Trading Strategy

I originally learned how to do full documentation of my trades in 2005. It's now 2008. I had these bracket trading sheets that helped get me in and out of trades. In a market that is not volatile, this was okay for me. But, when things started to get pretty volatile late last summer, I found myself being whipsawed out of many positions -- positions that were profitable, then having to take costs in them, or they were highly profitable to either break even or take so little off the table.

It was rather frustrating. My trading coach at the time is a wonderful coach, who is also my friend. He has a great deal of knowledge and has done very well for himself. He is, however, not a daytrader. I had always heard all these horror stories about daytrading and sure, with anything if you don't understand what you're doing and do not execute properly, you can get your head handed to you on a platter.

After being whipsawed numerous times in my real accounts, and after recommendation by my trading coach, he said I should consider daytrading. My technical trading skills and disciplines were good. I gave it a try and found success, good success. I was far more profitable and actually daytrading in volatile markets helped calm me. The swing trading made me very nervous and not holding positions overnight helped give me more peace of mind.

However, as things have heated up in my divorce and my work needed in my divorce has ramped up, and also my children needing more of me, it has made daytrading also a challenge. Unlike in swing trading, attentive focus RIGHT NOW was not always necessary. I could put my contingent orders in and let them fill. With daytrading, I had to babysit my trades pretty much the whole time if I wanted the best entries and exits.

While daytrading suits my personality much better, due to extenuating circumstances, it's made it also costly for me because the focus isn't always there. There are many distractions right now and that does not lend itself to good trading. And, I've found I've mixed my emotions and other things into my trading, which is a NO NO!!!

In April, I took on a new trading coach whose style is pretty different. I've been learning more in depth as to the WHY'S of things, and now have a much deeper understanding, well, at least just brushing the tip of the iceberg in understanding and knowledge. It is very exciting.

The past couple weeks, I've not gotten very far with my trading plan, well, haven't gotten anywhere. But, there are always going to be distractions and I had to get moving. I had to have a better way to manage my emotions. We all have emotions and it's not reasonable to say you're going to get rid of them, but you can control them.

This evening, I spent 4.5 hrs writing down specifically ONE strategy for entry and exit for both in the bullish and bearish directions. I tested it on AAPL over the past few months and it's working pretty well. It allows me much cleaner entries & exits, though. I will use this strategy on options and futures trading to rebuild my accounts.

Once they are at a better level (my accounts), I'm going to add some interim steps that will get me into trades a little earlier and exit also at a more optimal level, with smaller pullbacks/reversals. What that means is if the move is $30, my strategy will allow me to take about $24 of it, which is still excellent, but the revised strategy will allow me to be like $28 instead. That extra $4 means a bit more risk, so it would be when getting in earlier you start with a smaller position and add to it and the confirmed entry.

For exits, it would be getting out as things take a breathing, but you would be scaling out of the trade. You would get completely out of the trade once all your signals are confirmed that things are reversing.

Honestly, I'm not sure I would really share exactly what my trading strategy is, but I may give hints here and there and let you develop your own strategy. This is a free blog, and I have been sharing a lot of information that has cost me many thousands of dollars to learn either through the school of hard knocks, through paid classes/DVDs/books, through coaching, etc.

I don't mind sharing ideas periodically or helping provide some insights and guidance, but what may work for me, may not work for another person.

Anyway, I'm excited that my Strategy is fully written out in words, giving me very precise signals to take. It mechanizes my system exactly. So, let's put my money where my mouth is and see what happens in the next few weeks.

Precision Trading

My trading coach is taking me to a new level. He is amazing and I'm really soaking the information he's giving me up. I'm having very clear entries and exits now and I know exactly why. The things that I used to just blow over are now very important, which gives me clues as to what is happening, as to what the professionals and institutional people are doing. That, of course, is hugely important.

