Archive for June, 2010

Trading Psychology

June 30, 2010 Leave a comment

I often get questions about trading psychology. Is it an important aspect of the business? I typically get a number of different answers, its 80% mental and 20% skill. It’s 80% skill and 10% mental. I have to agree with the first one. I think most aspects of this business are mental. Can you get back on the horse when you get knocked down. If your down in the morning big are you going to have the mental fortitude to battle back and get positive. Or are you going to curl up in a little ball and cry.

Look at today, choppy all day, if you shut down the computer blaming the market you would have missed the move in the afternoon.

Read Think and grow Rich. It is a great book about positive thinking in life and how to mentally get back in the game.

Have a great and profitable day!!


Market Update June 30th

“Do not trade every day of every year. Trade only when the market is clearly bullish or bearish. Trade in the direction of the general market. If it’s rising you should be long, if it’s falling you should be short.”- Jesse Livermore

I want to thank WeeklyTA on StockTwits for reminding me of this quote from Jesse Livermore.  This is actually one of Jesse Livermore’s rules and this was one of the best days to be reminded of it.  The volume today has been nonexistent and nothing has fit my plan so far today.  Being reminded of this rule and having it at the forefront of my thought process has helped me do nothing today.  Trade setups that make sense to you and if what the market is doing does not fit your plan than don’t commit capital.  There will always be opportunities but the need to be disciplined on days like today will be the difference between you being a breakeven trader and an extremely profitable trader. 

Basically for the day I am still watching the 1040 level in the S&P 500 and am only trading around that level.  If it holds as support I may test some longs and if we break through I will get more aggressive from the short side and with more share size.  Best of luck for the rest of the day. 


One road to Success

June 30, 2010 Leave a comment

There have been many people who have tried to make a living from trading. Some have been successful, others have not. What is the different between the person who is able to accomplish their trading goals and one that is unable. Is it the stocks they are trading? The size and amount of risk a trader takes? Is there a golden rule or secrete that propels a trade to success? From my own experience and reading different articles about successful traders, the number one reason that separates a successful trader from one that is not is a PLAN. 

A detail trading plan to be more specific, a plan that lays out guidelines and describes actions that are to be taken once opportunity/edge has been identified in the markets.( but this is only half the picture). I know many people who claim to have a plan but are not able to take consistent money out of the markets. So this bares the questions. What is a complete trading plan? Would any trading plan work so you can make a living from trading? As you might have guess the answer to the latter is a firm NO. A complete trading plan should provide solutions to all trading decisions a trader will have to make while executing the plan. 

A good/complete trading plan should include/cover 

Market What type of market best suits the plan 

Entries- When to buy or sell

Stops- When to exit

 Exits- When to exit winning trades

 Position Sizing- proper leverage

 Executions Most cost-effective way to implement plan

 Expectation- Criteria for judgement of underlying strength of trade idea

 As I stated previously having a complete trading plan is only half of what you’ll need to find success in this business. The other half of the equation is developing attributes of a professional trader. Discipline and consistent are very important, which in turn will create confidence. This confidence is important so that the trader will follow the rules/guidelines outlined by the trading plan even during period or streaks of losing trades. Having a complete trading plan will allow the trader to re-focus on the fundamental concept that creates the edge in the markets; which will also help assist the trader in overcome short-term emotional struggles that could arise from losing periods. Point blank a trader must have/develop the confidence and discipline to consistently apply the rules of the trading plan, once this is accomplished they will  find success as a trader.

Massive Selling Hits Wall Street

U.S. equity markets were besieged by sellers today as concerns about the state of the global economic recovery and sovereign debt problems in Europe continue to weigh heavily on stocks. Making matters worse were bearish reports from The Conference Board on Chinese growth and U.S. consumer confidence.

According to Reuters, The Conference Board on Tuesday corrected its leading economic index for China to a 0.3 percent gain in April rather than the 1.7 percent rise the group earlier reported.

The Conference Board’s U.S. consumer confidence index fell from a revised 62.7 in May to 52.9 in June. Consensus estimates were that the index would only fall very slightly to 62.0.

The Dow Jones Industrial Average fell 268 points to close below the 10,000 level at 9,870. The Dow traded in a range between 9,812 and 10,202. Year-to-date, the widely watched blue chip stock index has lost 5.35%.

The SPDR S&P 500 ETF (NYSE: SPY) lost 3.09% to $104.21 on Tuesday. Ominously, SPY volume was very heavy, with over 360 million shares trading hands compared to a daily average of just 262 million. Once again, volume has been heavy on down days, and light on up days – not a good sign.

