The Trader Talk Think Tank

Announcing an unprecedented opportunity to learn…

We are visiting Chicago and Philadelphia!

Keystone Trading Concepts presents the

Trader Talk Think Tank

Each month in our NYC office Keystone Trading hosts and moderates a two hour networking event that empowers our attendees to:

· Discover how to assess market conditions like a professional for the upcoming quarter

· Gain insight into which sectors have the lowest risk opportunities

· Discuss ideas you have previously traded and new ideas you are considering

· Review of previous Game Plans and how Keystone’s proprietary traders and students executed those ideas with real money

· Get a glimpse into the Keystone Trading Plan and how we plan to attack the markets in the coming week

Additional topics on the schedule include:

· The most common and (most costly) stock trading mistake and how to avoid it

· How to eliminate the anxiety caused by reading your brokerage statement

· The difference between a risk only trade versus a trade with a high probability to earn money

· How to qualify to trade firm capital for Keystone (remotely)

On Wednesday October 27th at 7:00pm EDT Keystone Trading Concepts will be hosting a preview webinar for the next Trader Talk Think Tank to be held in Chicago at the Sofitel hotel on Monday, November 8th 2010.

During the Preview Webinar we will be discussing the top 5 reasons why attending the Chicago

Trader Talk Think Tank on November 8th will stimulate new ideas for you, learn how a professional trading firm allocates capital to scenarios and most likely develop some great new friendships.

Think Tank attendance has no fee with pre-registration however we normally have standing room only so there is a $75 fee at the door for those without an entrance ticket.

We strongly encourage registering with a friend or spouse!

Once again the preview webinar for the Chicago Think Tank is this Wednesday , October 27th at 7:00pm EDT, (6pm in Chicago) .

Please call 212-594-8900 to Reserve your spot Today!

WY: Weyerhaeuser Co. Building a solid base

WY: Weyerhaeuser Co. reports earnings next Friday July 30. No matter how you decide to find trades or investments you can’t ignore a huge spike in volume combined with a 24% increase in price.

Whether you are day trading or value investor this stock is building a classic base; one that is consolidating its recent gains as well as giving you a terrific risk point to plan for a solid risk/reward.

Initiating the first part of my trade here with a stop below $39, there is some short term resistance to get through at $44. A close above this level I plan to add to the trade which should take me to my profit target of just over $48.

If I start to see similar price action in IP: International Paper and LPX: Louisiana Pacific this will confirm money is flowing in to the sector for earnings season and I will increase my capital allocation on the idea.

Stcok will adjust for dividend today and conversion to a real estate trust, let the charts clean themselves up and scenario will still be good.

Keystone Trading

Great entries are a small part of great trades

Trading stocks for a living can be one of the most rewarding experiences of your life if done properly. If you are trading all day every day for years and not making progress you are “practicing wrong.”

Of course by progress I am referring to earning consistent money.

Many of us here at Keystone have played competitive sports at one time or another, for me it was baseball and I often use baseball analogies to make a stock trading point. Today I am going to use football. Before I get to my point I was actually asked by someone at a BBQ this weekend what makes a successful trader?

While there is no “one” answer I feel one of two backgrounds give an individual a HUGE advantage; having previously owned a business or having been an athlete (especially if you went on to play at the high school, or college level and beyond).

Having owned a business you learn the importance of understanding how you will compete, how you will stand out in the market place to generate revenues; in other words you really need to dig deep to define an edge. As an entrepreneur you also learn what it means to put in an 80 hour week and sometimes not get paid, you learn very quickly the skill of paying attention to what is working and what is not.

As an athlete I feel focus, discipline and most importantly the ability to bounce back from adversity can be translated into a trading asset.

Getting back to the football analogy and your entries. far too much emphasis is placed on the entry signal. A football game usually lasts just over two hours when you remove all of the commercial breaks, each actual play is basically 7-10 seconds.

