September 28, 2014

Why Trading Stocks is the Best Therapy in the World

I’m writing this post in an effort to condense numerous lessons I've learned from several different sources I've studied in the course of trying to become a better trader.

Trading options and futures is a zero sum game--there is a winner for every loser. Equity trading isn't much better.

Moreover, most traders fail (you can also consult the Google for several research papers that further support this point).

Failure invokes powerful emotions and memories, that, as a result, invoke future behavior that tries to avoid failure at all costs.

Furthermore, fear and greed become more commonplace--which insidiously undermines traders by influencing them to avoid the very trading rules that gave them an edge in the market in the first place.

Any edge in the market can be easily and effortlessly undone by emotion.

September 27, 2014

Trade Recap - ALKM

This was my worst trade since coming back to trading in August. So let's see why.

First off, I heard about the OTC ticker ALKM being a StockTips pump and dump from @StockRealist via Twitter--as well as via his blog here--around early September. My goal was to put ALKM on my watchlist and watch for any over-extension on the daily chart. If that happened, I would begin putting in IB good-til-cancel (GTC) orders to short the stock for a couple reasons: 1) It's very difficult to find borrows on these stocks and IB GTC orders sometimes get filled pre-market; 2) Odds were this POS was going to collapse, and it was only a matter of time.

On September 5th, everyone and their brother thought ALKM was the next StockTips pick despite StockTips not revealing their pick. As a result, the buying came in fast and the stock went nuts--going from around .10 to over .50 in a single day:


However, it turns out that StockTips delayed their pick that night or so. Well the next day ALKM tanked right back down to the lows around .10. Then all of a sudden StockTips came out with their stock pick: ALKM! So I got back into go-mode, and started stalking ALKM for an over-extension.

September 23, 2014

Trade Recap - ASTY UPDATE

So here is a quick update post regarding my ASTY trade a few days ago. Turns out that ASTY was a POS like I thought and it did breakdown out of that consolidation area finally. It broke down so hard that it broke $4.50--basically down 40% from my short. :)


One takeaway from this stock is that I forgot to keep tabs on it. There have been several plays lately that have taken my attention. And once a stock starts consolidating, I tend to avoid the stock and look elsewhere for better opportunities.

I'm thinking that I should at least revisit stocks that I stopped out on in order to see if my original hypothesis is finally playing out. Actually, probably more often than not, I'm early on a trade. So I really should revisit stocks that I stopped out on and be ready to strike again because the stocks I short, especially OTC piece of crap stocks like ASTY, tend to behave as I predicted in the long run, and the rewards are huge with these type of stocks.

Anyhoo, I'm not upset, gotta stay motivated and focused. Dwelling on weaknesses can and will be toxic to my trading, and I recognize that. On the other hand, honestly and thoroughly analyzing trades ex post facto is essential to becoming a better trader.

Adios ladies and gentlemen,

Jory

September 22, 2014

My Trading Rules

Ask the best traders out there about the importance of trading rules and they'll unanimously agree that every trader needs well thought out trading rules.

Trading rules should be crafted to fit your trading style and should emphasize trading the best setups, risk management, trade management, and most importantly, systematic trading.

Systematic trading is the most effective antidote to emotional/unprofitable trading. If you know exactly what to do before you get into a trade, your emotions have a funny tendency of conceding defeat, "Well I want to freak out now, but I think he/she's got this trade under control." And then you evolve into a focused trading machine trained to take money from the volatile market.

Here are my trading rules to give you an idea:

1) Focus on great multiple time frame (MTF) chart patterns, then set a game plan.
2) Identify intraday chart patterns in relation to MTF chart patterns and react.
3) Identify the best with trend entry locations, stop out locations, and targets.
4) Adjust stops as the trade moves along.
5) How do you get back in if you get stopped out?

Based on research that is discussed in Dr. Brett Steenbarger's article about working memory, trading rules need to be short and simple enough for our working memory to handle. Otherwise, we risk undermining our ability to follow these rules in the heat of trading. If we don't follow our rules, we get emotional, over-trade and lose money, plain and simple.

Identify your trading rules for your style/system of trading, condense them as much as possible, apply them, and then analyze your performance. This routine will set up a powerful positive feedback cycle that will incrementally improve trading consistency and profitability.

Take care!
Jory

September 21, 2014

Structured Trade Analysis

I decided to download my trading data from my broker and analyze my trades in response to some of the lessons I've learned in Dr. Steenbarger's book, The Daily Trading Coach. I took the data, put it into Excel, and created some charts. So let's go over my period of performance covering 8/1/2014 to 09/09/14:


My initial reaction is wow, displaying raw trading data visually can really simplify the process of analyzing past trades. Analyzing my past trades as well as the impact different market variables have on these trades are essential to understanding my strengths and weaknesses as a trader. So let's focus on my best and worst trades for this period.

