Long-time readers know that, every month since I’ve started, I’ve been wanting to work on my trade-rate. Well, unless May turns out to be an anomaly, I’ve finally reached a level I’m happy with. I made twice as many trades this month as last month, while maintaining a good win rate and expectancy. There were only three trading days where I could not find a trade I wanted. Check out May’s Calendar View of my trading, compared to April’s Calendar View (not to mention, lousy February…).

I’ll cite two contributing factors to my increase in trade rate (unless it turns out to be an anomaly this month, which would make the next couple paragraphs complete BS):

1. I did an investigation and wound-up switching to point and figure charts as my primary trading chart (for both daily and intraday views). I took five trades this month that I consider “point-and-figure”-specific plays, but at present I’m still primarily scalping. I just spot the moves on point and figure charts, rather than another kind.

   A big benefit of pnf charts (and, really, volume charts as well) is that they tend to break out more detail about the price action at the open. As such, I’ve found myself suddenly able to trade during that all-important first hour of trading. It’s been a huge help. Back when I was watching 15′ or 30′ charts, the morning hour was basically an information void that I couldn’t safely trade against.

2. Hanging out on wallstreak and jaiku has been helpful, because especially on wallstreak people keep asking me what I think of stocks. I would normally never look at most of those stocks, because of how thinly they trade. But, once I pull the chart up to give my opinion, I find myself identifying trades I want to take. I’ve had some success with the thinner stocks, but I have to use limit orders to get out, which bugs me.

May also saw my 2007 profit reach 100R. Here’s hoping it reaches 200R by December! That would rule. Here’s the R-chart from 2007 so far, courtesy of StockTickr (the blue line is a 20MA of the profits):

As you may have noticed, I’ve started to review my trades from a year ago, and it’s making me curious about why I abandoned the trading ideas I used to employ. It’s early yet, but right now I think the ideas were decent, but that my execution was all over the place. So, just today, I tentatively reintroduced the “ema-reversion” idea, with some success. Maybe more will be coming. Or maybe that was the only good idea I had back then! Time will tell.

I’m too lazy to do all the tables tonight, and tomorrow I have my 30th Birthday to contend with, so we’ll just do the summary table this time, and return to the more detailed stuff at the end of June.

Overall Performance as of May 2007

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

The Chairman highlighted CIEN today. Here is the PnF for Dummies setup. Is that 45 degree trendline magical or what? I cannot figure out what the significance can be behind this trendline on a stock that is running.

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

Tyro wrote an interesting post comparing driving to trading. Cell phones weren’t around when I learned to drive, but I bet my parents wouldn’t have allowed me to talk on the phone as I was learning to shift gears, and react properly to different situations. Learning to even get the car to drive 10 feet without stalling was a task in and of itself. After I became familiar with the rules of the road, and my own vehicle, driving became second nature. Like most people, I now find myself talking on the cell phone, sending text messages, eating, and driving with my knees. I’ve done a few other things while driving, but this is a family site. :-)

During the course of the trading day, I find myself reading blogs, Wallstreak, and surfing the net for inappropriate material. After giving this a lot of thought, I need to cut out the distractions.

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

If you’ve been reading my reviews of my early trades, you know that I was wondering why I don’t trade some of those early ideas anymore. They aren’t bad ideas, really… my execution was just very bad on a lot of them. Today, I traded one of those old ideas.

I woke up late, and missed the first 15 minutes of market action. And worse, I knew I was going to be away from my screens most of the day. I knew I wouldn’t have time to wait for a proper breakout setup, since so many stocks surged so hard at the open. It takes time for them to properly consolidate, and gather more steam. So, I decided that, instead, I’d look for a stock that was running too fast, and short it. It’d be fun and quick, and it also just felt cool to be shorting a stock when everyone was talking about how strong the market was this morning.

About the Setup

So, the idea is simple enough… When a stock has pulled away from a fast moving average (say, anywhere from 5 to 10-period averages would be fine), it is in an unsustainable situation. One of three things will happen very soon:

1. The stock continues higher, and the moving average catches up.
2. The stock consolidates sideways, and the moving average catches up.
3. The stock falls back to the moving average.

