Resumed Monday

Today’s Trades:

If these dots seem a bit confusing, let me break it down. Bought lows, sold at 49 just before the number. Then shorted right before the number because I saw a good price, and somehow I forgot the number was coming out within 30 seconds(I was really focused on the tape). Covered that for a loss. Still liked the short side, so shorted again, then added to it, then took a piece off as it went in my favor, and then took the last part off for a break even on the add.

Today’s Journal Entry: None

Last Note

Closing shop early today. Made three trades this morning in KSS on MATD action, and so I am done. I have to say, I love love love fading momentum. It is some of the most fun you can have trading because it’s so effortless. Compare fading (shorting) a significant new high to buying a breakout and holding. The breakout will probably make you more money, but you will have to sit in it longer. The fading momentum play has a very clear stop out point where you know you are wrong, and the tape actually works in your favor. When I trade a breakout higher or lower, I feel like the tape actually works against me (especially on a long), trying to knock me out of the trade, trying to paint a picture that the breakout move is over just before resuming. Yesterday was a great day, but there was way more effort to holding trades, sitting through fake outs, etc. No matter what, you will almost always be dissatisfied with your exit. When you fade momentum, the tape works for you because every burst of orders that goes against your position gives you more confidence if you are not stopped out.

In KSS this morning, when I bought at the lows, I watched as selling came into the stock after I took my position, and I absolutely loved it. It was like I took a stand and said “I don’t think you can keep pushing this lower given the context of the market, but you are welcome to try.” It doesn’t always work out, but it always gives you information that you can use in your next trade. The best times to fade momentum are after days like yesterday, where you know people have missed a move and they are just ripe to chase.

I also have to be careful because this morning’s trading was way too easy, and now I am heading into a four day weekend where I could easily reinforce some faulty ideas about the nature of the market. I remember awhile ago I had a great MATD day, and then got absolutely tore up the next MATD when I tried to repeat the previous success (with ACI). Whenever I do anything that prompts me to think I do not have to actually pay attention to the market action, I suffer. Part of why I did well this morning was exactly because I was not sure, and I waited for the best opportunity to present itself. This leads me to an idea that has been slowly growing for the past couple months: uncertainty IS my edge. When I am uncertain like going into today (as indicated by my plan yesterday), I pay attention, and execute on my edge. Whenever I get to a point where I am certain of some aspect, I stop paying attention, and get reamed.

Windfall profits, large losses, and any emotional experience can create havoc. All of these tap into that thought “now it is different, I can be like this now.” As soon as you think something is different, and that you don’t have to be just as uncertain as you were when you had the initial experience, your dead meat. You will chase moves because you are certain you are right, you will hold onto losers, and you will make all the mistakes that come with having faulty expectations of the market. I am watching out for these!

The firm is taking tomorrow off, so I will not be posting until Monday. Enjoy your long weekend! I am going boating! Very excited. Anyone else doing anything fun for the long weekend?

Lucas

What a day! Stats were very bullish with a 2,200 AD reading and higher volume. The market pretty much closed right at the highs as well. If this were not Thursday before a holiday weekend, and the first of the month, I would say an MATD tomorrow is a given. Lots of traders missed out on the move today; either they got out too soon, or didn’t believe the move, and missed it entirely. You can easily imagine day traders going into tomorrow morning with the thought “I wasn’t sure about the long side yesterday morning, but I sure am today! Buy Buy Buy!” Under the circumstances, I am just not quite sure. Will volume just completely recede tomorrow? Will the breakout higher simply continue unabated because of the lack of volume to stop it? Is the breakout so significant that any MATD action will be drown out?

I think the long side is the right side, I am just not so sure what tomorrow morning’s trading will be like. There are some more news numbers coming out, so we should definitely get some volume around those. Keystone tends to get chopped up pretty badly in the morning after days like today because people chase momentum. I can’t say what the right move will be, but I definitely will not be “unleashing the MATD dogs of war,” so to speak. If we do get MATD like action, I will be looking for really emotional volume and ticks on both sides of the market. This would give me the green light that fading some of the momentum moves in either direction have an edge to them.

My Best Ideas:

•For MATD, I will be watching WFC, NTAP, and KSS in that order. WFC had lots of volume today and is coming into significant resistance at 25. It may have some good action around that number.

•UAUA has a nice hourly trend higher and I think 23 is a reasonable next target.

•JNPR is worth watching as it had a very strong morning, but unlike many other stocks, really sold off hard in the afternoon. I am watching to see if it sets up something recognizable.

•Other then these few specifics, everything is a tentative long, assuming this breakout has legs. Some of the more beaten down stocks like WFC and Macy’s have a little more gusto because of covering shorts. Tomorrow is the last day before a four day weekend (I am going boating!), so have fun!

