Friday, December 31, 2010

notes for 2011 strategies

when there is light volume -- find the support lines and buy those (i.e. buy on weakness near trendline)

when stock is strong, look for breakout and buy on strength. 
 Buy momo stocks on 3 bump pattern and breakout  (set tight stop)

on intraday weakness:  look for 3 tight higher lows to enter.

Your Edge:

My greatest edge, which I can use or not use, is my patience.  If I know a stock is worth more, I have no pressure to sell it until it reaches my price.

 And my second edge, my small size, allows me to exit my entire position for the top price.

 My edge crumbles when I lose patience and want to exit a temporarily losing position, or take profits too early.

thinking back:

First thing I want to remind myself of is this:

 Many trades I made that I eventually sold went on to become winners.  Many were based on value.  They just took longer.

 Many I bought too early and got trapped too long.  I didn't wait for a clear - 100% clear support line to enter on -- so that the position didn't drop too far. 

 Many the size was too big so the drawdown was too uncomfortable.

 When I look back -- I think I have more of this mistake -- selling too soon.  Always selling too soon.  Especially with winners. 

 My edge requires letting profits run.  Think about that for 2011

Tuesday, June 1, 2010

market breaks

after being up intraday -- market sinks to lows on heavy -$tick readings...

 key indicators:  terrible   adv/dec. ratio --  oil/oih sector decimated all day...

  lost money trying to fight an obvious trend.  

  would have done better to do nothing until afternoon when trend resolved to downside.  I shorted 3 times -- but did not hold on.  

  sellers swamped all buyers.  

    Trade in direction of general trend.  Brief green markets were opportunities to short all rallies now.   Leadership names AAPL and GS were all alone (GS faded to red) -- so market had nothing to support cascade.

  Poor job managing risk.   All losers hit stops, all winners -- sold too early 

Monday, May 24, 2010


fair value $125

 AT 57.77 --  this is a long term buy.  It will be very volatile with BP news but the market no longer looks out 5 or 10 years.  So it can trade down to 50 I'm sure.  Still worth $90 - $125 long term.  So the only winning strategy is to do nothing.  No stops... just hold -- for  a long time.

  Market conditions still bearish... Need to stay mostly cash unless buying super long term positions.

Monday, April 19, 2010

Never Say It's Over

Big bounce today.

 I watched GS all day -- as I should have, being the 'in play' name -- today's open was low of the day -- eventually going on to push up about 8 points.

 MON had buyback news -- up 2 points.

 It really helps to be in news-driven stocks as that's where the volume is.

 Overtraded today with nothing to show for it.

 I am mostly in cash, no big blow ups.  I can continue on next week.  Focusing on

 1) support/resistance
 2) order flow
 3) market signals
 4) risk management

  Today I did well not to lose a lot.  I did poorly not letting the one main winning trade move up.  My initial ideas - -HUM and MON were good.  So just need to follow through with picks like that.

keep missing:

I flagged HUM and MON as longs -- they both went higher.

 Then I played around in SRS - got stopped out twice, third  time WAS the charm - but I didn't hold long enough to offset the losses.

 What I could have done better was look at the chart and define resistance - it topped out 4 cents above the 20 day MA -- a simple backtest.  That would have gotten me in perfectly.

 leaders are weak, XLY is weak -- this is a corrective market.  The best ppl I follow are raising cash.  I will not fight the trend.

Tuesday, April 6, 2010

not holding long enough

mistakes:  buying weakness

 selling out winners too soon  -- over and over again -- not having the confidence to hold through.

 Need to keep position size smaller.

 Keep gravitating toward weak names -- which will require more time.

 Entries often too high -- selling on pullbacks...

 Need to have more conviction, smaller size -- and simply hold the best idea.  

 Overtrading into 3rd tier names.  No need.

  Need to focus on just a few names each day.  Don't be afraid to do nothing.  The moments of profit will be quick and violent.  If it doesn't happen immediately... it's a sell.

Tuesday, March 30, 2010

one step at a time

Trading well past few days....

 Taking very small gains... but they're adding up -- instead of watching long positions chop around for no gain.

 What's working is -- being patient... assessing strength, particularly by watching volume and also, the overall markets for sentiment.

