PR Trade

ASTI had a huge gap up this morning.  Waited for the chart to setup and entered on the break of the morning high.  My entry was on the break of $6.25.  Fill was at $6.29. Sold 1/2 of my position @ $6.62 and another 1/4 @ $6.85.  I kept 1/4 for an end of day run with a stop @ $6.50.  The chart based for most of the day and looked like it was trying to break out again, but never did.  I still hold 1/4 of my position with a stop @ $6.50.

SMB Post

http://www.smbtraining.com/blog/traders-ask-how-do-i-stop-losing-money

Traders Ask- How do I stop losing money?

Dec 1st, 2011 | By Bella | Category: Mike Bellafiore's (Bella's) Blogs, Traders Ask

Hi SMB, thanks for all the great posts and learning tools that you guys have done over the years (stocktwitsvids, One Good Trade, etc.) I have been fortunate to have been trading (intraday strictly) professionally for 3 yrs now but have managed to lose 80% (i know it’s a feat esp no leverage) of every dollar outside of trading (XIV is the biggest culprit–i never double down in trades, but i’ve “dollar cost ave” the heck out of XIV.) This is not the first time i’ve been humbled by madame mkt and it certainly won’t be the last. After seeing non-trading assets disintegrate (and remorsing that I didn’t just spend the darn $$) i know that i need a process to get better at saving/investing.

Have you guys gone through a similar experience? How did you guys get better at building/keeping hard earned income from trading? Any input would be much appreciated.

Bella

There is not one thing to say that would make the difference. There are not a few things I could write that would make the difference. This question ties nicely into a conversation I had just a few minutes ago in my office with a mentee, which I will share.

First, after you are consistently negative you should not be trading live. You should be on a demo. If we are working with a student and they are consistently negative then they are placed on the demo and asked to work on their playbook. Every day they should catalog a set up that makes the most sense to them in SMB PlayBook template form. The idea is to focus on the trades that you can make at this stage in your career profitably.

GMan developed a risk analysis sheet that crunches how a trainee should bump their trading size. Needless to say that you start at 100 shares and do not get bumped until you make money at this level. This severely restricts how much money you can lose intraday before you are consistently profitable.

New traders undervalue the power of being consistently positive. Too many new traders would rather lose 1k in a day than make $200. At least with these losses they are trading bigger. Trading bigger makes them feel more professional. There is nothing professional about losing money consistently as a trader. In fact that could be the very definition of amateur, or as we say “piker”. Respect trading losses.

Today Carlton, our floor manager, and I talked with a trainee about too many negative trading days from last month. To me this is a lack of respect for money. A good intraday trader ought to strive to pull out money from the markets 4/5 days a week. If you are negative two days in a row you ought to hold an emergency trading summit with yourself. What will you do tomorrow to ensure you make money? And then stick with those plays and lock in pulling money out of the market the next day.  Do not expand your trading outside of these plays.

This hyper-focus on making money forces the trader to hyper-focus on the set ups that are best for them. Sticking to these set ups while trading live then improves their results. Better results then builds a trader’s confidence. Improved confidence then allows the trader to find more set ups that are best for him.  It is a vicious cycle of profitable trading.

A typical pattern for the successful intraday trader is:
lose money
lose less money
flat
consistently positive
expand your playbook on other trades
add size to your best trades which grows your P$L

But if you are just at the stage of losing money you should not even be thinking about adding size. There should be no delusion that you are close to breaking out as a trader. You are not. Your next steps are above. And you are not going to get to the stage where you should be sizing up for many stages. So be realistic about your work ahead and be patient.

I hope that helps.

Bella

Mental Toughness by:Flarex

Flarex of www.youngunstrading.com posted a great article on the mental toughness needed to trade successfully.

http://www.younggunstrading.com/2011/11/mental-toughness.html

Mental Toughness

SUNDAY, NOVEMBER 13, 2011 AT 9:34 AM POSTED BY FLARE9X 0 COMMENTS

The mental part of the game. Its an aspect of trading that can easily be ignored, we all choose how we approach this game. Some see failures as opportunities to learn and progress, while others see them as outright failures and road blocks which should be avoided at all costs. Its all about attitude. 

I feel that trading should be 'easy' It should be effortless and without conflict. If we are going to be in this game for 20+ years. I feel its important to make the experience as easy as we can. We shouldn't be 'fighting' with the market, in the boxing ring, hoping, fearing and stressing. 

There is RISK management, but SELF management is equally as important. When we are actively trading the market, we are free to make buy and sell decisions whenever we want. The tough part is consistently making the correct buy/sell decisions. These decisions come with conflict!

Taking Profits

So this is the hardest part of trading. It can be made simple if we accept a few hard facts. 

1. You will never sell at the top. 

2. Your going to be wrong when you sell. 

This is fact. As soon as you sell, the stock will probably keep going up. You may look at it 5 months later and its up 100% since you sold it. Point is, when you sell, your probably going to be wrong. This creates a conflict. 

