1/31/2011
Personal Effectiveness Blog
Personal Effectiveness Blog
As there is lot of psychology related discussion on this site which is not directly related to trading, I continuously get emails and requests for focusing on this subject daily or asking for books or resources on the topics.
As there is overwhelming demand for this topic I am starting a new site focused on psychology for day to day life for Stockbee blog readers.
The blog will focus on personal effectiveness, leadership, motivation, self efficacy, expertise development and other related topics.
1/28/2011
Situational Awareness (SA) is important trader skill
The key skill to develop is to quickly get out in such situation otherwise you are a sitting duck. Months worth of profit on individual stocks can vanish in minutes.
That is the trader mentality you need to develop.
For that situational awareness (SA) is so critical. You have to mentally rehearse scenarios. See my earlier posts on SA. SA is an aviation terminology and it teaches pilot skills to be prepared for all possibilities.
If things improve in the market it is easy to get back in. But first 10 priority is to not lose money. Then make lot of money. That is when compounding works in your favor.
If you can compound at 5% per month without drawdown you end up up 80% for the year. If you can do 7% per month you end up with 125% return. But once you are in drawdown, you waste time digging out of the grave,
Manage risk first
Manage risk first
This market is at extreme level. At this stage your first priority should be to not lose money.
It is easy to get back in. That is how as a trader I think. At first hint of reversal I was out of my few open positions. That ensures the gains made in January are protected.
Objective is to make money without drawdowns.
It is waste of time to crawl back from drawdown.
Most important trading decision
On a daily basis I get over 100 emails from members and readers of this blog and I have observed some common problems.
The most critical problem many of you face is inability to decide your basic trading instrument or horizon.
Everyday if you keep changing your basic time frame decision then you will never get anywhere.
Why do people change time frame, because they get allured by other peoples trade or results.
If someone talks of his day trading success then many run to become a day trader.
If someone talks of option bomb , then some run to become bomb makers.
If someone talks of position trading then some abandon what they are doing and run to copy that approach.
If it is Monday then it is swing trading day, on Tuesday you want to be day trader, Wednesday you want to be Option Trader, Thursday you want to be Index futures trader, Friday you do not know what you want to be.....
Each of these instrument or time frame would take you anywhere between 6 months to 3 years to become good at it.
Unless you are running billions of dollar you don't need to be multi strategy hedge fund.
Most successful traders specialize in one style or one instrument. There is a reason for it, expertise is very task specific.
Expertise is developed by narrowing your focus further and further.
If you think you can be jack of all kinds of trading you are fooling yourself and you are wasting time.
Stop flirting . There are always temptations, but at some stage you need to select your niche.
Make the darn decision....
Are you serious about your trading?
If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.
It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.
Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.
Why traders come to stockbee?
The member site is one of the most recommended site for learning to trade by other traders and bloggers. You will see no advertising, no hard marketing, no promotions, no free offers, no affiliate marketing, no incentive to other bloggers to promote the site, no constant twits self promoting the site, no free trial and no tall claims of making you instantly wealthy, and yet the site attracts new members everyday. Members come from all walks of life and all kinds of trading size and trading styles.
You will see that many trading bloggers have been using my market timing methods, scans , stock ranking lists and chart templates. They have developed their own methods based on my methods. Many paid newsletter site recommend my site to their subscriber for learning about trading and market.
Over the years thousands of traders have been members and those who benefited from the learning talk about the site to others or talk about the methods used and that is how new members learn about the site.
What will I learn in the members site?
The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.
As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.
You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.
You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.
You will learn about Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.
You will learn about Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.
You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.
You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.
You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.
You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.
You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.
You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.
You will learn how to set up your own scans, select right kind of stocks, how to set up stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.
The site has hundreds of videos and trading methods and variation of methods. Members help each other in developing the methods and share actively their research and finding. A collaborative spirit allows you to get input from others on your trading ideas or problems.
The site gives you opportunity to interact with some of the most successful traders and learn from them about their trading methods. It is a vibrant community with members from different background and experience willing to help each other. The emphasis is on continuous learning and up gradation of market knowledge and setup knowledge. The members range from hedge fund employees, financial advisers, active swing traders, investors and new traders.
If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.
Do you have a trial?
If you are just looking for trial you are better off trying thousands of other trading sites that offer free trial or one month trial and offer you promise of riches.
It is for those who are ready beyond the trial phase and ready to put serious months or years of efforts to learn to trade on their own. It is for those who want to learn to find their own fish.
The free blog has all the details about the methods I trade and if you go through the posts highlighted in the sidebar you will learn about them.
