Back in Comission

Havent updated this in a while due to work, traveling, and being sick. The truth of the matter is that I havea job and it has limited my trading... I havent traded for almost a month due!!! Tried trading while in deal flow and I can't concentrate on two things that require high focus and attention at once. Anyways, I hope to be trading soon once again. Here are the last two trades that I have done since my post- tried to get a chart up but don't know how to get historicals on Think or Swim (yet).

UFI (10/17-10/21):

Got this one on a TimAlerts morning watchlist as a breakout-

• Buy @ 4.89 (10/17)
• Buy @ 4.78 (10/17)

I can't recall this one exactly but remember not trying to sell immediately when it showed some patience as in some of my previous trades I got scared out when it showed some negative price action. I had a last minute call to get out of town on business and set a stop loss at I think around $4.65 and see how it would ride from there. Given that this is not the smartest move, it worked out.

• Sell @ $5.29 (10/21)

(Side note- trying to monitor and set stop losses from your phone is not a great idea. I learned that it is not worth the hassle and stress... if I am going to trade... I am going to trade... with these volatile stocks it can't be managed away from the computer."

OCNF

Don't remember the story on this one. Once again, from a TimAlerts morning watchlist. I think there were some better plays out there, but couldn't reserve anything.

Here is what I remember (considering it has been a month since I did the trade):

• I had a tough time executing the trade. I had reserved, but when the price started to move like I wanted, I had to put the order in through the trade desk and lost some money having to get them online and then put it through the trade desk. Need to learn how to move quickly on the first trade for reserved shares- any thoughts on how to do this?
• The spread between the bid and sell was higher than I have dealt with in the past and freaked out when the price would jump around. Stuck in the trade though.
• Sell @ 8.01
• Buy to Cover @ 7.63 (Just checked the price... @ 4.06- but take a small gain in these markets any time.

Looking back at my trades the one thing that is eluding me is patience and discipline. I hate trying to stomach things out when the trade isn't moving my way. In additiion, I always think I have to make a full trade within the day or the next day. Never shorted over a few days when the trade could have been more lucrative.

Screening Stocks

Here are the variables I use to screen stocks:

I have one set up that I call "Day Movers"-

1. Price: $1-$10
2. Volume: min. 80,000
3. Net Change: min 15%

After that I start screening all the stocks that the screener pulls up. Look for the right patterns and add to my watch list. Once I have my watch list set, I usually check the internet message boards to see if there is any hype surrounding the stock and make plans from there. Furthermore, I get confirmation in the morning from my subscription to www.timalerts.com to verify what from my watch list is a solid play.

Another screener I made is called "5 Day Movers"-

1. Price: $1-10
2. Volume: min 80,000
3. Net Change: min 50%

Post coming up on UFI soon...

Amen

So long, suckers. Millionaire hedge fund boss thanks 'idiot' traders and retires at 37
Andrew Clark in New York
The Guardian,
Saturday October 18 2008
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Article history

The boss of a successful US hedge fund has quit the industry with an extraordinary farewell letter dismissing his rivals as over-privileged "idiots" and thanking "stupid" traders for making him rich.

Andrew Lahde's $80m Los Angeles-based firm Lahde Capital Management in Los Angeles made a huge return last year by betting against subprime mortgages.

Yesterday the 37-year-old told his clients that he had hated the business and had only been in it for the money. And after declaring he would no longer manage money for other people, because he had enough of his own, Lahde said that instead he intended to repair his stress-damaged health; he made it clear he would not miss the financial world.

"The low-hanging fruit, ie idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking," he wrote. "These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government," he said.

"All of this behaviour supporting the aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America."
Lahde became one of the biggest names in the investment industry when one of his funds produced a return of 866% last year, largely by forecasting the US home loans industry would collapse.

In his farewell letter, which concluded with an appeal for the legalisation of marijuana, Lahde said he was happy with his rewards and did not envy those who had made even more money.
"I will let others try to amass nine, 10 or 11 figure net worths. Meanwhile, their lives suck," he wrote, citing a life of back-to-back business appointments relieved only by a two-week annual holiday in which financiers are still "glued to their Blackberries".

Lahde's retirement came amid an implosion among the hedge fund industry - some 350 of the funds have liquidated this year, according to Hedge Fund Research.
His final words of advice? "Throw the Blackberry away and enjoy life."

