Investing: Back to Basics

Investing in the markets is both fruitful and yet exhausting and frustrating at times. In 2011, S&P 500 closed unchanged, after all that happened in 2011 where most of the investors have loads of losses in their accounts, they would be surprised to know that the markets in general didn't really go anywhere and remain unchanged. I wanted to share a few of thoughts about investing.

1. Risk what you are willing to loose. If you have any sort of fixed payments that you need to do in life, please and please pay them off first before you risk anything in the market. Market is always going to be there.

2. I love this quote 'Markets can remain irrational longer than you can remain solvent' by John Keynes. In layman  terms, it simply means no matter what you think about a particular investment both on the upside or downside, the markets can go against you till your account goes into deep red and you get frustrated and take your loss, before your conviction is actually right.

3. Invest but always know what your risk is. Always know how much your willing to risk per investment and how much do you want to get out of it. Never invest based on hope. Always invest based on facts.

4. If you are wrong, accept that your wrong and move on to the next investment. Never let ego or overconfidence on an investment come in your way. It's better to get out and take a small loss, rather than hoping for things to work itself out.

5. If the investment you bought is not going your way. A simple reason is that you bought it at way too high prices or made a wrong investment in the first place.

6. Never ever buy any investment based on what somebody else told you is a good buy or a good sell. Always do your own research. Own your decisions, blaming is too easy.

7. If you invest based on fundamentals, then you better know what the business your investing is all about and what is reported on the financial statements. If your into technicals , you better know what levels or patterns your looking for.

8. Cash is also a position. Many people would disagree with me that however, only those who got hammered in 2011 would agree with me now. Sometimes, it's just better to stay out and wait for the right opportunity.

9. Always remember even though on the longer horizon, markets do move up, however, only 5% of the people succeed in investing.

Wish you all a HAPPY NEW YEAR and hope 2012 as I say it is gonna be a 'MONEY YEAR'

Follow me on twitter @dchsn6

dchsn6

BUY:RIMM

RIMM (Research in Motion Ltd.) reported it’s earning last week on Thursday December 15, 2011  and as I mentioned in one of my previous posts cheap can become cheaper. I am sure with most of my viewers who saw the  TITLE ‘BUY:RIMM’ they would be licking their lips and waiting for the markets to open on Monday and buy a lot more of RIMM shares cause  it’s trading at stupid cheap valuations or if they already hold it , they would want to buy more and average down.

I am sorry to disappoint you guys, in my opinion, RIMM at these prices is in my

‘GARBAGE’  stocks list or should i say ‘ DO NOT TOUCH’ list. Let me break it down for you.

Fundamentals:

1. Product Delays: RIMM over the past few years has suffered most in terms of product delays than any other tech name out there, and surprise surprise, they have announced that their new set of blackberry phones will not hit the market until late 2012 as compared to early 2012 as per their previous announcements.

2. Market Share: In US , RIMM in the smartphone business had a market share of 9% in third quarter of 2011 , down from 24% in 2010.

3. Net Income: $265 million in in Q3 2011 as compared to $911 in Q3 2010.

4. Tehnical Issues: RIMM which is proud of its BBM service, had an outage for almost 2 days.  A lot of users who were debating about whether to switch to Android or iphones couldn’t have found a better reason to switch.

Techinals:

I have attached a daily and a weekly chart, show it to any 2 year old and ask them what do you see in these two charts, a simple answer would be ‘it’s going down’. 52 week low every week tells me something that nobody wants to buy it and sellers are looking at every opportunity they can find to sell it at every up move they see in RIMM.

CONCLUSION:

I am not recommending to short RIMM or buy RIMM. As an investor, I would recommend that there are a lot of other good names out there with good growth stories and future growth outlook that you can be in, rather than buying a stock which you might be stuck in.  Hence, it’s in my ‘GARBAGE’ list stocks for now, cause I don’t see a good risk-reward ratio.

dchsn6

Disclaimer: I have no affiliation to RIMM (Research in Motion Ltd.) and I do not recommend it as a buy, hold or sell. I would recommend the viewers to please contact your Financial or Investment Advisor before making any trading decisions. This post is only for my own personal use and stocks analysis.

Most Important virtue of being a successful Investor/Trader

If your a trader or an investor, you will come across various rules and vodoo, that would be mentioned to you by other traders or market gurus. I have a whole personal list of trading rules for myself too, however, the only and only one trait to be a successful investor/trader is being PATIENT.