September 15, 2014

Trade Recap - ASTY

Here is a daily chart of ASTY, an OTC POS, as of Sept. 12, 2014:


The daily chart shows ASTY has more than doubled off the consolidation in the $3s; however, it has now started to consolidate at these new levels. With this in mind, I was short biased, but I didn't have much conviction in the trade because of the new consolidation taking place.

Next I pulled up this fugly beast's intraday chart at around 2 pm that Friday:

September 14, 2014

Disclaimer

This blog is my trading journal for information and self-development purposes only. Use of this blog in any way constitutes your full understanding of and compliance with this disclaimer.

In the interest of full disclosure, I am not a professional day trader, let alone guru. In fact, I'm quite the opposite. I am an aspiring trader trying to get better by publically discussing my thoughts on various securities and cryptocurrencies.

I use this blog as a centralized database for all the research and resources I've come across over 10 years of trading. This blog also serves as a trading journal at times where I'll discuss my current thoughts on a particular security. I'll also discuss past trades in order to document and analyze my performance and adherence to my trading system and rules. Documenting this information helps me learn and adapt.

My posts are in no way meant to be construed as a suggestion, hint, hot tip, or pressure to purchase or sell any equity, derivative, commodity, or any security for that matter. Once again, use of this blog in any way constitutes your full understanding of and compliance with this disclaimer.

If you have any questions, please ask them in the comment section below. Thanks for reading this disclaimer and welcome to the Furu to Guru blog!

Jory

September 13, 2014

Trade Recap - GIGA

After coming home from work, I noticed several top traders on Twitter talking about GIGA. So I pulled up the daily chart and noticed GIGA was up big after a long period of sideways consolidation.


Then I looked at the intraday chart. It was very nice and was up-trending perfectly. So I was looking at the chart around 3:00 pm, and was looking for an entry at the next pullback with a risk at previous support around $2.47. I did get a little pullback and entered at $2.64 with a price target of....nothing. I had no price target, which is really poor trading in hindsight. However, I did at least note the $3 magnet:

Trade Recap - OTIV

I noticed OTIV once I got home from work and started researching tickers via traders on Twitter--check out my Resources page for the best traders to follow on Twitter--as well as through my scan on FinViz.com. So I first looked at the daily chart, and noticed it almost doubled from the day before.


OTIV had a huge trading range on Sept. 10, 2014, but faded bigtime after the morning move. So I was short biased into the close because the intraday price action suggested people/the market do not support this excessive price appreciation. So I started watching around 2:00 pm and was looking for a lower high or double top after the $4 washout. I got it, shorted $3.74 with a risk at the previous resistance at $3.85, and a price target of $3.42--the reason behind this choice is because of a potential $3.50 washout and green-to-red (G/R) move:

Trade Recap - GALT

So yesterday, Sept. 12, 2014, I was watching a few overextended stocks and a few beat stocks that may bounce soon. Then I saw this tweet:


After a quick glance at the daily chart for GALT, I noticed the stock was beat, but recently started an uptrend. Moreover, the stock was nearing a breakout at ~$6.60.


Next, I took a quick glance at the intraday chart and noticed a strong chart that already was nearing $6.60 when I first glanced at it. I think I pulled up GALT at around 3:15 pm and at ~$6.40.

September 10, 2014

Key Lessons After Coming Back to Trading

I've consistently executed good trades since coming back to trading in early August 2014. Here is a snapshot of my cumulative return so far:


That's a pretty decent stair-step-like progress chart if I do say so myself! I'm not used to this type of steady progress, so it's quite refreshing. In fact, I've never had such a good positive-to-negative period ratio--I.E., green trades versus red trades:

September 7, 2014

Breaking Down My Worst Trade Ever

  Back in March 2014, I had the opportunity of a lifetime. I witnessed the over-extension of one of the most traded OTC stocks in the market, FNMA.


  It was clear this was going to collapse soon and I was totally prepared. So how did I snatch defeat from the jaws of victory? For several reasons.

Trade Recap - SGOC

Here is a one year daily chart for SGOC. This hit my scan on the big green candle with massive volume in late August. I noticed this stock had ran hard/spiked in the past. So I was not in a short mentality but a long mentality.


I decided to look for a weak open entry, then hopefully a red to green (R/G) move and continued momentum. So I set my first entry price at a support level during the previous big green candle day around $2.67. And for some reason I felt an additional entry at major support from the previous day at around $2.50 would be a good add.

Resources Mega List

Knowledge is power and with power you can achieve your wildest dreams! But to acquire this knowledge it takes passion, practice, discipline, and an open mind at all time. Here's my Mega List of Resources on everything trading and trading psychology!

The #1 Goal that Leads to Trading Success
What I learned over the years was that, despite what everyone in the trading community tells you, there's really only one major goal in trading, and that everything else is either secondary or a waste of your time. And if you achieved this one goal, you could make it into the top 5-10% of successful traders after climbing out of the losing 90-95% of traders.

Trading 101
How we make money trading, plain and simple.

Fundamental Principals of F2G Trading
The "Why" behind F2G trading and what we believe.