YGE- Disecting me being a pussy

I did no research last night (10/7) and realized I had two day trades left under the NYSE ruling of accounts under $25k allowed to do 3 day trades in 5 rolling business days. My day trades get replenished tomorrow so thought I would try to use one. Got my TIMalerts (http://www.timalerts.com/) watchlist in the morning and saw some long plays on stocks that reached their lows and might be a good bounce back play...

Here is where everything went wrong... all premarket:

1. I just wanted to trade and try to make money when I didn't understand the stock fully enough.

2. I didn't understand the sentiment of its owners as in some previous trades.

Here is the trade:

Here it the take away:

1. I should have taken profits when it had an early market spike.

2. I wasn't losing that much money when I sold. But my lack of understanding of who owns this stock and getting it on emotion, I freaked and just sold it. That is a pathetic trade...

3. I fuckin re-entered for no real reason. I really don't know what I was thinking, but its sick how I re-entered pretty quick after I sold and the sold again pretty quick. That is a disgusting trade...

4. If I had a nut sack and could have waited just an 1:30 I would have been golden. If I could have waited towards the end of the day, I could have sold at a profit. Reverse everything I did as if it were a short and it still would have been a bad trade... because I had no reasoning really going into the trade, out of the trade, back into the trade, and then out of the trade.

So the small gains from DNDN were wiped out completely from these trades. This is by far the worst trade by far and lucky I didn't have that big a position in it.

Overall down 2.5% on my account.

DNDN- Disecting a decent trade

Unlike my last trade on QCOR, I actually had a story to back this up. DNDN was up on 10/6 on this news: http://biz.yahoo.com/ap/081007/dendreon_mover.html?.v=1. DNDN is some biotech company who had some numbers that were positive, but not good enough to pass FDA standards. In my eyes this looked like the stock was getting pumped up (up over 30% on the day)... therefore leading to a dump...





I checked the message boards as these are the people who truly believe in these types of plays. I feel bad for them, but in this niche someone has to lose in a zero sum game. The boards seemed divided, some were thinking this was the start of this stock going to astronomical highs, others pointed out DNDN has done the same thing in the past and then tanked... I believed the stock would tank the next day.





Reserved shares in the morning of 10/7. At first my broker (TOS- Think or Swim, http://www.thinkorswim.com/) didn't have any for me to borrow but magically found the amount I wanted. This stock came up in my TIMalerts (http://www.timalerts.com/) subscription and suggested being on the weary side as it had a high amount of volume the previous day so the pattern couldnt be as predictable. I used 2/3 of the shares I originally reserved. Here is the trade:

Here is the takeaway:

1. The stock tanked quickly in the beginning of the day (first circle). Anywhere in that area would have been ideal, but I had no clue if there was going to be a short squeeze or what it would do in the first 15-30 minutes. When it started to move sideways, I got in at $6.10. I could have got in at $6.15 but this was the first time trading with hard to borrow shares and didn't realize I had to actually place an order through trade desk via the chat sysyem. It was at $6.15 but it was going up and down so I told my broker to execute at $6.10.

2. The stock had trouble cracking the $6.00 and $5.90 level for most of the day. I sat patiently and waited believing this stock was no good. Looking back it seems like a risky play to make that bet since it lost a lot in the opening minutes. Also, had some small squeezes during the trade (second and third circle).

3. Waited patiently till the late afternoon where it started to gain speed fading and sold at $5.56 which was a pretty good exit point. Thought I could ride it down to $5.50 but took profits.

QCOR- Disecting a bad trade

After getting out of QCOR, I decided to get back in on 10/3 as I thought I could get in and sell around $7.80-8.00ish. This was based on pure emotion which was a somewhat costly mistake. I really believed this stock could keep going up and had potential, but in the end I should have stuck to my guns and stop playing in it:

Here are the lessons learned:

1. Once a stock stops showing potential... especially in the small caps, there is no reason to believe in anything especially without a story backing it up. Message boards had low volume of any responses and the movement was pretty indicative.

2. I could have taken a small profit when it spiked in mid day but got greedy for more and then held on thinking it could spike again... again without any real reasoning.

