Life relates to trading and trading relates to life. Constantly revealing, unfolding before us as we trade and live, so I write about how my life relates to trading and how I trade the markets. Along the way I share my opinions on anything that evokes my passion or tickles my funny bone trying not to forget that enjoying life is the best part of living.
I don't generally do long term predictions. Many psychics agree that there are too many variables and we cannot deny freedom of choice by everyone who can effect the outcome. Like with life, it's easier to look back. So imagine my surprise about a prediction I wrote last year and, which, I forgot about until a reader congratulated me for it the other day.
There certainly were plenty of variables this past year, as in any year, in the $DJI yet I did a pretty good job about being able to pinpoint certain pivots and tops and bottoms here is the prediction written Jan 03.2010:
Short below 10400 to about 10350, breaking below 10320 to about 10270, 10200 then 10127 areas. Break down of 10000 we'll see 9900-9800 retest. Long above 10500 to retest 10550 breaking above to near 10600 after which 11000 will be possible with regular intervals. Moving higher on strong momentum the 11200, 11400 and 11800 can be revisited once again.
Actual:
We are still working on the high, so far it is 11625
Low was 9614.32
Tops were : 10729.89, 11258.01, 10920.27, 10175.02, 10594.06, 10400.10, 11216.65 11591.13 high and last
Bottoms were: 9835.09, 9774.48, 9757.55, Low 9614.32, 9941.84 , 11023.5, 10942.98 last
Missed low by 185 missed high by 175 which means roughly 175 point shift lower on high/low would have nailed it.
So much for predictions, although I feel pretty good about this one, my first, and if I use some of my quirky trajectory plotting, we are still on track to 10800 but it does not guarantee that we won't see some lows again.
Hope you had a fantastic year as well, I'm looking to see more of you next year around here and on the dance floor!
Happy New Year and do the most Living you can!
Anni
An old song I heard not long ago about being too late and getting on home. Reminds me that it is the last two weeks of the year and it is rather too late to plan any adjustments prior to the close of year. It's best to have had it all execute by now. To be "home" on time it takes as much planning as getting there. So exits have to be honored as much as entries in any position.
If there is one recurring message in all posts that I read, consciously or unconsciously intended is that your rules need to be honored. Although I extend this thought in a different direction on my other blog, trading requires rules and today I wish to drive home the point that no trading method will work unless you learn to honor its rules. Try as you may to define it differently the truth is that freedom and life require rules and in order to gain your freedom from whatever you're seeking you need to follow the rules to get you there. Without it, you will remain the slave of those who wish to define your life be it your boss, or your lender.
You may wish to kick open a box or too on the way , but giving up on rules that have worked for others also has it's consequences; namely, you will have to invent a new method which is time consuming work and you may lose a lot of capital on the way. But if you so choose it, the rules are still to be defined and tested for validity, and you still have to follow them to succeed. So, in short, you cannot avoid rules in your life no matter how you wish to live.
The sooner you realize this simple fact, and discipline yourself to follow it, the faster you'll be on your road to your freedom.
So for your Christmas present, write up your rules:
1. Don't enter a trade without a plan and a vision
2. Set your stops and let them work
3. Profits, they are gifts of your work so take them and give thanks.
Fill in whatever you need to complete the rule plan for yourself. Don't make it long. Probably only 2 or 3 is all you'll need. Don't complicate it. Simple always works better.
Happy Trading, Living and Dancing
and a Merry Christmas to all
Anni
Do you know how to take winners? I don't mean before they become winners but when they are winners. Many traders give back winnings. You may wonder why would they do that, or you may know what I am speaking about because you've been there and done that.
We all may look back on our trades to see where we should have taken profits, but many traders let opportunities fly by only to take a fraction of their potential wins just before they melt back to their entry price.
The problem may not be so troubling if it was as simple as taking profits at highs, but it's not because traders don't want to take profits at the highs , but BECAUSE they DO. You see when a price is rising, often traders think it will keep rising. It may and it may not, of course, as we all know, but in the heat the markets it all looks good from "here" until it reverses and then, traders think it will, of course, reverse again. Therefore, the slide back to entry.
OK then, what is the cure. Well, for one sticking to your plan is important. Know your target and goals and be sure to take your profits into the direction of the trade. But I can't help but think that most traders know that. What most traders don't know is the subtle effect of watching a price rise (or fall, if short) it's hypnotic effect and therefore the lulling into a secure feeling that "it", the trend, won't change.
So the best way to avoid such a hypnotic state is to 1., Set your stop and 1., set your target. Then, use the best alert system out there. Not one that sends you emails but one that will ring your bell and won't stop until you pay attention. By setting an alert for yourself, you can relax into knowing that you will be able to adjust your profit taking along the way as need be, without paying attention to each hypnotic tick. Then, once your target is reached, be sure to take at least part of your profits to the bank.
