Wednesday, July 05, 2017

The perfect chart and goal

Originally published January 17, 2014

A lot of us on StockTwits fit within different variations of what is called “active trading” even though personally we have slowed down a lot as the years have gone by.  Sometimes we think that many years down the road as we get close to retirement ages we will trade even more infrequently (10-12x a year?) and look for those sweet trends to jump on.   A text-book case here is $WYNN
Take a look at this chart (click to enlargen):
Entry on trend-line break.   Look how it acts — it goes to top of standard deviation 2 on the Bollinger Band (#1 and #3) and then corrects by going to test the upper standard deviation 1 (#2 and #4) and then bounces back up.    Just perfect.   Also a good case scenario why we don’t like shorting the top of Bollinger Band (while we do like buying oversold stocks testing bottom of Bollinger Bands) — there’s not much meat there.   On a strong trending stock price action often goes horizontal until the BB meets up and then resumes trend.  Not worth the risk going contra-trend.
The trick of course is finding these stocks before they start their multi-month trends up — you need the right market condition and the right stock, and then you need patience to sit on the winners — something a lot of traders, including ourselves, struggle with on an ongoing basis.   As a rule of thumb, the less volatile the market, the longer we try to hold the swings.  The more choppier the trend the more we go into “daytrade mode”.
If you started trading in the last couple years do note that this is not the “norm” — this is an exceptionally benign and bullish market.    We’re naturally cautious traders — probably because we were marked in our early years by the horrendous tech crash of 2000-2002.  We haven’t “maximized” gains during the bull run because we are not the pedal to the metal types and when we get overbought, we get defensive and raise cash.   We have no regrets on this — one of the things you learn in your career is to find a balance between quality of life (stress of positions– we don’t want to lose sleep or obsess about our positions once we leave the office) and PnL.   Our goal for many years now (for all of us this stage came after we started after having kids) has been not to make the maximum amount of money but to balance out a good life with a good income.   Easier said than done but always the goal.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Make peace with not catching every move

  • Posted by 
  • on April 7th, 2013
We had two conversations about a particular  trading topic on Friday — one was with a long time sub we like very much, and the second was with an internet Troll we blocked after a few minutes.   The gist of it is this:     The one thing traders have to accept in order to have any type of peace with their job is that they will not be able to catch every move, every turn in the market.   That’s not what short-term trading is about.
Trading is about coming up with strategies that yield good risk/reward returns.  Now for us often this is waiting for a support long at a certain point — we sometimes try to catch it short before it hits that point, but often we’re not successful and instead just wait for our spot.     Let’s say stock HCPG is hovering at 52 and we see multiple support converging at 46.    We have a good idea that at 46 we will be able to catch a very good risk/reward trade.    Over the next two days it does go from 52 to 46, a 6 point move down, but we’re not able to catch it short, that is it does not set up in any strategy that we know that offers good risk/reward for the move.    At 46 though we buy with 50 cent stop.  Over the next two days it rallies to our target of 48 and we sell it all.  For us that is a solid trade, our meat and potato trade, catching 2 points on 50 cent stop.
The internet troll comes along and says, ha ha, while you were looking for a measly 2 points I caught the 6 point short.    That’s where the internet troll shows his real colors, that of the infamous noob.  We are patient; we wait for everything to line up, and then pounce.  A stock could move 10% before we make our move looking for 2%, and that might sound crazy to a non-trader, but that’s the way it works.  Just because a stock moves 10% doesn’t mean it’s easy to catch.  We only trade what falls in our strategies, nothing else.   We miss moves ALL THE TIME.   Every trader does.  That’s not what trading is about.  The other obvious point is risk/reward, 4x your risk is the same if you risk 50 cents and make 2 points, than when you risk 5 points and make 20 points.
Unless you make your living off OPM,  comparing yourself against market benchmarks is counter-productive.   If market goes down 20% for two years and your fund goes down “only” 8% you are a rock star fund manager.  However, if that happens to us, we’d have to shut down.   Short-term traders like ourselves are all about consistency, being able to pull consistent profits from the market, no matter the condition.   Our PnL does not correlate to market %.   In fact some of our biggest profits are made in flat markets while we tend to under-perform in slow grind-up markets.   As traders know, the more volatility, the better.  The goal of trading for us is not to beat a certain benchmark %, or to be in the top 10% of any list, but to be able to make a good living year in, year out.  Every month we want to be able to pull money out to pay the bills that sustain our lifestyle for our families, and save whatever is extra — which basically is what every worker wants.  That’s about it.
As for future internet trolls– we’ve been trading for 16 years.   We’re good at what we do and we’ve proved that on the stream with real-time calls over and over again now for over four years, and in our newsletter for seven years.   If you want to follow us, great, be quiet and learn.  Don’t criticize, don’t offer advice, and if you don’t like what you see, simply hit that Unfollow button.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