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: None

Last Note

Very interesting day for me. I was pretty angry after the morning session, almost like last Thursday all over again. I went and did the meditate/journal/beat up pillows routine for about an hour. I got to the point where I realized I was trying to create and hold up an image of myself, and the market had not complied. I wanted to have this outstanding day, but the market, from my perspective, was not offering it. I mean I still had a great day, but it wasn’t enough for this mental image of myself. I really drilled down into these thoughts and reactions, and I am flabbergasted by what I found. I mean, I have what I want right? I have been working so hard at this for years, and the whole time this “consistent profits” idol was my motivation. Well, this is it, what is the problem?

It appears that my mind will take success and positivity, and use it to order and manipulate people, get angry, push those I love away, and cause misery for myself. It absolutely blows my mind where these ideas come from. Picture it, here I am with exactly what I want, and the reaction from inside is anger, and most of all, greed: it should have been more! Absolutely amazing.

After the anger wore off, I came to a place where I really realized that everything we traders do here is a gift. When the market offers a trading edge, its a gift: it isn’t like you did anything to get it. Other traders are asking you to take their money; how much more of a gift could it be?! All I can do is be open and make myself available to receive that gift in whatever form those other traders feel like giving it.

Tell you the truth, at the moment, I’m scared. I am scared because something in my head says this can’t last, that I should take the money and run and hide. I feel it right in my chest, and I know it tends to make me look for trades that have no risk, and pass up good signals because they aren’t perfect. Add in the anger from above, which causes revenge trading, and my experience feels a bit like having one foot on the accelerator, and one of the break. Back and forth you go between too aggressive and not aggressive enough.

If you can’t tell, I am venting a bit here. When it comes down to it, I know not to trade from these feelings. I know that acting these feelings out can be disastrous. If I find that I do act them out, I pull myself way back, sometimes for a whole day, and do the emotional work to get back in alignment. I have a new indicator as well. My throat! Over the past couple weeks, it had tended to get sore after days when I get really angry (maybe from all the cuss words I have been yelling at my bed?). I will definitely be much more relaxed and peaceful when I get to the bottom of this anger, which will probably be some deep sadness that I need to confront.

Lucas

Like Erik said today, it’s pretty amazing how often the market has come down to the 1039.80ish (SPX) level and bounced. Not a wussy bounce either, but really taken off after hitting it. If you look at the intraday charts, the SPX has formed what looks a bit like a head and shoulders since last Wednesday. I do not put much faith in it, just find it interesting. So the big question in my mind is whether tomorrow acts like a usual 1st of the month (fireworks and gusto!), or does volume drop as we get closer to the holiday? I looked back the last few years to see what volume looked like at the beginning of September before labor day, and in the majority of cases, volume rose from the previous day. This is no guarantee, but it’s a good reason to not just write tomorrow off; at least turn on the computer! The first of the month is always interesting because it can completely ignore the most recent price action. So the head and shoulders I mentioned above may become completely irrelevant by tomorrow morning. Same with the 1040 SPX level. You never know.

Today’s volume was better then yesterday’s, and really isn’t all that bad for a holiday week trading session. The stats were mixed though, so its tough to draw any definite conclusions from the action (slightly bullish though). The VIX is pretty much a mess, but TLT came back strong, and is approaching its highs again. I do feel like the market is coiling up a bit, and getting ready to spring. I think the best trades for the past couple weeks have been fading momentum, but I have a feeling that may change here if we continue to get this indecision. At some point, something will break in either direction, and the trades where you sell new highs and buy new lows are going to sting. The internals will be the first thing to point the way, so I am keeping my eye on intraday VIX, AD lines, UVOL/DVOL, and ticks.

My Best Ideas:

•Everyone should be trading GG because it is offering great intraday opportunities in both directions. Today it had a huge topping tail on the daily chart, so I am watching for trades in either direction tomorrow.

•WFC may have made a double bottom here if it can stay above the 23 area. The volume looks about right as well, with decreasing volume on the second test. If it gets through 24, the next target is 25. I am also prepared for it to do absolutely squat (which I find more likely).

•ALTR is at the bottom of its box. It tested the lows this morning, rallied, and then came back down in the afternoon. This tells me there are quite a few scared longs with stops below the 24.50 area, and we should at least get a washout lower, if not an actual full break of the daily 200 SMA.

•There are a few stocks in my list I find pretty much untradable. STX (the only stock I’m negative on this month), M, and JNPR are the leading contenders at the moment. However, other stocks make the list on some days, like LVS this morning for me.

