More Random Musing

Watching UA, NYX and MO has given me more confidence, but I still think I'm going to get rid of UA and maybe NYX as well before they report earnings.

MO, I was watching that 72.20 price ceiling. It is so obvious that the stock has touched that ceiling twice already and didn't want to break. I don't care if you believe in technical analysis and reading charts but this one is just so apparent you know there's some deeper psychological level there. Now that it broke and the 72.20 level has actually became the floor, I'm holding on to the stock. Plus there's the spin off in January next year of PMI... exciting stuff.

UA, not considering last Friday... it really was almost like magic that it went up couple of points on Monday when the market in general was down. My thinking is that people are starting to buy it on valuation thinking that it is cheap. Meanwhile there are still a lot of people that are bearish on the stock, thinking they're not going to hit their high growth figures. They report next Tuesday. I might get rid of it today or on Monday

NYX popped on Wed when it officially replaced Hilton. I was going to watch it on Tuesday if there's a strong seller but it wasn't, at the same time the buying strength is dwindling. I might get rid of this soon as well if I see some negative signs.

Random Personal Portfolio Musing

I'm thoroughly confused at this moment. There is no clear signal on whether I should be bullish or bearish right now and it's obvious a lot of people feel this way from the way the market has been behaving today. At least we have some sign of stability now after the sell off on Friday. It appear a lot of people are still testing the water before jumping in.

If you want an example of hitting it out of the park, just listen to AAPL's conference call and their numbers. It is just so sick. I don't know if I'd chase it here near the low 180's... actually I probably would as I could see this thing go easily to 200 and potentially 250 or 300. An 80/30 risk-reward ratio. I think I do like it. A lot of people are going to be scared to buy AAPL here, which is fine and logical but those people remind me of my mother... they make me sick. No stock price is too high to buy or too low to short.

AT&T reports tomorrow morning... I'm very interested to see how the iPhone sales number affects them.

People might be bearish on RIMM after the AAPL numbers. I don't believe that's the case. Blackberry's and iPhone are two different markets and I don't think they really compete with each other THAT much. If RIMM dips to the 110 I'd consider going long.

What I was really more interested in was the PC sales figure. AAPL is selling more Mac's but how much more relatively to the overall market. I need to figure out a way to track that. All the PC makers are doing pretty good, ex: HPQ. To me, it matters less that it went up, it matters more that it went up relatively more to other Windows OS PC's, which means Mac's are stealing market share. Plus the profit margin in those are higher, too, I think.

I've been looking at this RIO for a while now. I actually traded it at 32 after a downgrade on valuation... stupid Wall Street analysts. I longed it and it went to 36, so I adjusted my stops. I was going to get out at 38 if it hits new highs and I put in a stop at 34 to lock in my profit. The stock did pull back and my stop got hit, which at first kind of pissed me off b/c it traded back to 36 but I kept telling myself that I need to follow my rules. It's trading around 32.5 now. I would probably long it again if it comes back down to 32. The mining industry is still good and I haven't seen any visual confirmations of the contrary yet.

Now the most interesting stock... UA. It is definitely a growth stock by my definition and therefore it means high volatility. I would watch this with DKS and listen to the conference calls. Ideally I think I'd wait after the earning reports come out but I put a limit order in for UA @ 55 thinking that it's low enough and it wouldn't be hit and if it did it'd be near the support and I wouldn't mind too much. Well, son of a bitch, I forgot about this order and it got filled yesterday... when I could've got at least a point maybe 2 below where I got filled. Today's rally while the market is a good sign though. It means someone out there do believe that this is oversold and people are buying, even when the futures are signaling down. I have to be very careful though. If it gets to 52, or 51 I would be looking to get out. People are bearish on this because of the warm September we've had and UA typically makes a higher margin on its coldgear apparel rather than the heatgear. I'm thinking that's a non-factor at this point. I believe this is a trend breaker (and there's lots of people that believe that)... all the young kids that play football, lacrosse, etc are wearing UA gears. It's becoming a fashion statement much like Nike basketball shoes.

Speaking of NKE, I like NKE as well. I have this untested theory that NKE rises during basketball season and then cools off after the NBA finals. Maybe? Haven't really tested this. I'm just eyeballing the charts right now.

NYX... man, that stock I think is dead. Hopefully it delivers a blow out quarter and the volatility picks up. It went up last Thursday on news that it will be added to the S&P 500 index. Because of that, people that track the index would have to buy it. It has not done much since then. It was hard to gauge it with last Friday's sell off but today it's kind of clear that this thing has no steam, no momentum. I'd wait and see to decide what direction to go on this...

