1) I objectively identify my edges
2) I predefine the risk of every trade
3) I completely accept the risk and/or I am willing to let go of the trade
4)I continually monitor my susceptibility for making errors
I understand the absolute necessity of these principles of consistent success and therefore, I NEVER VIOLATE THEM!
I have this taped up onto the side of my monitor. I pulled it out of a book but I can't remember which one. Just some good words to follow and to live by as a trader.
Noticed something interesting between these 3. They're creating something that I've heard been called, the jaws of death. Which something I've kind of noticed before but didn't know how it would play out but now it's still going on about 3-4 weeks later.
If you notice in the black box, the red line (bonds) are heading down which creates the bottom part of the jaw. The blue line (sp500) creates the upper line of the jaw and creates a mouth looking thing. It represents recession. Gold is still up, sp500 up yet bonds are going down, dollar is going down. Bad situation in my opinion, for what it's worth.
I was in the shower this morning and I came up with an analogy on how I view trading.
I call it the bus analogy.
Say you want to go from LA to NY riding the bus. You go to the bus stop and wait for the bus to come by. The thing about this bus is, it won't stop for you. It'll keep driving by so you need to jump on when you have an opportunity to get on.
Now, the bus isn't being driven by one person. Everyone on the bus is deciding which way we should go to get to NY from LA. When the bus decides that it wants to go back home to LA, why would anyone want to go back when their so set on going to NY? Get off the bus and wait for the next ride to come. Get on when you can again, and see how far it can take you before you'll have to get off and wait for the next bus.
At the same time once the bus starts turning around to get back, you don't want to be forced to travel more ground so you get off at the closest bus stop and wait for a new one to come. Doing this over and over, you'll eventually get to NY. It'll take some time but if you keep looking forward and waiting for the next bus to come by as you know it will since there are busses all over and at the same get off once it starts going the wrong way, you'll get to your destination.
There was more I wanted to say but I forgot some of it as I was trying to write out what I remembered. If it comes to me I'll edit this.
After I made that complete trading plan I waited until after hours so I can start finding stock setups for Monday and I quickly started noticing something. Once I got down to the 3 stocks I liked out of 80 or so, I realized that I setup high expectations for the stocks. I didn't notice it until tonight. That would probably explain why I've been on so such a crazy losing streak. When it comes time to look for entry points, I'm so focused on my target and exit prices that I can't objectively see the market as it's happening and I'm missing the true opportunities as they're unfolding.
I should be able to keep a plan, but adapt to the new situations, which I can't do. Paralysis by analysis. Before I'd wake up not knowing what I was going to be trading that day. I'd have a real time scanner going picking up opportunities and since I didn't have any expectations that morning I could easily and objectively spot opportunity after opportunity and take them as they happened without fear. Once I got in I immediately put in a stop and let the stock unfold.
The thing I didn't do however was get in using an edge or something that would help with identifying good entry and exit points. I kind of winged it so to speak. That's when I started looking to setup a plan to find stocks the day before, which now I've tried, I can't do. I just can't focus on the market when I do that. I wake up with all these expectations of how my stock should unfold but when it goes against me I don't mind, I know it's part of the business. My problem though is I can't identify the true opportunities like I can when I wake up with no expectations.
So, I'm kind of in a weird mental state right now. I'm going to spend all next week with no expectations of winning. I'll scan the market, if an opportunity comes up in real time, I'll pull up the chart and see if I can spot an entry using a 9 and 21 day EMA setup. I'll get in if I can, set my stop and let it unfold. If the stock starts providing profits then I'll look to start raising my stop to break even then eventually raising it capture profits.
Only down side is. I don't have the necessary requirements to day trade. So I'll only be making 3 full trades at the most a week. Which is nothing, but it'll be a start to test my mental state in this new modified environment.
