Wednesday, June 24, 2015

How's Microsoft Doing?


My friend asked me how Microsoft is doing at a dinner party. This is how our real conversation went last night:

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Friend: How is Microsoft doing?
Me: I don't know.
Friend: Don't you trade stocks?
Me: Yes.
Friend: Then how do you not know how Microsoft is doing?
Me: I haven't traded Microsoft in years.
Friend: Why? It's one of the biggest companies.
Me: It's too big and not volatile enough for me to trade.
Friend: Have you been following what's happening in Greece.
Me: A little.
Friend: So what's going on?
Me: There's a debt crisis, the economy is bad. They could default.
Friend: Deep analysis bro.
Me: All I care about is how the markets react to Greece. I don't care too much about the details. I'm not an economist.
Friend: Okay, if you say so. You may want to start looking for a day job again.
Me: And you might want to give your portfolio to someone who knows what he's doing.
Friend: Yeah, I'm just now starting to recover from my big losses.
Me: Your porfolio manager knows a lot about economics, huh.
Friend: Yup.

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Tuesday, June 23, 2015

The Trader I Strive To Be

Focus on your trading strengths
We are almost at the half way point of the trading year. As usual I am ready to review my trades and goals. A cursory scan leaves me with the feeling that I have done a good job, but as always have plenty of room to improve.

When doing a performance review, most people focus on what they have done wrong. It's natural to want to improve where you are lacking. Heck, even this post's title talks about what I strive to be, indicating I need to fix what is lacking rather than enhance or repeat my strengths.

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The problem with focusing too much on deficits is you will lose focus on what you are doing right. So ask yourself if those deficiencies of yours going to make much of a difference? Is focusing 50 percent of your valuable free time worth hitting those deficiencies, or is it better used enhancing your strengths?

Let's say you are an excellent breakout trader. You have a 58 percent win rate on breakout traders and your average win is 2.5 times your average loss. You are killing it on these trades. However, you are trading at a 35 percent clip on failed breakouts and not managing risk well. What should you focus on?

I propose that you enhance your strength. Dig deeper into breakout trading and tweak your style until you go from good to mastery. You will gain more from mastery of one area than going from bad to average at another. You can postpone the lacking setup, gain mastery int he other, then come back to the lacking setup once mastery is achieved.

This does not mean we ignore our weaknesses. Some areas where we are lacking must be fixed, especially if they relate to risk/reward and psychology. The key is knowing what weaknesses are important and will produce big gains once fixed, and which are trivial and not worth the allocation of valuable time.

There is another benefit to focusing on your strengths. It leads to a positive attitude. Trading is a mental game and I firmly believe that the best traders have positive attitudes. Focusing on your strengths naturally leads to positivity.

Remember, it does not matter that you are perfect. If that is your goal, you will always fail. Understand that you will be weak in some areas, and strong in others. How you balance this decides the amount of money you will make, or lose, trading.

The trader I strive to be is one that gains mastery over the things that make me a successful trader.

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Sunday, June 21, 2015

Why are you trading low quality stocks and setups!

Only Trade High Quality Stock Setups
The most critical decision a trader makes on a daily basis is selecting a stock to trade.

Yeah, I know I have said that stock picking is only 33 percent of trading, while the other 66 percent is risk and trade management. That is true, but risk and trade management start after stock picking (though you should have a plan of action before entering the stock).

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Herein lies the rub. Traders have thousands of stocks to choose from, and even after working hard to narrow that list down, we still usually have 50-100 interesting stocks to trade. Yet most of us can only trade somewhere between two and ten stocks at any given time.

Since we are trading a limited number of stocks, we can afford to be selective. We should only pick the best of the best stocks and setups to trade. It's a common sense approach to trading, yet  I constantly come across Trade Report members and students who talk themselves into trading low quality setups when plenty of great setups are available to trade.

There are a number of psychological reasons for this that I'm not going to list here. Just remember to focus on your best setups and never fall in love with a low quality setup or stock. Any time you talk yourself into trading a low quality setup, ask yourself why you are taking this trade rather than taking on the 10 other stocks on your watch list that are more volatile, showing great money flow, confirming price action and fit every element of a setup you trade.

It is these simple, common sense trading ideas that everyone knows to follow, but few do, that separate the winning and losing traders. So remember, only trade high quality setups.

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Wednesday, June 17, 2015

Chart of the day: Guidance Software

Today's stock chart of the day Guidance Software Inc. (GUID). GUID is from the hot cyber security sector and is beating the sector ETF HACK by a wide margin. Strong money flow, price action and a recent breakout make this a stock to watch. It broke out from a minor pullback and now looks ready to make it's next run up. 

