iBankCoin
Pro Day Trader and Real Time Trading Mentor.
Joined Oct 26, 2011
16 Blog Posts

Is your girlfriend a 6?

A scene in the movie Moneyball in which an old-school baseball scout doubted a prospective players confidence because his girlfriend was a 6! Pretty funny stuff. The thing is lots of traders have a girlfriend or boyfriend that is a 6. So if it’s true that a lack of confidence can be drawn from this conclusion how do you expect to become that profitable trader?  Now I am talking about a would-be trader’s favorite indicator, pattern or anything that signals them to enter a trade, not their girlfriend per say. Once you get that entry signal you need to have the confidence to see that trade play out and to take the size that this confidence demands. So if your are walking around with a 6 by your side how are you going to get to that place you really want to be? Today’s markets are dominated with algorithms that feed on any lack of confidence or fear you may have. I am not saying that all you rely on is any one indicator or pattern blindly, but that you need to be familiar enough with “your girlfriend”  and confident she is not a 6.  How do we get that “girlfriend” that’s a 9 or 10 not a 6? Experience and backtesting is how. Whatever you use you should have intimate knowledge of  its best qualities and worst qualities in different tapes. Once you have this type knowledge then and only then can you assume that your not the guy or gal walking around with a 6. Once you KNOW that you have that 9 or 10 then you can take the real risk that is required to make real money in the markets. So get out and find the tools that you can have confidence in to execute with confidence. In blog posts to follow, I will give a peek  at a girlfriend of mine.

 

 

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Trapped

Trapped is the word of the day..  a : something by which one is caught or stopped unawares;also : a position or situation from which it is difficult or impossible to escape Did you see that second part?… a position or situation from which it is difficult or impossible to escape Whats that mean to you? I know what it means to me. Do you know how to scan for that in your nightly scans? This is a place where I plan to bank some coin. There a bunch of investors and fund managers that have some stuff on the sheets in which they feel trapped.  They will become ever increasingly dis-interested in continuing to own these nightmares. These poor poor equities won’t even  hardly rally when the market does because trapped longs will use any bounce to sell. Fund managers wont want the world to know that they have these on the sheets as we get closer to the end of the quarter. I’m a day trader and my job is to find predictable repeating patterns and profit from them. Trapped longs are a highly predictable creature.  A couple of these bruised and battered will become just like an ATM. They will be on my screen. Short the rips baby 🙂

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Smart Money? Dumb Money? $AAPL

When it comes to $AAPL who is selling? Everyday on CNBC, everyday on Twitter, Apple is fawned over like a new born baby. Love ,Love Love..love Apple is all I hear. Anyone who owns an IPhone, IPad and IPod will tell you they are the best. If I ask them if they own the stock they reply something along the line of “till$1000” ,or “I’ll never sell they are the best company” and my favorite”I’m in until the ITV comes out. They can all tell you how every person in China wants Apple products because it a status symbol.  The thing that bugs me is even if this is all true, which it may be..the people I am talking to are the so called Dumb Money. So if the Dumb money is not selling and holding till death do us/them part..who is selling? The only other money left is the Smart money right? Maybe I’m completely lost and there is another money out there that I don’t know about.

Anyway, $AAPL the stock, not the company has managed to go 3 days without a lower low stop running fatality of the longs. Since April 10th that’s a record. It sure does look like a bear flag to me though. If by chance the other money decides to stop selling maybe the market can bounce. On the other hand if the other money(because it couldn’t be the Smart money..wink wink) keeps selling, this market could be in for some very rough sailing. An oversold market that fails to bounce can be pretty dangerous and over the weekend I have read umpteen stats on how oversold the market is and how bearish sentiment is. So I guess it’s a safe bet were oversold.

So I guess I’m hoping that the Dumb money, or  the Smart money..wait,wait I got that confused  I think I meant the Other money..hold on maybe I didn’t mean ..oh crap I’m all confused.. Let’s all hope that the Other Dumb Smart supplier of supply of Apple stock stops selling.

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Hearing Whispers from the Dresser Drawer

Every addiction and demon that you keep inside your dresser drawer from time to time will whisper to you.  “Hey don’t forget about me, you know we’re good together” , “remember the fun” and “C’mon just a little”, are some of the whispers you may hear. Sure most times you can ignore the whisper or leave the room to avoid that drawer. We all at one time or another have given in to the whisper though and opened that damn drawer. A Beetlejuice moment for sure.