Finding a way to cash in your winnings is as important as setting your stops to avoid losses. It takes discipline to do both, but the reward is sweeter when you get better at reaping your winnings.
Decorating, decorating, planning and plotting,
Rushing hither and fro?
Time to stop a moment for friends and ho ho ho
And lift a glass of cheer to celebrate another year !
I thought I'd share my watch list with you today. Like all traders I too have a daily/weekly watchlist. What is unfortunate about them is that they tend to grow. As I add stocks that look interesting and that have potential for a move, soon the list grows to an impossible length unless it's managed daily.
The danger is that if we have too many on our list, we can lose ourselves in the watching and catch fewer trades because, unlike chasing a stock that is on the move, we tend to chase stocks for the move when the list becomes too long. Setting up alerts is one way of handling the signals but oft the stocks move at once so we are left with alarms going off and not knowing which one to attend first.
I suggest having several lists but to make sure that the possible players for the day get picked from those into a central list. It is a way of weeding and keeping your day manageable. So below is what I'm looking at for today. Hope it helps you to see a perspective of how and what some of us are looking for.
I don't know why we think, as parents, that we have something to do with our children's achievements when they become adults. It comes from perhaps the congratulations we get along the way while raising our children because whenever they achieve something growing up, we too get congratulated as job well done about instilling some good habit or behavior. Once they leave the nest, however, that right leaves with them and what they achieve is totally in their own hands therefore all congratulations and responsibility and pride belongs to them.
There is only one right parents retain and that is the right to boast. It's something we hang onto which is akin to giving encouragement that used to be expressed via a pat on the head, a "good job", a "way to go", a smile of approval or a congratulatory hug. So using that right once more, I boast:
No, I didn't go to Mars, in a way my son did, because he is a digital illustrator and he worked on the layout team of this Motion Picture. Perhaps though, the more fun part of the story is that since he was little he had to endure my love of illustrated films especially around holidays. Like a child, I watch them so it's especially fun that he worked on a film of a story by one of my top favorite author/illustrators: Berkeley Breathed of Bloom Country fame. Opus and Bill characters always bring a smile on my face and of course my favorite Christmas story ( well okay, one of) " A Wish for Wings That Work". If you have children or like me, like to bring the magic back into your life, watch his magic work on you with messages that will always be true.
So today instead of musical notes, spend a few minutes laughing and feeling good and be sure to see "Mars Needs Moms" too this Holiday Season.
Charts? Reading charts? Everyone knows how to read a chart don't they? It's simple, just look at the price, time and candles or lines or dots or whatever. Add to that Stochastics, Moving Averages, Volume, and about a 100-1000 different combinations of strategies and what most people end up with is confusion. Of course with enough time devoted, we can all become master chart readers, but what is probably more important to bring into focus is just how much of it is really necessary for you.
In order to find out which tools work the best for you, you must devote time. Some traders are more technical than others and some use many indicators, signals, bells and whistles to trust a pattern. Some just like all that "stuff" and more importantly some like to play with all the possibilities. Where it becomes a problem is when the playing with the tools is more fun than learning to use them properly in order to enhance trading ability.
Using technical tools can also confuse someone new to TA; especially when trying to use too many at once and not giving each one a chance to be examined on it's own. It takes time to get to know each one's abilities and limits and how each indicator fits your style. Some may enhance some may distract or even mislead your view of the charts.
The best way to start, in my opinion, is with what I call "Naked Charts". In other words, learn to read the sticks first, recognize patterns, repetitions, and rhythms in the way they line up from week to week, day to day, hour by hour, minute by minute. The longer you spend with candles the easier it becomes to dress them up with trend-lines and other indicators to assist your trades and you'll be better able to decipher which ones suit your needs the best.
At this time, there is turmoil everywhere around the world. At home in the USA there is no exception Debt, Deficit, & Inflation worries, Bank failures, Tax worries with no cooperation from leadership so far, we are not looking very secure despite the gropings of the TSA. Coupled with International manipulations via IMF, UN, NATO and overseas failures of Greece, Ireland and possibly Spain and Portugal, and advice from Germany and France, it gets more precarious. Add to it war threats from No.Korea and Iran with continued problems in Afghanistan, Pakistan, Iraq and Israel, we have certainly enough on our plate. So, why add a turkey?
Perhaps one of the most challenging for those who trade regularly and especially daily, are the holidays. Getting ready to the different time frames intra day and then day frames around the the holidays will assist traders, but the biggest effect in trading is the reduced volume causing more volatile prices and spreads.
Most money managers and professional traders will take vacation or holiday this time of the year and what's more, many will liquidate days prior to departure or hold until the beginning of the year. Those of you who follow me and are members know that I've talked about the positioning that actually begins in October for both tax reasons and for rotating in/out of positions in order to get ready for the end as well as the beginning of the year. For many who have not adjusted their portfolios, by this time, it can be more difficult as the year wears to the end.
