March 21st 2008
I guess money does buy happiness…
Attention Tim Sykes haters.
If you’re thinking about trading commodities…
And finally, I thought this was an interesting take on the Fed as a Bank.
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March 19th 2008
So, I’ve been getting sucked back into day trading. If I am honest with myself and my readers, I don’t want to do it. I think there’s a fundamental flaw with day trading. That flaw is the number of decisions a trader is forced to make. I can make swing trades and make a handful of trading decisions a week. For me, trading less is a risk management technique. I may risk more on an individual trade, but my trades are thoroughly researched, and emotion is better kept in check.
If I’m going to day trade, I’m going to use one setup: The trap. I’ve detailed traps before. Today it worked really well. Let’s look at some examples:
Not a perfect setup on the daily, but I couldn’t ignore the gap this morning.
15mn entry over the HOD/triangle break worked out well. They don’t all run like this.
One other example.
I guess LOW was just “oversold”
Two nice entries depending on your timeframe. I prefer the 15mn, but also trade the 5mn.
Traps don’t happen all the time, and when they do happen, they’re not always tradeable. But if you can be patient and pick your trades carefully, they’re a very reliable pattern. If I can catch a few trades a week, I’m very happy.
The volitility in the market is killing my swing trading, but it’s this erratic market action has helped my intraday trading.
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March 18th 2008
A little MSM for you reading pleasure:
http://www.cnn.com/2008/POLITICS/03/17/poll.national/index.html
Ok, so how do you know this Recession is going to end. Honestly, it needs to get worse. As far as sentiment goes, when it can’t get any darker, you know the corner is close. It may be 6mo or 2 years, but it’s when everyone feels like there’s no hope. That’s when things start to change.
I don’t really put too much confidence in this CNN poll. I think we could drop for some time. But let’s look at a chart:
We’re in our third wave of selling. It is my experience that the waves beyond the third wave are more prone to failure. I’m not saying we won’t go lower and I’m not saying we’re going to rally.
What I am saying is if you haven’t gotten short by now, I would keep that capital close. There will be another opportunity.
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March 17th 2008
It gets stated ad nauseam that successful traders control their emotions. Greed and fear cannot enter the decision making process. The reason why traders have trading plans is to mitigate the input of emotions into trading decisions. But I’m not a robot. I’m not a computer that mindlessly buys and sells based on some algorithm.
For a discretionary trader, like myself, the ability to separate emotion from my decisions is a challenge. On the one hand, I have a rule based system that evaluates potential trades and governs my entries and exits, yet I must incorporate the human brain that looks for aesthetically pleasing chart patterns and reminds me of the cool toys I could buy if I exit a winner early instead of following my plan.
Here’s my suggestion for overcoming the emotional trader phase:
Associate trading capital to inventory. If you associate trading capital to some kind of illiquid inventory for your business, the less you will see it as something that could easily have been spent on toys, vacations, or whatever else you may want to do at the moment. I don’t even call money, “money” anymore. I call it trading capital. It takes the picture of a medium of exchange and replaces it with a bulldozer. I’m serious. When I hear “capital” used in a business context, I think of capital expenditures. Those large outlays that businesses make when times are good. For some reason I think of a Catepillar-brand bulldozer. Weird, I know, but it works!
Change how you measure trading success. Ultimately it does come down to how much you have in your bank account, but the daily fluctuations can be so erratic and dramatic that you’re better off associating trading success with the quality of how well you execute your plan. Being focused on following my plan doesn’t stress me out, instead it empowers me to push forward. I get a good feeling at the end of the day when I followed my plan to the letter because I know it works over the long term. One of the worst feelings I have is when my trading plan isn’t followed and I had a great day. I have no idea if what I did to do so well will work in the future. If faced with the same trading situation, should I bend my plan and do it again? I don’t like to answer those questions and feel that kind of pain.
As I stated previously, the ultimate gauge of trading success is the growth of your bank account. The only way to do this is to control your emotions. The only way to do that is to stop thinking like the investment public. Your trading capital is a tool, it can’t be exchanged for anything else and your job performance is graded by how well you follow your trading plan.
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March 14th 2008
Do you have the 7 habits of highly ineffective traders?
I’ve been keeping a trading journal for many years.
Here’s a cool short interest screen.
I learned traps from Brandon and Toni at Trading from Mainstreet. In this article Brandon defines a trap.
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