How can I become a member?
To sign up go to www.stockbee.biz and follow the sign up process. The site uses Paypal for payment processing.
1/27/2011
Learn the language of setups
Setup selection is key. Setup selection allows you to condition your behavior. It allows you to develop your procedural memory. It allows you to automate your thinking.
When it comes to setup selection your time frame is very critical. A setup that is good for day trader may not be good for swing trader. A swing trading setup may be extended setup for position trader.
This is the setup idea behind Stockbee Trend Intensity breakout. Unless a stock fits in to that setup I do not look at it.
While the setup idea for Episodic Pivots is very different . It is for position trading a specific news catalyst on a neglected stock .
The STIB setup is classic swing trading setup which has been around for hundred years. You find a stock with momentum, wait for a sideways move on it and then buy on next b/o.
Same setup a pullback trader can trade as a pullback setup to a MA or channel. Where they buy on a touch to channel or MA.
Tumbler ( a member) trades a news based day trading setup. His setup idea is similar to the EP, but it is on day time frame. What he looks for is a stock with some news and then buys it on some intraday pattern looking for small moves.
CKbergin (a member) has described to you a setup idea to trade good fundamental growth stock on pullback. His setup is geared towards position trading.
If you understand a setup and the conceptual logic behind it and the market structure that supports the idea then you can understand it and you can master it.
As against that many are chasing picks. They are constantly looking for someone to highlight stocks to buy or sell. They are dependent.
Your objective in trading is to setup your own trading factory. Once you setup a well designed trade factory, your setup scans will bring you stocks to buy or sell. Then you can take a decision qualitatively to decide between those ideas. The more you do the same thing you become better at it.
Profit is an outcome of such process driven approach.
As against this many are just flirting from one idea to anther, from one pick to another, constantly changing setup. So they are constantly in flux.
Then there are others who have secret setups and are looking to show you how good their system is without telling you the logic. If you want enduring edge you should avoid these traps.
Besides setup the more important things are also how much to risk on a setup. Your profit depend a lot on how you manage that. A trader might boast of a 25% profit on a position but if the size of his trade was just 2% of his account , its not going to move the needle much.
These are all issues which you need to get in to depth and understand them at microscopic level. It will take you 6 month to a year to do that.
If you do that then you will develop self efficacy beliefs and your self talk will change to "hey I can make 50% plus on my own using my setups" "hey I know how market works" "hey I know how to find stocks to buy daily on my own", "hey I know how and why my setup works" "hey I know when to push the pedal and when to play for beer money" "hey I know what is behind any ones claim of secret system" "hey I can do this on my own"
That is the end goal you need to reach. The objective of this site (members site) is to help you reach that goal as fast as possible.
If you can reach that goal then you don't need this site or any one else to tell you how to trade.
1/26/2011
FLY might fly 10% or more
Another stock in the same sector AER is my current position. Not likely to be fast mover but can make 10% plus move from here in next couple of months. Value kind of play.
1/25/2011
How to use conditioning to improve your trading (Part2)
Using Conditioning to improve your trading daily
Thought conditioning is a tool used to condition your behavior. Thought conditioning works by changing your thinking. To do successful though conditioning you need to constantly remind yourself of the thoughts that need conditioning.
Thought conditioning works by changing thinking sequences. Techniques like checklist, constant reminders, visualization, simulation are used to condition your thinking. In workplaces though conditioning is used to reinforce certain behavior. Good example of thought conditioning is in hospitals and restaurants where a constant reminder of "Wash your hand" is used to condition employs. Similarly in aviation sector constant thought conditioning is done about SA, accident avoidance, safety, suspicious behavior etc.
There are many ways to do thought conditioning and as usual advertising industry is at forefront of using thought conditioning to change your behavior. And we will look at some of the techniques used for thought conditioning and how they can be incorporated in to your trading.
Right mind frame is critical to your trading success. A right mind frame allows you to identify market opportunities quickly. It allows you to make quick decisions. It allows you to avoid big losses and respond to market changes quickly. If you want a quantum leap in your trading, you need to condition your mind to be in trading mode. To do this successfully you need to develop a method to constantly keep your conditioning aligned to the market opportunities. When the mind and market is aligned you will be in winning streak. When the alignment breaks down you will have frustration and losses.
One of the ways I use thought conditioning is by using series of checklist every day. These are tools for conditioning the mind to think of issues before open.
Are you bullish, bearish or neutral on the market?
What is your plan if your view is bullish on overall market?
What is your plan if your view is bearish on the overall market?