 I am achieving my daily goals.  I am managing risk well...   the key was simply -- keeping track.  It keeps you honest.

  It's easy to buy stock dropping -- but the weakness rarely pays off.   See how SKBI just kept going?  Buying into strength is much harder than it looks.

 Today was a particularly difficult day in the markets and I managed quite well.   And there's lots of room to improve as well.

Friday, March 26, 2010


Listen more.

 Wait for the stock to tell you what it will do.

 FOLLOW a PLAN, stick to it.

 Buy strength: volume or above 20 day MA or both.

  Enter / set stop - as it begins to move your way.   Keep trades that immediately work.

  Take profits.

  Listen to the whole market before entering.

Thursday, March 25, 2010

no edge

I have one account that is profitable:

I have made very few trades in this account.

I bought the best ideas.

I held through volatility and took big draw downs.

I held through large moves.  I did sell one name for a big gain, one for a small loss.  

Value investing has worked for me.
 Daytrading has been mostly awful.

It's clear what will work in the future.

 It may not be what I thought it would be.  But it's what works.

Monday, March 22, 2010


Made many trades, had nothing to show for it.

 Really gave it back by shorting... which I have sworn off many times.  I am terrible at it.  They are almost 95% losers -- every single time.

 My winners were value names I know and trust, like YONG and ALJ  -- both were bought on pullbacks.  I know these stocks well.  They were instantly in the green.  I was comfortable with them the whole time.

 This is my edge: buying value stocks using TA -- knowing the names well.   This is what I learned.  It's harder to trade names you're not familiar with.

 I thought the markets would have turned today -- but I thought wrong.  So I took many small losses that added up.  Overall, I was up a tiny amount.  With two trades in play (one down a bit, one breakeven).

 I am now keeping track of everything carefully on a spreadsheet.  I wish I had done this a long time ago.


I put on some short positions -- and lost on all of them again...

 Market gapped lower and then went shooting higher -- trapping all the shorts -- who obvioulsy are being squeezed to death again.

 I'm not sure what else I could have done -- I oversized the shorts and also did a few long trades which mostly worked out.

 I think I recognized the squeeze early but it was a slow squeeze.  The daily charts looked broken.  Maybe it'll die end of day here.  But IYR ripping to new highs.... all on low volume.   Every sector is green but utilities.

  SPY now at top of descending channel.

 INDEED:  today's lesson -- watch $TICK -- there's no readings below -300 -- buyers are still in charge and that's the first sign there's no selloff coming.

I hold TZA and SPPI now -- having traded all day for small loss.  I'm probably overtrading.  I don't see an edge anymore, long or short.

 So that's why you leave stops... market can keep going anyway.

 I don't understand what's going on but I guess I don't have to...  Charts broke back up.  End of story.

 Shorts are probably trapping themselves on low volume.  A break to new highs will force massive covering.

Sunday, March 21, 2010

Trade: DHT

I bought DHT on Friday based on  my usual swing pattern.

 I will sell immediately if it moves below the 20 day MA.

 It is important to constantly monitor trades and take losses immediately as they move against me.

Tuesday, March 16, 2010

ADY chart

ADY has been trending down a long time.  If you use charts, this was an avoid.  Today ADY is down 16% on a bad ER to fresh lows.

 The charts once again were crystal clear.  The key for microcaps is buying the breakout -- like CHGI.ob, which did nothing for 7 mos.  As soon as it cleared its last high of 1.90 -- it ran up around 75% in 6 days... more or less.   The key was just stalking it and buying the volume breakout.

Monday, March 15, 2010

sticking with 20 day

so far: whipsawed out of XIDE

 lost on CMTL, STP --   overall indexes extended so not much upside.

 the 20 day breach works best after a correction or longish base.  Otherwise, the stock is probably not ready to trend up.

 I'm now short... but market now pushing back up end of day.  I feel I should hold for multi-day selloff rather than take quick profits... but I might get stopped out.  Well, I have always taken quick profits before and it's never amounted to much so may as well leave the slightly green positions alone.