This is how we trade reversals (as opposed to “catching” falling knives)

  • Posted by 
  • on October 30th, 2011

We’re all about looking for a tradable spot for reversion to mean trades, and then waiting for it to hit.    Sometimes it hits, sometimes it doesn’t, but it’s how we trade.
An hour ago we wrote:

What do we mean buy “buy on reversal, stop under”?   This means that you wait until the stock/future hits your support level and reverses — you buy your number with stop at the low.  In this case the buy was the reversal back to 1710 with stop just under 1707.7
Our first target usually is the 9EMA (in this case 1718 as we posted).    8 point target trade for just over 2 point stop.  Good risk/reward.
That’s exactly how we trade support long/resistance short  reversion to mean trades.  The up-side is that it gives you a defined stop and good odds at a win.  The down-side is sometimes the stock doesn’t hit your level and you miss the trade.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

EMA talk / day trader tool box

  • Posted by 
  • on August 11th, 2011
We wanted to go a bit further into how we trade futures and use the EMA.  A couple of points:
  • The reason we watch 3 min, 5 min, 15 min, and 60 min simultaneously is because we always want to know which time-frame the market is keying off.   Our golden standard for 10AM to 1PM is usually the 5 min chart with 9/20EMA.  But we also often have an eye on the 15 min chart.
  • Most times the market responds to the EMAs/ pivot points on the $SPY, but not always.   Lately we’ve found the $ES_F has been leading.   Note that Pivot points on SPY/ES_F do not correspond with each other.
  • We’ve also often found that the ES trades better when we have no daily spots (stock alerts), which of course works well as a complement.  Volatility in stocks makes things very messy, but often gives excellent ES opportunities.
  • We try to only trade futures when the EMA is smooth ascending/descending.   For our way of trading if we only trade the ES_F when the EMA is non-wavy our consistency rate is excellent, and the exact inverse is true when it’s wavy/flat. 
We were keying off the 15 min on the ES_F today — note the perfect Indy set-up.  We run up fast to 1150 zone, base until 9 EMA catches up, and then rip up.  Excellent long risk/reward trade. 
SPY 5 min was also decent pattern, but not as clear.   Note how SPY constantly hammered on the EMA refusing to close under it, finding support on R1 — very bullish sign.

Second clear trade came at shorting R2 with a very tight stop on the ES_F for a decent scalp.   The only way though to take a short like this is when stock rips up from base extended from base, and into resistance.  If EMA had caught up we would never go short this pattern.  
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

In it for the long term

  • Posted by 
  • on July 10th, 2011
We’re active traders (probably 80% day-trade, 20% swing) and quite aware that the burn-out (and blow-out) rate in our business is quite high.   It’s a given that trading is stressful, probably more stressful than many jobs out there, and because of this  there are certain measures we’ve taken which have helped us avoid burning out (so far anyway, going on 14 years trading, and 5 years since we founded HCPG).
1.  The most important decision for us was to become trend traders.  For the most part we’re breakout traders.  Even when we do support longs we’re buying oversold markets bouncing on longer-time bull-trends.   We sometimes engage in contra-trend trades  but rarely for long stretches of time.   Why?     Because going contra-trend for extended periods of time is exhausting.
Have you ever noticed those that are bears in bull markets cover way too early when the tide finally turns?  Or perma bulls  in bear markets who sell into the first real rally when things are just getting started and go into cash very early in the rally?  It happens all the time.   They’ve been underwater in their positions for so long that when they finally go green they’re psychologically burnt out and running on empty.  They take meagre profits when the run has just started.     This isn’t to say that contra-trend traders don’t make any money.  We’ve always said that there are many ways to make money in the market and for the most part it’s a personal preference.   But it’s not for us –we find contra-trend trading too exhausting.  Kudos to those who can do it long-term.    In life often the easy path is the wrong path.  In trading the easier path (trend-trading), we’ve found,  is the right path.
2.  We’ve accepted the idea that we don’t have to catch every turn.   There are times, for example, when we feel the market is very bullish but extended.  Instead of looking for break-out failures the next day we instead chill and wait for the long-setups to get ready.   In the beginning of our career we weren’t like this — we were hungrier and wanted to catch every turn up and down.   As the years passed though we slowly decided the extra stress of constantly switching directions didn’t warrant the extra profits.   In the end it’s all about risk (stress)/ reward (trading profits).     In extreme choppy range-bound markets we still go back and forth but in strong trending markets we try to stick to one direction.
For example, as you can see in this chart of the $SPY it was smart to trade range-bound while in the box, but once we broke out of the range we were happy to stick to the trend and not try to go long/short at every small opportunity.

