Tuesday, October 27, 2009

Format and Themes for Upcoming StockTwits Episodes & Videos

[Queue the Rocky theme song]

We're getting in fight shape as we practice several pilot episodes for our eventual debut on StockTwits.tv. Believe me - we need the practice. But in the end it will benefit you, dear reader & viewer.

Here's our current format for a 15 minute show. When we start taking tweets, we'll grow to 30 minutes:
  1. Intro - Market summary
  2. Strategy in Automation - description of pattern we're hunting in realtime; odds of our trading plan
  3. Charts! - what trades we've done, we're in, and what might pop up during show
  4. P&L Update - where we are today and how we are managing the trades

Several themes will be recurring in our episodes. These are the touchstones for the way we trade. It's not the only way to use the Trade Ideas tools (goodness knows there are better traders using our technology), but this is how we use "the scalpel" to heal and grow the patient (our P&L).
  • When trading try and let the P&L speak to you. Be less concerned about what will or might happen; just focus rather, on P&L in the now
  • So much time is spent on looking at charts not realizing that it is where YOU are in the trade (i.e., the plan/expectations you set before the trade) that is most important
  • This is what separates great, good, average, and bad traders: The ability to see the relativity of price action to your entry (i.e., what's your stock's wiggle?)
  • Trader as scientist. One of the most critical points as a trader: How does one know whether to keep doing what they are doing or change tactics (i.e., hypothesis and assumption testing)
Have a preference for what you'd like to see in an episode? Leave us a comment about format or topic you want to see covered.

Stay tuned.

Monday, October 26, 2009

Signposts: A Method of Market Forecasting Which Strategies to Employ

3 Roadsigns popped up today from 3 different people whose opinion and calls on the market activity I respect.

These people aren't market timers - if anything they're probably early with their calls, but when I hear or read people I respect offering these types of market forecasts, I pay attention and start to pull up previous strategies I think might be appropriate - in this case Bearish.

Here's the evidence:
@steenbab 11:25 AM CT - Midday briefing shows significant selling pressure in the wake of USD strength: http://rurl.org/223v
about 6 hours ago from web
@AnnMaries2006 So many failed breakouts...sure sign of resolution to the downside for now $$
about 3 hours ago from Seesmic
@TradeIdeas1 http://chart.ly/2ang29 $SPX - One of the ways that helps me know which way I should be trading is illustrated in this picture
about 3 hours ago from Chart.ly

Signposts can come from anywhere. The reason for them is simple: to understand with more clarity what's coming ahead. Devise your system of signposts - of places that will deliver the information you'll use to understand the larger, dominant themes in the market, so you'll know whether your swimming upstream or with it.

Related Articles:

Wednesday, October 14, 2009

New Version of Trade-Ideas iPhone Application is Now Available through iTunes

iTunes has just released the latest version of our iPhone application. This version fixed several of the previous bugs our users reported. We would really appreciate if our users who also had iPhones downloaded and rated the free application.

We want to add more functionality to this iPhone application. One thought is giving users the ability to monitor and interact with automated robot trades through the application. Another thought is having cool automatically updating top 10 lists. We also encourage users to give us ideas of what they would like to see in an iPhone app.

Thank You!

Tuesday, October 13, 2009

Like Gump But Without The Smarts: More SOES Stories & Trading Lessons

I have the unfortunate luck of having been in some of the best, upwardly mobile stocks of all time, and not taking advantage of it.

There - I said it.

Like Forest Gump - wherever I live, the craziest bullish stock of all time happens in the same place.

Case 1: DELL

This stock was the best stock to buy and hold for 5 years straight in the 90s. I was living and trading in Austin and traded in and out of DELL countless times. I discussed the problematic nature of my DELL trading in previous blog posts. Suffice it to say I left about $15 million on the table with that one :-(

Case 2: QCOM

When I moved from Austin to San Diego in 1998, QCOM was in the mid forties. A year or so later: the cellphone boom. QCOM went from a regular stock to something just insanely bullish. I finally figure out that I should get long around $187 :-).

I bought 200 shares during a breakout and held on. QCOM went and went and went. I was still long my 200 shares at 440 dollars. This is where my DELL memory really played havoc on my finances. I remembered how I failed to buy and hold DELL and thought this time I finally did it right. I was up over 200 points on 200 shares and was ready for the split and continuation of the run up. This was going to be my million dollar stock...

QCOM pulled back, and then it pulled back some more. I held on tight and it continued to pullback. I finally sold my position at 192. The desire to be right and make money was so bad that it blinded me to any kind of money management rules which would have gotten me out much much sooner with a ton of profit. It was crazy how I just let all that money get away from me, but people do the same thing all the time. It is so difficult to catch yourself in the act.

