Better performance from me today… I tried to be extra aware of the fact that I’ve completely changed the look and feel of my charts. That disorients a trader like me, that trades based on feel, so I need to allow some time for my sort-of subconscious pattern matching to come back up to speed.

3 Trades Today… 1 on the ES, and 2 on CFC.

In the video, you can see that I am trading the eotpro.com indicator set, and am evaluating how well they apply to stocks. So far, it looks like they apply pretty well, but it’s early yet to be sure. There are clearly differences in the way stocks move and the way the futures move, so I wouldn’t be surprised if I need to make some adjustments.

I am also using the signal to noise indicator that I’ve been writing about. I think it works pretty darn well. You might say, “Richard, can’t you see when action is too noisy just by looking at the chart?” And, the answer is that, I usually can, but the main use for it is not on a chart at all. It’s on my TradeStation radar screen:

I’ve put the SNR indicator in the third column. This tells me at a glance which of my watchlist stocks are tradeable at any given time. Really cuts down on the amount of chart-flipping I need to do, especially during the lunch hour when everything is usually pretty choppy. Very nice.

Hope your day was good!

Tradestation annoyance of the day: I love the matrix… I’ve never had an interface like that before, and I really like the visceral feel of moving around orders. But, for futures, Tradestation doesn’t tell you the avg price of your current open position, which is what I want to know during a trade. Instead, it highlights the avg price of all your positions for the whole day. I wish this were a selectable setting….

Watch this post's video on Youtube

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

Friday I said the market handed me a lesson. I tried to “finesse” my way in and out of a stock that I “knew” was gonna go my way. Result was R 3.5 loss after the carnage. No sense posting the chart, could have been any setup that I KNEW was gonna go my way. I have made this mistake before, but it has been a long while. Good day yesterday, was sick though. Today I took some really poor setups, and some really good ones. I made a few R’s, but the ugly ones were ugly. I was pressing to find trades that weren’t there. I will let you be the judge what were quality setups and which weren’t.

IMCL:

CFC:

LDK:

OMCL:

AINV:

SMOD:

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 9 times today–3 wins and 6 losses. Two of those losses were a full -1R and dumb plays where I chased a rally. I just throw money away. Luckily for me, I had a trade pay off big in CFC early today, and I finished up about +1% on the day (from a high water mark of +3.5%). I entered once for a loss and then the second trade paid off in spades. The chart of the CFC trade follows:

I went short premarket at 19.56 with a stop at 19.75, above the premarket high. After the open, we made it as high as 19.71, where I covered to avoid slippage on my stop. This happened to be just about the top tick. After more weakness, I went short again at 19.47, and got the break I was hoping for. I covered half at consolidation after the breakdown, and then covered the rest when we broke back above 18.80 where I had set a stop to protect profits. My stop was 0.10 from entry, so I pulled out +6.2R on this trade. My $ size was only 0.5% of my equity, so it only returned 3% though. Not all R’s are created equal.

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 RIMM like every other daytrader on the planet today for break-even. I missed the basing setup in the afternoon. I also played CFC today. I was in and out 3 times for a total of a few pennies loss. I didn’t post it. I hope to never trade like that again ;).

RIMM:

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

So I did a really boneheaded thing today. After trading without any luck this morning, and losing -2.6R over 5 trades in CFC, I was mad. I was mad that I had smacked CFC around yesterday and it was “beating” me today, and I felt like I could scalp the money back. This was after 3:00 pm already, on an OPEX Friday. I traded, lost a lot and gained a little, and then doubled my size, and lost more. During all of this, I kept very tight stops, but when I came to my senses I had traded 8 more times and lost another -3.4R, making today’s loss -6R overall. Based on the $ sizing, today I gave back -6.5% on my equity because I chose not to leave it alone and stop trading. I am responsible for these trading results. Boneheaded choice, no? At least I still ended the week up 4.3%.

This wasn’t a “Keep Swinging” problem, because you don’t size bigger when you’re down. That’s backwards. So I’m going to learn from this lesson so that my tuition money isn’t wasted. I will not open positions after 3:00 ET, only manage open ones. I will also only “Keep Swinging” if I see a defined setup. I will not increase my size when I’m down. I will not scalp blindly, but only in combination with a good setup and tape reading. I knew the action was aimless and random, and I had no business gambling to make my money back.

