Friday, April 9, 2010

Mental Preparation

Thanks to Charles Trader at esanalysis.blogspot.com for this mental preparation video featuring Evan Longoria. . Some key cross overs for a trader:

  • "step out of the box" after a bad swing. After a bad trade or a missed setup, do whatever it takes to mentally reset. Go for a walk, take a breathe, write in your journal, etc... Longoria steps out of the batter box and repositions is batting gloves and takes a practice cut.
  • Repetition. Longoria has been practicing/honing his mental game since his college days. One can not expect the mental side of their trading game to happen overnight. Start practicing now.
  • Improvement. Longoria went from undrafted and unknown to Major League all star. This reminds me of Don Millers "bamboo tree." The bamboo tree starts growing slowly but once it goes it really goes. trading careers can take of exponentially too.
  • Remember your breathing. Longoria takes this seriously. Many bloggers, including Dr. Brett write about biofeedback, brain activity and breathing. These need to be in control.

Here is the video with some great clips on Don Zimmer included:



E:60 Evan Longoria from E60 on Vimeo.

Thursday, March 25, 2010

Clues to the sell off

Today was an interesting day and can be viewed in 2 parts. The morning saw continued strength in the market. Many leading tech companies show great strength. QCOM AMZN GOOG PCLN all stuck out. I heard many market talking heads speaking about the "melt up" market environment. I will not often try to fade a trending market however, I will try to listen to the market for clues that the momentum might be waning. Today, I noticed that LVS and WYNN were relatively weak in the morning. These stocks have been on fire as of late so the change in character caused me to be a bit cautious. Next, the TLT's were weak and after the poor 7 year auction I thought that investor might use the rise in interest rates as an excuse to take some profits. I positioned my self long IWM LVS WYNN and FAS puts to name a few. I was able to make some nice profits into the close as I started to cover when the s&p futures went negative on the day.


After each trading day I will focus and remind myself that the next trading day I will get back to center court and be ready for what the market tells me.

If you are interested in learning more about my style of trading or you are looking for some more formal coaching or teaching, please email me at info@tradingrm.com.

Have a good night.

http://www.streetinsider.com/Corporate+News/BioMarin+%28BMRN%29+Shares+Rally+on+Klein+Resignation+from+Board/5470783.html



This morning there was a news story that a director from BioMarion Phamaceutical Inc. (BMRN) had decided to step down because the CEO of the company had received a take over offer and did not disclose it the board. The stock gapped higher on the open. I bought the April 25 calls for $1.00 based on the idea that more news might hit the tape including a potential take over price.(around 9:45 est on chart) The stock based for most of the morning until the headline hit a popular audio news service.(around 11:45 est on chart below) Right after that news hit the volatility in the april 25 calls exploded. I had the perfect opportunity to ring the register in my position. Note on the chart that the stock price did not move that much however the volatility in the options exploded. I had to decide how to handle the trade. I sold some of the calls at $1.75 and then I sold the April 30 calls for .70. This changed the position from a long call position to a long vertical spread. I am now long an April 25 30 call spread for free. I can now sit in the position for a couple weeks with no downside risk. If there is a follow up news story that causes the stock to go up I will profit nicely.

I would be happy to talk to any who is interested in learning more about this trade or how I approach the market in general. Contact me at info@tradingrm.com.

Wednesday, March 24, 2010

The options marketplace continues to evolve as the exchanges change their rules and fee structures on what appears to be a daily basis. The latest development is the new designation of professional customer. Option traders or groups who average 390 unique option orders on any exchange will be classified as a professional customer. The exchanges are attempting to increase their revenue by charging active traders a fee for each trade executed. If you are wondering how this will affect you or how it effects the market as a whole, email us at info@tradingrm.com and sign up for a free consultation.


Trading RM LLC consults, teaches, and adds new traders to our prop trading group on an ongoing basis. For more information about our services please email us at info@tradingrm.com.

