Patience

Gun's & Roses came up on this mornings shuffle. It happened to be the song titled patience. I started thinking about CME since I have been pretty vocal about my stake in it, and from how it sounds there are a lot of others trading it.

Yesterday's move was a little intimidating, right? It could be due to the double dollar moves the stock makes when it does in fact move. I know yesterday shook a lot of traders out, and I can't help but wonder if this was due to emotion, or if there was a legitimate rule in place to exit the trade.

Keep in mind these double digit moves in the stock are only 2-3 percent moves. This is the equivalent of a $100 stock making a 2-3 dollar movement. Noting to be overly concerned about, right?

Bottom line, I see no reason to have exited the trade. Let's overlook emotion for a minute, or how many traders used their unrealized gains as a generator of fear. Was there truly a technical signal to warrant an exit? Yesterday the stock was up maybe 3%, is that enough to say you were wrong? Did this move break any resistance level? I try to navigate away from day trading, but it seems that the daily movements are sometimes under a microscope when a trader has staked a claim in a trade. I think one should stay disciplined, take slightly more of a hands off approach, and have faith in your technical exits.

Recommendation: Don't ever, ever, ever mentally book an unrealized gain. Gains are not realized until you sell. Therefore I recommend you don't bother looking at your trades this way.

Long: indecision & plane tickets to the Sweet 16 in San Jose.

Short: Day today to go catch the tournament.

Jeff..

Emotion is tough. I lost a huge profit on CME....I panicked and got out yesterday...crying today..I wish I had a direct phone line to your brain just for re-assurance, to keep me in check, to help me follow THE RULES...fear beat me down yesterday...another lesson learned. Traffic on the blog seems sow, where is everyone? Eyes glued to the computer?

Jeff, Bob...you seem to be the only 2 on today,

Great post Jeff. I don't know about this patience crap, I want my money now!!!!

I exited a trade yesterday and as soon as I did it rebounded! Yesterday was crazy and today all my puts have been going up and calls down. Quite the time to be a trader.

I wish I had the cash to play a higher risk like CME - it's bottoming just as predicted, however I did see quite an intra-day spike...that volitility again.

I never reaponded to Mike's rules, I guess because I was surprised that they were so specific in some areas. I've gone for the KISS method, just a few rules about sticking to the analysis and enter at the right time and exit when the trade breaks down.

Jeff, I probably need more help analyzing the risk/reward scenario - perhaps a follow-up to last night's marketcast. I have gotten myself into some trades that go in the right direction but don't appreciate in value the way I think they should. Does everyone pretty much use the "options greek" tab and see how much of a gain that is likely from a certain move on the stock? or is there another method?

Happy Trading!

Gary
Boston

CME: Yesterday, I made a post questioning the rally that merger news brought upon CME and BOT and how long do merger talk rallies typically last. It was suggested to me, by David S to be patient. Although I appreciate the patience advice, as a new trader you need to be reminded that, my anxiety for this was not spurred by a “trade gone bad” but reevaluating my target based on the merger news. Thankfully, ICE cooled this merger a bit and I stuck to one of my rules that I don’t exit until the trade has gone bad until a weakness has slowed or reversed while I have a substantial profit in before my target. My profit was not that big because I chose an OTM option and I was willing to give it up for the greater good of the $510 target. My other rule that I ignored is exiting a trade based on news that is negative to my position.

This trade will let me ease my “negative news” rule a bit to see how things play out because today’s news was much more gratifying than yesterday’s…

John
Rhododendron, Oregon

John,

NEWS has always been an issue with me. Here is my take...

1)Good news/earnings does not alyways have a positive affect on a price movement. Many of my trades haev moved against me on good news. Vice versa. Maybe I should have a new tule, follow the trend, pay attention to volume and price movement, igonore the news.

I've seen price go up on bad news, go figure. Maybe the news is not as good or not as bad as the market was expecting?? I don't know, but it has hurt me a bunch.

I wish there was more activity here on the blog, INSTANT ACCESS to some of the bloggers here to help keep the emotions in check during itra day activity. Jeff, you need your own HOTLINE!! Had I had that, perhaps I's still be in the CME put I chickened out on yesterday....I turned a healthy profit into nothing....and for NO GOOD REASON other than I guess fear...STUPID STUPID STUPID!!!!!!

Anyways, just venting a bit here...been a rough ride for me the past month.

Sunny in PA, cloudy in my account..