Tuesday, March 9, 2010

Game Plan

I feel more comfortable buying swing trades.  I need to focus more on swings.  I also feel more comfortable buying stocks near the lows -- but the caveat being -- I need to wait for the first sign of an impending new trend.... whether it's a sign of volume. or a 20 day MA break or other.

 Then -- I can always start with a small position and add - since the swing will last many days.

The trades should come in chunks.  First profit taking... then getting in, then scaling out.  But all over a fluid process.

 Too much focus on daytrading is a distraction and hardly profitable.

Thursday, February 25, 2010

Rules are not bad.

Looking back at a few trades -- I think my rules are actually quite good and effective.

 Just need to actually -- you know-- follow them.

Tuesday, February 23, 2010

not my market:

It seems I am struggling to figure out how to trade this market.  It's probably best I step aside then.  My focus on the 20 day MA is a good rule -- it seems all the strong stocks move above the line.  Below is a time of consolidation and danger -- and that's where most of the stocks I follow are.

 However, the HAO is above its 20 and consolidating there -- this may not be such a bad time in a few weeks.

 I need to relax.  Observe more, trade less.  See what is working.   IPXL was one I bought and it immediately went up.  Those kinds of over-the-20-day stocks are working still.

 You can't always win when the markets are not moving.  So stay focused.

Monday, February 22, 2010

trade: ENDP

Lost a little -- stop was hit.

 ENDP was up on earnings - above all MAs -- thought I saw my pattern.  Stopped out for smallest loss possible (now even lower).

 I guess this was a good trade... I'm okay with it as I did what I thought would work and protected the downside.

 Today I see the market as choppy so not really much to do.   I think my read is right on.

Sunday, February 21, 2010


The easiest trade from last week was JCOM -- I picked it because it was above its 20 day MA, its 20 day MA was sloping up.  This stock was already heading up.  All I did was ride the wave.  The other easy trade was DLM.  It was also above its 20 day MA.  Its 20 day MA was heading up slightly (in a long base).  It broke out the next day for a quick, easy, fast gain.

The worst trades were shorts going against the trend.  Whenever I bought a stock that was down for the day, below its 20 day MA -- it kept going down.

 What worked, and what didn't work -- was so obvious it is stupid.   The market has a very one-way mentality.

 For next week -- I'd like to continue buying with the trend.  One short would have worked out much better had I waited for my clear 3 bump pattern to emerge. I think this pattern is still highly effective -- but in an uptrending markets, it would have required greater patience as it wasn't there on the short side until Friday.

Nonetheless -- no matter what -- it pays to go with already trending up stocks rather than fishing from weakness.

Friday, February 19, 2010

20 day MA

Can swing trading really be as simple as waiting for the 20 day MA to turn upward and riding the wave?

 Well, yes and no.  The 20 day MA must turn up for a rally to happen.  But some stocks jump way above an others linger for weeks.

The other signals would be to watch underlying indexes and most importantly, doing some good value research.  Many small caps blast off way too fast when they finally rally.  But it's a good start to a system for swing traders.

Wednesday, February 17, 2010

position size

As a longer term investor:  It's important to keep position size small to withstand drawdowns.

 Watching the market and raising cash at extreme levels and rebuying is easier.

 But also knowing there will be times of drawdowns.  You have to lose sometimes in order to win big later.

 Not being overly concerned during the down times is part of the game.

 Being patient and waiting for the fat pitch is the other.

 I took a few small trades and my position size now is very small.  I need to refocus and revive my confidence so I can be successful for the long term.

Thursday, February 11, 2010

trade: ATPG

did a quick trade for practice --  bought strength on the open... also saw my pattern and saw volume.  Bought it and it was up right about from the start... never dropped more than .10 from the purchase.  Sold it too early most likely for .20 profit...   (sold because market is red and very weak).

 Key was:  found strength, bought strength.  

Tuesday, February 9, 2010


Having given back all gains from the beginning of the year then taking losses, I feel like I am stuck.  The emotional toll of being a value trader -- and then deciding to cash out to protect losses (and thereby selling near the bottom) has hurt my confidence.

I am quite sure I have solidified my trading strategy as a swing trader, using charts to denote times to enter or exit the market.

I did not use clearly defined risk management skills.  I remained far too complacent as the signs stacked up for a correction.

