No magic, only method.

With a nod to the recent comments that I am a market magician, I have to tell you that I am only following what the markets are telling me to do.

A big part about gauging the momentum correctly is being able to see what the markets are showing you and react to those signals in the correct manner.

Am I able to do this time after time with what may appear to be magical precision but it really all comes down to my simple method relentlessly applied.

I don't read or listen to any news about the markets so I do not have pre-conceived notions about what the markets will do. This frees my thinking and powers of observation up to see what the markets are actually doing and not focus on some crazy idea planted in my head.

I don't have favourite stocks or fall in love with any company. I trade familiar stocks that exhibit trading characteristics which have shown me they fit into my trading system-low spread, high volume, large daily trading ranges. I don't care and frequently don't know what a company actually does. That is irrelevant to me. Stock symbols are simply letters and portals to profits to be used and discarded when their usefulness ends.

I am prepared mentally before the day begins through my visualization and affirmations. The moment I wake up I start to picture in my minds eye what my edge looks like long and short, what typically market formations I will see today long and short although I don't know when they will show up. Beginnings, middles, ends.

I have plans in place to tell me where to set stops, when to add size to winners, when to take profits, when to take losers.

I never take on too much risk. I rather like to put on more trades. Too much risk will affect your decision making process.

I have no profit goals. Every day is a new day. The markets will present opportunities and it is up to me to utilize them or not. I don't get a salary from trading but the bonuses are spectacular.

I don't know what the market will do or what a stock will do. I don't think I know beforehand if a stock will go up or down. What I do is play the probabilities happening based on what the markets are telling me and what my experience in connecting the various signals I am getting.

When you can do these things you can see what is happening or is likely to happen with great clarity and simplicity. I'm prepared to trade any direction, any stock that fits my criteria on my terms. It's all about spotting and using the opportunities as they are presented to me.

I don't fight the market or myself. I am in harmony with both.

I know a lot of this flys in the face on conventional wisdom, but the CW is wrong. You don't need to watch CNBC. You don't need to know anything about a company. Frankly the less you know the better off you are as a trader. You don't need to know what will happen next if you are prepared for anything to happen.

You can see that applying my system/edge/plan to the opportunities is not magic but only my method.

FAZ long entry

sold FAZ, take profits. during these volatile times, it is important to take profits, don't let them be eroded by the reversals that almost always come

RIMM short

RIMM cover

take profits when you'd be an idiot not to....

VXX in

VXX out

TNA short

TNA cover

So many opportunities

I hope you are not just staring at your monitors during these fantastic conditions. These are the times when you can make huge gains. Shorts are king at the moment but there will be bounces so be ready.

And yes the markets can go lower.

I'll bank some coin on this plunge...

LULU short

LULU cover

classic QLD doji short signal

QLD cover take profits

A tale of 2 trades

My previous post went on about choosing stocks that have friendly trading characteristics that match with your skill set.

Here are two entries at the same time.

BTU is a stock that I mentioned and trade frequently. It has a good daily trading range,$ .01 spread, high volume but it is also a good trending stock. No hype, flash or tech announcements. It is steady.

EDZ is a ETF that I've never traded before now. Probably a 3x. Volume is OK but not like FAZ or TNA, spread is from $ .01-.04 trading range is very good, volatility looks high.

In this trade BTU made an $.80 move, easy, relaxed, no tricks, traps or tails.

EDZ stopped me the the first trade for a .$13 loser then made a $1.20 move but I could have just as easily took only $.35 off it as showed it was going to drop big again and in fact almost went back to my entry before rocketing up. It moves fast.

(sorry I lost my EDZ entry chart)

1st chart is BTU short

2nd chart is BTU exit

EDZ exit

Choosing your opportunity

When you are learning how to do anything new, including trading, the best way to cut your teeth so to speak is to start doing the easier levels first. You aren’t going to be a chef at a Michelin 3 star restaurant if you’ve only flipped burgers before at Rotten Ronnies. You won’t fight a black belt in karate in your first class.

New traders should seek out stocks that are steady movers and have a history of not making sudden, crazy moves. I’m talking here about not trading the ETFs, especially 3x ETFs. Sure it’s easy to be seduced by the excitement of it all in the same way a pair of high heels and long legs wrapped up in a mini skirt will catch the eye of any red blooded male. But just like when your wife or GF elbows you in the ribs, the reality of the ETFs can give you a more painful lesson. They are better left to traders who have experience trading them.

I have a bunch of slower moving stocks on my watchlists like ABX, BTU, CLF,GG, LVS, PCX that come in handy when I want to slow things down a bit. They all move well enough in the day to provide .50 or more runs, sometimes much more. They have no long tails sticking out from the candles which is a sure sign of volatility.

If you really stick to our plan and trade on the signals they give you will find you’ll be making less trades per day but holding on to them longer.

If you are suffering from losing days and getting your confidence undermined pick some slower stocks. This is just common sense.

Make sure your charts are set up in a way that gives you a clear picture of what is going on. Set the scale appropriately, a range that is relevant to your trading scheme and clear off any useless information.

Don’t use 1 minute candles as they put you to close to the action and you’ve just increased your decision making by 4x more. Don’t use 15 minute candle as it puts you too far removed. This applies to momentum day trading only.

Don’t increase your size to more than you can handle. When you set your stop, if you can’t kiss that amount of money gone, then reduce the size until you can.

Don’t over trade. Select a maximum number of trades per day and stick to it if you find you are engaging in revenge trading or are entering without a definite plan or edge.

If you are wrong 3 times in a row on a particular stock, stop trading it and move on as you are not in sync with what is going on with it.

There is no B league to learn trading in. You are going into the same arena with people who are professional with vast experience and deep pockets. It’s up to you to choose your time and place that best fits with your abilities and personality. Play your game and not someone elses. The market owes you nothing so don’t think you can just show up and be paid X number of dollars. It doesn’t work that way. The way it works is that it displays information in a neutral manner for all to see and trade as they see fit to. Some traders see more than others. The opportunities are there. You take advantage of it or not. There is always another opportunity around the corner.

Take some time to decide what is the best way to turn the opportunities you see into a positive result.

Longer holds

I am a day trader and always have been for the last 8 years. A couple of days ago though I decided to try my first swing hold, AAPL short. The sickening fanboi hype on the ipad , the ensuing technical issues and don't think me callous but Steve Jobs looks like death warmed over coupled with declining markets made me want to try something new for me.

First short on the big pop and added shares about $5 lower, cover today $15 lower.

Another was FAZ from yesterday. Added at the same time as the VXX chart from yesterday shows, wound up with a $2+ ride.

I can't say that I like this form of trading. Compared to being in cash at the end of the day, the risk seems too great. It worked out but momentum day trading is still tops for me.

1st chart AAPL short

2nd chart AAPL cover

FAZ long

FAZ sell

Sticky note

Fear & Greed Day Trader: How to trade in a wild, pile driving market.