Tim,

My first question would be what is it you are trading (patterns, bounces, etc.) and what are your rules for the type of trades you make?

My most common mistake was to not let winners run...and to enter/exit trades mid-day based on emotion, not based on rules. This definitly takes discipline.

Hi Tim,
I'll keep this short and sweet, and although I don't know your risk tolerance or how much time you're able to baby sit trades, I have a feeling you might be over-trading. Some of the investools instructors say to never have more than 8-10 positions at a time (especially when first starting out), while another says to only trade 8-10 equities/indices (this allows you to know them as if they were your children..know what makes them move, which MA's they use for S/R. Hope this helped.

Hey everyone, here's a little more info in response to the questions and the day.

First, I'm feeling a little better at the end of the day as things recovered a bit, but that's really not a solution because -- what if they hadn't recovered? I want to have the mindset to face things in any circumstance.

Also, I did exit the PAA trade as it closed below my exit point. That was my only exit. I took a trade on GRA and PSA today. The PSA trade is a "hold over earnings" trade sized accordingly.

To answer the question about my rules:

1) I am trading 99% bounces right now, though i am watching breakout trades and trying to learn.
2) I watch for strongly trending underlyings to pull back, then i wait for some movement in the right direction, then i get in.
3) I only enter or exit at the end of the day. Though I'm still trying to determine if there should ever be a point of exiting intraday, as we have discussed on the blog previously.
4) I look for 3:1 in reward to risk, but this is becoming a little trickier as I am trying to be more "loose" with my exit strategy which means it is difficult to determine exactly where the risk is. This is an area I could use some input on and it's one of the areas I'm hashing through most right now.

Also, please note that in the trades i listed, all of the trades have approximately the same total dollar risk, whether they are stock or option trades. This is because I am using stock just to practice trading the patterns when options are too expensive or present too much risk. So, the stocks show a very small percentage loss but the total dollar amount is roughly the same.

on the issue of overtrading -- i have wondered about that, but since i'm learning, i want to be able to test strategies as much as possible. i am generally no more than 8-12 short term trades at a time.

the thing is, since my position sizing is so small, it gives me the opportunity to put on more trades, and i'm still not using all of my options trading capital, which in itself is less than 5% of my account.

Tim,
I think most of us on this blog know exactly how you feel. If this were a science, there'd be a lot more people doing it. Instead, it's more of an art-form and you've got to find the style that suits you best. Your trading style sounds virtually identical to mine. I have been very lucky this last three weeks with a few really good runs (DRYS, TSO to name a couple) but I've had quite a few duds, too. I'd say the trick is getting out of the duds early... but who's to know which are duds until you've lost a bunch of money? I got out of DRYS way too early and held on to WCG way too long. Both of them looked to be rolling over and had I made the oposite call on each of them I'd have my own villa in the Rivierra by now (or an aircraft carrier... I always wanted one of those.)

I wish I could pick apart your process and say "this is what you're doing wrong." but I don't see it. Stay true to your rules (do as I say, not as I do) and the home runs will come. Especially if you follow the recommendations on this blog (although trying to filter through them is like drinking from a firehose... or worse, from the water tower downtown.) I was up 30% from my original investment after a month of trading and thought this was easy. I stand before you 33% below that original investment, slowly clawing my way back and learning lots along the way.

Tim,

Your situation sounds way too familiar to me. Two weeks ago my account was down 25%, and I'd only been trading for one month. I was desparately trying for any trade that looked that it might work.
I decided to enter only one trade per week and for now, and diversify by having both puts and call positions most of the time. It took some pressure off of trying to trade nearly everyday. I also decided to exit only at the end of the day, EXCEPT, when a winner hits it's target, then I take the win gratefully and don't worry about what the stock does after that.
I also decided to trade more triangles. I'm having better success with them than the bounces. My account is 10% on the positive side now. Talk about breathing easier.
I felt like quitting before, but decided that would be too much like exiting the trade just before it takes off. (done that too many times)
Good luck.

Michael

Tim,

I can probably relate to you as much as any. So I'll provide my own perspective as to what I've gone through. Take from it what you will, if any, and throw the rest away. Based on the responses you’ve just posted, it seems like you are probably on track and in time a lot of the information you are processing will likely fall into place.