I need to let the past go and not fear missing out on a new rally or remaining in cash until signs show I should reenter.  I need to be willing to put cash to work as the signs emerge that the markets can push forward.

 This is  a long race.  The main thing is to learn from each new mistake and rise anew.

It's time to focus on the next step now.

don't give up:

I went back to ERY and bought again...

 Made 8x my first loss with a bigger position.  Right idea, bad timing the first time.

 Now ERY is once again dropping fast.  Definitely played it much better the second time.

 I see confusion today so hard to pick a side.

fighting daily

I tried to short the counter rally and got stopped out --  market up 154 points here...

 Too early to attempt to catch the roll over... got squeezed out for -$200.

 This was not a good trade because I was fighting an incredibly oversold market with all sectors green.  I was going counter-trend which rarely works.  Especially with no 3 bump pattern to show the bulls are tired.

 Chances are this short will work later in the day.  Maybe I will watch for that.

 Pro traders went long today on strong names and won.

Monday, February 8, 2010

taking it slow:

Well, there was a small bounce in HAO but I'm not taking any chances.

I attempted two daytrades and pocketed a grand total of $58.91 -- about the usual take.

 The market is mixed so it's not like there's any strong trend.

 Both trades were buys on strength (news related), both China names I follow (CTFO, HOGS).  The HOGS would have been good but I bought very little and sold it too soon. It moved about .50 from my initial entry which is excellent.

 I did earn over $500 on HOGS in a managed account.  With the market in a downtrend, I feel good being mostly cash now.

 Not having any stop losses in place on the correction was simply... well, that's a mistake I will never repeat again.  All stocks are deadly in a weak market.  And now the weakness is starting to strengthen as the day goes on.

Sunday, February 7, 2010

Hope is for the Unprepared

Sometimes you hope the markets will go up or a stock will do this or that.

Hope is for the unprepared.

If you're trading for a living, you can only control your own actions.  So if a stock moves down, where do you plan to limit losses?  What signals will indicate the environment has shifted?

When will you switch from offense to defense?

A trader must always be prepared to go over the scenarios and diligently watch for the signs of shift in investor confidence.  A trader must always have an actionable game plan that covers every scenario.

If not, the trader will inevitably start hoping -- a sure sign that one's strategy is closer to failure than realized.

Saturday, February 6, 2010

Cashed Out:

Starting over... again.

Working on developing a system to get me out of weakening markets and completely out of corrections.  But went to cash (90%) to preserve capital in this new treacherous environment.

Rule #1 is don't lose money.

Once you start losing big hunks of money... there's not much else to say.

So the first rule of the new trading I will implement is starting with the question:  How much are you willing to lose on this position?

Once you can define your risk, you can start to trade.  If I don't know how much I'm willing to lose, it will always be much more than I think.

So this will involve proper position size and identifying a support level that must hold.

And secondarily, it involves identifying a benign vs. hostile market.

Tuesday, February 2, 2010

Relief Rally: New Beginning

My portfolio is back to break even after being up 12% -- then losing it all and more in 8 days of huge losses.

So a fresh beginning.  That's okay.  Especially if I've learned from my mistakes.

Taking profits is part of the game.  Sure, the stocks I own should be much much higher, but the market cycles and will regularly selloff after extended runs... consolidate, run some more.  Not taking profits when they come fast and furious is foolish.  Making money is easy... keeping profits is not.

I will be much more observant of charts going forward... using them to make occasional sells when they get extended.  What works with value stocks is simple:  sell when they are the must-own exciting names... buy them when they are being tossed in the garbage heap.

To succeed, it is critical to do the very opposite of normal human behavior.   Good times should bring on fear and concern of loss.  Huge drops should be welcomed and embraced.  And always keep proper position size and cash balance to take advantage.

You can make money in the larger swings... but you must have the patience to hold, the ability to let go too early, and not fear the panic lows that bring the most opportunity.

Thursday, January 28, 2010

What Did I Learn?

It's hard to protect profits AFTER a correction has started.

Sentiment is everything in the short term.   Your profits can be generated by selling joy and buying grief.

There is a time to be a turtle and a time to be a tiger.

Proper set ups take longer than you think to emerge but the swing itself is often shorter.

