Tattoos and Trading

Ok I know you’re probably saying “What’s up with this guy?  Salsa Dancing, NYC Bus System, and Whack-A-Mole…now Tattoos’ and trading”. Well if you have been trading for any period of time you have most likely been tattooed at one point or another. Once you get tattooed for real it is there to stay it doesn’t just wash off. You are now the proud owner of a tattoo on your trading psyche.

Tattoos’ are sometimes famous for the circumstances that surround their birth in to existence. Was it a conscious well thought out decision or the result of a night or series of nights in which conscious well thought out decisions were not remotely within the realm of possibility?  It matters. A tattoo that was planned and picked with you knowing exactly what one was doing is usually worn with pride. Whereas the less thought out, spur of the moment alcohol or love induced tattoo may not be something one is anxious to show the world.

In trading being tattooed is much the same. Did you get tattooed in a trade that wasn’t well thought out in a moment of revenge trading or the classic “get back what was taken from me” trade? Did you opt to only think about that moment and not what this moment may imprint on the future?  Or was it a well thought out planned trade that just happened to encounter the law of probabilities and it was your turn for a tattooing?  One type of tattooing reminds you of loss of discipline and pain. The other although painful reminds you of why you keep your discipline so this happens less frequently.

What types of tattoos’ are you inked with? If you are tattooed from trading on tilt, revenge trading and a host of other brain seized strokes of undisciplined behavior, you need to be heading to the closet and finding a long sleeved turtleneck. The tattoos’ are there but you have to find a way to put them out of sight. Cover them up and move on. Vow to not make decisions that are going to harm your trading. When you sit down to trade wearing that turtleneck wear it with pride! Let it be a reminder that you have moved past the days of unplanned tattooing.

Jeff Davis      @Shaq48_Trading    [email protected]

So here we are with the market extended by most short term technical standards. As a day trader what should you be looking for to tell when profit taking is starting to kick in? In this tape recently trending stocks intra-day have had shallow pull backs and stocks that have opened down for the most part have been bought rather quickly. Short side exposure has been mainly scalp type trades that don’t seem to get legs. Lately, you end up taking off shorts with smaller targets while the long side has rewarded those that are able to keep something on(trade to hold).  I have found for day traders that the first day of real profit taking when it gets started is a great day to be active.

Since I use the old fashioned high/low tickers one of the first things I will be watching for is how fast the new low ticker starts moving when a sell program hits the tape. This is the first sign of sellers not hanging out in the offer but getting to work hitting bids. Profit taking once it gets rolling is easily identified by how easy it is to get filled on the bid for longs. Sellers are there to take profits and get out or reduce exposure.  The key for a day trader is to realize that when those first dip buyers come in you have the chance to add or put on a position because once profit taking is under way dip buyers get treated like bottom pickers and become road kill. The beautiful thing about profit taking setting in is that it’s usually a more broad based event and not so stock specific.

This gives you the opportunity to keep adding positions and as they move in your favor get stops in and add some more positions. A trend day down is a beautiful thing to an adept day trader and gives a great opportunity to use a good amount of buying power. Just as it has paid to try and hold a piece of any longs because upside targets seem to be run through with ease these last weeks the opposite holds true once the profit taking mentality kicks in. The longer you trade the more you will realize that the mindset of the traders involved is more important than targets on your charts.  Maybe just maybe,we get a Monday morning gap up that turns into full blown profit taking. I will be watching the action on the bid for clues. You should too.

Jeff Davis    @Shaq48_Trading (twitter)

Don’t Worry Be Happy….Take The Loss

When was the last time you got a paper cut? Do you remember? I’d bet you struggle to come up with the time and place. Exactly, you forgot.

Keep your losses like paper cuts so you can forget about them and continue working. Paper cut losses are simple, effective and essential.

