Looks like the market is going to pause from the jumper trade last Friday's positive jobless reports.
Sunday, February 5, 2012
Move On
Friday, February 3, 2012 at 03:45 PM
One of the most challenging aspects of trading is learning to understand and appreciate that our constant desire to be right and smart in the markets will always cloud our judgment and too often work against us at the most inconvenient times.
In this current bull stampede, there are unfortunately too many traders and investors who are short or sidelined and now in desperate need for the market to move lower. How do I know this happening? This past week alone I received dozens of emails from those who expressed utter confusion and disappointment in why I’m not paying much attention to a number of bearish factors (i.e. low volume, overbought conditions, VIX readings, earnings/data not surpassing expectations, Baltic Dry Index, poor February seasonality, etc.) My reply in every single case was the following:
“The price action remains positively firm and our job is to be aligned with the price action as long as it remains that way. While that doesn’t mean we ignore the risks or think this market is somehow has magically become invincible, we have to constantly align our positions in the direction that offers the great probability for profit. In this environment that means you stay opportunistically bullish until we see that change. And, don’t worry – I’ll be here to help you see that change as soon as it happens.”The challenge, as all of us will learn soon or later learn, is that Mr. Market doesn’t listen or care about anyone’s else opinion but his very own. This is especially true when we are wrong and not following his hidden and often very confusing agenda. Mr. Market often acts like a rebellious teenager and does exactly what he wants to do, when he wants to do it, and at the same time pays no respect for anyone who disagrees with him or believe he should act logically or within reason. In fact, a recent tendency is for the market to do exactly the opposite of tendencies we’ve seen so many times before. This is why you must place so much importance on what the market is actually doing rather than what you think it should do.
In truth, we’ve all been there, haven’t we? I know I have. In fact, more times I can even recall or really care to admit. I have also wasted and missed far too many opportunities by devoting precious time and energy looking for reasons to justify mistakes I have already made hoping that somehow that will make it better or help me to overcome my disappointment in my bottom line performance. Unfortunately, that never works and, even worse, only increases the pain and lengthens period of poor performance. This is not good especially if you are trying to make a living from trading!
While I know many of you don’t want it, here is some free advice for those who were positioned wrong for the past few weeks and who are significantly under performing so far this year. Your job right now is not to spend a moment longer asserting you were just early (which is the equivalent of being wrong in this game) but rather own up to the mistake and then figure out why the mistake was made. After you do that, it is just as important to figure out what lessons there are to be learned so you don’t repeat the same mistake again. In simple, ask yourself this – what could you have done differently or better to have profited more since this rally began? That’s the question to ask right now. Once you have your answer, then move on.
In my experience, that’s what winners do that losers do not. And, since we all desire to be winners, that’s what you need to do right now to get back on track especially if your among the many who have been left in the dust in this bull stampede!
Courtesy from Kirk Report
Friday, February 3, 2012
Thursday, February 2, 2012
The market is on the sideways from the open then drops through mid-trading day.
Looks like the market is suffering from exhaustion and needs some breather.
A choppy trading today where the play is to scalp the market opportunities.
Unless you can watch/read the markets, you cannot make a trade.
Watching the market movement intently and reading the minds of the markets is where you can make a good setup/trade.
It takes a lot of patience!
Looks like the market is suffering from exhaustion and needs some breather.
A choppy trading today where the play is to scalp the market opportunities.
Unless you can watch/read the markets, you cannot make a trade.
Watching the market movement intently and reading the minds of the markets is where you can make a good setup/trade.
It takes a lot of patience!
Stern Advice: 5 reasons to start day trading now
(Reuters) - We all know what we are supposed to say about day trading: It's horrible, a scam, a vestige of the 1990s tech boom, and just for naive chumps.
But still, there are days when it would be nice to lock in a big win, or pile into a favorite stock when it seems to be beaten up.
In an era of flash crashes, computerized trading, whipsawing volatility and sell orders that cost less to execute than it takes to buy a gallon of milk, why should you stick with the old buy-and-hold strategy? It seems a bit out of date. You don't have to party like it's 1999, but you can be a little more active around the edges.
