Managing Losses....the why.

Everyone always says that we have to manage losses to be successful. But what does that mean? Everyone seems to have a different scheme and everyone says you have to find your own method.

Well in a previous post I commented about my difficulty controlling the loss of the high leveraged 3X (or 2X) ETFs. I said that what I was going to do was put in an "absolute" 20 cent stop loss which goes in as part of the order and which I do not change (except to raise). So on a 4,000 share lot of an ETF this is a limit of $800.

Well I was curious to see what this would do to performance.

I have a spreadsheet with every trade. I went back to it and looked at only the FAZ and FAS trades since Jan 2.

When I total the net profit/loss since the beginning of the year I am up a few thousand (net of commissions). Not very good. And even questionable whether the intensity of the trading of 3X financials is worth the time -- perhaps I should better spend it elsewhere.

Then I eliminated all the trades that lost more than $880 (I used $880 to allow for execution slipage for market orders). Well I nearly fell out of my chair. Merely limiting the loss in that way would have resulted in a net profit of over $30,000 since the beginning of the year.

So....as least for these ETFs, a loss management as simple and arbitrary as 20 cents would have made a world of difference.

While I haven't looked at the last few weeks, I suspect that one of the reasons why I have done much better in the last weeks is that I have had no losses greater than $800 on any ETF trade.

May Day Thoughts

2009-05-01T22:32:00.003-04:00

Not much to say recently. It's been a lot of up and down -- large profits, large losses -- on balance decently positive but the losses are doing a number on my stomach. I've noticed that over the last couple of weeks that we have a move in the morning, volume drys up by 10:30, the market tends to drift down (which it will on low volume anyway), we might have a short (20 min) burst of activity just before noon Eastern, then we have volume increase and a move sometime after 2:00 and into the close.

So today we implemented a variation on our strategy described before.

Zone 1: We took the pre-market activity (pop and fade) to set the directional tone for the first 90 min to be up. So we only traded longs (stocks and (today) FAS). The bias was confirmed in that the back and fill generally did not lead to lower retraces. Breakouts through resistance followed through. Volume started to decrease sometime after 10:00 and a very significant FAS breakout to a new high only ran a few pennies before a significant fade to a support, followed by a partial retrace and then a fade below the support. We should have realized but didn't that this was the beginning of Zone 2 and exited the trade with a small loss. We didn't and this became the large loss of the day which took a while to work off.

Zone 2: Mostly watched and used the weakness to close several longs including DRYS which we have yesterday (taking nearly a $1 profit).

Zone 3: A small pre-noon volume spike gave us a nice FAS trade.

Zone 4: End of day we took several FAS and FAZ with only one having a small loss. Tight stops here.

So all in all, it was an excellent day and a good learning one. So different from yesterday but so much the same too.

What today seemed to indicate to me is that when the volume is very low any trend which gets established is not tradeable (me at least) without having a fairly high risk. The trends look tradeable but the charts and my way of looking at the price dynamics does not work.

Also this week we've been trading many more stocks. Orders for our favorites are going in before the opening as "alert" order that triggers if the price is at or exceeds our target and the time is after 9:33 or so. The order submitted is a limit order, so we sometimes don't get any shares but we insure that we do not end up buying way above our breakout.

The bottom line for this is the (a) our stock picks, which are usually momentum plays have been about 4:1 successful, so we feel comfortable having the order execute without our having to look at the chart and decide whether to enter. [See the discussion of P&F charts for some of our selection methods.] At the same time, we feel that the market bias is neutral to positive so the momentum follow though works pretty well. On the other hand, we are usually out of these positions in under 2 hours, if that long. On rare occasion we will intentionally hold overnight (DRYS for example). This will change and we will know when the momentum follow through does not happen and the fade comes quickly for the majority of our picks.

For the ETFs, we've been using stop limit orders above resistance so that we get the price we want and not end up chasing. Again this is a momentum play. For FAS, FAZ we are currently looking for a minimum move of 5 pennies (based on the 1 min ATR). Our share size is such that this produces an acceptable profit and if it can run more then we are very happy. The place where we are more likely to see runs is in Zone 4 -- after 2:30 and usually after 3:10.

