Archive for July, 2007

stock trading: not a collapse

As an online stock trader you are always looking for an obvious opportunity. You are hoping to wake up one morning and have the market hand you money on a silver platter because the bias of supply or demand is so tilted to one side it’s juts a matter of how many shares you get and how long you are going to hold on. Yesterday was one of those days. It was a day to clean up and pay your rent.

One of our newer traders who is trading firm capital reached his intra day stop loss 20 minutes into the open. The market basically drifted sideways for the first 45 minutes before starting its decline. He wasn’t patient, there was nothing to do yet. He blew an opportunity to have a big personal day because he wasn’t disciplined. Always remember you are not being paid by the hour as a trader, you are being paid by the month. I will be having a talk with him this morning, I hope he went home mad. It’s the only way to improve.

Getting back to yesterdays collapse. If you were watching CNBC you would have thought they were brodcasting a funeral. You always need to kep the big picture in perspective. The market has not had a significant pullback in almost two years. Yesterdays 300+ point decline was long overdue and we are probably not doen going down. We did the second most volume in NASDAQ history yesterday which suggests a significant distributions day. Housing starts were down and believe me, the sub prime mess has not even begun to be felt, those houses in potential foreclosure will not hit the market until next spring. Yesterday was a blip in the big picture. Keep it in perspective.

Categories: Psychology

Stock trading tips: candlestick charts

July 24, 2007 1 comment

Every month in NYC we host a meeting for online stock traders. Some of the attendees are fulltime stock traders some do it as a hobby. If you would like to attend the next meeting, sign up here There is a massive difference between trading for a living and trading as a hobby. There is no pressure to find a good trade that will help pay your mortgage or rent if you have a full time job.

It was during our last meeting that one of the traders who is a full time teacher was relating a story about making a trade in $220 stock that he got off a one minute chart, the entry signal was a DOJI reversal. I think it was great for him that the trade worked out, but entry signals (in this case one candlestick from a one minute chart) must be taken in context of the bigger picture.

Candlestick charting was intoduced by Steve Nison and has many devoted followers and I will tell you I teach using them in my training program. The main point I want to make here is that they are not gospel that something is definitely going to happen. The candle is showing you the most immediate battle betweeen supply and demand. It is NOT showing you the trend. The trader I am speaking of was swearing the stock bounced $3 because of a one minute DOJI. Candlestick charting works, but keep it in the perspective of the big picture.

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Stock trading: Trading Styles

Trading stock for a living and making consistent monthly income requires knowing what type of trader you are. It is very common for me to see a newer trader come in with a little experience and want to trade actively all market conditions. This can lead to a very frustrating start to a trading career.

Any trader who is earning his or her money from the markets (not someone who is doing it as a hobby while they hold down another job) will tell you that trading consistency comes from following your plan flawlessly NOT from predicting what is going to happen next. That is of course if you have a plan in the first place, most trades who commit capital to the market do not.

A plan could be a simple as how much you are going to risk per trade and what the trade needs to look like for you took book a profit or take a loss. Once these parameters are in place you will know before hand how the trade must look in order for you to make a decision. This will help you clearly determine what your trading style is.

For example if you don’t like to take let the market fluctuate that will translate into smaller losses but it will also mean smaller profits per trade. You would identify trades on a shorter time frame and make many trades with a risk reward of one to one.

If you are better at analyzing more pieces of the stock, the market and the sector and feel the smaller time frames are nothing more than noise in relation to the bigger trend, then your trades will be longer in nature and you will lets your trades breath a little longer.

Neither style is right for everyone and it is very hard to be both. Pick which one suits your personality and develop a system around it. Your trading will flow much more stress free because you will only get invloved in YOUR particular scenarios.

Categories: Beginner education

Stock trading lessons:Networking

Online stock trading can be an isolating business. I have been a full time trader for over 10 years and none of my personal friends have ever traded before. When we get together on weekends we can’t talk work because they have no idea what some one who trades for a living goes through day in and day out. They have their 9-5 job where all they have to do is show up and get paid, they can’t fathom working an entire week and sometimes not getting paid (never mind losing money for the week!)

Don’t get me wrong, I wouldn’t change places with any of them. The point I am trying to make is it can be very refreshing to get out and speak to other traders. The trading community is a club that requires a certain kind of entrepreneurial mindset, no wimps allowed. You can get beat up mentally sometimes, it can feel good to have a group of other traders who you can share battle stories with.

To be a trader you need the ability to keep your emotions in check-not too high, not too low. You need that rare quality to bounce back and get up when you get knocked down. You want the positive energy you get from other people who are out there in the market with making their own way. Try to find some other traders in your town to grab a coffee with or to have dinner with once a month. You will be glad you did. It can inspire you and push your trading to new heights.

Categories: Beginner education

Using Losses to your advantage

July 9, 2007 Leave a comment

So often in this market do traders frequently see losses turn from bad to worse in the blink of an eye, just to prove themselves right. However, losses are one of the most important keys of a trader’s psychology. Generally speaking, it may seem that as soon as we put our order out and get filled the market goes in the opposite direction and we take a loss and have to re-evaluate. Every trader progresses once he/she learns that taking a small loss is not the end of the world, but a way to either gain a better position or an opportunity to re-evaluate his bias.

Categories: Psychology

Stock trading: the market this week

The NASDAQ was the only major indice to break out to the upside last week. It was obviously pushed higher by AAPL and the I Phone. A careful look at the Dow and The S&P will tell you they are making lower highs. Both are making a wide choppy topping pattern over the last two months. On the surface this would be distribution, we will know for sure if we see some big cap stocks breaking down with significant volume.

I say on the surface because we are in a confirmed uptrend on virtually every chart. No one knows whether it is distribution or just a pause, be patient and let the market tip its hand, not need to guess. Earnings season starts tonight with Alcoa (AA), lets see if it leads the next push.

Categories: Market Set Up