Wednesday, January 27, 2010

On the Sixth Day of Painmas

Well, there goes 2010.

 Profits completely wiped out.  Losses now growing.  Sitting through a correction is a bad idea.

 What I did wrong:  I quickly added to declining positions instead of observing that a major shift was taking place.  Had I simply kept my 25% cash position alone for a few days, I could have added at much much better prices instead of being helpless today when finally, some actual bullish, bottoming signals showed up for a variety of stocks.

 In a correction, trendlines will definitely be tested and violated.  It's best to let the first wave get crushed by the fear than enter headlong.  This was a huge learning experience in impatience and stubborn belief.  When the markets want to correct... the entire world of technical analysis changes.  Stocks don't just bounce... they fall fast until exhaustion.

 Some of the signs of a bottom (if this is indeed a bottom -- it probably isn't ) are:  strong buying vol. intraday.  You can clearly see the green bars showing buyers are coming back in.  Dragonfly/hammer candles form at old support levels.   A glimmer of hope from the msg. boards.  I added way too early and now I am 100% helpless should the markets continue to correct lower.

 Should I survive... I will remember these six days forever.

Tuesday, January 26, 2010

need to learn from this

I just don't think I can go through a drawdown like this again.

Value investing is not always fun or even tolerable.  Sometimes it is just pain.

Five Days Down

Making money should never be easy...  yet it was the first two weeks of January.  I made a lot of money.  But I didn't do anything about it.

 Now -- in five days, I have given it all back.  What the market gives, it takes back twice as fast.  Had I been listening to my inner voice... I would have taken more precautions to lock in the gains.  The market is a beast that can turn on you in a second.

 It does not care about value or anything else.  When it wants to drop, it will drop through all your fancy plans and charts.

 If I'm really an investor then days like this should not bother me.  But the fact is -- I think I need to be more of an active swing trader and take the profits as they roll.  Staying long and giving everything back on each and every major correction is too hard to deal with.   I did quite well taking profits.  It's the ones that I held onto that returned back to their trendlines.

 I did buy a lot of names on trendline support today.  Small caps are broken now. And I'm still losing huge chunks of money every day.

 I wish I could be a daytrader and be in cash all the time but I am terrible at that.  That only guarantees I bleed to death slowly.

 I still have not lost money for the year but tomorrow it goes red.  Hard to keep going after five days of this.

Correction Continues

Taking more heavy losses -- now four days in a row.

My tolerance for pain is reaching maximum.

The market has decided there is too much risk in owning China names and I have suffered by holding on.  The market is saying get out but the market is impulsive.

I learned that the market can turn on a dime and not look back.
I learned that my habit of taking profits is a good one -- one that I need to do more often when I feel like the profits are coming too fast, too easily.  Always recognize that feeling.  Locking in profits is always a good thing.

 Don't be in a rush to put cash back to work.  If you ever feel rushed, fearful, giddy, or greedy -- you are about to make a big mistake.

Thursday, January 21, 2010


Today the Dow was down 213.

I suffered perhaps my largest one day loss ever.

What did I do?  I bought more stocks.

It did not feel good. And as I write, GOOG is tanking on earnings.  But the stocks I own are long term plays that are far below fair value.  It makes no sense to sell them because the market is puking on political news that doesn't affect the business.

In fact, my largest position, NEWN.ob was actually up .25 today!  So how's that for ignoring a sell off.  I think last year I would have freaked out on a day like today.  I certainly wouldn't have been a buyer.  It may be a big mistake.  Today was a huge technical breakdown.  And there will probably be follow through tomorrow.

 The market is understandably nervous about the new rules.

 The other important thing to remember is this is one day.  I am focused on monthly performance.  (For the month, I have done quite well despite today's give back.)

 I feel I followed my plan... even though today was a horrible day.  Let's see what the future brings.


I feel I'm seeing the market well lately.

 I had shorted the market via QID on one of my best up days ever.  I set a stop that was as low as 4 cents away but it turned.

 The next day the markets gapped down and I exited close to my target.  My overall portfolio was hit really hard but there was some recovery end of day and it wasn't so bad at the close.

