Another Week in the Books

This low unemployment report that came out this morning was a best case scenario for the market. I think if we can hold the days gains and close towards the highs of the day, then the market is likely to continue higher. Go figure.


I know this correction in the market has probably caused some losses, created fear, and caused traders to throw in the towel, give up, and call it quits. Just to let you know, you are not alone. Throughout my career I can't count the amount of times this has crossed my mind. I can't count how many days, weeks, months, that I have taken breaks, or stepped away from trading to gather my thoughts and really ponder if trading was for me, and if I would really be able to make it work.


Let me use an example... I relate becoming a successful trader to an individual working towards a CFA designation. Let's say you start with 100 people. Only 40% of them pass level one. Out of the 60% that fail, a lot of them drop out and do not continue. The 40 people that passed, 50% of them pass level two (20 people). Out of these 20 people that have made it all the way to the final exam, 67% of them (13 people) walk away with the designation.


Think about your progression as a trader and how far you have come, yet how far you need to continue. How bad do you want to be in the top of your class? I wanted it more than I have wanted most things, and I had to bust my ass to get it. It took me about 5 years doing it the hard way...and the way I see it is that each of you have it so much easier than I did. You are lucky. There were not companies out there that wanted to teach me how to do it. There were only books. There weren't many successful people sharing how they were trading, or discussing what was working, or any support groups willing to help me out when I felt lost or overwhelmed. George Lucas said it best...


"You have to find something that you love enough to be able to take risks, jump over the hurdles and break through the brick walls that are always going to be placed in front of you. If you don't have that kind of feeling for what it is you are doing, you'll stop at the first giant hurdle."


Do you really want to be a trader? Are you convinced that you can be part of the few that make it? I believe you can. It is very challenging career we are chasing, but it will eventually be one of the most rewarding accomplishments once you get to where you want to be.

This is what prompted my comment last night. I know that times like this people curl up and disappear and I don't want this to happen to you. This is why I want people to continue to post comments or feeling on the blog so I can see what it is that people need to get past these day to day hurdles. For the most part, plenty of people are here for the trades rather than to learn how to trade. There is nothing wrong with that as long as you are taking my "ideas" and turning them into your actions. But for the people who want to learn the "why" behind all of this, I wanted a little feedback on features, technology, or just plain ideas on what you would find helpful. Please continue to keep them rolling in. I have plans for this site and your feedback and ideas have gotten us this far. Let's keep it going.


In closing...keep your head up. Think about this not from a day in and day out perspective. But keep in mind that it could take months or years to be where you want to be. When you start thinking like this, you'll see how important things like position sizing and diversification are to a trader, and that these gains/losses are very inconsequential to what you will go through for the rest of your careers.


Hang in there.


Recommendation: Don't stop believin!

Long: ----
I already tipped my hand, tip yours!
Short:----

Jeff,
Great read....I'm long with you!!! Of course I enjoy the trades but definitely hear to learn and grow, even if it is with a huge ding to the miniscule portfolio.
It has always been my plan to earn enough from this part-time trading to buy real estate (my passion and full-time employment). That is why the video's are so good, because we get more of the understanding and why I think an audio file of commenting on our blogs would be an awesome addition.
My rules have been refined thanks to you and my eyes are better focused on what I need to see to make the trades happen. Thanks.

Gary
Boston

So, I'm long still in PCP and APKT. I've wavering big time on APKT since it's right at my stop...any thoughts?

I'm short in ADBE and NFLX...just sold HOG this morning - good idea??? who know's but it was a planned exit at a planned time - so I followed my rules!

Gary

Jeff,
One thing that means a lot is the compassion that comes through on the Blog and the caring that you give when you sense the frustration that all of us are going through on a daily basis. It appears that everytime I have that feeling to "throw in the towel", you come up with the comments on your Blog that gives me the encouragement I need to continue. One of the best things in life that a person can do is learn from someone else's mistakes. I do have to say I have learned more valuable information from you than I have from the training from investools. It's almost like being on a diet. You can pay the money, get on the program, but it is the support group that keeps you afloat. Thanks again for all you do!
Debbie L.

jeff,
great post and thank you for the pick me up. its important that we post and stay positive. this is my biz and im dedicated to make it work. im working 2 part time jobs while i trade full time all day. this is what i want to do in addition to coaching high school basketball.
im long BNVI as a speculative play and DGX as a channel play
thanks
brendan
ca

Excellent post. Sure I like to see what your seeing,but the learning is the most valuable part of this blog. This is my one year anniversary, and many times wanted to quit thinking I should be much further along,but when Tuesday hit and I new what to do,it became clear..."I've really learned",and I attribute most of that to you. At this point I'm trying not to focus on the money ,but rather the trade. And every time I'm ready quit, I think what would Jeff do? I shake off the day,turn off the computer and wait for tomorrow to try again.