Best Of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: None

Last Note

I was much more relaxed today then yesterday. I felt fine letting the market putz around this morning on the several news items that were released. After about 45 minutes, I saw my trade in NTAP, I took it, sat in it for 5 minutes, added as it started to go in my direction, and then booked as momentum turned. It was a very satisfying trade, and I was so relaxed and satisfied that I pretty much spaced on my challenge of three trades a day. It was a good end to August, and so I decided not to keep trading. I am okay with not pursuing my usual three trades so long as I do not fall back into old habits (Make ten cents, quit for the day! Lose 20 cents, trade like hell!)

August trading was pretty amazing. Definitely a month I will always remember. If you look at my equity graph, it looks like a perfect breakout higher. I don’t know where it will go from here, but I would long it (maybe after a pullback haha). I made back pretty much all the money I have lost at Keystone since starting back in January, so now any profits that roll in are going directly into my pocket. It was also a monumental month for self awareness. There was a shift away from the usual cycle of growth fueled by debilitating sadness towards anger, and watching as my mind attempted to sabotage my results. Part of why this month was so challenging was because I was getting exactly what I thought I wanted (profits), yet if I was honest with myself, I still was not happy.

I was angry, I felt disappointed and betrayed. I was getting what I “wanted,” but it still wasn’t good enough, and so my mind was trying to force something that would eventually lead me to giving back all my profits. I still cringe a bit inside when I think that making money in this business is going to be the same thing every day. Some part of me screams out that it is too boring, that it lied, that it wasn’t what I thought it was going to be like. I think once you start to see the top of your own personal mountain, and that it is empty, some part of you wants to retreat lower so you can still believe that the top holds nirvana. I always said I wanted to be a trader for a living…well…this is it. I have been doing it for awhile now, and after the initial excitement starts to wear thin, the negative part of you recognizes it as a grind, a complete daily grind.

The positive and free part recognizes it as a dance. A dance that never ends, that keeps flowing and moving. It is lovely, peaceful, and beautiful to be in. One of my daily challenges at this point is to bring that attitude to my trading everyday: it’s not a grind, it’s dancing, so dance.

Lucas

When you get low volume days like today, its tough to discern future movement from the action because the market becomes so easy to move around. The stats for the day were pretty bearish, and the expected follow through from Friday’s action fell flat on its face. Consumer Confidence comes out tomorrow if I am not mistaken, which can definitely move the market. So we may get some good action from that number. I think the best trades at the moment are fades into major support or resistance. GG this morning was a great short into its highs, and there are other examples that are similar. One other thought I had was the possibility of a trending move this entire week off this low volume. I remember a couple Christmases ago, everyone went off the vacation, and the market rallied almost every day into the end of the year. Was wild to see because the volume was pitiful, but the move was pretty significant. I am on the lookout for something similar this week, with the market moving down through support easily because of the lack of volume able to support it. Just a thought, what do you think?

My Best Ideas:

•M looks like a good short, although very choppily.

•ALTR has this nice box that is has made since its gap down a couple weeks ago. As it approaches the low of its box, I will be watching for it to break through, or to weakly bounce. Either way, a potential trade.

•WFC looks to be following through to the downside, 23 is the next level it has to breach.

•UAUA failed after its gap higher today to maintain the bullish movement. However it is my most bullish stock, so I like this puppy for longs.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: None

Last Note

I over traded today. Looking back at my trades, I liked all of them as scenarios, but there was an eagerness to my trades this morning that hurt my results. I think you can separate trading into ideas and execution. To use a football analogy, there are the coaches, who have the ideas and plans, and the players, who execute those ideas and plans. As a trader, we have to wear both hats, and this morning, my execution hat was not up to its usual standards. Mondays are funny like that, because I think some of the worst trading I ever do is right after the weekend. I relax over the weekend, play games, and maybe drink some beers. Then I come back Monday and the first few trades still come from a place that is in weekend mode. I have to come back to the reality that I am operating under, because it is completely different then regular reality.

Still ended the day positively, and didn’t make any afternoon trades, although it was a surprisingly good time for shorts. One of the mentors said it best: He is already counting down the days to vacation. Volume will probably spike with tomorrow’s numbers, but then…

Lucas

I wanted to figure out why Keystone did so well this week, and I think I found at least one reason why. This past week, the market had three violent down moves that were short lived (but profitable), and had equally violent reversals. These reversals lasted throughout the day twice, making a very obvious direction of trade. At this point, it would not surprise me if the market slowed down a bit in the coming week. I mean this last week was a great battle between the bulls and the bears, giving both sides an opportunity to profit at different times of the day. Perhaps this battle will slow down before the memorial day weekend, but who knows!

