Questions and Answers

What books do you recommend?

I have read over 100 books on trading and frankly, most have been a waste of time. A few that I have liked include The Market Wizards books by Jack Schwager, Entries and Exits by Alexander Elder, Thomas Bulkowski's chart pattern books, Alan Farley's trading setup book (if you can get through the horrendous writing style) and Technical Analysis for Dummies by Barbara Rockefeller.

I would spend more time going through historical charts than reading books. Flip through at least 100 charts every day. Look at past winners. Understand price movement, momentum, sector analysis, volume and patterns.

You don't talk as much as you used to about psychology. Do you focus less on it?

Not at all. These days I focus more on psychology than I do the markets and setups. At this point, trading analysis comes easily to me. It takes me about 10 minutes a day to analyze the indexes and key sector charts to come up with a theme for the next day. The hard part for me, considering I have a ultra-competitive, addictive personality and am prone to taking gambles, has always been the pyschological aspect.

Creating a simple, balanced lifestyle and adopting a Zen-like approach to trading has helped. I also focus more on research than obsessing over current positions. I force myself to let my initial trade analysis do the job, and only exit at my preset stop or target.

Earlier in the year you metioned you wanted to start trading options. Have you put on any trades?

Not yet. I have done some reading and am starting to get a feel for the vehicle. I hope to put on my first options trade sometime this year. I know a few of the trades I have made would have made much more money had I went with an option strategy.

Are you still as bearish on gold as you were before?

I am standing aside the gold trade right now. Remember my analysis was short term (and profitable), when I made my trade. Now we are getting mixed signals. Price action still looks bearish, but I am seeing some indicator divergences in GLD. For instance, RSI broke out recently. Gold stocks like BVN and GOLD are acting more bearish than GLD. These might be better trades, although they are currently very oversold.



What sectors are the best right now?

It's tough to say what's "best", since strong sectors like energy might not currently be good long trades. I'll just list areas that I am watching closely, both for long and short setups:

Energy, Coal, Financials, Steel, Natural Gas, momentum tech stocks, recent earnings breakouts and breakdowns, Railroads.

Invest Like a Shark

I am currently reading Invest Like a Shark by James DePorre. For those who don't know, Deporre, otherwise know as Rev Shark, lost his hearing, job and wife before starting to trade with a $30,000 stake and turning it into millions.

Thus far there isn't much that I already don't know. However, from time to time it's worthwhile to review what you know to get the mind focused on what's important. For example, DePorre likens successful small investors to sharks, who patiently wait for an opportune time before striking aggressively. I like the analogy and I am already waiting for better setups.

Click on the picture below to view Rev Shark speaking with Jim Cramer about current market conditions.

Odds and Ins

I am not doing much trading today. Just managing my positions. BCSI was on my radar after the breakout, but the gap down today concerned me.

Don't forget, I'll be posting answers to your questions later this week. Ask me anything. Send your questions to: SinghJD1@aol.com

I'm going to spend the rest of the day doing some light reading and catching up on a few TV shows and movies. I am currently reading two books.

Against the Gods: The Remarkable Story of Risk by Peter Bernstein, takes a fascinating look at the history of probabilty theory and risk. While it may sound boring, it's a page turner.

House of Leaves by Mark Z. Danielewski is the freakiest book I've read in quite some time. Smart, scarey, hip, spooky, funny, romantic, sexy and sadistic are a few adjectives that still can't quite do the book justice.

Take a look at this link from Lifehack.org on self-teaching. I have taught myself much of what I know, and this article does a wonderful job of outlining how to teach yourself anything.

Currently my five favorite televison shows are Curb Your Enthusiasm, Heroes, Smallville, Ultimate Fighter and Friday Night Lights.

As I posted after the season finale, Curb ended with a great episode. I am now watching reruns. I've seen them all, but they still are hysterically funny. Hereos and Smallville are great if you are into conspiracy, comics, sci-fi, intricate plots and good acting. Friday Night Lights takes a look at a small high school football town in Texas and Ultimate Fighter is a reality competition that gives a fight contract to the best fighter.

Movies on my que are Reign Over Me, Children of Men and Sicko.

OT: George Vecsey's Baseball: A History of America's Favorite Game

One of my New Year Resolutions was to read one book per week. This week, I read George Vecsey's Baseball: A History of America's Favorite Game. I would highly recommend this book to anybody who is a sports or baseball fan. While it's not an in depth historical account of baseball's history, it is a fun, breezy, passionate look at some key events that shaped the game. Highlights included the games historical lineage, going back to Europe and Asia, the development of the game in the 1800s, racism and Jackie Robinson, the Negro League greats, Babe Ruth, free agency and Curt Flood, Pete Rose and other big scandals, and the current state of the game.

I found the chapters on race and the game the most moving. Here is one of my favorite passages:

Some Americans began talking openly about the injustice that blacks were dying for their country in service but were still shut out from organized baseball. "I can play in Mexico." Negro League pitcher Nate Moreland had been quoted as saying, "but I have to fight for America where I can't play.

What I'm Reading

I took my daughter to Barnes and Noble today. Of course, I had to sneak over to the investing section. I picked up Steve Nison's Japanese Candlestick Charting Techniques, Second Edition and Pring on Price Patterns : The Definitive Guide to Price Pattern Analysis and Intrepretation

Steve Nison is considered the candlestick guru. However, I have yet to read one of his books. Everything I know about candles I've learned from online sources and my own research. I had no plans to read the Pring book, but a friend of mine had recommended it and I'm a pattern addict. Hopefully it will be a good supplement to the Bulkowski chart pattern books.

I'll let you guys know how the books read in a couple of weeks.