What we need to add to this problem this year is the fact that we have no idea what this lame-duck Congress will do. The coming year will depend largely on the budget and taxation that they will pass and publicize and pass under the radar. So positioning becomes even more difficult and perhaps short term traders will hold back from trading positions that they may need to close early next year.
For traders entry and exits can be more difficult as less shares are available and the spreads get wider so the requisite number may not be available for the trades. Today, Monday, was the first day that this pattern actually emerged. Notice that no matter what the news, or time of day, the traders popped and dropped more often, also notice on the minute chart, the volume evidence of trades. Many looked on the 5 minute chart what normally would show on the 1 minute. All evidence of lack of trading interest causing lack of momentum.
Those receiving great news may look like they are trading better than usual, but those lacking news become dead or whipped. Also, especially at the beginning of this type of activity, traders are more likely to sell off rather than accumulate. Which may change at the beginning of December prior to the Christmas holiday as many may position into next year as witnessed the last few years of the DJIA . Look at the lows in November and accumulation in December.
Of course, nothing is perfectly scripted, and although so far, it looks to be shaping up in much the same way, be sure to allow for differences due to news and financial woes both here and abroad.
In a nutshell, rather than being more relaxed trading becomes more intense due to the volatility, so if you are new, you may wish to take a lesson from those around longer. Take a vacation and have a Happy Holidays around family and loved ones. To those who simply can't stop or get away, try paper trading or at the very least, reduce your size, expect the unexpected and place fewer trades.
When trades trip you up, and they will, what do you do? How are you prepared. Being stopped out is never easy for ego or for pocketbook, but I feel the most damage is that we lose confidence. And the loss of confidence is what most wish to avoid, therefore, I think it adds to the reason why many traders do not put in stops. Yep, a stopped trade only reinforces the feeling of failing.
There is nothing worse a trader may think at the time it happens, than to reveal a bad trade.
It may help you to know why you don't place your stops and rather suffer through losses. Of course, sometimes those too have a way revealing themselves but perhaps not as badly since it can be stirred into overall returns. And the term "loss" has much less of an impact on ones psyche as being "stopped".
"Stopped" is like being caught. Like for being on the wrong side of the road. You know, the cop with red lights behind you feeling. Have you been drinking? What are you doing going driving the wrong way? Take a test, are you on drugs? In other words a feeling of somehow being wrong; as in "What's WRONG with you?" This is a blame; it's all your fault.
A loss is easier on the ego, psychology being what it is, everyone loses sometimes and everyone loses a lot sometimes. You can justify it easier. After all, you lose your job for many reasons or you can lose at a game of chance against the odds. "Bad luck, chap!", go to welfare and get help. People will feel sorry for you and give you help, hold your hand, sympathize and even help you lick your wounds. This way you don't have to admit to being wrong. This way you can save face; and rather than being wrong, you are "POOR". Poor you, too bad.
It's important to know that this way you can continue your way and end up broke. 90+% of traders fail, this way.
So then what? Well it depends on how much you rely on other people's approval to be honest. How important is it to you to be judged by others and how much do you rely on their judgement. I am not speaking business wise, because that is different, but speaking on your personality and how much other people's thinking influences your behavior.
Some of us were raised by influences in our environment that relied more on what other's think than what we think. These influences emphasized our blending in rather than sticking out. Some of us were raised by influences that allowed us to question and not necessarily accept what was told us and to rely on our instincts and our knowledge. One creates dependence the other independence. I think we all have both but which one dominates you and your life only you can assess. Knowing which will help you to overcome your bad trading behavior and can help you to survive to trade another day.
Survivors breed confidence, and confidence breeds success.
Much is said/ written about how we trade, how we should trade, and there's always a discrepancy when we actually trade. There is a reason for that; namely, fear.
No matter how much we practice on paper, discuss, analyze and philosophize or imagine and visualize our trades, the one factor non of those will include is the actual feeling of fear when the trade involves real money.
It is important to note here that this fear is not only real, it is realistic because once the money is gone, it is really gone. There are no redo's or oopses or I didn't mean its. It's gone as if you put a match to it and watched it poof in flames. So if you do not feel fear as I described that, I did a poor job of writing, or you have ice in your blood and money to burn so this article is not needed by you.
The fact is we all feel it no matter how much experience we have had trading. If not, you lie because the reality is that we know the potential of loss. But the real question to put here is not will we lose, but HOW MUCH are we going to lose. When you start turning the question around, and examine the possibilities within it, you shall see that you have control of the fear and that you are the sole controller, not some other trader out there who is your nemesis.
