Today's Ideas:

    IMPORTANT : Below is what we're looking at currently, but pay attention to our UPDATES on the side of each page for actual entry/exit times and prices. Refresh pages often! You will witness our winners AND losers; something that is rare in our business.    TO VERIFY ACTUAL PRICES AND TIMES, PLEASE CLICK ON  A TICKER ENTRY TO THE RIGHT.  ALL TRADES, WHEN THEY OCCURED, ARE VIEWABLE.  Whenever possible, we have included the ETF symbol for those who are not experienced trading futures, etc.

    Tuesday, May 13, 2008

    Morning update

    A lot of trading involves waiting. Great opportunities with high a probability of working don't present every day, and that is where we stand right now. Make no mistake, this is really where the money is made, and especially kept. In markets like we've seen the last 2 weeks, it's easy to get distracted and start searching for what is "wrong" in your trading. These are great times to look for new ideas, but it's no reason to jettison your prior discoveries. Instead, look to study new trade setups for possible use in the future.

    It's difficult not to get caught up in labeling. For example, my opinion that the US economy is in disrepair has led some to consider me a bear. This is not true. I do have a negative outlook on our country's financials, but trading stocks is very different. In order to be successful, a trader must remind themselves the difference between analysis and trading. I've mentioned this before, but trading is doing what works (makes money), even if it doesn't make "sense".

    Size is everything. Being correct on the direction of an instrument has little impact on your account, positively or negatively, if you only have 1 share. I go to great lengths on this site to share the sizes of my positions, how much I add, etc.

    This is the information most sites lack, and that readers should find absolutely necessary. If I own 1 share of a 20% winner, and 100,000 shares of a 2% loser, I'll have very different results than if I won with the bigger size. I'm either a star, or going out of business in short order! This was one major motivation in starting this site/blog. Every service on earth says they "like" stock Z to buy. This information is of very little use. How much they like it would be revealed by the size they took. More importantly, the reader would know whether or not the advisor actually makes money or not over time! Nobody would follow an advisor that has 5 tiny winners and 1 huge loser, even though he has a high win percentage. Always remind yourself that "stock picking" has very little to do with trading success. Every single trade has only a 60-70% chance of working, if we're lucky!

    Therefor, profitability (or losses) are determined by the size of the position taken. It really is surprising how few "advisors" address this topic. Even terms like "heavy" or "light" need a context. I suspect that this issue is glossed over simple because so few traders actually make money. This idea is not meant to discourage you, but rather to keep you focused on the really important questions that must be answered, if you expect to take money from the markets.
    P.S. The bond chart above is the exact chart I'm using to proclaim that treasuries are close to setting up a nice shorting opportunity. No other charts or analysis is necessary, just keep it simple. I'll either be right or wrong, the question is "how right" vs. "how wrong".
    Interesting reads:


    For previous posts visit the archives.



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