I'm glad I've finally come to this realization that what I've been doing was, to put it lightly, the worst thing I could be doing, trading without a full plan. I knew all along I needed one, but I couldn't develop one that was custom tailored to me. I've developed a plan that I like and it's a very simple system. I won't know how this will perform so I'll have to stick with it religiously for a few months to see how it's working out but I think it'll do ok.
Stock Selection:
Step 1: 9 day EMA must be either heading up to cross the 21 day or have just crossed the 21 day EMA on a 6 month chart in 1 day increments
Step 2: Plot out support and resistance levels on the 6 month chart
Step 3: Stock must be close to support levels and far enough from resistance to potentially make a decent profit
Step 4: If the stock can't make a 3.0 risk/reward, lower percentage of portfolio to use (see Stop Loss) if neither option can work, abandon stock
Step 5: Volume must be increasing over the 200 day EMA as the 9 day EMA is starting to cross the 21 day EMA.
Step 6: If everything checks out start looking for an entry and exit point
Entry:
Step 1: Zoom in to a 5 day intra day chart to plot potential support/resistance
Step 2: 9 Day EMA must be close to crossing or has crossed the 21 day EMA.
Step 3: Stock must be close to support and far away enough from resistance to potentially make a 3:1 profit
Step 4: Depending on where the stop is, figure out how many shares to buy
Stop Loss:
Step 1: Place stop based on volatility of the stock and support levels on a 3 day chart
Step 2: 2% stop (maximum) use 50% of portfolio
Step 3: 4% stop (maximum) use 25% of portfolio
Exit:
Step 1: Zoom in to a 5 day chart and see where the action is in relation to support/resistance
Step 2: When the stock gets close to either 6 month or 3 day resistance, raise stop to a level of profit taking but not enough to get stopped out right away
Step 3: Either get stopped out and move on or let the stock run until I do get stopped out (keep raising stop)
This will be my base plan. I'm sure I'll be fine tuning this over time but this is what I'll be working with.
I saw an opportunity early in the morning to get in so I took it. I got in at 57.05 with a stop at 56
Lets see how this plays out.
Edit:
Sold MDT at 56.70 Wasn't working out and I know why. I don't have a freaking entry and exit strategy for my new system I'm using for stock selection. Right after I bought MDT I immediately realized, "what the hell am I doing, I don't even know when to get in or out". So, I'm scraping everything and starting over and keeping it nice and simple. It's taken me about 3 weeks of losses to figure all this out even though I knew I needed it, I don't know how to implement it to fit my style and personality.
My next post will be my trading plan for stock selection, entry and exit. The plan will be going in my trade book and will be followed religiously until I can see some results on how it's been working out.
Here's the chart for MDT on my exit.
I needed to take today off. I feel like I've been going way overboard with my trades these last couple weeks and my results prove it. Today was good though, I felt like I regained my objectivity again and I can see and think clearly. I'm also feeling a lot more confident with myself.
I came across MDT and I like where it's at right now. It had a nice little shot upward and looks to be in a very tight trading range, about a 1% range for the last few days. Looks like it's "taking a break" before it shoots again. I don't have any intra day data for this guy so I can't really fine tune my entry and stops but whatever my entry is my stop will be 1 point below that if I buy under 57. I'll have an alert go off at 57.08 which could be the starting point of it taking off if it gets to those levels. The low alert will go off 56.70 so I can start looking for a good entry point.
edit: Well, looks like MDT just hit my low for the day post market and is now at 56.56 on just under 150k shares. I'll setup a new low at 56.30 and if it drops below 55.50 I won't touch it anymore
MDT:
TSU is basically the same setup. Had a nice move up, and looks to be going neutral or in a resting period. It's also riding some decent resistance at 41 levels so if it can break those I think it'll give it that much more boost to the upside. I don't have intra day data for this either so I'll be setting up alerts to go off to let me know when potential entry points might be present.
I'll have a high alert go off at 40.95 and a low go off at 40. I'll set a stop roughly 1 point below entry just like the MDT setup, depending on if I can get in and at what price.
