So, I think it was yesterday that I said I don't think ROK was strong enough to sustain itself above $55... And then it closed at $55.13 and I was stopped out of my position when it breached my stop that was set at the 2 days ago prior high. Of course today ROK gained 2% and I bought my short sale ($57.57) back for $55.60. A 3.3% gain (adjusted for Cost of Trade) over 7 trading days. I'm not one to argue with the market, and I'll happily take my 3.3% gain and say thank you, however...
I could have got more like a 5% gain if I interpreted the news headline: "Rockwell Automation to Present at Prudential Conference" as positive news that other traders and investors would want to buy ROK based on the results of that conference presentation. Combine that with the narrow range candle (almost a Doji) on Friday that could have been interpreted as an exhaustion gap (the % distance of the gap wasn't quite enough for me to jump ship) and I could have exited earlier. I stuck to my trading rules though because none of that had quite enough certainty. Based on the information I had, I decided that I'd leave it some wiggle room to hopefully let the trade develop a little further before tightening up my stop. I do want to review this with coach Rob and see what he thinks of how I handled it and accept any criticism offered.
In other news, I have a problem of my open trades working for me. It's a good problem to have, but I don't have quite as much experience managing the trades when they're working for me! I have 6 open positions (LNC +1.5%, T +5.4%, AMAT +2.3%, NAV +3.54%, GM +0.7%, OSI -0.4%). As you can see, this is a very good problem to have, but knowing that the markets are a bit overbought and we're more likely to see some profit taking than not tomorrow has me a little twitchy on these long positions. I'm going to follow the rules in managing these, but may tighten and get out on early signs of sell-off in order to actually lock in those profits. Stay tuned, it's just beginning to get interesting!
Tuesday, September 26, 2006
Monday, September 25, 2006
Current Positions Update 2006-09-25
It seems I must have dumped my AT&T Option early. it's now worth $1.70 (240% return) which is way more than a mere 150% return. Does this bother me? Not really, I'm only dabbling with Options at the moment. I still have the stock and it's gained over 6% for me (in 4 days). Stocks are my primary focus for now.
Every position that I have is working for me at the moment (long: LNC +0.95%, NAV 0%, AMAT +0.85%, T +6.43% & short: ROK +5.01%). So, despite my early sell-off of option on T, I'm in good spirits and am feeling pretty good about these trades. I was very close to putting live money into the market on the setups I saw coming today, but alas decided to stay my hand for a bit longer. It will happen very soon, quite likely on the next clear market setup (such as today's broad market setup). Combine that with a nice setup on an individual stock and I'll be placing real trades. Of course the current percentage returns are only if I actually locked in my profits today, I could easily end up with more or less...
Currently ROK is has my attention most of that list, since it's the only one working against the general market direction. It even breached over $55, but has since pulled back. I don't think it's strong enough to maintain above 55. Earlier today I saw some institutions showing sell intentions and the buy-in volume isn't really anything to be overly concerned with so far today. It wasn't a huge surprise to see some buy-in at it's low today ( 53.85 so far), given that the previous swing low closed at 53.90. ROK's sinking could be weakening or it could just be the general market pressure falsely holding this particular stock up (or preventing it from plummeting). I'll keep a watchful eye, but at the moment I'm still happy to be short on ROK.
Every position that I have is working for me at the moment (long: LNC +0.95%, NAV 0%, AMAT +0.85%, T +6.43% & short: ROK +5.01%). So, despite my early sell-off of option on T, I'm in good spirits and am feeling pretty good about these trades. I was very close to putting live money into the market on the setups I saw coming today, but alas decided to stay my hand for a bit longer. It will happen very soon, quite likely on the next clear market setup (such as today's broad market setup). Combine that with a nice setup on an individual stock and I'll be placing real trades. Of course the current percentage returns are only if I actually locked in my profits today, I could easily end up with more or less...
Currently ROK is has my attention most of that list, since it's the only one working against the general market direction. It even breached over $55, but has since pulled back. I don't think it's strong enough to maintain above 55. Earlier today I saw some institutions showing sell intentions and the buy-in volume isn't really anything to be overly concerned with so far today. It wasn't a huge surprise to see some buy-in at it's low today ( 53.85 so far), given that the previous swing low closed at 53.90. ROK's sinking could be weakening or it could just be the general market pressure falsely holding this particular stock up (or preventing it from plummeting). I'll keep a watchful eye, but at the moment I'm still happy to be short on ROK.