John,
The BOT CME merger news was old news that was already pretty much priced into the stock since it was announced in October. Today's move was new news and that was a gift if you had a short term March put like I did today. I was expecting to see if I could catch a piece of the downtrend for a very limited risk of $200 before Friday expiration. Caught enough of it that I am happy. I am a slow learner on position sizing, but I have to admit that the fact that my potential loss was within my tolerance, allowed me to stick out that move up yesterday. I would normally have bailed and been miserable both for taking too much risk to start with and then being even more miserable for what I left on the table today. I hope this post is as helpful to you as it is to me right now by reinforcing my need for correct position size to help control my emotion. I don't know about others, but emotion seems to be my only constant in the trades I am in! It has been a rough ride here too!

Lois

I feel ya on CME i did stay in after learning my lesson on KBH getting out early.... Hey jeff on what Bob said how about a "Option addict Chat room?" Lets do it, if we have a bunch of addict sitting in front of a computer we might as well be chattin it up.

Danny DR
Mo-Town CA

Gary,

I've been more successful calculating what the intrinsic value of the option will be at expiration if the stock makes my target. If that provides a 2:1 reward/risk I will take the trade (and it meets my other rules). This almost always means buying options that are 1 to 2 strikes in the money (or deeper if implied volatility is high). If the stock makes the target early, I know that I will have time value as well as instrinsic value which will increase the reward/risk ratio. The only time I use the greeks and Black Scholes is when I expect a huge move in the price and am buying out of the money options. This system has worked pretty well for me.

On our other topic, emotions overcame me yesterday and I exited CME early. Another learning experience.

Joel R.
California

Gary, I can sympathize with you today about your puts being up and your calls being down. That is the kind of day I had yesterday.

Bob, I hear you on the “news” thing… Traders and news can be completely irrational. Yesterday, I learned to stick with my analysis and rational rules.

Kelly Altman did a Mastertalk on 2/28 on “Controlling Emotions with Hard Data.” By and large, it has helped me curb my emotion a ton.

Oh yeah Lois, position size and proper risk allocation helps control emotion too!

Everyone,

I thin you need to factor the news, but don't have an opinion about it. Always defer to the price & volume if you have a news event you are uncertain about. If you still can't come to a conclusion, defer back to your entry/exit rules.

Jeff..

I listen to the news all day...I am addicted to it, so I do listen to it. I listen to Bloomberg all day long. Maybe I shouldn't. Anyway, yeah, you are correct about mot forming your own opinion on the news, I have done that way to often.

Maybe Jeff you can make a "Kohler Pill" that you can put your experience and knowledge into. I'll pay top dollar for one of those babys...

Back to watching the charts...

Congrats to all of you who stayed in on CME yesterday, where were you when I needed you!! LOL, only joking...

Congrats to all of you in CME. I saw identical patterns in BOT and CME and went with the cheaper play (BOT). Real smart.

Anyway, thanks to the TOS trading desk i was able to get out with a small loss, when i expected it to be catastrophic. So that's good. Now if KU loses to Niagra...

What a difference a day makes. Yesterday CME was showing price strength on volume and today it's showing even more price weakness on even more volume.

I exited my CME put yesterday. My analysis was price action and especially volume showed considerable strength.

After yesterday's price action I suspect news may be the wild-card today as ICE has floated a competing offer for BOT.

Am I making up excuses for exiting CME? Am I thinking too much about this when I should be just watching for a break in trend? Bring it on. I can take it.

mike - seattle

Mike,

I am in no position to bring it on, but, sitting back and looking at the trade, the previous breakout and re-test of the breakout of the sym triangle on CME, there really was no reason to jump out, unless perhaps if you had a bad entry point. I took an april put just before the close on 3/7. Bailed out yesterday on all the price action, and what really got me was the DJ being down 125 points rallying up to +50 points. A volatile day. But in looking back, and listenening to Jeff, the trade did not really go against me..and it moved within it's acceptable price movement. I guess my lack of experince got me.

The whole BOT and ICE thing, well, to add insult to injury, I took a loss on BOT...

As for the whole news issue...I think I will take Jeff's advice and listen to it, but form no opinion on it. I think I like the idea of keeping things realtively simple, follow rules, not emotion.

Jeff, where is that pill??

Chat room??

Here is one of my news examples...a few weeks or so ago Googles price target was raised to $600 by some analyst...the stock is now down somewhere in the neighbor hood of $60 since that news....go figure. I would think it would help to move the stock up, but what do I know..

Another example of what I think Jeff is trying to tell me, don't form an opinion on news...

Anyways...It is a matter of time when google gives a signal, either way....we are getting close...

Google has formed a bull flag pattern the past couple of weeks, and $435-$445 looks like a good support area....but a strong resistance line going diagonally from the top of the candle on 2/1 through the top of the candles for the past week. Plus it has been in a downtrend. And recent news, they are being sued... but that news has had little affect on it's price movement. Go figure..