Patience is the key to be successful. If you have a sound investment strategy, then you need to be patient enough to wait for the right opportunities and hit it as hard as you can when it comes. Patience is required once you execute your strategy and waiting for your strategy to work and reach its goal. At times in trading the trade might not go your way right away, however, if you believe in your strategy and are patient enough you would know where your stop loss and profit targets are and would not panic with the volatility or paper loss.

Patience is required so that your not chasing after stocks, cause chasing stocks can disrupt your risk-reward parameters and if the trade doesn’t work, you will feel disheartened and might involve into revenge trading which as many of you know, back fires in most cases.

Patience in Action:
A really simple example is say your a value strategy guy and your looking for stocks to have realtively cheap valuations, however, just because the stock is cheap doesn’t mean it can’t get any cheaper. Being patient and waiting for the stocks to show some signs of recovery or bottoming formation is one way to go about it. or let’s say your a momentum strategy guy who like to play breakouts, being patient to have the breakout happen will save you on a lot of trades, than if you anticipate the breakout and the breakout fails ( the momentum strategy in reference was in terms of probabilities- there are traders whom I know who can anticipate true breakouts from false breakouts, but if your starting out or even an experience investor/trader being patient can make all the difference).

Patience is such a simple word to understand, however, it’s application when mastered can improve not only investor’s/trader’s return, but also the quality of one’s life.

One of the articles which goes into more details about how to go about cultivating PATIENCE :  http://wisdomalacarte.net/blog/learning-how-to-cultivate-patience/2011/10/


dchsn6

Copper Fever

Copper is a leading market tell atleast for me. I follow it as a guiding light to me to show me where the markets are headed. The reason being it’s one of the cheapest metals , available in plenty and used for various purposes.  For markets to improve the demand for copper should increase and hence increase in price of copper. However, at this point of time, it seems copper is going nowhere but back in its trading range of 3.05-3.90.

How has copper guided me through these rough times?

As seen from the two charts that I have posted down here back in Oct 4, 2011 (marked as 1 on SPY and Copper futures chart) when $SPY was falling apart and people felt that the world is coming to an end with the break of ever so important 112 level, Copper hardly broke its low of Oct 3, 2011 which was a short term bullish sign that it ain’t over yet.

On Oct 27 (marked as 2 on SPY on Copper futures charts) when SPY was looking to breakout out the 127 level  and almost everyone out there was going all bullish, copper was no where close to its resistance of 3.90. Hence, I had no conviction to be bullish.

I will be keeping a close eye on Copper 3.05 and 3.90 levels going forward .

dchsn6

WHY and HOW to build a Portfolio?

Buidling a portoflio is similar to buying a house. You simply use a top-down approach. First, you decide, what kind of location you want to live in and then you decide what kind of house you want to live in depending on how much money you have to spend. Similarly, buidling a portfolio, you decide what phase of market cycle your in, and what kind of investment you want o be invested. It sounds simple, and when applied correctly, you can reap great returns.

Why build a portfolio?

This is the first question which comes up in the mind of most investors. Any novice investor,wants to buy one stock and get rich quick. However, an experienced investor will diversify his investments across different investments to minimize risk as different investments/stocks grow at different pace to each other during bull market and understands that during a bear cycle correlation in stocks in downturn is equal to 1 i.e. they go down together, and it’s close to having to no edge in the market. Having multiple investments like stocks and bonds in a portfolio helps to improve the return of an investor as he or she can position his/her portfolio in a position of strength during different kind of market conditions.

How to build a portfolio?

First foremost, it’s important to understand what phase of the market we are in. Is it a bull or bear or is it rangebound? During bull markets, stocks usually outperform bonds. But which stocks to pick, here is where relative strength comes into play. During different stages of market cycle, some sectors outperform the other and some stocks withing those sectors outperform the others. In terms of determining which sector is strong, it can be determined by looking at the ETF’s of each sector. Some of the common one’s that I follow are:  XLU (SPDR-Utilities), XLE (SPDR-energy) , XLF (SPDR-Financial), XLV (Healthcare), XLI (Industrial). Secondly, for investors who are more conservative can look for large cap names which have a history of paying dividends, for investors who are willing to take on more risk, you can indulge in small caps within those sectors and determine which one has the highest potential for growth. Thirdly, if the market is in a bear cycle, shorting stocks is a viable options too, however, once again depending on which sector is weaker across the board, look for stocks which have low short interest (the reason being there is lesser likelihood of a short squeeze as compared to stocks which have high short interest). The other option during bear markets are investing in bonds (which is altogether a huge topic in intself). 