I am looking for a slight pullback entry with a stop under yesterday's breakout bar.

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Saturday, June 13, 2015

It's scary buying the dip and what ever happened to the Zune

Fear and greed control every stock that ever existed. Even the greatest stocks of all time have had mini-scares that now seem ridiculous.

Apple bears, remember when you said Microsoft Zune would spell Apple doom? Blockbuster online was supposed to kill Netflix. The courts and anti-privacy legislation was supposed to bring down Google.
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Yet these companies still stand, and many have lost out on fortunes listening to the news and not paying attention to the technicals.

When you find a great company with great technicals, buy every dip you can no matter how scary it is to enter. Mange risk properly and more times than not you will be greatly rewarded.

If you would like to learn more about how I trade, receive my nightly focus list with market analysis,setups and trade alerts, sign up for a 14 day free trial at BullsonWallStreet.com

Monday, June 08, 2015

When you have the courage to do what you love, even your friends will call you a fool


It takes courage to pursue personal freedom. That is why most people choose the relative safety of a salary. That salary may chain you to a location, tie up almost all your waking hours and keep you from doing what you love, but hey, at least it allows you to squeak by in life.

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If you are in that situation, this is not a put down. I was in that situation. You've gotta do what you gotta do, and I understand that. However, if you are reading this blog, following me on twitter, or a member of my Trade Report, I know you are motivated to be free. That takes courage and I commend every reader of this blog that is doing SOMETHING.

Whether it's building your account to a level that allows you to trade full-time, creating some side income while you work so you won't be tied to that job, or working on building enough for early retirement, it takes courage to even attempt these goals. While most dream about it, they will never take ACTION like you have done.

Anytime you do something courageous, those who don't have courage will bring the "hate". Do not listen to them, and never try to please them, because you never will. Their criticism is not constructive and is not meant to help you, it's to help themselves and their fragile psyches.

Take their criticism as a badge of honor. It means you are doing something right.

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Friday, June 05, 2015

The Art of Learning to Trade: Become a Master and Not A Jeopardy Contestant


I rarely read trading books. Experience tells me most are a waste of time. However, I read every performance book I can get my hands on. One of the best is Josh Waitzkin's The Art of Learning.

Josh was the chess prodigy that the movie "Searching For Bobby Fischer" was based upon. Not only was he one of the best American Chess players ever, he also made himself into a martial arts world champion. How did he become a champion in two very different fields? Simply put, Josh's talent is understanding the art of learning.

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Josh believes in acquiring a deep understanding of a discipline, and points out that few actually undertake the time and effort to gain mastery. For instance, he points to most American Kung Fu classes that teach students a plethora of average techniques at a superficial level, never actually mastering anything.

To gain mastery, one must take a technique or strategy, break it into parts, and study each part in depth. For example, Waitzkin spent thousands of hours studying the relationship between two chess pieces, king to pawn. He focused on nothing else. This gave him a keen understanding of these two pieces, their relationship on the board and the subtleties of each piece. Once he gained mastery, he moved on to another relationship. In time, these parts that he studied would come together and the whole was mastered.

It is not difficult to see how this learning technique applies to traders. I can't even count how many bad traders I have run into that are encyclopedia's of every setup and candle pattern known to man. On a superficial level, they seem to be geniuses. Yet somehow they are bad traders. It is because they know a lot at a superficial level, but do not truly understand what they have memorized.

So "trivia trader" can name every bearish topping candle pattern. As I type, I could only name one or two. However, while their names escape me, I understand the psychology behind why they are bearish, can recognize them on different time frames as they develop and know how to trade them. I choose mastery over the superficial.

When I work with students, some become frustrated because they want that toolbox of 20 setups right now. I could easily give them what they want, but who does that really serve? Instead, I spend many sessions going over the intricacies of that one setup before moving on. The process can be tedious and frustrating, but in time the student gains mastery of the setup. Then we can move on.

If you are serious about trading, work hard to learn everything you can . . .about that ONE thing. Then over on to the next. Master a few things. In time, those few things will become many and the "whole" will follow.

Put it into action right now! What is the one things you plan to master? Let me know in the comments below or by email and I will get back to you with an idea of how to go about doing it.

If you would like to learn more about how I trade, receive my nightly focus list with market analysis,setups and trade alerts, sign up for a 14 day free trial at BullsonWallStreet.com.