My biggest problem is that I hate to lose, period. I’ve made peace with the fact that every trade can’t be a winner, even though it took me a while. Now I’m battling with myself that every day can’t be a winner! I need to accept that I will have some losing days–I can’t be green every day! My goal should be to end every week in the green; I believe that is achievable. There’s nothing wrong with losing, just losing big. There’s nothing wrong with being wrong, just being wrong big! I should have walked away, and next time I will. I can’t imagine how much harder this must be for someone who trades for a living and has pressure to take money out of the market to pay the bills. There is no urgency in my trading, other than the urgency of wanting to get enough capital to trade full time.

I share all of this for juxtaposition next to my results from yesterday. It shows how much I’m still a novice trader, and that my personal discipline and psychology need work, even if some of my techniques are starting to improve. See what I mean when I say that ol’ Jesse Livermore and I have something in common? With me, you’ll get the good and the bad–it’s “reality internet”. I’m really mad at myself, but that won’t do any good, so I’ll refocus my anger into discipline, and come back ready to look for quality setups on Monday.

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

Along with Dino and Bubs, I cleaned up today, putting a personal “Best Day Ever” on the board. Pulled off my first +10R trade ever today! And I actually did it twice! I lost -2.2R in 4 trades in a row this morning, in CFC short, ZOLT long (twice) and CAL long. The losers were nothing special, just reasonable risks that didn’t pan out for me. Not too good a way to start the day, but “Keep Swinging”, right? So then I got my game on, and I traded Countrywide Financial Corporation (NYSE: CFC) 5 more times over the rest of the day. I was scalper-boy, trading with $0.10 stops and watching the tape for trade frequency and volume more than anything, though I did watch a 1 minute chart too. I took partials where momentum paused or we had a severe retrace, and I exited close to round numbers or breakeven. Here’s the chart of my winners in CFC:

That’s three trades for about +2R, and two trades of around +10R–overall, I made +20.1R today (just over 10% on my equity)! I remember a post that Trader Mike did about his path to +100R in daytrading. Here’s my chart superimposed on his:

I post this chart not to gloat, but out of complete astonishment! I can’t believe my eyes! I look up to all the great traders out there, and I’m floored that I’m doing this well. Once I overcame my capitalization hurdles and was able to trade at a frequency that suits me, I’ve been taking off. I guess I did it all the hard way for so long that it forced me to really drill in the basics of risk management, position sizing, setups, etc. I blame my success on all of the great traders like Trader Mike that have shared so generously and taught me so much over the last couple of years! If my R’s beat Trader Mike’s, it’s because he paved the way and cleared the path. Thank you!

I can’t believe I made it 1/5 of the way to +100R in a day. (For those counting at home, at a rate 1% of equity risked per trade, +100R is a 100% return. I started with 0.5%, and dialed up to 1% where I stand currently.) Frankly, I’m stunned to be profitable at all, to say nothing of being up this big. I’m now up +35R overall after 92 trades since starting Prop Trading on July 25 (that’s a net return of +29.7% on my starting equity). As Dino said today, God Bless America.

Trade Grade for Today:

As a side note, I gotta LMAO at this timely recommendation! Whoops. To be fair, I did say that the short interest was a potential problem, and that a sharp reversal would cause me to change my mind. That’s exactly what we got after 12:00! I covered my short above my entry point in the afternoon, and went long to get some short squeeze action. Bought at $44, sold at $44.95, and made back double my loss on the short. I still think that FED is doomed, but the end may not come for a bit. You have to respect the price action–fundamentals are just supporting information. I’m proud of how I reversed my stance on CFC and on FED. I overcame my built-in biases and traded what I saw. Hope everybody else did well today too!

Stocks Mentioned In This Article
Stock	Links
CFC	| |

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 thought I’d give out a single stock pick, and as “The Fly” is wont to say, if someone had a gun to my head, I’d say “Shoot me if you must, but before you do…” Fly will probably melt this blog with an internets laser beam for stealing his shtick, but I live for action, remember?

Shoot me if you must, but before you do, short FED

Not to be confused with the Fed, FirstFed Financial Corp. (NYSE: FED) is a “holding company for First Federal Bank of California that provides various banking services in California”, including mortgages. They aren’t a sub-prime headliner since their specialty is in the Alt-A arena (which is starting to get attention along with sub-prime) in option Adjustable Rate Mortgages, where you can decide not to pay and the interest gets amortized negatively back into your loan balance. Note that American Home Mortgage used to be one of those lenders, and they imploded impressively recently.

This article from Seeking Alpha, while dated, does highlight the reasons why I think FED is in trouble. The gems below are for those who are “attention span challenged”:

Its mortgage portfolio is packed with risky loans known as option ARMS.

80% of its loans have little or no documentation to prove the borrower’s income or assets (Liar Loans –Prospectus).

