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Federal Reserve takes drastic step, Buys 300 Billion in Treasuries

Thursday, March 19th, 2009

Today is March 18th and the Federal Reserve took a big step to buy treasuries.

All I can say is, “What a day.”

I did not know that today was a Fed decision day. Shame on me. I usually check the economic calender for that. I don’t usually pay too much attention to news, because it always shows up in the price anyway, but that is one I always look for – because of the explosive moves following the news.

It usually happens at 11:15 am West Coast time and I was in a trade just before the announcement, with only 1 contract and then, boom, a 10 point move for the S&P in minutes. I re-entered for another move up after a consolidation for another 11 point move and again I only had on 1 contract. I kept re-entering long, and some short, to the very top of the market.

The S&P hit 800, which was the support at the purple trend line that I had talked about a couple of months ago. Support, when broken, usually then becomes resistance and the market traded right up into that resistance. After noticing that,  combined with the fact that now we had traded exactly to a 62% retacement from 873, the last recent high, to 666, the last recent low and back to 62% retracement at 800 and previous resistance, it made more sense that this would be a higher target for the market to trade up to. And it did – with me in it.

Once the top was reached I saw a good spot for a short and went with it, still trading very light, I think I had 2 contracts there. That was good for about 12 points to the downside. I must have had about 50 S&P points in all, which is about 25 times the amount I need to get my daily goal of 2 points, but that would be at 5 contracts. I traded very small once my equity started to get over $1,500, but it added up real fast for a finish to the day at $5,500 after commission. I took 33 trades total. Yes, that was a lot. But it still turned out better than 75% winning trades in about 3 hours. I have a couple of short video’s showing some of this, take a look below, at the end of the first one is where the Fed released the news and the market shot up.

I must say, that I was a little surprised that the Federal Reserve said that it was going to buy 300 billion in Treasury securities on the open market and 750 billion more in mortgage backed securities, bringing their direct involvement to 1.25 trillion. This is the first time they have done this since 1960. Does anyone know what that means? To me it looks like there was no one to buy the treasuries. China said last week they were very concerned with the U.S. debt market.

Do you know that the Federal Reserve is a private corporation for profit and is not a federal agency. It’s as much Federal as Federal Express. If you did not know that, all you have to do is Google it. The Federal Reserve is owned by a group of private banks from the U.S. and Europe. Basically, the government brokered out the job to a private banking corporation. I know this may be a shock for many, but people are reacting to the news like this is a good thing. This group is beyond reproach and no one has ever performed an audit on this group.

It is relative to the markets and to the economic equation because, while it is holding interest rates down for now, it will have a reverse effect in the near future. The Gold market did not like the news at all trading up nearly 6% for the day at 965 an ounce. The dollar did not like the news at all either, dropping against all major currencies. But the stock market did like it, or so it thought.

It is going to be good for the market in the short run – how long that is, I don’t know – but in the long run, it will be disastrous. There is so much money being floated out there right now that no one can keep up with it.

Here is another thing you may not have known. The total bail out so far is said to be 8-9 trillion dollars. That is a lot of money. Again, why is that relevant? It is going to cause inflation like nobody’s business. All I can say is be careful with your long term money. Let’s hope the market moves up over the next few months giving those who want to get out of their long term investments an opportunity.

Everyone has been trained in thinking, “it will come back, it always does”. This time could be different. Do your own research and think for yourself. Don’t listen to the experts and don’t even listen to me on these matters, but spend the time and check it out.

If you do a Google search using “total bail out so far”, you will get a few figures, but they are all up in the range I mentioned. It is nowhere near the figures we hear on the nightly news.

Sorry for the ramble, but it kind of ticks me off when I hear news like this. To those who are considering a career in trading and have the risk capital, the time to make money is now. The markets are moving nicely up and down and there is profit to be had for those who can wade their way through the noise.

http://www.screencast.com/t/FifEKWgjVXr               Today’s equity chart

http://www.screencast.com/t/u9xVvzQlpfW             Some of today’s live trades

http://www.screencast.com/t/kTfMA2×13w              Some of today’s live trades

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Posted in Market News | 1 Comment »

Consistent Day Trading Success

Thursday, March 12th, 2009

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Sentiment numbers stronger than expected

Sunday, March 8th, 2009

This is for Friday’s market March 6th, and the sentiment numbers are out.

I had talked about the investment newsletter writer’s poll out for this week, expecting them to be a bit weaker than last week was, adding to a more negative environment, which would set the stage for a bigger rally. It did not work out that way.