In order to accomplish fearless trading you need to accomplish loss control. Along the way of your trading education you have learned a style and a strategy and a boldness with which you approach the trading day, yet what many and most traders I speak with lack with all that knowledge is the same boldness with which they follow their stop loss rules; if they have one even. Most stuffed that somewhere in the last place of order forgotten immediately after entering the trade therefore unwittingly making their fear factor increase by x strength.
Do you doubt me? Try this on a live trade: Buy 2 small lots (100) shares of xyz stock; let's pick one that can whip you about just for a snack. Using your usual strategy and rules for entry, place your stop and 1st target in immediately in on one trade and not the other.
Now, observe yourself and your reaction as you watch the chart, ticker or whatever method you follow to track the trade. Which gets most of your attention? Which gets most of your trepidation? Which gets your finger twitching over the mouse at each tick? Which do you take sooner when a profit is available? The point here is that fear not only gives you stress over the loss of money, but also stress over the potential gain of it; leaving you to be unable to run the gain to further profit.
So, trading fearless does not mean you do not trade without fear, but that you control it to the point where it becomes a non-issue. Fear is a friend when you can control the cause and an enemy when it's allowed to go unchecked. No soldier goes into battle without fear, but it's controlled with ammunition, training and the knowledge that one does not jump up and down in front of the enemy and shout "here I am!" . Know that when you trade without calculating and setting your stop, you are not only doing that but also putting down your weapon of defense.
Much is said/ written about how we trade, how we should trade, and there's always a discrepancy when we actually trade. There is a reason for that; namely, fear.
No matter how much we practice on paper, discuss, analyze and philosophize or imagine and visualize our trades, the one factor non of those will include is the actual feeling of fear when the trade involves real money.
It is important to note here that this fear is not only real, it is realistic because once the money is gone, it is really gone. There are no redo's or oopses or I didn't mean its. It's gone as if you put a match to it and watched it poof in flames. So if you do not feel fear as I described that, I did a poor job of writing, or you have ice in your blood and money to burn so this article is not needed by you.
The fact is we all feel it no matter how much experience we have had trading. If not, you lie because the reality is that we know the potential of loss. But the real question to put here is not will we lose, but HOW MUCH are we going to lose. When you start turning the question around, and examine the possibilities within it, you shall see that you have control of the fear and that you are the sole controller, not some other trader out there who is your nemesis.
In order to accomplish fearless trading you need to accomplish loss control. Along the way of your trading education you have learned a style and a strategy and a boldness with which you approach the trading day, yet what many and most traders I speak with lack with all that knowledge is the same boldness with which they follow their stop loss rules; if they have one even. Most stuffed that somewhere in the last place of order forgotten immediately after entering the trade therefore unwittingly making their fear factor increase by x strength.
Do you doubt me? Try this on a live trade: Buy 2 small lots (100) shares of xyz stock; let's pick one that can whip you about just for a snack. Using your usual strategy and rules for entry, place your stop and 1st target in immediately in on one trade and not the other.
Now, observe yourself and your reaction as you watch the chart, ticker or whatever method you follow to track the trade. Which gets most of your attention? Which gets most of your trepidation? Which gets your finger twitching over the mouse at each tick? Which do you take sooner when a profit is available? The point here is that fear not only gives you stress over the loss of money, but also stress over the potential gain of it; leaving you to be unable to run the gain to further profit.
So, trading fearless does not mean you do not trade without fear, but that you control it to the point where it becomes a non-issue. Fear is a friend when you can control the cause and an enemy when it's allowed to go unchecked. No soldier goes into battle without fear, but it's controlled with ammunition, training and the knowledge that one does not jump up and down in front of the enemy and shout "here I am!" . Know that when you trade without calculating and setting your stop, you are not only doing that but also putting down your weapon of defense.
If there is any symbol of freedom more evident, I know it not; the ballot and your vote is most precious. If you have any doubt, look at the evidence demonstrated by those who for lifetimes could not express their choice via the ballot. The most recent, Iraq, where many in defiance voted and proudly displayed their stained finger as proof.
When is the last time that you proudly wore the little sticker given to you after you voted? When is the last time you really felt exalted at the privilege of being able to mark your ballot? When is the last time that you realized that voting meant responsibility? When is the last time you owned your freedom; not as a privilege, not as a right, but as responsibility.
Freedom is not an entitlement, freedom is life's essence. Without it you're a fish without water; a bird without sky. Something you don't know until it's gone.
There comes a time when you know what you are doing is part madness, but are unable to stop. The answer to why is what has plagued many but knowing the answer does not necessarily lead to the act of change. Why again? Why indeed!
The answer: "Better the known evil than the unknown good" has long been used and it is totally accurate. It is why so many hold on to losing trades with hope rather than cut loss, do a flip for a more likely gain. But there are other reasons why people hold on: it's familiar. The known gives "comfort" the unfamiliar is mysterious it's comfort, not guaranteed. It's been reported that people who are relieved of pain after having suffered long with it, have trouble functioning and sleeping without it.