I've been with Investools for about 7 months. I had traded mostly unsuccessfully before that and knew that I needed more information, which Investools began and then primarily Jeff and Eric (and myself) have built on top of that initial education.

I started out much like you. Mostly losing trades and still have those, POT being my most recent ugly example. As I've experienced these losses, I always attempted to take away lessons which this (sometimes daily) "trading education" is giving me. I suspect I’ll always have that occur, hopefully less frequently as I continue to learn.

Over time, I've gained more confidence and also made some ‘good’ and some GREAT trades, which also builds ones confidence.

Do I still screw up, absolutely! Do I learn from it, even more so! If I don't I'll be out of capital and won't be able to play anymore and I can't afford for that to happen, so I have mentally enforced that I have to trade better and that I will succeed…the mental game...

I'm still refining my rules and as I recall hearing Jeff say on at least one occasion, that he still is too.

In my experience, reducing your position size is a good thing. While having a huge position may not give you an even bigger literal returns WHEN you hit that home run, you will still win; although the loses should be smaller and more manageable when you follow the rules you set for yourself, therefore allowing you to trade another day.

Of course no one can tell you what those rules should be specifically, although many can provide ideas and which you can test, see what works and jettison the ones that don't seem to. You can also use the Paper Trading account to try out new ideas as well.

I completely understand your desire of wanting to use real money as it puts more on the line and makes it...well...REAL! I did the same thing and am still doing that.

If your capital is getting low, you may want to go to the Paper Trading, even for a few or periodic trades, until you can build your confidence up to where you feel you want it to be.

While I've taken some losses over the last week, that is a part of this game and yet I got out of MLM and DRYS yesterday with profits, then today I was able to watch both stocks drop! Things like that absolutely boost my confidence level up. Not because I made money, but because I was able to get out without losing anything and also feel that I'm gaining a somewhat better understanding of how the markets move and that I 'may' be gaining a little better understanding of what in the world I'm doing! (Maybe it was luck…if so, I’ll take all the Good Luck I can get!)

I've gotten into some trades today to see most of them start out very well only to see them dwindle to either slight losses or small gains. Does that worry me? Not really, as I’ve learned to be patient with this, not trying to force it, to let time and the stock/option take its course. If you have patience, learn what you can from others, get your own experience, you will likely do fine.

By the way, holding over earnings is risky, I've done it quite a bit, some very successfully, some definitely not, it's something that I would not do unless you felt comfortable doing it, i.e., only if you can afford/absorb the loss.

I've read this blog for some time (only recently started writing) and feel that much of the information presented is useful taken in context...again, you need to sift through it and use what you can.

Much of trading is a mental game and you will help yourself by being prepared, mentally, technically and then establish, revise and follow your rules.

This is how I approach things and it seems to be bearing some fruit, although I’ll know more in the months to come, that is, if/as I continue to make positive progress.

Best of Luck, be patient and to paraphrase, Jeff and Eric: Let your winners run and keep your losses small.


Chip Hopkins

Thanks, Chris. This is really helpful. Two things:

First, I think one of the biggest things I'm trying to figure out is whether I'm doing something wrong or if this is just the way it is. Will there just be days when the markets pull back and all my PUTS go up? It sounds like from what you're saying that maybe it is just the way it is. That helps, because a big part of the emotion is thinking "man, i am really screwing this up."

Secondly, you say "get rid of the duds early" but then mention that you can't know if they're duds until you lose a lot. This is at the heart of what I'm trying to figure out. Everyone says "cut the losers short and let the winners run". But I think I was cutting them too short.

Recently, I've been trying to let things move more before cutting them out. I think that's helping, but it's tough on a day like yesterday or today. You think you should be doing something to fix it.

Tim, other than trading over earnings I think you could replace Tim with Bob and it would be me. Boy, can I relate to what you said about you just think you get it and see the bullish trades setting up so you get in just at the point the market goes bear and then get stopped out. I was building my account back from 2/27 until this week hit and I like you see my Puts going up when they were what was supposed to be my insurance or diversity in my account. I have been trading for almost four months like you too. I have a relative small account as my large 401k account I am not going to transfer until I have yielded success with my cash account. My account is currently down around 13% which I know is not as bad as others have mentioned but everytime I make gains days like this week drain them all away.
Tim, see what I said - I can relate and I need to learn with you so that person you see on the floor next to your therapy couch is me, hope you do not mind too much.