So, you find a stock that is over-extended. It has run too far, too fast at the open, and created a big gap between the current price and a fast moving average. When it shows weakness, you short the stock, looking for case #3 to materialize. The risk involved is generally acceptable because you only take a small loss if case #2 occurs, and case #1 is the least likely of the three if you gauge the weakness correctly. I don’t have any backtesting to back up that assertion, but I’ve been looking at intraday charts enough to know that it’s relatively rare for a stock to show weakness, but then go straight up without any meaningful dips.

Today: Navteq Corporation (NYSE: NVT)

In my old trades, I was not very sophisticated about selecting a weak stock. I still may not be great at it, but I think I did a decent job. Let’s look at the evidence I considered for todays NVT trade:

• The stock was running on unusual volume, so plenty of enthusiastic people buying at the top of the opening move might panic and help drive my short to profit.
• We were coming upon the “reversal period” at 10:15 to 10:30ish. A little early for it, but coming in range.
• On the daily chart, the stock had run up more than usual without reversing. “More than usual” is just a pretty sloppy assessment, meaning “much farther than any other run in the last six months.”
  
• On the intraday PnF chart, you can see that the upward momentum slowed down quite a bit at 9:42, when the price crossed 44.00. It then pushed a little higher before falling back down and giving a sell signal. The signal happened to correspond not only to 44.00, but a break of a minor trendline.
  
• On the 15 minute chart, the wide opening candle is all wick above 44. The second candle is green but weak, with a tall upper wick. The third candle drops below 44, giving me my shorting opportunity. It dropped a little over a point to meet the 5MA, and then dropped another point for good measure.
  

When all these things come together, it’s hard not to make the trade, no matter how strong the overall market is! I was a wimp, and got out when I had a 3.25 R gain, rather than waiting to hit the target. If I see enough examples hit their targets, I will (slowly) get more brave with these plays, and possibly refine the way I choose targets. If I start making these plays often, I’ll give them a name and track their performance separately in my stats, as well.

Stocks Mentioned In This Article
Stock	Links
NVT	| |

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

I promised Zoomie that I would stop posting sh***y articles, and he knew that was impossible. In fact he brought it to my attention that the other contributors of MtM are in talks with other blogs about a possible trade. Fortunately for me, there are no takers. The only one slightly interested is the Trading Goddess, and we know she’s not picky.

Today is the first day that Northwest Airlines will trade under its new ticker symbol - NWA. I’m not recommending buying an airline stock, but I do recommend that you pull out your old copy of one of the classics.

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

Here are my reviews of trades I made way back on March 29th 2006. Compared to the set from the 28th, it seems like I really improved, overnight (but it’s actually just an indication of how inconsistent I was).

Trade 1, RHAT

This one is easily the worst of the batch. Here’s the chart with my original 2006 comments on it:

I think it’s hilarious that I said my exit looks ridiculous. I think my entry point looks pretty darn ridiculous. Well, I’ll at least give myself points for observing the natural round-number resistance at 28. But, look at the whitespace between the stock and the fast ema at the open. That sucker was pretty likely to keep running up. It seems like I was selectively oblivious to the price’s relation to its 8EMA, because the next two trades are based on this relationship.

I think I said it all back in 2006: “I have no idea … how much the stock will move, or in what direction.” Hmmm… then I wish my 2006 self would have gone on to remind me why I took the trade in the first place. Stupid trade.

Trade 2, ENER

I like this trade. There’ve been a couple others like it in this review series already. In fact, I don’t know why I’m not taking trades like this today. They make sense. As you’ll see, though, I seriously jumped the gun on my execution. Here’s the chart with my 2006 comments:

There was ample room for this stock to fall down and consolidate, which is good. 75 cents between my entry, and the 8EMA at the time of entry.

I guess I’ll give myself points for trying at a round number, and maybe in a sub-15 minute chart I’d see that it hesitated prior to my short. But, 30 minutes later than my actual trade would have been a much better entry. A weak 15-minute candle that didn’t make a higher high…

As with all these early trades, I don’t mention where my stop was, but I bet it was either $0.50 or $1.00. I was trading in the Millenium Traders chatroom back then, and they always used $1.00 stops, so I did that sometimes. I would have used $0.50 because that’s about a 1% stop loss in terms of the stock price.

