Practice Paper trading and work flow

Before you invest any money in trading you should practice how to trade.    What brought these stocks to your attention? Why do you want to buy it and at what price? When do you want to exit the stock and most importantly  how much do you want to lose? Then making money will follow.   Have a plan and write it down. Practice some fundamental techniques 1st before investing. Remember you can not lose money if your not invested in the market.  The markets will always be there you don’t have to trade today. Practice  the vocational craft of trading.   As for last week results it’s a good thing I don’t have real money in the markets.  

Today’s possible trade I predict they will increase in value

Cme 119.19 buy 120 call April contract $200.00, there is indecision  and the technical indicators are over sold

DE 109.53 buy April call 110 at $1.55

PPL 37.64. Technicals say it will go down possible  reversal but the up tend looks good wait for another day or two days for confirmation,I’m guessing it will go up maybe a April call 38 at .50

LECO 85.47  technicals looks good o, indecision 

Results of the picks

HRB 24.26 no real change in price went as high as 24.50

BKE 18.90 put@.50 went as high as 19.20but I bet in the wrong direction it never went down but technical say other wish

NBR 13.95 put 13 April @.48😀 took a lose did not get out in time but went as low as 12.80 next day

GWR 68.74 😐April  70 call 1.50,took a loss. Dojo  had indecision wait for confirmation then invest in that direction like going short broke the moving average  in two days

PEI 15.07 call April took a loss but really going down trend as predicted 

NKE 57.60😀April call 74 went as high as 58.01

Lesson is to make the trade then get out in 1-2days have a stop order. Take the small profit .options move fast have protective stops

On a positive note I did pick investment  that did move in a direction and they move a lot more than .30

My picks this week

HRB 24.07 looking at April call at 25 strike .45

BKE 18.48 Looking at going short 17.50 strike puts around .60-.75

NBR 13.41 Looking at going short strike 13 put april at .62

GWR 70.13 lots of indecision call strike April 70 at 2.75

PEI 14.76 next few days it will go up, then it goes below 14.00 in the long run

NKE 56.67 looking at call strike April 60 around .58 

Let’s see what happens in the next few days

Can exercising make you a better stock trader?

I believe any form of exercising can make you a much better person.  Exercising gives you the opportunity to release your stress in your daily life.  I like to look at it as the alone time every person needs, like the a zen moment or prayer time something to clear the mind and refocus on whats really important in your life because there is so much noise in the world you can be pulled in all directions and not accomplish anything.  As a stock trader exercising should be part of a daily routine before placing a trade.

In the markets there is a lot of information noise that can overwhelm a person like the news, CNBC,Wall St Journal,uptrends, tech stocks,mergers etc…However when you exercise your head would be clear and focused and you will not make emotional decisions on an investment.  Instead your decision will be made with good business sense.  Like the saying goes “You have to have a strong stomach to trade the markets.”  If you follow any person who is at the top  of their profession they are following some kind of daily exercise program that works for them.  I wonder what exercise YOU  do ?

Invest in Mastercard get a roller coaster ride

I was looking for some kind of business in the financial markets that makes a lot of money. Then it hit me it was in my hand the whole time,a credit card.  I use my MasterCard all the time for basic purchases from gas stations to restaurants.  They charge interest rates so high if you don’t stay on top of if you will be in dept with them your whole life.  This creates a repeat customer and repeat customers is good for businesses.  However I consider them the legal loan sharks.  But as a investor their interest rate is the profits.

Thinking like a stock trader, I was looking at the technical charts it is a solid uptrend a few dips here and there but still going up towards the top right. This is where the roller coaster ride begins for me on the March 27th.   I included this chart.  Notice the home made arrows

 

Arrows show the roller coaster ride up and down of MasterCard

 

So I got excited watching the price go down thinking its a bargain but not to get in early waiting for it to break resistance anything higher than $427.  I get in on the 27TH the price goes down a little no big deal yet, no major news.  The next day goes down a lot cause of bad news.  There was a security breach with MasterCard.  Hackers broke into one of MasterCard vendors.   The roller coaster ride of loosing your money sucks,but I do not want to get off this ride yet.  The next day the Government releases a report consumers are spending a lot, then  price goes up for next two days and I’m smiling.  But then ride changes directions again.  The Government does not want to spend any money on the economy all stocks go down that day.  Now the Associated Press says all credit card company has closed higher.  I just want to get off the ride before my option expires this month with some profits. I can only wonder if I will be happy or sad Monday 9th.

 

Day trade a double edge sword

I am not a day trader but it is nice to have that option to trade like a day trader.  So about three weeks ago February 15 I set out a simple plan to attempt my first day trade, I wanted to see if I can do it.  I was looking at Netflix NFLX and was looking at the options and saw a call option 130 at the time it was priced at $60.  I did not want to buy it feeling it was priced at full retail. Like any other consumer your looking for a items to go on sale. I would settle for a price at $50.  If i got at that price I would immediately sell it at $85.  This is a day trade plan.  I do not want to be greedy so I’m willing to take a small profit for a short amount of time. If you have broker they should be able to set up at Conditional Order:

Definition of ‘Conditional Order’

A type of order that will be submitted or canceled if set criteria are met, which are defined by the trader/investor entering the order. This allows for a greater customization of the order to meet the specific needs of the investor.