One other thing of note. Something happens at "exactly" 3:00 and lasts for 2 min to maybe 5. In that time we can see a large sell off or positive price spike, then the move fades. The problem here is that tight stops trigger. But if the fade does not occur and the stop is opened to allow for the volatility, then this can rapidly end up in an unacceptable loss. So we try not to be in any leveraged ETF positions by 2:55. We are not always so positioned and my stomach can be in knots for 5-10 min. What happens at 3:00? I don't know; maybe some of the pro's do. My guess is that computers kick in to start to unwind positions. People just can't do anything that precisely at the same exact time. If I were programming the computers, I would put a random time generator on the time trigger so that not every computer hooked into the exchanged trigger at the same moment.

Finally we have been greatly increasing our trade size for the last few weeks. This is because we feel much more confident about our trading strategy. Instituting the 20 cent fixed stop at order entry for the leveraged ETFs has given me piece of mind that even though the stop would result in a large loss, it will not decimate the account such as happened in the FAS trade a few weeks ago that I talked about in gory detail.

Point and Figure Stocks

2009-04-26T14:05:00.003-04:00

For a long time I've looked at Point & Figure charts (the small book by Michael Burke / Investors Intelligence is all that is needed). I like playing the break outs. So in stockcharts.com, we scan for breakouts of a Quadruple Top, Ascending Triple Top or Bullish Catapult, and also 52 week highs. My trading buddy, Stephanie, does the scans and then trims the possibilities to what she likes. Her picking has been outstanding, though we have not taken all the trades. Usually our daily watch list is 5-10 such stocks and while they are not necessarily day trades, about 1/2 of them are. In our screen, we also set minimum volume and price limits so that we get adequate liquidity. Finally, we look at the daily ATR over about 1-2 weeks so that we can see that there is the potential for a reasonable price move.

So, two things....

1. Lately this has been an excellent stock selection method.

2. I have an "indicator" which is the following: Since these are continuation moves, a good indicator is the percentage of "failures" after breakout. 6 months ago failures dominate. Lately "failures" are rare. So for now we are bullish. But we are watching for this to change so that "we do not beat a dead horse"

Friday and the Finnies

2009-04-26T10:49:00.002-04:00

Friday was a wonderful day (as was the beginning of the week). I have said before that the financials would have many opportunities and news driven until the full release of the stress tests. And rumors on twitter and elsewhere will move things on a dime for brief periods.

I ended up the week with one of the best performances. But earlier in the week I was up and down many, many dollars and finished even. So the volatility bagged me from retiring .. lol.

On Friday I implemented a stop strategy of an arbitrary 20 cents from my entry and put that exit in as a "bracket" when the purchase of FAS or FAZ was made. It worked to get me out without having to "think" and see the trade go south while I was thinking. The dollar loss was more than I normally like but FAS and FAZ were very volatile. I adjusted the exit up if the move was up and if I was up more than 20 cents, I used a 20 cent trailing stop.

I was stopped out of 5 trades out of 19 on Friday, and the gains (net 35) swamped the losses.

Earth From Saturn

2009-04-26T10:41:00.007-04:00

Inspired by Brian Shannon, here is a photo from Saturn. Can you find the Earth in this photo? Hint, it's very small and inside the rings. I may post a blow-up at some point that has an arrow pointing to it. [For now, look in the 2nd comment posted].

And here are sunsets (with moon) over the North Pole

The Demise of Some Community

2009-04-19T22:51:00.002-04:00

I am officially going into mourning over the loss of Alphatrends and UpsiderTrader to the community of open sharing. Yes....having met and talked with both Brian and Joe, I can understand some of their reasoning. I also can't help but to think that they may have tried to do much for others and started to lose sight of their original reason for starting a blog, which they both said involved (in part) putting their thoughts down and by articulating what they were doing, it was helping them in their own trading.

I would have hoped that those of us that followed them sometimes contributed ideas, warnings, triggers and other information to them so that it was not a one way street.

For my own reasons, I do not feel that adding $600 or so per year for each "premium" blog is prudent. Personnally I think that if someone wants to sell investment services, that it should include specific trade execution recommendations and there should be a history of performance tabulated (and made available) on all trades whether profitable or not for a period of at least 1 year.