But knowing it, again, does not assist in changing the habit and it's why we keep electing and re-electing people into political office even if we know that they do a terrible job for us and waste our resources. Some who know of their habit, admit to it, others deny it and come up with false reasoning for their choice.
Hence the madness continues, unbroken with perhaps a tiny fracture here and there when sanity shines through only to go into hiding again, when we seek the comfort of familiarity once again.
It takes more than just positive reinforcement to make a change for our good. It also takes consistent reward but most of all it needs assurance. Assurance is faith based because it 's not a guarantee. Assurance is what we discover within us and upon seeking, receive from others when going through changes.
In life as in trading, you must recognize patterns and rid yourself of destructive ones lest they become your comfort zone of madness. For trading, it is good to make a list of habits you have and put them in one of two categories:one negative the other positive. Then filter each trade you have made with that list and see where the madness takes over in your trading style.
Then, seek assistance to change it. In today's world it's not really difficult to find. There are very good blogs, and books. More directly there is the StockTwits and Twitter communities where like people can find each other in need and support. And finally there are trading rooms and coaches where traders are very supportive of each other. I am proud to say that members in my room fit this category very well.
The pattern of madness breaks when we realize that we are all seeking the same thing: we all seek to become better at trading, living and dancing. So come and join us today for a step or two around the dance floor, offering good music and good trades without madness.
With cooler weather, storms and rain, what am I thinking? Well another day of earnings will bring on some change as to how wild we'll see. But since expectations are for the good side of profits, I wonder if there will really be surprises.
Is it all for the good, for real or for the setup? We keep ignoring facts influencing far more than those current upgraded earnings. When expectations were so low not so long ago, anything plus is an up. Profits, real profits come from growth and not cutbacks and it's something not really addressed. Real profits come from growth not from inflation. Another items which seems not to be addressed. Real profits come from private enterprise, not from government supplied enterprise. Just one more of that troubling thought but perhaps I am old fashioned, after all, we keep ignoring government takeover of free markets and private companies happening everyday.
There are days when I feel that setups are difficult; when I question direction and when I wonder how far is far enough, how high is high enough.
Today is one of those Mondays when I'm not too eager to sink my teeth into much, perhaps overly cautious, and I look at it perhaps with a different filter; the filter of reality, I hope. I follow my inner guidance while trading and I will again today. It does not mean I will step aside only that I may be more in harmony with both.
There is another cause for my lack of enthusiasm related only in timing; because I am reminded that it is when least expected that the biggest turn of events happen. My life changed forever at a young age at one of those events and the anniversary thereof was just this past weekend. It was not to be my last experience of great change, but it is to this day the most profound. One that changed not only my environment but shaped my view of the world.
I was not alone in that experience, as it happened to thousands of us; 250 thousand to be more exact but each of us experienced it differently of that I'm sure. It's much like in trading each one of us experience the markets differently from day to day, hour by hour, minute by minute; what may be a buy for you may be my sell to you, yet we all expect certain outcomes largely based upon our calculated approach and action.
I was certain that the end result of my experience those years ago would last my lifetime until recent times and events made me realize that the events of that long ago are encroaching on a new land and may repeat history on a people far less suspecting. Just as in trading, market direction may be too grim or too enthusiastic, yet many new to the game may not heed its warning and having no experience may come to realize early, some later and some too late that the winds of change have yet again brought us to a day of reckoning.
It's difficult to imagine sometimes when or where a stock will take you on a journey of possibilities. I found that to be true with BIDU having traded it for a few years, I at times thought it crazy especially in it's IPO days. Ever mistrustful of "wonder" stocks as this was, I mostly stayed away until it was just too difficult to ignore. Then came the downturn and a hard lesson for stops once again burned into my brain.
The drop was severe the shorts made us winners but the calculation of where it would end was the challenge, my last bottom calculation was somewhere around 93 but it finally ceased to drop at 100.50. Since then, BIDU hardly glanced back with a run that is seldom seen, up to current highs. The highs which I have questioned in recent days/weeks but after yesterday's earnings have to recalculate once again.
One thing for certain, you do not bet against a trend and you bail fast if you do. This climber is like an invasive strong vine that clings to house and home walls if need be, and twines around anything in it's way of growth. How high is high? Jack and the Beanstalk comes to mind, but your guess is as good as mine. Watch the video below for earnings trade and future thoughts.
Apple earnings gave a mixed bag.. are there any rotten apples in there? I don't think there are as many as there are blind believers in the AAPL theory.
If you watch AAPL being twitted about, written about, talked about and stalked, it is no wonder that most get persuaded easily to jump on the bandwagon. I don't really blame them, since AAPL has produced some nice gains for people who have, but enough already! It's time for AAPL to rest; until next earnings.
