On paper, February was not very kind to me. You can see on the StockTickr Calendar View that I traded very little (7 trades versus 17 in January). And, my returns were a pretty meager 1.52 R in the end. Net positive after commissions, but not by much!

So, I am not sorry at all to see February go. Lots of choppy, overbought behavior was keeping breakouts in check. But, I can’t blame the markets, really… it’s mostly a matter of me sleeping at the wrong times. Several days I recall stalking stocks, only to give in and go to sleep before they finally broke. Oh well… most of the time I’d rather be rested than a little richer. But, when doing a month in review post, it starts to look bad after a few weeks.

Luckily, January was very good.

Here’s the table:

If I don’t sound concerned, it’s because I am noting that I have been spotting more good trades than ever, lately… I’ve just been pathetic at managing to catch them in February. Let’s see what we can do about that in March! (uh.. but not tomorrow… I’ve got other plans!)

I guess the only other standout thing about February was the big reminder of a daytrader’s advantage… no exposure to that big drop a couple days ago. That felt nice (though not as nice as massive short exposure would have felt!).

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I shorted JOYG today. I didn’t trade it properly, and was stopped for a 0.5 R loss. Thanks to Jamie, here is how it should have been played.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Crappy day for me. I took two trades, one a loser and another that broke even. I shouldn’t have traded today because I broke my undercapitalization rule–I only had 1/3 the equity I needed to support my commissions–1000x the cost of a one-way trade ($3.50 for Zecco after the 40 free ones). I should have waited one more day until my free trades reset from Zecco. I broke a lot of rules, actually. My focus was distracted by trading a Muddy setup and an X setup, which I referred to yesterday. That’s actually two daytrade styles, rather than a swing and a daytrade. Too much for me. I was also playing against the odds with my commission drag, and I felt the need to trade today, instead of saying “I don’t have to take a trade today”. Dumb! I rationalized that the Risk/Reward was still high on these trades, even with commissions included, but I need to stick to the 1000x capital rule in future, as it still affects the trade, where the breakeven is, etc.

Here’s the trades:

Northwest Airlines Corporation (OTC: NWACQ)

Bought based on big volume and 10/60 ema crossover.

One thing I did right is resist the urge to hold on overnight and hope for the loss to come back. Good for me–I only lost 1R, which was 1.5% of my equity plus some slippage–my planned entry was $1.56. A side note–the commission was 0.33R all by itself. What was I thinking? Also, with Muddy-style trades, you have a lower win rate but a much higher return on the big winners. I can’t just pick and choose single trades, but need to dive in and really trade the style if I’m going to do it, which I can’t at this point in my trading and life. :( Maybe someday, Muddy!

Trade Summary:

NWACQ Long 78 Shares
Entry: $1.58, Stop: $1.40, Target: $3.00
R: $21.04, Exit: $1.40
P/L: -1.00R, or ($21.04)

Joy Global Inc. (NASDAQ: JOYG)

Trader-X daytrade that broke even (almost). I chased the entry bacause I missed it–Strike 1. I had to be away from my desk, so I placed a stop at breakeven and left–Strike 2. My breakeven was much lower than my entry because of my commissions–Foul Ball, but pretty much a strikeout.

And a zoomed-in version:

I cranked up my trade risk $ amount since I am rarely “wrong” when I pick a good X-style trade. I don’t usually make the fib extension, but I usually at least breakeven or make a small profit, which is exactly what happened. Trader-X is going to be my exclusive daytrade style going forward, since it’s about taking fewer setups that are higher quality, which is what my capitalization demands. Also on this chart is the beta debut of my “Trader-X” Paintbar–the blue and the white arrows. I’ve been writing more soliloquies than Shakespeare lately, so if you want to know about that one, you’ll have to post a comment. :)

Trade Summary:

JOYG Short 50 Shares
Entry: $44.48, Stop: $45.13, Target: $42.00
R: $39.50, Exit: $44.36
P/L: -0.03R, or ($1.00)

Stocks Mentioned In This Article
Stock	Links
JOYG	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I’m starting to get email questions, so I thought I’d make a post about tomorrow. What I’m telling people is… Try not to care too much what tomorrow will be like. Whatever you expect to happen, probably won’t, anyway. Just do whatever is called for. Tonight I’m looking for charts of stocks that fell hard but are near support. If the markets start clawing their way up tomorrow, these ought to be good to buy. I’ll also be looking for charts of stocks that weren’t hit as hard as everything else. If the markets are really negative again, I’ll be watching for these to break down. No matter what, if there’s no low-risk setup, there won’t be a trade.