Can't wait for what's ahead. You are the best.

Sarah
Santa Fe,NM

Jeff,

That was a great read - very introspective and encouraging. This blog has been great for me as more down market days have had me giggling as I read your posts. For me that has been the best part of the blog.

One question for you, Jeff, and everyone else, what is the 'one thing' about trading that has made you as successful as you are or aren't?


Happy Trading All!!

Jodi
Canuck

What's happening to the market right now??? I thought the report that came out this morning would help stabilize the market and give us a nice upward move into next week!!!

Gary

Frustrating, huh Gary!!

Don't forget CAL. It is a confirmed H&S that has not done much for the last week until today. Still has a lot of room to drop.

Sean M.
CA

Jodi

By no means do I consider myself an expert trader but I am starting to consider myself a successful one and here is why: When the market crashed last week I was stopped out of all but one bullish trade and while it was painful to watch that happen it was all part of my "disaster" plan. The puts I owned were skyrocketing and by the end of the day I was selling bear call spreads to take advantage of the huge volatility, and by the end of the second day I was actually up 4% from the day before the crash! All of those bear call spreads continue to look safe except for SNDK which I had to buy back for a small loss yesterday. I am learning that to be a success you need all of the right tools in your box and you have to know how to use them -- so the next time the pipe bursts you are going to grab that wrench and fix it instead of waiting for the plummer while your house floods.

Allen

Thanks for the pep talk.

I have to agree with Debbie, I've learned more from Jeff's blog, Master Talks, Trading Rooms, and Marketcast than from the rest of Investools or other sources. I've also learned a great deal from others posting on the blog. This community really helps me pick myself up, dust off the setbacks and get back to business.

Two other things help keep me focused and motivated. First, my sister is a much better trader than I am...and you know how sibling rivalries are. Second, I have an itch to find myself sitting next to C&C and smoke Chris (in the nicest possible way, of course) when he suggests he's a better trader than I am.

I've got a long ways to go but I see the path and I see the goal.

Thanks to all,

mike - seattle

Well said Jeff... I guess its better to paper trade in this situation rather than forcing trades.

--thanks, Meena

Like all good support groups...

Hi, my name is Amy. I have been trading for almost 3 years (some paper, mostly real).

And, trading has been wonderful. Am I successful? Well, I haven't lost anything, but haven't made much either. My profits seems to even out my mistakes. The learning curve is huge! But, I keep my eye on the prize and believe that all this hard work will pay off. When I evaluate how far I have come, then I see that I am successful. Right now, my success isn't measured in $$$$. It is staying disciplined trade after trade, following my plan, and keeping a check on emotions.
Easier said than done!

I am thankful for this blog and all who participate. I look forward to reading it throughout the day and continue to look up old articles Jeff has written.

Long: PCAR, EXPD, ARW
Short: SNDK, FNM, and possibly DSL later today.

Have a great day!
Amy
Sunset, TX

Jeff,

Great blog post. I've gone through many periods where i wanted to quit, but i absolutely refuse to. I've resorted to painstakingly reviewing my trades (comparable to hitting yourself with a mallet) and forcing myself to realize what i was doing wrong. I don't know if i'll achieve my dream of trading for a living, but you can bet your a$$ someone's going to have to rip my heart out to make me quit.

Okay, I'll tip my hand...

Long: ARW, AUY, CYTC, IPS, MLM, PCP, WNR, ZMH

Short: BOT, CAL, DVN, EXP, GOOG, HOG, MA, MLI, SNDK

Would love to hear thoughts about today's price action.

It appears that we lost the momentum we had this morning. The DOW is struggling around the significant 12,250.

Does anyone think we are finding some resistance and possibly heading back down?

Amy

Wow Jeff,

You must have been sensing my mood. I’ve been trading options actively for 2 years.

I have a trading journal, I know my win/loss percentage, I know how to calculate risk, position size and target prices. My winning trade percentage is 35% across a mix of stocks, covered calls and option trades. I am confident I have all the knowledge required to be moderately successful. I’ve never worked harder to learn and perfect a skill since my college days. I spend 20-30 hours per week studying, listening to trading rooms and searching charts.

After 2 years of hard work and significant investments in my education I am embarrassed to say my trading capital is down 3% from where I started.

I’m a heartbeat from throwing in the towel. I’ve given myself until July to demonstrate a profit or I’m done.