Happy Trading, Living and Dancing
Anni
The Daily Pick - Trade it like you see it AAPL earnings:
Sometimes we enjoy ourselves at an activity so much that we forget when or why we started. The doing itself is addictive and a motivator. You know what I mean. Those times when you wish the party did not have to end. Like a party where the music and fun goes on and the dancing doesn't stop until you realize you're dancing alone. The markets can be like that but instead of feeling embarrassed about your lack of savvy, you are left embarrassed and perhaps penniless because of your lack of attention.
That is why I advocate peeling profits. You cannot time the markets and you may not make the most, but you will be left with profits when the market turns and often without much warning takes you out of the game.
I don't know how high it will go but the markets are heady now. It's like being at the county fair. You may see higher from he ferris wheel but will you know when the wheel turns to take you down? Taking part in the games, rides, food all combine for a heady day, add a little too much fun and too much sun and you forget about the little pony you wanted to buy. If you are not careful the fair will end, the rides shut down, the ponies will be all gone and you'll be left with only a headache and a queasiness in the tummy.
Yes there is a feeling of discovery this week, not just from a historical perspective but also from a new energy that seems to be entering the markets and the feeling in the world. I just spent a day watching how awesome the Universe is with miracles being performed every moment and truly we never know when the next discovery will come out of this total chaotic soup. Remember that there is an order to everything, including when we tap into the next greatest discovery.
A discovery which becomes known throughout the world, is thought of by millions within the same time frame. The reason is need, the calling from the spirit for a solution and what is right for the time, will not be denied. Columbus set out to find India via a different route, not to find new land. He set forth in the spirit of trying to find a solution not to prove the world as round necessarily.
The only problem with discovery is that not everyone realizes its significance; whether its in the context of a day, like a breakout stock, or context of a people who occupied this land not realizing they were to become the first occupants of the greatest experiment in Government known to mankind. Imagine if they knew then or even had an inkling about it back in 1620 perhaps they were its first supporters like the first turning of a moving average, it barely made a blip on their consciousness as they were leaving oppression behind seeking freedom in a new land.
Much like in trading, when we are intensely involved in following a pattern, we may not immediately see that it has already changed direction, because we anticipate the continuance of where it's been. The best time to study the stars is when you're stuck. Not astrology but astronomy; as you gaze up into the universe infinite possibilities reveal themselves into your consciousness and while you're full of that wonder, take a fresh look at the charts.
There is a great song by Esther O'Connor "Lost Innocence" that makes for a perfect study for traders.
Most start this business of trading in all innocence, wide eyed to all great possibilities until the day comes when we come to know that not every trade is easy nor is every day, and markets can betray us like a lover. How we handle that "lost innocence" can make or break our future as a trader.
"What you can never ever replace is written on your face"
Were you surprised by that unexpected loss? Were you prepared for its possibility?
"When they ask you where you're going and you no longer know"
Was a possible loss planned in your strategy? If not, you will feel lost, not knowing what to do.
"When the way ahead is changed in a twinkling of a night"
Always plan for a loss with a stop so a major loss is avoided. Once planned think of what possible trades you can do in its stead if it happens.
"And all that you rely on is gone out of sight"
Your original strategy did not work and now you can do plan B if you have one. You can flip the trade if it's strongly against you, or recalculate for a better entry.
"Loss of innocence there's a time when losing wins, When it makes no sense"
Yes, trades can happen just that way and we have to face the fact that we can't know everything; realize we can't control everything. But you'll turn each loss into a win if you commit to keep studying and learning from them. Rather than a deer caught in headlights, the loss is a great lesson for your next plan, so look at it as a win and include it into your next trade.
"And nothing is the way you choose."
We cannot have everything the way we choose. Life would be boring and beautiful songs about it would not be written. So, celebrate your "Loss of innocence" each time it happens because in trading, as in life, "When at the end is where you begin".
What can possibly be next? Another earnings season, elections, terror travel warnings, Holiday hiring, are all coming into season but before we rush to that, let's consider that the run up of last month needs first to be digested, or that, for better or worse, October is a month for planning.
Profits to be taken, losses to be shed. Tax planning is important for a trader and investor both. Especially since this year may mark the last for the most favorable capital gains tax we've had in decades and regardless of the type of trader or investor you may be, it's important to start finalizing your tax strategy. Planning for the event starts at filing of the last return and gets adjusted during the year; but if you have not started, it's important to at least have a grasp of your standing and get familiar with the pros and cons of your choices. You have until the end of December to carry out the plan.
This is also the last year of the zero capital gains tax if your income is low enough. It has been in effect for the last 3 years, but usually, regardless of income, minimum capital gains tax applies and this tax may not be kept going forward. In addition, I am not totally convinced that low tax rates and the previous tax cuts will carry on, although it would be wise to continue them. Politicians have their own agenda and lame duck or not, they usually decide on tax cuts and raises somewhere around Christmas Holidays when they also sneak in their pay raises. Most tax payers don't pay attention then. Maybe this year will be different, but different for who, one cannot guess, and perhaps you cannot gamble on the chance or the change.
