FOCUS for stock trading

I think in the past few weeks that I’ve been at Keystone, the one  resounding theme has been “focus”.  You can go into the morning, fresh and prepared (having already set your game plan for the day) and then have it all thrown against you because you lost focus (for even 2 minutes) while in the game. 

I think the past few weeks have been extremely helpful in helping me to understand what to focus on while I’m trading.

FX has been a driving factor of the markets and focusing on the USD and the EUR moving  has been extremely helpful in reacting to moves.  Making sure to focus on currencies, and broader market indices (VIX, SPY, DOW, ETF’s, etc…) at all times, have allowed me to have a greater understanding on the way certain stocks move.

It’s not to say that things are always going to play out the way you “expect them to” (green on the screen) but you could definitely limit your downside over the long run making an effort to understand and focus in on all the moving parts while in the game. That’s what I learned at least…

Liberty Global Inc. (LBTYA, LBTYC)

LBTYA/LBTYC are two stocks for the same company, just different classes. They provide voice, video, and broadband Internet services. Some of its competitors are also seeing positive order flow coming in, such as CMCSA, DTV, VIA-B, TWC, and DISH. LBTYA is a 10+ long on the charts, 10 above the 20, above the 50, above the 200.

It has been rallying from a breakout starting September 1st, 2010 and has had only 8 days since that closed lower than the open, all of which never dipped below the previous 5-6 day range. Significant volume started coming in on October 15th and since then the lowest volume day was a down day on 2.2million shares traded, while the other days usually have a range of 3-4 million shares traded. Unfortunately the ATR for this stock is only 0.67 but the beta is 1.44. Today is unfolding very bullish, it could be an energy candle.

The hourly chart looks very orderly and easy to trade, it doesn’t pull back hard or gap around much. But again this stock does not move too far, usually about 40 to 50 cents a day. If you are looking to trade this sector, which is pretty bullish, this is definitely a stock to trade, either intraday or swing trade.

NEVER PREDICT, REACT!

Today’s meeting and insight on the trading day yesterday brought a lot of ideas full circle for me. Pete mentioned that a lot of traders including myself were confused with the market yesterday especially during the morning sell-off after the gap up. As Pete began explaining that essentially, the market is going to do what it wants and you cannot have any emotions about it, I began to remember the famous Mr. Market metaphor by, of all people, Warren Buffett.

Interesting how this fundamental investor provided one the best insights on Prop. Trading and specifically trend trading. Simply put, if you did your home work, you have a game plan, a price level, an ISL, an IPT, a break even point etc…, you are very well prepared but the market is not looking rational to you, step back and do nothing.

Mr. Market does not always give you the right price says Warren, he also does not always give you the right set-up. It’s OK.

Don’t get upset, mad, frustrated, simply look for the opportunities Mr. Market is giving you, or wait. It is very easy to feel like you need to do something, and I know this has been said over and over, but we need to keep reminding ourselves that doing nothing is also a position. Sometimes, by sitting back, and calmly cycling through your stock you may start to see things differently than what your perfect picture of the market looked like coming into the day.

You may start to see swing-low opportunities in a strong market week opening situation. You may start to see relatively strong stocks in a non-broad based market. You may even realize that, hmm… I rather not take these trades because the risk/reward is not there.

Patience is a virtue and it pays to be patient!

-Lee

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!

Making an Appointment

As I have discussed numerous times on this blog planning is one of if not the most important thing in trading.  You must plan out what you are going to do in every single scenario, so as to not hesitate if and when a trading opportunity presents itself.  Sometimes these plans take a little more time to develop so you must set alerts and be ready at all times like today in Hewlett-Packard (HPQ). 

HPQ has been weak on the charts ever since their CEO got himself in a little bit of trouble and resigned.  This downmove has been met with a lot of volume as funds have been liquidating their positions based on the uncertainty this company now faces.  On Tuesday I was looking to get involved in this stock if it continued to show weakness on the tape.  The levels we were watching were 42.40, 42.30, and 41.94.  I got short a few times on Tuesday anticipating a break only to watch the stock basically trade flat save for the last 5 minutes of the day. 

This last 5 minutes of the day was so important because it basically told the story of what to expect coming into today.  We traded through the first two levels I was watching like they were nothing and with increased volume.  Also we closed below these levels so I had a good idea that HPQ would be in play today on the open.  If you weren’t paying much attention to HPQ on the close Tuesday you probably weren’t ready for it today.  We opened down today and basically broke the flash crash lows of 41.94 in the first 10 minutes and trended lower for the entire day. 

This was a very simple trade as long as you were ready for it today.  The setup is one that everybody can understand.  A stock sells off, consolidates, then makes another leg down.  The key was to not get frustrated the previous day and keep this stock on your radar.  Put your alerts in at the price you need to see the stock trade at, then when it breaks get involved.  Have a good night and best of luck tomorrow. 

Kyle