Friday, September 22, 2006
T - NOV32.5C
Slightly ahead of coach Rob talking to me about options, I bought the AT&T Nov32.5 call option for $0.50 on Wednesday morning at the same time as I purchased the stock for $31.60. I only bought one contract for $50 and sold it this morning for $125. Most people can do that math in their head: 150% in just over 2 days.
Of course any one trade can make you money, and options can certainly get you triple-digit percentage returns. That's very exciting, however one thing that coach Rob did not have to tell me about options is that the difference between the Bid-Ask spread is a hugely significant percentage (5-10% typically), compared to the percentage of the difference between the Bid-Ask of a stock. This means that any buying and selling of options comes with a 5-10% loss built-in. With slippage like that, you really need to have a solid win-loss ratio.
Consider the option trade I described above: Sure I made 150%, however I could have easily lost 15-30% and sold the contract back for $45-$35 had the stock gone the other direction. Although the reward:risk may be justified at ~3.5:1 there's no such thing as a completely certain trade, and when you're losing 5-10% built-in, you've really got to be trading well to not get eaten alive!
Of course any one trade can make you money, and options can certainly get you triple-digit percentage returns. That's very exciting, however one thing that coach Rob did not have to tell me about options is that the difference between the Bid-Ask spread is a hugely significant percentage (5-10% typically), compared to the percentage of the difference between the Bid-Ask of a stock. This means that any buying and selling of options comes with a 5-10% loss built-in. With slippage like that, you really need to have a solid win-loss ratio.
Consider the option trade I described above: Sure I made 150%, however I could have easily lost 15-30% and sold the contract back for $45-$35 had the stock gone the other direction. Although the reward:risk may be justified at ~3.5:1 there's no such thing as a completely certain trade, and when you're losing 5-10% built-in, you've really got to be trading well to not get eaten alive!
Thursday, September 21, 2006
Discipline, Patience & TIMING!
Hi all. Yes, it's been a while since I've had my regular postings. It's because life outside the markets has been taking up so much of my time. No regrets on this and truthfully it's been a learning experience. I was just getting reasonably good with reading the markets and opening & managing positions. I was beginning to see some consistency and feel far less clueless than when I began paper trading over a month ago. I began to devote less time to analysis of the markets and my watchlists started to go stale. Even though there are plenty of stocks out there that had setups, I just didn't have them in my watchlists and it left me a little frustrated and impatient.
My impatience has cost me more than the previous gains when I was trading well. The difference? All three of the words in the subject line of this posting: Discipline, Patience & Timing! Yeah, it sucks, and it makes my track record look worse than I feel my skills & knowledge should reflect. Unlike my earlier bad trades, I definitely had the direction read correct, but my timing was bad. I got impatient because I wanted to have some open positions to talk about with coach Rob. Instead of being able to be proud of my trading prowess Rob immediately questioned why on earth I'd enter the trade when I did. Actually he said that with a bit more care... something more like "So you just wanted to tie a noose around your neck and hang yourself, eh?" ... ok, maybe that wasn't that gentle ;-).
Fortunately these are Paper Trades! My ego may be bruised a little, but at least my pocket book is not harmed. The natural question, at least for my analytical mind, is: How did I get here? Several factors play into these bad trades:
The silver lining that has me optimistic: I nailed entry on HOG on 9/8 for ~$58.60, but had my limit too tight to my stop trigger (I put in a 5 cent window, which should have been 10 cents on a stock of that price range) and didn't get filled. I'd still be in HOG today with an adjustment to my exit stop set to $60.43 (two days ago's low) as of close of market today. I also mentally nailed CSCO with an entry on 9/11 for ~$21.95, but didn't have the time to do the further in-depth analysis that I'd like to have before entering a trade. I stayed out of it rather than haphazardly entering. I would have been kicked out on 9/19 for ~$22.55, but that is ~2.7% gain in 7 trading days, and you know what: I'll take that every time.