3.  Trying to find a balance between work/life is always a juggling act.    Our goal now is not to maximize profits but to find some form of balance between a good income and a good life.  A good life for us is one that consists of retaining a certain economic comfort while still having enough time to spend with family, friends,  on leisure, and exercise (post on home gym relevant to this point).   To state the obvious, consistent balls to the wall will wear you out.  There’s a time for intense work but there’s also a time to step back and balance out the work/life equation.  One of the most useful points taught in any ECON 101 class is the concept of the law of diminishing returns.   Our thinking is not to maximize PnL but to find that sweet spot between work/life that will most efficiently allow us to maintain a good life-style (money coming in via trading) while having enough free time to enjoy life.
Easier said than done of course but finding the balance between work and life is one that we’re constantly trying to achieve.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Charts are never enough

  • Posted by 
  • on June 21st, 2011

We  rarely trade only on what we see in charts, nor in fundamentals.  We always defer first and foremost to price action (especially to divergences), and a lot of times to “feel”.     Yesterday was a good example — we went long late in the day on a basket (tweeted before close) of $ANR $CMI $SMH $GDXJ $OIH $XME and it certainly wasn’t what we saw in the charts (even though we liked the potential of trend-line breaks in CMI ANR) but price-action.    We started to sound more bullish in our tweets yesterday and finally purchased the basket — why?  Two reasons:
1.  We had $UA 70 in our newsletter for a few days and it finally triggered and worked very well.  Appetite for momentum was coming back into the market as retail stocks ripped.
2. Market  refused to die no matter how much bad news it was bombarded with from overseas.    As our readers know we don’t like to buy support when there’s basing — because often what happens after the base is the stock craters.  But on the flip-side when a stock refuses to die even though it’s basing on support then there’s a chance it will rally hard, which is exactly what we saw yesterday.   We didn’t think the 200SMA would hold but it was holding — and that was enough to flip our bias and to initiate a position long.
We’re out half of the basket  ( up on the worst position SMH 2%, and 4.7%  on ANR, our best position).   Stops are on lows of day on everything but will be updated after the close.
It’s still hard to trust this market as these one-day rallies have consistently been sold, however this is a good start with the break of trend-lines.
Long  $CMI 93.38 (posted real-time yesterday) and made it in our newsletter for trend-line break long.
We’re playing it tight enough (already out 1/2 and stops over break-even is tight in our books) but also leaving some room (might swing 1/2 but at least 1/4) in case today’s bounce has some legs.
We posted this yesterday as our SPY road map –$SPY now has passed several short-term resistance areas but still has to deal with the big kahuna resistance of 130.
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Trader’s edge: Overcoming the Distancing effect

  • Posted by 
  • on June 9th, 2011
Modern civilization demands abstraction, and money is the ultimate signifier.    Most of our interactions are removed from reality.     This distancing effect is a common part of our life.  We buy an iPhone and all we think about is the dollar price, we don’t think beyond  the money — about the life of the person who actually helped construct the phone at Foxconn.

