Trading education

Dr. Steenbarger did a great post about micromanging trades. This is an area of my trading that I've been working on improving for a long time and I've made a lot of progress. In the past I would find a good trade trade on a daily chart, but then constantly watch the position on a 1-min chart. Inevitably I would get scared out by something that happened on the 1-min, even though my trade was still fine on a daily timeframe. Because of this I think it's important to establish a price target and timeframe before entering the trade.

I remember being surprised when watching Jeff Bierman's thinkorswim chat on daytrading and how he was trading on an hourly chart and saying it was unnecessary to to watch every little price movement. Longer timeframes help to focus on the bigger picture and not get distracted by noise.

When thinkorswim got bought out I started considering potential alternatives just in case it changed dramatically. I realized what I needed in a broker was cheap commissions and a margin account for shorting. Thinking about my trading and what I actually needed helped me understand my own style better. I don't like short-term trading where I have to make quick decisions. I'm much more comfortable with a slower paced style.

Lastly, I found this show on BBC where people are selected to be trained as traders. The title "Million Dollar Traders" gives some insight to the mentality of the show. In the first episode, the new traders describe their motivations. Most of them are simply interested in getting rich. One retiree talks about his hopes of learning to trade so he can make money trading his retirement saving and "provide a more comfortable retirement". Another of the candidates, who works promoting fights, says "it's about validation" and that he wants to "prove" he can be a sucessful trader. To top it off, one of their coaches says "if you sleep really well every night, there's probably something wrong".

So BBC has a show about trading, meant for the public, that says trading is about validating yourself to other people, making lots of money, and taking on excessive risk to the point that you never sleep well. Great advice, BBC.

But on the other hand, people who are interested in trading and have the dedication can learn a lot. Retail trading tools have increased, commissions are cheap and the internet is full of amazing resources (like the ones mentioned above) for people who want to learn.

gbp/jpy again

I've been following gbp/jpy a lot recently because there are some great setups. On a longer term timeframe this pair is in a strong downtrend. Recently it made a base and rallied up to its descending trendline. This also coincided with the 129 level which had been an area of previous support. Stochastics are heading down and MACD is rolling over.

Here are the trades so far. Yesterday I sold some and covered a little. After it broke through the downtrend line I covered more and my stop on the rest was just below my entry. I reshorted again a few hours ago.
After spending a long time looking for a good international clock for my computer I found this nice little utility from Microsoft that times in the toolbar. Pretty hand for currency traders.
http://www.microsoft.com/downloads/details.aspx?familyid=07fb0bd8-f390-458d-a629-6f0258ac7cdf&displaylang=en

gbp/jpy

Pretty clean setup in GBP/JPY. I'm short from 128.24
Took a little off and moved stop just below breakeven.

Jan 28

I've been busy with classes and haven't had a lot of time lately.

I got stopped out of CNP and AZO. I covered my SRCL short. I think it's a good long-term trade, but I'm not really a long term trader.

Still short DRI but with a stop above today's highs.

I've been following currencies a lot lately. I'm making a few small trades on a very small account for practice. All the trades made in term of risk/reward and % risk to the account. So I plan on doing this for a while to get some experience, and it allows me to easily scale up once I have good performance.

ADM looks like a good short, but they have earning on 2/2.

Up about 22% on TBT.

Long EUR/USD

EUR/USD was channeling down and has now broken the descending trendline.

DRI

I'm short DRI which is currently up around 11% on really aggressive buying. At first I was sort of angry and was thinking about covering the position. But I relaxed a little and thought it over. Instead of looking at a short-term chart, I looked at the bigger picture.

After looking at a long-term chart I've decided my trade idea is still intact, but that I'm taking a little pain. If it gets up to 29 or 30 I'll get out.

One thing I noticed is that the 200DMA seemed a little fast, and a 300DMA was often support or resistance. DRI broke a long term trendline and is in a downtrend below it's 200 and 300 MAs. The stock is in a bit of a downward channel and seems to be nearing the top of that range. The top of that range seems to coincide with the 200 and 300 MAs which are very close together.

