$BHI Would like to see it hold here
Would love to see BHI hold here. Traded lower on Friday on heavy volume. We'll see what happens this week?
$OTEX - Waiting for another set up.
OTEX one that looks great moving here after basing for 8 weeks. One to keep an eye on to see if it sets up again.
$WYNN Launching Higher
WYNN took the trade away from me on Friday as it gapped above my long entry. Will watch for another entry price. Just feel I'd be chasing up here.
The Cup & Handle
- Trend: To qualify as a continuation pattern, a prior trend should exist. Ideally, the trend should be a few months old and not too mature. The more mature the trend, the less chance that the pattern marks a continuation or the less upside potential.
- Cup: The cup should be "U" shaped and resemble a bowl or rounding bottom. A "V" shaped bottom would be considered too sharp of a reversal to qualify. The softer "U" shape ensures that the cup is a consolidation pattern with valid support at the bottom of the "U". The perfect pattern would have equal highs on both sides of the cup, but this is not always the case.
- Cup Depth: Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. However, with volatile markets and over-reactions, the retracement could range from 1/3 to 1/2. In extreme situations, the maximum retracement could be 2/3, which is conforms with Dow Theory.
- Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. Sometimes this handle resembles a flag or pennantthat slopes downward, other times just a short pullback. The handle represents the final consolidation/pullback before the big breakout and can retrace up to 1/3 of the cup's advance, but usually not more. The smaller the retracement is, the more bullish the formation and significant the breakout. Sometimes it is prudent to wait for a break above the resistance line established by the highs of the cup.
- Duration: The cup can extend from 1 to 6 months, sometimes longer on weekly charts. The handle can be from 1 week to many weeks and ideally completes within 1-4 weeks.
- Volume: There should be a substantial increase in volume on the breakout above the handle's resistance.
- Target: The projected advance after breakout can be estimated by measuring the distance from the right peak ofthe cup to the bottom of the cup.
$HS - Break Out on Heavy Volume Today
After basing for almost two months, nice break out on heavy volume. Just getting started.
Trading
Do not sit down and enter a position right away- see what is going on first
Do not fight the trend- wait for indicators of a reversal such as increase in volume, technical indicators- double top or bottom,
After a successful trade and the stock settles down- wait for it to show you something before entering into the same position as before because you think you are going to miss the “real move”
Do not initiate a position at the resistance or support- instead wait for it to break the level then get involved ( do not buy hole numbers or other such levels unless you are adding to a position)
If the market is quiet be more selective about trades to enter because you will get jigged out and end up paying spreads and not being confident enough to hold the position even if you are right
Make each trade count- do not enter a position without knowing why you are involved- have a reason: market movement, tops, bottoms, increase in volume, levels
Do not chase a stock as it is moving unless you are adding to an established position; instead, wait for the pullback and when the stock settles down and it looks like a promising trade then get in
Do not get frustrated and try to fight a trend and keep shorting into an up move or vise versa and then decide to flip especially when nothing is going on- be selective, keep your cool
Try to choose one way and stick with it instead of going back and forth, but if you are wrong do not hesitate to rethink your strategy
If you are playing a stock based on hidden buying and selling- not in the book then be more patient. Take one long position from a good entry point and hold onto it rather than constantly getting in and out- churning
Do not trade if you are in the wrong frame of mind
If you start off the month on a bad note do not try to make it back in one day…have one solid day and build off that
Identify a trend in the market and the sector and stick with it until you see a real reversal- use the pullback as entry points of following the trend instead of thinking every small move up or down is the beginning of a reversal
When choosing tops or bottoms, be quicker to hit out when things go against you because the trend is still holding
Use the 50 day EMA to identify trends in the stock- it will act as support or resistance and once it breaks to the other side the stock should start to move
Stock selection is key- do not get hung up on one stock if you are unable to make money in it
After making a nice push in the morning do not be afraid to stop trading- and if you do decide to trade- pick your spots better and have a real plan instead of doing random trades
If you are going to trade a volatile stock like PD, do not protect your PL when you trade or else the risk your taking on is greater than your reward
Do not base your trades on news that you read. If the stock shows you otherwise then trade the stock accordingly instead of sticking with a bias. Use the news as a guide but do not base trades on it unless it is confirmed by the stock itself
Resist the urge to trade stocks that you have not been carefully watching
If you make a good trade in one direction and get out successfully, then try to get back in on the same side and it doesn't work- do not continue to do it- instead, wait for the stock to show you that the trend is continuing and then get involved
Use volume as an indicator of overall market activity
When volume is lower than usual it means that institutions are not active and stock moves will trend less and have little follow through
When volume is lower be quicker to scalp and do not get involved as much because although the futures may be swinging the stocks will not react and it will cause you to write tickets and lose money by paying the spread only causing frustration
Track the volume of the stocks you follow for periods of the day- such as how many shares until 11, until 12, etc.