300? Oh no, 400!!!

So I haven't really been updating about my trading for a while mostly because I haven't found anything meaningful to write about. I've been just plugging away and I found myself having another up week last week and I'm starting off this week pretty good, too up about $40 today. I'm feeling slightly in a zone so I'd have to make my reads and trade very carefully and ideally I'll have another up week so I can trade 400 shares!

Caught a really good trade in CTX today. The market was down and I noticed the homebuilders were up. I felt like someone was trying to pick bottoms again like Bear Searns always try to do. I see that it level off on a top and started to go down. Seeing the bids are getting hit hard, meaning people are shorting it, I took 100 shares @ 25.70 and it soon started dropping and I can see people cancelling their bids so I know it'll have quite a bit to run. When the activities died down I got out @ 25.27 although I kind of chumpped it. I tried later with LEN and TOL... TOL didn't work out but I got out with limited damage and LEN was a good winner. I was seeing all the home builders starting to make new highs and I wanted to shorted it so it didn't work out. Later on in the afternoon they started to dip and LEN was the only one that hasn't made the move yet and that's why I shorted it.

KHD... there was news on CNBC about it. The company makes cement and I personally felt that it made a nice run and it was time to reverse. I got in near the whole dollar... the first time I got in I didn't follow my rules. As soon as it broke, I knew that my outs were limited b/c the liquidity was low for a stock that trades about 160,000 shares a day and I got burned in the end. I was playing that big spread a little bit. I would throw my order out below the level 1 offer and if I get hit I'd turn around and throw out a bid to try to get hit there as well or just wait for it to come down itself. It worked couple of time but overall I still lost money on that stock.

Market Wizards: Gary Bielfeldt

You don't just play every hand and stay through every card, because if you do, you will have a much higher prbability of losing. You should play the good hands, and drop out of the poor hands, forfeiting the ante. When more of the cards are on the table and you have a very strong hand---in other words, when you feel the percentages are skewed in your favor---you raise and play that hand to the hilt. If you apply the same principles of poker strategy to trading, it increases your odds of winning significantly. I have always tried to keep the concept of patience in mind by waiting for the right trade, just like you wait for the percentage hand in poker. If a trade doesn't look right, you get out and take a small loss; it's precisely equivalent to forfeiting the ante by dropping out of a poor hand in poker. On the other hand, when the percentages seems to be strongly in your favor, you should be aggressive and really try to leverage the trade similar to the way you raise on the good hands in poker.

Market Wizards: Paul Tudor Jones

When youare trading size, you have to get out when the market lets you out, not when you want to get out... ... ... If you want to move a large position, you don't wait until the market is in new high or low ground because very little volume may trade there if it is a turning point.

Even though markets looks their very vest when they are setting new highs, that is often the best time to sell... ... ... to some extent, to be a good trader, you have to be a contrarian.

Never play macho man with the market. Second, never overtrade.

Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don't have control.

If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. There is nothing better than a fresh start.

Don't be too concerned about where you got into a position. The only relevant question is whether you are bullish or bearish on the position that day. Always think of your entry point as last night's close.

The most important rule of trading is to play great defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown.

Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very god. The second you do, you are dead.

From studying history that credit eventually kills all great societies. We have essentially taken out our American Express card and said we are going to have a great time. Reagan made sure that the economy would be great during his term in office by borrowing our way into prosperity. We borrowed against the future, and soon we will have to pay.

Trend following. The basic premise of the system is that markets move sharply when they move. If there is a sudden range expansion in a market that has been trading narrowly, human nature is to try to fade that price move. When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion

I always believe that prices move first and fundamentals come second.

Don't focus on making money; focus on protecting what you have.

Market Wizards: Richard Dennis

I have learned that when you have destabilizing loss, get out, go home, take a nap, do something, but put a little time between that and your next decision. Wehn you are getting beat to death, get your head out of the mixer.

95% of profits come from only 5% of the trades

The times when you least want to think about trading---the losing period---are precisely the ties when you need to focus most on trading.

Market Wizards: Ed Seykota

The elements of good trading are: 1) cutting losses, 2) cutting losses, and 3) cutting losses

I handle losing streaks by trimming down my activity. I just wait it out. Trying to trade duringa losing streak is emotionally devastating. Trying to play "catch up" is lethal.

A) Cut losses. B) Ride Winners. C) Keep bets small. D) Follow the rules without quesiton. E) Know when to break the rules.

Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.

It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to satisfy them. Those who want to win and lack skill can get someone with skill to help them.