Hey Tim,

I was just wondering if you are keeping a journal of your trades. I recently started doing it so I can go back and see what mistakes I made and how I could have prevented it. The whole process of keeping the journal is bothersome but it really does open your eyes to mistakes you might be making. I wish I could offer more advice but I am not yet a successful trader myself. Please let us know how you are progressing.

Stephen

Couple of brief things Tim ..... Jeff recommends some great books ... I am an ITools student .. but I read also to get a good variety of information ... I have just finished ...Technical Analysis of the Financial Markets by John J. Murphy ... It has helped me to be more patient since I understand trends and am able to better analyze what I am seeing on the charts ... Second book I am reading now .. is Trading in the Zone by Mark Douglas ... This book is dealing with attitudes and emotion issues we all face ... I highly recommend them both ... good stuff!

Also, JOURNAL ... I can't live without it ... I post every aspect of the trade I am making and then go back to it when I sell ... to see why I chose it and how I did. There are several running around .. and any of the coaches at ITools can pass one along ... Connie Hill showed me the one I use in one of her Options Trading rooms .. I have altered it to suit me .. but it sure helps ....

Hope this helps some ... We're all in the same place ... some longer than others but all of us have lost and all have gained ... but I agree with Jeff ... get rid of the losers faster and be more patient with the gainers .. trending upward!

Best of luck ... Asking for this help on the blog is definitely a step in the right direction!

I would love to contribute, but I have this thing I call a job that has been very busy the past couple of weeks... I will do my best tonight, maybe before work in the morning... maybe, maybe, maybe, blah, blah, blah...

I know I am late on this but I am trying to add a photo and looked at Brett's instructions but just cannot get it to work. I created a Blog page with a photo but do not know how to get this to show up here. The URL does not seem to work from the Blog post with the picture.

Hey Tim-

I've been trading for about a year and when I first started it felt the same way. I think it's normal. I kind of relate it to learning a second language. You think you're getting it and it makes sense and then there's this time period when you feel like you don't understand your native language or the language you're learning and then all of a sudden you realize that you're not having to translate anymore, you just understand it. I started to trade smaller position sizes and diversify more and that seemed to help. I also cut down on the amount of trades I took for awhile. The two books that were mentioned above also helped a lot. And I continually read this blog, a few more trader blogs and I listen to the marketcast, call the hotline and keep asking as many questions as I can. But I know each and every day I'm still learning. You'll get it and things will begin to click in place.

liz
pasadena, ca

Totally off-topic, but i was reading another blog and RATE was featured as a bearish play. I analyzed it further, and I saw that RATE is reporting in the morning. Just having some fun with the chart, i backed out to a 2 year and...whala! A long-term symmetrical triangle brewing over the last year. Then, I backed out to a 5 year and i see a strong uptrend before the 1-year triangle consolidation. So basically, had i just taken this guy's advice blindly (and he is fairly high-ranking guy at INVESTools) , I'd be fighting a strong uptrend on a stock that very well might break loose tomorrow. Or next week. Or next month. The point is, KNOW THE BIG PICTURE.

I know Jeff hates these longer-term pattern, but i have found a LOT of success with long-term triangles. See PTR for an example of this. They can be explosive. Anyway, if nothing else, it will get you to start backing out on your charts and seeing the bigger picture. Just because someone sees a pattern one way doesn't mean you'll see it the same way. Maybe RATE looked bearish to him in the short term, and maybe he's right. Maybe he's nuts. Either way, the more time you spend with a chart and the more time FRAMES you spend, the clearer picture you'll get about a particular stock. Your success rate will be higher if you know all trends, short and long term. If you trade a short term bearish pattern against a long-term uptrend, you have to know going in that it's a short term play. Conversely, if you're trading a short-term breakout against a long-term uptrend, you might want to stretch your time frame out to capitalize on a breakout and updraft.

Sorry Tim, didn't mean to step on your therapy.

