March 5th, Friday

One quick trade on FAZ. I had little time to look at the markets with Day-Job as busy as it was; maybe 20 minutes to watch the charts between appointments.

This was all I could come up with, catching the upper end of the bounce off the nice move down in FAZ from 2:30 to 3:05pm. I could sense that the momentum had stalled and I got out. My hunch proved right as I sold the highest bid of the move.

-

Out of my frustration from yesterday, I have decided to focus more on going with momo instead of trying to fade so often. Fading is my natural reaction to a big move...ever since I started trying to trade; it is like a nervous tick...Ha! In a large percentage of these cases with reversal plays, I am either too early or just at the turn. I am often putting myself in situations of temptation to add to losers by fading early and having the trades promptly go negative. Ideally, I'd like to wait for a higher likelihood of the turn to occur and thereby remove most of the situations where averaging for better price present themselves. And most importantly, I will be in a position to profit from the continued momo by trading with it instead of against it!

In trading with the momentum, I may enter at or very close to the end of trend. This still puts me in a position where I must accept the risk and exit my bad trade with a stop. But, it will at least be a loss taken in pursuit of the most gain... trading in the direction of momo and not incorrectly fading it.
I am exploring the idea of preset stops just to get in the habit of selling off a loser. ...take the choice out of my hands and make it a contingency of the trade. Part of my hesitancy to sell and take a stop loss is that I have not learned to trust that I can make up that loss with my winning trades. Successful traders understand that good winning trades will offset the less frequent stop-losses.

-
After taking a closer look at Thursdays trading, I noticed that in some of the areas where Scott Farnham was playing a turn in TIVO, I was also sensing a change of direction and fading the monster move up. For that reason, I think I am beginning to feel the market. This "feeling" now must be followed by appropriate action. If my read of the direction change is not correct, I must sell it and learn to go the other way, as Scott did. I remember reading one of Scott's posts from 2008 (?) where he wrote in reference to the behavior of other traders (paraphrased), "... why they don't sell and go the other way, I'll never understand." There is clarity and simplicity in that. It says that the action of selling and reversing the trade is really as simple as clicking the mouse, assuming one has the right mindset. That is where I want to be someday. For this and many other reasons, I continue to follow and recommend others to http://fearandgreedtrader.blogspot.com/ as the primary resource for learning how to trade high-ADR, momentum stocks. Without that site and his work, this journey of mine would have no road map. It is a resource and a benchmark without peer, in my opinion.

March 4th

Well, here it is for all to see. Part of having a blog which is open and forthright is that my weaknesses and my errors are exposed to everyone. In that regard, I present to you my paper-trades for the day in RMBS and TIVO. I will preface by saying that I went 10 for 10 winners with a gain of just over $3,000. And I'm angry at myself for it. Why? The final eight of the ten winners were achieved by averaging up a better price by adding to the original losing trade. This dysfunction really seems to be pathological for me. I don't remember how far down I was at the high price but it was more than double, maybe thrice my eventual gains. Such is the power of the mind to avoid pain; avoid admittting I was wrong and of not truly accepting the risk.

For months and months I've been aware that this method of trading is the road to ruination because if this had been real money, I would not have been able to take being that far in the hole in a trade before the eventual turn. And, I KNEW the turn was coming, as sure as I know my own name. That is the kicker, knowing that you will be right eventually keeps you holding on. If you have been following this blog for a while, you have noticed that I make very, very few losing trades. That is a clue that I am doing this all wrong. The best traders take losses every day, because it is impossible to trade in this style and be right every time. It is unnatural to always win. If you do, you are either taking very little risk, or in my case, far too much risk. Either way, the outlook for success is bleak with this approach.

-

This blog has never and may never be about trading education. While I certainly have progressed and do share some of the things I've learned, I am for the most part inexperienced at this. What this blog has been about from its inception is the journey of a regular guy living a regular North American life, doing blue-collar work, who aspires to trade stocks for a living; to transform himself at middle age without formal trading education and without paying much money in pursuit of the goal. And, to show that it can be done by anyone with the right attitude and the committment.

-

So, that is why I do this. Lest anyone think this is a concession speech, I offer that I am more fiercely determined than ever to be a professional trader. I write this post as a way to express my frustration with my inability to change and make it clear that if you too want to be a successful trader, learn from my mistakes. Trade the way it should be done and don't try to cheat the devil. The devil will always win eventually...

March 3rd

I felt great about this paper-trade short, but didn't have the time to see it through. I jumped out of the trade with a small gain, drove like crazy, and was still about 5 minutes late for my day-job visit with a customer.

A short time ago I had a chance to sign in to see how FCX finished for the day. Looks like I had a great entry on a 40 minute drop of 87 cents.