We buy our meat from companies that do everything they can to distance you from the idea that what you are eating was actually a live animal that was butchered.  It’s not even called “Cow part”, it’s called a Rib-Eye, another distancing effect.
The distancing effect is even more exxagerated for traders.  Money is already an abstraction, for traders it’s taken to a different level where money becomes an electronic number, green and red, bobbing up and down like in a pin-ball game.    Compare this to a carpenter who works for an afternoon, makes $100, and goes home with the money knowing what bills the money will pay. Every hour that passes he knows that he has pocketed another $25.     The connection is tangible.
Back in the bubble days (tech bubble, 1999) I was in a car with a buddy prop trader, going out for dinner, driving too fast down the highway.   We got clicked by a ghost cop car halfway down the route and my buddy was stopped an issued a ticket.  He was pretty flippant and I’m sure the cop was happy to give him the $250 ticket.  We drove off and he laughed, “Ha, I made that much in the first two minutes of the day”.   He didn’t care about the ticket , he had no connection to money, and incidentally enough, to risk.He blew out in 2002 and we lost touch.
The lack of respect for what you gain and can lose is directly related to how quickly traders blow out their accounts.   What is essential for new traders, especially prop/daytraders, is to make a physical connection between those flashing red and green lights and income.  Basically, what is needed is to try to overcome the distancing effect — to realize that those flashing lights represent hard-earned money and thus do everything in your power to follow the strategy/plan/discipline.    In this business to lose money is unbelievably simple.  On the other hand, to become a professional trader who can pull money consistently out of the market is quite difficult.  The first step in this quest is to respect those flashing lights.
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Daytrader Toolbox Talk: when to short the gap up

  • Posted by 
  • on May 31st, 2011
We had a lot of spots in our newsletter last night that we liked if they could have waited a few days.  We had nothing that was ready.   A number of them gapped above and proceeded to sell off for the morning.   Reader M.D. wrote to us last night:
“I understand your preference on the market action.  On many setups you write ‘needs a day’ or a few.  What if the market does not play ball, and the alerts trigger tomorrow?  Do you pass on them?  Or if not, how would you play?”

We answered back:

“Then we usually look for shorts on breakout failures, shorts on ES, or just sit it out.”

If the market has run a lot for support to resistance, and there are no alerts that are ready, then shorting a gap up is usually a very good risk-reward trade.   This is very similar to our strategy of  buying the gap down on a market that closes oversold on support.    It has a very consistent win rate and something we recommend you add to your tool-box if you are a daytrader.

Big run from support to resistance — silly gap up on an extended market means good risk-reward short.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

