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Trade Recap

July 31, 2010 1 comment

Just sitting here running through some of my trades from the past week and thought I would share my thought process on one particular trade I was involved in from this past Friday. 

The stock I was involved in was Research in Motion(RIMM).  My thought process going into the day was this stock was a long only.  There was fresh news from the previous day about the upcoming release of a new touch screen blackberry that would be a direct competitor to the Apple(AAPL) iPhone.  Also RIMM on the previous day had shown very good relative strength to the market by not selling off, then when the market turned around RIMM rallied over 2 points.  The levels I was watching Friday was 54 which was very strong support and the 56 level as resistance which it had failed to close above.  I wanted to get long around the 54 level or find an intraday level where the buying was strong.  If RIMM got above the 56 level early in the day I could easily see it filling the gap to the 58 level. 

On the open I got exactly what I wanted as RIMM started to selloff and approach the 54 level.  I put a bid out there waiting for the price I wanted.  Buyers stepped in early, around 54.30, and RIMM started to consolidate at 54.50.  When the 9:55am number hit RIMM took off.  I didn’t hit the offer as I was patient knowing that RIMM would give me an entry.  I got that entry at 55.25 knowing that I would be out before 55 was broken.  I added into the trade once I got confirmation that there was real buying in this stock and bids were being supported.  I scaled out some at 55.90 as RIMM started to consolidate around the important 56 level I had identified coming into the day. 

One mistake I made was not taking this opportunity to put on some serious size.  I knew what the level was and the stock kept testing it.  At 11am when the range got to a very manageable .20 I should have loaded the boat and even mentioned it to my deskmate Chad.  I ended up adding some shares on the break but it was irresponsible not to load the boat as this was the opportunity I was waiting all day for.  I had planned for this early break of 56 and made a mistake not putting enough size on this trade.  In all honesty I didn’t follow my plan.  I ended up riding the rest of this trade till RIMM got above 57 and took the last piece off at 57.15.  This was another mistake on my part as my profit target was 58 and I shouldn’t have been so quick to give up on the last part of this move. 

Now don’t get me wrong getting 2 points on a trade, especially before the weekend, was very nice.  I planned this trade out well going into the day, and found some very nice entries by reading the order flow on Level 2.  But I still made mistakes on this trade.  I believe one of the most important things we can do as traders is to eliminate as many mistakes as we can.  This was a nice trade but I could have done so many things differently to make this trade better.  This was a trade that made sense to me, with patterns that made sense to me.  Now I can’t go back in time so what I am going to do is keep replaying this trade so when a situation like this trade presents itself again I will take better advantage of it.  I will go through my journal and take note of what I wrote going into the day.  I will write down details of the trade as it was unfolding.  I will also write down what I did right and wrong.  I will also watch the trade again using tick replay and take note of how I could have capitalized better on the price action. 

As traders it is very easy to beat ourselves up on our bad days.  What we need to do is reinforce our good days.  The good trades are the ones that need to be studied.  These are the trades where things came together and made sense.  These are the trades that you want to repeat.  Hope you all have a good weekend. 

Kyle

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how a professional stock trader earns money

Do you want the secret to consistently going to the bank? The all powerful golden rule that will unlock stock trading profits and financial freedom for you?

The first part of the secret is keeping a detailed journal during the trading day of what definitely does not work. I am not talking about a long bunch of paragraphs, I am talking about maybe ten 7 word bullet points of observations.

As you build up more screen time you MUST build your personal list of  low probability ideas. In other words “Don’t do this, and this and this.” The sooner you can minimize mistakes the more crystal clear your trading plan will become and you will have a list of do this and this more often.

This leads us to the second part of the secret. New traders lose money on every idea they have, they allocate capital to every idea without deep consideration for the probability of that idea making money.

Consistently profitable traders lose money on good ideas. They don’t execute a trade if after giving it some thought the expectation for follow through is low. In other words newbies execute a lot of trades that they can manage risk on, but has little potential to actually earn money. They feel safe but they also won’t earn a living.

Everyone will lose money trading, maybe even 50% of the time, it is a given. Make sure you make the list of what definitely does not work, then commit capital great ideas only.

You will still lose money on some good ideas but you will come out positive at the end of each month.

Significant break GLD trend line

July 28, 2010 Leave a comment

We have seen a significant break in the daily GLD trend line. this means a couple of things can happen. We can have a retest of the next support level of around 110.55. We could pop right back in the range and retest the top of the range of the 123.56 area. Or we can continue to go sideways and consolidate.
At Keystone we will not try to predict where we are heading. We will let the charts and the market tell us where we are heading. So keep your powder dry and be patient for the market to pick a direction.