We may still get a rally but when is the big question? The numbers changed in the positive direction, which is a little bit of a surprise. They were 28.6 bullish last week and they moved up to 29.7 bullish this week. A reading below 35 is typically a bullish sign, with a rally potentially at hand. With this sell off, extremes are difficult to time and it can take longer for the signals to have their usual counter effect. The reading only went up by 1.1%.  That may help in prolonging the coming rally. We will have a rally, that is for sure, but we don’t know if it is going to be from 1,ooo dow points lower. These numbers are just something to watch and keep in the back of your mind.

Most people who write investment newsletters have their opinion taken each week and some of them became a little more bullish this last week as of  the Tuesday reading. The point is they are usually wrong when polled as a group. It is just like so many other investors, they follow the trend and as the trend continues in the initial direction for some time more and more of them become bullish or bearish, whichever the direction.

Basically, they are late to the party and become bullish at the top of the market, when it is only then apparent to them The herd mentality. The same is true during a market sell off, they then think it is going to continue down, since that is the direction of the current trend. Last week 45 percent of them thought the market was going down. This week only 44 percent had those same feelings. That lets up the pressure a bit for the market to continue down possibly, but I would say, not by much. It is not a science. I have posted and explained this before, but for the benefit of those who are not aware of it, there you have it.

There is another point to all of this. Learn how to read the markets for yourself and you won’t be victimized by other people’s opinions. There is a way to do that. It is kind of like a language. If you don’t know it, you will be lost, wandering from place to place, looking for your way. I am not the only person who knows how to read the markets, for sure.  But I would say, there are very few who can do it effectively and consistently. I will be talking more in the future about just reading the charts themselves, with no indicators at all, just the price action.

This is a great way to start understanding what is happening on the screen. There is a struggle going on, constantly. A change in ownership, from weak hands to strong hands. Those that want to sell to others who want to buy – but at what price. It is their price, the price that they are willing to pay. In the case of a sell off, it is people who cannot handle the heat (weak hands) who sell to those who can assume the risk and are at that moment strong (hands). It usually takes only a short while of seeing lower prices until those strong hands soon become the new weak hands and begin to offer their shares and/or contracts to other stronger hands, but at their price (the new strong hands). This is how a sell off is carried on and how we get continued lower prices.

There is always someone buying, all day long, but again at their price, which often times does not hold and then the selling continues. This process stops when there are no longer a majority of sellers left to sell to and the buyers are taking the upper hand, taking all of the available supply the market has to offer and the struggle continues. There is always someone selling and there is always someone buying – but at adjusted prices. That is how and why the price changes.

We step in now and then and help them out. We create liquidity for the market place. When a mutual fund manager is faced with selling a large portion of his portfolio to meet redemption requests, but feels the drop is only short term, he can sell futures contracts by the thousands and give himself the insurance that he needs from a large market drop. If he had to sell all of the shares in the open market, he may be pushing the market down with his large size and thus adding fuel to a down market. If the drop comes, he is protecting his portfolio ( a kind of insurance ) from a market decline. When the market comes back up, the original value comes back into his portfolio but he has made a big profit from the decline. If the market does not come back, his portfolio has taken a big loss in the drop in value, but he has large gains in selling the futures contracts so he has offset his portfolio and has not lost money for his clients. If there was no one to take the other side of the trade, when he wanted to sell thousands of contracts over time, he would not be able to do what he did in the example above.

Traders and yes, day-traders, provide an essential part to the process. We make it possible for so many to buy the insurance they need to protect themselves. The market would have so much more volatility to it if we traders were not there to help smooth out the process. So there is a purpose being served here.

It is the same for the farmer growing corn or the company selling orange juice or coffee beans. By them selling futures contracts in the future, they are agreeing on a price they can live with, a set price in the future. If at that time the current price is much higher, they do not get to enjoy that higher price. Their contract says they agreed on xyz price and that is the price they will get 2 or 3 months from now when the crop come to harvest. By same token, if the current price at the time of harvest is 20% lower, they will still get the agreed price of xyz at the day the contract was agreed on.

Traders take the other sides of those trades and speculate that the price will be higher or lower in the future. The farmer is guaranteed on his price and he is happy to get it. If he came to market in the future and received  30% lower than current price, he may get financially destroyed and he can’t afford to take on that risk. But others are able to.

Those are just a couple of examples in the financial and commodity markets of the functionality of the instruments that we trade and why. On a personal note, most traders trade for personnel profit and that is understandable. They are taking a risk, and for that risk they can be rewarded when they are right.