On slow days, be quicker to switch to another stock/sector. Don't let pride hurt your trading
On slow days, if you get off to a bad start and then make half of it back- take that as a positive and stop trading...However, if the market is active and you get burned early, refocus and carry on trading normally
If you lose on your first few trades take a step back and understand what you are doing wrong instead of repeating the same thing over and over
Do not flip in between stocks- if you are trading poorly in one, then switch- if you succeed in the new stock do not go back to the other one unless you think you have reevaluated it enough to be able to trade it successfully
Do not make trades hoping for a miracle by getting into massive size for no reason
Do not fight the trend- wait for indicators of a reversal such as increase in volume, technical indicators- double top or bottom,
After a successful trade and the stock settles down- wait for it to show you something before entering into the same position as before because you think you are going to miss the “real move”
Do not initiate a position at the resistance or support- instead wait for it to break the level then get involved ( do not buy hole numbers or other such levels unless you are adding to a position)
If the market is quiet be more selective about trades to enter because you will get jigged out and end up paying spreads and not being confident enough to hold the position even if you are right
Make each trade count- do not enter a position without knowing why you are involved- have a reason: market movement, tops, bottoms, increase in volume, levels
Do not chase a stock as it is moving unless you are adding to an established position; instead, wait for the pullback and when the stock settles down and it looks like a promising trade then get in
Do not get frustrated and try to fight a trend and keep shorting into an up move or vise versa and then decide to flip especially when nothing is going on- be selective, keep your cool
Try to choose one way and stick with it instead of going back and forth, but if you are wrong do not hesitate to rethink your strategy
If you are playing a stock based on hidden buying and selling- not in the book then be more patient. Take one long position from a good entry point and hold onto it rather than constantly getting in and out- churning
Do not trade if you are in the wrong frame of mind
If you start off the month on a bad note do not try to make it back in one day…have one solid day and build off that
Identify a trend in the market and the sector and stick with it until you see a real reversal- use the pullback as entry points of following the trend instead of thinking every small move up or down is the beginning of a reversal
When choosing tops or bottoms, be quicker to hit out when things go against you because the trend is still holding
Use the 50 day EMA to identify trends in the stock- it will act as support or resistance and once it breaks to the other side the stock should start to move
Stock selection is key- do not get hung up on one stock if you are unable to make money in it
After making a nice push in the morning do not be afraid to stop trading- and if you do decide to trade- pick your spots better and have a real plan instead of doing random trades
If you are going to trade a volatile stock like PD, do not protect your PL when you trade or else the risk your taking on is greater than your reward
Do not base your trades on news that you read. If the stock shows you otherwise then trade the stock accordingly instead of sticking with a bias. Use the news as a guide but do not base trades on it unless it is confirmed by the stock itself
Resist the urge to trade stocks that you have not been carefully watching
If you make a good trade in one direction and get out successfully, then try to get back in on the same side and it doesn't work- do not continue to do it- instead, wait for the stock to show you that the trend is continuing and then get involved
Use volume as an indicator of overall market activity
When volume is lower than usual it means that institutions are not active and stock moves will trend less and have little follow through
When volume is lower be quicker to scalp and do not get involved as much because although the futures may be swinging the stocks will not react and it will cause you to write tickets and lose money by paying the spread only causing frustration
Track the volume of the stocks you follow for periods of the day- such as how many shares until 11, until 12, etc.
On slow days, be quicker to switch to another stock/sector. Don't let pride hurt your trading
On slow days, if you get off to a bad start and then make half of it back- take that as a positive and stop trading...However, if the market is active and you get burned early, refocus and carry on trading normally
If you lose on your first few trades take a step back and understand what you are doing wrong instead of repeating the same thing over and over
Do not flip in between stocks- if you are trading poorly in one, then switch- if you succeed in the new stock do not go back to the other one unless you think you have reevaluated it enough to be able to trade it successfully
Do not make trades hoping for a miracle by getting into massive size for no reason
The 10 Commandments of Trading
By Todd Harrison
Former Vice-President f Morgan Stanley
THE 10 TRADING COMMANDMENTS
RULES LEARNED FROM A CAREER OF SUCCESSES AND MISTAKES
I remember why I wanted to be a trader. I figured that the easiest way to make money was to stand near the cash register. Of course, as I discovered through my 16-year career, there's a reason why consistent producers get paid the big bucks. Flashy bets and big swings sometimes connect but, in the end, a disciplined approach pays the bills. I've tripped plenty through the years, the types of missteps that almost cost me my livelihood. But I preserved, climbed the ladder and morphed those mistakes into valuable lessons. My approach wasn't always constant but, in the end, certain rules allowed me to stay in the game.
These are the rules:
1. Respect the price action but never defer to it. The action (or "eyes") is a valuable tool when trading but if you defer to the flickering ticks, stocks would be "better" up and "worse" down and that's a losing proposition. This is a particularly pertinent point as headlines of new highs serve as sexy sirens for those on the sidelines.
2. Discipline trumps conviction. No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and, above all, never believe that you're smarter than the market.
3. Opportunities are made up easier than losses. It's not necessary to play every move, it's only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.
4. Emotion is the enemy when trading. Emotional decisions always have a way of coming back to haunt you. If you're personally attached to a position, your decision making process will be flawed. It's that simple.
5. Zig when others zag. Sell hope, buy despair and take the other side of emotional disconnects in the context of controlled risk. If you can't find the sheep in the herd, chances are that you're it.
6. Adapt your style to the market At various junctures, different investment approaches are warranted and applying the right methodology is half the battle. Identify your time horizon and employ a risk profile that allows the market to work for you.
7. Maximize your reward relative to your risk If you're patient and pick your spots, edges will emerge that provide an advantageous risk/reward. Proactive patience is a virtue.
8. Perception is reality in the marketplace. Identifying the prevalent psychology is a necessary process when trading. It's not "what is," it's what's perceived to be that dictates supply and demand.
9. When unsure, trade "in between" Your risk profile should always be an extension of your thought process. If you're unsure, trade smaller, or paper trade, until your identify your comfort zone. Trading "feel" is cyclical and any professional worth his or her salt must endure slumps.
10. Don't let your bad trades turn into investments. Rationalization has no place in trading. If you put a position on for a catalyst and it passes, take the risk off win or lose.
There are obviously many more rules, but I've found these to be the common thread through the years. Each of you has a unique risk profile and time horizon, so some of these commandments may not apply. As always, I share these thoughts with the hopes that it adds value to your process. Find a style that works for you and always allow for a margin of error. No approach is failsafe. If there wasn't risk in this profession, it would be called "winning," not trading.