Don't get me wrong...I think Brian, Joe, Tim (TradersInterviews) and others have done a lot for many of us. I'm just very sad to see an excellent, open, networking community lose some of their participation. I hope they will still be contributors to the free and open community.

[Disclosure: I am an advocate of open internet and the free and open sharing on it. I have used the internet back in the days when it was limited and called ARPANET. Yes, everything on the internet has to be paid for somehow and there is no acceptable business model (yet) that addresses it. But fragmenting into micro-paid subscriptions is not, in my opinion, the way to go. I'd much prefer a "visit" charge of a few micropennies with the ISPs keeping track. But of course that offends the people who think that the internet should be 100% free (and are deluding themselves into thinking that it's free now (don't we all pay for broadband access?) ) ]

Free Thoughts

2009-04-12T09:20:00.000-04:00

Some of you who know about me know that I have been non-professionally with stocks for a long time....investing through thick and thin. But my foray into real swing trading and lately day trading is quite recent.

I've been thinking lately about "how to be successful" or for some "more successful". And that has led me to thinking about how I learned (and continue to learn). And that has led me to some concerns about the future of learning for me and others (and especially new people trying to enter into the club).

What did I do? Well like any computer knowledgeable person I search around the chat rooms. Once upon a time chat rooms were actually good networking places. But no longer as I quickly found out. I discovered a newsletter (Gorilla Trades) by my occasional reading of Investors Business Daily. I subscribed...and this was really my first organized entry into Swing Trading. But there is no silver bullet. Gorilla Trades (like other newsletters I have had in the past) overstates success rates since you cannot exactly follow their recommendations (nor do they want you to). An outstanding source of newsletter performance for many years has been the (Mark) Hulbert newsletter. He evaluates only newsletter than present a detailed buy/sell prescription so he can "paper trade" their portfolio recommendations. Gorilla Trades (and so many others) are not on his list. But I learned two things from reading Gorilla Trades. 1. Use it for a stock "watch list"....let them be one of the ways that I outsource the work of finding promising stocks; 2. Realize that they are Swing Trading. So I started to really think about trading.....when to buy, when to sell, and what a stop loss or price target should be for me (rather than what someone else said). And an interesting trailing indicator emerged. Quick fades or stopped out of the Gorilla Trade stocks indicated that the market was topping or bottoming (short term trend, that is).

My next education came from theStockBandit. Another fee service. But before I talk about tSB let me comment about how I got to tSB. I fell into a site called TradersInterviews. And started to listen to some of the interviews. This was a free site. Many of the interviews were about Forex (not my interest) but many of them were with equity traders. So it was here that I discovered Jeff White (theStockBandit). Later on it was here that I discovered upsidetrader. And there have been several others. Unfortunately TI is no longer free.

When I first subscribed to theStockBandit, Jeff ran a sort of twitter board for subscribers for day trading. In it he and those of us online talked about day trades and Jeff guided us through some of his day trades and advised us on ours. And we got to see what others were doing. It was a small group. And I learned enormously from Jeff and some of the others. Alas, Jeff found that the attention to the board detracted from his own trading (where he made his living) and had to stop the board. But his letter with excellent video analysis of potential stocks still is available. And I continue with it...letting Jeff be one of my stock pickers, so to speak. But what I trade and how I trade it is entirely me. theStockBandit is primarily a Swing Trade letter but for the last 6 months (it seems) but the market has dictated that it has become more of a day trade letter. I like that since it tells me that Jeff is adjusting his strategy to what the market is telling him rather than just following a prescription.

My next big foray into learning the craft was to attend a Traders Expo (less than one year ago). It is free. The free seminars are (as you would guess) pushing the speakers' newsletter, software, consulting, courses, etc. But with only a few exceptions the speakers were real, live traders who love their craft and talked primarily about what they do in their own trading. I listened to many experienced traders and even talked to them. One that I always learn from is John Carter (TradetheMarkets) but I do not subscribe to any products that he is involved with. I have obtained one of his CD's (as part of a very inexpensive promotion) and found it an outstanding educational source. I highly recommend Traders Expo. My first time was "all new" and overwhelming. The next one was many of the same cast of characters but it reminded me of things from the first that I just didn't have time to integrate at the time.