Oh yeah, I'll be using imageshack.us now to host my pics as I'm sure there's some people who has to adjust their browser because my pics are so big (to me their small) and it'll help me consolidate all my chart pics and keep them online instead of having 100's of JPEG charts on my PC.
Mark Douglas once said, "Ninety-five percent of the trading errors you are likely to make-causing the money to just evaporate before your eyes-will stem from your attitudes about being wrong, losing money, missing out, leaving money on the table"
I've over come all of these except the fear of missing out. Which is clearly shown on my blog on all the trades I make every day that consistently become losers. I've been forcing myself to justify bad setups into thinking they can be profitable just so I can trade them. I need to seriously stop that if I want to be successful at this for the rest of my life. I'm reading this book for the second time now since I'll be having more down time while I wait for good trading setups.
The quote above is from a book called Trading In The Zone by Mark Douglas. Easily one of the best books you can find on trader psychology. Anyone who is interested at all in the market or who is currently trading now as an amateur or professional should read this book before doing anything else with trading.
My last post about CKP I won't be trading. It's only trading around 130,000 shares I think. Way below my guide lines. I still watch it to see if it plays out but I won't be trading it either way.
I'm going to do my best to stay patient and wait for my opportunities, not the ones that other people are waiting for all around me who've found them based on their systems.
Basically, I don't want to be over trading anymore. It's starting to kill me.
Found a decent looking setup using my new system. One that I'm going to stick with forever. Includes stocks that have made quadruple tops are riding support and trading at least 250,000 shares. Stock needs to have the potential to make 5-7% while risking a max of 3%
I don't know if I'll trade this right away. It needs to hit the $27 dollar level before I even consider. If it does hit 27, I'll start looking for a lower entry point if possible. I'll setup a stop around 26.35. If it gets close to 27.85 I'll consider selling if it can't break these levels. If it does start piercing these levels I'll definitely hold onto tight as we'll probably be going higher.
One thing I'm going to change is I won't force a trade. Something that I think I've been trying to do the last week or so. I need to wait for the really good looking setups, instead of the mediocre ones. That's something I going to try and work on. The setup below would be close to mediocre, in my opinion.
I think what I'm doing is over trading. I'm finding opportunities that look good but don't perform. Or still, my time frame for holding a stock is way too short. I need to get over, over trading. Maybe I should try holding my stocks for a few days longer and see if my analysis of the stock will play out if it has time to grow, instead of forcing gains.
I also need to develop more strict guidelines for picking stocks. These are my current guide lines; stocks that have made new triple tops, stocks that are very close to support levels, stocks at least 250,000 shares. I need to fine tune this more to where I get to the point that I have a higher probability of the trade performing better than worse. Although I'm not worried about having a trade go sour, I'm worried about my probability of winning trades, which has gone down significantly over the last month or so. On the other hand, I have changed my trading plan since then.
Before, I was trading stocks purely based on trending channels of support/resistance. Buy low, sell high in this upward channel. In June and July this was fairly easy since we were in a great trending market. Things have changed and I haven't been able to spot any trades that looked like the ones I traded back in the early summer. That's probably when I started over trading. I felt I had to be in the market constantly to be make money. Which isn't the case as I have, ummm...7 losing trades now in a row.
This is all part of the learning process I guess. I'll need to keep fine tuning my system and myself as a trader if I want to be truly great.
Looks like I was stopped out. I'm gonna have to re evaluate the way I've been picking stocks.
I've been trying to find ways to use my personality as an edge for my trading. I back in HS I took a Meyer Briggs personality test to find out what my personality was so we could find out what jobs would match us based on who we were. I was an INTJ, which is A "visionary, architect of systems, builder"; who "works on ideas with ingenuity and logic"; who "learns by an impersonal and analytical process for personal mastery"; and who is acknowledged in organizations for contributing "strategies and analyses".