Stats for Friday were very bullish, and on rising volume; the most bullish since the second of August. The market filled the gap down from Tuesday, and at this point, it’s a bit in no man’s land. The VIX and TLT both reversed downwards in a big way, although I assume some of the support they are nearing will hold in the short term. I am biased to the long side because of Friday’s great stats, but I am also aware of the 50 and 20 SMA above the SPY, and the fact that this week will probably fall in volume as the days go on. So either I will be looking for quick scalps in breakouts, or trades I can sit in while it slowly grinds higher on lower volume. One last note, the weekly SPY chart gave a bullish reversal candle right after a bearish reversal candle. Contrary to what you will hear on the news, the market is not signaling bearishness, but indecision, with more weight given to the most recent candle (bullish in this case). Lots of my stocks share this weekly signal, and we will probably see some follow through on it in the first few days of the week.

My Best Ideas:

•GG has been a great trading vehicle this past week, with lots of volume and good opportunity for both scalps and holds. I will continue to watch this stock for both situations, although I am starting to lean towards just scalping it after this ginormous move higher.

•UAUA made a 1-2-3 bottom on its hourly chart, and as long as it stays over 20, I am long biased and looking for trades to take it into the 20 and 50 SMA resistance.

•M is now the weakling in my list, so I will be going to it for shorts, although its in a choppy range. WFC is also a potential short sell, but its volume has been high or this bear flag.

•NTAP and LVS both look strong, especially NTAP with a higher volume breakout above its daily moving averages. JNPR is similar, but less strong, with resistance close overhead.

•I also want to say that with the market as it currently is, we should always be ready for MATD type action (intraday traders chasing momentum and creating a sharp reversal). I am going to stay away from getting locked into one direction Monday morning; I will be booking them if I gotem.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: None

Last Note

Lucas

Resumed Sunday

Today’s Trades:

Today’s Journal Entry: None

Last Note

Sooo I did not really slow down today as I planned. Like Don Miller says, sometimes being okay with sitting on the sidelines just makes good entries pop out at you. I think today I was 7 for 7 profitable trades, and had my largest dollar up day to date. This week will probably go down in the books as one of the most difficult weeks emotionally (one of THOSE weeks). However it was the most profitable. Funny how that works. Many times in the past I have had profits in my pocket, and have given them back because I was not willing to do the work around what winning meant to me. I was satisfied building up expectations from my new “prowess,” and then giving all the money back watching the market kick those expectations in the teeth.

I definitely did a lot of work around those beliefs this week. I made a lot of progress by taking an hour, and sometimes more, after the morning session to meditate, journal, and ask myself hard questions. Sometimes I would come back and feel much more aligned with reality, and other times I would just have other issues to deal with. What is funny is this little voice in my head that creates mental blocks at each milestone. I made some nice trades this morning, and I watched as this voice started encouraging me to go watch movies, play video games, and leave the screen. Each time these mental blocks come up, I have to consciously look at them, sink back into the flow, and open myself to whatever opportunities the market offers. I really do not get to decide what the market gives me, I can only make myself available. Or not. There is nothing wrong with taking yourself out of the flow for awhile.

This was a pivotal week, but I am not resting on my laurels. I am going into next week constantly checking in to see where I am on the cocky-ometer. One thing that concerns me is that Keystone as a firm really cleaned up this week. I mean we did great. Could it be that this was just a great week, and that as the market changes, I will get frustrated and revenge trade all this money back? There are other traders who had their best week at the firm as well. There are still things in my mental map that are trying to give money away with stupid mistakes. I am watching to see if my mind takes any of these things and runs with them down the expectation hole of doom (ha!).

Have a Great Weekend,

Lucas

So we definitely got our answer today on whether this bounce has legs or not. It appears that we have more downside to come, although TLT is reaching a point where a consolidation would make sense. August is wrapping up, and the way this market is acting, we should expect anything! Tomorrow is GDP and Big Ben speaking. Also, does anyone else think the VIX is not really acting right lately? It seems to be stunted because we are getting sell offs that should rocket it higher, yet it makes these meager moves. Odd

My Best Ideas:

•Macy’s looks like a good short under 19 and 19.20

•GG is just amazing, I am watching this tomorrow morning for some possible MATD action after its nice trending day today. Gold is a bit tricky though. If any of this bearish sentiment gets relieved, expect GG to deflate quickly.

•LVS is always worth watching, and it has this dark cloud cover candle pattern (if I have that right?) on higher volume. So it may have a date with its 50 SMA tomorrow or next week.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry:

Last Note

Today brought a lot of things up, and was a lot like Tuesday, emotional experience wise. I had to sit down for a good hour and a half after the morning session and really get to the bottom of my feelings. I had some great questions that came up, like, who are you trying to be here? Most of the struggle I go through, if not all, is about trying to be some body. I want to be a pro trader, I want to be consistent, I want to be successful, I want to be this or that (must have!). Nothing wrong with wanting these things, but I go back to what I learned when I was a kid in how I get those things. Often those tactics are very unsuccessful, and today is just another day that showed me where my thinking does not align with reality.

