How was your weekend?

Well, there’s more to life then just red and green triangles, so I just wanted to know if anything interesting happened with you guys this past weekend.

Here’s how my weekend went…

Basically, I got thoroughly whooped at soccer.  My body is sore from HEAD TO TOE, especially in between.  I got smashed, not just in my ego, but in my boys.  We lost 4-3, but it felt like we lost 12-3.  I scored a nice goal, juked out 4 players… hahahaha, suckers.  Then this big dude tripped me.  On the next play, I kicked his foot, on purpose, then said sorry.  We were down again, about 3-1, so I decided to get aggressive.  Well, that was a mistake-  as I was striking in the inside, the pass was intercepted, and kicked… and the ball made contact with, um, my balls.  Lol!  Anyway, I was hurting too much to be mad at anyone, plus yelling at anyone in soprano would have just discredited me even more, so I just watched as the Spanish speaking players dominated the rest of the game.  So yeah, we lost to the townies, but, I will be back!   I’m recruiting my Italian friends and we are going to take these guys out, Godfather style.  That’s where I learned how to play REAL soccer, in Italy, where my skill level is equivalent to an 80-year-old Italian lady with one leg.  Soccer, I mean, “football”, is their religion. 

Okay, back to the market…

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New longs:  CLR (42.80), HK (26.52), SKF (109.71), GG (29.79)

Added to longs:  FXP (82.78)

Buying the commodity dip here.  We had sector-wide selling, which I’m marking as capitulation.  Also, USO reversed off of 91, and the Vix spiked below 20 signaling a short-sale signal.  I can’t find that many short setups at this moment, so I just bought SKF and added to FXP.

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This list is my notes for trading this week.  They are for both day-trades and short term swing trades:

• Looking for a bounce in China, perhaps open deep in the red, then a gap up. (contrarian play)  Try, Yingli Green Energy Hold. Co. Ltd. (ADR) [[yge]] , Focus Media Holding Limited (ADR) [[fmcn]] , New Oriental Education & Tech. Group Inc [[edu]] , Aluminum Corp. of China Limited (ADR) [[ach]] , The9 Limited (ADR) [[ncty]] , NetEase.com, Inc. (ADR) [[ntes]] , Sohu.com Inc. [[sohu]] , SINA Corporation (USA) [[sina]] , Mindray Medical International Limited [[mr]] , China Medical Technologies, Inc. (ADR) [[cmed]] , .
• Gap up for Ag stocks.  I think on TV, there is some mentioning of shorting Ag stocks.  I hope to get long some Ag/Chem plays for a few days if POT can stay above 170.  Try Intrepid Potash, Inc. [[ipi]] , Sociedad Quimica y Minera (ADR) [[sqm]] , Terra Nitrogen Company, L.P. [[tnh]] , Titan Machinery Inc. [[titn]]
• Golden bounce for Solomon’s Portfolio… Goldcorp Inc. (USA) [[GG]] , Yamana Gold Inc. (USA) [[AUY]] , [[GLD]] , but not Eldorado Gold Corporation (USA) [[ego]]
• Short VISN under 20, get long over 21 … follow the trend
• Bouncing off 52-lows:  Get long Hansen Natural Corporation [[hans]] , or China Southern Airlines Limited (ADR) [[znh]] if the bear-rally continues.
• Watch the shippers (EXM, DRYS, TBSI, DSX) and the solars (FSLR, CSIQ, JASO, YGE, SPWR, STP) … both had very interesting activity last week.   Solars in particular have a few more earnings to report this week with JA Solar Holdings Co., Ltd. (ADR) [[jaso]] and Canadian Solar Inc. [[csiq]] .
• Short airlines on a rebound in oil/energy.  Looking for 8 footers here.

And if you haven’t already done so, plan tonight to read Part 1 of How to Position and Size Your Trades in my earlier post.  I will post part 2 later on tonight.

Scanning for day trades intraday in the comments…

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Thoughts on Position Sizing

This entry is by Mac, from chartswingtrader.com.