Just waiting for some price action and volume here. Which way is Google gonna go, that is the question.....

As for CME...take my lumps, maybe I can enjoy the ride back up...

Brett,

How did the think or swim platform allow you to get out of BOT with a small loss?
Did you sell today?

Thanks.

Valerie W

Hi All,

have not been here in a while and missed most of the action the last couple of weeks - Thank God!!!

After reading back thru the posts I can see so much of me and my trials and tribulations. I found a really good blog site that captures a lot of the emotions we fight each time we get readu to push the "Button". I would suggest you check it out to see if it answers some of your quesions. Have a great day - tomorrow will be better - I think?

John F.

http://blog.afraidtotrade.com/

Bob, just a couple thoughts. First, bull flags do not exist in bear trends. Always remember the pattern should relect the underlying trend it is supposed to be in.

Second, the analyst price target is not a reflection of the future. This does not mean the price will go there. Incorporate your buy signals or technical analysis to illusrate proof behind these claims.

Hope that helps,

JK

I was not in CME even if my diagonal trendline showed a strong possibility of reversal. If I had been in, I am pretty sure than I would have exited yesterday.
We always repeat over and over cut your looser let run your winner. How to make the difference between those 2?

Janine

A great book I'm reading on how to keep emotions from dictating your trading is Trading In The Zone by Mark Douglas. He's a psychologist who specializes in working with traders and does seminars on trading psychology for bankers, brokerage firms and money managers. It's helping me see my thinking & emotion based errors. He also focuses on how to build confidence in your system and a 'trader's mentality". I'm finding it really helpful; especially in this volatile market.
Loretta

Janine,

There shouldn't have been any loss on CME. Any trader in this trade taken at the time it was discussed would have only lost unrealized gains, unless you took this trade pretty far after the fact. Therefore there was no loss to take on this or to keep short. All you had to do was let the winner run, and that was why I brought it up today.

Valerie,

After nearly choking on my Cocoa Krispies when the news came out, I called TOS's trade desk at 8:30 and had a live operator working with my for about 5 minutes. I knew I had to get out because with the CME likely to get into a bidding war with ICE, there was NO WAY that stock was ever going to get near $165 again. There was a huge spread, and it was bouncing all over the place, but he put an offer at $5.00 and it got hit. The stock was at $190 at the time. I suppose with the volatility so high I stole one there. That option dropped all day long. My loss was pretty small when you figure i bought the June $165 puts for $7.30 when the stock was $168 and sold for $5 a week later when the stock was $190. All in all, a horrendous early morning became a pretty decent day.

Very important to keep your composure, plan the work and work the plan. Oh, and as jeff told me, stay the hell away from takeover targets if you're bearish.

Has anyone seen the after hours trading increase on CME?!?!?!? An increase of $31.09 as of 5:07:29 PM EST, consequently the same amount it lost today.

CME is back to earth now...

Jeff,

Thanks for the clarity on GOOG..I am not in the best mind frame..

I only lost profits on CME....but a lot of them...a big OUCH! Let winners run, let winners run, let winners run...I'll say it a hunderd times now...

Brett,

That is quite a small loss for that move on BOT. I would never have thought of calling TOS to get an order through. Great thinking!

Valerie W

Good morning everyone...

anyone want to share some of their CME profits with me, LOL... (I am jealous!)

I am watching X (sym triangle) and GRP (at horizontal support?? bull flag)

waiting for confirmation.

Cloudy & rain today in PA..

Never, never, never book unrealized gains

Okay I just added these to my "Mike's rules". I will admit to having done this and will admit it caused me to break my rules when I saw gains evaporate.

I didn't buy into CME so didn't have to ride that rollercoaster yesterday. Congratulations to all that obeyed your rules.

MikeH

keeping an eye on TEX today....

Well I only had a couple minutes yesterday and again today to watch the market in the morning. Good news is that because I was gone my CME trade did great, bad news is that I only paper traded it because I was gone all day. Doesn't that make it worse? I too have been watching X and several days ago asked about it on the Cast and got a strong maybe.
Bob H
CA

Does anyone have an opinion on "waiting for the pull back and buy" versus "buying the breakout" in this market???

I'm looking for my next affordable trade (btw $200 - $300 per option) and am thinking that playing the breakout might be my best bet short-term.

It just seems like that is contrary to what Jeff (and Eric) were suggesting last week.

Any thoughts???

Gary
Boston - snowing!