That's the view of Richard Schmitt, an adjunct professor of retirement planning at Golden Gate University in San Francisco, a long-time retirement consultant, and author of "401(k) Day Trading: The Art of Cashing in on a Shaky Market in Minutes a Day" (Wiley, 2011). Schmitt has been moving his own retirement account money in and out of the market on a daily basis since 2008.
"The beauty of doing it in a retirement plan is that trades don't trigger immediate taxes," he said. Trades within 401(k) plans, individual retirement accounts and Roth IRAs don't trigger capital gains taxes, though many 401(k)plans do limit the frequency with which you can trade.
Here's Schmitt's system: "Near the end of each day, if the market is lower, I'm buying. If it's moving higher, I'm selling." He suggests investors take 1/1000th of the value of their portfolios, and link that amount to the daily percentage change in the Standard & Poor's 500 stock index.
So, if you have $150,000 in your retirement account, you would trade $150 for every percentage point move in the SP500. You'd do that near the end of the day, by moving that much money out of a stock fund or exchange-traded fund and into a money market mutual fund.
"It's a lot like rebalancing, in that when you become overweighted in an asset class like stock, you will sell some," he said. "It takes the rebalancing concept to an extreme."
Schmitt concedes that his plan could hurt investors in the event of a long raging bull. But he expects stocks to be volatile, yet in a narrow trading range, for years to come. That would be one reason to adopt some day trading habits.
Here are others:
-- It's cheap and easy. In the old days, buy-and-hold strategies made the most sense because it could cost hundreds of dollars every time you bought or sold a stock. Now you can make $8 trades in an online brokerage account in moments.
Mutual funds used to come with big sales loads and exit fees. Now you can buy and sell the entire market, in the form of a total market exchange traded fund, for pennies. Many 401(k) plans offer brokerage windows in their plans, through which you can do this.
-- The big boys do it. Hedge funds and institutional investors are using computer programs that swoop in whenever the market crests and pull their profits off the table. That's why you can be watching your profits grow slowly and steadily and then whoosh!... they are wiped away.
-- You have more information than you used to. You can watch the market in real time. You can see if shares have moved up or down for days in a row, or if there's a big move starting at 3 p.m. on any given day. Using your knowledge of history, you know the market doesn't move unrelentingly in any direction for days and days in a row.
You can see if the index or stock you've been buying and selling moves into a different valuation territory.
-- You can do it gradually. Day trading doesn't have to mean sitting at a computer all day and buying and selling large lots of shares on minute moves. It can mean being a little bit more aggressive around the edges, about buying more on bad days and selling more on good days. One tried-and-true technique called 'value cost averaging' does that in a moderate way.
In value cost averaging, you invest in a mutual fund or ETF on a regular schedule; say biweekly. Instead of investing the same amount of money per period, as you would with dollar cost averaging, you increase the amount of money you put in when the share price is down, and decrease the amount you put in when the share price is up. Say, for example, you were putting in $100 on average every two weeks. If the share price fell 3 percent in those two weeks, you'd add 3 percent to your contribution, and invest $103. If the price rose 5 percent, you'd put in $95 instead of $100.
Over time, you'd commit more money during lows and less money during highs. That won't protect you from a meltdown like we had in 2008-2009, but it will help you manage your costs and risks with a long-term investment.
-- You can manage your risks. If you've made a killing, you can take some money off the table. But one of the biggest risks to long-term investors who day trade is this: They'll be out of the market when it takes off. To protect yourself from missing out on the all-important rallies, remember to buy back in when things look bleak. And to do your "day trading" with a portion of your funds and not all of them.
(The Personal Finance column appears weekly, and at additional times as warranted. Linda Stern can be reached at linda.stern@thomsonreuters.com; Linda Stern tweets at www.twitter.com/lindastern.;
(Reuters) - We all know what we are supposed to say about day trading: It's horrible, a scam, a vestige of the 1990s tech boom, and just for naive chumps.
But still, there are days when it would be nice to lock in a big win, or pile into a favorite stock when it seems to be beaten up.