Mike

Mike-

Wow, 3%? I've been at this a year and if i'm back to only being down 3% at the end of year 2 i'll be ecstatic!

Everyone PLEASE use caution next week. There is probably more downside to go.

Joe

Jeff, first thanks for the use of your blog and your comments. As CEO (ex-CEO) of let's see three companies I have given this type talk a lot to my staff many times and I always asked where is your passion and once you find it, do that for a career. Money is NOT the issue as I have seen so many wealthy people that just hated what they did and some of the poorest (in money) have the best times and life. I have always wanted to learn about what all those bone-heads that invested my money all those years where doing and when they said buy and hold and it was a down market we will just hold for next year were doing with my money. Now that I am out of corporate life and self employed money is more important as this is food on the table but I want to learn this. I am really hard headed and just do not give up mostly because I am not smart enough to know when I should be done. Imagine a guy who barely could make it through math becoming an engineer (in College was told to get an easier degree) and then CEO of an engineering company. Too many other stories that would bore everyone. I have found that those that keep after it and do not give up are the most successful not the smartest and most talented.
Hope I did not get too personal. The blog is great Jeff and your compassion and willingness to be a true servant leader giving all the time you do to us is trully amazing to me - Thanks!
Helping me define my rules and see opportunities is probably most important for me, both you have covered but updates on different types of systems would help.
Bob H.
CA

I just attended the ADVANCED OPTIONS in L.A. with Stacey Acevado. All this talk has reminded me about one thing she said. She said she almost quit several times because of frustration and losses. She said if it wasn't for her trading partnets that she would have quit. She said she cant express how glad she is that she stayed with it because now she makes $$$ regularly. Listening to that and with Jeff's post its clear that none of us are experiencing anything harder than what the pro's experienced. In fact as Jeff mentioned, we have it easier because of all the coaching from Investools & this blog. I recommend getting some trading partners or joining a trading group to ensure you stick with trading if you really want this as a career.

Mark

Tell you what Mike,

If you are truly on the verge of quitting, would you be open to a little publicity here? How about as a group we use your trading system as a case study, and openly discuss it and optimize it over the blog. We'll all contribute to getting you help. What do you say?

Jeff,
The charts always come with an explanation of what you are looking at and why. The "why" is the most important for me. The blog is a great place to enhance our education. I study not only patterns, technicals and advanced option strategies but also how the market is affected by the dollar, commodities, interest rates, etc... I like to think I know a lot and I still had a bad week. I actually did ok on the big correction day, it was the couple days after that hurt me. I was crazy busy at work and dealing with a family health emergency. I was not thinking straight and broke my rules. Of course not much good came from breaking rules. I learn something every day on your blog. I just learned the hard way that I shouldn't trade unless my mind is clear and I'm focussed. This is one of my rules I broke over the past week(s). I hope someone else can learn from this.
Although I'm a little beat up I still believe that I will be a very good trader.
I will never stop learning. The blog always helps.
Thanks to Jeff and everyone else who contributes.

Dave

I love your blog. I've been doing this for a year and even though I've learned a lot through Investools, I still felt like I was floundering around and then I came across your blog and it has been really great for me. I love reading everybody's comments and support of each other. I'm a stay at home mom with three small boys so this blog is the next best thing to having trading partners. And since you started adding audio and video I feel like I've upped my learning curve. I still get frustrated and have days where I want to throw in the towel as well but then I read the community's comments and I feel better and I realize that I don't want to give up. I want to be successful at this more than anything. Even more than writing and that's a big deal for me. I also went to Stacy's Advanced Option workshop this last week and came away with wanting to continue learning and not giving up. Okay, well, now that I've spilled my guts... Thanks Jeff for all you do. I know you're busy so it means a lot and thanks to this community of bloggers.