Tuesday, March 23, 2010

Option Expiration Week

Last week was option expiration which is usually the most volatile week of the month. In addition, we had the March futures going off the board which increases the volatility of the overall market. Unfortunately, the market did not have any huge moves. We had a tight range in the market with the S&P cash having a 28 pt range on the week. The thing that was interesting about last week is that a few underlying stocks had huge moves. At Trading RM we were able to capitalize on a few of these stocks(QCOM, GE, NTRI) last week as our subscribers to TRM Real-Time witnessed firsthand. Granted we had our share of losing trades but if you stuck to proper money management techniques the winners were 5 times your losing trades.

Please feel free to e-mail us at info@tradingrm for a one week free-trial of TRM Real-Time where you can get these trades real-time. This monthly service is 49.99 per month. Trading RM also offers coaching, training and mentoring.

Friday, February 12, 2010

Steve Stricker update




Reading the sports this week I notice that Steve Stricker is leading the money list, is 2nd overall (behind Tiger) in world rankings and is in the top 5 of several other categories. Check out our past post which draws several parallels between Stricker's rise, fall and rise again with our trading careers. Recall Stricker's advice in the September post:

"never give up, practice with a purpose, find a coach to help you, etc.."













Thursday, February 11, 2010

Who likes DD?


I am closely watching the chart of Dupont (DD).



Look how many days in a row that DD has held the $32 level. The line in the sand is cleary $32.


I am watching/waiting for a break below $32 on heavy volume. (preferably in 1st hour of trading.)

Monday, February 1, 2010

Deja Vu all over again?


Posted a simple daily SPY chart below. We have seen a similar pattern play out a few times. Sell off, rally is over, whoops rally is back on. I am not making a prediction but I am going to be ready to capitalize if I see a rally playing out.



Ned? Ned Ryerson?

Friday, January 29, 2010

Trading RM Real Time

Just a reminder for anyone interested in Trading RM Real Time or the Trading RM Audio clerk, you can email info@tradingrm.com for a free trial.


Check out our blog to see how Trading RM Real Time can benefit you. Here is a quick video describing Trading RM Real Time. See some examples of Trading RM Real Time at work here, here, here and here.


Trading RM audio clerk is another product we offer that provides a wealth of audio information to traders at home or in an office. This includes but is not limited to:

• Real Time reporting of stocks making new daily highs and lows
• Unusual stock volume
• Unusual option volume
• Key market and stock levels
• Key Futures levels
• Up coming conference calls and events
• Trading RM’s Wave Indicator


Psychic Anyone?

In light of Dr. Brett's recent post I can offer you this. We recently received the following resume/letter. I think a psychic would make a great addition to any trading office:

Sent: Thursday, January 28, 2010 2:53 PM
To: info@tradingrm.com
Subject: Talented psychic seeking trading position

(Please note – I am offering a generous finder’s fee to the person who arranges an interview for me with a trading or investment firm, should I be hired. Click xxxx
for more information.)

Greetings Trading RM,

I have an unusual gift that is perfectly suited for equities and commodities trading.

Some call it psychic, I hesitate to make this claim, but I have worked very hard to develop it the past ten years. Now it is honed into a system that generates amazingly accurate and reliable trade signals in a variety of markets.I need to find a trading or investment firm that can put my skills to work. To me there's no question - whoever hires me will be thankful they did. The profit potential here is very serious. People are skeptical about this, understandably. But if you explore my site you can see, this is a very real phenomenon, and a very real skill I have developed.As you might imagine, this field does not lend itself to a normal resume. I have included some basic information below. For a more complete picture, please refer to
xxxxxxxx

Very truly yours, xxxxxxxxxx _________________________________________________________________________