One of the things I've learned from trading is focusing on strengths. Currently I consider my skills in technical analysis much better than those in trading. Because of this I'm focusing more on long-term trading that relies more on technical analysis than trading ability. I'm always going to working on improving my trading ability, but I'll do that with fake money.


I

Inauguration

My calls on USD/CAD and EUR/AUD dont' look that good right now. My analysis on currency isn't that great but I'm learning. Luckily I know this and trade small.

Here are the stocks I'm short. I bought the June put in AZO just after the open. I put up the daily charts for my reference. I could probably trade these off the 4-year, weekly charts.




And the ETF I wish I was short. A head&shoulders pattern, breaks the neckline. Then it finds support, does an amazing retest before falling away to all-time lows.

Brian Shannon did 2 great videos. In the first he outlines some trade ideas and in the second video he reviews and explains them. Really great information.
Trading Ideas
Trading Review

Currency trades

I think USD/CAD looks toppy. I like it for a longer-term short.

EUR/AUD is also toppy but looks like a better trader. On the daily it has made a double top and broken the ascending trendline.


Here's the 60m. After breaking it fell but has retraced a lot of the ground.
A closer look on the 10 minute shows a nice H&S forming.

MLK Day

Strange to think that it was one year ago when futures tanked and the Dow opened down -600 points and people were scared.

I'm more interested in the S&P lately. For a while it was all about the inverse head and shoulders, but that failed and seems like it could be turning into a H&S with the neckline around 810. I don't see any reason to go higher. It could break below 810 and test the lows. It might also just might chop around for a long time. MACD doesn't looks good. Maybe one more up day and I would want to get short SPY for two or three weeks.
Here are a few charts. Pretty good triangle.
Looks like this is heading lower. Some nice toppy chop getting stopped at the declining 200MA. Below 35.75 is nice.
The confluences of MAs is interesting. I don't see a good trade though.
In AZO there might be support where the 50, 100, 200MA are all together. But AZO seems to trade through those easily. I love this as a short even more than before and will be putting it on come Tuesday.

SRCL had two huge up days, but I'm still fine with my position. The long-term picture is still intact. DRI has been up a bit but I'm still short.

I wish I was short ADM still. Maybe short the stock instead of long a Feb put.

One of the problems I have to spreading money out over too many trades. The positions I'm putting on right now are too small.

TAP

TAP closed below it's 50MA and broke out of the channel this morning.

In other news, the bid on the ADM puts is now 2.80. I'll be kicking myself for a while.

Good-ish morning

Having a big down open is nice when since I had 5 short positions and no longs. But that only makes it a good-ish morning.

I closed the SPY put and the WMT call yesterday. Both were questionable/dumb trades. I think I made a dollar on WMT and nothing on SPY.

Got stopped out of USD/JPY. I'll see what happens and might re-enter later.

This morning ADM is down big. It's bittersweet because although I bought the put at 1.10 and sold it 7 trading days later for 1.95, it has a bid of 2.60 now.

This is still one of my biggest difficulties with trading. When I have a winning position I'm usually too aggressive and get out if it starts to go against me in the smallest way.

It seems like I broke 2 of Tim Knight's trading rules.

One of the things I noticed when reviewing my trading from last year was I closed positions too early, and in many cases they would have made a lot more money and not gotten stopped out. Because of this I consider myself a better technician than an trader.

From now one I'll only exit via stops. Altough it is some consolation that got short on Jan. 6 which was a great entry.

Anway, I'm short SRCL which looks like a weekly chart of death.

USD/JPY

I bought 1.5GB of memory for my old computer. Thinkorswim worked like a charm. Unfortunately the RAM won't work in my new computer which only has 512. I'll be buying a 1 or 2GB stick soon.

Anyway, USD/JPY looks nice for a few days. Long at 89.71 with a stop just below 89. I switched TOS to the white theme. I'm liking it so far.

Waiting

I'm waiting around today for my new computer. Right now I have 2 19" wide LCDs, but I can only plug one into my computer. Finally I'll be able to use both on the same computer.

CXG isn't doing much. THG looks like it might be breaking out to the upside.
BIIB was doing well for a while. That will teach me to get up on time.
I ended up shorting TAP which is working well.
Also the SPY.
Long WMT as a hedge against how many short positions I have

5 to 1

I have 2 long term shorts, 3 intermediate term (a month or so) shorts, and one long position.