I've included one more indicator in what I'm using, so here are all the indicators I use:

- Price Action
- Moderate Bollinger Band settings (18, 1.9)
- Faster Parbolic Sars
- Moving Averages (10, 20, 50, 200 EMA)
- RSI (either 7 or 14)
- Volume (5 and 21 EMA)
- MACD (12, 26, 9)

You must be able to define your entries and exits very well and stick with them. Your exits will be like your entries, just the flip of it. If you're in bullish, then your exit is about a bearish entry. Does that make sense? It basically boils down to that, but a little bit different.

I'm learning doji's are not indecisive candles, rather there are movements by professionals to hide what they are doing, as they already know which direction they are loading up on. They are just either shaking out sellers or buyers (depending on the direction) before moving where they are loading up on.

I have pages of notes, and they are not exactly organized. Perhaps when I can organize them and begin trading this way funded, I'll share some of those things. A lot of work ahead of me.

Upset & Offended

In Facebook, apparently I offended someone and didn't even realize it.

There is so much on my plate, so let me spell out for my readers some of the things going on with me to give you a better perspective. I wish there was an easy solution, but that's not where I am now.

At the beginning of last year, I retired from my day job, a senior level mechanical engineer at a Fortune 100 company. I got paid reasonably well, and the physical conditions of my job were pretty comfortable. As a Christian, and I know Christians these days often have a bad rap or it's distorted by the media or by even people you know. I will do my best to be as transparent as possible without compromising who I am, my safety or that of my family.

I'd been investing and trading on/off since the mid-90s with success. Of course, the expression, "Don't confuse brains with a bull market" so applied in my case. After a series of very successful lucrative trades, thinking I was such a hot shot, listening to my broker, I lost most of it when the market began to tank in the 2001ish timeframe.

In 2003, began rebuilding the accounts, inspite of the fear that was present. Got a bit more knowledge and went at it again. No clue of risk management, skills, etc. Just basically had knowledge and that was dangerous. Lost it all again.

By 2005, I had a major traumatic experience that made me re-evaluate life, my purpose and I decided I was no longer just going to keep making money just to lose it all. Decided to get some formal trading education, and thus I did so starting Sep'05 with BT (the company will remain anonymous for the sake of this, but I'm sure I've mentioned them before somewhere in my blog).

I poured my hard-earned money, which was tens of thousands of dollars in the next 1.5 yrs into BT training, their subscriptions, their software & tools, DVDs. Though I had a lot of success, made a lot during that timeframe, my risk management was still not all that great. There were many lessons to learn that I either didn't hear them or they were not taught to me. Nevertheless, it's been a challenging road.

As I said earlier in 2005, I had a traumatic thing happen to me that involved police. The police in the first quarter of 2006 dropped my case, which sent me into a depression. Within a few weeks, I experienced the deaths of 3 different people super close to me. That, combined with extensive traveling for these trading classes, working full time at my engineering job, raising 2 young kids with my husband was just too much for me. I ended up having a mental and physical breakdown that put me on medical leave from my engineering job for 4 months.

During that 4 months, I did not travel. My trading had to be put on hold, but I did attempt to trade. My medical leave stipulated that I had to be medicated and under psychiatric care, which, as a person that is into natural living, alternative health/medical practices, this did not bode well with me, but I complied.

The anti-depressants were simply horrible, giving me terrible nightmares, lots of physical and mental side effects that I would not wish on my worst enemy. Well, after all that was over, I returned back to work, got off the meds, but realized I was not suited to be an engineer any longer. I had lived under extreme stress for many years and never knew it until there was something to compare it to.

Well before any of this happened, for years I prayed for what I would do after engineering. Little did I understand my breakdown was all a part of the plan to get me to recognize I was quickly killing myself with the workaholic lifestyle I had grown accustomed to.

Technically, I left my job in December as I took all my vacation before my actual last day of work, where I just turned in everything. That was in Jan'07. My husband said it was fine for me to leave my job/career, and though I was the major breadwinner, he said he would be there for the kids and I, supporting us financially (means he would go out to get a job) until my trading was good enough to sustain itself.