Special Skills and Training:
The special skill I possess – the reception, recall, and interpretation of forward looking dreams – is best described as shamanism. Shamans have deeply explored their minds, and are able access the realm of dreams for information, where precognitive dreaming is a common occurrence. Regarding the financial markets, these can be a source of significant abundance.I have spent most of my life devoted to inner exploration: 34 years of meditation; 4 years at Esalen Institute (Big Sur, CA) immersed in yoga, group work, bodywork, and shamanism; 3 years in India deeply immersed in meditation and tantric training; and 25 years recording and studying my dreams, including 10 years of market dreams.For the past ten years I have studied and traded the markets. I have done extensive technical analysis of both equities and most commodities, having developed a system based on a convergence setup, mainly using Elliot Wave Theory, Fibonacci retracements, and pivots. While this system generated good signals, it did not compare with the accuracy of my dreams.

Other Work Experience:
Mountaineering instructor; carpenter; roofing contractor; massage therapist; meditation instructor; cook; science teacher; trader; columnist for xxxxxxx.com



Wednesday, January 27, 2010

Wake up running

I thought I would share this quote from The Kirk Report. This morning Mr. Kirk sent this tweet:

"Every morning in Africa, a Gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a Lion wakes up. It knows it must outrun the slowest Gazelle or it will starve to death. It doesn't matter whether you are a Lion or a Gazelle...when the sun comes up, you'd better be running."


Monday, January 25, 2010

Adjusting your game plan

Many good traders have a game plan for a particular day, week, year, etc... One thing we have discussed at Trading RM is when to deviate from your game plan. It is great to have a game plan. But if the game plan is so rigid as to prevent you from a winning trade, then it is no good.

To take a step away from trading: say a particular football team has a plan to establish the run to open up the pass. It may come to be that the opposing team is running run blitzes on 60% of the downs to start the game. This may open up an opportunity to pass to the tight end. The coach will have to adjust to this and use the pass to set up the run.

Sometimes I catch my daily game plan being too rigid in the following examples:


  • "I just got back from days off I am going to trade small." -the market does not care that you were on vacation, today may be a day to trade large
  • "I am no going to trade the open, the first 10 minutes have been unprofitable." - again the market does not care about the past. Today may present a 8 out of 10 opportunity in the first 10 minutes of the day.
  • "I am getting killed on shorts I'm only looking at longs." -It may be true that my short set ups have not paid, but today shorts may pay
  • "I am not buying highs or selling lows." - Today chasing" may pay.

The key for me is to create an open ended game plan that uses positive language. So instead of "I am not going to..." I say I will short/trade the open/up my size when I see x, y and z characteristics.

The examples are endless. Even famous TV icons sometimes develop too rigid of a game plan. Ronnie from MTV's Jersey Shore once said:

"never fall in love at the Jersey Shore."

As we see below he adjusted his game plan.

Monday, January 18, 2010

Next Best Trade






A couple baseball players have been in the news lately. Mark Mcgwire finally admitted to using steroids for the bulk of his career. This news overshadowed the Cubs signing long time pitcher Greg Maddux as an assistant to the GM.

Greg Maddux will surely go down as one of the greatest pitchers of all time. But he did not have over powering speed (like Nolan Ryan or Randy Johnson), a wicked curve ball or the physical attributes of many great pitchers. What he did have was great control and a great mental game.

Greg Maddux recently had this to say of pitching in the "steroid" era:

"If the guy was skinnier in the on deck circle, you realized you had to talk your chances with him."

Maddux was not a macho guy who had to prove himself against everyone. He put himself in situations with the best odds. If the guy on deck presented a better opportunity for an out than Mark Mcgwire, then Maddux pitched around Mcgwire.

Often in my daily and weekly goals I write to my self "be ready for the next best trade."

  • A trader can not worry about a past loss
  • A trader can not worry about a "missed" winner
  • A trader can not worry about last week, month, year

BUT, a trader can worry about the next best trade. Is it in the batter's box right now? On deck? What does it look like? What characteristics does it have? Will I know it when I see it?

