Trader's Corner

Kerry,

I would like to thank you for a great service! You have fantastic video consultations and really inspired me, I am more inspired than ever before.  Your service helped my equity to grow. I doubled the amount of bonuses on the SpikeTrade and will  win Bank Robbery Award 3rd month in a row.  What I was missing before was what strategy to use in what market condition. This helped me a great deal. Also I adjusted entries/exits based on your ATR channels and Triggers. This minimized the number of emotional/impulsive trades. This minimizes my capital drawdowns and increases equity curve.

Thanks,

Vlad

Missed opportunity

There will be times when the trader will be thrown off balance by the market. Basically you will be fooled and you may have the sense of confusion or you are in unfamiliar territory. Keep one thing in mind!

When this happens you will be susceptible to changing your rules and typical methods. It is at these times one finds themselves in danger of incurring a bigger draw down than expected.This bewilderment is what may cause one to make additional trading mistakes and make matters worse rather than better.

If you find yourself that things does not seem to make sense to you, back away and wait. The old saying if in doubt, stay out is important. Taking risks when things seem cloudy and unclear is similar to flying a plane in conditions that you are not trained to fly in. John Kennedy Jr. died taking a risk he had no business in taking. He flew his plane in conditions that he was not trained to fly in. The slogan when in doubt stay out would have benefited him and most likely would have saved his and those with him their lives.
It is the benefit of hindsight and seeing what did happen that may force you into trades that you ordinarily would never make.

The particular methods I use will not and does not get me into every trade I am interested in making. What it does do, it helps me stay out of trades I may would have made impulsively when I should not be making those trades.

A good example recently is LULU. MY method did not get me in that trade I was ready to make. If I begin changing my methods too much than it is likely to put me in more trades that I should NOT be making. Be careful to over adjust due to one trade after having the benefit of hindsight.

I spoke on this issue of missing the boat in last nights WPT group consultation. It is unrealistic to think you can catch every move even when it is on your watch list. Trading is a numbers game and not based on any one single trade.
Successful trading hinges mostly on how we manage ourselves and our emotions. It will not be the last trade I miss and it was not certainly the first. There are missed opportunities every month and year. The focus is catching enough of them to achieve ones objectives. Make sure your objectives are realistic.

“It never was my thinking that made the big money for me. It always was my sitting.”

Jesse Livermore was one of the greatest traders of all time. 


One method that satisfies the desire for profit and subdues the fear of a losing trade is to take one half of your profit off at a predetermined level, put a stop at breakeven on the rest, and let it play out without micromanaging the position.

I personally like to practice a scaling out in one third positions. Once I lock in one third of the profits my stop moves to break-even and then let the trade run. It if turns and stops me out, I guarantee myself the trade cannot lose me any money at this point.

A method that creates doubts in your mind will never work for you, even if it is beneficial to others.

Ask yourself these questions after every trade

After every trade regardless if one made money or not, one should ask.

1. Did I make money - yes/no
2. Did I trade the plan – yes/no
3. If #2 question was no - If I had traded the plan would I made money – yes/no
4. If #2 question was no and I made money on the trade the way I traded it, would I had made more money than I did – yes/no
5. If #2 question was no - What was the main reason I exited the trade pre-maturely? ( try to answer as honest as possible) 

Some examples may be....

• I read or heard someone else’s comment and second guessed myself...
• I feared losing what profits I had
• I feared losing more money
• I felt physically sick
• I did not like the trade to start with and entered impulsively
• I entered the trade based on others comments but really did not like the trade.

You can add other reasons but the exercise is to keep this in your journal so you can identify patterns with yourself. The Trader is 80% of the equation and if the trader cannot function properly in the heat of the battle, the battle is difficult to win.

With the AAPL trade, I looked at the charts about 5 different times since the trade was entered on Monday. All were looked at based on pre-determined alerts and the system alerted me to look over the chart and make the next decision. I was in meetings most of yesterday, no need in micro managing a trade. Either the plan works or it does not and if it does not, I have identified up front how much money I am willing to lose. A trader can only control when he/she enters or exits a trade. Nothing else.

With the AAPL Swing trade example...

Did I make money = yes
Did I trade the plan = yes
Would I make this trade again regardless of profit and loss = yes
Since the trade was traded as planned and I made money and I would make the trade again regardless of profit or loss, end of analysis, next trade.

One should practice doing this exercise on every trade. YES I know, it is mundane, boring, and I rather being making trades. This exercise will help you make better trades and become more comfortable managing the trade. I did not have to be stuck in front of the screens watching 5 minute charts for this trade. At the moment It appears I will leave money on the table, but I don't mind when I leave some money on the table, as the Trading Gods get pissed off when you don't.
In all seriousness, the only two options I have when targets are met is either take my money and run or move to a momentum trailing stop on a smaller time frame. Being that the swing part of the trade was to be closed by end of day due to earnings and I could not find a trailing stop I was willing to use to stay in the trade, I was happy to close the trade and take the profits that was given since Monday afternoon. It is an idea trade for me.
Low risk entry, very little draw down during the trade, and target hit within 3 days. These are the trades that I try to be patient and live for. AAPL gained about 15 points in profits if traded you the shares and if one traded the $310 June calls as mentioned  those gained about 10 points on a $28 dollar purchase.

REMINDER: When using options to trade higher dollar stocks be careful with choosing the month and strike prices. You want a 70% Delta at least two months out. It is not being used for leverage, these calls are being used to allow one to trade $300 dollar stocks without tying up all that capital for the stock. It should only be used when one feels they obtained a winning edge.