It's Not Enough to Beat the Indexes

This past weekend I got together with a trading buddy and we were talking performance. Like many are apt to do, he excused average performance with the "but I beat the indexes" cliche.

That is one of my biggest pet peeves. The idea that I could be down three percent but feel good about it because the indexes had done worse is foreign to me. If that is your thought process, I doubt you will ever become an exceptional trader. Sure, you may become a consistently average trader, but is that really why you put in all the time and effort, to be average?

I'm in it to make monster profits. I know the fact that I am an individual investor, who can move in and out of positions with ease, both to the long and short side, gives me a huge advantage. I am not satisfied with average performance, and neither should you.

Watchlist and Lebron James

Here is a list of stocks added to my watchlist. All of these stocks are 3 percent breakouts from Thursday or Friday. I am looking for pullbacks to support.

MW: pb 48
GGL: pb 21
SNCR: pb 24
AMTD: pb 19
CIEN: pb 32.50
JCG: pb 42-43
BIDU: pb 130
TS: pb
CEN: pb 34.50-35
VT: pb 39-40
FTK: pb 47.50
NTGR: pb 36
YZC: pb 60
DXPE: pb 45-46
GES: pb 43
TNL: pb 27.50
BYD: pb 50-51
EWZ: pb 58
NFX: pb 50
KSU: pb 40
CASY: pb 2
ESL: pb 46
IPAR: 26-27
KR: pb 30
MT: pb 60
HDNG: pb 30-31
ITU: pb 44
CYNO: pb 30-32
MTOX: pb 25
GGB: pb 22
BBD: pb 24-25
CBD: pb 34
CIG: pb 38.50

Off Topic:
If you are a basketball fan and are kicking yourself for not watchlist Game 5 of the Eastern Conference finals, give thanks to youtube. Lebron's performance, at only 22 years old, placed him in the Jordan, Magic, Bird category of greatness.

Friday's Additions to Watchlist and Quote of the Day

Watchlist:
Here are some new additions to the watchlist with notes:

HCR: pb 60 (breakout-pullback setup)
JASO: pb 20-21 (b-o setup)
WOOF: pb 39
CSX: pb 42-42.50 (thanks to Buffet and takeover speculation)
MEDI: pb 41-42 (bo-pb)
RRD: pb 38.50-39
AAPL: hammer confirmation?
CCOI: pb 25 (bo-pb)
SU: bo 82
GROW: multiple entries
CCJ: just watch for now (need deeper pb or bo)




Quote of the day:
I had to fight back from being seventh on the depth chart. My mother and father brought me along and taught me to never quit, and to strive to be the best.

--Joe Montana, greatest NFL QB of all-time

When Joe Montana entered as a freshman at Notre Dame, he was seventh on the depth chart. He ended up their QB and lead them to one of the greatest Bowl game comebacks of all-time. After college, he was drafted in the 3rd round of the NFL draft, with 81 players taken ahead of him. Montana ended up leading the Niners to multiple Super Bowl victories. It's not hard to see why I am such a big Joe Montana fan.

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"Pump Up" Books

{Thursday's Watchlist}

Once I find something that I am passionate about, I tend to relentlessly pursue that endeavor. My closest friends and family would say I do so to the point of obsession. While some may see this as a negative, I see it as a positive. It's the only way I know to achieve excellence.

However, there are some negatives to the "full tilt" pursuit of expertise. The most obvious side effect is burnout. In the past, when I'd feel burnout setting in, I would completely step away from what I was doing. However, when I came back, I wouldn't feel much different when I came back.

I've learned to take a different tactic when I'm burned out. I take only one day off, and spend that day fully immersed in the subject. I know it sounds crazy. Here's the rub; I immerse myself in "pump me up" activities. For example, when I'm tired of lifting weights, I watch "Pumping Iron" the bodybuilding classic that documents the rivalry between Arnold and Lou Ferrigno. If my tennis game is lagging, I go to my collection of classic matches. One of my favorites is the 1980 U.S. Open final between McEnroe and Borg.