Avoiding These Mistakes

Since then I have devised a couple of great ways to avoid these types of mistakes. One is a mantra of knowing that tomorrow is another day and anything can happen. Treat today like it is your last trading day, do the right thing. I don't focus on the future because I came to realize that it is impossible to predict. There are just to many variables out there that can impact a theory. The most important part is that the market does not have to make sense to you. I learned the very very hard way that a market can stay irrational much longer than you or I can stay solvent fighting it.

Another method of keeping yourself honest is to look at your open positions during the day and hiding the symbol column so you don't know which stock is doing what, you just know the P/L and act accordingly. This last exercise was one of the best I had ever come up with in helping to free myself from the bind of needing to be right. Give it a try and watch how your discipline takes over!

Friday, October 09, 2009

The Market Sneezes, but Trade Ideas Never Catches a Cold: Data Variances

Editor's Note: The following post is from our Chief Technical Officer, Philip Smolen. In it he points to a rather frequent occurrence of the data inconsistencies that plague the tape and which, if left unchecked or not addressed, can seriously affect real-time sensitive tools like Trade Ideas.

Fortunately for us and for those of you who are subscribers, our team at Trade Ideas works tirelessly and with great precision to engineer such errant data out of our systems - as they happen.

Here's a peek behind the kimono . . .

I was looking at a suspicious price. Our primary data feed had a questionable price. When I checked other data feeds, they disagreed with each other. Here are three free examples. Look at the price of the open.



This, and variations on this, happen a lot. People don't always realize it. If they hurry, they can see this example for themselves.

We also have a video tutorial highlighting this issue.



A lot of people try to be very precise. At one price they buy, at a penny less they don't. Some people scour the charts, and get excited when we don't match exactly to what they were expecting. Here's the reality check. Here's one I just happened to run into. I'm sure if I spent the time I could find a lot more. If you deal with market data, you have to understand the limits.

Tuesday, October 06, 2009

Make the Market Work for You

Counter Trend Trading: Inviting Your Ego to Trade

Today while trading and discussing trading on Stocktwits, I came across a very interesting article written by Dr. Brett Steenbarger. This article discusses the compulsion some traders have to counter trend trade. Traders who counter trend trade are sometimes called contrarians. The reason I wanted to blog about this article is that when I first started trading this was a mistake that I made often and it was costly.

I want to give a personal spin on what this is like as well as explain when being a contrarian can work to your advantage. Click here for the complete article.

I started trading in the early nineties, using the SOES and Select-Net systems to get in and out of Nasdaq stocks. It felt really good to be doing something that most people could not even remotely understand. It was an ego boost. Back then the high flyers were stocks like DELL, and CSCO, and INTC and my favorite INTCW. We would see the sellers stack up on level II and watch as momentum slowed and just when we thought the time was right we would hit bids, get short against our boxes and look to make a quarter or fifty cents on 1000 shares. It was awesome, especially if you were half way decent. But, as we worked the mechanical magic of trying to get short into the momentum and bid in a quarter later for our $250 dollars we were completely blind to the fact that these stocks were tearing the hell up. There was no sexiness to buying these stocks and holding them, yet at that time that was really all that you needed to do. Our super smart SOES system was state of the art and it made us money, but we lost countless millions in opportunity cost. I was living and trading in Austin, Texas at the time and there were many low level DELL employees driving Ferrari's around all because of their stock options. All the while, we the trading experts, just could not see it. We were blinded by our ego's, the speed, and how cool it all seemed at the time.

The Power of Right Now - Not I'm Right

As I got older I realized that being a good trader had nothing to do how fast I could punch keys, but rather it was about simply making as much money in the market that I was able to make and most of all making sure that I managed my exposure and risk in a way that would allow me to milk a trend but not put me out of the game should something not work out. It is not the stock or the market type I realized that makes you money, but it is how you manage a trade. Many traders and pundits attempt to guess what the market is going to do tomorrow, but nobody knows. You might guess right but you certainly will be wrong at some point. When you are counter trend trading as a habit, you are focusing on being right, you are not in the present, but rather in the future that has not happened.

There is a more scientific type of contrarian trading. This contrarian trading uses the power of statistical analysis as an edge. It is often called mean reversion and in our experience, is most effective when used with an automated trading system. This type of trading requires you to be in several positions at the same time and it is almost impossible to do it by hand. This is where technology really can help the trader. Our automated trading software and our OddsMaker analysis software combine to allow trader to take a quantitative spin on contrarian trading. We have several videos showing this type of trading in action on our YouTube page.

Kick the tires. Evaluate this approach. You'll be a calmer, data-driven trader who only plays the odds as a result.