3. Held overnight (10/03 to 10/06 with the weekend) to save a day trade... this was a fucking horrible idea as it tanked right when the morning bell rang.

4. I am pretty sure the Level IIs were below the last... should have been a warning to try to put something in premarket hoping that it would be sold off and minimize losses.

Up and Running

I finally got my brokerage account (Think or Swim) funded last week. I have been in the simulator for the past 1.5 months learning the software and more importantly learning how to screen for picks and learn applicable patterns of my strategy (PennyStocking, see http://www.timothysykes.com/).

Thursday rolled around and I did my first dumb thing as a trader right out of the gates- I went outside my strategy and made some dumb play on Washington Mutual (WM) thinking that it had a chance to rebound on a buyout from a supposed private equity firm and the bailout supposed to be signed that morning- both were fucking jokes. So I was down pretty big in 3 minutes and left the position within 5 minutes. It was a stupid trade and I wasted one of my three day trades allowed under the NYSE day trading rules.

It felt like a punch in the stomach- going outside my strategy after being in a simulator for 1.5 months. Lesson learned. I made some of my money back by shorting Apex Silver Mines (SIL). It is apparently some silver mine in Bolivia that was up astronomically due to I believe the Bolivian government allowing redistribution to shareholders or something. The point is, it isn't a good company and was up on speculations. A lot of people subscrbing to the PennyStocking strategy via TIMAlerts got in on this play and rode the wave down banking on profits. Since my account was opened only recently, I could only catch the very tail end of this action but still made some money to recover from my WAMU trade. There was some downside left to take profits, but mentally I just wanted to try to regain some of my loss. Here is the trade:

Another stock under the rader that came from my alerts was Questcor Pharmasuticals (QCOR), The pattern showed strong strength and expected it to rise fast. Instead, it has been a pretty slow trade. I just got out of the position today, using a stop loss that I needed to put in as I was commuting back from a lunch break. The stock reached its 52 week high today at $6.65ish and then started dropping. It had trouble breaking the $6.25 resistance level on 9/30 (finally did at the end of the day) and then trouble breaking through $6.50 today. Here is my trade:

I was a huge pussy and sold around $6.8 when I purchased at $7.0 the day before. I still had that sick feeling about my trade with Washington Mutual and was trying to protect against downside. I could have prevented that loss realizing the chart pattern was strong and to realize there was some support at that level if I went back enough. After the small loss, I decided to get back in at 2 differnt positions, one at $6.94 and the other at $7.0 again. I was pretty happy that I got in at $7 again because the stock made the same pattern, dropping after making SLOW gains and I noticed the opportunity to get in. However, this has been a SLOW ride and with my day trades bumping back to 3 I need the liquidity in my account to jump on any opportunities that may come along.

Recap of Week 1

I lost track of some of the days so recapping everything I have done for this week. I think I will do more weekly updates as it is a better and more effective use of my time.

I am almost finished with Tim Sykes' PennyStocking DVD. I am not doing a full review, but commenting on the value I got out of it:

• I love the fact his strategy is based on trading on a short term base rather than long term. The strategy places little emphasis on fundamental analysis and more on technical analysis.
• The money I will be investing is pretty small. His strategy seems pretty optimal for what I am trying to start with.
• I have very little knowledge of technical analysis, the DVD was a good primer and introduction to it.
• His explanations of chart patterns was pretty interesting and educational. I like the fact he used several real life examples of where he was successful and not so succesful. Also him being transparent and pointing out where he made errors was insightful.
• The charts... he goes through several patterns and pounds certain things in your head. He makes the point patterns repeats themselves.
• Going year by year as an investor. There was a lot of value of him imparting what he has learned throughout the years. But this part was particularly interesting because he gives value by imparting knowledge only gained by experience.

The thing about the whole DVD to be quite up front is that it seems pretty easy. Yeah, I haven't begun trading yet but conceptually it seems like a pretty simple strategy. But reading Trend Following has made me correlate to a lot of what he is talking about regarding technical analysis and following patterns and trends.

Also read a lot more of Trend Following. This is something they never taught me in school (although I was an accounting major). I love the fact that they follow a lot of real people and utilize them as examples for learning instead of just being cut and dry like most books on finance.