So now we get to Twitter. I got to Twitter thanks to upsidetrader. I cannot speak too highly of Twitter.....but it is really the twitter (and more recently the StockTwits) community that I am talking about. Key to my use of Twitter is to weed out the wheat from the chaff and to not use what other people are doing/saying as something that I just follow. I tend to follow very few people.

And through Twitter and upsidetrader I learned about alphatrades. Since I like the dynamical aspects of intraday charts, Brian's videos are wonderful. They have honed my own chart reading or perhaps they have helped in the transition from continuous chemical production charts to continuous stock trading charts....there are many similarities but the underlying "process" is different so there are some significant differences.

I now get to the point of this dissertation....

I have benefits enormously from these freely given pseudo-educational opportunities. From Jeff's intraday discussion, to tradersinterviews, to upsidetrader, to alphatrends, to contributors on twitter, to stocktwits, and others.

But....I think the handwriting is on the wall. Many of these will cease or cease being free. First of all they cost time and money to keep up. Next there is obviously an understandable desire to monetize the effort. And finally the purpose that it serves to those providing them probably changes (and lessens) with time and become more time, effort intensive as the number of freeloaders like me increases. After all the people providing these free services are primarily traders. I was struck by upsidetrader's comments in his post yesterday, while on vacation, where he apologies to all of us for taking a 2 week vacation and will not be posting much, but he will maybe try to post. Now it's one thing for him to be obsessive and unable to get away from looking at the market, it's another thing when he seems to feel that he has an obligation to his followers. In my opinion that feeling of obligation diminishes his use of the blog for his benefit and will inevitably drive him to either monetizing the blog or dropping it. I read the same thing "between the lines" in some of the things that alphatrends says.

So....I have no answers...I hope that my concerns over the future of the "free community" are excessive. But in so many areas of technology the path from free...to charge....to (sometimes) riches has been the norm.

Maybe the next stage for some of us, will be to form our own limited sub-groups using technology like Twitter, or Skype, or Gizmo. That could help us all, but leaves the new people entering into trading without the access to the skilled and experienced people that I have learned from.

However, I do not foresee Traders Expo charging (or if the do it will be nominal). And maybe I will start using TE as a place to meet other traders who are attending rather than mainly the speakers.

Lastly.....your comments and dialog on these thoughts will be welcomed. And there is an early post about Gizmo.

How Chart Views Change the World

2009-04-10T14:54:00.000-04:00

While watching the end-of-day video for Thursday that was posted by alphatrends.blogspot.com, I was stuck by the obvious parabolic increase of XLF at the end of the day. I missed that entirely. So I went back to look at some charts and found an interesting effect: the length of time and the aspect ratio of the chart can enhance or hide the real behavior.

Here is a small example showing only the effect of time frame (but not aspect ratio).

The charts are all 1 min charts. The first 2 are for 1 hour.

Here I show the XLF chart near the beginning of the parabolic rise. I can clearly see the breakout into the bullish trend. But this doesn't seem all that unusual a move, to me.

Now let's look at the last hour...same chart window. Still a nice chart, but nothing that tells me what is really going on.

Finally, a full day chart, still 1 minute. The parabolic increase is clear from shortly after the S1 breakout.

I've played a bit with the time frame and the aspect ratio. Increasing the aspect ratio and increasing the time frame makes it easier to see. But it's not obvious to me what time frame and size I would use to not miss such a trend.

My conclusion is to frequently flip back to a 5 or 5 1/2 hour view to see the entire picture. Maybe a longer view in a 15 or 30 chart would also be good. I have not looked at that. But my feeling is that in a fast moving chart like XLF, the 1 minute time frame is really important. After all the duration of the parabolic portion of this chart is only 1 1/2 hours and you don't really know that it is going parabolic until after it has started and you see the rapidly increasing moving averages.