When knife catching is not knife catching

Originally published May 10, 2011

We’ve tweaked this strategy as the years have passed and here is quick outline of the main points of sector support buying:
1. For the most part we prefer to get involved with ETFs over stocks, or at least put the size on the ETFs and smaller size for the stocks.    This type of trade boils down to confidence, and for us it’s much easier being confident in an ETF than a stock.
2.  This one is very important — it can’t just be one stock hitting support, it has to be the whole sector.  The more stocks hit support at the same time, the closer you are to a bounce.
3.  Best time to add is the day after a trend-day down.  The sweet spot for buying support is in the morning sell-off after a trend-day down.  That’s when the best bounces come.  However sometimes market ends at the lows (this is what happened to miners on Thursday) and then gaps up on Friday.  This is the reason we partial in on different days, because it’s very difficult to time the exact bottom.
4.   Best support buys are when it’s not on fundamental news.  For example we wouldn’t buy support on cloud stocks after bad earnings. Period.  We stayed away from buying the dip after Japan nuclear crisis because we couldn’t “game”  the situation (too bad, bounced great).   But buying “margin pukes” is probably the BEST time to buy support as there is no change in the fundamental scenario.
5.  You don’t anticipate this type of trade, patience is key.  You have to wait until there’s blood and then partial in — and never all in on one day.    It’s all about buying power and allocation — you have to give yourself concrete levels for adding.  As long as the rubber band stretches past support, you can add.  Once you’re in overshoot territory your adds will lower your cost basis and eventually your target will be your first entry at initial support.    The first target of overshoot is always the first support.  For example let’s say you want to get into an ETF called OO.  The sector is deeply oversold and many stocks in the sector are hitting support at the same time, similar to what happened here.   You start your first partial at 50  which is long term support, and add near the close at 48.   You’re now in overshoot territory.   Next day it opens at 46, and you add more.  Sector starts bouncing.   Since you’re in overshoot the  primary exit for first partial now is the support that you first started buying, 50, but your cost average is now 48.   However, it can also happen in which we are not “feeling” it and do not wait until target and take the profit earlier.   Either way, once you get the bounce, your stop automatically becomes the low, no matter what.
6. The exit plan if things go badly:   if the stocks start basing over the next few days, then you need to start lightening up and taking losses as any basing diminishes the rubber band snap back effect.   As said, once the bounce comes that low becomes the stop.   If the bounce is not enough for you to get out of your positions profitably and you go back to the lows then you will have to take the loss, which can be quite significant.   We hate to jinx ourselves but, to date, after 14 yrs of trading, this has never occurred in which we bail on the entire position without a bounce for significant losses.   There is always a bounce in ETFs.    However, what can  occur (and has happened to us in which we have scratched the trade or gotten out with some damage) is that you get out on the initial bounce but with losses  when sector  bounces weakly and you feel like it’s your best chance to exit before your position goes back through the lows .
7. One last thing:  for 90% of our trading we will not go into a trade unless we feel that our risk reward is around 3:1.   This means if we risk 1 point we expect to make 3 points.  This is very common for traders and is a very sound strategy.   This means that even if you’re wrong 50% of the time, you still are profitable due to the 3:1 ratio.     However, for this particular strategy this is not the case.   Sometimes  our profits are less than how much our unrealized losses were but we still consider it a good trade.  For example, let’s say we start buying on support and add on overshoot.  At the lows we are down 40K unrealized.   Sector bounces and we get our first target and start partialling out, bounce stalls and we exit everything for 20K profit.   Now most traders will tell you this is not good trading as you were down/risked 2x more than your profits.   However, it’s the way it is in the strategy and we haven’t been able to change it — what makes us override this red flag is the extreme consistency of wins the strategy yields.    The only time we can endorse a strategy in which the risk is more than the reward (for example 2x) is when the strategy has an incredible win rate.    Again, this could be a turn off for many of you, and that’s understandable.  This strategy is definitely not for everyone.
8.  There are three places where traders often make errors:
a) Getting in too early.   They put on a small position early and then see it become quite red and start adding.  Don’t even start that original position until there’s blood in the street.  Disasters start slowly and this is a prime example of it.  They use up all their buying power and cannot lower their cost average.  When the bounce occurs it’s not strong enough for them to go green and they exit with losses.  This is THE most common error a support trader can make.
A  2% pullback on a strong momentum stock could be a nice entry, but only if you get in on reversal with stop under — we would never use the described strategy for stocks near their highs.   It has to be a fast (the faster the better) deep pull-back, often when stocks are hitting the 200SMA or at least 100SMA.    Even the 50SMA often is not enough for us to enter this strategy (but yes on individual support buys which are very different than what we’re describing here — for those we wait for reversal, buy, and put stop on that low.  We never add and we always have a defined stop).
Additional nuance: we don’t always wait for the ETF to hit major support (even though it has to be very close) but the leading stocks in the sector.
b) Buying a broken stock instead of  buying oversold into support on longer-term bull trend.     We would never get into a broken stock just because it’s “cheap”.  In our business nothing gets cheaper faster than an already cheap stock.    When we say we’re buying on “support”,  it automatically means that the long-term bull trend is intact.    If it’s a broken chart, by definition, there is no support.
c) Not waiting for whole sector to hit support.  Probably the main reason we’ve had such consistent success with this strategy is that we simply wait for whole sector to hit support simultaneously.  If you want a recent example look at the charts from last week’s post here.
The ETFs that we use most frequently for this strategy are OIH XLE KOL JJC XME GDX GDXJ SIL SMH QQQQ, and when it’s with the Ags then POT CF MOS AGU as basket.
We’re primarily break-out traders but there is no strategy that has rewarded us more consistently over the years than buying baskets of deeply oversold ETFs hitting simultaneous support while in longer term bull trends .  We hope these detailed notes explain how what some perceive to be “knife catching” is not knife catching at all, but just a good short-term trading opportunity.
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Trading Thoughts

Wisdom doesn’t necessarily come with old age; it comes through experience, learning, and above all, self-analysis.    The same is true in most professions, sometimes a bad doctor/teacher/plumber stays  a bad doctor/teacher/plumber until he retires.   Two exceptions are sports — if you’re a bad athlete you’ll be cut and that’s that, and trading — if you’re a bad trader you will blow out.    However, the analogy still holds true for everything in the middle ground.  There are traders who are good enough to pay the bills year over year but their PnL never reaches the “comfort” zone.   In our experience there are a few things that can be done to help advance the improvement curve.
1.  You have to analyze your actions.   Trading, like life, is all about patterns.  The newer you are the more analysis you need to do: profit analysis, risk analysis, trading journal.   We did this for years and still keep a PnL Excel graph on a daily basis.  When an anomaly occurs, we write a paragraph beside it to describe what we were doing to cause the anomaly, good or bad.    Writing the HCPG newsletter  for 5 days a week for 5 years is now a form of journal writing for us — it forces us to make concrete what is potentially abstract.   The act of writing lends clarity to one’s thoughts and enables the next stage of understanding.  Starting a blog, even if it’s private, and writing out your trading plan is an excellent method of trade introspection.