So, good idea, good candidate, very bad execution.

Trade 3, RACK

This is the same theme as the ENER trade, only it’s the move after the retrace to the fast EMA. I like this play.

Once again, though, I completely jumped the gun on my entry. It would appear that I entered simply because the price touched the 8EMA. That’s silly. The following candle showed weakness and would have made a better place to enter.

Trade 4, AKAM

This last trade was definitely influenced by my time in the Millennium Traders chat room. We constantly bought dips in uptrending stocks. If you follow what I write here at the site, and elsewhere, you know I still like this idea… I just don’t know how to safely execute it. Trading breakouts is much more clear-cut.

I give myself credit for keeping the round number 32 in mind, and recognizing a double top as my cue to exit.

I said in my 2006 comments that the 1:00 pullback would have been a good entry. If I had taken that entry today, I’d have been stopped out at 1:30. I clearly used wider stops back then.

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

Trader-X had an interesting play with BIDU. It gapped down with the rest of the market, and rallied all day.

I’m not sure why, but when a stock (or futures contract) is trending, it bounces off the 45 degree trendline with amazing frequency.

I used a 10 cent box with a reversal setting of three.

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

Another great directional call by OMNI today.

Trade1: Long ESM7 OMNI

Trade 2: Long NQM7 OMNI ish

To Prospectus: Never give up!

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 traded my first swing trade today after the daytrade moratorium, in UltraShort QQQ ProShares (ETF) (AMEX: QID). I entered based on the 6% drop in the Chinese stock markets last night. I entered in the first 15 minutes, and the markets reversed and marched on upward. I finally got stopped out today after the FOMC minutes were released, so I ended up daytrading after all. Another -1R down the hole. End of “swing” trade.

Worse than yet another loss is the psychological capital I keep losing. I have no confidence in my trading abilities anymore. Even my long term 401k holdings are suffering. I’ve got them all in bonds since February this year, and I’m flat for the year instead of up 9% like the rest of my market-ignorant coworkers. Four years studying markets and two years trading, and I can’t even outperform them. Pretty pathetic. I’m really struggling with whether I should keep trying or just admit my failure and save the rest of my money. I’ve always had confidence in myself that I could accomplish the goals I set for myself, but I’m not so sure about this one. I’m so far out of touch with the markets it seems. I “know” so much, but maybe I’m one of those people that knows a lot but can’t trade.

Anyway, hope everybody caught some of the upswing 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

John, Tyro and I had been talking about traders’ intuition. Getting it requires watching the market for a long period of time, so I have been told. Trading the OMNI setups has helped me watch the overall market with a better, bigger picture. Today, before the open, I looked at SPY, and thought, boy, there wasn’t much of a bounce on Friday after the big red candle on Thursday. Looks as if we may consolidate here, and perhaps move lower sometime this week. Choppy today probably at best. So, I promptly ignored my bias, and chased three long trades. I broke-even on my first trade, so I thought maybe I should look for another, and another….not a good idea. This is what destroys accounts…..the belief that you should be able to get some money out of the market each day. Only Richard can do that ;). He is one hell of a scalper.

AL:

TMO:

SONS:

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’s my trade from today in Continental Airlines, Inc. (NYSE: CAL) that was the final straw in my daytrading struggle:

The One I Missed

I was watching this setup, and then missed the entry due to a distraction. It would have been a great trade:

I was watching for a breakout of the base at $39.40. It went on to hit the pivot point resistance from a prior day, which was my target.

The One I Took

After missing the last one, I saw another base set up:

I picked a higher interday pivot for the target, and was watching the prior high just above $40 for potential resistance. At 39.90, price dropped on volume, but the bid/ask spread widened, so I took it as a cleanup of panic sellers. Price then retraced to my entry point and went on to hit my stop.