Why do I care? I think a couple of reasons:

1. I would certainly ride this right into the close or slowing of the slope. (Yes I did that, fortuitously).

2. I would have a different stop loss strategy. Not sure what but possibly give it more room for volatility.

3. I also would be much more inclined to increase my position size during the acceleration phase.

Dumb Move and Compounding It

2009-04-09T20:19:00.000-04:00

OK, this morning I put up a chart showing DJUSFN yesterday afternoon. I took a small position in FAZ after the breakdown having waited for a pullback which then showed a decent continuation (see how the EWMA8 goes horizontal, then goes back down, and look at the index bars).

Screw-up number (SUN) #1: I failed to notice (don't ask how) that we hit S1. We almost always overshoot S1 (or R1) and then consolidate back. So I have a mental trading rule to sell at S1 or at least have my finger on the button watching the overshoot. So I should have sold, but didn't.

SUN #2: EWMA8 went horizontal, WARNING, and started to turn up, SELL....I didn't.
SUN #2a: Dumb...I wanted/expected market to sell off, so I gave it room (Lesson once again: the market does what it wants not what I want it to do, although it might do what you want it to do.)

SUN #3: We now had an 8/20 crossing positive.....a warning of a potential consolidation (sometimes even a buy). So sell FAZ....nope I didn't.

SUN #4: EWMA 20 goes horizontal, EWMA 8 is also horizontal, so we are in a consolidation area. I didn't note that (or maybe I did) but instead expected the market to go down again.

SUN #5: EWMA 20 turns positive. We are in an uptrend. We are near the end of the day when things can be fast and furious. DUMP, DUMP, DUMP.......which I didn't.....DUMB.

Minor SUN #6: So having ridden FAZ down into a nice loss, I decided to hold it overnight. After all, news is bad, I didn't have good feel for the market on Wednesday, and end of day rallies seem to fade in the morning or at least open somewhat even...so I would have a chance to sell in the morning.

SUN #7: SPY and other indicators were up in post market (a lot). Japan was up (not all that important). DAX was up overnight strongly. We would be up. So....be ready to sell even in pre-market. But futures were up a bunch, but not terribly (in my opinion), so I expected an open near the pre-market high in SPY and possibly a small overshoot followed by a fade. On a "NORMAL" day, this would have been a reasonable assumption....and I expected a "holiday" type of day, so I expected a sort of normal day. Foolish: as more skilled people than I have said, read the tape (so to speak), read the market, and don't follow what you think will happen.

SUN #8: Now the Wells Fargo news hits. Now the futures, XLF and everything else gaps to moon. Sell the news....right? So since I was already short (FAZ), I continued to hold. Well today this was wrong.

SUN #9: For a good part of the morning we are in a very narrow trading range. So I am holding a big loss and watching the chart "playing" it for an entry (not wanting to exit). I had multiple times to get out in the trading range. At this point it made no large difference if I stayed in or got out, since the range was so narrow. What I should have done was booked the loss already, and watched for an entry if I was still rational.

Smart #1: A brief consultation with one of the blog people reinforced to just get out, watch for an entry (either long or short), but get out...no point in holding. FINALLY Sold FAZ.

Smart #2: Now I was able to concentrate (after about 1 hour of misery) to look at the market again and watch the bullish breakout. Trading FAS in both scalps of 5-10 pennies and decent runs of 15-35 pennies. Traded enough shares that I made up nearly half of the FAZ loss, and if I were gutsy I could have easily made up all of the loss just in the late afternoon parabolic up. But I was gutsy enough to trade at all, I thought.

So.....I know from talking to a lot of other people over the last year or so that everyone makes some really dumb mistakes. I know the key is to keep the loss limited always. And especially LEARN from the mistakes.

So....I post this:

1. by going public maybe I will really learn from my mistake (and apologies to my trading buddy to whom I did not tell this tale of woe at all today, because I felt so stupid).
2. I'm sure that others who read this blog will already have or will someday beat themselves up for something similar.
3. Find it useful to have seen by post-analysis that there were 7 times when I could have exited more sensibly with several being profitable (or near breakeven) and many being smaller for losses. [This reminds me that in most things you are offered multiple decision/opportunity points, and the real mistake is not taking any of them.]