Always understand what is the risk/reward and risk what your willing to loose. If you can’t sleep at night because of fear of investing or can’t pay your next mortgage if your investments go down, I would recommend you to reevaluate and check if your in the right investment.

dchsn6

What’s your bias??

In these market conditions, almost everone has a bias about the markets. Some are bullish and some are bearish, but if you asked them if they will bet their money on it, they will shake their head and say  ‘No way, market’s too crazy’.  I look at the markets with a neutral bias, atleast when I start my day and watch for the price action to guide me what’s going to happen on that particualr day, mainly because I am a small time retail trader, looking for market inefficiency to trade.  The conclusion of my bias is usually to see if that particular day is with the trend of the bigger picture i.e  yearly, monthly, weekly and based on that I take my trades and determine the size of the position I will take. I always like to trade with ‘TREND’ which is my friend.

What can bias do to you?

I have seen traders who become investors, on the flip of a coin, why because everyone who wants to make quick cash and bought a particular stock based on his friend’s recommendations, TV shows or newspapers buys the stock with a bias that everything is great about the stock and he is going to make money right off the bat. What happens next is a common story, the stock goes down and down and the trader buys more and more. At the end of the day or week, the trader who was looking for QUICK gains is now like a deer in front of a speeding car. He doesn’t know what went wrong, cause he didn’t buy it on his own analysis in the first place and now he’s stuck in a stock which has gone down and he doesn’t know anything about and eventually he becomes an investor and makes up his mind, that eventually it’s gonna come up and becomes from a trader to an investor. The transition is usually so fast that even the trader doesn’t know what happened. One typical example is RIMM:  People who were trying to buy 52 week low are still buying it at 52 week low.

I would highly recommend people not to have any bias about a particular investment or market. Always have an open mind. The reason being for every bullish analyst, there is a bearish analyst and vice-versa. If you have worked so hard for your money, why let some ABC or XYZ tell you what the market’s are going to do (exception: the people your taking recommendation from actually have a transparent history you can cross check their calls on).  Any kind of investor or trader needs to have a risk-reward strategy, afterall investing is about a game of probabilities, nobody can be right all the time, but make sure when you are your right in a big way and if your wrong, it’s only for a short period.

I want to make it loud and clear, markets are here to take your money off you. If your not upto the game, don’t dabble your feet into it , cause trust me, it has crushed some of the most intelligent people out there and you are a no big deal for it.


dchsn6

My First Photoshoot

Trading can be exhausting and I try to find different avenues to go and search how I can focus my energy on different projects. I recently completed my first photoshoot with my friend.

Feel free to visit and comment on it
https://www.facebook.com/notes/justin-chang-photography/mark-li-portrait/250471381673031

Here is a couple of samples:

Trading and Workout: Hand in Hand

Two things that I just can’t do without in my life is trading and having a good workout. The two sounds so different but when I sit down and think about, it seems that both of them are actually pretty similar and requires the same kind of training and mindset.

1.  Beginning- The Attraction

Trading: you see a friends or family or individuals around you and all the TV Jazz that so and so is so making so much money in the markets and it’s so easy to make money and then you think to yourself. Damn it, that sounds easy. Why didn’t I think about it before.

Workout: You see friends or individuals with well defined bodies and their fitness level at their peaks and on hearing that those individuals go to gym only a couple of times. Sounds easy, maybe I can get beefed up to in short amount of time.

2. Honey-The Sweetner

Trading: Ever heard of beginner’s luck. Yes, that applies to trading too. You can get a couple of good trades and think hey, this is actually easy. I should put in more money and make more money from the markets. I can easily be rich in quicktime.

Workout: You go to the gym a couple of weeks and think hey, I am actually getting bigger. Now this wasn’t that hard was it. I can easily get those eye candy physiques in no time.

3. Reality: Unspoken Truth

Trading: Now the person after having some big positions thinks he knows it all and try to hit some homeruns, what happens is anybody’s guess. The homeruns don’t happen, and it gets hard to even strike the ball and here come the losses.

