Selloff

I am stopped out all my positions but TSL today. Cash is the king!

How to take a defensive posture? Mark Minvervini gave us details:

1. Get off margin immediately
2. Raise at least 25-50% cash
3. If you choose to trade, take smaller than normal position sizes
4. Reduce overexposure in any one industry group and diversify more broadly
5. Reduce exposure to high beta stocks
6. Avoid laggard stocks (even if they look cheap)
7. Nail down profits when you have them (be less greedy)
8. Tighten up your stop-losses (be less forgiving)
9. Sell all stocks that break down in price (especially if they can’t rally)
10. Upgrade in quality and reduce exposure to low priced stocks

A daytrade example

Why I take profit at same day I entered? The profit shows up too big and too quick and the general market condition is not a strong trend, like today. I don't want to take further risk. Now I use daily chart to find my candidates that have to about to break out. Then I use 5 min chart to get in and out. I got in JOBS at $30.44, out at $31.8.

Sorry if this does not sound a typical day trade, but it fits my belief and strategy. Hope you find yours too.

Mainly day trade right now!

I can't ignore the strength, I can't fight the trend, so I covered my NUE, SCHN shorts yesterday. I remain a long term bear, but I respect the current bull trend and daytrade the long side nervously.

I am right, this time

I know I have sounded bearish a number of times this year, but I did bravely and timely call a market top on Sep 16th on Twitter, which I feel pretty good about it.

What I learned from 19 consecutive losses

As I am doing some catching up for my lack of posting here, I conclude that I had 19 consecutive losses from end of July to mid Sep. Two of them turned out to be big winners, CIEN and LVS. In order to find out why I had losses after losses, I go to the big picture, the NASDAQ daily chart. You can see from the highlighted dark blue area: it was whipsawing, no clear trend. My method clearly failed in that kind of trading environment.

Ignorance is a bliss

First I have to admit I made a mistake, I tried to pick the turn again. I should not start shorting the market before the trend changes that is 30 week moving average starts to point down. Now once again it is proved that we are still in a monster bull market that has rallied over 54% within 6 months! I have been firmly believing that we are in a long term bear market, because the economy is in a bad shape and this time the root is bad, the Americans have to change their life style. Besides, the technical picture did not support a sustained rally: no double bottom or triple bottom. So from the beginning, in the bottom of my heart I was thinking and projecting the rally is just temporary and doomed to fail some day. I still believe that, but this belief makes this year's trading particularly difficult. I have to trade from the long side while holding a chuck of shorting positions to hedge. And as long as the market keeps rallying, the struggle inside my head gets more intense and at some point my belief is going to shake. Maybe this time is different? Ignorance is a bliss. It is so fit in this situation. If I am a rookie, I could be much happier this year.

Panic button

I am concerned by the speculation on the small cap stocks and I also think the uptrend from March is due for a break. I used the "panic button" today and closed most of my long positions. I will watch from the sideline for the rest of the week.

Lesson from Sol at Xtrend

Among the investing bloggers I regularly visit, I have a lot of respect towards Xtrend gang. The main reason is they correctly predicted last year's crash and made lots of profit from it. Trader Sol grew his account from 350k to 4 million at the end of last year. Today he announced he blew it off.

How can a good trader like him lose it all? I conclude 3 reasons from my observation of his trading this year.

1. Fighting the trend. He has been shorting this market all the way up from March.
2. Picking the turn. He has been trying to pick the top from March.
3. Being stubborn instead of flexible. Though we are in a long term bear market, the inter medium is clearly up after March 23rd. Being a trader, recognize it and go with it.

And best luck to Sol, hope he learned his lesson and recover himself from it. He can be much stronger.

My jump seat

Remember the "panic button" I was talking about? If tomorrow's GDP number disappoints, I am probably going to employ that technique.

Panic button

I think every trader should have a panic button in their mind. What does it mean? When the trend changes, traders should get out of the previous bets right away, even though some of the charts look still favorable to the previous trend. Lock in the profit or take the loss, just get out. The sooner the better.

I conclude this is a "must have" technique in a trading friendly market, like what we are in right now.

More about trading

When you are in a wrong position searching for the turning pt, you are so pathetic. Do not ever let you become that!

Chartpattern and indicator

Chartpatterns are for immediate actions, indicators lag behind.

Explaination

I know I sound contradictory to my yesterday's comment, but I don't like the bulls have tried 1550 area 3 times and fail. The odds are high we could have some near term weakness, maybe shallow, maybe deep, which I really don't know. They all say upside is limited. Even if I am wrong and the market charges higher tomorrow, my stop is close and I won't lose much.

Buy and hold method

The buy and hold method has been under fire lately. Why is Warren Buffett still insisting his buy and hold for life on CNBC today, even though quite a few of his long term holdings have dropped to single digit? Because the method works for him and has been worked for him for a long time.

Does it mean it will work for everybody? NO. Buy and hold sounds so easy, it seems everybody could copy his method and have the same financial success. If that is the case, then how many Warren Buffett in this world? Shouldn't it be many? I never heard of an average investor achieved the massive wealth by his method. He is the only one can do it this well.

Bolt set the 100 meter record with 9.72 seconds. Running is so easy that everybody can do. But can you do it with 9.72 seconds? Even if you eat what he eats, practise the same hours as he does, do exactly same, you are not going to run as fast as him.

The method is nothing wrong. The problem is that investors blindly follow his simple method, which can be described under 10 words "buy a good business and hold it for life". If you really think his method is this simple, making a fortune is really this simple, then who else is going to lose money?

A colorful tomorrow

In his annual report, Warren Buffett said America has faced bigger economic challenges in the past, including two World Wars and the Great Depression.

"Though the path has not been smooth, our economic system has worked extraordinarily well over time," Buffett wrote. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."

I totally agree with him as human being, but disagree as an investor. If following his "buy and hold" stratergy and having bought his heroic call last Nov, you will not live through this dark time. You are out of ammo by now.

"Buy when others fear" is a good investing stratergy and works most of times. However, even most sounding method could lose its magic, which does not mean it is not good, nothing is perfect. Unfortunately it does not work quite well this time. You have to prepare yourself for the worst outcome, which Warren Buffett did not outline you, no other so called professionals ever did. And that is why I am pissed.

C

What did I say yesterday about C? If you acted on my call, at least I save you 50%:)

React, not predict!

If you ever leaned anything from the disgusting decline of 08, it should be "don't ever listen to professionals' predictions". ONLY REACT. If you listened to Warren Buffet's heroic speech and bought his predictions last year, you are in deep water right now and do not feel any patriotism any more.

Why it does not work? Simple, because you are not Warren Buffet. You are a small investor with limited capital and limited financial tools while he has billions of dollars at his hands that he can average down or deploy other methods to cut the costs down. So even if his prediction is wrong, he could still make it work. But you, you are dead when you have a fatal mistake.

So as a small investor, only way to survive a brutal market is to look at the charts and to react.

Frustration

I don't know about you, I am just frustrated this month, in which we can't even get a trend for two days. I am forced to be a daytrader, in this market.

Strong open

I am about to give up my bearish stance. Only some retailer shorts left.