NT's -The Promethean Temperament. Comprises about 12% of the population and includes all of the NT personality types: INTP, ENTP, INTJ, and ENTJ. NT's must be competent at whatever they do. They look to skills, abilities and ingenuity to define self worth. NT's love intelligence and want to do well under a variety of circumstances. They are the most self-critical of all styles and tend to put high standards on themselves and others.
Judging by that, you can see why I love technical analyses so much and why I always plot out my plan before I trade, It's in my nature to do so.
I found an excerpt on my personal and how it relates to trading.
The Promethean Temperament: The Promethean Temperament comes into being when the qualities of intuition (N) and thinking (T) are dominant. The NT temperament (INTP, ENTP, INTJ, ENTJ) is only found on average in about 2% of the population. As a result, NT people must grow up in an environment full of people who are usually quite different from them. For example, about one family in 16 would have both parents as Ns and only one in a thousand would have both parents as NTs.
The NT personality is looking for power over nature: to be able to predict, control and explain realities. Thus, the NT trader would be one who wants to predict, control and explain the markets, much of which is the antithesis of good trading. However, since his ultimate goal is to be a good/great trader, the issue is simply how to get there. He has a strong drive to continually improve (as opposed to the SPs drive to simply act). As a result, I would generally expect this group to produce more good traders than any other. Our data suggests this to be the case! First, we have a lot of data on the NT personality types. Although they only constitute about 2% of the population, NTs constitute 45.2% of our sample population—a truly amazing statistic. Among our NT traders, about 10% show outstanding trading records—a higher percentage than any of the other temperaments.
The NT is very self-critical. He badgers himself about his own errors. He taxes himself with the resolve to improve. If his pushing is used as a learning process, then he is bound to improve. However, the NT can easily get caught up in the perfectionist trap, which can prevent him from getting anywhere. For example, if the NT's self-criticism is tied into his/her self esteem, then he can become frozen into inaction or into repeating the same task because he is not satisfied with the results. However, I have found that NTs show tremendous improvement when they go through my private consultation program.
The NT is likely to know that recreation is important to his health and overall well-being. However, his play has little spontaneity or fun. Instead, NT play is an exercise in conquest and being the best. He does not allow himself to make any mistakes, logical errors, and yet, paradoxically, requires that he have fun because that's what people are supposed to do when they're playing.
The trader who is an NT will live his work. If markets stay open 24 hours, he is likely to try to follow the market for 24-hours just because the market exists and missing something might be making a mistake. He wants to be the best possible trader, so he will do whatever he can to be successful. He is extremely vulnerable to the "all work, no play" syndrome and this kind of attitude can lead to a very out-of -balance lifestyle.
The NT wants to be the scientific trader. They are drawn to occupations that have a logical understanding, in which they can master some new concept about trading or design some great new trading system. He has an inquiring attitude and deals with others in a straightforward, albeit cold, approach.
The NT generally focuses on the future, trying to figure out what might happen next. And once he masters a challenge, he is very likely to move on to another one. Why? Because his goal is competency in every field. Thus, his goal might be to achieve greatness in trading, but as soon as he receives it or thinks he has it, he is likely to move on to something else.
To develop NT skills, spend at least one day a week reading everything you can about the markets. Make a list of 50 ways you can improve your trading and then work diligently to adopt each of those ways.
You can find out your personality types by going here and reading Van Tharps ideas on why it relates to trading. This was the same test I had to take in my English class in H.S. for our senior project. It's about 70 questions but it's very thorough and in depth. I think it took me about 45 minutes to an hour to finish. I took the test 3 months apart and they both came out as an INTJ, which is what I am.
I'll be spending a lot of the day today finding my weakness in my personality and how I can take advantage of that to benefit my trading.