Mistakes: I keep messing up my entry, stop and targets. I pick a target that is too far compared to my timeframe and entry setup. I pick a stop that is also too far relative to my timeframe and entry setup. On short timeframe trades (1 min) I have taken, I watch price go up in my favor and then slide right back again for a breakeven or a loss. I don’t have a feel for when price is retracing or when it is reversing, so I either get spooked out, and the trade goes on for a win, or I hang on to avoid a whipsaw and price really reverses.

So there you have it. My last daytrade until I can get in a better situation through capitalization and skill. Thanks for reading, and thanks to all the truly great daytraders that have helped me. I hope to join you someday.

Stocks Mentioned In This Article
Stock	Links
CAL	| |

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 Chairman is posting dummy trades again, and I am going to embark on a little experiment. What I would like to do is take his dummy trade of the day, and display it on a point and figure chart. I think it may prove to be useful, but only time will tell.

For now I’m using a five cent box with a reversal setting of three. I think that setting will allow traders to filter out much of the noise, and find a low risk dummy entry. The chart he posted today wasn’t a screamer. I will alternate between dummy trades, and Trader-X plays.

Edit: Vincent pointed out that my settings were not correct. This chart looks more familiar.

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

Here are the three trades from my second day of daytrading, March 28th, 2006. You can read the original post, if you want. Sadly, only one of these trades makes any sense to me today, and even that one appears to have been executed all wrong.

The trades were all winners, so it’s hard to be too tough on myself. But, it’s clear that I wasn’t taking much context into account back then. These decisions all appear to be very localized. Still no mention of my stop loss, though from the beginning I have always had a stop loss in mind. I hadn’t yet caught the “R” fever, so you’ll see no R-based profit reporting for a while, yet.

Trade 1, SNDK

For instance, take this short play at the open on SNDK (my original 2006 commentary is on the chart):

On this 15 minute chart, the trade looks ridiculous. I wil give myself the benefit of the doubt and assume that I witnessed what I thought was selling pressure at 57. Today, I would never short a stock that had been rising toward its fast EMA on high volume. It seems like I should have known that, even back then, as I made lots of decisions based on that EMA. Oh well.

Trade 2, DXCM

Speaking of EMA plays, here’s what I consider the “best” play of the three, on DXCM (again, with 2006 comments on the chart):

The stock was falling, but retraced to its fast EMA. Signs of weakness at this point would be a good time to short the stock. So, I think I had a decent trading idea, here. But, somehow, back in 2006 I saw fit to short near the top of the candle. Today, I would be looking to short the stock on the 11:15 candle, if it fell below the low of the 11:00 candle. Of course, the stock found its strength again, and I wouldn’t have made any trade at all.

Trade 3, SWN

This one looks like nonsense. The 1:45 candle had a surge of volume, and began an upswing, sure enough. I must have been convinced we would make new highs. But, if you look, we were making lower highs and lower lows at the time. The two candles after the 1:45 candle failed to break round number 34, and it would appear that some selling pressure stepped in after it tapped 34 during the 2:15 candle.

Yet, inexplicably, I went long in no-man’s land, on a red candle at 33.82. In my 2006 commentary, I said I got out because I felt the market tide had turned following a Fed announcement. Today, I wouldn’t need any news report to get out of this trade! It’s a bad trade! How embarrassing!

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

After another string of 1R losses, the most recent today in Continental Airlines, Inc. (NYSE: CAL), I’m finally giving up on daytrading. Even though daytrading fits my personality and my desired risk management style, it doesn’t fit my capitalization level or my current skillset. True, with Zecco I have no commissions, but with less than $25K I have the patter daytrader rules to deal with, which limit me to 3 daytrades every 5 days. This does not allow expectancy or a high Risk:Reward style to play out, and my profitability is completely a function of my win/loss rate, which is about 30/70 over the last few months. With the PDT restrictions, I’m not really daytrading anyway, since I can’t take a lot of positions (a lot to me being maybe 3-4 per day). If my trading skills were exceptional, I could trade consistently enough to pull this off under these limitations, but they’re not and I can’t.