Gold moved marginally higher, as the fear trade was back on across Wall Street. COMEX gold futures gained $1.80 to $1,240.40 an ounce. The SPDR Gold Trust ETF (NYSE: GLD) added 0.15% to $121.27. All-time highs were breached on an intra-day basis in the GLD yesterday, before prices pulled back. Look for a re-test soon.

The rally in Treasuries continued in a major way during Tuesday’s session. The iShares Lehman 20+ Year Treasury Bond ETF (NYSE: TLT) jumped 1.09% to $101.07. Treasury notes with a 10-year maturity are now yielding an ultra-low 2.9545%.

Keep a very close eye on the bond market to gauge the near term direction for stocks, as the continued push into Treasuries is suggesting investors are frantically reducing risk exposure.

The U.S. Dollar was higher today, as money flowed into dollars and away from currencies which are perceived to entail more risk. The PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), which tracks the performance of the dollar versus a basket of foreign currencies rose 0.48% to $25.08. The closely watched EUR/USD pair is now trading at $1.2188.

Tesla Motors (NASDAQ: TSLA) began trading on the Nasdaq exchange today after the company’s IPO raised over $220 million. Tesla is a Silicon Valley electric car maker. The shares surged an incredible 40.53% to close at $23.99. The deal had been priced at $17 which was above the expected range of $14-$16. The size of the offering was also expanded by 20% on Monday due to strong demand.


Stocks Close Marginally Lower (SPY, QQQQ, GLD, USO, TLT, UUP)

After remaining in positive territory for much of Monday’s session, the Dow Jones Industrial Average weakened in the last 10 minutes of trading to close 5 points lower at 10,138.52. The Dow traded in a range between 10,101 and 10,202.

The SPDR S&P 500 ETF (NYSE: SPY) finished 0.31% lower at $107.53. Volume was much lower than the three month average. Around 167 million SPY shares traded hands compared to a 3 month average of over 262 million.

The PowerShares QQQ Trust ETF (NASDAQ: QQQQ), which tracks the performance of the Nasdaq 100, closed 0.38% lower at $45.10. Year to date, the tech heavy ETF has declined 1.42% after registering large gains earlier in 2010.

Gold fell in a volatile trading session on Monday. COMEX gold futures are currently trading at $1,239.5 an ounce. The SPDR Gold Trust ETF (NYSE: GLD) hit an all time high of $123.56 in morning trading, before pulling back sharply. On the day, the GLD declined 1.36% to $121.09. Volume was heavier than usual.

Oil declined today as well, as NYMEX crude futures fell $0.82 to $78.04. The United States Oil Fund ETF (NYSE: USO) lost 1.26% to finish at $35.21.

Treasury prices moved higher on Monday, sending yields even lower. The iShares Lehman 20+ Year Treasury Bond ETF (NYSE: TLT) jumped 0.94% to $99.98. The 52 week high in the TLT is within reach at $100.31. The yield on the 10-year bond is now at an ultra low 3.02%.

The U.S. Dollar notched gains today as well. The PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP , which tracks the performance of the dollar against a basket of foreign currencies, climbed 0.52% to $24.96. The closely watched EUR/USD pair is currently trading at $1.2278


Not much time before the open, Goldcorp GG: nyse, is setting up a most opportune short. With assets here across the board richly valued, I believe we will see people ring the register on gold before other consumer driven equities. Tight stop at $46. Good luck this week.

Categories: Uncategorized

Market Update June 24th

Going into the day today as a firm we had identified a few levels in the SPY where we were looking to get involved.  The first level we had looked at was the 108.50 level, which had a few reason why it was significant.  The first reason was that it was the lows from the previous day, which is always a significant level.  The other reason was that it was around a Fibonacci level which was 108.80.  Now I don’t put much credence into the Fib numbers but I do look at them for the markets.  If one of the numbers may be coming into play during the day I want to be aware of it and I watch to see if volume comes in at that level.  That was the case yesterday at 108.50. 

We opened up at 108.69 and immediately traded below this level.  Many of the people in our firm got short Western Digital(WDC) and Seagate(STX) around their opening range.  Many people today got paid off in a big way on the open because they had a plan for what was unfolding in the market.  The SPY traded down to 108 bounced and then made a perfect swing high around 10:30 which many traders got paid off on, except myself who got caught in JP Morgan(JPM) which rallied a point of the lows during this time. 

Right now we are trading in a range on the SPY between 108.30 and 107.70.  As long as we stay below 108.50 I am biased to the short side in this market.  The SPY looks to me like in the next few days we should be testing the lows at 104.40 but as usual the key is trading what the market gives us.  Always have a plan for the other side of the market so if that plays out you won’t just be jumping into  a position.  Look for stocks that are showing relative strength and is the market bounces above 108.50 those should be the first stocks you look at to go long.  Best of luck for the rest of the day.