One day not too long ago I opened the drawer. Inside was a bag full of fade powder my trading demon. I pulled it out did a few quick lines and off I went..$LVS  here I come. Oh yes I was ready to party!! I found the most crack fueled runner on my board that

day, $LVS was strong. I have my own proprietary algo designed from the inner reaches of my head using my decade plus of day trading experience and $LVS was the number 1 ranked strong signal.

With a nose still covered in fade powder though nothing seems to strong to fade. Too far, too fast I told myself this baby is ready to pull back. I offered some out above the inside offer and got filled right away. I knew this meant I was probably just a bit “early”.  Yeah “early” that’s the word I prefer instead of the word “wrong”. Wrong is no fun because it doesn’t let me be right so “early” it is.  Wrong would have meant that once I got the quick fill above the offer that once a bid held above that I started to reduce risk or cover completely. Today though with fade powder residue on my face I chose to do another line. So with my “early” position against about a quarter and the fade powder kicking in I added to my fade. I thought I saw some hesitation in the tape. I know better than to hit the bid and add without the tape really doing or showing me something in the direction I want to trade it, but the funny thing about trading demons is the paranoia they produce. All jacked up on my demon fade powder the only thoughts I was having were “Oh man this baby is ready to drop, I have to hit the bid now before everyone else realizes what I know and I miss the move without being bigger”.  “You got the top, you’re right” was whispering to me from that 1/2 a bag of demon fade powder that was left. Without hesitation(we all know hesitation is bad for day traders) I hit the bid. Now I’m bigger and immediately the book is flushed if the offers above me and the bid goes into leap frog motion. Now I’m feeling it..some pain but it feels good in a way too. I’m so jacked up on my fade powder that I choose to battle. Yeah it’s on now!!  “Just early, just early” I mutter to myself, “relax,relax calm down look at things clearly”, I tell myself. Since I have been doing this a long time I rarely get nervous anymore. I have the skills to usually battle and come out okay. Besides I have run into the middle of the highway with fade powder on my nose plenty of times to pick up the quarter off the road and live to tell about it. No need for nerves..”just early”.

No matter how long you have been trading your own personal trading demons exist and most of the time you keep them in the dresser drawer and out of sight. You know that it’s in there and yet every once in awhile you open the drawer. You know its not good that it will harm your trading mental account and most likely your trading account. Even if you have lasted and acquired the trading skills to somehow come out okay after opening the drawer it’s still WRONG. Wrong , wrong wrong..yeah three times for emphasis. My demon of showcasing my fading skills and surviving danger did nothing but waste the opportunity to be long the strongest stock on my own algo and make any easy 2 bucks rather than battle for a quarter. “Early is wrong. Early is a waste of time, opportunity and capital”.

I know my demon and have named it. Have you recognized and named your demon? What do you do in your trading to keep you from opening the dresser drawer?

My next blog post will talk about why I opened the dresser drawer and what I know I need to do to keep it closed.  Fading moves can be profitable but only when done without a demon whispering to me.

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Tape Reading: Learn to Look Inside

If you are going to day trade for a living tape reading will be a great help. Learning how to decipher the level 2 is essential. Your level 2 is not the holy grail first off, it tells the truth and lies all at the same time. Can you tell the lie from the truth? Most can’t . If you are looking at level 2 from the wrong angle it will hurt you not help you. Jump in front of size that’s shown..good luck..maybe in to 90’s.  Held bid ,held offer…oh yeah, seems simple but if that’s the only info you are going to consider for the trade..move on..find another job. What you are being shown is what they want you to see. Who is they you ask?  They is the trader working the order or the robot executing the order. Do you really think they will make it so simple for you as the above examples so you can just front run them for easy money! I doubt it. They are showing you nothing and that’s what you need to see or they are blatantly lying and that’s what you need to understand. Nowadays an order for size can be easily broken up to trade the whole large order in small size without ever showing size. So when size is shown doesn’t it make sense that it is done to fool you and get you to react. Not only react, but react in a totally predictable way. When you see size how do you react? What questions are running through your head? Are you Pavlovian in your actions?  Letting the level 2 rule your emotions and reactions without having a full understanding of what is actually being told to you by it is very dangerous. What prints in your time and sales stand out to you? How did the prints line up with what the level 2 was saying? Prints on the bid or on the offer should be speaking to you, sometimes loudly and sometimes in a whisper. What about prints that don’t find the bid or offer are they meaningful to you? Question after question that you need to know the answer to if you are going to risk your money.

I can’t stress the importance of  aspiring day traders really and truly knowing the rules of the game they are playing in and who they are playing against. In poker there is a saying “when you sit down at the table if you can’t identify the sucker..it’s you”.  Don’t be the sucker. Learn and study the correct things. It will still be tough, but the reward is worth it. I have just touched on one small part of tape reading and yet it requires knowing the right questions and answers. Make sure you know both before you risk big amounts of money.

