Lessons I learned from Trader Mike

When I started daytrading, I spent countless hours trying to find and learn from successful traders. I would search the internet and scour the forums to find experienced traders who have gone through the ups and downs of trading and were willing and humble enough to share those experiences with other traders. Of course, such magnificent traders are a dime a dozen on Stocktwits today. But a few years ago, one had to dig a little harder to find these traders.

One such trader was Trader Mike who has an excellent blog. It used to be a daily routine to visit his site, where I learned quite a bit about trading, Psychology, other traders (like Maoxian), keeping good records, self-analysis and keeping things simple. I also learned that many successful traders (if not all) follow quite similar paths of mistakes, experience and eventual success. One of my favorite posts is How I Became Such a Great Trader where he shares some valuable insight on his past experiences and some of the things he does to stay sharp.

Another lesson I learned is that while it is critical to focus on the technical and physical aspects of trading (trading plan, setups, charts, etc.), it is also very important to focus on the emotional aspects such as Psychology and self-affirmations. Now what's that you may ask? Trader Mike was not shy to share that he listens to a trade affirmations CD to make sure his mind stays 'right'. After purchasing the CD and listening to it, I understood why. I have converted the CD to MP3 and I listen to it as often as I can (on my iPod or PC). Here is a clip below:

Some golden nuggets of advice from Dr. Elder on Psychology

Dr. Alexander Elder has written some excellent and practical books on trading and psychology of trading, among them Trading for a living, and Come into my trading room. I’ve read his books and recommend every trader do the same.

However, in addition to reading his books, I also have Trading For a Living on CD and I make an effort to listen to it as often as I can. He emphasizes a lot on psychology of trading, as do many experts like Mark Douglass in Trading in the Zone (another must read).

Below is a clip from Dr. Elder’s book on Individual Psychology. In it, he offers some excellent advice for the average trader and some common mistakes that traders make (over and over again).

Some of my favorite quotes are along the following lines: The goal of a good trader is to NOT make money - it is to trade well. Money follows... Just because you have a successful system does not mean you will make money...

Favorite setups from ST50 for week of 10/24

I hope everyone is having a great weekend.  As usual, there were some fantastic and endless ideas and analysis on Stocktwits this weekend.

Let’s start by taking a look at the weekly and daily charts of the SPY:

Price action is right at the weekly 200MA of around 119, and the resistance areas on the daily can clearly be seen on the chart as well.  The persistent trend keeps grinding higher in the face of some overbought conditions, but as we all know, that does not necessarily mean we will not go higher.

Personally, I will be exercising some caution next week and will not hold any overnight positions should the indexes exhibit any signs of weakness.  Regardless, there are still some great looking charts out there.

Please do you due diligence on the picks (such as earnings, news releases, etc.).  The recommendations are only meant as idea generation and my own personal analysis on these stocks.  Additionally, please use proper money management should you decide to get into any positions.  This are my weekly picks from the Stocktwits50 list:

APKT, UNP, INFA, CGNX, TIBX, INTU, CMG.  Entry points and commentary on the charts below:

Good trading and good luck next week.

CL Analysis for coming week

Good morning – I hope everyone is enjoying their weekend.

Since I’ve been trading the crude oil futures a lot more these days, I wanted to share my thoughts on the longer term charts and some scenarios on how it might trade next week  I will start with the Daily chart:

The daily shows a very obvious tight range/consolidation since early October between 79-84.  The bounce off 38% Fib retracement shown on the chart is bullish and sets up a bull flag scenario with prices approaching 84-86, and eventual resistance in the 90-92 area.

Should it fail to breakout higher from this range, I would look for the 50% and 61.8% Fib levels to be tested, and if these do not hold, I would look for support in the 67-69 range.

Now, let’s look at the hourly chart below:

The tight range channel can be clearly seen here as well and the unexpected move late on Friday afternoon (on volume, I might add), brought the price right back to the top of the channel.

I believe this sets up a move above this channel and back to the 84 area in the very short term, but it all depends on the reaction of the markets to the G20 meetings this weekend.  Where it goes and how it reacts at the 84-85 level will determine the outlook for the next few weeks.

In any case, as I have written many times on this site, I am not in the business of predicting where prices will go on Monday or Wednesday next week or any time in the future.  I merely follow price action, understand where my support and resistance areas are, and take the high probability (and lower risk) trades.  Analyzing the chart setup helps me plan my actions and my trades during the week.  But I will not hesitate to change my bias at any given time should the chart show any significant changes.

I hope this helps.

Good luck and good trading next week

Anatomy of an Intraday Chart of CL (Revisited)

I wanted to follow up on the post from this morning regarding CL December futures 5 min intraday chart.  Below is an updated end-of-day chart:

Points 1-6 were discussed in the previous post.  However, on point 6, the support zone has moved since the chart was in an uptrend all afternoon.

7. 7a and 7b show the price touching the support area around 80.60 with the occurrence of a divergence on the MACD.  A bounce from here would give very good odds for a long entry, which is exactly what happened.

8. Minor resistance area was taken out around 81.30.

9. Major resistance area was taken out around 81.60 and price continued to 82.10.

Strange action so late on a Friday afternoon for CL, but it is what is. All we can do perform the analysis and make real time decisions on what we see.

We’ll see what Monday morning brings.

Good trading.

Update on my ST50 picks this week

I want to start following up on my picks from the ST50 each week and report on their performance.

While many stocks on this list did extremely well, this is a way for me to record my results as well.

Here goes.  These were my picks from the weekend:

CTSH : Setup was long over 66.80 (sorry, typo in the chart). Setup triggered yesterday and was good for at least $1.45 (2.2%)

AMZN : Did not trigger until today (post earnings and was a big winner), good for at least $5 (3%)

LXK : Triggered long at 46 on Wednesday and was good for about $1.30 (2.8%)

NBIX : 8.25 was triggered on Tuesday and was good for about 40c (4.8%)

MIPS - probably my favorite setup: Triggered at 10 on Monday and was good for around 50c (5%)

All in all – not bad at all.  But then again the market has been unstoppable.  Hope some of you caught some of these moves.

I’ll post some more charts over the weekend.

Have a great weekend.

Anatomy of an Intraday Chart of CL

Good morning.

I wanted to post and analyze a 5 minute chart of the CL Crude December futures.  Earlier, I talked about rising trendline, breakout, false breakout, etc. and wanted to share what exactly I was looking at.  Below is a 5 minute chart of CL:

There are 6 areas I’d like to focus on:

1. This is a horizontal trendline at 81.60, which also coincided with a major resistance area.  Usually at 9AM EST, there is a heavy move in one direction, and the thought process was if it breaks this level on some volume, it would breakout.  Which it did.
2. After the breakout, the next candle formed a Doji right on minor resistance at around 81.75.  At that point, some profit was taken and stops moved to breakeven.  Subsequently, the next candle dropped the price right back below 81.50 and the initial breakout/resistance area, signaling a false breakout.
3. Shows the rising trendline Tweeted about, going back from around 3AM EST.  As soon as it closed below it after 9:30AM, it moved lower to the first support area of around 80.90-81, where it has bounced briefly.
4. Shows the are of minor support at 80.90-81.00.
5. Shows the next area of support at 80.50-80.60.
6. Shows the next area of support at 79.35-79.50.  This area is a major magnet should CL decide to break below 80.50.

I hope this was educational.  Whatever indicators you use in your trading, on whatever timeframe, introducing and using trendlines and support/resistance zones will greatly enhance your trading, not to mention money management techniques (knowing where take profits, etc.).

Please do not hesitate to drop me a comment or tweet if you have any questions.

Good trading.