Market Wizards: Larry Hite

Successful investment was really a matter of odds, and if you could compute the odds, you could find and test methods that could beat the market.

What makes this business so fabulous is that, while you may not know what will happen tomorrow, you can have a very good idea what will happen over the long run... ... ... The insurance business provides a perfect analogy. Take one sixty-year-old guy and you have absolutely no idea what the odds are that he will be alive one year later. However, if you take 100,000 sixty-year-olds, you can get an excellent estimate of how many of them will be alive one year later. We do the same thing; we let the law of large numbers work for us. In a sense, we are trading actuaries.

If you nver bet your lifestyle, from a trading standpoint, nothing bad will ever happen to you. Second, if you know what the worst possible outcomes is, it give you tremendous freedom. The trust is that, while you can't quantify reward, you can quantify risk

Never risk more than 1 percent of total equity on any trade... ... ... keeping your risk small and constant is absolutely critical.

Always follow the trends... ... ... you can lose money even on a good bet. If the odds on a bet 50/50 and the pay off is $2 versus a $1 risk, that is a good bet even if you lose. The important point is that if you do enough of those trades or bets, eventually you have to come out ahead.

Diversity: trade more markets worldwide and don't just use a single best system.

Track volatility: when the volatility of a market becomes so great that it adversely skews the expected return/risk ratio, we will stop trading that market

In trading, you can define three categories of players: the trade, the floor, and the speculator... ... ... The trade has the best product knowledge and the best ways of getting out of positions... ... ... The floor has the advantage of speed... ... ... While the speculator doesn't have the product knowledge or the speed, he does have the advantage of not having to play. The speculator can choose to only bet when the odds are in his favor. That is an important positional advantage.

When you are on a motorcycle, never argue with a car. You will lose. The same leson applies to trading: If you aregue with the market, you will lose.

1) If you don't bet, you can't win. 2) If you lose all your chips, you can't bet.

Finally Getting Some Volume

Earning season is here and you can kind of feel the activities picking up again. I traded 2200 shares today, which is more than what I have been doing lately.

I feel like I'm better at looking for trading opportunities now. I'll spot something that is running away crazy and look for an entry to go back the other direction. Like today I got into IBN twice, once after it started bouncing after reaching a new intraday low, made about $30 on it and then another time I see the big offer that have been keeping the price low either got hit or someone lifted it near the whole number and made another $30 or so on it (too bad I only took 100 shares that time).

I had two scalping trades that I took profits too early. I remember seeing the big bids in the montage and that really should've given me the confidence to hold the position. I probably could've made at least $10 more on each of those trades.

Since now I'm trading 200 shares, maybe I can get out 100 shares and then hold on to the other 100 and see if I can get a better price for it... something to think about.

I've been thinking about my keys a lot, something to help me scalp faster. I've tried it out to day and it feels pretty good. I think I can make some more modification to make it faster or more comfortable.

Market Wizards: Bruce Kovner

Don't get caught in a situaiton in which you can lose a great deal of money for reasons you don't understand

You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.

[on how you're different from the average guy] I have the ability to imagine configuraitons of the world different from today and really believe it can happen. I can imagine that soybean prices can double or that the dollar can fall to 100 yen. Second, I stay rational and discipline under pressure.

One of the jobs of a good trader is to imagine alternative scenarios. I try to form many different mental pictures of what the world should be like and wait for one of them to be confirmed. You keep trying them on one at a time. Inevitably, most of theses pictures will turn out to be wrong---that is, only a few elements of the picture may prove correct.

To make money, you have to hold a position with conviction. That is very difficult when you are following someone else.

The general rule is: The less observed, the better the trade.

Undertrade, undertrade, undertrade. Whatever you think your position ought to be, cut it at least in half. My experience with novice traders is tha tthey trade three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks.

Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not a a point determined primarily by the maximum dollar amount you are willing to lose per contract.

Market Wizards: Michael Marcus

I learned the importance of intraday chart points, such as earlier daily highs. At key intraday chart points, I could take much larger positions than I could afford to hold, and if it didn't work immediately, I would get out quickly.

My trading was a little bit like being a surfer. I was trying to hit the crest of the wave just at the right moment. But if it didn't work, I just got out. I was getting a shot at making several hundred points and hardly risking anything... ... ... I don't think it would work as well in today's markets.

I think the secret is cutting down the number of trades you make. The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone. First, the fundamentals should suggest that there is an imbalance of supply and demand, which could result in a major move. Second, the chart must show that the market is moving in the direction that the fundamentals suggest. Third, when news comes out, the market should act in a way that reflects the rigth psychological tone. For exmaple, a bull market should shrug of bearish news and respond vigorously to bullish news. If you can restrict your activity to only those types of trades, you have to make money, in any market, under any circumstances

Place an order to get out of the position with an order to get out.