I think this might be considered an educated impulse buy, loll. I saw HSOA last night looking over a lot of charts and liked it but didn't setup a plan for it because I needed it to drop a little. Well, it it took off a little in the morning and I got in at 3.79. My stop is at 3.65 (black line) My target is about a 5-7% gain and I'll be holding it until the end of the day.
There is some resistance at 3.84 but after that it's up to the traders.
Interesting. Whoever is buying so many shares must know something about this. Especially now that it looks to be making a bottom.
Both of these charts are 6 month charts. I really wanted to emphasize how strong these support and resistance levels were so I panned it out to 6 months.
ZHNE: Below is a beautiful setup. My jaw actually dropped when I saw this. There is so much support at 1.22 it's unbelievable. I can put a stop at 1.18 which is way below normal here on the chart and still be in my risk guidelines. Heck, I can probably even drop it to 1.17. The upside potential for this is solid. There looks like a bit of short term resistance at the 1.25 level but the highs today pierced it and got to 1.27. Once we get passed 1.25 it could be all uphill from here until 1.38-1.40 area.
Entry: 1.22
Stop: 1.17
Exit: 1.40
Risk: 3%
Potential Gain: 13%
Shares: 400
Risk/Reward Ratio: 4.0
Potential Holding Time: 2-4 weeks
Only downside I see to this is the amount of volume. It's barely trading around 120,000 shares. I don't like to trade stocks unless it's at least 250,000. We'll see what happens.
COSI: This is one is looking good. However, I need to see it test the support levels at 3.60 which are pretty strong but I don't like the look of that candle for today. The current entry target could be a little too low but I think it's a good spot considering the bearish candlestick that's represented for today and the strong support level which the candle closed at. It's kind of stuck in between.
Entry: 3.50
Stop: 3.36
Target: 4.00
Risk: 4%
Potential Gain: 16%
Shares: 140
Risk/Reward Ratio: 4.0
Potential Holding Time: 1-2 weeks
Just got out of STKL, turns out it wasn't as good as it looked. No big, I didn't lose any money so that's good. I'll start looking for the next opportunity probably later tonight.
I sold at 13.95 I had a chance to get out at 14.00 but my internet connection dropped and I missed it right as I was filling in the order, I get a "connection cannot be completed" lol.
Looks like my price target was, well, way too high lol. I didn't think it would have this hard of a time breaking 14 bucks but hey, the markets are always right. My target price is 14 I'll hold it for the end of the day, if it doesn't hit 14 by the end of the day I'll put in a limit order for whatever the price is before the close.
I've also tightened my stop to 13.85 to dramatically lower my loss because of the light action. No need to be risking more than necessary.
STKL dipped very quickly to my entry point and my limit order got filled at 13.88. I immediately put in a Stop Loss at my target of 13.63. My time frame for this stock is a couple days so I'll do my best not to watch this stock like a hawk. My stop is set, my risk is already pre defined to a level I can tolerate, so I have nothing to worry about.
Today has been such a weird day, emotionally and psychologically for me. I got to the point where I was second guessing myself as a trader and questioned if I should even keep doing this. I'm sure my loss had something to do with it, 6 losses in a row, but hey, that's the nature of the business. Before, I didn't mind too much last couple weeks with my losses but I guess it was something about this 6th one that kind of did it for me. Any who, I'm over it and I'm feeling confident in my skills. After that trade I went to go eat, take a nap and then look over all my trades and notes which helped a lot boost my confidence again.
With that said, I've got a trade I really like for tomorrow. This time, if it hits my entry point, I'm going to trade it!! No matter what!, lol.
The way this is setup, I'll be risking about a 2% loss for a potential 6.5% gain. The entry point is riding above some strong support (green line). Stop loss is just under that by 30 cents which is in a great area (black line). The target exit point is where the red line is at 14.75 roughly where the last line of resistance is for this stock. The yellow line represents a little resistance over the last 6 days of trading so that'll be something to look out for.
Time frame for this stock will be 3 days at the max or less if my exit target is reached.