As humans, we do not want to be wrong. We seek perfection, we want to nail the top! It can help explain why people run up stocks 20% to watch them come all the way back down to break even. The reason why they did not sell is because they are afraid to be wrong. By selling you are forced to draw a line under your mistake. But being wrong in the stock market is inevitable. 

From a practical level we can always sell half, and let the other half run. This creates a psychological win win situation. If the stock goes down, hey you locked in half.. and if it keeps going up, hey I still own half.

Taking Losses

It is amazing as humans, how we want to avoid mistakes. I do not know the exact reason. But I know that outside of trading mistakes and failures are not acceptable. Perfection is strived for. It is installed in us from an early age. In school we get rewarded for being 'right' we get good grades and if we are 'wrong' then we get bad grades, we are a dummy. Its a generally negative experience to be wrong. In the work place, if we are wrong we can be punished. If we fail we can lose our jobs etc.. you get the point. 

In trading when a position goes against us. We would rather 'give it a chance' or wait for it to come back. We do not sell because we do not want to admit that we are wrong. It is much easier to build in failure to your trading strategy. ACTUALLY expect to be wrong. Fully accept that you will wrong be A LOT of the time. It is inevitable. 

Reacting to Losses

So we have a string of losers... we follow our strategy perfectly, take positions in good quality names  in sound consolidation patters. We have 5 positions open. One by one we get stopped out. We have a 10% draw down. How do you react to this? Do you feel mad, feel like ripping the face off your monitors? Want to make the money back!? It is at this critical moment that you have a very important choice to make. 

You can get over aggressive, take on a gamble trade to try win the money back. You will most lilekly trade something not in your strategy at this point. You may also trade at the wrong time in the market. You feel mad, and have a loss. Your trading on emotion. However the market does not know you feel this way.. the market will just do what it was always going to do... most likley you will lose again. Say screw this and walk away from the machines. That is one scenario. 

The second is you take a step back from the machine. You do your numbers, which are showing your batting average for this current time is down in the low 30's. Your numbers are telling you to scale back. 2 things can be wrong here. "The market is hostile, or your selection criteria is wrong". The exact steps to do now are almost counter intuitive. You must at this point SCALE DOWN YOUR TRADING SIZE. If you are getting stopped out of everything, the market could be at the start of a new correction. IF YOU SEE A PROMISING SET-UP. Take it with small size to test out the waters again! If you are wrong again, you are only wrong on a small position which will keep your profits intact! 

The exact same approach goes for getting back into the market after a bear market/correction. The waters must be tested with small position size. Use the current volatile environment we are in right now. Would you want to be walking into 2-3% gap downs fully invested? This is how you sleep at night. Make your trading much easier. Test the waters with small positions, when those positions show you some decent gains... you can then step up the size and get more aggressive. 

Your wrong a lot of the time

The big question is: Do you want to be right? Or do you want to make money? FULLY accept this part of trading. You are wrong a lot of the time. When you can fully accept this, many conflicts quickly dissolve. You no longer say, DAMN should have held it, or damn I should of sold it. You will no longer be afraid of making decisions in the stock market. 

Embracing Failure 

Failure has associations of negativity. However, failures are opportunities. Generate a feedback loop about your trading. Carry out post analysis every weekend. INCORPORATE it into your trading routine. While many see failures as extreme set backs, others see them as opportunities to learn and move forward. Nicholas Darvas was the master at this. He made sure he never repeated the same mistakes over and over again. 

Half the battle is being conscious of what is going on in your trading. Some people do not know they are repeating the same mistakes over and over. If you don't know about it, how can you fix it? How can you move forward. 

Learning from mistakes can be a difficult task as we are forced to take responsibility for our actions/results. It is to easy to just pretend that they didn't happen. However this is where the secrets about your trading lie, the cause of failure and also the improvement needed to move forward. All this is revealed in our own results.

Lets take a series of 10 trades. You carry out post analysis. You find that you traded your strategy perfectly on 4 of the 10 ideas. The other 6 ideas were traded on your gut, or the 'need for action'. You look at your results and say OK 4 of the ideas worked because I bought them at the right time, coming out of a price consolidation where my risk was in check. The other 6 ideas, we traded on human error, the need for action, or a cheat buy not in a proper set-up. What exactly has to be done here in the future? 

More self control is needed to follow the strategy. No doubt there is a lot of varied combinations. Your trading results could show that you are swing trading in bear markets, Taking a series of 3-4% losses on full position sizes, therefore giving back your gains for the year. 

It takes a certain degree of honesty to look at your failures, but only truly knowing where you are going wrong can you improve in the future. There is no magic to this, no one is going to do it for you. 

Changing our perspective 

Fully aware that mistakes are bad, failures are bad. Not allowed, taboo or whatever. In trading they are ALLOWED. It is OK to be wrong. You are wrong when you buy, your wrong when you sell. Fully accept this. 

Take the trade, monitor the position and honor you stop. Plain and simple. When it starts to work, sell half at a decent gain and let the rest go. Scale in and out of positions, at least when your wrong, its a small position. If your proven to be correct add to it. Scale out of your position at a decent multiple of your risk. 