The trading day was good today, picking up 1 & 1/2 times daily goal. I have some of those trades in a small recording from the session. I think it may be helpful for some to see the market trade in a live environment. I have had technical problems in posting my equity chart so this is the next best thing and probably better for most. As soon as I can get it fixed, I will post them again.

http://www.screencast.com/t/m8FOo2HQwNj       some live trades from Friday’s session

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Posted in Trading Turning Points | No Comments »

At last, an up day

Thursday, March 5th, 2009

Today is February 4th, and we finally got a move up.

It has been a long time since we have had a move up and it sure is welcomed. I had gotten that feeling that we would rally today, when I heard Obama say that Americana’s with the means should consider to buy stocks. It is not very often that you will hear a sitting president, to buy stock in the market. I think he got tipped off by Goldman Sacks. If we do get a rally, everyone will be saying, “see, Obama told us the bottom is in and we should buy stock”.  Knowing how people think, heard mentality, people went out like good little citizens and did what they were told, buy stocks. I am being a little sarcastic and maybe I should not be, but I can not help myself right now. I do not ever remember a president making a market call like this today and I have been following the markets for 25 years. Oh well, there is a first for everything.

The rally was welcomed, I am sure by all. I thought yesterday, that as the market closed close to the low of the day and Tuesday is the day that the sentiment numbers come out by the news letter writers, that the numbers must have dropped again, which is good news for the bulls. I will post those numbers tomorrow, because I get them two days late. I am not a subscriber so the best I can do is a little delay, I will take it. My guess is that it dropped 3-4 % to 23 or 24, with a reading under 35 as a traditionally a bullish signal. You need to remember, that all of the times we were in more or less, normal market conditions, these readings were very very accurate. But as we find ourselves in this massive sell off, which has happened before, like in 2000, sometimes the readings get stretched to extreme levels before the market reacts. This is such an environment currently. When the numbers got to the mid 20’s, we had a big market bounce off the bottom in November of last year. Since then the numbers started to rise and are now getting back to what they were before, pending Thursday’s reading. So, I am thinking that we may be in for a bounce up for a few day’s. In addition, I heard a lot of people starting to say that much lower levels are coming, like now. When you hear people on TV and Newsweek, Time, etc. saying the same thing, look for a move in the opposite direction. Those people are rarely right and it usually can pay to bet against them. With all that being said, the current trend of everything is still down. Let hope we get some follow through this week.

The market did sell off just at the close, by 100 Dow point and 10 S&P points, in just a few minutes. That sure was not good, so for tomorrow, look for a continuation of the pull back initially and watch for a rally back up. It is possible that we could get a few days of consolidation at these levels to give us a better footing for an up move, but we will just have to wait and see.

Yesterday, I made a comment about the Pension Funds being underfunded and I found a chart of just such a story, explaining the facts. Below I will post a chart of some of the underfunded companies that are having the most problems. Over all, I hear there is a $ 409 billion dollar shortfall in the pension funds right now. Last year there was surplus and now, a big underfunded liability. These companies have some time to make up the difference but if things do not improve soon, it is really going to hurt. They are regulated by the government to make these pension contributions to cover future retirement obligations. They are currently only funded to 60%, which leaves them 40% short. They are going to have to take more of there earned income and kick in a bunch of money to make up the difference and that is going to hurt earnings potential. On Wall Street, its all about the earnings. “What have you done for me lately”. That is an old saying in my family and is appropriate for the current situation hear. Oh, the reason for the big shortfall, is that a lot of these companies invest that money in the stock market and with valuations going down so much, it is putting a big strain on there balance sheet. This can turn into the old snow ball effect, if things do not turn around soon, lets hope. Just reporting the facts here.

In my day-trading effort, I only had a limited amount of time to trade and did so for only 15 minutes in the morning. I did get my daily goal with all gains. I placed 5 trades with 8 exits in the morning and as I said all were gains, nice. I found a few minutes in the afternoon session around 11 am and traded for about 25 minutes and added nicely to my gains. I posted around $1,300 for the day with 22 pieces of profit and 3 losses, 88% . I started out with a 1 point gain on 5 contracts for $250 profit, then started to reduce my size, played it safe, because I had a limited amount of time. If I had draw downs it would be harder to come back, not having the time. It worked out just like I wanted and so, I chalked up another days worth of gains. I think I am now about 30 days in row of posting solid profit every day, no loosing days. I had many days of profit before that, but in the last week of January, I started to post every day, no exceptions and it has been going great. I have had struggles and came close to my daily loss limit, where it is, that I will have to stop for the day, but my streak is alive and I plane to keep it that way, by trading smart and following my rules as best I can. Below is an equity chart of the days gains and a chart of some of my trades in the 233 tick. I am taking these trades in the 100 tick, but I am looking at other time frames to give myself a larger view and perspective.