2.  You have to be hungry to become better.   Is there any more humbling career than that of a trader?  As the years go by the learning curve flattens but it should never stop.   There is always room for improvment, always.
3.  Having a trading buddy/mentor/community to bounce ideas off  is a fantastic catalyst for advancement.   Many moments of enlightenment for us have come through the discussion with traders of strategies, building upon each other’s thoughts until you reach a new level of understanding.
4. You can’t be afraid to lose.   We read years ago a trader who said: “Trying to avoid losses in trading is like trying to avoid breathing in life.”  Losing money is part of the job, it cannot be avoided.   You cannot trade well if you are in constant fear of losing.    That’s what risk management is for, that is what stops do, they take away the fear and help a trader stand back and let the trade unfold.

5. Once you get the basics of strategy and risk management down it all becomes mental.    For active traders at this stage of  our career it’s all about conviction.  We touched upon this issue in a post a few months ago —  if we start to second-guess ourselves, it’s game over.   Traders know this, and that’s why in a tight trading group it’s a faux pas for any one trader to talk negatively about another’s live position.   It’s the reason we never ask anyone’s opinion about a trade.   If we have to ask then it automatically means it’s not good enough to take in the first place because the idea doesn’t jump out on one — it’s not a no-brainer, a lay-up.   If we had to point to one reason why we’re still around after all these years it’s because we wait for the trades that jump out — if nothing is good enough to trade step back and become a spectator until the next set-up emerges.  Don’t worry,  there’s always a bus that finally comes around the curve.
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Originally published May 07, 2011

How to run a straight-up business: newsletter case study

We have been running the HCPG newsletter now since 2006.   We are very happy with what we have created over the years and believe that many of the lessons we have learned in running HCPG also can apply to other businesses.   So here’s our case study.
1. Don’t claim anything.    The quality of your product is the only thing that matters.     We could be three punks trading from a double wide in some trailer park,  or we could be three very well-off successful traders.  We’ve never claimed one or the other.  Does it matter?   No, not at all.   All that matters is whether the information we provide can make you more profit than you would have without the newsletter.  Stay with what is relevant.   We stay under the HCPG moniker without providing personal information because frankly, our personal life is no one’s business.   All we do is provide potential set-ups for any one who pays $44.76/month.   You’ll find out very soon (including a 10 day free trial) whether it’s all nonsense or whether it can add to your bottom line.
2. Unless you intend to provide an audited PnL record that you will provide to your subscribers every week never talk about dollars or brag about how much money you’re minting.   You will never hear us talk about money, be it on stocktwits, twitter, or in the newsletter.   You will never hear us say Big Kaching!!   If we’re happy with a trade we’ll say it was a good trade; whether we had 100 shares or 100,000 shares should have no effect on your trading.  Keep your ego out of your business.
3. Be nice and always look at the big picture.  If you’re in it for the long-term as we are (HCPG 5 year anniversary in a few months) then try to build solid relationships with your readers.  Don’t nickel and dime people.  If a subscriber forgets to cancel a trial and gets billed on the 10th day  and emails us that they don’t want to stay on, we refund the money.    We believe that readers should consider us a lucky find — rather than trying to trap people for an extra month because they forgot to cancel in time.   We want readers to stay with us because they want to stay with us.   This is also the reason we do monthly payments.  No contracts, no specials.
4.  Be the best in what you do.    Easier said than done but what will propel you on this path is to specialize.   Find your niche and then be the best.     We only trade high-beta very liquid US equities, mostly in the commodity and tech space.  We’re not interested in trading small-caps, Chinese time-bombs, biotech-time bombs, and while we like to watch currencies and hear about options, they’re not our specialization and you won’t find them in our newsletter.  We want to only talk about things we know very well and frankly, options and forex do not fit into that category.
5.  Teach people.   Subscribers who have been with us  for a good chunk of time  know our strategies as well as we do.   Create a community and  build bonds and you will see the benefits of organic growth.
6.  Keep your cool.   When you are writing the newsletter or posting on twitter/stocktwits you are representing your company.  Don’t get emotional, or get into cat fights with other traders.    If you are dying to rant then open up a personal twitter account and go nuts.   But everything that comes under your company name should reflect professionalism and integrity.   Don’t get us wrong, we love to joke around, and believe that’s an important part of relieving stress in a very stressful job.   But you won’t find HCPG losing it in a temper tantrum.
7.  Don’t fret about the competition.     We often retweet posts from our competitors, and consider many of them as online friends.   Don’t be afraid.   There’s always room for a quality product in the market.