Beyond those specific mental-only trades I have been getting better reads on the broad market indexes and haven't really been surprised by the general market movement. As a matter of fact, I've been quite keen on general market direction recently and am getting better at applying that knowledge to help weight individual positions. I'm currently long on T (AT&T), with an aggressive entry of $31.60 on 9/21. One of my bad trades was an entry on Friday for LNC (bad timing, but it still has the potential of closing positive for me). I made a nice swing trade entry by shorting ROK on 9/18 for $57.57 which is shaping up nicely and I expect will spend tomorrow below it's close today at $55; in the meantime I'll adjust my stop to $57.06 (two days ago's low) which, barring any crazy up-gaping, should lock in a small profit at the very least.
I've made my share of mistakes recently, but am learning from them. I'll be back-dating posts to cover my weekly coaching calls, so look for them below. Thanks for checking up on me and I'll be keeping the content fresh as my life reaches a more sane pace!
My impatience has cost me more than the previous gains when I was trading well. The difference? All three of the words in the subject line of this posting: Discipline, Patience & Timing! Yeah, it sucks, and it makes my track record look worse than I feel my skills & knowledge should reflect. Unlike my earlier bad trades, I definitely had the direction read correct, but my timing was bad. I got impatient because I wanted to have some open positions to talk about with coach Rob. Instead of being able to be proud of my trading prowess Rob immediately questioned why on earth I'd enter the trade when I did. Actually he said that with a bit more care... something more like "So you just wanted to tie a noose around your neck and hang yourself, eh?" ... ok, maybe that wasn't that gentle ;-).
Fortunately these are Paper Trades! My ego may be bruised a little, but at least my pocket book is not harmed. The natural question, at least for my analytical mind, is: How did I get here? Several factors play into these bad trades:
- I haven't had my regular ~2 hours a day in front of the market. I have been watching the S&P, DJIA, COMPQ, and have only been quickly going through my watchlist.
- I haven't been keeping up with the news.
- I didn't follow my own trading rules.
- My watchlists became stale and I missed opportunities on a number of stocks that are now in my watchlists that would likely have been there before, had I been more vigilant in maintaining them. The time investment in improving my watchlists beginning with the end of last week has resulted in me having better trading opportunities this week.
- I postponed my weekly coaching call with Rob because I wasn't prepared on Wednesday, and quite honestly have not been getting quite enough sleep.
- I got impatient and wanted to have a few open positions to discuss with Rob, which only turned out to be an embarrassment.
The silver lining that has me optimistic: I nailed entry on HOG on 9/8 for ~$58.60, but had my limit too tight to my stop trigger (I put in a 5 cent window, which should have been 10 cents on a stock of that price range) and didn't get filled. I'd still be in HOG today with an adjustment to my exit stop set to $60.43 (two days ago's low) as of close of market today. I also mentally nailed CSCO with an entry on 9/11 for ~$21.95, but didn't have the time to do the further in-depth analysis that I'd like to have before entering a trade. I stayed out of it rather than haphazardly entering. I would have been kicked out on 9/19 for ~$22.55, but that is ~2.7% gain in 7 trading days, and you know what: I'll take that every time.
Beyond those specific mental-only trades I have been getting better reads on the broad market indexes and haven't really been surprised by the general market movement. As a matter of fact, I've been quite keen on general market direction recently and am getting better at applying that knowledge to help weight individual positions. I'm currently long on T (AT&T), with an aggressive entry of $31.60 on 9/21. One of my bad trades was an entry on Friday for LNC (bad timing, but it still has the potential of closing positive for me). I made a nice swing trade entry by shorting ROK on 9/18 for $57.57 which is shaping up nicely and I expect will spend tomorrow below it's close today at $55; in the meantime I'll adjust my stop to $57.06 (two days ago's low) which, barring any crazy up-gaping, should lock in a small profit at the very least.
I've made my share of mistakes recently, but am learning from them. I'll be back-dating posts to cover my weekly coaching calls, so look for them below. Thanks for checking up on me and I'll be keeping the content fresh as my life reaches a more sane pace!
Wednesday, September 20, 2006
Coaching Call Week 13
Now that we've completed the formal training manual, I get to pick Rob's brain and get some feedback on my trades. After a great deal of diligence on my part to get better stocks into my watchlists, I found some decent swing setups and opened a couple trades. Rob and I looked at how I entered a long position on T earlier that day. I was complimented on this being a nice swing entry and there wasn't much more to say about it. Likewise, I had entered a short position on ROK on Monday. This was a classic swing entry and was developing nicely. Once again I was complimented on my entry and we spent only a moment talking about managing this trade. I just followed the rules and this was a far better week of trades. You learn much more from your mistakes, so we went on to talk about other things.
