Archive for Da Rules

Google
 

On Tilt

As per the previous post, set up my great 3rd monitor. Got the best night’s sleep in weeks, maybe months. Got up this morning (my day this week off from the ICK! regular job), made coffee, fired up the Command Center, watched the pre-market action.

Then, insidiously and without warning, it happened. Made a trade. Small loss. Routine.

Market reversed… caught it, ha! Made another trade, took extra-large position because I was feeling smug. Market went up, but the stock went tick, tick, tick, down, down, down. Sold half the position at a loss. Back up a little, then down, down, down. Sold the other half.

Went On Tilt for the rest of the day. Click that link and read it. I’ve said professional trading is like professional poker. That link was me today. Fully On Tilt.

Now this evening as I’m mopping the blood up off the floor, I’m humbly going back to What I Know. Run an Advanced Analyzer scan on every stock that finished significantly up or down. Study daily, 30min, 15min, 10min, 5min, 3min, and 1min charts of each of those stocks. Take notes with a pen and paper. See if there’s anything new happening, or if I just wasn’t paying attention to my old notes. Where are they, anyway? Under a pile of bills and other papers on the desk or the bookshelf, somewhere. How long since I’ve actually looked at them? Yeah, I can recite them all, but how long since I actually read them?

I read Trader-X’s post this weekend, and thought, yeah, he’s so right. Well, hell.

Been trading a long time. Been here before. Let’s take a breath and collect our thoughts. Thanksgiving week’s a good time.

I’ve been neglecting the personal site since June. Think I’ll work on it a bit. Owe that to Da Girlz. Hits here will decline. Ad revenue’s bound to fall. ;-)

 

Market readies for next thrust

First, let’s just count the rules I broke today… nah, no need. Knowing that a certain day’s your one chance this week to get some trades in can make you too earger, like going hunting and saying, “By God, I’m gonna shoot at something!”

The range-bound sideways movement made for a perfect day to get some chores done, or maybe invite a friend to call in sick and come over for “coffee” (and she knows who she is). Instead I made 7 trades, trying to switch from short to long with the indecisive market, and got stopped out of 6 of them, 4 for losses. Ah, time to get out the notebook and re-read some old passages.

One benefit of today’s “tuition”: I noticed some very interesting patterns of market-makers hitting ask- ask- ask- ask- with small lots to run the price up a bit, then flipping and feeding a buttload of falling stock to the unsuspecting. 50 cents lower, and they’d do the exact opposite on the same stock. On one stock, I had a stop-limit short order well below the last 30-60 minutes’ action. Midday when the volume got really thin, some SOB walked the price down over 50 cents in about 15 seconds, bought the chunk of shares from me, then let it walk right back up, like a vulture picking up a piece of dead meat. Most folks, including me, have rules about not entering new trades after around 1200 EST, and this kind of game is one of the reasons. But, today found me doing my Judas Priest imitation (”Breakin’ the Law, Breakin’ the Law”).

 

To the charts! The Market Today showed a gap-down opening, then buying, then sideways the rest of the day:

QQQQ

The candle this action drew popped up as a Thrusting Bearish pattern:

QQQQ

However (and there always seems to be a damned however, eh?), this candle is not a major bearish signal by itself. It could easily mark a near-term bottom. How to know? Well, as always, don’t anticipate. Wait for the break, grasshoppa, wait for the break.

I have a swing short on the Qs I entered off its hanging-man last week. A break of today’s bar to the upside will see me covering. A break to the downside, and I may add more.

The S&P put in an almost identical performance:

SPY

So… tomorrow should provide some interesting trading. Yesterday definitely did. Alas, I was off work today. Dammit.

 

Breaking Your Own Rules

Ah, yes. Rule No. 8 gets me again, this time for a major chop with GOOG. One day soon, I’m gonna remember this rule when I’m entering trades, not just when the trade’s over and I’m either drinking a toast to dollars lost or lovingly spooning with my trade confirmations. Nah, I don’t really do that, but there was this one trade last summer, on Google no less…

I’m not in such a sour mood. I can set position sizes hanging upside down with one hand tied behind my back, and the temptation to overcommit never bothers me anymore. My stop on GOOG was really wide (about 10 bucks), and my PS was correspondingly small. So, I’ll take a whack on this trade, but even though it’s more than I anticipated, it’s not crippling.

I shudder to think back to the days when a decision that the way to be pointed in Google was “down” would have seen me using half of my entire account’s equity to buy at-the-money puts, in which case right about now I would be in the bathroom Calling Ralph on the Big White Phone.

So, if this is the spanking that reminds me to think of that rule in the future, well, it’ll be worth it.

YEAH Baby! Market breaks out, oil bottoms, I catch a falling hammer

How about that! S&P solidly crosses 1326 (finally). The Qs have 40 in the rear-view mirror. Sweeet!! Check out The Market Today:

SPX breaks out!
 
Qs look back at 40
 

Yesterday afternoon, as I was working on the Krebs Cycle-looking chart for my currency rant, I noticed the oil stocks all showing some serious intraday reversals. Some had gapped down and reversed into the gap. Some had just flipped. But they all headed up like gangbusters after oil came back above $60/barrel. This type of intraday action results in a hammer on the daily chart, and virtually all the oil stocks made one. The OIH didn’t quite form a textbook hammer, but the action was the same:

OIH

I scrolled thru a few of the ones I regularly follow, looking for a more volatile one to get long on. I was going back and forth between UPL and JOYG, and finally settled on JOYG. It formed a near- Dummy Spot, and I had a bit of an itchy trigger finger, so I got long with a smaller than normal position size, and set my initial stop below the day’s low.

JOYG

Now, the normal way to play this trade would be to wait for the next day’s break of the hammer bottom. That happend emphatically this morning:

JOYG hammer bottom

However, since I saw the hammer clearly forming, and there was no danger of a re-reversal, I went ahead and got in a little early. This is a bit more risky, hence the smaller position size. This time, it worked out nicely.

This is a trade which will require a tight trailing stop. Why? If this is just a pullback into a downtrend(I don’t think it is), it’ll fail within a few days. If it’s the end of the preceding downtrend, this will be the first bottom, in which case it may run a little more, but will come back (any Fibonnaci fans out there?). If that happens, I’ll let this trade get stopped, then get long on a resumption of the new uptrend, with an appropriate stop and position size.

 

I would be remiss if I didn’t mention my recent nemesis Apple Computer:

AAPL

I was watching for a break of 76 as a point to get long and set a tight stop. Always a tight stop. Instead it gapped up and ran. Can’t chase it, stop would be too wide. Ah, well, I’ll revisit AAPL soon enough. And for the record, I’ve decided my wishful short of Apple was a break of Rule 8. Breaking our own rules is a bitch, no?

11 July 06: Stops

This post has been promoted to “Article” status, as I can already see I’m going to be referring to it quite a bit in the future. Please see the article The Importance of Stops.

Cheers!