How to Master Trading
Think TAPER (Technical Analysis, Planning, Execution, and Review). #1 key here is to plan your trade and trade your plan.

The F2G Trading System Checklist
Simple step by step trading checklist to high probability F2G trading.

The Laws of Trading
If you aspire to become a successful trader and want to smoothen your learning curve now, review these Laws of Trading.

How to Trade Anything on the Planet
You can trade any market in any market condition if you know how to apply the right trading strategy for the current market condition, not the past one.

Why Trading Stocks is the Best Therapy in the World
I wrote this post in an effort to condense numerous lessons I've learned from several different sources I've studied in the course of trying to become a better trader.

How To Overcome the Most Stressful Trading Situations
As a newb trader analyzing his past trades, I've noticed that I struggle with sticking to my trading plans/rules and overcoming stressful trading situations. I realize that I'm not alone with this problem, and so I decided to do some research that might help me and other traders identify ways to improve upon these weaknesses. This post is about what I've discovered.

A Trader's Daily Routine/Process
My daily and weekly routine. Hopefully it you gives you some ideas to work with in order to craft and refine your own routine to tackle the stock market.

Trading Abbreviations, Acronyms, and Terms Explained
The goal of this post is to thoroughly explain the abbreviations, acronyms, and terms that I use on a daily basis.

The Best Videos for Traders
I watch videos for a couple reasons, but it mostly has to do with trying to become a better trader. However, I also watch videos in order to understand more broad concepts such as what do successful people do that makes them so successful, as well as what can I do to improve my chances of reaching my own goals in life.

The Best Traders to Follow on Twitter
I follow traders for a few reasons, but mostly to get trade ideas and advice on how to become a better trader.

The Best Blog Posts for Traders
Some of the most important lessons I've learned about trading have been from these blog posts. I encourage you to read every one.
    The Best Blogs for Traders
    I review trader blogs for trade ideas and advice on how to become a better trader.

    The Best Books for Traders
    These books have also taught me several invaluable lessons about trading and the markets. I also recommend reading the books in the second list because the quality of your trading decisions (and any decision in your life for that matter) is only as good as the quality of your thought process. Therefore, a thorough understanding of critical thinking, problem solving, and innate human behavior is essential to your chances of making into that top 10% of traders--i.e., the only people that are profitable.

    The Best Trading Gurus
    I've had the pleasure of being mentored by a few gurus, each specializing in a specific style of trading.

    The Best Brokers for Traders
    I trade on a budget because I work during the day--i.e., I can't justify paying for expensive monthly data subscriptions when I only trade the last hour or two of the trading day. I focus mainly on NASDAQ/NYSE/AMEX stocks under $20 and penny stocks on the OTC market.


    Adjustments to My Learning Process

    After watching a very helpful video by trading coach, Dr. Brett Steenbarger, http://youtu.be/2LKW1fbDNOo, I've decided to structure how I track my trading performance and how to use that information to make incremental improvements to my trading using the following outline:
    1. Practice decision making (performance)
      • Identifying and taking advantage of opportunity in the market
    2. Measurement of results
      • Outcome feedback (how well I'm doing)
      • Process feedback (what I'm doing well, what I'm not doing well)
    3. Use the feedback to set achievable goals and try to improve future performance
      • Vividly imagine great trades, what I did, and how it made me feel
      • Vividly imagine poor trades, what I did, and how it made me feel
    Simple enough, but we'll see how it goes!

    Jory


    September 4, 2014

    Trade Recap - TROV

    For my first trade recap--and forgive me if this is a crude first recap--let's look at TROV. Here is a one year daily chart of TROV. As you can see, TROV took off mid-August from the $3s up to almost $6. The last green daily bar before the red blow-off top was when this hit my scan.


    So from this daily chart, I noticed this ticker does not run--a runner is a stock that can spike big. I also felt historical resistance in the $7s would introduce some selling pressure. Taking these observations into account, I identified my ideal entry points as well as my stop loss and profit target.

    My Trading Strategy

    Before I discuss my strategy, I'd like to start with an important quote that's relevant to aspiring traders:

    "Many of life's failures are men who did not realize how close they were to success when they gave up." –Thomas Edison

    Perseverance is one of the most important personal qualities of a successful trader. Its importance is backed up by research, which you can learn more while not boring yourself to death in this great TED Talk by Angela Duckworth: http://www.ted.com/talks/angela_lee_duckworth_the_key_to_success_grit

    Okay, now for my strategy. I try to keep it simple stupid (KISS):

    September 1, 2014

    My Ultimate Goals

    Thank you for visiting the Furu to Guru blog. I plan to use this blog mainly as as trading journal and somewhere I can put my thoughts/reasoning behind my trades into words and pictures. This will help me more easily identify what I'm good at, what I'm not so good at, and help me focus on and develop my strengths as a day and swing trader.

    My ultimate goals in the market provide me a framework and guide to my desired self. They help give me clarity and guidance to ensure my overall well-being, not just as a trader. Here are mine: