Monday, July 31, 2006

Tough Trends

With the word on The Street echoing statements like: "This is the most volatile market we've seen in 30 years," I seem to be entering my trading career in very difficult market conditions. I know, my friends are asking: "But you said you can make money in any market condition: up, down or even sideways." Although this certainly is true, it does seem to be easier to take advantage of trends and directional movements. I say this mostly because I've been studying trends and looking at swing trades. Additionally, I realize that there's a different kind of analysis involved in trades that take advantage of stagnation.

You may have realized this for yourself if you read my post on Trading P.I.T. Session 5 because of the need to quickly compare the different risk graphs for the various ways to take advantage of stagnation. A Calendar Spread is a great way to make money on a stock that's expected to trade in a set range. In order for me to really unlock the power of Calendar Spreads I'm going to need some more sophisticated analysis software. I've been working out simple Excel spreadsheets for basic analysis, but it's really difficult to compare the variations on the trade without risk graphs and the ability to compare all the aspects of an option (strike price, cost, delta, gamma, theta, etc...). Being able to match the risk graph with your outlook for the stock is the idea here. It may even be that you'd favor a Diagonalized Iron Butterfly instead of a Calendar Spread in a glance with the ability to quickly compare the risk graphs.

I'll be working on getting OPUS or something to help me assess these kinds of trades. I think I'm going to stick to the original trending trades here in the beginning. I favor the Ratio Backspread for these directional moves right now because of the uncertainty of specific direction for the market as a whole. It seems like stocks are getting ready to actually move in a direction, but that direction seems unclear. Maybe August isn't the month to actually establish a trend... we'll see.

In the meantime, I've discovered Interactive Brokers' recorded webinars about Trader Work Station (their trading platform). I now know how to place a Spread now, but I'm still a little confused about entering the stop-loss position automatically if the initial order fills. Now that I know the basics of Trader Work Station I'm sure I can get an answer from a coach on the Teach Me To Trade coaching hotline or attend a live IB webinar and ask.

I have managed to open a few positions and will let you know more as they develop and/or close.


Branden said...

I dont have a blogger account so it will Prob come up as anonymous...but my name is Branden. i just got done taking that starter workshop from TMTT but didnt have the money to do so seeing that im only 22 and out of state currently.

I was looking for some background info on TMTT(because I was excited to get started and figured it couldnt hurt) and found a couple sites bashing them and was really quite let down by what was being said until i found your post on one of them.

I have taken a few hours to read all your posts since finding that link and have decided to do the same thing. Borrow the money, sign up for classes one way or another. My gf helped me start a live journal because neither of knew anything about blogs. I will eventually send a link over. I figure the more people who keep track of their progress the better. I should be starting everything in the next month(classes and all) But will start putting in things anyway.

Thanks for blogging and hope to read more soon

Your friend in trading,

Trader Taocode said...

Hi Branden,

I'm glad you found my blog useful. I'll have a discussion board set up soon to open up the discussion a bit. I'm certainly not going to discourage you to learn more about the market nor undermine your efforts to create a blog. I think another person's experience will offer others even more insight into the process of becoming a professional trader using what Teach Me To Trade teaches.

With that said, trading is certainly not for everyone and blogging about it adds to the amount of time you'll need. I just make it look easy :-P. Between the classes, studying with my coach, practicing what I've learned, setting up a brokerage account, working on getting my credit fixed, being a freelance musician, and a full time job, blogging does seem to be a bit of an extraneous burden.

I have received several thank you emails and comments, and some ridicule. Most of the comments have been favorable. A big reason for me to blog is to help others make a more informed decision regarding Teach Me To Trade and the experience of becoming a professional trader.

I look forward to hearing more about your experience and expect to see you on the discussion board that I'll create. I wish the best for you and truly hope that trading is something that you really want to do. Having more knowledge is certainly never a bad thing, so I'm glad you'll be learning more before you become further involved.

Oh, and thanks for reading the whole blog. I can't imagine doing that at one sitting. Honestly I've surprised myself by how much I've written!

-- Mark