Thursday, January 14, 2010

Once again today we saw more action to the downside in rambus, as previously reported there was a "fat finger" trade which was busted and rolled back. Why? I wonder that myself because it is clear there is selling pressure in RMBS, today the selling spikes were probably from the same firm or fund or whatever. Someone clearly wanted to get out of the trade because they felt that the outcome of the trial will be negative in regards to the PPS. To me all of the macro news means nothing, i just read the price action. I have no opinion or position in RMBS for the long term, if i start formulating an opinion chances are i will be wrong because i cannot control what happens over night. What i can control is my risk intra day and apply my tape/price action reading skill to help my profits. You to can apply the same skill set by understand the "signals".



The first signal yesterday in RMBS was the large downside volume of over 100k shares a few minutes after the open. This right away told me to keep RMBS on my radar, so i pulled up some OTM puts and watched, no position yet. I begin to realize people are betting on a large fall, because offers were being aggresively taken in the 20 puts with size. This was signal #2. Signal #3 was someone showed up with large size .15c above the next best bid on the 20 puts, this was a signal get in front of him and buy. I take the offers for 37c next thing you know RMBS falls a point on 400k shares, i sell out the calls for a 1 and 1.29. After the initial drop i took my profits and waited for more signals, eventually the signals came. Large bidders in the options followed by massive volume on the downside. The trading gods gave you three chances to capture the volatility in RMBS yesterday, most of the time you only get one move like this and its over.


Wham bam thank you ma'am. I let the gorilla show me where she was gonna trade, someone smarter than me and more in the know than me was pushing. i follow "gorillas", in my experience you never trade against the size or "gorilla".


Hopefully now you can understand how interpreting the tape and price action correctly greatly increases your profits. Scenario recognition comes into play also, you can use last weeks RMBS trading as a prior scenario. You can apply these principles to any stock, you just have to understand where the buyers and sellers are. If you do not understand that you can contact me and i will be more than happy to explain. I could even do another blog post on this topic.

Tuesday, January 5, 2010

Airlines Takeoff





A few weeks ago I pointed out that bullish patterns where forming across the airline sector. Today many of the airlines were showing great strength and made big moves. Below are a few examples of airlines that were on the move today.

CAL found support on its 20MA and gapped up and opened near the top of its range.


UAUA broke out of its range then had a bullish pullback.

ALK pulled back to its 20MA where it found support and was a tag and go.

Sunday, January 3, 2010

Unleash the Warrior Within


Most traders recently took a 1-2 week break. I hope everyone enjoyed their time off and is recharged for 2010. I read some books over the last two weeks including "Unleash the Warrior Within" (recommended by Jeff Quinto on his website.) The book is written by Richard J. Machowicz. Richard is a 10 year veteran of the Navy Seals, host of Discover Channel's "Future Weapons," author and propietor of the martial arts institue Bukido.


Reading this book I came across several of the same themes I have seen in trading books (and various other goal orientated writings). One of the main themes Machowicz lays out is as follows:

"We dictate our targets.

Targets --> dictate --> weapons

Weapons --> dictate --> movement"


Machowicz uses this across all processes: nuclear warfare, hand to hand combat, business development, overcoming phobias, etc... How does it apply to trading?
  • We all have targets/ goals. These are important. But how do we get to these goals? We pick a target: this can be one profitable trade, learning to trade a new product, limiting losses, working on timing, using a new indicator, etc...
  • What weapons will help us reach this target? Our front end, our co workers, our trading coach/mentor, our morning game plan, our after hours review, etc...
  • What movements do we take? Our weapons will dictate our movement. A trader may read about a new indicator, back test some data, seek out a mentor, write in and review a journal, etc...
All of this reminds me of being process orientated. Remember our post on Tiger Woods making the best swing he can. He is not focused on shooting 7 under par. He is focused on one good swing. We also saw this theme in the book "Lone Survivor." In this book Marcus Luttrell had the goal of becoming a Navy Seal (and later of staying alive). But he focused on his most immediate movements, dictated by his weapons at hand, to achieve his target.