During the week I started tracking TIM Alerts using my TD Ameritrade Strategy Desk. I followed what he was looking at and followed trades he did throughout the day. I just figured out there was an online access to the TIM Alerts where a lot of subscribers post their trades. I am going to start following their trades as well.

I hope to open a paper trading account to get a feel for trading and still slated to trade my own money late August/mid September.

Day 4

Stagnant with progress due to work. Here are forward movements:

• Reviewed the mark-to-market election my personal assistant researched for me. Will post a summation and thoughts later.
• Started researching a concept I learned through poker called Kelly's Criterion- trying to figure out the applications to trading.
• Reviewed more eLance proposals. While some of the bidders are giving me the hourly rates I am looking for (approx. $15/hour) they still want a high up front fee for setting up Quickbooks and all that other good stuff. With an accounting degree, I can't logistically see myself paying for these types of services for general bookeeping. The questions is if I want to invest the time in doing bookeeping or to defer it to someone else to free up time...

I was thinking about Trend Followers the other day and how relatively simple their ideas seem. I thought back to the 80/20 principle where 20% of the work produces 80% of the results. Still thinking about how to cross this over...

Day 3

I'm on a project deadline for work so I haven't been able to press forward much...

• Going through Trend Followers at a pretty good pace and should have it done by the weekend.
• Got the Penny Stocking DVD set and manual... plan to study this on the weekend as well.
• Briefly reviewed eLance proposals for an accountant- seems like $15/hour is the lowest I can get for a qualified person. Still reasonable and don't think it will be much to set up a Quickbooks file and start tracking start up expenses.

Day 2

I was supposed to have some time off this week, but seems as if I will need to be shifting back in to analyst mode for the time being. Updates and progress are as follows:

• Purchased "Trend Following" by Michael Covell (?). Picked this up after browsing through random investment book lists through Amazon. It's a pretty sizable read but looks promising.
• Received Penny Stocking DVD program. I was going to dedicate the tail end of this week to watching it and will now have to reorganize the schedule to fit it.
• Received a report from my personal assistant on the "mark to market" accounting election used by traders. Still haven't read it.

I'm also considering trying to train my body for 4-5 hours of sleep per night. I tried this once and it failed miserably and fucked up my sleeping pattern. We'll see how that one goes...

Day 1

I've been busy setting up my business and getting some educational products and books. The first thing I did was find a system that was niche with low competition but profits still can be made. This principle was inspired through Timothy Ferris' "The Four Hour Work Week" where he reccomended setting up self-automated businesses in a niche market with little competition. I am sure this principle can be found in different forms and mediums, but solid principles and truths have their way in manifesting and demonstrating themselves in different forms and different ways. I opted to go purchase the educational product of Tim Sykes, who gained a lot of his attention from "Wall Street Warriors" in addition to his breakout in Trader Monthly's 30 Under 30 a while ago. His system is based around shorting penny stocks- a niche market with not very much competition. I'm pretty interested learning through his product.

Next was setting up a business entity to do my trading. I had my personal assistant do some research for me on how I could operate as a trader while still having a full time career as an analyst for a private equity firm. He gave me some articles detailing the advantages of forming an LLC so I went that path. I used a local firm here to set up the LLC- I think I could have done this by myself as I have registered different LLCs in the past, but went with him anyways to ensure everything was done right. I have a gut feeling I could have done it a lot cheaper as well, but lesson learned. The filing took about one day to complete with the state and now I registered with Internal Revenue Service getting an Employee Identification Number.

I found out through some reading on forums that if an account is under $25K you are limited to 4 trades every 5 rolling business days or else you are flagged as a day trader. That sucks even though I am not engaged in trading yet. In online poker you can reduce your variance by playing multiple tables and exploiting your edge. While luck is still a factor, your edge should be able to counter any bad beats or variances. It's too early to tell if this principle carries over, but that is just the first thought that came to mind.

Finally, I posted an ad on www.elance.com trying to find a bookeeper who can help me with the start up, proper accounting methods, and how to expense the start up costs and future daily operations. I have 3 bids right now, but waiting to see if I can get a firm outside the US to take on my project. However, the more I think about it the more I may want to keep that aspect on the States side.

Coming Soon...

This blog is intended to track my journey as an independent trader- literally from Day 1. From making my first trade junior year of high school to a brief stint over the summer, I intend for this to be a learning tool for myself and others.