Workout: Even though you saw that initial increase in strength and power. You don’t actually grow in size, it just that you have used those bodyparts in the gym that you haven’t used before and now after some bloodflow in them, you think your getting bigger. But it’s nothing but just rush of blood.

4. Bigger is Better:

Trading: Ok so now your getting losses, you know what I am going to put in heavier bets now , double down and with luck I will get abck to where I started in no time.

Workout: You will now go to the gym maybe twice a day now. Put in those hours and get that rush of blood to look  beefed up all day.

5. No More Please

Trading: Your right on the verge of blowing up your account and now here is what differentiates a good trader and a wannabe trader. A good trader, will sit out at this stage, review what went wrong, speak to people who have been successful in trading and analyze what went wrong.A good trader will look for areas to improve . A wannabe trader sees no more  hope in trading and fades out, closes his account and say’s it’s not for me anyways.

Workout: Your on the verge of cancelling your gym membership, cause you didn’t have any growth and have self doubts if you can actually achieve what you thought you wanted to. Here is where the differentiation lies between people who end up having good fitness and physiques and people who end up being who they were or worse than they started workout. People having good fitness will ask their trainers, read books, speak to people who have made it. On the other hand people who don’t end up having a good fitness find reasons like I don’t have time, I don’t have the right genes and so on.

6. Growth Stage

Trading: A good trader now has gained all the knowledge that he has accumulated and see things in a different way and puts in more time and starts getting profitable again at a slower and more consistent pace.

Workout: After having spoken and analyzed what went wrong, you start implementing the good habits and achieve the fitness level that you had always wanted.

P.S. I will do a blogpost on the similarities between the mindset required for both Trading and Workout.

dchsn6

Quick Update

Hi Y'all,
Sorry I won't be able to post my trading account updates due to personal commitments. However, once my commitment is over I would surely display all my account history as usual. If any of you reader have any questions, feel free to email me and I will get back to you asap.

I'll try to keep writing some posts about trading though.

Remember, trading is a game, the more time you put in to train yourself ,the more successful your gonna become. I'm nowhere close to where I want to be in my trading but believe me, I am working on it 24X7 to be successful at it. After 'ALL I CARE about is WINNING'

dchsn6

October 2011: What Went Wrong

I came into the month of October after a week break from trading while my account was being switched to a new broker and in between that break I lost focus. Trading needs preparation and yes it requires a lot of it. It may sound to be a cool job to sit at home and trade, but believe me, it's the hardest job on the planet. The markets can humble any trader with one bad trade. Coming back to the first two weeks of October, I was in deep red, mainly because my bad habits started to creep in which is not doing day end analysis of the markets, not creating a set of stocks to watch intraday and not knowing the important levels to look for in the charts. I literally lost nearly 40% of my equity in a span of two weeks.

After a heavy setback, I told myself to trade small and look for best setups but again I failed in 3rd week and gave up another 10% of my equity. However, during the third week , I decided to set my goal as being green on any given trading day irrespective of what happens. I would have to say that drawdown of close to 50% of equity is no joke. I took it upon myself to turn things around and I made plan as to how to go about having 'GREEN on the SCREEN' again. I went back to basics, i.e. running daily scans to look for stocks with good setups which would give me an edge the next day to trade it.

Moral of the story, trading is a game, where if you want to play , you have be to prepared for it. There are no shortcuts or loopholes, you are either right or you are wrong. Developing a plan is necessary and is of utmost importance. If you have a plan you would know how hard you can get hit and how much can you gain. Executing the PLAN is my priority going forward.

I have been humbled by the market once too often and now it's time for me to get things right and succeed. Nobody can stop me from what I want or what I can achieve or what I wanna be. After 'ALL I CARE ABOUT IS WINNING'

My inspiration song for this week.

dchsn6

Stock Trader To Stock Junkie

The past 4-5 weeks of trading has been pretty disappointing. Since I have started with my new broker with 10K , I have officially redcuced my equity to $5K. Yes, a 50% decrease. To some people it would be surprising and they would be astonished but to me, it's just another learning curve.

