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Archive for June, 2008

Do you have a business plan?

Keep a journal?

Even if no one ever shows up and reads my entries, no matter. This is my journal, and the consistent focus on capturing my primary trading thoughts each day brings clarity to my business.

Yes, trading is a business.

It is not a hobby or a pastime; it is how some of us earn a living.

We have capital as our inventory; our discipline, knowledge, and skills as our sales team. Our losses, fees, equipment, data, and education are expenses.

Our profits are what we earn above and beyond the sum total of our expenses.

A business is not about any one customer or client. Trading is not about any one trade, but rather the consistent approach to finding high probability opportunities.

A few of the gurus were so busy suggesting we were going to1295 today they kept missing the pattern set up and the normal trading signals. Markets usually need to stabilize before they can retrace. In reality, we made a 10 point lower low.

Why bias your thinking with the thought “Today must be a bounce day because we went down so far yesterday.” ? Just read the signals, get lucky with a guess or two, and see the “completed pattern” in your mind even as it is in it’s embryonic state.

Keep it simple, and just take the trades.

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The noise you heard today was the crashing of the bulls hopes and dreams.

Umbrella’s were up all day long, and everyone who kept buying the low for a bounce got beaten up pretty badly.

Body bags were issued for all the traders who get it wrong and average in going the wrong way.

Intuition is a trader’s best friend, (after the stop loss, of course) and seasoned traders were not interested in the long side today if they understand how markets work.

Differentiating between a normal rally and pullback scenario is quite different from yesterday’s reversal.

Several key charts were available, as well as the code sells that occurred premarket and during the regular trading hours.

The Wolfe wave on the daily that began May 19 completed it’s destination right on schedule. There are so many good ideas out there, just find these tools and use them.

Every month or so you get a fierce trend day that belies belief. If you cannot recognize this type of day, then you are doomed as a trader if you keep fighting it. You will give up a week’s worth of gains or more.

Give it your best shot, then if your normal plan isn’t working, stop trading. Live to fight another day.

If I were a salmon, I would fight the stream. Since I am just a dumb trend trader, I prefer trend trades until they stop working.

Forget the analysts, forget the gurus.

Learn how to trade what the chart is screaming at you.

Click to enlarge.

A Picasso

 

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Last Friday was the summer solstice, and there were approximately 30,000 party animals celebrating the event in Stonhenge.

Imperceptibly, but without dispute, we know the longest day of sunlight has already occurred for 2008. We are not ready to plunge into darkness; summer has just begun.

The seed for that season has just been planted.

I like to imagine a ball being tossed into the air. At it’s apex, it sits momentarily weightless, as if suspended by a thread, taunting none other than Sir Isaac himself.

This is that pivotal moment in time that Jesse Livermore would observe the current pyschology shifting from bullish to bearish.

As traders we need to observe the same reversal of momentum. I try to forget the talking heads on CNBC and use my powers of observation.

What tools do you use to recognize the reversal of trend?

After range trading for an hour or so after the FOMC minutes were released the market tested the upside.

With no clouds in the sky and sunglasses on, it was time to reverse.

 

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Jack was at his best in Heartburn.

Tigers cannot change their stripes, any more than bears or bulls can.

Let’s all get on the same page.

Sing along with me, won’t you?

The itsy bitsy spyder…

A main weapon of the boys is ambiguity.

Is the cup half empty or half full?

Let’s try another song to help us remember.

I’m a little teapot…

Like Jack, in another one of his memorable performances, on cue at 28 the bears proclaimed “Here’s Johnny.”

Here’s one of my own creations I am working on:

Mama bear pushed the bull’s head underwater,

Just like any good bear oughta.

Oops, now the bulls turn to run and snort,

‘Till it ‘s time again to take them short!

 At the risk of over staying my welcome with Jack, let’s end tonight’s lesson with one of my favorite’s. We need a few good men for this exchange.

 (You can be Kaffee)

Kaffee: “I want the Truth”!

(I will be Col. Jessep)

Col. Jessep: [Shouts] “You can’t handle the truth!”

The game goes on and on.

Watch for the sun, watch for the rain;

use sunglasses and umbrellas,

to avoid the pain.

The Itsy bisty spyder…

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So… what can’t go up, must go down. Or what can’t go down, must go up.

So we have been led to believe. If that is your reality, you may want to enroll in OT, overtraders anonymous.

Sideways action is often a path the market takes when it is indecisive and digesting a big meal like Friday’s. Range trrading allows us to scalp long and scalp short.

This type of action catches the late shorts who are finally convinced to jump in, and traps the early longs too eager for a reversal.

The numbers change, but the psychology does not.

System players recognized the key location and traded accordingly.

Waiting for candles to close for confirmation in a range day gives up an enormous edge to traders who trust their instincts and play tennis from the baseline.

Oversold markets need to correct themselves and revert to the mean through time, price, or both.

We are coming into the end of the month and end of quarter, so be on your toes for FOMC shenanigans.

 

 

 

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X rated

This week was option expiration.

Anything goes, and we were prepared for it.

Selling puts and calls every month seems to be quite a profitable enterprise for the boys judging by all those beamers, lexus, rovers, and mercedes they drive.

Of course, now and then they get beat.

Selling time decay (a certainty) and a loss of volaility (a possibility), the edge goes to the casino.

We need to be thinking ahead, how we will react to possible scenarios, and be ready for anything if we are going to win at this game.

Clinging to a bias is the surest way to get beat.

Understanding the premise that they want to run stops like they did thursday afternoon, then plunge overnight with the herd on its heels is the flexibility we need in our thinking.

Code traders understood pattern completion and had a field day this week, including friday.

X marks the spot.

Stan Moore  has developed an incredible system, and I am indebted to him for his valuable indicators as well as his system. Absolutely brilliant.

Adding the secret code to his methodology gives us a huge advantage.

By adding valuable parts to an already viable system we can increase the results exponentially.

Sweep your profits out of your account and have a blast this weekend.

 

 

 

 

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Anyome who is an active trader is sure to understand the significance of the immortal words, taken from the Gladiator:

“E: Strength and Honor.”

“FT: We who are about to die salute you!”

You need a reality check if you don’t understand.

Strength and courage to take the trades as they unfold at the most opportune time.

The courage to Honor your stops if you are wrong.

Kevin Haggerty is a great trader who you need to be studying if you are serious about your trading. His ideas have helped me a lot. The first year I read this kind of information I had no idea what he was talking about. It takes time to let it all sink in.

I had a great day in the market, I hope you did too.

 

 

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