 http://www.screencast.com/t/E8oNvlEsc6r         Today’s equity chart

http://www.screencast.com/t/KTX51dkd               Some of today’s trades in 233 tick

http://www.screencast.com/t/dOBUnSMx              Chart of, some company pension shortfalls

http://www.screencast.com/t/MAWnN1pts7b     Day trade chart of IBM, my promise from yesterday

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Index’s closing near the low of the day, again

Wednesday, March 4th, 2009

It is Tuesday, February 3rd, and another down day for the markets, but a great day for me.

 Well, it was another downer on Wall Street today. I would bet that people are getting pretty nervous out there. As I said yesterday, all anyone can do is hope there is a bounce coming to relieve the market of its anxiety.  Usually though, when that happens, at least initially, the rally will be met with more selling until it can flatten out and put a bottom in. No signs of that happening yet. To try and be a buyer in this market, without any signs of a slowdown, is like trying to catch a double edged knife while it is falling – not usually a good idea.

I know there are many calling for a bottom here and I hope we get one, but anyone thinking about buying here needs to wait. You could be a hero and catch it right, but you would be taking a big chance. What I am talking about is longer term money, not trading capital. During the day, there is all kinds of buying and selling going on in the the large cap stocks. In fact, tomorrow I will post a few stocks and show how they can be traded in this environment.

As I write this, the aftermarket is taking the the Dow and S&P 500 down, 60 points on the Dow and -6 points for the S&P. For every 10 points on the Dow, you get about 1 point on the S&P. The Dow is around 6700 and the S&P is at 696. When you see the Dow off -200 the S&P is usually off by about 20 points.

I would like to be as positive as I can be about the markets and the economy, but right now everything is down, down, and down. All time frames are lower and are not showing any signs of life. If we keep going down, companies are going to have a real hard time contributing to their employees’ pension funds. It is currently taking so much of their profit right off the top and at some point they will probably stop contributing to it out of shear survival. As they take their earnings and put it aside, it will lower by a wide margin the money that could be going to the bottom line. As their earnings projections are lowered, so goes the stock valuations.

That is one thing the market is factoring in right now. It always looks out 6-9 months and see what are the conditions are going to be like then and it will price the stocks accordingly. So far the economic numbers are going to be bad over the next few quarters, that is what the market is saying. We will feel the brunt of that in higher unemployment and so on.

Trading is still a viable opportunity for those who can handle the risk and have capital. You are not going to get a return in the bank and if you have the willingness to take on some risk for a large consistent return then this could be a possibility for some.

I will be the first person to say that day trading is not for everyone. There have been so many who thought they could do it and failed. Most people do not make it. There are several reasons for that which include no trading plan, no discipline, no patience, no focus, no dedication to learning, over-confidence, and the list goes on and on. Everyone is different and I believe most people with a desire can learn if they have the right person teach them. You have to know what to do, that is for sure. You need to have insight into how the markets work, knowing that theor job is to make you fail. It will put you into a position only to take you out and second guess yourself, to put you back in and out again you go.

It has a field day with those who can’t stand to be wrong. You can’t afford to have an ego while trading, because the market will do its job to humble you quickly. All that being said, it is almost imperative to have a mentor, someone who is doing it and can tell you how. There are a lot of people who do not know how to trade and that may even be an understatement. There are so few people who understand the underpinnings of the markets and how they can be harnessed to produce consistent market gains virtually every day.

If it were not possible, I would not be writing this blog and wasting my time. But it is possible. You can see everyday that I have consistently posted winning days for over a month straight, while limiting my risk to a very small margin. There are very few people who can do that, straight up. You need to start at the beginning – price action. People are always looking for the “Holy Grail” indicator or system that will take the trades for them. Well, if you continue that pursuit, you will be looking for a long time. Indicators can help, but usually they are lagging behind price. So would it not make more sense to then look to the price and learn how to read that? You will be one step in front of everyone else. That is what I do. I will tell you that I do look at a couple of custom indicators that I have modified to give me confirmation with my timing, but I always rely on price action first.