Rob primarily trades Options and he wanted to talk a little about how options work and the Reward:Risk ratio that option trading involves. With Options, you're talking higher leverage trades and timing is even more critical. You can lose 20% or gain 80% (or more). Does that sound like a reasonable Reward:Risk? Sure does. Eventually I'm certain to trade options including spread trading (especially the strategies taught in the Trading PIT classes), but not until I have achieved a mastery of stock trading first. Rob's thinking behind this is that I'll benefit most from actually mastering on trading system in the realm of stocks. A master of one rather than being so-so with many. I'm quite new to trading and his guidance has helped me stay on track and given me some feedback that has been very useful in developing the discipline of being a trader. I think this approach is a great way to go about learning this profession.
Rob primarily trades Options and he wanted to talk a little about how options work and the Reward:Risk ratio that option trading involves. With Options, you're talking higher leverage trades and timing is even more critical. You can lose 20% or gain 80% (or more). Does that sound like a reasonable Reward:Risk? Sure does. Eventually I'm certain to trade options including spread trading (especially the strategies taught in the Trading PIT classes), but not until I have achieved a mastery of stock trading first. Rob's thinking behind this is that I'll benefit most from actually mastering on trading system in the realm of stocks. A master of one rather than being so-so with many. I'm quite new to trading and his guidance has helped me stay on track and given me some feedback that has been very useful in developing the discipline of being a trader. I think this approach is a great way to go about learning this profession.
Friday, September 15, 2006
Coaching Call Week 12
Today's call was rescheduled from my usual Wednesday morning time-slot because I was feeling a bit too ill and unprepared for the regular Wednesday morning call. Life has become very interesting recently and sleep, Trading and Music pursuits have all sacrificed a little. Since we finished the formal calls today's was free-form where we looked through my current open positions.
I suppose now is a good time to interject a little background to help set the scene. This posting is coming out of order, I'm actually writing this on 9/26 but am back-dating the post to 9/15 to keep the coaching calls in the order they actually happened rather than the order in which I finally get around to writing up my experience -- please forgive this minor inconsistency but I didn't find time to write up blog posts while all this was happening. As I've mentioned in a couple other postings I met a very special lady and well... those first couple weeks I put nearly everything on hold... Can you blame me?
So, in a hurried, impatient manner, and ignoring my normal good practices in finding a stock with a nice 2:1 (or better) Reward:Risk ratio and basically ignoring all my trading rules, experience and knowledge I opened 3 long positions while the markets and the individual stocks still had much more pulling back to do before it was time. I didn't have any open positions for the previous ~7 days and didn't want to have a coaching call with no open positions to discuss with coach Rob.
As you can imagine, at first glance Rob was bewildered by why I'd do such a thing. I believe the question was: "So you just wanted to tie a noose around your neck and hang yourself, yes?" I fessed up that I will not defend my positions and that impatience and wanting to have some open trades led me to entering these positions. Fair enough right?
I've already covered all this in another posting entitled: Discipline, Patience & TIMING! which is my confessional about all the sins I committed with those trades. I don't feel the need to rehash here, that would be far too much self-abasement for my taste and would be about as useful as actually beating myself up. Hey, I made some mistakes, and have that experience to draw from to not make them again. The great thing about making these mistakes is that I've been able to learn some lessons at no cost to my trading account. These are not mistakes that I'll soon repeat.
I suppose now is a good time to interject a little background to help set the scene. This posting is coming out of order, I'm actually writing this on 9/26 but am back-dating the post to 9/15 to keep the coaching calls in the order they actually happened rather than the order in which I finally get around to writing up my experience -- please forgive this minor inconsistency but I didn't find time to write up blog posts while all this was happening. As I've mentioned in a couple other postings I met a very special lady and well... those first couple weeks I put nearly everything on hold... Can you blame me?