What "method" is driving your bullishness or bearishness
Is it logical or based on questionable premise or second hand information.
What is your pre market trading plan
What data sources you must monitor in the morning for that
If you identify a good opportunity in pre market how will you enter it
Have you thought of where you would put stop, how much you will risk on them
What will you do if after entry it does not act as expected
What is your plan for managing :"each" of your position
What is driving that decision
If I am going to use EP in the morning everyday am I organised for it
Is there a set routine for it
Is my broker/software set up for it
Do I really understand what is involved in trading EP
If I am going to use STIB everyday am I organised for it.
Is there a set routine for it
Is my broker/software set up for it
Do I really understand what is involved in trading it.
Like this I have series of conditioning prompts and scripts . There are conditioning paragraphs that I have developed for myself based on issues faced in trading.
Another example of thought conditioning is about keeping drawdowns small. I shared an example of that on members site:
Thought Conditioning: Drawdowns
Every day think of this table.
What can you do to keep your drawdowns below 5%.
What stops you from cutting losses quickly?
Why is this table important?
Why should you look at this table 10 times in a day?
How can you develop a conditioning script to constantly remind you of this.
Advertisers constantly use thought conditioning questions or prompts to help you act on their message.
You are constantly bombarded with a conditioning message:
Ask your doctor about ED today.....
and as result billions of men go to their doctor and ask for the blue pill.
That is thought conditioning at work....
There are many ways to use though conditioning to align your behavior with your trading goals and I will be covering more of this topic in later posts.
Related post:
How to use conditioning to improve your trading (Part1)
1/24/2011
Bullish Setups For January 25, 2011
BDX- Becton Dickinson &Co.
BIDU: Baidu
EW: Edwards Life Sciences
IO: Ion Geophysical Corp
MTB: M&T Bank
PBI: Pitney Bowes Inc.
WYNN: Wynn Resorts Ltd.
AER : a good swing setup
Stocks move in momentum bursts. A high volume breakout like this can be start of a 10 to 20% momentum burst.
Seven short ideas
Seven short ideas:
BAX,Baxter International Inc
CYN,City National Corp
GOOG,Google
MA,MasterCard Inc
SLB,Schlumberger Ltd
VFC,Vf Corp
WRC,Warnaco Group Inc (the)
1/21/2011
Conceptual understanding will help you build enduring edge.....
Everyday same thing happens in the trading world. Someone talks of a tactics or a scan or a trade and then every one runs after it. Many have been doing this for years and still struggling in their trading. The reason for that is very simple. Low conceptual understanding.
Concept comes first then strategy then tactics.
If you are serious about your trading there are some concepts you must know in significant details. Once you understand those key concepts you will stop chasing tactics and will find greater success.
Deep understanding of concepts will help you build a strong foundation on which you can build a trading system. There are seven concepts you should study:
Momentum : If you understand this you will understand trends and mean reversion. You will understand why and how momentum works in the market. Most indicators are momentum based. Trend following and buying strength also works, so does mean reversion. They are all part of the momentum phenomenon. Once you understand momentum you can design hundreds of ways to trade momentum. Billions of dollars are traded and invested using momentum. Momentum is one of the core strategies used by every single quant fund.
Concept comes first then strategy then tactics.
If you are serious about your trading there are some concepts you must know in significant details. Once you understand those key concepts you will stop chasing tactics and will find greater success.
Deep understanding of concepts will help you build a strong foundation on which you can build a trading system. There are seven concepts you should study:
Momentum : If you understand this you will understand trends and mean reversion. You will understand why and how momentum works in the market. Most indicators are momentum based. Trend following and buying strength also works, so does mean reversion. They are all part of the momentum phenomenon. Once you understand momentum you can design hundreds of ways to trade momentum. Billions of dollars are traded and invested using momentum. Momentum is one of the core strategies used by every single quant fund.
Market Breadth: Stock markets are composite markets. The overall move in market is an aggregate of moves of several hundred or several thousand stocks. So the level of participation in a move is important. Market breadth deals with the participation of moves in any market or sector. Market breadth is the basic concept used by every big institutional player to build trading strategies and determine market direction. Once you understand market breadth you will find 500 tactics to make market breadth work. Market Monitor is one of the ways to do that. And there are several ways to do it.
Equity Selection: Because the overall market is a composite of many individual moves, it becomes critical to select right kind of stocks from the universe of 8000 stocks. Hence equity selection is extremely critical. You should know various ways in which one can select equities. Your returns are a function of your equity selection method. If you are trying to make big returns then equity selection is key. You need a equity selection strategy before you can move to next level of trading decision. Most novice traders have no understanding of equity selection concept.