Novice day traders need to understand the importance of taking paper cut losses. They will protect your account and psyche from damage. Small losses allow you to focus on the next trade without influence from the previous trade. One Good Trade to the next One Good Trade.  Paper cut losses can prevent the common pitfalls of revenge trading or trading the p/l from creeping into your trading day. Losses that more resemble hitting your thumb with a hammer are much tougher to forget. Taking losses is an everyday occurrence in the life of an active pro day trader, they must not trigger self sabotage stress induced decision making.

The great thing about paper cuts are that they hurt for a second, but the pain ends quickly and you can get right back to work. As your tape reading and foundational trading skills improve your personal definition of a paper cut loss will evolve. What may start as a simple small, dollar loss position sizing strategy should progress into trading bigger positions with a better ability to keep them and derive more profit from them while maintaining a paper cut mentality.

Jeff Davis             @Shaq48_Trading      [email protected]

I dressed up as a rampaging robot algorithmic trading bot!! Oh yeah it was a blast. I got to run around all of Halloween stealing candy from unsuspecting trick or traders. You should have seen me hunting the stops  of anyone who crossed my path with a position on their sheets. Day and swing treaters are all just easy pickings for me when I don this costume. I won every costume contest I entered …  you know why? Because I have been secretly wearing it for a year now rampaging and running stops. Practice makes perfect.. This costume works so well tricking people I may continue to wear it daily and turn my Halloween into Christmas! Look, I found your candy under my tree. Ha Ha Ha

So you’re a day trader. Ok, you have the computer, a few monitors, and a brokerage account with a few bucks that is going to make you many more bucks. Throw in a charting program, a few books worth of knowledge and the passion for trading and your set. Now what? Good question!

As a new or even a struggling trader with all of the above in hand, what is your job description? When you come to work each day at the screen what is your job? How are you planning on doing your job? Can you describe to me in simple terms what you are trying to accomplish? If these questions give you pause, it may be best for you to prepare yourself for some rough sailing. In my experience rough sailing in the trading business usually involves losing money! Wait… now hold on a minute, that’s not the job you signed up for. This all too common scenario occurs with a percentage of probability that equals “all in” in your friendly poker game or “get bigger” in the trading world. Among remote traders this is way too common. Office traders most likely have some sort of support system to help them or at the least point them in the right direction. To those of us who go it alone from home where do you start? You should be starting with a job description that you can visualize and understand. Yes, I said visualize and simply understand. If you can’t really tell me what your job is as a day trader in a KISS (keep it simple stupid) kind of way you most likely will struggle. Struggling is no fun for any trader..  been there done that. So tomorrow I will give you a KISS version of my job description as a professional day trader. It’s not rocket science but I employ it every day! Until tomorrow I would love to hear some thoughts of yours as to a day trader job description.

Jeff Davis   @Shaq48_Trading      [email protected]   Trading Coach/Mentor

What the heck does the NYC bus system have to do with day trading?  Think about it, is the best way to start your day waiting on the corner for the bus or running down the sidewalk trying to catch the bus?  I choose patiently waiting for the bus.  If you want to make it as a day trader you should opt for my choice. Here’s why…

Finding and trading the different opportunities that are presented each day is task number 1 in our job. It pays to be on time and ready to work without being all sweaty and out of breath from chasing the bus. Some trades you are on the corner waiting, the bus comes you hop on and like magic it’s a nice easy ride that gets you where you wanted to go. Many times however you see the bus leaving the corner and you decide to make a run for it. When this happens do you get upset? Sulk? Or continue chasing? None of them are choices that will help you survive in this job. So take a deep breath and think of the good ole NYC bus system …ANOTHER BUS IS COMING! You don’t have to stand on that corner long before another bus or trading opportunity comes. Opportunities are easier to make up rather than the losses that come from chasing, trading mad or frustrated. You are going to be late sometimes ..GET USED TO IT. It does not matter how long you do this job once in a while you’re going to be late. How you handle being late will determine how your day is.