When I started this blog sometime in June, I traded with passion and with a goal, somewhere down the line, I have lost the fire in my belly. The break which I took during transitioning of the account has hurt me a lot. As I felt I was trading brand new again, but nevertheless, when I sit down and review my trades, it has left me shocked and mad at myself. I look at the entry and exits and kick myself while I drive to my fulltime work ( I only trade till 1pm) and talk to myself how stupid I was to take that trade. Majority of the trades, I have taken looked like more of a junkie i.e addicted to trade rather than follow a game plan and executing the plan and now after horrible past couple of weeks, I step away from it and ask myself what is the reason I trade.

Here are the reason's why
1. To have an independent life , not answering to anyone and have my own working hours.
2. I am sick and tired of corporate world.
3. Trading helps me a learn a lot about life ( look up previous post ' Knowing  Thyself')
4. Trading helps me to be disciplined and have a goal in life.

Trading to me is like a game, where you have a strategy but you also need to be able to physically and psychologically execute the strategy. A bit too early or a bit too late can get you out or in awkward positions where you don't wanna be. I need to respect the game and not abuse it.

Making money from trading is a great motivation, but the more satisfying part is you risk a little to gain a lot which means your beating the all the HFT's and top institutional players in the game.

Winning is a bad habit I have and I am not ashamed to ask fellow traders for advice. Thankfully, there have been a lot of great traders who have helped me and I am sure in the coming weeks I would be able to get myself out of the hole.

dchsn6

Game Plan for the rest of the yr

Time and again I have achieved 100% return on my initial investment, only to see it giving all back. I have spoken to a couple of trading mentors and as most of the great trading gurus on twitter land say ; the last 3 months, have been the most volatile months for trading since 2008 and starting to trade during these times, is BAPTISM BY FIRE!  Two things can happen: 1. I can sit there and blame it all on the markets being volatile and all or 2. I can  man up and work on my game to get better and most importantly get back to winning. I choose the second option.
Gameplan
1. Stick to setups which I have in my playbook (which I have successfully developed)- any trade setup which is not what I have seen before in my playbook, I won't be pulling the trigger on it period.
2. Need to stick to my stops better. Since most of my setups are momo  (momentum) plays, all  my favorite trading setups usually have very tight stops with huge risk and reward.
3. Need to concentrate on one trade at a time and make it a HOLISTIC experience, where each trade is 'ONE GOOD TRADE' at a time.
4. No revenge trade (taking aggressive trades trying to makeup losses for the day). Period.
5. I have made daily targets which I would be looking to achieve, given that I see any profitable setups.
6. Need to reduce excessive trading. My best weeks have been where I have taken less trades.

As my twitter handle is : dchsn6  . Above were 6 points of my gameplan.

'ONE TRADE AT a TIME, ONE DAY at a time' . 'Success comes to people who work hard for it' - These would be my two quotes which I will instill in me.
Nothing but having a good trade is what I am gonna concentrate this week. I gotta cut out all the noise, cause ALL I CARE ABOUT IS WINNING.

This is what I listen to when I have a successful trade.

Fabolous - You Be Killin Em

http://www.youtube.com/watch?v=3sg_rP4y7r0

Invested $7K and in Week 3: September 2011:$1590 loss, Total profit in 11 weeks: $5109

Following is a screen shot of my week 3: September Trades. I have started to work with a new broker. Feeling a bit rusty after not trading last week and put in two wrong trades due my error of pressing wrong hotkeys on the platform. But overall I am happy with the new broker and would be reviewing my trades this weekend. I love this game of stock trading, as I am only as good as my last trade . I am passionate about it and don't mind putting in as many hours as possible to develop my game (for example after a 75 hours long week of trading and working fulltime, I am still blogging at 2am) and develop my playbook of trade setups. I can feel it that my gameplan is right there but my human emotions are coming in which is causing losses. I would be looking to trade like a robot and trade what I see with no emotions.  At the end of the day ALL I CARE ABOUT IS WINNING!!!

New Beginning

I have now officially opened an account with a firm which had provided me with 5:1 leverage, which means for the 10K provided I am given 50K buying power to trade and with increase in profits being generated the buying power is suppose to increase (the $10K which I have deposited is purely from my trading account which I had started off with $7K). I have traded with them for about 3 days, still getting a feel of their trading platform like trade exceutions, charts, trading reports and all. Overall, I am satisfied with it and yes, I am down about $250 for this week , have been trading small to get a feel of new platform.