 What I discovered is that posting my ideas and thoughts on the Mainely Stocks board seems to help me with my trading.  Talking ideas out 'out loud' means I have to be just a bit more analytical and thoughtful.  It forces me to explain my reasoning.  As such, I'm less prone to making impulsive trades.

 I feel that market has reached a top for now based on a number of developments, mostly political, and there may not be such easy gains going forward.  I need to watch out that I don't get bored and try to force a trade.  I have made good profits this year.  If a month or two goes by with no more profits... it would not be a disaster.  The main thing is to focus on waiting for good entries... and finding constructive things to do during slow periods.

 I still think this market is going to reward value so that's where I'm looking.

Tuesday, January 19, 2010

TraderFeed repost:

Another great set of thoughts from Brett Steenbarger:

1) Turn Every Day and Week Into a Learning Experience - Make sure that you take away from each day something positive that you've learned and will work on in the days ahead. If you grade yourself on your learning and your improvement, you'll be able to weather the trading setbacks;

2) Find Teammates - One way soldiers get through the rigorous training of Rangers and SEALs is with the support of buddies. Colleagues can advance your learning, but can also be a source of encouragement and challenge when times are tough. 

3) Hone Your Niche - Relentlessly identify what is working for you in your trading: what you're doing well when you're making money. By focusing on your strengths, you can build upon those and stay in your performance sweet spot.

4) Have Plenty of Reserves - You can't be pressuring yourself to make a living from your trading when you're just first learning how to trade. Like any business, you need to be well capitalized, so that you can survive the lean times and the start up phase.

5) Make Sure You Have Support at Home - A spouse needs to be part of a trader's business planning. The support at home is key when it comes to facing those lean times and start-up frustrations. To sustain that support, the trader needs to make sure that the financial needs of the couple and family are not jeopardized by the time (and capital) devoted to trading. 

Saturday, January 16, 2010

What Was I Scared Of?

Several times this year I have dumped positions at a loss... even though they did not violate mental stops... and watched them all go raging higher.

I think what I learned this week is that all good positions have a scare you out moment... or almost all of them.

As I mentioned before, good value stocks take time... and you don't need to trade every day.  You also can withstand drawdowns.

I have often frequently bought stocks that tanked that I thought were great and very often, I wind up buying the bottom -- because someone else is panicking.

The pros I follow never dump positions for losses.  They just don't do it.  Once you stop doing it too, you will improve your performance... as long as you've done the work and know the value of what  you own.

Friday, January 15, 2010

Is Time On Your Side?

I'm thinking about time today.

As I have shifted from a trader to a longer term value investor, I realize time has shifted to being on my side.  I don't make money every day.  In fact, I lose money on many days.

However, I have two things going for me.  Time is the main thing.  Over time, the value names tend to assert themselves and finally provide the big gains that might have come from hundreds of small trades.

The other thing is I don't have to be in front of the computer all day stressed out, giving me time to think about other things and do other things.

So essentially, I am getting a lot of extra time, less stress, better results.

That's a winning strategy.

Wednesday, January 13, 2010

Three Questions:

Did I trade well today?
What did I learn about myself?
What did I learn about the markets?

Today was a down day and I made an egregious mistakes by selling part of a large position because I was nervous.  I did not sell all of it.  I was overweighted so it was a relief to get rid of some it.  The stock rebounded and I locked in a big loss at the bottom.  I then regained my composure.  I bought several downtrending names because I felt they were too cheap.  At the end of the day, a big loss ended up being a smaller loss.  The stocks I follow were out of favor.  Meanwhile, all the indexes were up, adding a sense of being in the wrong names.

I learned that I still need to work on my emotions on down days.  This is a marathon, not a sprint.  My portfolio is up -- outperforming all major indexes for the year -- despite two down days in a row.  I need to accept these consolidation days.  I'd rather be up 6 days in a row huge then down 2 then small gains 8 days in a row for a smaller overall gain.  I anticipated the drawdown anyway... I just was extremely uncomfortable anyway.  What's the point?  My targets on many names are far away.  None the stock had specifically negative news.  Today was a normal day.  I was reminded of the importance of focusing on monthly performance and not getting caught up in the day to day movement.  Otherwise, I am just trading like a noob.