As far as trading goes, it was pretty much a toss up, ending the day down like 9 bucks. I definitely don’t have a problem anymore with under trading, in fact I wanted to trade very badly all day, with no regards to market environment. I had some pretty poor entries (WFC! M!)), but somehow I didn’t get myself into any really bad spots. My throat is kind of soar, so I am taking it easy tomorrow. I sometimes think that playing poker, and losing, is saving me money in trading. I was uber emotional, I switch over to poker, go on tilt, lose all this money, break down in frustration, and then come back to trading with a clear head! Only costs me a couple bucks, but the same feelings are at stake: “I want to make money my way, I want things my way, this is how I am going to get it, where are my things….raaaggee!” Ha

Lucas

If the market has an initial down move tomorrow morning, it’s either a direct gift from the trading gods, or something is really wrong with this rally. This afternoon short covering bonanza should have some legs off this incredibly negative sentiment. When the market shows its hand like it did this afternoon, you get tons of information from its follow through. I think the market should rally into the end of the week, even on lower volume if it comes to that. If it does not do that, and starts giving me really nice long entries, as in TOO nice, then there is something very wrong with the bullish hypothesis. Opinions are great to have if you can tell quickly if they are wrong, and deduce market movement from both their confirmation or falsification.

Both VIX and TLT made reversal signals today, TLT on higher volume. Overall volume was about the same as yesterday, but a bit lower. Some stocks made great up moves in the afternoon, while others did rather poorly.

My Best Ideas:

•If I got through my list and look at what did the best this afternoon, I see LVS, ALTR, WFC, and KSS (wow!). These are all decent long candidates, however WFC is on the tail end of a pretty large down move. So WFC is either going to be a fantastic, straight up, “omg I cannot believe this,” long, or a do nothing. KSS had such a reversal today that I will be watching it in the morning for some MATD action.

•UAUA and NTAP were big party poopers in this afternoon rally. UAUA had some good action, but it was within its daily range. If selling comes into the market, I will probably default to looking at NTAP, and then UAUA.

•My main focus tomorrow ill be on LVS, ALTR, and KSS in the morning. I will also be watching WFC, and then UAUA and NTAP last; that is how my focus will be allocated.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: Janitor Work

I feel a bit like a janitor, constantly cleaning up my own mess on a minute by minute basis. My entire focus on a morning like today is to make sure that I do not take the current feelings I have into my next trade. I made an LVS trade today that was a complete BIKB (But I Knew Better) trade. As soon as I made it, I knew I had fallen for some fleeting momentum. I stuck to my stop which was rather quickly hit, and I felt definite regret after the trade was closed out. I was a bit pissed, I was switching through my list of stocks looking for something to trade, and I generally wanted some revenge to make up for the mistake.

I call myself a janitor because I had to stop, look at my emotional matrix, look at how I was acting, and identify the tendencies I was about to play out (and then clean them up). I wanted a revenge trade, therefore I was more likely to chase momentum, and less likely to see actual people behind the trades I was going to make. I was more likely to just chase extreme tick readings instead of actually discerning the most likely action from the current given price action. I knew from experience that the feelings and attitudes I was feeling were probably shared by MANY traders on the day, and that if I followed the urging of my revenge wielding self, I would probably get chewed up.

So I decided to sit with these feelings for awhile, and just stare at ONE stock for a few minutes (UAUA). While doing this, I noticed a feeling that wanted to switch through my list quickly in fear of missing something. The fear from missing something was around this regret I felt if something happen without me: “Oh if only I had made that trade I would be positive on the day!” I know from experience that sitting still, silent, and attentive will always bring up the most pressing impulses that create trading hell. In this case, it was missing out, revenge trading, and avoiding regret.

I stopped watching UAUA intently (it was perfect for this exercise because it was doing NOTHING), and switched slowly through my list of stocks. I saw ALTR, and a few other stocks making a bottoming pattern. I had that gentle little shove that says to get involved. I did, was patient, and booked a winner at my target not too long later. I saw an opportunity to put on multiple positions in JNPR and LVS as well, but I obviously was not ready for that because I balked. Step by step!

So I am basically a constant janitor, cleaning up the emotional mess that clouds my thinking and perception. The good days are not necessarily the days where I make money, but where the mess I have to move through is relatively small. Today was a better day then yesterday, yet I made more money yesterday.

Make no mistake, moving through these emotions is not a cake walk. The way to deal with an emotion for good is to feel it in its original context. So you feel what it was like to be bullied when you were in 2nd grade, knowing that’s the emotion’s root. If you don’t feel it in its original context, then you default to tricks and tactics like walking, beating pillows for anger, and writing it out. These all work great. They keep you balanced and in the best place to make good judgments.