I am now ready to trade the market with my gameplan and given the fact that I managed to have converted $7K of my initial investment into $14K in about 11 weeks with a pheneomenal 100% return. I would be loking forward to convert those $50K into $50K, only time will tell if that will happen I will continue posting my trading report every weekend. All I care about is Winning, I learn from my losses to move forward.

As far as I remember 'I am as good as my last trade' (helps to keep me grounded), things should fall into place by themself.

dchsn6

Quick Update

There was no trading done for this past week, as I am currently in the process on switching my funds around for more leverage to a new broker. I would be back trading only the morning sessions this coming week. Looking forward to more WINNING weeks ahead.

Invested $7K and in Week 1: September 2011:$1,605 profit, Total profit in 10 weeks: $6,699

Following is a screen shot of my week 1: September Trades. As I indicated in my last post, slowly but surely I am getting a lot more conviction in my trades cause I am now able to find a lot more cleaner trading setups and am able to filter out the noise. Last week was a short week due to Labour Day long weekend. I still continue having problems with my broker such as their systems not working and trades are not able to be executed ( it has resulted a few losses this week for me due to that). The only reason I am still with my broker is because as a retail investor, I require to have $25K to day trade i.e able to execute more than 5 trades per week due to PATTERN DAY TRADING RULE and because my account is less than $25K , my broker is the only broker around that doesn't have the PATTERN DAY TRADING RULE. I am trying to leverage the money that I have with more buying power and am in talk with a couple of firms. I would be trading less for a couple of weeks due to personal commitments. However, if the time is right and I am in front of the computer , make no mistake about it, I will TRADE, cause after All I Care about is WINNING.

dchsn6

Invested $7K and in Week 5: August 2011:$112 profit, Total profit in 9 weeks: $5,094

Following is a screen shot of my week 4: August 2011 Trades. I was in and out the whole week, therefore, I would say I managed to trade for about 3days in total this week. Even though my profit is only $112 , with each trade I am learning a lot more of what I should and shouldn't do, what is working for me and I am now way more relaxed when I have a trade in. Yes, I have made mistakes this week and it did cost me quite a bit, but overall I am pretty happy this week because now a lot of trades I have lot more conviction about it because of my entry prices. I am in talks with firms to have more buying power so that I would be able to trade stocks only and hence minimizing my risk and more profitable trades.

Knowing Thyself

One of the best things about trading is you can review everything at the end of the day, end of the week or maybe just about anytime and you will find what went wrong with a particular trade and how you can improvise on it.

I trade not only because of the money I can make from it instead trading is a lot of about how I have a plan and I let the event happen and then execute my plan to perfection. Yes, nobody is ever perfect in life, that's why I keep on improving. Every trade is like a simple process, if I have a good strategy and I keep on doing it and improving it I will triumph. 

Most of the time when I tell people that I am a trader, the first question is how much have you made so far whereas if I answer that I am an investor they ask me which all investments did I buy.

Let's break it down 

1. People consider trading as gambling, you will never win is the saying. I beg to differ that simply because in trading you can calculate how much your willing to loose and always cut your losses and move on to the next trade whereas in gambling once your in a play you cannot cut your losses if you feel whatever you did was incorrect, hence exposure to a larger risk.

2. People consider investing as a money growing tree as if its gonna guarantee you a return for sure. I beg to differ on that as well as I believe in life only two things are guaranteed: death and taxes. Now a lot of people talk about investing and say I am in it for a long haul so even if my so called investment goes down in value I would still hold it as it would EVENTUALLY come back up but guess what these individuals are willing to take a paper loss of 70-80% of their portfolio and close their investment on breakeven if it ever comes back to their buying price, in most scenarios it never comes back and these same individuals will take 3-5% profit and miss out on 65-70% profits.

Now you guys would be thinking why am I writing all of this (maybe it's because its 4:30 am in the morning and I still haven't slept yet so I am rambling on and on). But what I am trying to get at is I have understood myself and have considered myself as a trader. I don't believe in having losses, if a trade goes bad I cut it out and move on. I trade based on chart patterns that I have been studying for the past 5 years and not based on somebody recommendation or that some person on TV was giving props to a company or because US job numbers were bad or someother nonsense news. For me personally everything outside the charts is all noise which I avoid.

I started my trading blog with heavy options trading but after my reviews I have understood I should rather trade stocks directly because of two reasons 1. Value of options fails to track price 2. once your in a profitable trade in options, it's not possible to give your trade enough time to breathe ( what I mean is even if the stock price comes back to breakeven price I will still loose money on options because of the spreads), therefore it's not possible hve a breakeven on an options trade.