The bulk of FirstFed’s income is derived from noncash earnings, largely from the deferred principal on its option ARMs. That so-called negative amortization constituted $223.9 million, or 68.4%, of the bank’s income before taxes in 2006, compared with 1.3% in 2004. In essence, FirstFed is booking profits on money it hasn’t collected.

Not only do they face default risk and the repricing of their mortgage portfolio, they also face the possibility of having to significantly restate their past income should they have a lot of defaults. They escaped relatively unscathed in the February-to-March sub-prime scare earlier this year, along with CFC, AHM, TMA and other “strong and unexposed to sub-prime mortgage troubles” lenders that are now being poleaxed. FED is kind of obscure, but once they make a few more headlines, I think that the bloodletting will begin in spades.

One problem is that a lot of the float is already sold short: 47.6%, so some strength in the stock or a change in the credit markets could start a good short squeeze. However, the short interest stayed high even in the face of the run-up from March to June this year, so I guess that’s a good sign that the shorts aren’t weak hands.

My price target on this one is 6, as in 6 feet under. I think they will cease to be, will join the choir invisible, push up the daisies and all that. I went short for a position trade today at $43.34, and with the sell off at the close today I may add more in the morning. A sharp rise here would cause me to reconsider the timing of my position.

As a side note, I had to LMAO at this timely recommendation. For your reference:

I guess $40 is the new $80? LOL

So “shoot me if you must, but” you know the rest…

**DISCLAIMER** I’m not recommending that you do anything. Do your own research and make up your own mind. Don’t just take the word of some moron from the internets about what you should do in the markets.

Stocks Mentioned In This Article
Stock	Links
FED	| |

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

Most days I trade part-time when I get the chance from work. Today I had the day off and nothing else to do, so I traded my first full-time day as a prop trader.

It was the hardest I’ve worked in years!! I placed 39 different transactions through a web-based interface, all from a single computer monitor. I was flying around windows and spreadsheets, charts–If I ever go full-time, I’ll buy another monitor and get better-than-free tools immediately! Plus, with the Fed jacking the markets up it was a crazy day. I traded almost $200,000 worth of stock today; there’s your trivia for the day.

I decided to crank my risk up as I discussed yesterday and play StreetSmack Style short scalps. At the open, we gapped down so hard that I faded it and went long CFC:

I went long as CFC went above the high if the first few candles with a stop at the day’s low. I added and removed at a few points, got confused and tried to sell some and ended up buying instead towards the end. I had no idea where I stood at that point risk-wise, so I just closed it all out at the purple line. Whoops.

The rest of the trades were short scalps. My worst case drawdown was -11%(!!) of my equity, and I finished up 6.7% on my equity when it was all over. Maybe the risk was cranked up too much (ya think)? Anyway, I’m glad to finish green on a day like today.

My paintbars served me quite well. They did the heavy lifting of telling me when to enter the first part of the position. I added inconsistently and bailed on some trades earlier than I should have, so my execution was off, but hey, it’s a new strategy for me. I depended on people calling out parabolic runners on Wallstreak, as I have no scan for those yet (Trade Ideas gets blocked by a firewall, so I can’t use that). Stewie made a dollar gainer scan on Prophet.net that he was using, so I’ll have to see if I can come up with something there.

In any event, I didn’t exactly follow the rules I set out for myself yesterday. I tried 8 short scalps–here’s the charts of the trades, some good, some bad (lightly annotated):

I’ll post an analysis of my rules and any changes I’ll make (I have a few ideas) over the weekend–for now, I need a break X_X

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 scalped my brains out this morning, and basically ran through over -3R in losses. I was off in my timing, and was holding too long and with positions that were too large / stops that were too tight for the volatility. Just trading poorly.

I tried to refocus myself, and looked for setups on higher timeframes than 1 minute. Zoomie called out a setup in ORA on Wallstreak. It had been basing for over a year, and had a breakout yesterday and a big gap up today. It was a Trader-X style setup. Zoomie traded it on the 30 minute chart, and I traded it on the 1 minute chart.

I wanted to play a breakout of $47 with a tight stop so that the payoff would be big if it moved. My first entry was too early as it turns out, and I punched out to avoid hitting the stop (which was too wide anyway). Strike 1.

Trade Summary:

ORA Long
Entry: $46.98, Stop: $46.60, Target: $0.00
Exit: $46.78, P/L: -0.54R

Trade Grade:

Next, I watched the setup to see what it would do. ORA made a higher low inside the base, so I entered pre-emptively inside the base to give myself some cushion, like I did yesterday with CFC, though my stop was still too wide. In the end, it moved to just above $47, but no volume really came in, so I bailed when price retraced back below $47. Not a loss, so foul tip.