Last Note

What a day. When I wrote that journal entry, I was not above yesterday in PnL, but that changed in the afternoon. I decided the afternoon offered a ripe opportunity in both LVS and ALTR to try out the multiple positions deal, and it worked wonderfully. They both had great higher volume breakouts, ALTR to new intraday highs and LVS right below its daily highs. I held ALTR through a pullback after its breakout that I am almost positive I would have exited into if I was trading only it. I even brought up a sell order as I thought about it, but I was not going to exit into support.

The action before that 2:30 EST breakout was just so typical of the market. It did everything possible to get me out of my position, and put me on the fence. “On the fence” is not a big winner or big loser, but around a break even with mediocre action, and threatening to go against me. I was saying to myself over and over again, its just anxiety, its just anxiety. I kept my finger off the button, but while saying “I have to do something, I have to do something, I have to do something.” I think I quoted this awhile back, but its a good reminder: “The worst traders are those who feel so much anxiety that they simply have to do something, anything, to relieve it.” I was not going to be that trader, and act against my own best interest.

So another up day, woohoo… I feel a bit like I am setting myself up for a major fall. I have to constantly be on the alert for impulsive behavior. That first LVS trade today is a good example. It is so much easier to be focused, peaceful, patient, and carefree when you are coming off a string off losses. Losses are more debilitating in an obvious way. You cannot move, you cannot believe what has happen, you are angry, sad, and don’t want to do anything. Winners though, they are sneaky in their debilitation. You give trades “just one more nickel” when they start to go against you. I also have a tendency to scalp more and chase momentum, which does not work the majority of the time.

I realized the debilitating nature of these winners, so I have been very very alert to thoughts that allude to my greatness, encourage unhealthy eating habits or laziness, push me to do something because “I have to,” and any boredom or snappiness. Being on constant patrol is a tough job yo.

Lucas

The morning action with the news was pretty amazing. There was tons of selling in both the broad market and home builders coming into the announcement, and when the number came out, there was panic selling. The whole scenario reeks of sell the rumor and buy the news. I placed a swing long in the SPY after the event, and I see the entire market as playing out in one of two scenarios. The fact is, this morning’s action is how bottoms are made. Whether this is THE bottom or A bottom is yet unknown. If it is A bottom, then I expect some churning to the side for a short period of time, and then new lows to be made and the SPY 101 area re-tested. The VIX did not have a gang buster up day, and would say this is unlikely. TLT did have a gang buster up day, and would say this is very likely. So some mixed signals from these outside sources. If this is THE bottom, then I am much more excited for the next few days because we are going to get many opportunities where selling comes in, but does not follow through. Traders will wake up, see the market higher, and think “wow the news the other day was bad, shorting this is a no brainer!” Their blood would fuel the upside move that would eventually culminate in a puke higher.

I think the second scenario would be very profitable because you can basically operate from the premise of “buy any dips” for a solid few days. It could be that we get this scenario, but just not right away, or after another plunge to the downside. I think most traders come to love downside pushes because they are fun to short while they are going down, and then offer great long opportunities when they begin to turn higher. Some of the best long opportunities out there are not in slow, plodding bull markets, but oversold bounces during bear markets. My swing long in SPY may be premature, but whatever happens, trading is going to be great for awhile here. Tomorrow may definitely have some MATD action as there are many people who missed out on moves today. The market may have mostly chopped around after its gap down, but many stocks had trending days, so expect there to be momentum chasers tomorrow.

My Best Ideas:

•UAUA closed below the 20 area, and sold off really hard this morning pre-number. It was tough to trade because it was simply straight down, and then bounced after the number came out. Hopefully in the days ahead, it will offer some good shorting opportunities. The hourly is pointed straight down, so until that picture changes, it is a short.

•WFC looks like an awesome short, but again, it is getting a bit squirrely. Notice it did not make much of a tradable down move in the morning compared to stronger stocks like UAUA and LVS. I still keep my eye on it for set ups intraday, but its action is getting less and less discernible.

•STX broke out lower from its consolidation, so it may be a good short here.

•As volatility rises, independence falls. That means that a stock’s character diminishes as volatility rises, and it adheres more closely to its sector and the main market. So if this market keeps falling, short LVS, short UAUA, short the names that are moving intraday, whether they be strong or weak on higher time frames. When volatility is up, you want to narrow your focus to the action at hand, and ask less questions about why something is moving; just go with the flow. WFC should have been a great short this morning, but LVS was better. Why was KSS the only stock not outside its previous day’s range for most of the day? Who knows, just follow the money, adapt.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: Do The Emotional Work

If you have no emotional work to do after today, then you are either brand new, or very experienced. I woke up today feeling much better than I did yesterday, but I was still angry right out of the gate. Anger has been quite the companion lately. I am not exactly sure why I am so angry, but I am dealing with it in a healthy manner. I write it out, I beat the crap out of pillows and my bed, and I curse a lot. I do NOT trade the anger out.