The markets always have a flow or rhythm to them, just like so many other things, (real estate being one of them). Making a purchase on a home is an emotional experience and it is like that for almost all people. So collectively when all of these transactions are taking place, the market is being moved by what people think and feel about life, their job, their status, and so on. All of these things get portrayed out in the market place to establish trends and those trends move people to action.

The same is true for buying and selling stocks. It is a group of people establishing the current market value for a company. As conditions change, so does the price. All news is always factored in the current price of a security. That is why I rarely ever look at news, because the current price reflects the news. Which is more reliable, the news or the current price action of the security?  It would be the current price action.

People are funny and predictable if you know how they operate. Going back to news, a good example would be an earnings report is coming out and it is expected to be good, what happens as the news comes out, great earnings. The next thing you see is the stock dropping 2-3 points on the news and you say, “what the heck”. You see the price had reflected the anticipation of good earnings and bid the stock price up days and weeks before, so when the actual event happened, there was no longer a good reason to keep the stock, as traders and investors cashed out. It is almost always like that, you can hardly make any sense of the news and how it relates on a daily basis. It all goes back to everything is reflected in the current price today.

As the markets look into the future they are going to try and price in a recovery ahead of time and or continue to adjust themselves downward as they see the future earnings potential of the companies they represent. If you know how to read price action, you can take control of your 401 K,  IRA’s and mutual funds as opposed to listening to those who have a vested interest in keeping you fully invested. There is something to be said about dollar cost averaging into a retirement account, but if someone knew that after 8 years it is now time to step aside for a while, and after 2 years of being in cash, you go back in to add to your position. Being able to side step the markets while the volatility is taking prices down and out, is a talent that most people do not have, but it can be learned.

In today’s day trading, I had a flat start for the first 30 minutes, then got going. It seems like when I have a little draw down, I seem to get more determined to get back, and stay, on top. Just a little observation that came to me. I was not planning on trading as much as I did today, but it all turned out great. I was very focused on putting trade after trade on. Trying to forget the last winning trade and just focusing on getting the next one right. I did plan on staggering my exits today and it worked perfectly. When you have a trending market, I can capture more profit from the move. When you set a small target at first and get it, you then lower your risk and can move up your stop, to put you into at least a break even position. As your next target goes off, a few ticks higher, your can comfortably ride the last one for what ever the market can give you, while always moving up your stops .

After the slow start today, I put together about 52 winning segments of profit with only 4 losses. I only took about 30 or so trades, maybe a few more or less, but my equity chart posts each segment of profit as a separate trade. That was a real nice streak I had – not my best, but very good.

The percentage today was about 80% W/L ratio, which is what I always strive for and most often get. The total profit after commission was $ 5300 dollars. The interesting thing about this is that I did that while mostly trading small, 2,3,4 contracts. I did take a few that were a little bigger, but most of them were small size.

Towards the end of the day, I did load up on an area that I felt was going to go. I did yet another different type of trade, that I call the pyramid trade. You first establish a position and as it goes your way, you move your stops up. After a new signal or break out in price, I add more and yet another signal up, I add more. I had 13 contracts built up just before today’s close and then started selling them into strength little by little, until they were all gone. Wow.

That is it for now!!!!!!!!!

http://www.screencast.com/t/mf1cQP9ud7                  Equity Chart- small audio

http://www.screencast.com/t/Q6dnbEWChS1              Some of todays trades

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Still dropping, not good

Tuesday, March 3rd, 2009

Today is March 3rd, and boy, the selling  just keeps coming.

The Dow was off -300 points, the S&P off -44 points or 4.66% for the day. Since the purple trend line break that I had warned of breaking a few weeks ago, the market has fallen about 17% – that’s a lot for just two weeks. Now the long term trend line that I had warned of breaking just last Thursday looks decisively broken, that was on the monthly chart. I had made a comparison of the 1930’s to now on that posting and I would say that it is not looking good.

The sentiment numbers came out last week and they had dropped too. I think it was only 28% of newsletter writers were bullish. That is a big drop, but it is not the lowest it was since we started going down. I would bet the new numbers coming out tomorrow will be even less of a bullish tone after these drops.

I cannot say at this point when we will get a bounce of any significance, because we sure did not get it at the double bottom. That is why I said that the people buying off that bottom are not usually the smart money. I guess that proved to be true. There was only a very small move off that bottom, which showed that this market is in trouble. We may get a bounce up, but I would not hold my breath.