(originally published April 09, 2011)

Wednesday, March 14, 2012

My favorite workout

Last June I posted My best purchase in a long time which gave a detailed account of my new home gym.    Indeed it was a great addition to the home office and I feel even more strongly about it now than I did even in that original post.
Today I’m going to go into detail with my current favorite work-out.   Only requirement is a heart-rate monitor.   My treadmill comes with one but if you don’t have one then buy one — it’s a great little purchase.     There are three good contenders:  Garmin,  Polar, and Suunto.   All three are excellent  (at one point or another over the years I’ve tried them all).
This work-out is a combination of straight out cardio and HIIT.   If you think you’re too unfit to do it then read this great NY times piece on HIITs.

This is a 48 minute work-out (with few minute warm-up and cool-down after to put total around 54 minutes).
I do it on a treadmill but of course you can do it outside.  As said, all you need is a HR monitor/watch.
As you can see there are 24 bars meaning each bar is 2 minutes long.

First 12 bars (first 24 minutes)  jog/run/walk  so that your heart-rate is around 140-150.    That’s a nice longer type warm-up.   Now the fun starts:
Each long bar (hill) represents your cool-down.   You have 12 bars left meaning 24 minutes–  12 of these minutes will be hard runs, and the other 12 minutes will be cool-downs.
On the 13th bar (minutes 24-26) take the pace down (you’ve just jogged for 24 minutes) until your heart-rate goes under 130.   This could mean light jog or slow walk, whatever it takes to get your HR down.
On 14th bar (minutes 26-28) start running until you get your heart-rate up to 170.  What I usually do is run fast for the first minute to get to 160 and run faster in the second minute to get to 170.    On the next bar (15th bar, minute 28-30) you need to do whatever it takes to get your heart-rate under 130.    Decrease speed/incline until you can achieve that (for most people it will mean a walk).    Next bar means sprint again until HR 170 as goal and so on until you finish the program alternating each 2 minutes.
Some people might not be able to recover to below 130 on the recovery bars– for these people it might be best to change the time workout and take more time for recovery.   So for example 1 minute hard to get your heart-rate to 170 and then 3 minutes recovery so your heart-rate goes down to below 130.
Change it up, experiment around, but do it (three times a week would be great)– it’s an awesome work-out that’s not boring and great for the most important muscle of all, your heart.

Sunday, March 11, 2012

Easier to stay long with financials at our backs

Having conviction on the long side (which is essential when it comes to buying pull-backs) is a lot less stressful when financials act this well.   We’re above all major moving averages now on the $XLF on daily and weekly.   Note this 15 area on the XLF has been a critical area for years.    Digestion here is normal and healthy.     Our guess is that once 15 is gnawed at a bit more, we’ll lift off from that level to the next resistance level at 17.     And if we pull-back in the digestion phase, first major support comes in at 14.

Tuesday, March 06, 2012

The Other Side

When $IWM broke 81 we wrote a post saying it was the big news of the day and that if bears wanted to push, this was the time.   Now it’s the other side — first test of the 50sma this year and if bulls want to hold, this is the time.

Wednesday, February 29, 2012

Divergence food for thought

Not sure how to interpret this chart (lack of belief in China growth?) but the divergence between $QQQ and the metal miners $XME hasn’t been this significant since 2008.    Our time-frame is too short to trade off such a chart but interesting nevertheless.   Even if you take out $AAPL out of equation the divergence is very significant as a $SPY/$XME chart shows  similar divergence.   Any thoughts?