After looking at this 60-day chart of the /ES I feel more comfortable with that many shorts.

Other positions

I got stopped out of BIIB by the low open this morning. But the failed moves higher are interesting.

I really like the ADM trade.

Some ideas for tuesday

I like THG below 41
I probably won't trade TAP. But it's an interesting setup. A break of the bottom of the channel would also take it below the 50MA. It would be an good long, but the upside is limited by the declining 200MA
SRCL is one of my favorite long term shorts.


FAF could be a good short, but it needs to work some things out on the intraday.
Like CXG if it breaks 24.50

Oil

I'm surprised by how much I read in blogs about people buying oil and trying to pick the bottom.

On the way up I was dumb enough to think I could pick a top. Thankfully I've learned since then.

It's strange how people are compelled to trade oil even if there is no good trade to be had.

There are thousands of other things to trade, plenty of which have good setups.

The profit from buying the bottom isn't that great once you factor in the risk and the low probability of success.

I bet most people are dreaming about the huge move last year to 150. But chances are that oil isn't going to make a V-shaped bottom and explode higher toward 100 or 150.

DXO, the double-long oil fund, was a great contrary indicator. Came out less than a month before oil topped.

I think it's Brian Shannon who says that bottoms are a process not an event, which is a good thing to keep in mind.

Monday 1/12 DRI, BIIB, ADM

This is what I get for waking up a few minutes late. I'm going to put some time orders on my stops from now on.


Anway, ADM is falling nicely today.
I also shorted DRI, but that's all I can do today. I can't use any of the money from the BIIB sale because of some FINRA regulation saying I can't use funds from the liquidation of an overnight position until the next day.

I'm so sick of all these stupid regulations about day trading. The people who lose all their money day trading will just lose all their money swing trading, but it will just take a little bit longer. If anything the regulations put smaller investors and traders at risk since it makes it difficult to manage or create positions.

Of course those regulations don't apply if I trade options in a cash account, or futures, or currency. So the assets with the least leverage get the most regulations, while the fast-moving, highly leveraged products are fine for day-trading.

Ideas for Monday

Any person or service who offers large amounts of fast and easy money through trading is a liar.

I've spent a huge amount of time over the past 3 days working on stocks. I've looked at a over 1,000 different stocks. I narrowed that down to around 50 potential ideas.

The problem is that just because I think a stock is going to move in a certain direction doesn't mean I can trade it. A lot of stocks didn't have low-risk entry point. I always have to a safe exit strategy if I'm wrong.

There is a lot of work after finding the idea. A lot of time spent in Excel. Figuring out capital allocation, stops, potential profit targets, commissions, and risk/reward ratios.


The nightly server maintenance alert has become a regular occurrence in my nights and usually means I should be getting to bed.

Here are my short ideas.

BIIB

Buying BIIB. Breaking out through this neckline/trendline. Looks like it can hit 52.50
Here's the 60-day chart of the breakout.
Still have the ADM put which isn't doing much today

Other views of ADM

ADM wed

Watching 28.20 for a break

ADM

ADM looks like a good short here. I bought a Feb 25 put.

ADM has retraced about 50% of its fall and has more than doubled since it made its low. 200 DMA is heading down and it's acting as resistance for now.

Upward momentum is slowing and MACD is headed down.

I'll stop out above the 200-day. Looking for it to get to 23, but that's a rough guess.

Currencies and treasuries

30-year futures not looking too good.

TBT has been strong lately. Red line is where I got in.

Shorted some USD/CAD last night. Looks pretty toppy. While I'm writing this it broke that trendline.
Also shorted some EUR/USD
Here's the hourly. Had important support at 1.3850 that was getting tested.
The small red line is where I shorted. I initially put on the trade to play the range, but I thought there was a good chance it would break.
Here's EUR/CAD which looked toppy.



I'm trailing my stops but not too aggressively, I think these can be longer trades.

Last night I went through a few hundred stock charts and found some great setups. I'm just watching for now, but there is a lot of opportunity out there.