Tim,
As you can tell, you are normal. I have been trading for 14 months and every month I think I am ready to do this full time and every month I am humbled. I feel your frustration and pain. If you have a high tolerance for a lot of trades, use stop losses on everyone. This made a huge difference for me when I let the Stops take me out of the trade. I hardly ever exit on my own anymore. Most of the time I get stopped out for either a gain or loss ( dah ), but the minute I decided to change this one aspect of my trading, my winners started to run.
Using stop losses on every(almost) trade has changed my whole trading career. I did not start doing that until this last Jan. Please Tim, don't wait as long as I did!

Hey Tim,
Like you I'm a newbie. A couple of things that have helped me (in addition to Jeff's blog and the Marketcast) are having clear trading rules. Of the 3 trades I looked at, (NKE, XING,and BNI) the only issue I see with your trades is entry rules.

Why did you enter those trades? What in the charts told you "Buy Me Now"? There was an entry for BNI, but it was right before earnings so I would have held a really tight stop. I didn't see a signal on the other 2 trades. For instance on NKE, I would have wanted to see the stock price move above $55 since the $54.50 range seemed to be pretty strong recent resistance. XING was also moving sideways after having popped up and then pulled back a couple of days before you entered the trade.

Here are my rules for entering a trade.
1. Find a confirmed pattern breakout or bounce. Sometimes I'll enter a trigger order if I think (or if Jeff thinks ;-) a stock is about to move. Otherwise, I wait until I see it. As a note you will often miss opportunities if a stock moves a lot in a day...be patient.
2. ID support and resistence (there may not be resistence on a breakout)Use these to set your stop and your target. If there's not resistance, use the rules of the base of the triangle or the height of the flagpole, etc (I will also look at historical chart patterns) to guesstimate a target price. On a trade, I may set my stop less than 3% below resistance. Looser for an investment.
3. Position size based on my risk max of 2% of my portfolio or 10% in a single trade. (This should also keep you at around 10 trades max - you do have too many trades IMHO.)
4. Diverification - no more than 2-3 trades in an industry group and at least 2-3 contrary to the broader market trends (i.e., have some bearish positions too)
5. Pick the right strike and expiration. Jeff talks about this a lot on the cast and on the blog...I'm just starting to learn...
6. Check the chart everyday. Is it moving as you expected? If not, wait (patience is a virtue) or get out and put your money elsewhere. If it is, have you hit your target? Does the target still make sense? adjust your position (stop, size etc) as needed. Lock in profits if you can. Tighten stops if you will hold over earnings. Personally, my goal is to never sell, I'd rather tighten stops and let a winner keep going until I'm stopped out...But then again, I'm new at this.

Most importantly, hang in there! I'm really motivated by this group on the blog. You guys are great!

JD

hey tim,
i applaud your efforts and reaching out. the one point id like to share for better or worse is to keep records and a journal. my biggest lessons have come from learning from my mistakes and putting my buiness in a position to foster by not making the same msitakes. its and educational process and with that in mind, keep believing in yourself. i do this full time not b/c i can, but b/c i want to make this my career. i actually know i shouldnt do this full time b/c im not that good yet. but i believe i can learn anything as long as i put in the hard work....and im no better then you. hang in there!
brendan
ca

Hello everyone. Thanks for all of the great feedback. It has definitely been an encouragement, which is what I needed more than anything. I am contemplating all of it and will post more later, but for now, here's a few quick responses to some of the issues raised:

1) Benton -- thanks for the word on the books. That is something I have been thinking a lot about and I think I will start reading more.

2) I do keep a journal of every trade with detailed notes on a spreadsheet I created. I also make notes on the prophet charts in TOS for trades I'm in so that I can quickly see my intended exits and targets.

3) Duane -- i'm unsure about the idea of using auto-stop losses. that's what i used to do and it's what was taking me out of everything too early. on days when i'm away (like the next few days coming up) my plan is to use a wide "emergency" stop just in case something really blows up, and then use contingent orders set to execute at the end of the trading day for my "close below" exits. But on a normal day to day, my problem always seemed to be getting out more than i should have. i'm still thinking on this though if you or anyone else has any more feedback.

Oh, and Bob H., what's the address of your blog where you posted your photo? Send it to me (tim@dailygenesis.com) and I'll take a look to see if I can be of help.

two words.
Dirk Nowitzki

Those two words where published by:
Ladd, Cedar Rapids, IA

Tim,
My stops are all contingent on stock price. I usually leave myself plenty of room which in turn means that I can not buy as many contracts. But that big leeway keeps me in thru the intra day fluctuation.