Sunday, February 26, 2012

Refiners coming into important zones

Refiners had a hard reversal on Friday and look like they want to test their respective 20SMA averages on daily.   Let’s take a look at our three favorites,  $HFC $WNR $TSO and their respective initial support zones.
WNR 17.6 range is the first initial support.   Note that this would be the first test of the 20sma this year.

TSO first support near 26.75
And HFC first support near 32.8
If they aren’t clearly trending down (following 20ema on 5 min intraday chart) we’ll try all three for support long buys, either a) waiting for reversal before entry with stop on low or b) bidding the aforementioned spots with around 0.5% stop.
To put it simply  bullish would be a bounce on the zones given in this post, and bearish would be no reaction on these levels as buyers shy away from initial support.
Refiners can sometimes act as decent market tells and with crude approaching $110 and $SPY at resistance we’re on the look-out for the possibility of at least a pause in the music.   Keep your eye on that empty chair.

Thursday, February 23, 2012

Market hasn't gone anywhere but look at the move on these stocks

We have referred to this market as “benign” as a while now and one of the features of a kind bull market is even when the market sits and digests,  break-outs work.   Take a look at the last four freebies we gave out on the stream  $SLW, $IBM, $WLL, and $CLR.    Big moves in individual stocks while $SPY has done very little.
CLR was an alert in our newsletter but also a freebie on the stream for 84 break-out.
IBM has been on our list for weeks, and we mentioned many times on stream:
Just before we left for vacation we gave out this idea for SLW,  long on close with stop on lows of day.  Awesome continuation.
WLL 54 also given out on stream — and again, big move.
Market sits and does very little while individual set-ups work very well.   Definition of a benign market.

Tuesday, February 14, 2012

8 day record?

We can’t remember the last time we saw a stock trend above the 20EMA chart for 15 days and even more impressive trend above the 9EMA for 8 days.   $AAPL is the only stock in our universe that has done that this year.    Any other examples out there (non-small cap)?
If you want to short this behemoth at least do yourself a favor and wait for the trend (at least the 20ema/60min) to break.
20EMA is blue line, 9EMA is orange.

Monday, February 13, 2012

This is how we trade

We keep things very simple for our trading.   Every day after the close we manually scan through our universe of stocks looking for patterns to trade.   This is our homework and anyone can buy it for $44.76 a month.    We send our alerts out to our subscribers.   The next day we review everything that triggered, win or lose, whether we traded it or not, etc.
During the slow parts of the day we start writing the newsletter.   Right now we have taken day-trade profits in $AMZN $KLAC $ALTR long,  $WYNN short, and have small swing size positions on with hard stops that we’ll take into tomorrow if we don’t get stopped in the next 3 hours.
Our Sunday morning newsletter included all the alerts that we review today:
KLAC support was 49 or 48.5 overshoot. At 49 stock was trending lower without any pause, but finally green bar reversal on 48.5. Decent move back to the 20ema at 49 (overshoot often rallies back to primary support – that’s the first day-trade target).
ALTR 39.26 alert—found it’s footing just under and decent bounce back to S1 (day-trade first target).
We liked our chances with KLAC ALTR also because of SMH coming within pennies of our 33.8 support. The more support that hits at same time, the greater the chance of recovery.
WYNN short 112 at open we found impossible as it went on opening bar, bounced on S2, but gave good entry on bounce back to the 20ema and back to new lows.
AMZN was the star of the day – but you needed some conviction on this one to buy the new high near the open. For those who hesitated stock gave second entry on pull-back to R1 at 188 and then great action to 190 which was first day-trade profits.  (Trend-line break was on our newsletter for Friday, and 188 was sent out Sunday morning — AMZN is one of the best trading stocks right now in the market).
Swing long as long as 188 holds.
Every day after the close we manually go through our master list of 300 stocks to look for patterns. Sometimes on weekends we look for new names and do scans – FTI was a product of a scan. We often regret adding them after as we realize “there’s a reason the stock isn’t on our master list”. We wrote yesterday that FTI was not a good trading stock but 55 was big number. Decent swing candidate to keep an eye on on a close over 55, but crappy day-trade action at extended run and scum of 55.
We don’t like surprises.  We like trading our pre-determined list every day and nothing else.
All charts are from E-Signal– our subscribers get a substantial discount on their service. If you’re interested please email us at info AT highchartpatterns DOT com