Trade Summary:

ORA Long
Entry: $46.90, Stop: $46.60, Target: $47.60
Exit: $46.97, P/L: 0.19R

Trade Grade:

Just like with CFC, the third time was the charm for me! Volume dried up at $47 and the 15 minute timeframe was finally aligned with the 1 minute, guiding me to go long. I entered early, with a tighter stop this time. About 20 seconds later, ORA popped about $0.30 immediately and ran up about a dollar in 2 minutes! It was unreal, and Zoomie called it in plenty of time for anyone on Wallstreak to get in. I took a partial at the 119% fib, and then closed out the rest when I had to leave the computer. I thought that I would miss the 138% extension if I was away, which was my target just above $49. During that time I was away, ORA made it within a few cents of that level. Amazing.

Trade Summary:

ORA Long
Entry: $47.00, Stop: $46.70, Target: $49.23
Exit: $48.47, P/L: 4.32R

Trade Grade:

Net PnL Today: +1.05R (even after all my screwups this morning)
Prop Trading Return on Equity from 7/25 to 8/8: +11.7%

If I can keep from throwing money at bad trades, then my PnL should really take off. Trade well and the money will follow.

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 was busy all morning, but I got time to trade just before the Fed released their statement. I saw CFC taking a dive, and tried to scalp the action. My first entry was short at the bottom of a swing, and I was quickly out for a loss. Determined to keep swinging, I tried again to go short. This time the entry was good, but I didn’t partial out when I should have, and scratched the trade. Since trade #2 wasn’t a loss (2 strikes in the same stock and I’m out of it for the day) I tried again, this time looking long. My entry was terrific: I sent a market order to buy just as I saw price fall back from round number $27 and got filled at $26.90. CFC then snapped back to $27 and began battling it out, doing lots of volume a little above $27. This gave me an immediate cushion on the trade, and it ended up great, offsetting the loss from my first trade by about 2x. Here’s the chart:

Trade Summary:

CFC Short
Entry: $26.89, Stop: $27.08, Target: $26.50
Exit: $27.12, P/L: -1.20R

Trade Grade:

Trade Summary:

CFC Short
Entry: $26.96, Stop: $27.15, Target: $26.60
Exit: $26.92, P/L: 0.16R

Trade Grade:

Trade Summary:

CFC Long
Entry: $26.90, Stop: $26.80, Target: $27.50
Exit: $27.26, P/L: 4.34R

Trade Grade:

Wallstreak user Johnson also pointed out a beautiful base forming in JNPR, right at round number $33. I set an alert to tell me when it broke out. I held a very tight (for me) stop of S0.10, and it paid off very well. I traded off the 1 minute chart, though the 15 minute shows the base better, and I watched it for confirmation of the price and volume action I saw on the 1 minute. That’s kind of backwards to how I usually think (the higher timeframe guiding the lower instead of the other way around), but it worked out well and kept me confident to hold even though the 1 min looked scary at times.

Trade Summary:

JNPR Long
Entry: $33.09, Stop: $32.90, Target: $33.50
Exit: $33.59, P/L: 2.08R

Trade Grade:

I’m on a tear lately, and it’s a function of three things:

1) Good luck (I admit–I’ve gotten a few good breaks recently)

2) Freedom to trade at will from my Prop firm

3) An increase in my skills from my own experience as well as excellent mentoring from the exceptional traders on Wallstreak.

My prop account is up 10% since 7/25/07. That’s not only the best performance in two weeks I’ve ever had, it’s also the highest my trading gains have ever been. I’m finally making money by trading. Still, pride goeth before the fall, so I’m trying to be very cautious to avoid mistakes and not think I’m ‘home free’.

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 a Pile ‘O Charts from my trades today. I took seven trades, 3 losers for -2.2R, two breakeven, and two winners for +4.6R, leaving me at +2.4R for the day. My prop account overall PnL is up about +1.5R from my starting balance. I’m happy with those results for now, especially on the last few days we’ve had! I need to be quicker to cut a loser–I still have some of that bias left over from all of my retail trades, trying to save that daytrade!

Here’s the charts. As always, Red is my stop, orange my entry, green lines are for targets, and blue lines mark exits. On my trade in Continental Airlines (NYSE: CAL), I partialed out successfully, taking some profits and letting the rest run, giving the one big win of 3.53R.

CAL Short (My good trade for the day)

AAPL Short (Quick -1R that afterward turned and went way beyond my target! DOH!)

CFC Short

BIDU Short

ISRG Long

RIMM Long

CROX Long

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