Sunday, December 28, 2014

Questions from How I Started Trading I

Before I get to Part II of How I Started Trading, I want to answer a couple of Questions that were emailed to me about Part I.  They all centered on what was the most important concepts to learn.  Well to be truthful, I like to use the “KISS” method. (Keep It Simple Stupid) I found that the simpler I can keep things, the more I can remember and apply.  This is what I focused on learning and what I recommend learning before you start trading.
      1.  Market Terminology – I had to learn the market terminology to follow along with what is happening on Twitter, in chat rooms, etc.  Without this fundamental knowledge you will fall behind and never catch up.  The terminology I learned came from chapter 2 of Textbook Trading DVD.  It starts off with basic terminology like buy, sell, short, buy to cover, limit order, market order, margin, short squeeze, and the exchanges.  Then it gets into typical chat room terminology and acronyms and then Level II terminology.  However, there are a lot of free resources on the internet such as YouTube where you can learn this terminology
      2.  Basic Supply and Demand - Next, I learned about how supply and demand effects the price action of a stock and why the stock price moves up and down.  This is very important to understand and connect to what you are seeing when you are following a stock.  This knowledge, though it may seem elementary, is very crucial when you are analyzing the action of a stock.
      3.  Technical Analysis – If you are just focusing on day or swing trading versus long term investing, you must understand basic technical analysis.  In my opinion, the basics is all you will ever need.  In technical analysis you are basically looking at charts, identifying support and resistance levels, predicting possible entry and exit points, and setting educated risks.
a.      Charts – This gives you the story.  It allows you to visually see what’s happening as a stock is being traded.  I use candlestick charts and I believe there is nothing better.  I learned basic candlesticking.  None of the candlestick patters you read about in books or magazines, just the basics on how to read the candles.  I learned how to read charts over multiple time frames, daily, 6 month, 3 month, 30 day, and intraday charts.  I learned how to find support and resistance levels.  All these moving averages and studies on charts just add too much noise and for me, took my focus off of what’s truly important, support and resistance. Tell me which chart you feel makes more sense to you:

These charts are from which offers part of their services for free.  I always eliminate the “noise” from my charts.

Once I received this basic market education, I was able to follow trades and understand what was happening.  Only then was I able to begin studying the trade set-ups and developing my own comfort level for how I wanted to trade.  I was able to make educated decisions on what trading tools I needed and which ones made sense for how I wanted to trade. When I first started trading I did not do this and I lost money.  I was blindly following throwing good money after bad and there is no future in that.

WARNING!  There are a lot of videos and publications on the internet teaching their version of the same thing.  It is imperative that you pick one person and lean from that person and the traders in his/her community.  All of the “good” ones have free videos on their YouTube channel so that you can take a free ride along with them.  I took advantage of it and that is how I ended up where I am today.  Listening to too many people from multiple trading communities is a recipe for disaster.

Friday, December 26, 2014

How I Started Trading: Part I

How I Started Trading: Part I
Education First 

In my initial post I shared with you how I ended up with Nate and Investors Underground.  There were other guru’s that I looked at throughout the beginning of my trading career as well as other strategies so what I want to share is my advice on how to get started based on these personal experiences and challenges.  I do want to say for the record that I do not get paid by any of the services that I mention or use.  They are my personal preferences and work the best for me.

First I would have to say that if you are interested in trading because you want to make quick, easy money, you will be one of the 90% of day traders that lose money.  I admit when I first started I thought it would be easier.  I quickly realized that there are several elements to trading that will take time and dedication to master.  So I would say the first step in beginning a career in trading is to truly understand everything that’s involved in it, and I mean everything, before you make the final decision to fund an account.  Before I made the move to where I am now, I had to go through this process.
So what’s involved in being successful in day trading?
Managing Emotions
There are more but these are the main ones.

Once I understood the demands of day trading, I knew that in order to shorten my learning curve and give myself the best chance of success, I needed to choose 1 of the “gurus” to follow.  Even though I liked Tim Sykes, I didn’t like his trading style.  Well I didn’t like OTS’s and Pink Sheets.  I had done a little research on Nate and his DVD and knew he was into NASDAQ’s.  I liked the feel of trading NASDAQ’s so I knew that was the direction I wanted to go.  I did look at others and did as much vetting as possible for free.  I did not want to waste money to try each of them out.  Most gurus have Twitter, Instagram, and post videos on YouTube.  That is the best way to get to know them and get a feel for their strategy.  That is exactly what I did.  I took advantage of free tours and samples of their services.  I know each person is different and has different personalities so you have to spend some time getting to know them for yourself.  After this tedious process, Nate at InvestorsLive kept coming to the top.  His style seemed to fit my personality.  He made it a point to personally answer emails and not pass them off to someone else.  Coming from a service where you rarely got a personal response from the guru this was a breath of fresh air. So I bought his first DVD and subscribed to his chat.

When you are learning, you must be dedicated to studying and exercise patience.  Also, you only need to follow 1 person and their community .  If you are following multiple gurus who have different trading styles and philosophies you will get lost.  Again, one of my main recommendations is to filter out as much “noise” as possible.  I spent two weeks watching the DVD and taking notes.  I followed silently in chat, watched charts, and tried to connect as much as I could.  I never opened a paper trading account.  I just traded small size when I did trade.  I listened to the chat room moderators and followed them on Twitter.  I felt that if Nate chose them as moderators they closely followed his style and set-ups.

I cannot preach education enough.  I am not just saying that because I am a teacher.  I am saying this because it is a very important element of trading.  It is also a never ending process.  You are always learning.  You have to be dedicated to learning your craft.  This is why I say “EDUCATION FIRST”. Learn how to read charts and identifying support and resistance. Learn how to identify the set-ups. Learn how to find the stocks that are in play by scanning at night and in the morning.  Learn how to become self-sufficient.  You know the old saying, “give a man a fish, and you feed him for a day. Teach a man how to fish and you feed him for a lifetime”.   I want to be the fisherman!