Stop worrying about getting stopped out, stop worrying about stuff going up after you sell it. Big shit people. You will never, no matter how hard you try be able to nail the top / bottom and you do not have too either. It is our EGO that wants to be in early, nail the top or nail the bottom. Our EGO wants to be right! Hold that loss, 'give it a chance' Dont want to sell... might keep going.. conflict after conflict! Worry and stress. Lets forget about it. Follow the strategy and sound rules and just relax! :)

Happy Trading People!

Remember. Do not be afraid of being wrong, failures are opportunities. 

Making money is more important than being right!

November 8th

Swinging:

1/2 $CONN from 10.20

ROIAK from 1.54

BZH from 2.30

Earnings Nov. 7 - 11

• Monday: 
• BSFT, CCJ, CRNT, DISH, LPX, MNTA, SYY, APEI, BRS, DPM, DMD, EGLE, FTEK, LOPE, GTAT, HALO, HOLX, PCLN, SONE, BID, VVUS, and WMS.
• Tuesday: 
• ARGN, CRZO, CAAS, EMCI, SSP, FOSL, GEL, HFC, JRCC, ROSE, LEDS, ATVI, ALSK, DOX, NILE, BEAT, CBOU, CLNE, MDR, PAAS, TTWO, STEC, SINA, and WTW.
• Wednesday:
•  ASH, ATPG, DF, ENER, FSYS, LGF, LIZ, M, SODA, WEN, JOBS, NDN, AHT, CSCO, JMBA, IPAR, OMPI, TTGT, and TTEK.
• Thursday:
• ARQL, CAE, DUSA, FXCM, MMS, PBH, ELOS, TK, THI, VIA.B, BRKS, COGO, HOKU, KIOR, MSCC, MCP, JWN, NVDA, and DIS.
• Friday: 
• BAM, and DHI.

Watchlist November 7-11

Playing the Squeeze Zone

October 17-21 Watchlist

Bear Flag Setup

Bear Flag Setup - What to look for:
Break down with volume.  
Dead Cat Bounce with low / decreasing volume.

Short at Resistance.
1st Target is breakdown support.

October 10 Watchlist

Mentality of Becoming a Trader

Stewie said...

I can give you advise by telling you about how i transitioned. hope it helps:
Once, i admitted to myself that trading isn't about finding a magic system that will make $$ on every trade: When you trade you will have winners and you have losers. It's a NOT a judgement of your intelligence or talent as a trader. it's part of the business of trading. trading is about finding WHAT kind of trader you are(your comfort zone) and realizing that the mrkt is always changing and you need to adapt your trading quickly and if you are not sure what to do, then DO NOTHING. There's a time to trade bullish, a time to trade bearish, a time to trade bullish with big/small size, a time to trade bearish with big/small size and of course and most importantly i believe is the time to JUST SIT and DO Nothing. Traders always need to trade, not true, the best traders just sit and wait most of the time and when the opportunity comes knocking they take it without hesitation and if they are wrong, then NO big deal, just wait till the next one arrives. Trading is about separating the EGO/'need to be right' attitude from the pure neutral observer who places confident/strategic trades at the right time as the market ebbs and flows. The market will ALWAYS give opportunity, you just need to be ready when it comes and waiting patiently. The BEST traders will go from bullish to bearish in a blink of an eye, it's pretty strange but sometimes the mrkt will look bullish and then turn bearish and you need to be ready to react whether that means you making money, making less money, breaking even, losing money or losing a lot of money, you need to react in a neutral objective way. I am NOT a perma bull or a perma bear, i am trader and i want to make money without bias.
T achieve the higher stages in trading i am a big believer in trading without emotion and the best way i can think of is to trade with small size most of the time. this will allow you to separate potential $$$ gained/lost from pure objective trading. trsut me, if you are trading well, $$$$ will be made and it add up quick. The key is not put yourself in a situation where you stand to lose a lot of money.

I can go on forever but hope this helps or at least makes sense. you will get there. Strive to keep understanding the ebb and flow of the market and how your trading style fits. Best of luck.

From:  Trader Stewie, Stages of a Trader (http://theimpatienttrader.blogspot.com/2008/01/stages-of-trader-by-bo-yoder.html)

Follow My Plan

I have to set out a trading plan, and then follow it.  Got a little greedy with TZOO and TNA today, and would have had a much better day $$$ if I had executed my plan.

TZOO

The plan was to enter on the break of high/flag.  Entry was perfect at 24.52.  The plan was to sell 1/2 quickly into the pop, and the other half at 25.  Sold the first 1/2 @ 24.73, and got gready on the other half as it just past 25. Work was busy with many distractions and opted to sell the last 1/2 @ 24.68, but it should have been sold on the pop over 25, as per my plan.

Similar with TNA, 1/2 on first initial breakout (34.12), with the plan to sell the last 1/2 @ 35.  Did not sell @ 35 and liquidated at 34.44.  Still for a profit, but would have been better if I executed my plan.