Financial Trade Example

2009-04-09T08:00:00.000-04:00

An interesting opportunity was seen in the late afternoon as shown on the below 1 Min chart of DJUSFN (financial index). Shown are the EWMA for 8, 20, 50. I have previously commented that a 8/20 crossing is often a good indicator of an entry point, and also watching it for a little time can indicate a consolidation. Look at the region inside the white box...
The 8/20 indicates a very tight consolidation. The break 8/20 divergence to the downside, then confirmed by the break of the lower box boundary was a good entry for a short (SKF or FAZ) entry. The worst case exit point should have been the 8/20 cross to the upside a little later. A long entry could have been initiated at the point, but a safer point would have been after the next 8/80 consolidation when the EWMA-50 has flattened out. Note also that the bottoming of the 8/20 occurred at S1, so we also had reason to believe that when the index value undershot S1, we would pause and probably at least pullback to S1.

Hindsight.... I didn't trade it as well as this chart would have indicated.

Financials Trade / Trend

2009-04-02T08:46:00.000-04:00

Using the 8/20 crossings on the DJUSFN worked very well yesterday. I then looked at how it compared to VWAP. It still gave excellent entry points. However a break of VWAP gave a better exit indicator (it was leading the 8/20 crossing)

Conferencing

2009-03-31T21:18:00.001-04:00

I noticed that a follower (wow....I'm honored) seems to have Gizmo (a phone like Sykpe). No charge for computer-to-computer. Nor for a conference call set-up (I don't think). Might be an interesting thing to try out for us relative newbies.

What do you think....let me know (however you do that...probably through a Twit at Twitter

Financial Index(es)

2009-03-31T20:45:00.000-04:00

A lot of us follow XLF, the financial SPDR. Indeed, I trade as much (if not more) based on the XLF movement rather than the FAS, FAZ, SKF, etc. It is closer to the movement of the actual underlying stock values so it is not as influenced by the buying/selling pressure as the ETF products are.

BUT there is another index -- DJUSFN -- the Dow Jones Financial Index. When I first started short term trading, I was directed to this index as a good way to assess the financials.

So recently I have been comparing XLF to DJUSFN.

I've seem some interesting differences. You can trade from either. But the Pivot Points and so to some extent the support and resistance are different. Since they are different indices, this is not surprising. Further I find that the FAS and FAZ will tend to stall when "significant" levels are approached on EITHER...in other words...BOTH.

So today, starting at about 12:30 I found DJUSFN to be a much better indicator. And at least from 12:30 - 3:00 I found that if I looked at the 1-minute chart EWMA-8 and the EWMA-20, that whenever the EWMA-8 touched the EWMA-20 (we were in an uptrend, so EWMA-8 was above EWMA-20)..that DJUSFN would bounce and FAS would follow suit. The FAS uptrend was preserved as long (over 2 hours) as the 8 did not cross below the 20. As soon as it did, it was the time to exit and consider FAZ. If I had not put pretty tight limits on what I would "give back", I could have had a several hour "hold" that would have netted nearly 50 pennies on FAS. Not all that bad had I done that.

This pattern could be seen for XLF too, but not nearly as clearly.

A caution...I think that any of these indices fall apart a bit after 3:00 when the pro's are closing out their day positions (not saying we aren't pro's just a different kind). This was obvious today which of course was window dressing end of quarter.

END OF DAY TRIN PLAY FOR S&P

2009-03-29T22:47:00.000-04:00

Upsidetrader had an article from GS about S&P overnight plays. It is a more general approach than one that I learned at a Traders Expo (I'm not sure from who).

The essence is:

If at the end of the day $TRIN is 1.50 or more, then buy SPY between 4:03 and 4:13. (And NEVER on a Friday for over the weekend)

Then sell them in the morning no later than 9:50. If you are in losing position....sell.

If $TRIN is above 1.8 (or maybe it was 2), then it is even a stronger bounce.

Now...the essence of this is that if the S&P was in a strong sell-off at the close then there is a high probability of a bounce in the AM.

I have modified this in two ways...

a. I want to see the trend of $TRIN increasing or at least horizontal into the close. In other words if we are deep into a sell off (TRIN very high) and we have an end-of-day rally, I don't want to but the SPY.

b. The stronger the sell off and trend, the more SPY risk I am willing to take.