In an era of flash crashes, computerized trading, whipsawing volatility and sell orders that cost less to execute than it takes to buy a gallon of milk, why should you stick with the old buy-and-hold strategy? It seems a bit out of date. You don't have to party like it's 1999, but you can be a little more active around the edges.
That's the view of Richard Schmitt, an adjunct professor of retirement planning at Golden Gate University in San Francisco, a long-time retirement consultant, and author of "401(k) Day Trading: The Art of Cashing in on a Shaky Market in Minutes a Day" (Wiley, 2011). Schmitt has been moving his own retirement account money in and out of the market on a daily basis since 2008.
"The beauty of doing it in a retirement plan is that trades don't trigger immediate taxes," he said. Trades within 401(k) plans, individual retirement accounts and Roth IRAs don't trigger capital gains taxes, though many 401(k)plans do limit the frequency with which you can trade.
Here's Schmitt's system: "Near the end of each day, if the market is lower, I'm buying. If it's moving higher, I'm selling." He suggests investors take 1/1000th of the value of their portfolios, and link that amount to the daily percentage change in the Standard & Poor's 500 stock index.
So, if you have $150,000 in your retirement account, you would trade $150 for every percentage point move in the SP500. You'd do that near the end of the day, by moving that much money out of a stock fund or exchange-traded fund and into a money market mutual fund.
"It's a lot like rebalancing, in that when you become overweighted in an asset class like stock, you will sell some," he said. "It takes the rebalancing concept to an extreme."
Schmitt concedes that his plan could hurt investors in the event of a long raging bull. But he expects stocks to be volatile, yet in a narrow trading range, for years to come. That would be one reason to adopt some day trading habits.
Here are others:
-- It's cheap and easy. In the old days, buy-and-hold strategies made the most sense because it could cost hundreds of dollars every time you bought or sold a stock. Now you can make $8 trades in an online brokerage account in moments.
Mutual funds used to come with big sales loads and exit fees. Now you can buy and sell the entire market, in the form of a total market exchange traded fund, for pennies. Many 401(k) plans offer brokerage windows in their plans, through which you can do this.
-- The big boys do it. Hedge funds and institutional investors are using computer programs that swoop in whenever the market crests and pull their profits off the table. That's why you can be watching your profits grow slowly and steadily and then whoosh!... they are wiped away.
-- You have more information than you used to. You can watch the market in real time. You can see if shares have moved up or down for days in a row, or if there's a big move starting at 3 p.m. on any given day. Using your knowledge of history, you know the market doesn't move unrelentingly in any direction for days and days in a row.
You can see if the index or stock you've been buying and selling moves into a different valuation territory.
-- You can do it gradually. Day trading doesn't have to mean sitting at a computer all day and buying and selling large lots of shares on minute moves. It can mean being a little bit more aggressive around the edges, about buying more on bad days and selling more on good days. One tried-and-true technique called 'value cost averaging' does that in a moderate way.
In value cost averaging, you invest in a mutual fund or ETF on a regular schedule; say biweekly. Instead of investing the same amount of money per period, as you would with dollar cost averaging, you increase the amount of money you put in when the share price is down, and decrease the amount you put in when the share price is up. Say, for example, you were putting in $100 on average every two weeks. If the share price fell 3 percent in those two weeks, you'd add 3 percent to your contribution, and invest $103. If the price rose 5 percent, you'd put in $95 instead of $100.
Over time, you'd commit more money during lows and less money during highs. That won't protect you from a meltdown like we had in 2008-2009, but it will help you manage your costs and risks with a long-term investment.
-- You can manage your risks. If you've made a killing, you can take some money off the table. But one of the biggest risks to long-term investors who day trade is this: They'll be out of the market when it takes off. To protect yourself from missing out on the all-important rallies, remember to buy back in when things look bleak. And to do your "day trading" with a portion of your funds and not all of them.
(The Personal Finance column appears weekly, and at additional times as warranted. Linda Stern can be reached at linda.stern@thomsonreuters.com; Linda Stern tweets at www.twitter.com/lindastern.;
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