My main problem all February is that I mainly want to sleep at the same time the markets are open. If you followed my new Twitter stream, you know I was watching for NCTY to break down, but then got (literally!) tired of waiting and went to sleep. I could have made some serious money on that break. I hope one of you out there caught it. I’m really liking twitter after one day of use. It lets me put thoughts out there without feeling like I need to make a whole blog post about something.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Tyro wrote an excellent post debunking The Law of Attraction. I won’t rehash it here. I didn’t watch the Secret — I would rather skim through Victoria’s Secret. From what I’ve read, it states that everything in our lives is wholly determined by our thoughts. As Tyro eloquently states, “the market doesn’t give two monkey shits about our belief.”

Over the weekend I was watching the military channel. They were doing a special on a military pilot (I don’t remember his name) who was in a POW camp in Vietnam. Because of his strong mental fortitude, he not only kept himself going, but everyone around him. There are numerous accounts of people who endured the hardship of the holocaust, kidnappings, or other forms of torture. Through those difficult times, they tapped into a place mentally that is not accessible to most people. Because of that ability, they survived.

In Tampa this past week, a child was kidnapped. He escaped in a McGyver like fashion. After being tied up in an orange grove, he managed to escape. Some people are just tougher mentally than others.

Our mental preparation (and health) is a key ingredient to our success in most endeavors in life. Not only do we have to be tough enough to make it through the difficult times, we must be intelligent enough to either devise (or copy) a plan to succeed. I think that most traders are independent. Born in a different time, today’s trader, may have braved the harsh seas to discover America (let me not get into that! — sarcasm alert). If they didn’t mind getting their hands dirty, they may have participated in the gold rush. It’s this type of independent spirit, accompanied with a desire to be obscenely rich, that drives most of us to do battle with the markets. Actually, our battle is really with other participants.

This brings me to the point of this post. All of the positive thinking in the world didn’t stop today’s carnage. I didn’t see many that truly capitalized on today’s action (including myself). It is the perverseness of the markets that negates The Law of Attraction as it relates to trading. When there are too many bulls, the market will eventually selloff. When there are too many bears, it rallies. Most traders understand that. On a side note, I saw that many traders reveled in the carnage — even if they didn’t reap it in their P & L.

As I have worked through some of the mental obstacles plaguing me, I have reaped the benefit in my trading. To be successful in the markets, you need the tools. After learning TA, or some other way to attack the markets, you may be faced with an inability to follow your plan. That is not the Law of Attraction. Positive thinking alone will not lead to your success. However, there may be other road blocks that need to be worked through. I recommend Mark Douglas’, The Disciplined Trader.

The markets may not give two monkey shits about our belief, but our ability to follow our trading plan, hinges on our belief system.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Here is a screenshot of the indices I follow to guage market mood. This is the shot at the end of the day, but it was just as red as when I initiated my short position on QQQQ this morning. A good clue there would be no gap fill…..

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Daytrading is risky, huh? Well, today my daytrading capital was safely in cash. The markets went bananas today, and I stayed out to be conservative. Mark-to-Market Net loss: 0%.

My long term investments in my 401k, on the other hand, happily vomited out all the gains I had made so far this year. Yesterday I was up 4%, and today I’m about breakeven. I would have sold on the open today with the futures down so much, but thanks to the stifling of liquidity in 401k plans and mutual funds, I have to take the full loss of today’s close, or hold on hoping for a bounce-back (which is what I’m doing). Mark-to-Market Net loss: 4%.

I would always rather be in a liquid position than an illiquid position. The entire reason that our capitalistic system works is that I can trade work or assets now for work or assets in the future, through money–Liquidity. To me, liquidity (or the lack thereof) is the real source of risk in trading, investing or even business. Timeframe is NOT the source of risk. However, the liquidity of the particular market is not the only thing. People who are highly leveraged in a position so that they can’t unwind it all even in a liquid market are also highly at risk. So before you look down on someone for their trading timeframe, vehicle, or anything else, assess the liquidity first, of their markets and their positions.

I’ll take daytrading any day, and especially today.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

The only good setup I saw this morning was QQQQ. It went my way but I tightened my stop too much. I rarely trade index ETF’s, but the QQQQ’s were screaming at me.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Phileo asked me if I favor $10 stocks lately. I have been favoring “cheaper” stocks for two reasons–first, I’m trying to find a low risk swing trading strategy using penny stocks. You’ve seen some results of that here on MTM.