The conditions don't happen very often, but when they do, my experience is that 90% of the time I sell for a profit of .50 or more. 10% I'm out even. I have never lost on this.

Finally, I like to watch the tick chart after 4:00. Often we will get a small bounce and then it will fade. I try to buy the fade. BUT SPY stops trading at 4:15 so sometimes I wind up chasing it.

Another point is that for 3 to 4 minutes after 4:00, SPY is very volatile. I don't want to buy until after the volatility resolves.

THERE is no equivalent trade for a very low TRIN, though I could see the possibility with TRIN less than about .5. But I have no experience nor have I heard it used.

Note SPY trades on the AMEX until 4:15 and (at Schwab) it is executed as a regular order not as a post market order, even though it is after 4:00)

TRADING PLAN

2009-03-29T22:40:00.000-04:00

I have come up with some "trading plan" rules that I plan to follow. But these don't necessarily correlate exactly to where I will put a stop loss. And they are subject to modification.

Trading Plan

Follow religiously, no exceptions; as much as emotionally possible
Stop for at least 30 min (maybe 1 hour) if 3 in row, 4 out of 5, or 5 out of 6 trades are losses
Stop for at least 1 hour if any single loss is $500 or more
Stop for at least 1 hour if total daily loss is $500 or more or if draw-down from Daily max is $500 or more
Stop for at least 2 hours if total daily loss is $1,000 or more or if draw-down from Daily max is $1,000 or more
Take a vacation day on the day before Options Expiration
Exit all trades 15-30 before FOMC release
Exit all trades (or very tight stops) by 2:59. Then let the 3:00 madness settle out (10 min or so)
Avoid trading in last 15 min of day

Indicators That I Watch for Day Trading

2009-03-15T22:31:00.000-04:00

I watch various indicators to try to determine the short term market tendency...

$TICK
+ If between +/- 600 generally indicative of choppy action. Outside of 600 indicates strong buy (>600) or strong sell (<-600). But one bar outside is discounted.
+ Trend of $TICK. I use a 14 period EWMA on a 1 min chart and a 2 period SMA on a 1 min chart. I like to observe a multi-minute trend, then look for a turning point from outside the +/- 600 level. I will consider entering or closing out a trade on the first follow though bar after the turning point.

$TRIN
+ I look at only the trend of $TRIN (on a 2 min bar chart). If $TRIN trends up, the market bias is down. If $TRIN trends down, the market bias is up. I try now to swim again the current (bias).
+ BUT, if $TRIN is >1.5 at the end of the day, then I will consider an overnight $TRIN play. In this play I buy SPY befor 4:15 PM (which is when the trading on SPY ends). I will sell the SPY in the premarket or within the first 15-30 min after the market open. This is a play that essentially takes advantage of a short term oversold condition that has not been resolved by the end of closing, so a short term oversold bounce is likely at the open. When this condition happens, I have a 90% success rate of 1-2 points and 10% of BE to slightly positive. I have never had a loss. But I don't always enter the play if I feel that the end of day action chart action does not confirm strong selling pressure into the close.

$VIX
+ I am told that $VIX can be a good alternative to $TRIN that is not as susceptable to distortions due to the Inverse ETF's. I have not watched this enough to confirm this, but it seems to be true. So following $VIX in the same way as $TRIN is subject to the same intraday interpretation.
+ I find (from Jan 2009) that when $VIX is >50, the volatility is higher to the point that I have to adjust my position sizes and stop loss limits to avoid being whipsawed. Obviously this should be a continuous change, not just below/above 50. But I find that 50 seems to be the "magic" level for my trading in recent weeks. (See ATR also)

ATR (Average True Range)
+ On a stock (including ETFs) I look at the ATR on the 3Min, 5Min, 1Day charts. I will use a stop loss (or a trailing stop loss) of 2 * 3 Min ATR or sometimes 2 * 5 min ATR. I will use 1.5 * 1 Day ATR to generate a Target price by adding (long) or subtacting (short) the value to the LOD (long) or HOD (short).