What does this have to do with trading? Everything as far as “practicing and focus.” The hard work, or better worded the reason you will earn money on on most trades is because of the hard work you do BEFORE you begin to look for an entry signal.

All football plays are mapped out for the coach before the game starts, your trading should be the same way. You want to be executing your ideas during the day, not finding new ones. If you are looking for ideas you are in a horrible environment or you are not prepared.

If you want to become someone who gets paid each month spend most of your screen time learning to identify great scenarios, one that have a high probability for follow through instead of focusing so much on your P&L and where to enter. In other words focus on IF there is something to do as opposed to where to get in.

trading your pre planned ideas

My plan today was a short bias on the markets and to sell stocks in my list that showed weakest on the daily charts, such as AK Steel (AKS) and Best Buy (BBY). Looking at Fridays trading, I planned two scenarios that I felt had high probabilities of playing out. The markets where either going to open weak and continue to sell off in which case I would short the 15 min ORB (open range break) or the markets would open with buying pressure and I would trade the first 15 min swing high, with the first profit target being the lows of the day; and possibly a break of those lows for continued selling momentum. As you can see from the price action the latter happened as the SPY in the first 45 min of trading tested the 15 min 20 period SMA which held as resistant creating a swing high, which gave us our first opportunity to short weak stocks.

Unfortunately I was not able to catch a good risk reward in AKS as the markets created the swing high, so I had to be patient and wait for a break of the lows around 13.07 as the next possible short; which unfolded for a nice momentum move down to the 12.80 area. In the afternoon BBY seemed to be the best short on my list in the lunch time consolidation below the morning lows. Even though price action did follow through to the downside in the late afternoon trading, you had to be quick on the keys and get a good entry to take advantage of the downward momentum.

What to do when markets are in a range??

One of the benefits of working on a trading floor is being able to gauge the type of environment we are in on a day-to-day basis just by opening up my ears.  You can almost feel the energy when the market or even just a stock is giving away money.  And on the flip side you can feel the boredom and frustration when the market is providing nothing.  More and more lately I have been feeling this frustration by the traders on the floor.  But during these difficult times is when traders need to step up and make adjustments in their trading and grind out a living.  You need to grind out a living and basically keep your head above water so when the markets pick a direction you are still around to capitalize on this opportunity.  Here are a few adjustments that I have been making in my trading lately. 

• Be Prepared.  Far too many days lately have been slow grinds with small periods of activity.  If you don’t have a plan for the market at all times you may miss this activity.  And if you are an undisciplined trader you may chase this opportunity and compound the mistake by not only missing the high probability trade but also taking a low probability scenario. 
• Lower your expectations.  When the markets are not trending you are basically momentum trading.  The key to momentum trading is taking what the market is willing to give.  Take your profits and reevaluate the trade.  Most trading is grinding out small profits and losses, the bigger money will present itself but don’t try to hit a home run every trade. 
• Respect support and resistance levels.  One thing I have been noticing in my own trading is that stocks are not only pausing at area support/resistance they are reversing off of these levels.  And if you have not at least taken some of your position off you end up turning a good trade into a flat or a small loss.  They key is to get out at areas you believe will be support/resistance and if we do break through get back in. 
• Hourly trends are most important lately.  Most of the stocks I have been watching the only trend I have been able to take advantage of has been on the hourly timeframe.  Stocks that are trending are basically doing so on a 3-5 day timeframe.  If you are paying attention to the hourly charts you may be able to take advantage of good setups by trading in this direction.  A good example of this last week was WDC as it traded from 44 to 38. 
• Your first loss is your best loss.  With lower expectations and less opportunity must come tighter stops.  When markets are trending and the direction is obvious you may be able to let trades breathe a bit.  The environment we are in calls for watching order flow and when the tape doesn’t feel right you need to get out of the trade and reevaluate.

Hopefully these suggestions help you in your trading.  If you have any adjustments that are working for you either post them in the comments section or email me at kylemkramer@gmail.com and I will post them for us to discuss.  As usual best of luck in your trading. 

Kyle