Read more: http://www.investopedia.com/terms/c/conditionalorder.asp#ixzz1oQ1r1Kha

So I put a conditional order the night before and went to sleep.  I do not want to watch the market every second at the opening bell.  How ever the next morning my order was executed and finished.  The marked moved so fast my orders were bought and sold ,at five call contracts @50 each 5*50=250 bought $250and sold 5*85=425. 425-250=175.  175-30commision=$145.  I started my day out with a $145 smile on my face.  I started out with a plan and it worked maybe i got lucky who knows. But this is the stock market, If the market changes direction then I could have easily lost the money.  Losing money at the end of day is not a good thing.

My question is whats your day trading plan?

 

Greedy with Pizza Hut

Last week I bought a stock option call YUM.  A fitting name for a company that owns the brands of KFC, Pizza Hut, Taco Bell, Long John Silver’s, and A&W Food Restaurants.  I buy stocks in companies where I understand the business model, and fast food is something I see everyday.  In the competitive fast food industries companies need to evolve to survive like Pizza Hut is in the delivery business delivering directly to the consumers home and Taco Bell is open late on weekends.  Its important to see how a company operates on a daily basis to see if they made a profit or a loss that day.  But as a investor you will never see the daily report of each division.  However companies have a report card that comes out stating how they did the past 3 months.  This report is called the EARNINGS report.

The Earnings Report also called “EARNINGS” is public information on the company web site it even tells you when the report will come out.  So as a trader if you know the date you can buy the shares or options before the date if you think the report is going to have lots of profits thus making the price of the stock go up.    You want to get in before the report comes out.  But before the report comes out sometimes you can also see what management is doing.  This is called Insider Transactions.  On Jan 27 I notice upper management buying stock in YUM.  Who else would know about insider information than the insiders themselves.  If the insiders are buying, then follow the insiders and start to buy. Besides its public information.  The SEC is like the paparazzi and the insiders are like celebrities.  The insiders have to tell you when their buying or selling, its part of the regulations of being upper management. They are buying before the report comes out, which lead me to believe they know something about the report. I bought 5 call contracts at $85.00 or $425.00

In the next few days I saw the $85.00 turn to  $100 than 115, 130, 140. and the report did not come out yet.  This is where the greed sets in. How high will the stock price go?  I was happy with $150.00, but then $225.00 then 275.00. As a trader, greed is very primal.  I wanted more than 275.00.  So I waited one more day thinking it would go higher,  but it didn’t.  I should have taken the profits when I had the chance.  Everyone else was getting out of the stock.  The price was going down really fast so I got out at $59.00 from $85.  It was a loss on that trade.

Whats the lesson learned,  before you enter a trade have a specific profit goal or time frame which ever is hit first get out and take your money.  It is better to take a little money than no money.  I’m going to update my check list to take profits #3 take profits

Numbers,Stats and Averages

The football is a major event in America.  As I watch the Superbowl the commentators are going over all the details of the players like who they are, where there from, how many yards they run or the number of passes thrown or injuries.  Looking at all the numbers and information you can almost predict which team will win based on current conditions.  Football or any other sport has numerical  statistics.  This raw data can be charted on a graph creating a better visual on the past performance in real time.  I’m pretty  sure there is a few graphs out in the web on sports stats.  Which can help you win on fantasy football or sports betting every week.   However this blog is about the stock market, how to predict the direction.

As a stock trader graphs are one of the tools used to determine which way the stock will go up or down.  One chart I like is the simple moving average (SMA). definition

Definition of ‘Simple Moving Average – SMA

A simple, or arithmetic, moving average that is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. Short-term averages respond quickly to changes in the price of the underlying, while long-term averages are slow to react.

Read more: http://www.investopedia.com/terms/s/sma.asp#ixzz1lgP8m81E

The SMA  must be used with the price of the stock.  The closing price of the stock is the 1st chart and the SMA is the 2nd chart.  Therefore your using really two charts overlapping each other.   If the SMA is below the closing price then the stock is going up and if the SMA is above the stock price then the stock is going down.  The SMA is only one element on the direction of the stock, there are other variables but this is a start in predicting which stock  has a better chance of winning.

Option Trade Netflix

11 days ago I bought at whole sale Netflix option strike price 130 call option for $284.00 but the first three days the price went as low as 70.00 not a good feeling losing more that 3/4 your investment.  This is one reason why option trading is not for everyone.  However the earning report was due Jan 25th I was expecting high profits since a few months ago they raised there prices. They lost a lot of subscribers but by raising prices it off sets the lose.  I can’t predict the future but the DVD business is slowly dying and Netflix knows this.  They have the raw data to support dvd rentals vs streaming videos and I’m sure streaming old videos more out weights dvd.   This is how I analyze this business but as a trader you have to think differently.

As a trader what I saw was a 1-2-3 bottom and it broke support after $100.00 thats when I got in.  Thinking it had already bottom and maybe was doing a beginning uptrend.  But lets not forget the earnings report season.  When the report came out the price of the stock shot through the roof.  At that point I was already looking for the EXIT strategy.  It is better to make some money then to loose it all expecting to get better price.  I got out at $615.00 so if we do the math 615-284=$331-20commision=$311.00 .

I can be happy with $311.00 in 11 days.