Market Anomalies: Market anomalies are the proven structural phenomenons in the market. If you base your trading on a proven and statistically significant anomaly, you will be profitable. Absent that no amount of indicators will help you. A through understanding of anomalies will give you an edge.In last 40 to 50 years there has been significant understanding of the market in terms of what works and what does not work. Every single thing which you can think of has been tested. If you know what works then you would spend time on it rather than chasing tactics. Most retail and novice traders have no understanding of what works and why. So they are gullible to any tactical claims.
Market Microstructure: Market Microstructure is a branch of finance concerned with the details of how exchange occurs in markets. Understanding this will tell you how the market operates. The concept of market microstructre is very critical if you are trading very small time frames or are a day trader. Because to be successful on those time frame you need to find exploitable anomalies in market microstructure. You need to understand role played by market makers, automated programs, arbitragers, large fund buyers and so on. Their tactics and behaviour creates certain patterns.Quant funds exploit such patterns daily.
Growth investing : Growth investors buy stocks of companies growing faster than the average company in the market. Growth investing is a well established field of study and practice in the market. There has been thorough research on what growth factors work, why they work and under what conditions they work. Many well known traders are growth investors or growth stock traders.
Value investing : Value investors buy stocks of companies which are cheap or out of favor. Valuation has again been extensively studied and there is lot of analysis to tel you what exactly to look for in value stocks. Big funds and hedge funds and institutions are primarily valuation driven. It allows them to put large sums of money to work.
These are the core concepts around which all trading strategies revolve.
Once you understand these core concepts then your next line of study is about trading tactics. Tactics are methods to implement some of these core concepts. Here again certain trading strategies have emerged over the decades like position trading, swing trading, hedging, arbitrage and so on. Knowledge of these concepts will help you understand how and why these strategies work.
Unfortunately most traders start at tactical end. Many blow up their account before they even can understand core concept. Many of you are going to do exactly the same thing.
If you want to become a surgeon would you start your study with what scalpel to use or with anatomy and physiology. If your understanding of core concepts is weak or non existent no amount of scans or software's or indicators or trading psychology or multiple monitors or trading chat rooms or advisory services will help you become a successful trader.
So next time someone talks about a tactics, scan, or a software, or a trade, instead of immediately jumping on it and deciding to learn it, relax, sit back, think. First ask yourself what is the core concept behind this. Is it based on data. Is it logical. Is it really a new new way of doing things or same wine in different bottle.
Conceptual understanding will help you build enduring edge.....
Are you serious about your trading?
If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.
It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.
Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.
Why traders come to stockbee?
The member site is one of the most recommended site for learning to trade by other traders and bloggers. You will see no advertising, no hard marketing, no promotions, no free offers, no affiliate marketing, no incentive to other bloggers to promote the site, no constant twits self promoting the site, no free trial and no tall claims of making you instantly wealthy, and yet the site attracts new members everyday. Members come from all walks of life and all kinds of trading size and trading styles.
You will see that many trading bloggers have been using my market timing methods, scans , stock ranking lists and chart templates. They have developed their own methods based on my methods. Many paid newsletter site recommend my site to their subscriber for learning about trading and market.
Over the years thousands of traders have been members and those who benefited from the learning talk about the site to others or talk about the methods used and that is how new members learn about the site.
What will I learn in the members site?
The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.
As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.
You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.
You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.
You will learn about Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.
You will learn about Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.
You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.
You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.
You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.
You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.
You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.
You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.
You will learn how to set up your own scans, select right kind of stocks, how to set up stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.
The site has hundreds of videos and trading methods and variation of methods. Members help each other in developing the methods and share actively their research and finding. A collaborative spirit allows you to get input from others on your trading ideas or problems.
The site gives you opportunity to interact with some of the most successful traders and learn from them about their trading methods. It is a vibrant community with members from different background and experience willing to help each other. The emphasis is on continuous learning and up gradation of market knowledge and setup knowledge. The members range from hedge fund employees, financial advisers, active swing traders, investors and new traders.
If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.
Do you have a trial?
If you are just looking for trial you are better off trying thousands of other trading sites that offer free trial or one month trial and offer you promise of riches.
It is for those who are ready beyond the trial phase and ready to put serious months or years of efforts to learn to trade on their own. It is for those who want to learn to find their own fish.
The free blog has all the details about the methods I trade and if you go through the posts highlighted in the sidebar you will learn about them.
How can I become a member?
To sign up go to www.stockbee.biz and follow the sign up process. The site uses Paypal for payment processing.
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