A few revelations from a few days of trading.

Been a rough couple days. Not terrible losses, but not closing up. I have been writing things down in the day,. Just short statements that I need to embed into my trading. I will type them out and write a little bit about them now.

To make sure the trade is as unemotionally attached to money as possible, try to get your entries RIGHT where the turn is, from strength to weakness, from weakness to strength. It is difficult to buy a stock as he moves higher because it is near a guarantee that it will be out of the money for you, keeping your finger on the button, and making the trade emotionally attached to the idea that you are losing money..

Always get the entry as the stock is turning so you have the best pricing. In addition, you can get best pricing by having an offer or bid near the buyer or seller. For example, BOL today was very weak, and he was trading around the .70-.80 range, but he LOVED snapping it up to .00 just to play around with you. Now, you can go to the market to short it because he is trading a lower range in the mid 70s or so, but putting an offer out in the mid 90s gives you better pricing, and IMMEDIATELY puts you into the money. This allows you to settle down and let the trade do whatever it wants without having to worry about taking a major loss.

If the stock wants to be strong all day, and if you have interest in holding it all day, it should continuously break the higher range and trade into a higher range. If the stock moves lower and trades a lower range, you may want to take some profits as it tries to move into a lower range from there. Perhaps this isn’t the time to hold it, and you will get a better entry.

Try to find out where the stock is printing a lot of shares, where the buyer and seller are trading a lot of shares back and forth to each other. It shows that this price is critical in the future movement of the stock.

If you can’t spot a general trend, you will be whipsawed by unpredictable buyers and sellers who will control the stock. If you are involved in a stock that you really aren’t reading well, you will soon be faced with something that IS readable, and chances are good its going to be an aggressive move against you. (plus tick bidding buyer taking a decent position, moving the stock just enough to put you out of the money and in an uncomfortable situation.)

If a stock is trading in a range, lets say between 60-80, and now it is trading between 70-80, then eventually at the 80. You need to be involved in some way, because you will be adding as he moves higher then 80 and chances are he will be moving very quickly, because late comers are waiting for the .81, but you spotted the buyer earlier as he supported the stock hugging the .80.

Is the stock doing what you expected it to do? if not, what you saw is probably gone. If a stock is showing a definite sign of soon to come movement, and it doesn’t move soon, it likely is because someone is holding it down, that same someone is going to move that stock lower. Keep the position light until he starts doing what you expected.

Especially in the morning, if a stock is trading a lower range, or trading a higher range, you need most of your shares in the SECOND higher or lower range, not the third, or fourth. By then it is too late and you missed your perfect entry.

If a stock looks weak because you have spotted a seller, and the stock eventually goes thru that seller, it doesn’t take away the fact that the seller exists. You very well might see him later in the day. Make sure as the seller is taken out in a specific area, that he is done. Many times he prints thru it and comes right back because the seller is just taking their time to reload some more shares. A small seller that gets taken out is still a sign that this stock has sellers in it. Until proven otherwise, or the seller was MAJOR, you still want to be bearish on the stock.

DONT TRY TO PREDICT WHERE THE STOCK WILL BE IN 5 MINUTES. YOU ARE TRYING TO PREDICT WHERE IT WILL BE IN 1 HOUR. This means you need to consider the futures, the general trend, the vigor of the trades in the stock, and your entry.

If a stock has issue going thru its high or low, it should DEFINATELY go thru the second time around. The buyer/seller has a certain number of shares and their program kicks on to take those shares at a certain price. If the stock is able to make it back to that initial price, it is definitely going thru it. If not, chances are this buyer/seller is going to take a lot to go thru and you shouldn’t allow the stock to go against you because they might control the trend of the stock very soon against you.

You don’t have to be at a loss to get out of your shares. If the stock isn’t SOON doing what you expected, then likely what you saw wasn’t as significant as you expected. Get out before your exit is tested and eventually pushed thru for a lose that you shouldn’t have taken. You KNOW this feeling. "He shouldn’t be trading here anymore after what I saw" Something isn’t right and you need to revaluate this trade. This is especially seen on Fridays because buyers/sellers are much smaller and show up spontaneously to get a handful of shares and then they are gone.

On Fridays, buy the end of weakness and short the end of strength. Entries are VERY important. It is very hard to buy into strength and short into weakness with smaller buyers and sellers. You need those good entries to make sure you have some leeway, and some room to be able to read how big the person moving the stock is. Chances are good they aren’t as big as you expected on a Friday.

There is an advantage to getting out, and looking for reentry. It makes you more conscious to letting a stock go that is weak. Instead of thinking ”i can afford a pullback" you are actually thinking "i don’t want to get involved in a stock that doesn’t look as strong as it use to."

IMPORTANT: Unless there is a freak movement, losses shouldn’t be but .10, .15 cents, meaning entries are for VERY specific reasons, and VERY definite and visible patterns. There shouldn’t be a time where you get into a stock because it may move .20 when the pullback can easily be .40. It’s a losing equation.

Try using more limit orders to short and buy. This makes for better pricing near where you saw the reason to get involved. Many stocks you see a reason at .20 and you get filled at .05 Not only does that take away from your profit, not only is that an extra .15 loss if you have to get out, but it also plays with the leeway you can give the stock, and the objective setting of being in the trade.

Friday Trading...like no other day.