“I never really put my strategy into words for this aspect of trading, and to be honest, I think a lot of times it is more of a “feel” thing for me, but then I thought more about it and realized it would probably be a good idea to do so. Here are some of the thoughts I came up with:

• The potential loss I face when I start a position is probably the biggest factor for me in how big of a position to take. I chiefly use moving averages and support/resistance levels as my stop loss levels – not just flat percentage stop losses. If I get into a stock that has a clear stop loss level very close by(therefore making the potential percentage loss small), then I may take a larger position because my overall dollar loss will still not be that big (because the percentage loss is so small). However, if say I missed a breakout and was farther away from a logical stop loss level, I would not want to take as big of a position because now my potential percentage loss is bigger, and if I took a bigger position, I would be facing a bigger potential dollar loss as well. I like to cut my losses very quickly, probably quicker than most, so this may not work for everyone.

• The overall market should play a big role in how big of a position you take as well. In a clear uptrend or downtrend, it is safer to take big positions in my opinion. In a choppy, whipsaw environment (like we have had recently) taking larger positions is a good recipe for disaster. Obviously, you need to have a system to determine what type of market you are trading in – there are various techniques for this. I use technical analysis of the indices for this and also a set of Telechart scans that I keep track of each day and use as an indicator of the market trend and to also show possible turning points in the market. For instance, right now my momentum indicator is at its highest numbers ever (or at least since I’ve been tracking it) and when this gets to extremes on the plus side, it usually signals a market that has run too far too fast and needs to cool down. Therefore, right now, based on that, I would not be taking large long positions right now because I feel it would be too risky.

• Recent trading success also is a big factor in position sizing in my opinion. If you find yourself on a losing streak, or just kind of grinding your way sideways, that probably is a signal that the market is not setting up well for your particular trading style, and in that case, you should definitely reduce your position size. I know I have personally seen that this past month. Stocks that I thought looked like very good setups have not acted anything like I expected, and that action told me it is not a good time to make big bets. Things are too hard to do that right now. On the other hand, if you begin to put a string of very successful trades together, and setups that you see act well and do what you expect them to do, then perhaps start to take bigger positions. A lot of this is just psychology too – if you get some bad trades strung together, your instinct is to try and get the gains you lost back quickly. This is counterproductive however – unless you are trading a totally new strategy and not following your normal rules that you’ve had success with, most likely the losses that occurred were a result of difficult market conditions. And when you try to get those gains back quickly, all you are doing is forcing yourself to make more trades in a poor environment, which is certainly not a recipe for success. If you condition yourself to trade less and in smaller positions when you are having less success, you will do a better job of preserving capital during difficult times and slowly allow yourself to regain confidence without blowing out your account.

• I would also add that fundamentals usually play a role for me in how big of a position to take. If I am looking at a nice chart of an IBD-quality stock, with great growth and sales growth, then I would be willing to take a larger position. The fundamentals doesn’t guarantee the trade will work, but it gives it a better chance of working, as earnings acceleration are the biggest factor in stock price appreciation. On the other hand, if I am looking at a biotech that has negative EPS, I won’t take a big chance in a stock like that. There are just too many question marks to take a large position. The chart setup is always the number one factor for me in trade selection, but fundamentals are important in my opinion as well.

• Finally, I think it is important to remember to build positions slowly as a swing trader. Ideally, I rarely will take a full position in a stock during my first trade. Instead, I will start a position(usually around 50-75%) and automatically look for a point where I will want to add to it. If it doesn’t follow-through and hit the add point, then no big deal – I get out of a small position with a small loss. But if it does move higher, I am forcing myself to add to a winning position, which is always a good thing. It makes the positions that are working automatically bigger while keeping losing positions small.
  
• UPDATE: Based on William O’Neil’s recommendations in his wonderful books, I don’t really believe in diversifying.   I really try to be focused in my positions, rarely having more than five or so positions total.    So I am willing to put up between 25-33% of my account into one stock.    I usually start my positions around 15-20% of my account each.    That may seem like a lot, but that is also why I cut my losses so quickly.   I can concentrate my positions without too much harm to my account (usually) because I try to keep all losses around 3% or less.  That equals out to about 0.5% of my account per loss, but I try to keep it lower than that actually.    Most traders I read about usually use the 1% of account value as how much they risk on a trade.    I prefer to risk or lose less than that.  If trades don’t work right away, I don’t see any reason to hold onto a stock.    Get rid of it and move onto a better one.    You can always get back into a stock if you need to.    I would rather be safe than sorry.    And if I follow my buy and sell rules (getting rid of ones that don’t work right away, adding to ones that do) it usually allows me to get bigger positions in stocks that are working well while not holding onto positions that stink.