When I started trading, commissions killed my expectancy, which was about -0.5R per trade. After the advent of Zecco, I thought I’d be able to overcome the commission drag I had from my old broker, and I did. But my situation hasn’t changed, as the PDT get in the way. Now I’m either at zero expectancy or slightly negative depending on how “lucky” I get with my 3 trades per week. Babak’s international option would help with the PDT rules, but then I’d have very large commission drag for my small account size. Even if I could get the commissions lowered, or trade higher priced stocks with a per-share structure, I still don’t have the time to watch all day, which is another of my problems.

My pipedream was to double my tiny account over some period of a year or three, to prove to myself that I can trade profitably. Then I would put more money on the line and go from there, possibly even full-time. I haven’t achieved anywhere near those results, and I’m net down since I started two years ago. So a combination of undercapitalization and lack of skill are forcing me to accept reality: I can’t daytrade anymore. Without better skills, getting more money won’t solve my problems. I’ll just lose it 1R at a time instead of 1r at a time like I do today. Seriously, I must just suck at the markets. I always hear people say that “it’s easy to make money paper trading, then you trade for real and lose money”, but I even lose money paper trading!

So what now? I have to move up to the daily timeframe and set my stops and risk level such that getting stopped out in the same day is highly unlikely. My daytrades will then become a safety net rather than my intended trade vehicle. Ideally, I shouldn’t ever have to use the daytrades anymore. If I can get swing trading skills such that I can grow my account, I can then consider rounding up more capital to risk. My NR7 scan results have been disappointing, so I think I’ll head in a different direction, but I’m not sure where.

I hope to return to daytrading someday, but for now I sadly bid it farewell.

Stocks Mentioned In This Article
Stock	Links
CAL	| |

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

When I was whining about dead stock blogs, it got me thinking about my early trades. Some of those trades were really dumb, if I recall correctly! :-) I’m not sure I want people trying to “learn” from those posts, in their current state. So, rather than taking my blog down, I thought it might be fun to review some of my earliest blogged trades over the next few weeks. I’ll forward-link to the new reviews from those ancient blog posts.

So, to start off, here are two trades I made on my first day as a full-time trader, on March 27th, 2006. You can check out the original post if you want to see it. In the end, I would not have taken either of these trades today, but one of the two at least had a sensible idea behind it. I was glad to see that.

Trade 1, MRVL

First, the chart, with my original commentary from 2006 on it:

My thoughts:

• I didn’t appear to be very aware of the bid/ask spread back then. I apparently entered a market order to exit while something like a 13-cent spread was in effect. Although I almost always use market orders now, back then I called my market order “DUMB”
• Volume doesn’t look like it’s anything special that day
• You can see in many of my trades in this era, that I had an irrational obsession with the 8EMA (why 8? I’m pretty sure it was the fast EMA used in examples in one of Toni Turner’s books)
• This is a horrible setup. I get points for playing in the trend direction after a pullback to a fast EMA, but I didn’t wait for any kind of consolidation or volume.
• The post does not say why I was targetting 58.01, and it doesn’t mention a stop loss. Though, I imagine my stop would have been just a bit below the 8EMA.
• I would never target 58.01 under normal circumstances today. If I want out around 58, you can bet I’m planning to pull the trigger at 57.97 to 57.99. If it gets over the round-number hump at 58, you might as well at least try for 58.05.

Trade 2, INFA

The chart, with my 2006 commentary:

My Thoughts:

• This trade, to me, makes more sense than the other one. The idea that a pullback seemed imminent makes sense. Volume was low, and there was some whitespace between the price and the fast EMA.
• Still, it wasn’t that much whitespace. 10 cents, to be exact. But, the HOD had been 15.65 or so, which makes 5 cents risk versus 10 cents expected reward. I was probably salivating over the 2:1 ratio.
• I really hope that when I said “It was trending well with its 8EMA” that I was referring to the prior day’s action. Because, at the time I took this trade, it wasn’t anywhere near the 8EMA, and I’d have no way of knowing if it was trending well with it.
• I give myself points for waiting until it was below the body of the previous candle to enter.
• I was almost certainly not checking the thickness of the bid at my desired exit price, or I might have known to use 15.52 for my limit order. I seem to recall having a lot of trouble with limit orders not being filled, early on.