I learned the markets are very much focused on daily performance... the markets are quick to overreact to the downside as fear is a strong motivator.  I learned value names rarely perform with the indexes -- they march to their own drummer.

Tuesday, January 12, 2010

Clocked in the Head

Today was a very big loss although not as big as yesterday's gain.   Nonetheless, it was a wake up call.

I took profits in LPIH which hit a new high but closed red.  I also took profits in LTUS.

I bought several names that got crushed but most of them closed near the lows.  This may get uglier as the SPY/NAZ leadership names are extremely weak now.  Many of the big cap names are extremely overbought.  The first six days were just so strong... profit taking is inevitable.

 However, my strategy as a value microcap investor is to not get shaken out as my price targets are still far away for many names.   The profits I have taken so far may be foolish and too early.

 Still, a big correction would be difficult to sit through.  Many charts were broken so it's possible the next few weeks will be nothing but losses or flatness.  It's best to protect gains when all signs point to a looming correction.

  It's time to be extremely vigilant now.  If the markets are sensing the easy money is over... there will be an over-correction to the downside before a new upwave.

Monday, January 11, 2010

Running Hot

Another strong day for micro China names.

I was going to focus on RNWK -- which I immediately sold for a small loss as it tanked at the open.  But as it turns out... I was probably premature.  If I had waited until end of day I would have seen it closed forming a massive dragonfly candle... so perhaps I was once again correct in my buy but too hasty to exit a losing position without waiting for the end of the day.  In fact, today was the best dragonfly candle I've ever seen in a long time in any stock.

Nonetheless, the rest of the portfolio was strong and my only real mistake has been taking partial profits instead of leaving it all alone.  However, it is never a mistake to take partial profits either.

My niche of following strong value microcaps far outperformed the markets today and last week.  I will continue to follow these names.

Sunday, January 10, 2010

Finding Your Niche

I am reading "Enhancing Trader Performance" by Brett Steenbarger.

The first major idea in the book is the idea of finding your niche.  Only once you find a way of trading that is comfortable for you can you consistently make money.

I have found that I am drawn to deep value and using charting to find excellent entry points.  I prefer finding the bottom of the range, when sentiment has gone deeply negative, and then looking for reversal signals (often the 'dragonfly' candle) to begin a position.

At the same time, I find myself excited by those big breakout stocks and watching them burn up for 50% weekly gains... I feel like I'm missing out.  However, this is not my niche.  By waiting for the low points, I often make a lot of money over a longer period of time.

That said, I have entered a position in RNWK on a classic 3 bump pattern.  I can see that if it falls below 3.70 -- I need to exit immediately.  This pattern is a bottom pattern and you can't give it room as a break means many weeks of dead money.   I know the stock is trading at book value but with no positive earnings... it can easily drop 10 - 20% if there's no more buyers.

 Other than that, I am mostly sticking with my various microcaps which performed well last week.

Tuesday, January 5, 2010

2010: New Beginning

Well, the first two days of the new year have been quite successful.

I'll start by mentioning my first big blunder, chasing CBTE on a 'tip' and getting caught for a sizable loss.  The only mitigating thing is that I committed less than 3% of my trading capital and the paper loss is less than 1/2 of 1% of my capital.  I suppose this is not the most egregious mistake, especially since the overall gains are around 4% YTD.

 China small caps are doing well.  My goals again are to trade less, hold for price targets, be more of a value investor, and get out of losing positions fast.  This means taking the loss on CBTE so I can focus on the winners.

  The people I follow now are the smartest of the web.  I notice I am really not using charts as much except mainly to add to positions ON DIPS.  I used to sell out on these big dips.  That's why CBTE was such a mistake.  I don't know this name and got excited to get into something.

 The fact is - this makes sense.  Today everything was going well for the 2nd day in a row and I took some time off and felt like... I wasn't 'doing' anything and felt well... bored.  Feeling bored is a recipe for disaster.  It leads to impulse trades and I definitely fell into the trap.

 Professional traders must have a solution to deal with boredom or their bottom lines will suffer.

 Twice a week I am away from my desk and this is good.  Now that my strategy and positions are secure, it'll be easier to step away and come back refreshed.