I wanted to follow up on ICE. I posted on the 26th that I entered into a strangle when the price was exactly 130. I bought 4 contracts at 6.40 and was wanting a $10 move one way or the other.
So I have got a $7 move and still holding those calls cause honestly I am confused about what earnings will do tomorrow. I am up .50 cents as of right now and would obviously like to see it continue down to get the most out of the trade.
The safe thing to do would have been to close out the trade today for a profit and run.
I will update tomorrow as to what happened to my option prices.

Good Morning everyone:

CMG is looking good this morning!!!
(I think Brett you are out of this one, sorry, but you stuck to your rules and you should be happy)

Take a look at FAST it is ready for a picking I think

We will make lots of money today write it down make it happen!!!!

Tim my word of advice it is all about attitude, every night you go to sleep and when yu wake up write down I AM A GREAT TRADER THAT MAKES LOTS OF MONEY. Put it out there and it will come.

Take lots of trades and do not be affraid of losing. The trades you should take are the ones with the highest probability, I personally like patterns they have a great success rate and the get out card is clearly marked. BUT !!! do not use those lines like the bible you have to interpret those with volume, time, lets say right before earnings people will sell because they are affraid of the unknown, get confirmation to get out do not just get out. Other traders, specially big boys want to trick the crowd to make more, they know where these lines are, just be comfortable if you lose that whole premium, that is why you trade options, you have a defined risk!!!

Let's make some money!!!
David S


David S

keep an eye on BCSI

David S

Obviously it's a "feeding frenzy" this morning with BWLD and CMG going nuts following earnings. I should have known better since I've spent way too much time and money in both the last year.

However, I have also spent plenty of time offshore drilling for oil, so I thought I'd hold RIG over earnings and i was rewarded. For the rest of you that didn't, check out the prior high level that today's open should take out. Back out on the chart and you'll see a gigantic cup pattern. This could be the START of a major move over $100.

Guys, today could be the last chance to get into PENN. It's about to break loose from a gigantic flagpole, it's a strong uptrending stock, it's near an all-time high and if that's not enough, the acc/dist is spot on!! (just kidding)

FEEDING FRENZY!

Brett..I got table scraps on CMG..got stopped out yesterday...with a prophet, but table with scraps caompared to the main meal being served today.

See, this is why we WAIT till the last hour of the day..I got shafted yet again....

MA is killing it, did a spread over Earnings ( I know some of you dont like these but sometimes they do work out)Invested total of $900(cost put and call) Put i bought of course worthless call is worth $5400 on initial investment of $450. I guess this time it worked out.

Danny

I got in PENN yesterday at the close..See eveyone, I waited till the end of the day to get in PENN, but I got stopped out before the end of day on CMG...go figure...yet another learning experience...

TAP

I like its set up, but earnings...

Take a look a VIP it has the longest flag it has tried several times to break 100 but there is a smuck selling every time. If it breaks today we could see a good move.

David S

Is anyone in IIG coming towards earnings? It's moving very nicely. It may be a tough decision on whether to hold over earnings or not. I'm liking the movement going into it though!

Also, VIP seems to be making another run at things today and PCP maybe heating up for earnings.

With so many companies beating estimates this season I don't know how I'll be able to resist risking some position size on holding over.

Wish I had a bigger account to trade some more!

Gary

Gary, i'm in IIG BECAUSE of earnings. As you can see, we're on the precipice of the biggest short squeeze in years.

Everyone: Focus on RS, OO, PENN today. 3 flags that can make you mad money.

Bob,

Why did you get into PENN yesterday? What did you see that made you pull the trigger at the time that you did?

VIP appears to be making a big move this AM...

Jeff,

I have a solid horiz trendline at about $48. I felt that with the good volume on 4/11 and 4/12,4/30 and then yesterday closing just slightly above my trendline (I have my flag trendline starting at the close of the candle on 4/12 running thru the close of the candle on 4/20)I felt that it was a good reward/risk realizing that I would exit upon a close below my trendline at about $48.80 give or take a bit.

Jeff,

I see what i think Bob saw on PENN. Yesterday was average volume and a close just outside the flag lines (if you use a line chart). It's not overly obvious, but i'd approve the trade.