So, in a hurried, impatient manner, and ignoring my normal good practices in finding a stock with a nice 2:1 (or better) Reward:Risk ratio and basically ignoring all my trading rules, experience and knowledge I opened 3 long positions while the markets and the individual stocks still had much more pulling back to do before it was time. I didn't have any open positions for the previous ~7 days and didn't want to have a coaching call with no open positions to discuss with coach Rob.
As you can imagine, at first glance Rob was bewildered by why I'd do such a thing. I believe the question was: "So you just wanted to tie a noose around your neck and hang yourself, yes?" I fessed up that I will not defend my positions and that impatience and wanting to have some open trades led me to entering these positions. Fair enough right?
I've already covered all this in another posting entitled: Discipline, Patience & TIMING! which is my confessional about all the sins I committed with those trades. I don't feel the need to rehash here, that would be far too much self-abasement for my taste and would be about as useful as actually beating myself up. Hey, I made some mistakes, and have that experience to draw from to not make them again. The great thing about making these mistakes is that I've been able to learn some lessons at no cost to my trading account. These are not mistakes that I'll soon repeat.
Thursday, September 14, 2006
More Blog Updates Soon!
Hi everyone, I've been taking a vacation from my regular postings, but haven't stopped watching the markets and looking for good trading opportunities. I have much that I want to post, but just haven't had the time to put my thoughts into words to share with you. In addition to a position change at work (now I'm full-time, which means I'll have more $s to seed my trading account), I've met someone remarkable (yes, a lady :-)) . This blog isn't about my personal life and I'm not one to be overly public about such personal matters, but just know that my head and heart (my top, most trusted analysts) are advising a "Strong Buy."
So now you know the reason behind the absence of postings, but I'm still here and am still progressing in my knowledge and skills related to trading. I can tell you that I've been getting better and better at reading the market and my daily forecasts on the broad market indexes and individual stocks has improved tremendously, however I've been having some difficulty finding good setups on the stocks in my watchlists. Because of this, I've realized that I must be more vigilant in maintaining my watchlists. Just another lesson on my path to being a successful trader.
More to come...
So now you know the reason behind the absence of postings, but I'm still here and am still progressing in my knowledge and skills related to trading. I can tell you that I've been getting better and better at reading the market and my daily forecasts on the broad market indexes and individual stocks has improved tremendously, however I've been having some difficulty finding good setups on the stocks in my watchlists. Because of this, I've realized that I must be more vigilant in maintaining my watchlists. Just another lesson on my path to being a successful trader.
More to come...
Tuesday, September 12, 2006
RE: up and down
A couple days ago my father asked me about two stocks. My response is offered below.
As far as IDCC... hmmm... Honestly, the 1 year direction is up, and the most recent movement has been up (after some major selloff). I wouldn’t be trading against the trend. Again, you looked at it few days ago and I don’t think you’re wrong to have thought we could see a reversal and downturn on Monday... However, it continued it’s uptrend yesterday and today. The fact that it can’t seem to sustain a price up above the $35 mark means it may be at the end of it’s uptrend and the previous couple days moved up as it followed the general markets more than it having individual strength. We could see a downturn, but this is trading against the trend and the trend is your friend. It’s just more risky to make that kind of a trade than to trade with the trend.
Sent: Sunday, September 10, 2006 11:19CRL seems to be a decent stock for a long position. Of course we’ve seen some confirmation for that since you sent this message (so congratulations on a good pick), but unfortunately we don’t have a good entry point. The entry point would have been on Thursday of last week however the reward:risk didn’t look good, not to mention the fact that it failed to put in a higher peak and consolidated around $41 (which I’d have looked at as a possible weakening trend, and why not just find a better stock?). CRL has confirmed it’s uptrend and now looks like it’s going to push through up to it’s previous range before gapping down back in mid-May. We’ll probably see it stall out at around the $45 mark, assuming it can break through the $42.50 mark that it hovered around in October & December of last year. This is one that I’ll keep looking for a good entry point in order to capture some of that movement
Subject: up and down
Mark here are a couple. I would like to know what you think?
2 weeks for a up CRL
2 weeks for a down IDCC
As far as IDCC... hmmm... Honestly, the 1 year direction is up, and the most recent movement has been up (after some major selloff). I wouldn’t be trading against the trend. Again, you looked at it few days ago and I don’t think you’re wrong to have thought we could see a reversal and downturn on Monday... However, it continued it’s uptrend yesterday and today. The fact that it can’t seem to sustain a price up above the $35 mark means it may be at the end of it’s uptrend and the previous couple days moved up as it followed the general markets more than it having individual strength. We could see a downturn, but this is trading against the trend and the trend is your friend. It’s just more risky to make that kind of a trade than to trade with the trend.