The whole market was on egg shells this morning, you could just FEEL it. The number at 10:00 EST was going to be big and furious. I shorted some LVS, and made my first mistake of the day by listening to a mentor, and exiting for a small loss despite my read on the stock. I was angry, but I knew I wanted to exit before the number, and most of my trading would come afterwards anyways.

When the number came out, the market straight up panicked. I was reminded of 2008, where people just want to get out, and at all costs. It was an amazing spectacle to behold. It was also a great example of a puke, where the majority of market participants get it wrong at the turning point. There is always this saying that the crowd is wrong. That’s not true! The crowd is usually right, but wrong at turning points! When it really comes down to making the best risk decision, they get it wrong when the chips are on the table.

I liked GG long after the puke. Gold had been doing very well on the day before the number, and I thought it had a great chance of bouncing. I went long and put in a pretty wide stop, knowing that it could easily chop me out of the trade if I was not open to letting it settle. My target was about 40 cents away, I was looking for yesterday’s lows. Something went off in my head when it started to move in my favor. I was scared and my plan seemed all together foolish; if I let this winner turn into a loser, the regret would be massive. I was frightened that I was buying a stock on a day that was massively down, and after terrible home numbers. It felt like standing in front of a massive train. I had HUGE confidence that the market had experienced a puke of giant proportions, and was most likely not going to retest those lows anytime soon. I had NO confidence in my ability to choose the right spot so soon after the news. I had my finger on the trigger to get out.

I got out at a 12 cent gain and so started one of the most angry experiences I have had to date. I was so mad and full of rage, I could barely even see straight. I was punching the crap out of pillows, couches, and my bed with abandon. I had missed at least a 40 cent, if not 50-60 cent winner. If it was soft and cushy, I was punching it while cursing at the top of my lungs. I was so mad, I knew that I should have stayed in the trade, but I was so afraid of losing on such a crazy day, I let my anxiety make my decision for me. The best trading I do is when the market bleeds emotions into my perception, yet I rest on a core of confidence that trades according to what I perceive. The worst trading is when the market bleeds emotion into me, and that becomes my core experience. When that happens, I am apt to make all the mistakes that everyone else is making: getting out too soon, jumping the gun, not booking profits, holding losers, you name it.

I want to be a part of the market, yet separate from it. I want to flow with it, yet know its next dance step. Most traders are so bad because they are so close to the market, they are experiencing exactly what most of its participants are going through. The good traders have that one step of distance.

I then made a trade in GG that gave back all my profits in one fell swoop (actually I had a 10 cent scalp before this). I could not believe it, I sat there in disbelief. Yet something switched in my brain that said the trade was not done, and so I jumped right back in, and made almost all of it right back. Not the greatest outcome, but I will take it.

All in all, I had a crap ton of emotions today. I think most people did. Do the emotional work. That means exercising to take the edge off. Eating good food and avoiding alcohol, caffeine, and other mind altering substances. Sit quietly and slowly go over your experiences of the day, focusing on what happen, not what you should or could have done. Don’t even bother with how you can improve at this point, just feel, because if you don’t, and it festers, then whatever you made today will soon be gone, and any losses you experienced will soon be larger.

I feel a bit beat up, but also excited about the opportunities to trade in the days ahead. I took a swing long position in the SPY this morning that I plan to hold for a couple days. Tomorrow should also offer some great MATD action, and more retail participation as today’s market gets plastered all over the news. The end of 2010 should be a great time to trade.

Last Note

I wrote in my journal today “I hate winning.” It is so odd and funny that I would say that, but part of it is true. I have been on this winning streak in both the market and poker, and part of me hates it. Part of me wants to give all the money I earned back. Why oh why? I think I hate the pressure I put on myself everyday when I am winning. I hate waking up in the morning and thinking that I cannot make mistakes, that I have to toe the line, get serious, and get focused. I hate winning because when I am winning, I am not carefree. There is an amazing amount of freedom in having nothing. When you lose all your profits, lose your market reading ability, and lose everything you tried so hard to get, you are free. You feel free, clear, and peaceful (after the initial feelings of loss, pain, and depression of course). It is like being on your deathbed: there are no more worries that need to concern you. You really won’t be around much longer for it to matter.

When I start winning, this pressure starts to creep in. I can feel the exact moment it triggers. Usually it is after a big win, after a certain dollar amount, after some “perfect” trade, or a complement from those above me. All of a sudden I feel like I have to get serious and stop messing around. I cannot feel carefree, or be in the flow anymore. I cannot make mistakes, I cannot lose money, I cannot have losers. I mean, it is so obvious now why I have been in this same cycle for years. Whenever I earn any money from the market, I give it right back so that I don’t have to deal with the expectations I have around being a “winner.” Once those expectations are gone, I proceed to win easily until I once again cross that threshold. The real questions I need to ask myself are “what does it mean to be a winner to you?” and “why do you believe that to continue to be a winner, you must struggle?”