Let’s sum up this blog:

1.Understand everything that’s involved in trading

2. Research the “gurus” and find one that fits your personality.  Make sure the guru is an active part of their community.  Do this before you drop any money into their service.  Make sure it’s a good fit for you then stick to learning from that person and his/her community

3. Make sure you filter out all of the unnecessary noise.  Listening to too many people who follow different gurus will leave you dazed, confused, and broke.  It wasn’t until I chose 1 person, 1 community that my trading success started coming

4. Invest in your education.  Your success in trading depends on it.  Purchasing InvertorsLive’s DVD’s Textbook Trading and Tandem Trader were the best investments I have made in my future.

Thursday, December 25, 2014

My Modest Trading Rules

These rules I have borrowed from many traders and adapted to me.  They are a work in progress so I may update/add as I progress.

My Modest Stock Trading Rules:

  • Delay all entries until 5 mins after opening bell.
  • Only trade my watchlist.  Do not chase other traders picks.
  • Have two plans for a stock.  One if it opens weak and one if it opens strong and takes off running.
  • Only trade my setups
  • No set-up, No trade.
  • Use daily support/resistance, whole and half dollar marks to gauge risk and base trades off of
  • It is OKAY to take losses. A small loss or break even is good! Remember, wannabe heroes often die. Never turn a small loss into a huge one!
  • Only 3 losses per day permitted, or a maximum of $150.  Once that mark is hit, leave market and go have fun.
  • When you’re new It’s very hard to make $1k per trade but much easier to make $100. So I try to pick trades wisely to gain $100 at a time. Patience is key. 

      • If I can gain just $100 per HOUR trading (6 hour trading days) that means I will make $156k a year! $50/hr is $78k a year!
      • If I buy 10k of a .20 stock and immediately sell it at .21 that makes me $100 off just a $2k position in less than a minute. Do it a couple of times within an hour and I’m up a day’s pay.  however, if I buy 100 shares of a $50 and it moves $1, then I make the same amount of profit with a lot less risk.  Obviously you know which strategy I recommend!
      • I make many trades for smaller gains (bat for singles) vs trying to swing for fences & most likely end up striking out.  Sometimes singles turn into doubles, triples, and occasionally an in the park homerun.
      • Trade for skill, not money.  If you trade for skill, hit your technical marks on the cart, the money will be there at the end of the day.
      • Chart support & resistance are the two MOST IMPORTANT chart indicators I will ever need to know.
      • Trading is all about pattern recognition, being able to recognize instantly the current situation and how to react & trade on it.  Ticker, Volume, Trend.  Study charts and price action
      • Do not over analyze trades. Employ the “KISS” method; Keep It Simple Stupid.  I use only BASIC charting when I trade.
      • Do not trust Level 2 alone to make trade decisions.  Use as a reference only.
      • Filter out as much noise as you can when trading. (Twitter, Instagram, Excess Chat Rooms, Etc.)
      • Study, study, study.  This is a lifelong learning profession.  Never stop learning.

      About Me/Why Trading

      I have always been fascinated by the world of stock trading.  My first introduction to the stock market, like most, was in high school.  However, this was before the integration of computers and it was a whole different animal.  I was hooked.  But I had very conservative and "safe" parents who told me not to think about a career on Wall Street.  Unfortunately my guidance counselor told me the same thing so there ended my dream.

      Once I became an adult, I saw an Ameritrade commercial and I realized my interest in the market was still there.  By now, the computer and internet was beginning to get popular so I opened up an Ameritrade account with a little bit of money and quickly lost it all.  Then I remembered what my parents, grandparents, and guidance counselor told me, "you'll lose your money son"!  So again, I gave up the dream.

      Fast forward 10 years later and I'm watching CNBC or a channel like that and I see a guy ranting and raving about starting with $12,000 and turning it into a million and he had a student that started with $1500 and turned it into a million.  My adrenalin started pumping again.  If you haven't guessed it by now, the guy was Tim Sykes.  I applied to be one of his Challenge Students.  I was selected but there was no way I was sending him $5500 so I joined his Pennystocking Silver service in January 2014, purchased his DVD packages, and opened a Suretrader account with $1500. I learned a lot about the market and level II, but didn't make much money and was never comfortable with OTC's.  Then when a stock I was in, I think it was NEWL, was halted by the SEC, I said enough of this.

      I had always heard about Nathan Michaud and the Investors Underground service as well as his new Textbook Trading DVD.  I felt NASDAQ stocks were more suited for me.  Since I am a teacher and summer break was coming up I felt this was the perfect time to study Nate's strategy and join the InvestorsLive chat. My world was changed.  I learned so much over the summer.  I traded small and learned how to recognize patterns and set-ups.  I made it a point to be patient and not blow up my account while I learned.  Summer was over before I knew it.  My quarterly subscription to InvestorsLive was over as well.

      I didn't get to trade much the first months of school but I studied charts, watched Textbook Trading DVD, and kept up with Nate on Twitter.  I started trading some in November and I felt I was a better trader and more prepared to attack the market.  I also bought Nates new DVD Tandem Trader and my world was changed again.  I started practicing scaling in and out and instantly became more profitable.  It was then I decided to just focus on textbook longs and get that strategy down first.  I have had my best 2 months since I have been trading.

      I started this blog to help me document what I have learned along the way so that if in the future I do loose my way I have something to help get me back on track.  I also wanted to share my trials and tribulations so that it may help others who may be in the same boat as me.  Well, that's enough for the first blog.  Time to go eat more leftover tamales!