Continuing thoughts from yesterday about this game of wits we play, I remember that we not only need to have quick reactions we also need a quick memory. And coupled with quick memory, quick pattern recognition is an important ability for us traders.
Therefore, I thought I'll share with you the exercise that allows me to improve my abilities and be able to compete with the best of them:
Sometimes I am amazed about the topics that come into my mind to write about. Take yesterday's article. It is first draft and short, to the point. I was just about to add some of my embellishments when surprisingly the opening bell rang, and I decided to quickly publish it as it was written. I had no idea what was about to happen. It is why I have faith in a spirit much wiser than me, who somehow infuses into my psyche very timely topics. Usually I would not publish such a unrefined article, often regretting it later, yet something compelled me to just toss it up on my site. What happened next is, as everyone knows the morning "flash" crash of AAPL among others. Hence, my article today.
Trading is serious business. The purpose of this business is to earn money the hardest way possible: Intelligent guessing.
Trading is also a game; a game of wits. It requires agility, quick recognition of patterns and changes and quick reactions to what we see. Reactions do not necessarily mean action; it can mean, non-action. In other words holding back and not acting on the urgent instinct which is associated with fight or flight.
Yes, Fight or Flight is a very strong instinct and I think it's one of the hardest for traders to control when the unexpected happens. Case in point was Tuesday morning flash-crash of AAPL among others. The fight to hang onto shares or the flight to let got of them, if one holds the equity takes high psychological strength.
Equally it takes quick agility and clarity to jump in for us traders if we are ready to take advantage of the opportunity. Both however require what I call a sanity check. Reason has to be present and the quick assessment of possibility must be done. First and foremost the possibility of buying in and then the possibly suffering a reversal is in the frontal lobe of the mind. Emotions are high and a wrong move could become costly.
Inevitably if a trader is unsure, it's best to do nothing.. it's what stops are for. For the rest of the traders, or for those willing to take a high risk, the only question remains is how well they know patterns and how quickly can they recognize them.
When concentrating on the movement of the stock, allowing it to play out and show it's pattern, will give a trader more control and assurance of a gain. The knowledge that the panic selling will eventually end and that sanity will return is an experienced traders biggest asset, controlling at once the instinct to neither fight it nor run from it.
So you think all is rosy? OK Looking for value in the clouds, check the ground first. Usually it's closer to your feet. Value is measured with useful qualities not so much with wishful ones. Perhaps, soon enough, the reality will hit us again on this cloud we're riding.
I like soaring very much literally, and figuratively in these markets, so I am up there with some, and won't deny it, as long as the winds stay in my favor. But I keep checking for clear landing just in case. Parachute, well hope I won't need one,
There are days when breathers are nice. Days when the sheer steep is exhausting just to look at. Funny I don't remember feeling that way when I skied those, but I sure feel that way when I look at some of the setups for trading. That is why looking both ways before stepping off is paramount to keeping your capital safe.
Mapping a trade both ways allows for choice, allows for safety and give a trader an easier way to admit to being wrong. Knowing there is an opposite option to the trade already laid out also allows an easier way to tweak the trade when conditions change.
There is nothing wrong with caution because I am reminded of how easily conditions can change on the mountain and how fast a great day can turn into a perilous one. Same on the trading floor, within seconds things can take off or fall off and being conditioned for the change can mean life or trading death.
While taping todays afternoon tune, I was alerting traders to the tightness of AAPL and NFLX. It was still that way when I finished the tape, but while uploading, the NQ_F, AAPL, AMZN, NFLX almost simultaneously fell off the cliff that I just moment before was pointing to. If not for stops, you may have been caught in the avalanche, however short lived, avalanches are deadly. Events like these are good lessons, teaching us the age old rule, that in life as in nature, to always be ready for anything.
Instead of a tune today, watch this awesome pre-season ski clip. You won't be disappointed and it has a good tune. :)
Be afraid, but don't walk away. Traders should not be emotional while trading, but this message is not the kind of fear that should interrupt your reason, but the kind that should bring it front to your attention and spring you to action.
It's about what and how your fortunes are being manipulated. The dollar eroded, your ability to earn downgraded, goods restricted and inflation injected, this nation will find itself soon totally ineffectual as a power. Don't get me wrong, as a nation of warriors, we'll be useful but as a nation that can feed and clothe itself, we'll be helpless.
Through various subtle, some brazen, some under radar changes have been put into place and the web is so wide I doubt many could event distinguish it as one. the FOMC confirmed as much yesterday. Their manipulation has no end and it will never end. If you think gold will be safe, it's purchase is already on books to be regulated, registered and tracked and who's to say it will not be confiscated? It's happened many times before in world history that gold could not be owned by ordinary people.