The biggest reason, though, is related to my recent FDX trade. I found a great low risk setup, but I didn’t have enough capital to trade the number of shares I wanted.

When you are daytrading a small account, you’ve only got three chances every 5 business days to make a trade. I want to most efficiently put my capital to work, and so my spreadsheet calculates a ‘% Capital at work’ figure for each planned trade. I look at the entry, the stop, and the maximum risk in dollars that I will take. That gives me a risk-limited position size. I then look at my buying power and the entry price, and determine the maximum position size that my buying power will allow. The smaller of these sizes is the one I trade. Due to the limit on my trading frequency, my objective is to put as close to 100% of my capital to work as I can each trade. A few examples might help to illustrate.

The FDX Trade:

1% of equity ($1000) = $10 = Maximum trade risk
Long Entry: $116.35, Stop: $116.02, Spread = $0.33 per share
Risk-limited Position Size = $10/$0.33 = 30 shares (round down)

Available Buying Power = $1577, Entry: $116.35
Buying Power Position Size = $1577/$116.35 = 13 shares (round down)

Final Position Size = 13 shares; % Buying power at work = 96%; Actual Trade Risk / Max Risk = 39%

For this trade, my trade risk was only $3.96, far below my $10 target. The trade yielded 4.6R, so I made a bit over $18 of profit. If I had my full position size, I would have made $46 of profit! So while the share cost lowered my risk to a loss of 0.39% of my equity, the problem here was that I put too much of my capital to work for not enough potential reward.

Now another example–my AMNT.OB Trade:

1% of equity ($1000) = $10 = Maximum trade risk
Long Entry: $2.45, Stop: $1.45, Spread = $1.00 per share
Risk-limited Position Size = $10/$1 = 10 shares

Available Buying Power = $1685, Entry: $2.45
Buying Power Position Size = $1685/$2.45 = 687 shares (round down)

Final Position Size = 10 shares; % Buying power at work = 1%; Actual Trade Risk / Max Risk = 100%

For this trade, my trade risk was $10, but my entry-to-stop spread was huge. The trade yielded 0.87R, so I made $8.70 of profit. I only put $25 to work, and I used up a precious trading opportunity in doing so. Not an efficient use of capital. I’ve also taken some of these types of trades that didn’t work out.

Most of the setups I daytrade end up having an entry-to-stop spread of around $0.20, on average. If I assume a $10 max risk based on 1% of my equity, then a stock price of $32/share will allow my Risk-limited position size to match my Buying power-limited position size. For a spread of $0.10, that drops to $16/share. So for my capitalization level, cheaper stocks make more sense.

Naturally, all of this relates to expectancy, win/loss rates and the like. In the near future, I hope to do a more thorough study of my recent stats and come up with the ideal risk/reward/$ at work combination for my trading style(s). Which brings me to one more thought–Different trading systems and styles should have different risk parameters! The result is that I end up risking too much on setups that don’t win often, and not enough on setups that do. I got a message from Trader-X the other day, and he told me something wise:

“As I have said in the past, you can focus on just one high-quality, consistent set-up and trade it 2-3 times a week. Your account would not need to be very big, and provided they are quality set-ups you can make good consistent money. But most people are not that patient and usually end up severely overtrading and their focus is all over the map looking for 4, 5, 10 different set-ups.”

My focus has been pretty scattered. I’m going to narrow it down to 2–Trader-X style daytrades, and a swing trade system TBD. I will also have two separate risk profiles based on the respective win/loss rates and expectancy analysis. I also overtraded this month, and used up my 40 free trades from Zecco, so I’ll start new in March.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I haven’t made any notable trades in the last week or so, which is getting annoying since I would like to make some money in February! I’m just not seeing a lot of opportunities right now. Take today, where most breakouts I saw ended up failing really quickly. But, it’s best to wait these times out, than to force a trade.

I’m trying out Twitter and have added their badge over on the sidebar of the blog’s front page. It’s basically like a microblog where you just log what you are doing/thinking/feeling at the moment. You can update it from IM, or mobile phone, as well as their web page. It’s got all the standard “social” friend-adding features that every site has nowadays. Seems similar to these tumblogs that are starting to crop up everywhere , but with the “status” focus. Whatever. If Twitter becomes a habit, I’ll be mentioning what stocks I am stalking during trading hours, and who knows what else. I think they have feeds etc. if your inner stalker wants to subscribe to my status.