Gary:

I think the market is going to swing back and forth a while and I don't think it is going to resume the bullish trend. For me this is a great opportunity for Bear Call spreads. Check out MA -- I sold April 110 and bought April 115. The credit on this is $1.3 for a 35% return if it stays below 110 by April 20th. MA is a bad looking stock (eventhough Kramer said to buy it)and right now it is at resistance at both the moving avg and a horizontal resistance line at 106 and the macd is topping off. I am out if it closes above resistance with volume.

Allen

Thur morning I said:

CME put (down 80%, should have sold yesterday)

Maybe due to blind luck maybe due to Jeff's patience post (thanks Jeff). I sat on CME and sold yesterday up 160%.

Stocks AA and DOW are still up. BVSN continues to climb. Took some FLT yesterday. Cheap and trending up very strong over past 6 weeks, industry group is heating up.

Strat,

Whay should you have sold CME yesterday? Was it in your exit plan to do so?

I missed Jeff's Master Talk last Wednesday and when I try to pull up the recording I only get the last 45 minutes of the Q&A :-( I am totally bummed b/c I really wanted to view this one -- Jeff can anything be done to fix this? Thanks

As Allen said this week's Master Talk recording is messed up. I'm bummed too.

Jeff, would you consider outlining the major points here on the blog as a topic suggestion? You were going to discuss pluses/minuses of trading indices, right?

Many thanks,

mike - seattle

Jeff, I missed the talk as well. It will be very helpful for us to hear it.

Like Mike mentioned, could we discuss the key points (trading indices) here on the blog?

thanks,
raaj

Good morning all,

Monday 3/19..

Time to get back on track for me...jeeessh....

GRP..Looks like a nice bull flag breakout start of the day 2 day...but I will WAIT and be PATIENT and see how the rest of the day goes so I don't get faked out...

Cheers to all...

Jeff..HOW's THAT CHAT ROOM COMING ALONG, LOL!!!!

I am also paying close attetnion to John Deere (DE). Sym Triangle, nice uptrend. maybe today it breaks out....it is certainly starting out the morning looking good, but I will be PATIENT and WAIT.....

Also X is looking liking a nice setup...another sym triangle??

Cheers....

Whats going on with VIP...jumped from 88 to 176 already and back down??

good morning,

Bob, where did you see that vip jumped like that. I have a call on it and didn't see that.

This is strange, now the high for VIP is $95...is there a problem with prophet charts? Anyone else experience this??

Anyone else lucky enough to be short on AGIX -- down 57%! I am starting to really love these bearish trades! I just entered a 180/185 bear call spread on SHLD for a $1.4 credit, and I am looking for another bear call spread to replace AGIX with since I just bought back the call for five cents :-) Did you guys know that Think or Swim waives the commission if you buy back calls for 5 cents or less -- way to go TOS!

On my prophet chart, today at 10:16am, I was watching it by chance and watched it spike to $176. Also, in the window showing streaming prices, the high and low, it listed the high as $176.....and reamioned listed as the high for at least 5 minutes regardless of howmany times i refreshed my screeen, changed ticker symbols, etc. Now, it does not show that....really strange. If prophet charts start doing stuff like this, showing activity that is not real...I am concerned.

I know what I saw, when i saw it, and had plent of coffee this morning so I know I ws not in a daze!!!!

My prophet chart says high of 95.00 and my TOS says the same. Never saw it go to 176.

Debbie

Pretty weird Bob, I have a call on vip, should of sold it at 176!!!!! Seem to be normal now though.

Debbie

Not short on AGIX, dang.

Anyone on yahoo IM??

Bob_raimo@yahoo.com

yeah, it is weird. But it defntly happened on my chart. Maybe I should give Tech support a call...

I have had a few issues since transferring to the new charts.

For all of you in calls in VIP, I hope it hits $176 again!!

I am curious for those of you in VIP calls, when did you take the trade and what was it you were looking at, why did you take a bullish trade on it? I am looking at the trade as a breakout today of a sym triangle. Am i missing something???

Thanks!!

Check out COP, broke out of a sym triangle on Friday and hasn't rallied today with the index, possible 12 point move?

Regards

Ken

Bob, I actually have been in vip for about 3 weeks now and held it on the huge down day. I didn't have a physical stop and of course it blew by that when it gapped down. So I just held on to it and was extremely lucky it's come back. I don't think I'll do that again. I'm not sure if I see a sym triangle or asc. tri. could be both depending on how you look at it. a break out either way tho.
Debbie

Debbie,
Gotcha on the sym and asc triangle...guess it depends on how you look at VIP.but yes a breakout it looks like either way. Thanks!!!

keep an eye on DE today...

Cheers...

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  • 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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