If a position doesn't feel right as soon as you put it on, don't be embarrassed to change your mind and get right out. If you become unsure about a position, and you don't know what to do, just get out. You can always come back in... ... ... When in doubt, get out and get a good night's sleep. I've done that lots of times and the next day everything was clear... ... ... While you're in, you can't think. When you get out, then you can think clearly again.

A good trader can't be rigid. If you can find somebody who is really open to seeing anything, then you have found the raw ingreideint of a good trader.

Gut feel is very important. I don't know of any great professional trader that doesn't have it. Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough.

Trading is emotion. It is mass psychology, greed, and fear. It is all the same in every situation.

Never commit more than 5 percent of your money to a single trade idea.

What Could Have Been....

I could've had a very nice day... but let's not live in the past and drive by looking in the rear view mirror. Hopefully I can correct this in the future.

Where to begin... I got hit on EJ today at 28 whole number after the specialist swept the book. If I just market it out to ARCA or INET right away I had an easy $100 profit but I hesitated an it ticked down... and down... and down... and I eventually only made $5 on it. It pays to be alert sometimes since I was playing poker on facebook at the same time I froze and really just in shock that I got printed.

I was right about NKE and GS today, except I got shaken out. NKE made new 52 week highs and I believe it will get the strength to run for a little bit more. And I was right, except my target was just a little bit too high and I didn't take my profit. NKE traded down and then bcak to 61 again but I didn't go long this time and I could've made an easy 60 cents on it. The volume was low when I traded it the first time b/c people were waiting for the Fed meeting minutes. When the volume died out I should've realize to get out (look at the volume bar more in the future!!) and the 2nd time market was going strong, I should've went long....

GS looks like it had resistance level at 230, I look at all the offers being filled and it looked like it was going strong so I went long after thinking short at first. I sold it back after a 22 cent loss but this thing did go for about 5 more points. GS is a high dollar figure stock, maybe I should've given it a bigger stop loss limit.

I was right about ADP as well... the problem there was that I was a little bit impatience and shorted it at .99 instead of .04 and the damn thing just doesn't move that much anyway. I was only expecting to make about $10 on it and I don't need stocks that don't move.

Podcast Notes

I've been listening to Trader Interviews podcast for a while. Sometimes they have really good insights but other times they talk about stuff that's not really applicable or tehcnical techniques in Forex that have nothing to do w/ me. But here are some sage words that I got out of it.

Dan Fitzpatrick:

I started profiting when I stopped losing---don't approach it with a gambling mentality.

One way to cut losses is better entry. It's the fear of missing out on a trade and the emotion kicks in and you start chasing.

You want to buy as close as to a level that if it's breached the stock is going to go lower for a certain reason.

Make better decision by making fewer decisions---even though you're taking a small loss on the trade but you can't reason why you're in the trade except the thing is moving.

It's ok to be emotional and beating yourself up for making lousy trades, but just not let it get to you and start making rash decisions.


Bill Kraft:

Know your exit before you enter the trade

Muchen Mag Dich!

Translation: Munich Loves You! Kind of like the I Love NY slogan. Well, at least somebody loves me b/c pretty much after this trip nobody does anymore. You'll see what I mean.

Oktoberfest was not at what I expected, both in a good way and bad. I decided on a whim to go to Munich for Oktoberfest and stay until my birthday. I've been wanting to put my six month Europe visa to use again since this summer anyway. Sounds cool right? Well, not if you leave the way I did. The following abbreviated dialogue sums up what I had and will have to deal with now that I'm back.

Mom & Dad: "What about work?"
Me: [stuffing clothes in backpack] "That's a chance I'm willing to take."

Mom & Dad: "Who's going to pay for this?"

Me: "You will, or I will. I don't care if I have to spend the rest of my life paying this off."

HR Personnel: "Well, you're a new trader Jason. It is really recommended that you be at your desk and get over this learning curve as fast as possible."
Me: "I know that. But it's not like I'm on salary. I'm paid based on performance. I know my opportunity cost. I'm gonna go."
HR Personnel: "Well, I'm disappointed in your decision, but you can't just go like this."
Me: "I'm sorry but I have to. You can fire me when I get back if you want.

Cute girl: "But what about me?"
Me: "What about you?"

Cute girl: "You're so selfish. You're just going to leave like this?"

Me: "Me? Selfish? You attention whore. I can't spend all of my time on you."

