Saturday, July 16, 2011

Screen Configuration Bonanza

There are lots of threads out there on traders sending in snapshots of their workstations — that’s fun to look at but what is more useful for a trader is how they actually configure what’s on their screens.  We’re doing a post on how we configure our screens and would like to add other trader configurations.    Please e-mail us at  info AT highchartpatterns DOT com with snapshots/(and if you wish explanations) of how you configure your trading software and we’ll add it to the post including your StockTwits/Twitter handle.
Here’s a random one found on google image.   Go $GOOG! :-)

Friday, July 15, 2011

Like a Zombie that won't go down

Like a zombie that won’t go down this market keeps getting hit with bullet after bullet and yet refuses to roll.    Many are looking for a regular session test of the $SPY 130 test (we already had that test in the overnight session on Tuesday $ES_F).
The market is absorbing bad news well.  Let’s take a look the afterhour action of Wednesday and Thursday of the Moody and S &P rating news.  The market immediately went down 10 points on Wednesday after the Moody’s review news and then recovered within hours:
Next on Thursday came the after-hour news of S&P possible downgrade PLUS the little detail of the agency asking for 4 Trillion deficit reduction deal in order not to get downgraded.    Again, ES plunged and recovered.
Dip-buyers have now been rewarded for two years.   There will come a time when the dips cease to be bought — we think it will come if/when we break the March 2009 trend-line but until then we’ll keep doing what has worked so well now for so long.
Note that range-bound strategy rules supreme in the current market hence the other side of the equation  has worked equally as well (at least this year) which is  sell the rips.    However as long as we are holding above a 2 yr trend-line we prefer to focus on the long side as we believe the force is stronger in the bulls.
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SPY areas to trade against

We’re at the close here and bulls  held the 20SMA/50% retracement of recent rally/ $ES_F AH low.
So what if doesn’t hold?  Next support comes in at 1295 on the $ES_F which is the top of the previous range (corresponds to around 129.8-130 on the $SPY) which also is around 61.8% retracement of the rally.
As to our position, we’re all cash.   If market rips then we’ll pay up for it and trade whatever sets/triggers.    However, we won’t be looking dark until we lose that 2009 trend-line — so far all we’ve had are mean reversions up and down as rips have been faded and dips still have been bought.  Until that changes we’ll be trading the status quo.
Big beat by the $GOOG machine in AH — ball is in bulls’ court now as they need to hold this technical level and rally from it using the earnings beat as a  catalyst.  A push from this 20SMA/50% retracement area would be a great start which in turn could bring in the “fear of missing” mentality.

Wednesday, July 13, 2011

Watch that Tuesday night low on the ES_F

 Remember this line in the sand we posted yesterday?  It’s baaaaack:

Tuesday 3AM futures tested and passed the top of range test.  We’re getting close to it again now.  Click to enlarge:
And on the $SPY it corresponds to 129.8-130 range.
Fun times.

Tuesday, July 12, 2011

Thank You

First of all, we completely forgot about our 5 yr business anniversary mark (June 13, 2006).    However, a belated note hopefully is better than nothing.   Opening the HCPG business forced us to step up our game — and for that we’d like to thank our subscribers, many of them who have been with us for years.  We may have many faults but lack of loyalty is not one of them — we always remember the people who have helped us over the years and want to give a quick shout-out on this 5 yr mark.

A year and a half ago we joined the world of StockTwits/Twitter and for that we’d like to thank @downtowntrader for giving us the initial push to join,  @howardlindzon, @ppearlman and @ldrogen for welcoming us aboard and getting us started via the Suggested Stream and later with a partnership with StockTwits.    Working with Dr. Phil has been a fantastic experience — he makes you feel you’re on his team and like a good coach, he’s always looking out for you,  pushing you to take it up a notch, and take that next step in becoming better.

We’d also like to thank all those that have given us increased visibility, too many to mention, but especially early RTs from (now) buddies like @gtotoy @traderstewie, @szaman @chessnwineThe Reformed Broker and the WSJ links, @DinosaurTrader for links to his early blog and the RO,  Charles Kirk for early links over the years on the The Kirk Report, and @abnormalreturns for links on his fantastic site.    Being part of the community of such a young and growing company such as StockTwits is very exciting — for us it’s a great win-win.  We’re happy to contribute value to the community, grateful for the friendships we’ve made, and for the fanastic exposure we’re experiencing alongside the growth of StockTwits.
Looking forward to the next five.

Look what happened while you were sleeping

We bounced right at the previous top of the range on the $ES_F — click to enlarge:
Too bad it happened at 3 AM…   Anyway, that’s the line in the sand going forward and the line that the bulls will have to defend against all lehman-cello type events.
News tapes are our least favorite tapes, add the fact that our beloved semis are getting clocked today, and you’ll find us mostly chilling today.  We have numerous alerts that could trigger but the market would need to firm up before anything like that occurs.  As for being a bear — not until we close under the March 2009 trend-line on the $SPY.
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Sunday, July 10, 2011

In it for the long term

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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