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What You Don’t Know ..They Do!! $GS

Jeff Davis ‏ @Shaq48_Trading

$GS lookin for lows..be careful..they always know more than you 🙂

2:04 PM – 10 May 12 via web · Details
Today Uncle Benny gave the green light on the banks but $GS just kept drifting. I always have an eye on GS because I know that they always know more than me or anyone else for that matter. The tentacles of GS stretch into every dark corner of the financial world. I sometimes think they write the copy for press releases and central bankers around the world.  When everyone is bullish but my old tell GS doesn’t lead the party I tend to keep my hands off the longs and short a lot more. The guys in my mentoring room hear me talk about and watch GS all day everyday and what it’s up to. Above was posted to twitter at 2:04pm today.. I had shorts on most of the day.

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Social Media Exposure..$FB

I am short $LNKD ..feels like funds raising money for $FB..allocations to social media being re jiggered. Everyone wants to jump on the $FB vehicle.

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Day Trading this Tape

With the $VIX  above 20 and volatility coming back in vogue you must refine and massage your normal day trading. I usually am what I like to call an “intra day trend trader”. I usually try to find a spot and hold on for as long as the trend is working intra day on my 2 and 5 min timeframes.  When volatility rises though I have to make some refinements. I like to work my positions by taking off a good size chunk on any quick moves and book that gain and hold the rest anywhere from 1/3 to 1/2 of the position on to see if a trend can develop.  I also like to make sure that I narrow my focus on the number of stocks I trade or if I even trade individual names at all.

When the tape is moving fast and free I don’t feel the need to keep jumping from different vehicle to different vehicle because they are all moving well. I have been commenting to the traders I mentor that I am concentrating much more on the index etf’s now. They are not made for reading the tape like an individual name but for trading against levels. In the $SPY for instance right now you can trade it from”dollar to dollar or  figure to figure”. What I mean is the SPY is moving from say 137 to 136 maybe on to 135 then back to 136, you get the idea. Hey this is not rocket science but it works. The SPY holds a level I’m long with the next figure as a target and visa versa. With some patience it works because the SPY has expanded its range and is moving well. If I trade a stock I am trying to find a good mover that can trade clean and use  the levels the same way. I don’t have to be constantly jumping around and chasing. When volatility is rising patience pays because stocks find their way to big levels you don’t need to do much in between.

I also look for things like first hour highs and lows to trade against. With volatility, the bounces against the trend can be bigger so be careful not to chase thinking an absolute bottom or top has been put in. Chasing in this tape is especially hazardous. Use simple criteria like higher lows and lower highs to trade against..they work and give easily defined risk.  The stop hunting algorithms are providing some great vertical moves both higher and lower to fade, learn to identify what’s a stop run and what’s not and profit from other day traders chasing or bailing at the wrong time. The headline risk in the tape can be frustrating but with the tape moving so free mistakes can be made up easily. Come to work with a plan and have the confidence to execute it.

 

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Dancing Between the Gravestones

As a day trader you should be dancing between and around the gravestone pictured. This morning the tape will open a shade of red. Yesterday the down open was bought, but the second day is usually not the sharp buying thrust..so we may be shorting early. Beware of headline risk ..read here http://t.co/Boy22yKT

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Who will come out of the closet wearing the “pumps”?

As a day trader times like this can be rewarding or frustrating. The tape is giving lots of opportunities to short profitably but risk abounds.  Any moment Uncle Benny or The New French Guy or just maybe Angela herself will put out a soundbite that will jack the futures and turn your shorts from pleasure to pain. Make sure you have stops in someplace above the normal robot hunting grounds for safe keeping.  After the European close it is fashionable to come out of the closet with a soundbite in hand wearing nice shiny pumps for all the world to see. Yes the markets will ramp on those heels ! Pumps, the shoe of choice to central bankers around the world seem to be all the rage whenever the tape turns sour for even a few days. Sometimes they don’t even have to come out of the closet wearing them ,they just need to hint they have a closet full of pumps and will wear them at anytime. Uncle Benny is famous for his off handed “I have a closet full and I am prepared to use them.” Mr ECB also has been known to have an affinity for the fine shoes too. Uncle Benny has taught them well with his  classes in how to wear them. So as a day trader you must keep an eye and ear out for who is coming out of the closet. I will continue to short if the tape is heavy but will concentrate on the weakest for sure. The central banker pump is a classic, and totally in style these days. 

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