I was not ready to financially give up my day job as I was not consistently making the money I felt we needed, or saved up enough, but at the prompting of the Holy Spirit with numerous confirmations up until the point of life/death situation, that was when I submitted to the Lord. Yes, it does sound hokey, doesn't it?

The first couple months I was basically decompressing. I was not on any meds except for my heart condition and enjoyed just not having to be tied to a job/career that I hated. It was during this time that the Holy Spirit began to reveal things in my marriage that were not right. Shortly thereafter, more things unraveled themselves.

To make a very long story short, I found out my husband was having an affair with another woman and by Father's Day 2007, he had walked out on the kids and I. At the time, the kids were 6 and 3 yrs old. This was the man I poured my heart and energies into, believing the dreams God had for our lives, our family. Nearly every day I laid hands on this man praying for God to protect Him, mold him into the man of God I knew he could be. But, my husband determined in his heart from what I now gather, that he didn't love me and subtly throughout our marriage, found excuses to chip away at the very fiber.

See, God gives everyone freewill, and though I was praying for my husband, he was in direct rebellion and gave way to Satan's lies in his life. Anyway, in July the tax government (we know who they are) came a knocking telling me that my husband failed to file our taxes from 2002-2005. During all my working career, I'd always paid taxes, but I didn't know he wasn't doing this -- filing, that is. Well, imagine how a small amount that could've been owed with interest and penalties? Not good.

And, on top of that, my husband had done a number of things (or not) that really put us in financial ruins. He walked away from all of this leaving me to deal with everything alone, including raising our 2 children alone.

Here I was about to start on my trading business full-time and the shock to my system. As those of you who are full-time traders, THAT in it of itself is a challenge, but now heap on a marriage mess, learning to be a single parent of young kids who very much need you, tax mess, financial mess, much less any emotional stuff that I could be dealing with, that is a lot on my plate.

So, all these months, one thing by one thing as I deal with this divorce where it's been financially draining. I'm not going to go into all the gory details of that, because they are gory. But, the one thing I can attest to is the goodness of God. He has provided every single day for the kids and I. It sometimes it through others, through different things, etc. It has been amazing.

I've learned a lot in my trading and it has been very challenging to juggle all these things. I'm learning that through Christ, I am strong.

So, how did I offend and upset someone? Apparently this person emailed and IM'd me. I was honestly not aware of the IMs. He did email me in Facebook and I thought I emailed back or said that I'm going through a lot of stuff and that I'm not always able to email so quickly back. There has been a lot of work to deal with my divorce.

As I recently took on a new trading coach, there is a lot of work there.

And, being a mommy to my 7 yr old daughter and 4 yr old son, who are smart & energetic, a lot of my time is devoted to them.

Their father up and leaving, rarely spending time with them, DOES impact them negatively and I have to contend with the consequences of this which has been a number of things. There are emotions, actions, etc. And, I'm not a child therapist, rather a retired engineer with no psychological training.

And, to also deal with my emotions of having my husband leave me for some woman old enough to be my grandmother. I'm thinking to leave me for what he left me for, he must be blind and dumb. But, it really doesn't matter because what I've come to realize it's his problem. Okay, maybe some of what I wrote wasn't called for.

The point is, I have a lot on my plate. If I forget to return an email or respond to everything someone wrote me or just totally forget to respond to a comment, it's not done to be mean, hurtful or offensive. There is so much on my plate.

I have to contend with my own emotions, my kids, manage our household, my trading business, go through this hell of a divorce & custody battle, deal with some of the insanity of my soon-to-be ex, rebuild my trading accounts, sort through the tax mess, sort through all the financial burdens and crap he left me with, and maintain good health, teach Sunday School, blah, blah, blah.

If emails are really long and filled with lots of stuff, I wish I could help you champion things, but right now I don't totally have a grasp of all my stuff let alone someone else's stuff. Do I know what I'm doing? Sometimes. One day at a time.