I haven’t made an article in a couple weeks, and need to do that… I’ve been spending my free time learning about IB’s TWS API, since I am doing a StockTickr add-on for TWS, and have also been doing some custom TWS programming for a fellow blogger. So, that’s been eating up some time.

I have a swing-trading type of scan that is starting to look promising enough to post to movethemarkets. I haven’t made any trades off it yet, but the ones I’m watching would have made February a very nice month. We’ll see if it holds up to more time. The idea would be to trade these ideas via Options (which, I realize, I also need to start posting about! always more things for me to do!).

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I traded KLAC on Friday, so did everybody else, so I didn’t post my chart. Trade Monday: RRI

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

LJ International Inc. (NASDAQ: JADE) is some sort of publicly traded smallcap stock. I really don’t know what else it does, but it sure had a sweet (albeit a bit scary) looking chart. I got the idea for this trade from TradingGoddess

1. Why did I take this trade?

JADE opened with a lot of buy volume on Tuesday. My alert went off when it broke above Friday’s intraday high @9.50. I watched for a pullback. It refused to go below 9.50, so I bought on the reversal back up @9.55.

2. What was the initial stop?

Initial stop was low of previous bar @9.30.

3. Why did you exit where you did?

I sold @11.55 on what I perceived to be a reversal on the 5-minute chart. I had a pre-conceived bias to exit this stock quickly. I was looking for any excuse to avoid being the last person in the game of musical chairs.

4. Is there anything you would do differently?

JADE is so overbought it hurts to think about it. But the technical indicators saying that it was overbought became irrelevant today, there was still plenty of buy volume and still plenty of buy the dippers.

I posted my trade on the 15-min. chart, but I was actually watching the 5-min. chart during my trade. Had I been watching the 2day, 15-minute chart instead of the 5-minute chart (or better yet, watching both), I would probably have stayed in the stock a bit longer for its morning run up to 12.40.

I actually tried to scalp the drop from 12.50 down to 11.20 this morning, but unfortunately, my broker told me they were unable to locate any JADE shares to short due to internal technical issues. Bummer.

Stocks Mentioned In This Article
Stock	Links
JADE	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Maoxian says to stop trading at noon. Who am I to argue? Tough trading gappers with gap up in SPY and QQQQ today. Trade: CONSOL Energy Inc. (CNX)

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Here is one that flew under everyone’s radar - U.S. Global Investors, Inc (Nasdaq: GROW) !

I even told everyone about this when I added it to my bookmarks. The story is that there are certain groups of Hedge Funds ganging up on GROW by shorting it. Everything was centred around this crucial shareholder vote to approve a 2-for-1 stock split. Well, it looks like the shareholders approved the stock split today, so Hedge Funds did not succeed in their shorting tactic.
Unfortunately, even I missed out on this feeding at the trough, since I took the afternoon off.

However, if my theory is correct (see my previous post on the Wi-Lan trade post-mortem), there should be some follow thru buying tomorrow. Which means a possible play for tomorrow.

Stocks Mentioned In This Article
Stock	Links
GROW	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I got the idea for Wi-Lan (TSX:WIN) from a (few) previous trades that I made on this stock.
1. Why did I take this trade?

On Tuesday, I bought Wi-Lan (TSX: WIN) on the breakout to new ATH’s. There was decent volume to support the breakout.

2. What was the initial stop?
My initial stop was @ the LoD @7.35. However, I raised the stop to 7.55 just before the markets closed.

3. Why did you exit where you did?

I sold as soon as I could on market open.

After markets closed yesterday, I found out that the company announced some stock offering @7.0 ! Craps, that sucked. But at least they had the courtesy to announce it after market hours, so I could at least prepare myself to get out as soon as I could.

4. Is there anything you would do differently?

The only possible warning sign of this morning’s nasty gap down was that I noticed that there was increasing sell volume into the close yesterday, which of course led to follow thru selling into today’s session. The sell volume into the close was a little worrisome, and nagged me like a thorn on my side. I also remember observing the exact opposite behaviour in FSLR (ie. increased buy volume into the close, with follow thru buying into the next day’s session).

Is this a pattern? I have a hunch about this, so I will look out for this and keep a mental score, but if it’s true, then it is better to reduce my risk and do NOT hold overnight IF there is increasing sell volume into the close (it doesn’t even have to be a selloff, just noticeably increasing sell volume).

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com