Let’s just hope things slow down because this is not a good prognosis for the country’s 401K retirement money, as well as Pension Funds. I was told by a friend today, who worked for the airlines, that he was not even going to get his pension because there is no money and he was going to have to keep working. Wow, that’s wrong.

Everyone has been trained for a long time to just hold on, it will come back. If it does, it is going to be a long, long time. I hate to say it, but the things that they are doing are accelerating the drop all the while making it look like they are trying to make it better and fix it. Who can understand these people? I am pretty sure I got their number, but it would not be a good idea for me to elaborate. Just calling it as I see it.

In today’s day trading, I did well. I had several good trades, but I was only trading 2 or 3 contracts. My equity would have been a lot more had I been trading regular size, but I didn’t, so I guess I should stop whining. Really it is fine. I had about 18 positive gains and 2 losses, posting 90% W/L ratio for today. There were a few trades that had one entry with multiple exits, with the exits counting as separate trades. Traded today for 1 & 1/2 hours, roughly 7 to 8:30 am.

http://www.screencast.com/t/ESjuajqM

http://www.screencast.com/t/4Tsfv8sLJoW

http://www.screencast.com/t/SJMhjFB5

http://www.screencast.com/t/mNM120LW0

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Posted in Bear Market | No Comments »

Tough start, strong finish

Thursday, February 26th, 2009

Today is February 25th and today’s trading ended great. But boy I had a hard time getting started.

I should have known better and taken some of my own advice from the day before. If you let your guard down, you can get smacked around pretty easy from the markets.

I was sick last night and could not sleep, up all night and feeling crummy. That was my cue to take it easy, but I did not and payed for it in the early going. I was not focused, did not have patience and thought I could take the trades anyway. Well, that goes to show you, if you are not 100%, it is better to wait until you are or just don’t trade. I did neither but wished I had. It was a struggle. What made it even worse was I increased my size and so, consequently, my losses. I had been stuck on trading 5 contracts or less for a while and said to myself that today I was going to increase it.

After saying all of that, I turned things around after getting settled, but I hit my daily loss limit right in the face. I was down to my last trade for the day and needed it to be right. Fortunately, it was and I did not look back after that. I had something like 16 out of 17 winning trades after that and my equity went straight up.

As I was getting into the green, I at times started to pull back in trade size and especially at the end of the day (see chart below). When you are on a streak you want to remain careful. The reason being, I know that it is again very easy to let your guard down and get sloppy. I had done enough of that in the morning and was extra careful not to take a big draw down after doing well.

That is what happens so many times to traders, they have some nice trades and get ahead, let their guard down and then get slammed. Your biggest losses usually come after you have had your biggest gains, so be careful. Before you begin the trading day, you need to go over all the trends and different time frames to see where you are in the overall picture. Pre-market preparation is imperative.  More to come later. Have a great day !

 

http://www.screencast.com/t/pjRP3XdUAM5   Live Segment from today

http://www.screencast.com/t/IlD9XkG2              Screen Shot of a few trades

http://www.screencast.com/t/aR5EpglS               The days equity chart

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Posted in Trading Turning Points | No Comments »

Market continues sell off & Nice smooth day of gains

Tuesday, February 24th, 2009

It is Monday February 23rd and the markets continue their sell off.

We did not get a bounce, but a sell off today. I checked the exact number on the S&P bottom of November and  I see that the market went right down to it, at 742, and stopped. The Dow continued it’s slide falling 250 point to 7,114. I may have been a day early, but I still think we are in for a bounce.

The whole economic picture is pretty bleak. It has been said that the more the government does, the worse things get. I would agree with that, but that is just my opinion. Actually, I take that back. The facts would say that this is true – so far.

I do not want to be a downer to my readers, but I have been ”Bearish” on the market for some time, as many of you know. I have been hoping the slide takes a break and gives us all a little more time to get things together. But again, the market does not listen me.

A while back I had posted on the daily chart of the S&P that this market needed to stay above the 800 level – or else. Well, it is looking like the or else is happening. The daily chart has been in a solid downtrend since the purple line of support was broken on a daily basis. It has been confirmed by the indicator as well and nothing at this time has changed. The Monthly is down, the Weekly is down, the Daily is down and even the Hourly is down. It has been that way for the last 5 days now.  That is what I had to tell myself in looking at the slide today. Everything is down, don’t fight the trend.