  As I gain more and more experience as a trader, perhaps my strategies will change, but for now, I feel this is the best way for me to trade, and it goes along with the general CANSLIM philosophy that I try to follow in my swing trading.    This method isn’t perfect – no method is in trading – but it works for me and for my personality and temperment.

Hope this helps and is informative. Good luck next week.”

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A Trader’s View: How to Position Your Trades, and What Size Should Your Investment Be

Part 1: From a Swing Trader’s Perspective, by Mac the ChartSwingTrader.com
Part 2: From a “Wave” Trader/Momentum Trader, by Gio theHawaiiTrader.com
Part 3: From a Day-Trader’s Perspective, by Stewie theimpatienttrader.blogspot.com, and Gio

How much of my portfolio should I invest in a stock? When should I sell? When should I add? It’s not working, is it time to double down?

These are really important questions that all of you should be asking yourselves before you click that mouse.

Anyway, I was able to ask a few financial bloggers to tell you, in their own words and experience, how they position and how they size their trades. These guys are very successful in their skill, and in my opinion, are very disciplined traders. I hope you enjoy the hard work these guys put into this topic. Think of this as your chance to get in the mind of a real trader and learn from our mistakes and successes on how to “position and size” your investments.

Each part will be released on a different post so you can direct your comments/questions to that particular topic. Do you have a successful way of positioning and sizing your trades? Leave a comment! We are all students of the game, and can learn from each other.

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WINNERS
BABY ( +6.56% at 24.7, bought at 23.18)
PCX ( +6.13% at 110.12, bought at 103.68)
FCX ( +11.21% at 87.33, bought at 78.52)

LOSERS
HK ( -9.05% at 28.50 bought at 31.96) – partial and completed

CURRENT HOLDINGS
APWR -13.28%
BOH (short) -8.26%
EDU -0.56%
FXP +7.60%
GMXR -0.70%
MEA -6.34%

Trader notes:
This week was just like last week… choppy!  But that’s normal for a week full of economic news.  Right now, my portfolio looks nasty, but I did however make a lot of good day-trades this week.  (Hat tip to Danny and Ragin for trading with me over on GoogleTalk.  We nailed FCX!  Sorry if you guys missed it, but we executed that trade with 3 minutes left to the close.)

 The week closed with a strong +300 day on the Dow, but once again on the fall of oil.  Oil had 3 big declining days, which signals we are getting capitulation here.  That’s good news for me because I know we are approaching a medium-term energy bottom (I am a contrarian investor when it comes to extreme levels of market volatility, and we’re seeing that in oil at this moment).

Right now, I would not get aggressive long.  I am simply waiting for the Vix to get under 20 so I can begin shorting all these sectors I’ve been featuring this past week.  As for this week’s trading… I am off my game in the swing-trading department.  I had a few bad exit points in PCX, TBSI, and HK.  I covered PCX, then it fell 18%, I covered TBSI then it fell 16%, and I sold HK then it went up 12%.  Sheesh! Lol.  Nevertheless, I did close TBSI and PCX with gains, and my HK was only 1/3 position sized.  And I am very pleased with how I handled hedging my portfolio while it was getting attacked.  For example, although my portfolio has a strong commodity-bullish bias, I am not afraid to short the weakest energy stocks for a day trade to limit my losses.  At one time I was hedged 6:1 AGAINST my commodity stocks on Tuesday, and I actually ended up with a gain! 😉

Jot these down! I’ll be swing trading and day trading these sectors for the rest of August…

–  Short solars if FSLR cannot get over 260, cover shorts at 265-270 level.  CSIQ, FSLR, YGE, JASO, SPWR, STP.  Get long beaten down CSIQ if FSLR above 270 + CSIQ above 29.

–  shippers will attempt to consolidate this bottom next week.  Try to catch a bounce if it succeeds.  Same for China-stocks… I’m waiting for one last bull-rally before the big O.

–  Energy!  The best way to play energy here is to short the airlines if you are bullish on energy, or get long the airlines if you think USO will continue to slide.  UAUA, CAL, HA.  Also, in the event energy does bounce, load up on SKF in addition to you airline shorts.  (Be careful drunken bulls! An energy relief rally will crush this rally!)

… well, that closes out my first week at iBankCoin!  It sure is great to be trading with you all!  This weekend, I’ll be playing soccer again.  We got called out for a rematch, and from what I heard, they’re recruiting more players.  Bring it!!  I’m going shopping for cleats. 

ALoHa!

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