I am currently in the process of looking for buying power and have started shopping around for firms to provide the seed capital. 

At the end of the day trading is not about Profits and Loss ( as from the month of August even if I trade well if due to unforseen circumstances I can see dramatic drawdowns), it's about having a plan , being patient and executing it well and get the most benefits out of it. ( For me it's just like the way I play soccer, I pass the ball around and once I see an opportunity I attack the opposition and the end result is good shot at the goal, scoring a goal is benefit but planning it is the most satisfying experience, at times the referee might make a bad decision here or there just like my broker systems but if I keep doing it again and again, everything will eventually line up and I will score).

 

ALL I CARE IS ABOUT WINNING!! I am willing to loose and learn and make my winner trades be monster moves.

dchsn6

Invested $7K and in Week 4: August 2011:$2,312 profit, Total profit in 8 weeks: $4,982

Following is a screen shot of my week 4: August 2011 Trades. Back to trading this week, broker issues seems to have been resolved atleast for now. After taking last week off not only did I analyze where I was going wrong but also how my broker was operating in different market conditions. I did try to open accounts elsewhere but taking money out from my existing account and transferring it over to new brokerage accounts would easily take about 2-3 weeks. Hence, I decided to stay with my broker for now. 


Overall a good week of trading, after some disastorous first weeks of August. It feels good to be back in the greens. At the end of the day, ALL I CARE ABOUT IS WINNING.

dchsn6

I HEART TRADING CAUSE IT'S MY LIFE

For me trading is a game which I try my best to be good at. It has a lot of similarities to my actual life.

1. I learn more from my losses than from my winners, just like in life when I'm down and out and I got nothing left to loose I come up with some great stuff which drive me out of the hole I had digged myself into.
2. Losses happens in trading but I don't take it personally, it's just a decision which went wrong. Just like in life when I make a bad decision it's not the end of the world but I learn from it and move on.
3. Cut your losses fast and let your winners run. In life, it relates best to relationships. There have been a lot of times when I became friends with someone and don't feel that he or she would be a good friend, I end everything and move on and develop long lasting relationships who improve the quality of my life.
4. I can never master the game (trading) but I can always improve, just like in life, nobody's life is perfect but you still live and learn and try to improvise on it.
5. While trading I am emotionless, I have found a system which works for me and it might not work for somebody else. In life, people need to find things they are good at, blindly following people has helped noone and copycats have never survived.
6. In trading when the day starts I am never biased whether the market or a stock is going to go up or down, I simply let the charts tell me during the day of what is happening at that point of time. Similarly in life, I am not biased toward a situation or a human being, I try to explore the situation or person by myself before I make a decision.
7. In trading I leave my ego at the door, I learn through out the day , I learn from each trade I make and never think I know everything cause every trade and every stock reacts differently. Similarly in life, I learn from different situations and relationships cause each one of them is different.
8. In trading being discipline is the key i.e. having a game plan and executing it. Similarly in life, having a goal and having steps to achieve it is the key.

Trading has taught me all of the above, even though I might struggle in trading i.e. profits might be lacking but it has taught me much more in my life than I ever thought.

dchsn6

Invested $7K and in Week 2: August 2011:$5,280 loss, Total profit in 7 weeks: $2670

Following is a screen shot of my week 2: August 2011 Trades. Tough 2 weeks. I won't be trading this week. I would be doing a lot of reading and self review.

Damn It brokers

I always thought if you trade a plan, you get the results but I didn't realize the importance of a good broker until this past week. Markets were volatile yes, but the more important thing is how your broker is reacting to those situations. My broker has just been ridiculous, the spreads between bid-ask has gone as high as 50-70 cents on options which has made not only profit making but also breakeven trades impossible. (the spreads on options and stocks can be manipulated by your broker)

I will give you a simple example of what I mean.

Let's say I am trading AAPL stock and its price is at $374 and its August 12 2011 $370 call options had quotes 4.50-4.75 (which means you buy it at 4.75 and sell it at 4.50). Therefore, when I expect the price to go up I buy August 12 2011 $370 call options for $4.50. Hence, just when I entered the trade I am down 25cents per share (if  I am trading 10 contracts which is 1000 shares, I am down $250 bucks).
Here is what I have noticed with my broker, as the the price of AAPL goes up, the bid-ask spread starts to widen , let's say now the price of AAPL is $376 and August 12 $370 call options would have quotes of 5-5.60. (which means you buy it at 5.60 and sell it at 5).