So why did I go? Honestly? I just heard my calling. Maybe like how God called out to Joan of Arc. Something was talking to me. Something just tells me that I need to go. Everywhere I go I see signs. Oktoberfest. Oktoberfest. My mind is completely obsessed with it. Well, let me be the prophet or discipline to the Beer God. This is my pilgrimage.

I shoot a msg over to Bobo who's working in Munich. Bobo both interned in New York. He was on the Deutsche Bank audit and I was on BNP Paribas. We've always joked about visiting each other in Germany or France if we sign on to PwC full time and do the foreign rotation. Well, he signed and I had a occupational revelation. He is south of Munich said he'd have a place for me to crash.

Well, I left Thursday afternoon and by the time I get into Munich it was morning but technically it was like 3, 4am in the morning back home. I called Bobo with my calling card but he didn't pick up at all... turned out later the bastard was at work. I tried to get to his place in Fasanengarten or Fasanengpark or whatever... fucking German, I don't know a lick of it. I ended up wondering around Munich that entire day with my stupid backpack filled with what felt like fucking boulders. I shoot him msgs on facebook and his email at the internet cafe but got no responses. This went on until about 6pm. Still no contact with Bobo. At least the sun goes down later here in Germany... I had to start looking for a hotel or hostel, just a roof over my head for the day until I get in touch with Bobo. This was Friday afternoon/night now... during what feels like the climax of Oktoberfest. There's not a single vacant room in this city. Not even a stable. If this was Bethlehem I could at least get a stable w/ the horses, man (sorry for all the religious/blibical references... they just kind of fit with the story).

What happens after that is a little hazy now... b/c I started drinking. Hey, I'm in Munich for Oktoberfest, what did you think I was going to do? Throw tomatoes at strangers? I'll leave that for the Spaniards. I took the metro down to my beloved Hofbrauhaus, ordered some food and a drink... which quickly became 2, and then 4. I literally walked or take the metro all over Munich while every hour or so I'd find a internet cafe to check if Bobo msged me back or try to call him. And drink. I exhausted the 40 euros or so I had left from the summer Europe trip and tried to get some more out of the ATM but the damn thing ate my card. WTF!!!!!!! I guess I forgot to tell the bank that I was going to Germany. Well, screw you, Bank of America! Can't a guy take an impulsive trip out of the country without credit card fraud suspicion? It must have been at least 2 or 3am before I found a nice big discrete tree in the English Garten and fell asleep under it.

I must have not rested for more than a few hours before the polizei woke me up. Talk about a wake up call. And by wake up I mean I really woke up. I don't think I've ever gone from zombei state to alert so quick. I guess they've became familiar w/ people random passed out drunk in the city b/c I thought they'd take me in for questioning or arrest me (or I've just been a goody goody kid my whole life I didn't know what to expect). I get to the internet cafe again... FINALLY!! Thank god, Bobo msged me on facebook that his phone was out of commission due to a beer accident, which his phone accident went skinny dipping in a giant mug of beer. He told me to wait for him under this gold statue in the big square in Marienplatz and he'll come find me at 10am. Find me he did! Geez... pray the Lord! I don't know how it worked w/ all the shit load of people in the city but it worked out. We took the metro down south to his place. I showered up and decided that I was in no shape to parttake in the festivities so he left while I slept the entire afternoon.

That Saturday night and the rest of Sunday and Monday is not as interesting... well, it is interesting but it's pretty much what you expected. Oktoberfest is 100x better than Mardi Gras, New Years, Halloween and the night when we beat Ohio State and won the first Rose Bowl on 6th street combined. Oh, the tents, beers, sausage... especially this white kind that I could eat for breakfast the rest of my life. Even pretzel. I don't like pretzel at all but with beer, it goes down all smooth. I hate to say it but I really don't remember a lot of it. I remember thinking to myself that German girls are either super hot (like Heidi Klum) or they're fugly, big and strong as if they're ready to do hard labor like chopping wood, hauling hay or change my oil (they'd fit in well at A&M). What sucks even more, is what was suppose to help me remember, my camera, managed to disappear from my possession. I'm pretty sure I left it at the Hofbrauhaus. They did hav some kind of lost & found but I came back the next day there was nothing... Boooooooo.

Anyway, I'm back now... so tired. I'm going to pay hell for this trip and I'm not just talking about financially with the credit card but I have to patch things back up with my folks, I'll probably find out in the morning if I still have a computer at my desk to see if I still have a job. As for the girl... whatever, I didn't like her that much anyway and it wasn't that serious. I joked with a few people that if my car broke down and my dog died or ran away this would be one hell of a country song.