When I've overdone it as a trader, and I cannot bear to look at another chart, I take a day off and spend it reading trading books. However, I am not reading trading "texts", such as Alan Farley's "Master Swing Trader." Trader biographies, interviews and profiles are what I use as "pump up" tools. Here are a few books that do the trick for me:

Market Wizards: Interviews with Top Traders

Jesse Livermore: The World's Greatest Stock Trader

Pit Bull: Lessons from Wall Street's Champion Day Trader

Confessions of a Street Addict

One of my new "pump up" books is Entries & Exits : Visits to 16 Trading Rooms (Wiley Trading) by Alexander Elder. The author interviews sixteen traders and not only asks them questions, but actually analyzes how they trade. Each traders gives some background on how and what they trade, and then open the vaults to their past trades, detailing the setup, entry and exit. It's sort of like reading somebody else's diary, with an added critique from Elder. This book takes the idea of "Market Wizards" and pushes it to another level.

I read this book for the second time this past weekend. Not only did it rejuvenate me as a trader, I gained some nuggets of wisdom that I will likely apply to my current methods. I highly recommend this book to anybody with even the slightest interest in trading.

Quality, Trading and Bruce Lee

My dad used to tell me never to do anything "half-assed." Bruce Lee put it more eloquently:

I have found, after much soul searching, that deep down what I honestly value more than anything else is quality; doing one's best in the manner of the responsibility and craftsmanship of a number one.

The reason I bring up this quote is because of the "half-assed" nature of my recent VLO trade. I spotted the divergences, resistance levels and low risk entry, so I decided to jump right in. While it was low risk, and I still feel the stock is going to fall, I don't consider it a quality trade because there were a plethora of better setups out there that I ignored. Furthermore, when stalking divergence trades, one of my rules is that I always wait for confirmation of the divergence. So the small loss isn't what bugs me, it's the fact that it was a crummy trade.

The Greatest Round in Heavyweight Boxing History

After doing my nightly sector review and preparing my watchlist, I decided I would fall asleep to Sportscenter. Being the boxing junkie that I am, I was happy to see that a replay of the final fight of the classic Evander Holyfield-Riddick Bowe trilogy was playing. Has their ever been a fighter with more heart, guts and determination than Holyfield? He is the only fighter, besides Hearns, who could gain more respect after a loss than most do after wins.

Well, I've wasted the past two hours watching clips of old boxing matches on the greatest gift to sports fanatics everywhere, youtube. Here is a clip of the 10th round of the second Holyfield-Bowe fight, arguable the greatest round in the history of heavyweight boxing. We're talking about two warriors that gave every fiber of their being and, as the cliche goes, laid it all on the line. This is the type of stuff that inspires me.

Michael Jordan Trading Quotes

As you may have noticed in my "inpirational photos" post, I am a big Michael Jordan fan. Not only was he one of the most talented players to ever grace the hardwood, he also was one of the most hardworking and mentally prepared. Growing up, I watched and listened to everything Jordan related that I could get my hands on. What I took away from Jordan, more than anything, is that you must have confidence in your abilities, strive to continually make yourself better, be determined and outwork your opponent. Here are a few quotes, that as traders, we can all benefit from.

I never looked at the consequences of missing a big shot... when you think about the consequences you always think of a negative result.

I play to win, whether during practice or a real game. And I will not let anything get in the way of me and my competitive enthusiasm to win.

I've always believed that if you put in the work, the results will come. I don't do things half-heartedly. Because I know if I do, then I can expect half-hearted results.

I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed.

If you accept the expectations of others, especially negative ones, then you never will change the outcome.

If you're trying to achieve, there will be roadblocks. I've had them; everybody has had them. But obstacles don't have to stop you. If you run into a wall, don't turn around and give up. Figure out how to climb it, go through it, or work around it.

My attitude is that if you push me towards something that you think is a weakness, then I will turn that perceived weakness into a strength.

Some people want it to happen, some wish it would happen, others make it happen.

The game is my wife. It demands loyalty and responsibility, and it gives me back fulfillment and peace.

Inspirational Sports Photos From My Office

Here are a few of the many pictures that adorn the walls of my home office. All are intended to inspire excellence.