Honestly, I am a day trader who's looking for $2-$5 moves in a stock which corresponds to $1-$3 moves in options. Hence, wider the bid-ask spreads , I would need a bigger price movement just to breakeven.

A lot of people ask me why I am noticing it now.I noticed it only after reviewing my last two weeks of trade which have been total disaster. I decided to sit and down and review my trades and this was my observation.

My broker's trading platform at times is not able to send my trades to the exchange and yes, sometimes their trading platform would be down for a couple of minutes during trading day ( but never before or after market hours). --when I spoke to my broker the response I got is trading has 'TECHNOLOGY RISK', my response 'the only job of the broker is to have the technology up and running so that they are able to send the order I send, so I guess my BROKER is a RISK'.


I have been put on Platinum list by my broker effective August 1, 2011 and my profits have gone down and losses have accumulated to a large extent since August 1, 2011. Is there a coincidence, its for the reader to decide.

I will be out of Toronto for a few days, will try to update my results by next week.

dchsn6

Worst 2 weeks of trading

Month of August  has just been utter nonsense trading by me. Currently, I am still in profits from the day I started trading , however, the losses accumulated  these past two weeks have reduced my profits substantially.

As a trader, its time for me to sit down and review the reason for the losses I have been accumulating.
1. Not Sticking to my plan.
2. Not cutting losses early.
3. I can identify buying patterns with ease but my ability to identify pattern to shorts are the worst (and when the markets have been going on a downward spiral- its not helping the matters).
4. Chasing stocks.
5. My Broker which is Questrade is not helping the cause, every now and then I am getting stuck in trades and am not able to send orders because their backoffice is not able to communicate to the exchange.

What I am doing good
1. I am not doubling up after my losing trade (this has been my biggest improvement, a trader always have a tendency to double up after their losing positions trying to make up for his previous loss and in the process losing all his capital).

What I am looking to do
 For long positions I try to determine the relative strength of a stock by following S&P500 SSO or QQQ, to short I will be looking at inverse ETF'S like TZA or SDS (I will take short positions only when these inverse ETFs have a buying pattern in it).

I am restricting my self to trade only 3 patterns.

I would have said wish me GOOD LUCK, but in trading LUCK has no meaning nor any importance, neither has HOPE.

RISK MANAGEMENT (which is how you manage your trades is of prime importance) is something I would be giving the highest priority to.

ALL I  CARE about is WINNING. I am a big believer of comebacks, as long as a person haven't fallen into hole too deep to dig out of, comebacks are always possible. (im my case if i loose all my initial $7K, then comeback would not be possible at all).

dchsn6

Invested $7K and in Week 1: August 2011:$2,820 loss, Total profit in 6 weeks: $7,950

Following is a screen shot of my week 1: August 2011 trades. Markets haven't been easiest to trade. But I violated my rules and got what I deserved. I have spoken to a couple of experienced traders and according to them this week was the hardest to trade. But I am not making any excuses for my loss, I know what I did wrong and improvisation on your weakness is the name of the game. After all all I care about is WINNING!!

July 2011 Trade Review

If I were to grade myself, I would give myself 'F' for July 2011. I made a lot of mistakes, but am learning everyday. I have chased stocks and yes, I have held positions overnight to trade on earnings as well. People ask me if LUCK is required for traders and let me tell all of you reading this 'YES' luck is required , if you don't follow your trading plan, which I am guilty of not doing. Hence, my rating of 'F' for July 2011.

Things I am doing  to help myself to trade better.
1. I am making a journal of each and every trade that I took and document the reasoning behind it. (cause I feel  if I can't reason my trade, I shouldn't be in it in the first place)
2. Respect my stoploss and not to wait on 'HOPE' to save me from my stupid mistake. StopLoss is there for a reason and I  will honor it.
3. Need to hold on to my winners as long as possible till the markets tell me to get out.
4. NEVEREVER CHASE STOCKS.

I am sure if I follow the above 4 steps then my August 2011 profits will be better than July 2011 ;). In the end, all I CARE ABOUT IS WINNING.

dchsn6