Yes, be afraid and don't count on this election to solve the problem, A Congress that lets itself be used for the purpose of dis assembling the constitution will not be effective ever again. It's all about control and controlling you. Yes, be afraid, but face it and don't walk away!
Can you shoot the moon? BIDU? GOOG? Do a comparison which is a better buy? The choice is yours.
You want Tax cuts? Just extend the ones already in place. Why all the smoke by this administration? Because it's not a tax cut. It's a get out and vote gimmick and too late, once again, tax payers will realize?
Credits are not tax cuts, credits someone pays for: the tax payer to the non tax payer. Government ordered (Forced) compliance is not a benefit or a tax cut it's a Stalinist style extortion.
So the recession is over. What happened to the worst depression since the Great Depression? Is it still around? Why does the government have to tell you that you are doing better or worse?
The markets are rallying on new promises or new hope that the election will turn things around. Either way, you are gambling to shoot the moon.
It's not just computers need a refresh, we all do. Charts indicate it along the way whether in an uptrend or a downtrend. We call it consolidation, or a flag. It's when a stock just needs a breather where traders/investors watch for the next opportunity having perhaps taken the most out of the stock's movements. Of course once done, a breakout is more likely, so it's good to let an equity take a little time off.
(Ever wonder what the poor equity is feeling? Having been pecked this way and pecked the other, I bet the rest and refreshment feels good. ( big wink)) Anywho, you know what I mean.
In case you haven't noticed my writing has been a little sporadic lately and it's for good reason; I too am in need of consolidation, rest, refreshment for my next breakout. Truth is I'm working on a project and it's taking some of my writing time away and rather than turning out bad data every day, I prefer to keep things well inspired. Content and quality being important to me, I would rather write fewer articles for the time being.
This is not to say that I will not be writing at all only that I will not be writing daily. Of course if it's daily contact you'd like with me, come and join my trading room, where I spend most of my time presently.
As traders we tend to spend a lot of time with charts searching for the perfect trade and setting up trades from which we plan to reap profits. Despite all that time spent, often we only have a split second to execute our plan and sometimes that split second we may be spend frozen, watching the opportunity pass. Then, watching our planned on profit evaporate, not because it was a bad plan but because we chose not to hop aboard the ride when it hollered "All aboard!"
Do you do that?
For many of us traders everyday is like going to Disneyland. We arrive, full of anticipation where we wait in long lines often for a long time waiting for that special ride for which we planned, but when it's our turn to jump into the pod, we balk and back away, courage leaving our being. It's what I did on my last trip to Disneyland, where having time for one last ride, we ran to board Space Mountain and then, I backed away.
Have you done it?
One thing to remember at those times is not to blame ourselves for the hesitation, but to examine the reason for it. Trading much more than any other profession gives us opportunity to get to know and learn about ourselves. Therein is the real opportunity, because the knowledge will only help us grow and become more "whole" in our being. The trade and the Disneyland ride of our choice will be there for us to board again.
I just finished a short article on technology and logic when I realized that it really belonged on my other blog, so I posted it there. I am trying to stick to trading issues here, but at times it's difficult to separate life from trading, and that is the reason I titled this blog : Life relates to trading as trading relates to life.
My article is about our loss off logical thinking. We rely on technology now to do most of it for us and not only that, we now demand that we be protected from our own lack of knowledge or logic. I see it daily receiving endless "class action lawsuit" paperwork on equities that somehow went contrary to someones idea. To lawyers it seems it's like popping candy. An earnings miss by a company, or a misspoken word and the next thing we should think is that it was all done on purpose, we were all little sheep, mislead. Nowhere is it understood anymore that trading and/or investing is not guaranteed riches. Somehow it's all supposed to work like magic: when companies say the outlook is for .20 eps and it ends up to be .19, they deserve to be stripped of any future chance to make a profit. Law firms specializing in class actions, are somehow never questioned about their ulterior motives or subject to scrutiny.
Of course I don't begrudge anyone from making a living, but it's due to lack of logic that so much does go unchecked by ordinary citizens. Reality dictates, or is it logic, that anything we earn, any items we have can be lost and/or rendered worthless in relatively short time especially in today's world, yet no one is suing the companies for that. For example, Apple and the iPhone vs the new iPhone. Sony Walkman vs CDWalkman then iPods, DVDs and Blue Rays, one makes the other worthless (except for collectors) and the expensive items of yesterday (almost literally) have no worth today.
So, why expect your stocks to be worth anything, especially if you bought it last year? Even the FDIC is worth far less today than last year and that does not include the worth of your dollar or your real estate. So how about a class action lawsuit against the government for making our houses worth less? Oops, that dang logic I forgot I had is acting up again. :)