Wednesday, September 06, 2006
Coaching Call Week 11
Today was the last formal coaching call that covers a chapter of the manual. The chapter title is "Trading Systems: Pulling It All Together." As the chapter title implies, this covers the ideas of daily routines, money management, trading rules, etc...
Rob started out of the manual by asking me the question: "What is the first thing you do each day?" I initially started with "Look through your hotwatch stocks..." but paused and interrupted myself, feeling that I was slightly off. Rob then followed up with "If you were going sailing, what would be the first thing you need to..." I cut him off: "Of course, check the broad market indexes, which I am already in the habit of doing, I just skipped that step and got ahead of myself." These weekly calls are in the AM, and have I mentioned that I'm not really a morning person? ... Chalk the initial answer up to the caffeine not having quite hit the bloodstream yet.
The start of my daily routine is an analysis of the broad market sectors (S&P, DJI, COMPQ) followed by a look at what's in the news and any events that may be coming up that will affect the markets (economic announcements, etc...). Follow this up with a dash of analysts opinions, set the oven for 350 and let your dough rise. Along with the typical sources of news, Rob pointed me to the following free resources http://tradertim.blogspot.com/, and http://www.thekirkreport.com/. Both can be useful as they can supply you with another trader's opinion of market conditions.
After knowing pertinent market information and pending news it's time to manage our current open positions. Knowing the general market conditions can help evaluate the viability of each open trade. Some time should also be taken to look at news items affecting a given stock and sector. A look through the intraday charts with a keen eye on volume spikes can help offer some clues as to the strength or weakness of your position. Often times it's as simple as deciding how to adjust our stop-loss.
Finally, it's time to look through watchlists for trades that will likely match the current market setup. If you're expecting the general market sectors are about to go up because a recent round of profit-taking, you can look for bullish positions. Or if you're seeing an imminent round of profit taking or the early signs of a bearish market reversal, you can give a little more weight to your bears watchlist when looking for good setups as a general market pullback may be enough to send one of your bears plummeting.
What began as a bleary-eyed, stumbling, stammering start ended up being a very enjoyable call that really does help pull it all together.
Rob started out of the manual by asking me the question: "What is the first thing you do each day?" I initially started with "Look through your hotwatch stocks..." but paused and interrupted myself, feeling that I was slightly off. Rob then followed up with "If you were going sailing, what would be the first thing you need to..." I cut him off: "Of course, check the broad market indexes, which I am already in the habit of doing, I just skipped that step and got ahead of myself." These weekly calls are in the AM, and have I mentioned that I'm not really a morning person? ... Chalk the initial answer up to the caffeine not having quite hit the bloodstream yet.
The start of my daily routine is an analysis of the broad market sectors (S&P, DJI, COMPQ) followed by a look at what's in the news and any events that may be coming up that will affect the markets (economic announcements, etc...). Follow this up with a dash of analysts opinions, set the oven for 350 and let your dough rise. Along with the typical sources of news, Rob pointed me to the following free resources http://tradertim.blogspot.com/, and http://www.thekirkreport.com/. Both can be useful as they can supply you with another trader's opinion of market conditions.
After knowing pertinent market information and pending news it's time to manage our current open positions. Knowing the general market conditions can help evaluate the viability of each open trade. Some time should also be taken to look at news items affecting a given stock and sector. A look through the intraday charts with a keen eye on volume spikes can help offer some clues as to the strength or weakness of your position. Often times it's as simple as deciding how to adjust our stop-loss.
Finally, it's time to look through watchlists for trades that will likely match the current market setup. If you're expecting the general market sectors are about to go up because a recent round of profit-taking, you can look for bullish positions. Or if you're seeing an imminent round of profit taking or the early signs of a bearish market reversal, you can give a little more weight to your bears watchlist when looking for good setups as a general market pullback may be enough to send one of your bears plummeting.
What began as a bleary-eyed, stumbling, stammering start ended up being a very enjoyable call that really does help pull it all together.
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