Rest assured I am asking myself these questions and seeing how deep I can go with them. It is so funny because one year ago, I would have traded places with myself today in a heart beat. A problem with winning? What a problem to have! Yet I hated today, I hated winning and I was so angry this morning. I hate this pressure I feel when I mentally step away for a minute. One more question I am always asking myself, like today in the afternoon LVS trade, is: “can you just let the market give you what it will give you?” Any comments on this entire post will be very appreciated, I would love to hear what you guys think.

Lucas

I am thinking that we could easily hit 1050 tomorrow in the /ES. The market gave a swing long signal this morning by rallying over Friday’s highs, but then about faced and closed weak. That kind of action is easily good for some continued selling pressure tomorrow morning. My internals today were messed up, so I am not completely positive on the day’s stats, but I do know volume was less, and selling was pretty modest by the close. Tomorrow there is some home numbers coming out and the expectation is that they will be pretty negative. So keep that in mind for early trading. VIX has also been in a range these past couple weeks, it needs to get over 27.50 and stay there for the shorts, and under 22-23 for the longs.

My Best Ideas:

•Macy’s is pulling back on slightly higher volume, but so far its buying order-flow is still intact, so I like it as a long. The first bounce off this pullback will probably be the strongest. If Macy’s doesn’t make new highs from that bounce, it will probably be a lower probability trade for a couple weeks.

•NTAP has a very interesting daily chart. It has made two daily bearish candles, and I am interested to see how they work out. It may be that some selling comes in that gives traders an opportunity to buy off that monstrous bullish candle from three days ago. I am keeping an eye on this one.

•WFC is slowly churning downwards. It has not been acting like the great short it was a few days ago. I was watching it today, and it is definitely pretty choppy. It is still the best short in my list, but I am less inclined to short and just hold it because I think it is passing from the phase of violent selling into slow dribbles of selling, but no aggressive buying. In other words, a slow move downwards with shrinking volatility and ranges.

•There is definitely a buyer in JNPR, and I am watching to see if it can push through that overhead resistance that aligns with a gap fill. Also continuing to watch UAUA, but it was a bit disappointing today after the bullish energy it showed on the open.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: None

Last Note

That NTAP trade was kind of funny. I needed to make one more trade on the day, and when NTAP was breaking out, I figured I could scalp it for 10 cents no problemo. I took 3 cents out of it and loudly proclaimed my great success to my skype chat room. About 10 minutes later, the boss of the company I work for came on the mentor room mic and said that NTAP was no longer tradeable on the day as everyone but ONE person who had traded it had lost money. Of the 20+ people who traded it, only one person had made money and they were only up three dollars. Great Success! I had a good laugh.

The morning was pretty rough. I woke up with high blood sugar, I had not dreamed while sleeping (dreams=sleeping well and refreshed, no dreams= groggy and stiff), and I was pissed off as hell. I was mad because I felt like my edge had dulled over the weekend. There is this weird thing that I think most experienced traders have gone through where if they are not constantly learning, getting better, and most of all plugged into the flow, it feels like you are getting worse. I felt like that this morning. I felt slow, not very focused, and I was really mad about it.

I am not completely sure why, but for some reason, whenever I meet with success, this thing in my head goes off and says “Hey! Alright buddy! Relax man! Let the money just flow in, no need to focus, get some cookies!” This theme of a “great success” being the very top of your performance plays out every where you look. I have experienced it on countless occasions. On a macro level, America’s crowning glory of the nineties was quickly followed with some of its worse times in decades. There is this odd human behavior where if you achieve something through focus, persistence, passion, and love of what your doing, then soon after, you think you deserve it and slack off. It is not slacking off in the general sense of being lazy. For me, it is more like I stop doing all the things I know are good for me. I eat more sugar, exercise less, play more mindless video games, and watch more movies and TV. None of these things really make me happy, yet I find some reason to do them when I begin to have more success.

So you can see that success in trading can be just as debilitating as failure. At least in failure, you are a bit more motivated to pay attention; you are getting beaten. With success there is no such motivation. On Sunday, I had a big poker win online, and afterwords I felt the starting of the anger I experienced this morning. It seems odd, but I was mad I was doing so well. That is so strange! I am definitely going to explore these feelings more. I ended the day down one dollar, which is kind of great considering how I felt this morning. On the other hand, I only added liquidity on 100 of the 600 shares I traded, which just goes to show my lack of focus. Have a great night all : )

Lucas