We have seen a significant break in the daily GLD trend line. this means a couple of things can happen. We can have a retest of the next support level of around 110.55. We could pop right back in the range and retest the top of the range of the 123.56 area. Or we can continue to go sideways and consolidate.
At Keystone we will not try to predict where we are heading. We will let the charts and the market tell us where we are heading. So keep your powder dry and be patient for the market to pick a direction.

Everyday isn’t the Same

As Mario posted earlier today, what a boring day to trade.  Sure there were some pockets of opportunity in Newmont (NEM),  Research in Motion(RIMM), and the gold sector to name a few.  But I think today taken in the context of yesterday was a great educational experience. 

One of the hardest things for traders to figure out is that everyday is not a day to push it.  Some days the best trade is to scan your list and realize your plan is not playing itself out.  I know the hardest thing for me to do is to sit on my hands when I haven’t had the best day.  Saving money on days like today and not overtrading will pay off in your check at the end of the month.  The flip side to this is when the market gives you a great opportunity and leaves money sitting in the corner you have to be aggressive and take it.  When your pre-market plan is playing itself out like Monday you have to push it and take on as much risk as you can handle. 

On Monday are plan as a firm was perfect.  But I know personally I didn’t have as good of a day as I should have.  This is my fault and its my job to find out why.  I took notes of what the market looked like and next time the well-defined levels in our plan are playing themselves out I will look for spots to add-on more size to my trades.  I also will look to have more positions in a broader range of sectors, so as to catch more of the move.   When the market pulls back into support and pauses I need to be more confident to put on more positions.  As traders we need to take advantage of days like Monday because days like today are always right around the corner. 

Nothing that happened today fit my plan.  I let the algos in RIMM chop me up even though I had the right side.  The volume was lacking in many of the moves today and it was very evident early in the day that it was going to be a tough day.  The key is don’t let these days go by without learning from them.  Learn to be disciplined when your plan isn’t playing itself out.  The disciplined trader will be around to take advantage of the good days and the gifts that the market sometimes provides.  Best of luck and have a great night. 

Kyle

Dull Summer day…

July 27, 2010 Leave a comment

Apart from the short burst of energy on the open this morning, the markets really didn’t have much of any direction or volume. the $SPY traded 204mm slightly higher than yesterday – but as mentioned most of it in the 1st 45min of the day. The 200 day moving average on the S&P has turned out to be the next resistance levels in the markets, we couldn’t stay above it today, despite the nice gap up we had this morning on the back of good earnings.

The VIX once again proved to be useful as it moved higher during the course of the morning session, keeping the longs under tight control, and keeping the shorts, especially in the gold sector, nice and profitable.

As for the rest of the day, Keystone mainly stayed on the sidelines, as the markets lost volume as well as a clear direction. Let’s see what sort of volume we get tomorrow…

$SPY and the Death Cross

The Death Cross is a crossover resulting from a security’s long-term moving average breaking above its short-term moving average or support level. As long-term indicators carry more weight, this trend indicates a bear market on the horizon and is reinforced by high trading volumes. Additionally, the long-term moving average becomes the new resistance level in the rising market. Well…here we are and we shall see if this definition holds true because today we hit the 200 dma.

Rally Continues

Stocks continued to rally on Monday, sending the Dow Jones Industrial Average 100 points higher to 10,525. This is the third session in a row in which the Dow has registered triple digit gains.

The SPDR S&P 500 ETF (NYSE: SPY) gained 1.06% to $111.58. Volume was noticeably light today, with only 176.8 million SPY shares trading hands compared to a 3-month daily average of almost 286 million shares. The S&P 500 closed above its 200-day moving average at 1,115.

The PowerShares QQQ Trust ETF (NASDAQ: QQQQ), which tracks the performance of the Nasdaq 100, jumped 0.83% to $46.44. Year-to-date, the quad Q’s have gained 1.51%.

Gold continued its recent slide on Monday. COMEX gold futures are currently trading at $1,186.10. The SPDR Gold Trust ETF (NYSEL:GLD) fell 0.51% to $115.50. Over the last month, the GLD has fallen almost 6%.

Oil was flat on Monday with NYMEX crude futures unchanged on the session. The United States Oil Fund ETF (NYSE: USO) fell 0.11% to $35.35. Volume was light.

Treasury prices fell today, as investors continued to rush back into risk assets. The iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) lost 0.17% to $99.61. The yield on the 10-year Treasury note is currently at 2.99%.

The U.S. Dollar continued its pullback on Monday, which likely helped boost the equity markets. The PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP) lost 0.54% to $23.86. The closely watched EUR/USD pair is trading at $1.2995.

Benzinga