Monday, May 5, 2014

Trade Like a Chameleon

In his book, Bo Yoder's writes: 

"For every style of trading there will be a "perfect" market environment. When the market is aligned to the strategy that you are trading, every trade will work itself out smoothly, losses will be far and few between, and you will feel on top of the world as you watch your profits accumulate! ......Sooner or later the market environment will shift, if ever so slightly, and losses will once again begin to appear.....This constant cycle from "zero" to "hero" and back to "zero" is why i believe speculation as a business has such a high failure rate."

This is a subject that you will hear all top traders talk about(Jason from Leavitt Brothers did several videos discussing this important issue).

This i think is one of the many keys to trading survival. The trader's ability to adapt very quickly to an ever changing market environment.

For example : Traders who flourish in a momentum/trending market will take overnight or swing positions in highly shorted and/or 'MoMo 'stocks,  ride them out for big squeezes and bank 'big money' . This strategy works great: you'll often hear traders say 'trading is so easy'. Mistakes are quickly recovered and bad trading habits are rewarded for a lack of a better term. Many traders will even feel unbeatable but once this trading environment that was so conducive for that particular style starts to fade, this same strategy will be responsible in taking back most of these traders' hard earned gains that they accumulated during trending/Momo markets simply because they failed to recognize a market shift.  As the markets ebb and flow from trending to choppy to corrective , trading styles also need to ADJUST IN ORDER TO ONLY KEEP YOUR GAINS but also SURVIVE.

As traders who wanna survive and be very good at this game, it is vital that we analyze and recognize quickly what type of market we are in. It's not about being "bearish" or "bullish" its about being a "chameleon" and by that i mean, traders have to be constantly be willing to ADAPT to the constantly changing market environments and never stubbornly hold on to one bias blindly.
We need to be ahead of the 8 ball and rarely behind. The quicker you recognize the shift, the more of your money you will be likely to keep and make much more down the road.







Happy trading!




Friday, January 3, 2014

Momentum Trading ROUND NUMBERS

Hey folks. 

I wanted to share with you a cool "momo" trading technique i use all the time in my personal trading. I think it will be helpful to many of you especially the more short term traders here. 

As many of you from the chat room might know, i love to trade around "ROUND NUMBERS" so when prices of Momentum stocks approach ROUND NUMBERS like $5, $10, $20, $50, $100 etc. I pay especially close attention as i am aware if these numbers are broken, they can catapult stocks even higher. Almost like a "turbo boost" after a Round Number breakout.  

So for example: check out CCIH and BWEN : these are two stocks i traded today and here's what i saw in these plays: 

First of all , CCIH was emailed to ART OF TRADING members last night in the watchlist.. Breakout was $10.. Now, for my style of trading.. i typically prefer to enter BEFORE a breakout area IF and ONLY IF i feel like a breakout is "imminent". Here's the DAILY CHART in CCIH: 




In the above CCIH chart: Can you clearly see a  "CUP and HANDLE" pattern there?  I Do : Hopefully you all saw a pattern that looks like this? 







Now, here's how i traded the CCIH intra day chart: 

Once i saw the CCIH 'CUP and HANDLE' on daily charts. I realized that this stock has very big potential to break over $10.. Stock was trading at $9.60: at that point in time.. I quickly entered buying 3,000 shares at an average price of: $9.62





Booked  $2,000 on this trade all in just under 15 minutes worth of work... CCIH is trading higher than my exit but that's okay. Happy with gains and the exit. You cannot buy the exact bottom and you cannot sell the exact top. 



Even if you bought it late or even if you bought it at the $10 breakout(entry): CCIH woulda still been good for a cool 8-10% gain . 





Another Setup i played today and also belongs to the $10 "Round Number" Technique : 

BWEN: here's what i saw on this DAILY CHART : 





This setup was also a  'CUP & HANDLE' pattern that was setting up just under $10 resistance... Stocks that base for a few days in small narrow ranged candles for a few UNDER a strong resistance level are very appealing to me.. Because once they crack thru resistance, they can make nice runs. 



Picked up 5,000 shares of BWEN at an average price of $10.17 > so i was a little late with my entry on this one as the ideal entry SHOULD have been closer to $10.00 but i was a little distracted and missed the first entry... That's okay tho, since i felt like BWEN still has more run up left in it. 




The overall market was showing signs of weakness as this trade was developing so i opted to exit with a $1300 gain and move back to ALL CASH at that point. Don't over stay your welcome and what ever you do never allow a nicely GREEN trade go RED. Raise stops, Trim some gains etc.



Conclusion:

In the two trades shown above , i day traded two "momo" stocks that were flirting with that KEY "$10 ROUND NUMBER" area... In CCIH i entered AHEAD of the $10 breakout anticipating a breakout which worked very nicely(even if you got into CCIH on that $10 breakout entry, you woulda done well) . 
For BWEN, i entered a little bit late but was aware that BWEN did the hard job which was to breakout over $10 so chances were very high it was gonna keep running. When stocks start to approaching ROUND NUMBERS or breakout over ROUND NUMBERS.... pay very close attention !

Even tho, i personally day traded these two ideas, most of the ideas that take place at AOT or alerted to members are intended to be / normally are SWING TRADES. 

Any questions, comments or feedback welcomed!






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