WOW what a day, I got killed in the morning. I knew that the news on WEN that they might spin off Baja Fresh or sell it was going to reflect positively on the stock, so when it opened and started trading up meticulously I bought 500 shares, as it printed the eggs by printing 30k shares, I figured its still early to get another 500 shares. With my 1000 shares WEN printed .01 and my Esignal went down. As soon as I can boot it up again WEN was trading at .65. BOOOM out $450. One large print gapped it out from the high. What a start to the day. a FRIDAY!! (more about this later)

I remember when I use to trade consistently, when i was on top, I rarely traded the morning. last two days I got KILLED in the morning and made it back in the afternoon, I should have been two up days real good, but the morning put me in a disposition.

why do I and other traders LOVE trading the morning? Well for one....ITS SEXY! What other business can you make $1000 in 5 minutes. There is nothing like that rush of knowing you are right and getting paid off for it. It is what we have all seen on Wall Street, Trading Spaces, Boiler Room, THIS is why we became traders right? WRONG! We became traders to earn a living trading consistently; the satisfaction of love comes from being consistently right on the market, not hitting the homerun.


Back to the issue of FRIDAY trading:

Coming to your trade station on Friday expecting business as usual is a recipe for disaster. Where on a normal day you want to take a good position and let the market takes its course, Friday is not that day. On Fridays, no important economic news comes out, no important earnings, AND trading is light, its a perfect storm for a choppy market, GAURENTEED losses ahead. Because of the essential change of how the market trades, you must essentially change the way you trade. Where you would usually take a position and hold, Friday you must take healthy profits as you see them, treat the whole day as you treat the mornings, quick exits to bank profit on the first consistent pattern of opposite movement.

The machines in the end will always win on a Friday, and their job is to take your $$$. On a normal day the PROG trading software takes positions, but the human trading element seems to even this out, or assists the trend, so follow thru is more probable. But on Friday, the programs are still on, and the human traders are not in the office. Things just are not the same.

So what is the resolution? Expect NO follow thru, so on a normal day if you are use to closing out profits of .60, expect 25 on Fridays. If you have 1000 shares take off 700 after a good run, and leave the rest, if it starts trading against you or it starts trading with the market get out and leave the stock alone. Don’t buy breakouts because they are sure to snap in your face. Make sure they are CONFIRMED and DEFINATE moves.


On another note, to relive some of the stress of trading, and going on the idea that the more you know the better your trading will be, come into everyday with expectations. When the stock does what you expect, you know what you are doing because the stock has communicated a confirmation. For example WEN today, snapped me in the morning which was unexpected, so I let him push thru the low. But as he started holding higher ranges off the low, I fully expected the high and more, so as he started approaching the high I was confirmed that my initial instinct was correct, so I loaded up and held thru pullbacks knowing he would soon push the high, which he did. This is the proper way to trade. Early signs of strength will turn into STRONGER signs of strength for other traders to see and react to, when you see this AGGRESSIVE movement, you are getting out some shares because you are to be rewarded for spotting this early. You are a tape reader; you have this upper advantage that charts don’t.

Amazing Entries and Accurate Exits

Today wasn’t too bad. I had a decent profit going into the afternoon lunch hour and little by little, i started to bleed it back.

A lesson I learned today was not to come in 20, 30, 40 cents after the easy money momentum and buy more than 100 shares. You missed the move, don’t get in until you see something definitive that can provide a reason to get in, AND a definite area to get out. More times than I should have, I would get 500 shares deep into something and not realize I needed to not be so many shares in, and I don't know where my loss threshold is. I don’t know why, but if a stock is moving up nicely, the second I buy it, guarantee the run is over. I think this happens 9 out of 10 times and has got me in trouble all of last year. I am stricter on my exits, so the losses haven’t been as big, but I need to get rid of this problem for good. If it need be, ill buy 100 shares just to satiate my itch.

Another problem that comes about in this momentum situation is adding out of the money. Sine my entry was pure momo, adding shares in a losing momentum trade can be very hurtful. I have come to the conclusion that I should be okay adding shares if I am getting better prices for a reason I saw.

For example, a stock has been strong all day and it comes up against the eggs (.00) and I believe it will not break the figure. GREAT place to buy shares. So the stock starts to move and I pick up 300 shares or so around .10. Well, the stock wasn’t moving this moment and it comes back to the .00, and STILL holds it. Well this is a good pricing, so even though I am out of the money, I would feel comfortable adding shares here. Now, if .99 prints I have to take all my shares and sell them, and take the loss. the entry was reasonable, and the exit is predetermined. Simply put, my reason is gone, so I am out of the stock.

In cases of momentum, if you don't see why you are in(chasing momentum) you shouldn't add.

For example, the stock trades from the 30s to 40s to 50s, and trying to move to the high. I can buy 100 shares in the 50s, as soon as he starts trading into the 40s and then perhaps makes a move to the high 40s, this is a dangerous place to add. Why? it might be trading up to a new higher range in the high 40s before he slams back into the low 40s and eventually 30s. So now you have shares long in the 50s, and added shares in the 40s to a losing trade. You just doubled your losses. Why? Your reason to get in was soft. You bought a stock because it went higher, and added thinking it would continue going higher. When you assume the stock is going to do something, chances are you are wrong. With hard reasoning, like the example above, the stock is telling you what to do. This is less like Vegas, and more like successful trading.

Chasing momentum is coming to the party late, there will be an easier trade you can sink more shares in and make a better profit EASIER...maybe not today, but definitely tomorrow.


BTW, the goal, I see today from watching my mentor trade, is amazing entries and accurate exits.