This blog IS a journey of my trading. And, the stuff I'm going through in my personal life does impact my trading. Maybe others can just set it all aside. That's not me. But, I am stronger and better now than I was a year ago. A year from now, I'll be better.

Anyway, I'm really sorry that person felt I was against him, ignoring him. I have to put my kids first and providing for them. I would love to answer all the emails I get and give them lengthy detailed discussions, but it's just not possible. Maybe in the future.

Anyway, the person blocked me in Facebook and I do feel bad that this person's perception of me is totally wrong. I have not an ounce of ill will towards the person. I don't even have ill will towards my soon-to-be ex.

Well, I've been writing this for sometime as I've been helping my daughter with her math homework that is greatly challenging her. Helping your children mature and take hold of their emotions, but to learn to work things out, see things as opportunities is not always the easiest. There is that innate part of me that wants to be harsh, because that's how I was brought up, but recognizing that isn't healthy, and creatively and quickly figuring out a way to encourage her to rise up to be her best.

My kids don't come with their unique instruction book.

Sagacious

I was listening to Larry Hite and he said, "The market rewards segacious laziness." Honestly, I had to look up sagacious.

SEGACIOUS = acute discernment

LAZINESS = lack of desire to expend effort

In Market Wizards by Jack Schwager, 2006 copyright, I'm going to list some things he said that I thought are good:

- I don't trade for excitement; I trade to win. It may be very dull, but it is also very lucrative.

- To me, all trades are the same.

- No matter what information you have, no matter what you are doing, you can be wrong.

- The truth is, while you can't quantify reward, you can quantify risk.

- Keeping your risk small and constant is absolutely critical.

- If you do not manage the risk, eventually they will carry you out.

- Frankly, I don't see markets; I see risk, rewards, and money.

- It is incredible how rich you can get by not being perfect. We are not looking for the optimum method; we are looking for the hardiest method. Anyone can sit down and devise a perfect system for the past.

- If a market doesn't respond to important news in the way that it should, it is telling you something very important.

- When a market makes a historic high, it is telling you something.

- You better realize that the more you risk, the more volatile the results are going to be.

There is so much to learn about trading.

Why?

There may be some of you that read this blog that are into penny stocks (OTC, pink sheets, the like). I am not. There is a lot of money to be made in many different things. One of them is penny stocks.

Have I made money in penny stocks. Yes, and a lot of it. So, why am I anti-trading these stocks, at least for the most part. I deem these as higher risk stocks for the following reasons:
  • Less liquidity
  • Fewer traders
  • Patterns less defined
  • False sense of confidence
  • Less cohesiveness among traders

Now, this isn't true of EVERY single penny stock. Probably my best play of a penny stock is TRPH. When we got in, it was in the $0.30-0.70 range. We bought many thousands of shares and by the time we sold, it was around $7-8. Cha ching.

HOWEVER, how my husband came about this stock was through chatrooms, heresay. There was no technical analysis, just sort of winging it. My husband chose quite a few different penny stocks that made some decent money. Of course, most of that was all heresay, chatroom stuff.

Due to over confidence that was really a false sense of confidence (aka ego), we can all see the downfall here. And, there was no such thing as a stop (aka stop loss) at this point. Of course, we learned nothing from seeing Intel stock go from above $140 to the $14-16 range, eh?

The market is always right. The market NEVER does something to a person because it is what it is. Few of us have true impact on the market. Sure, maybe if you're Jim Cramer, Warren Buffet or George Soros, maybe. But, most of us cannot say that.

If I had money that I just didn't care about whether it went to zero or not, maybe, just maybe I might invest again in another penny stock. HOWEVER, I'd just as well give the money away to someone that might need the money right then and there. I'd find that to be a better use of money.

I remember my husband (soon to be ex) was corresponding with the CEO of Genomed. They had all these promising things. That's fine, but now their stock is in the sub-pennies. Like 0.005 cent. That is pretty darned cheap. Okay.

If you want to trade penny stocks, have at it. As for me, there are plenty of ways to make money without having to go this high risk.

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