Below is a chart of the S&P cash and my equity chart for the day. This is the start of week #4 and I have been posting my equity gains and losses every day.  I have not posted a losing day as of yet, and I don’t plan on it, but it could happen. My daily loss limit is two times my daily goal of 2 pts per day, so that would be a total of -4 points. If I am trading 5 contracts, then that would be 1,000 before commission. As I said yesterday, I came up to that point only one time and was able to turn it around for several times positive daily goal. Most of the trading days have been met with 2, 3, 4 times daily goal and up, so overall, I am pleased with my performance.

http://www.screencast.com/t/B7sIbT9SjS7                          Some of today’s trades

http://www.screencast.com/t/mQP1X38U7s                        Today’s equity chart

http://www.screencast.com/t/tOxsYylTb                               S&P Daily chart

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Day four of sample training & What a reversal today!

Friday, February 13th, 2009

Today is Thursday, February 12 and it is day four of my sample training series.

I hope everyone is enjoying it. This series is the trading activity of just one day which you can see presents many trading opportunities to capture your daily goal.  If any one has questions, please feel free to email me.

Today’s market looks like a giant “W” formation. That is how it started off, straight down, then back up a little over half way, and then straight down again, only to shoot straight up in the last 50 minutes of trading to close at the high for the day.

As I said many times before, today’s market needed to stay above the support it was resting on and when it was broken early in the morning by over 200 Dow points, it was not looking good. Although, as I watched the market action this morning, I was somewhat anticipating a reversal before the end of the day was over. I did not have a chance to see the final push back up, but it was impressive.

If a person wanted to trade what I call “Pyramiding”, you could have added 12 orders, each with its own new buy point and stop. You just keep moving up your old stop to match the new stop from the new orders. In a strong directional move like the last hour of today, you could have cleaned up. Keep in mind, you would have to have this strategy planned out well ahead of time, so you are ready with your plan of action.

I have done this in the past, but I don’t do it that often. My current strategy is to make money a little slower and build my contract base up over time. This is a more conservative approach, but I am not totally against putting a trade on like this occasionally. If an opportunity comes up in the future, I will take it and explain in more detail the order process. When the move is finished you may have added to your position 10 times.

As an example, if you were only trading one contract you may finish the move an hour later selling 10 contracts. Each add on order is treated as a separate order and should stand on its own merit, meeting your standard buying conditions with your normal stop parameters. You do not take on any additional risk as long as the move is in the right direction and you keep moving all of your stops up.  This is called scalling in.

What I do many times is what is called scalling out.  But this is a totally different strategy for different market conditions and should be a part of your overall plan of action. Currently it is not part of mine, but it may appeal to others who like this type of trading. Not every pyramiding endeavor is going to be met with 10 add on’s but maybe 3 or 4 would be a little more normal in the context of a large run of say 8 to 10 S&P points. Today’s last hour run was good for about 28 points, that is a lot, let me tell you. 

Today’s trading went well, as I was able to catch my daily goal plus in about 45 minutes. It took a little longer than most days, but that is fine. The more time you actually spend in the market brings additional risk. If I were to count the actual time I spend in the market, it is going to be very low – the total time in the trade, not the time in between trades.

Tomorrow, I will check it and post what it is. Again, this is one more thing I need to keep in mind. For me, I know anything can happen, especially these days so we need to stay on our toes. More tomorrow, have a great evening!

Vince

http://www.screencast.com/t/O4ua9O8kP          Day 4 of sample training series

http://www.screencast.com/t/GiTPwKjiDL          Today’s trades taken

http://www.screencast.com/t/FOIYZ2SUV         Today’s equity chart

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Training series / First in a nine part series

Monday, February 9th, 2009

Hello, this post is for Monday, February 9 th, 2009 and today I will begin a 9 part sample training series on how to trade the S&P 500 E-Mini Futures for daily profit.

I know some of you missed Saturday’s training with conflicting schedules, but I have decided to give out some of my material to the readers of this blog. The information is, I feel, very valuable to the person who is trying to find a method that has the ability to take money out of the market every day.

All traders are different, in that you may find a group of traders who all use the same method, but they all use different entries and get different results. That being said, you can train yourself to react in a consistent fashion when you have repeatable patterns presented to you. The main idea is to walk away with a modest profit and do it again the next day and so on. It is a very attainable goal if you know what to do.

The first thing anyone who aspires to become a successful day trader is you need to know how to trade. That may sound a little simplistic, but you would be surprised at how many people do not trade with a plan but by the seat of their pants. I don’t mean to offend anyone out there who is able to trade this way, but whatever feels good or looks good usually does not produce consistent results.