No burritos for me for a LONG while. Clearly they've been charging me too much.

Brett - Addicts -- (I see Jeff's out golfing already)

GOOD MORNING. I'm one of those newbie lurkers. GREAT gapping on CMG this morning!!! My problem is that I tend to exit too early, and I need some words of wisdom just how long do I hold onto my whole 2 contracts?!? I know the rule is let your winners run, but I don't know how to know when to snap back the reins.

Open to all advice....

Thanks guys

cindy a
Coast of Texas

Brett,

What you did not see was me screaming this morning at CMG...I feel like a dope...

BUT, I am still laughing at your BOL flag pole comment that induced lemonade spray all over my monitor, LOL..

ok, i now understand the concept of the homerun. My tiny little CMG contract is currently up almost 800% and my account has made back all of the losses of the past week plus some, even with some losing PUT plays today (PLCE and SCHL, yikes).

I also have HWCC held over earnings and it's not doing well, but even with the big fall it's down about 50%. So I can see how the math can work, if you pick a homerun every now and then.

GS

Looks like a nice bounce today...good volume so far and good price action..
I got in this trade 4/16 and will add to it today ...

Tim,

what did you see that you took a put play on PLCE today??

Brett,
Don't piss off the Master... did you say Mad Money?!?! Shame. Today's volume on PENN, OO, and RS are very low (-65% of average, so far on the VV% chart) so they make me a bit nervous. I can see them all as support bounces and will watch as the day goes on. I have to leave at 1:00 today so may have to buy early. Hmmmm didn't work so well yesterday with BBY.

Tim, it's not been a pretty week for us but have a look at TSO. It's been our homerun this past couple of weeks. Without it we'd be in a spot of bother.

Danny, nice call on MA. It's been making big moves on earnings the last couple of times. Something to think about in three months. I do my own straddles by buying big cars and then going long on oil stocks. If the price of gas goes up, I pay for it with my profits. Probably not USDA approved but I like to call it my own.

Brett,
I'm right there with you on this one - IIG !

Also in GS, VIP, PCP, ETP, GRP and KIM (this morning before it started to rise with the rest of the market...note to self, don't take trades like this until the afternoon!!!).

OH, did I forget to mention my BALANCED portfolio???? SPY put that I bought a couple of days ago.

Let the market run!!!!

Gary

Bob -- my PUTS on PLCE were entered last friday. I saw it approaching resistance and starting to roll over. Until today, it's still been holding that resistance. So, I didn't enter it today but today will be my exit end of day if it stays up there.

Just wanted to make sure I emphasized one thing. Though today has helped my account recover, I don't think therapy is over. Dealing with the emotions of a successful day can be just as hard as dealing with the tough days. I want to have the emotional fortitude to approach everything from a balanced perspective. None of the trades that are winning today have been closed out so to me, they are all still up in the air.

I just wanted to comment that I do feel I can now see the math and the logic behind the homerun. If indeed I can close out CMG with a large profit, it will definitely help to offset some losers.

Cindy, Brett's been helping me to formulate an exit strategy for CMG after the gap. I have June options so there is still time so I think I'm holding it for the longer term and just ratcheting up the stop to see if I can learn how to let a winner run. We shall see.

Gotcha Tim,

I misunderstood thinking you got in today, my bad...

Looking at the trade though here are my thoughts on it.

I have a trendline drawn from the close of the candle on 7/18/06 thru the close of the candle on 1/26/07.That resistance trendline (at about $52.35)was broken on 4/25 and 4/26 on good volume. I would not have taken the trade on 4/27..I would have wanted to see a close below that trendline.

I hope my analysis helps a little...I know I could use others analysis myself at times....Jeeesh..

Bob,

I too took the trade on PLCE last week. I see what you are saying about resistance. My line was obviously drawn different...and wrong.
Thanks for your insight!

Amy,

Hey, offering what I see helps me as well, my pleasure. I wish sometimes I'd take my own advice instead of reacting on emotion and a "gut" feeling. Many folks here help me with that and they may not even know it. The blog helps. So, thanks everyone....

Brett,

Of course you'd approve it...it was your reco wasn't it?

yeah, bob. i didn't notice the resistance line. thanks for pointing that out. i am ALWAYS open to the additional input and help.