liz
pasadena

I AM CONSIDERING MOVING ON,
THIS WEEK WAS A RELIEF, BECAUSE I
DIDNT TRADE. I HAVE LEARNED SO MUCH
AND I AM GRATEFUL. I AM REALIZING
SOMETHING ABOUT MYSELF, AND THAT IS
THE TERM OPTION ADDICT MAY ACTUALLY
BE MY STYLE.I SUDDENLY DONT SEE THE
HUMOR IN POKING FUN AT THE TERM ADDICT.MY SON IS HAVING TROUBLE IN
SCHOOL AND LOOKS LIKE HE MAY HAVE
ATTENTION DEFICIT(A.D.D)I HEAR JOKES ABOUT IT AND HAVE PROBABLY
MADE A FEW MYSELF,SUDDENLY ITS NOT A JOKING MATTER TO ME.ALL THAT ASIDE IT WASNT EVEN LAST TUESDAY THAT HAS ME QUESTIONING THIS QUEST FOR FINANCIAL FREEDOM BY BEING AN
OPTION TRADER, THE TRUTH IS I STINK
AT IT. MY REAL PASSION IS HELPING PEOPLE,MY EXPERIENCE WITH ALL THIS
HAS LEFT ME UPSET AND I HAVE FELT
ANIMOSITY TOWARDS EVERYONE IN THIS
GROUP.I WANT TO WISH EVERYONE FROM
MY HEART THE BEST OF HEALTH AND SUCCESS,I AM DROPPING MY EGO AS OF
RIGHT NOW,THE TRUTH IS WE ALL CREATE OR OWN REALITY,SO I NEED TO
DO THAT.WHATEVER HAPPENS I AM GOING
TO LOOK AT THIS AS A GREAT LEARNING
EXPERIENCE IN LIFE.THANKS AGAIN
STEVE.L

This is my first time blogging so here goes.

Three things really helped me:
1) Subscribing to the Basic Options Trading Rooms

2) Listening to the MarketCast on the Investools web site

3) Reading "Trading for a Living: Psychology, Trading Tactics, Money Management" by Dr. Alexander Elder

-Steve

jeff, I want to thank you for all your effort and encouragement. i am definately here for the why and how to trade. Your stock picks help me to spend more time learning technical analysis and less time searching. I love it when my searches end up with the same pics as you have given us. trading is a learned skill and i feel very lucky to have access to your insight. I dont post often due to feeling that i have so much to learn but i want to be a part in anyway i can. congrats on the handsome little guy.bruce burns

Dear Jeff,

I have read your invite to post my trading system. I must admit to a crisis of self-esteem as I consider the public exposure that would entail. However the potential in salvaging 2 years of effort is worth it. So I'll type it up, post it and you can let me know how you want to proceed.

Mike

Jeff and fellow option addicts,

I have taken this last week to really focus on my studies. With the recent market action I did not feel comfortable entering any new positions. I can hardly wait for tomorrow (Monday) to come and go, so I can get a little direction. As i see it, if the market continues to go higher tomorrow we may be able to drift back up to old support as new resistance BUT if the markets go lower tomorrow then I will be fired up ready and willing to ride CME & SPX back down to support (wheeeeee !!!). So Jeff, the lack of participation in this wonderful blog of yours has been nothing personal. I love this blog (as does many others)!!!! I am sure I am not alone, perhaps alot of your bloggers have taken this last week or so to chill out on the actual trading and focus more on the learning. Of course I learn something from you and this blog everytime I log on, but I mean crack'n the books and the trading rooms. I actually signed up for the advanced tech analysis trading rooms and got to watch your price patterns class that you always talk about. So see "we" are still with ya and once Monday comes and goes, I bet you see more participation again. Thanks for everything (especially the pep talk) You are the greatest !!!
Tonya
daytona beach

Mike’s trading system

Definition of success: 15% annual profit minimum and a 35% annual profit target in all accounts.

Breakout entry rules (Triangle, double bottom, head and shoulder, 52 week high/low, etc)
Calculate target price for potential breakouts.
Breakout target should be at least a 10% move.
Buy option when stock closes above resistance with at least average volume, higher volume preferred but not required.
If you miss the breakout, you may buy the next day only if you can get the trade within 30 cents of the previous close.
Do not enter trade if the stock has moved more than 5% from the breakout point.
Don’t chase missed breakouts.
Option trade needs to exhibit at least a 2:1 profit/loss ratio.
Don’t risk more than 1% of account value based on 50% of the options cost.

Breakout exit rule
Sell when target is hit
Sell on 2 consecutive down days
Sell if option loses 50% of its value.
Sell if underlying stock closes below short term support by more than 1%
Don’t hold over earnings.
Use mental stops based on the underlying stock.

Support bounce entry rules
Buy when stock is within 1% of support
Buy if stock bounces off support with better than average volume plus a close higher than the previous day.

Support bounce exit rules
Use a hard stop 3% below support.
Move stop up to breakeven when stock closed $1 higher than purchase price.
Sell if stock closes 3% below long, med or short term support depending on time frame of trade.

Other rules
Don’t trade GOOG
Don’t take aggressive trades if you can’t watch it intraday

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...I'M AN OPTION ADDICT...I'M AN OPTION ADDICT...I'M AN OPTION ADDICT... ...I'M AN OPTION ADDICT...I'M AN OPTION ADDICT...I'M AN OPTION ADDICT...

About me

  • I'm Option Addict
  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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