There are so few people who are able to be successful at this. In a way, I guess that’s good because the returns would not be as large as they can be for some. For the person who makes a million dollars a year, the odds drop way down. One of the reasons for that is most people are not able to 1) trade profitably and consistently;  2) they cannot overcome the mental aspect of trading . You first need to know how, then you need to work on yourself in ways you may have never thought about before. Sounds like a lot of work and it is. Nothing worth while is ever easy, cheap and without cost.

Have you ever thought of the main reason for your trading pursuits?  One of the many benefits I find rewarding about living a trader’s lifestyle is you have the ability to make your own hours. For me, that is a high on my priority list. Not having to work for someone else is without a doubt high in the ranking. You know, the money is not as important for me as it may be for others, because I don’t need so much to meet my daily needs. The time freedom is probably the most valuable to me. The money just affords the opportunity to take advantage of that benefit. The answer to the question above is going to be different for everyone, but it is a good question, so maybe give it some thought.

This business is not for everyone and I will be the first one to tell you that. You need to have a desire and/or a passion to pursue this seriously because you will be going up against professional traders worldwide. You cannot take a casual approach and expect to consistently come out on top.  

Back to the training series. I have part one of a nine part series posted below. These are only 5 minute clips and they will continue the next day where I left off. The nine parts will last a total of 45 minutes and this represents just one complete trading day. I have moved up my chart to a 233 tick chart from what I usually trade, 100 tick.  I look at 3 different time frames during the day and make my final trading decision in the 100 tick. When you trade a higher time frame chart, two things happen. You usually need to account for a bigger stop, so your target needs to be higher as well to account for that, and the second thing is you have fewer trade setups.

The smallest time frame for me is the 100 tick as I have said and this is basically a scalping method by definition (taking small profits of a few ticks to a few points). I find that, it would be advantageous for someone to trade a separate account for a different style. Like trading for larger point runs based on the appropriate trade setup. With this style, I do like to gradually scale out of trades when I see nice chart patterns present themselves. Maybe taking off the first part at 1 to 2 points, then the second at 2 to 3 points and the rest, let it go to where ever the market says get out, that is easy to identify with my method.

I might add, there is another way I have handled nice trade setups and that is, I would identify the next biggest time frame up from the 100 (I usually go up in incriments of 4, for me that would be the 400 tick chart). When I see a nice pattern in the 400, that I know in the past has produced nice movement, I look to the 100 tick and go long with a standard order, lets just say 3 contracts. I will add another 3 at a new break out with my new stop in place and move up my old stop to the second add on spot. I will add again at a new break out treating it as a separate order with its own separate stop.  In a 10 point run you may be able to add 4 or 5 times safely without any additional risk other than your first order. Basically, I am pyramiding my position for maximum return without the risk. You stay within the larger trend which is pushing you higher and add in the smaller time frame for maximum return. You can do that if you are able to recognize patterns and be ready with your plan in place. Keep that in mind when you view the short video’s.

You can see the patterns more easily in a larger time frame. That is why I have gone up to the 233 tick chart. It does not matter the time frame, everything is always the same. There are a lot of ways to trade and no one can say that my way is the best way, because it may be the best way for you but different for others. I would say, I do like the 233 tick chart and I have traded it before. It is the maximum time frame I can go and still keep a small 5 tick stop, so it is a very good alternative to the 100 tick, which may be a little too fast for someone who is just starting out. This is still plenty fast and the trade setups are still fairly frequent. When I counted the trade triggers generated in the one day, there were 50 possible trades for this time frame (233 tick)

Again, the training is broken down into 9 segments of 5 minutes each, given to you one each day and represents the full trading day of  Thursday, February 5th, 2009.  By the way, Friday’s market action looks the same as Thursday’s and Wednesday’s looks the same as Friday’s, they all  more or less look the same, repeatable trading patterns that happen over and over again.

This is just a sample of what you can learn with me. If you decide to partner with me, you will be able to follow me in the morning for 30 to 60 minutes, capturing your daily goal. I think you will be nicely rewarded with new knowledge, experience and hopefully some extra cash to go along with it. 

Ask about my “Mentoring Special”, Learn While You Earn.

Have a great day!

Vince

http://www.screencast.com/t/WhGbWgD8Y                     Sample Training part  #1

http://www.screencast.com/t/44E4Uu492Qt                   Today’s equity chart

http://www.screencast.com/t/tBnsAUQswkN                   Today’s trades

http://www.screencast.com/t/kGkg0mjTPe                     Add on trade/1 entry 3 exits

http://www.screencast.com/t/ut61mZJgZn                      Updated equity chart

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