Karma Trades

This are the sectors that I usually follow as they usually are active and offer the best trading opportunities in my opinion. So lets see how they behaved this week and what is setting up for the next:

• Oil (USO, XLE, XOP, XES): After the drop and sharp bounce, oil is showing no clear signs of direction, while oil related and energy stocks seem to be pulling back. 

• Technology (QQQ,XLK,SMH,NFLX,FB,AMZN): Technology seems to be leading again as Tech indexes are making new highs and sector leader are also moving up with strentgh. Might be good to look for pullbacks in the upcoming weeks.

• Metals (XME,SLX,AA,AKS,X): The sector index is consolidating in a tight triangle formation, the weekly chart suggest that a break to the upside is likely but the popular steel stocks like AKS and X are losing strength and pulling back while Aluminum is showing strength. 

• Biotech (IBB,XBI,BLUE,TSRO,CLVS,IONS): The biotech indexes bounced sharply the next couple of days after Trump's negative comments but failed to close strong on friday. Somo stocks seem to be keeping up with the strong move of the past week while other seem ready to pullback or are getting overextended.

Volatile day on the market in what was a boring directionless week.
The Trump speech affected strongly the biotech sector while leaving the others quite untouched.

During the Trump speech the SPY went down sharply but quickly recovered showing signs of support and possible trend continuation this week or the next.

Some sectors that I consider to be showing BULLISH setups are:

• Oil (USO, OAS, WLL,  RIG, XES): Oil made sharp moves to the downside at the beginning of the week, but oil futures printed a bullish engulfing candle today and plenty of oil related stock moved to the upside response. Many of this stocks are also showing flag & consolidation patterns; maybe this move in oil will cause a break to the upside.


• Steel & Metals(XME, CLF, SLX, MT, FCX, AA): Also moving up today after making pullback/flag patterns. The pullback and trend continuation looks very clear on the weekly charts.


• Basic Materials(XLB, MOS, POT, FMC): Basic materials also moving and showing trend continuation in the weekly charts, Agricultural and Chem stocks showing bullish patterns.

Some sectors that I consider to be showing BEARISH setups are:

•  Biotech (IBB, XBI): After a sharp move to the upside the last few days, biotechs got hit hard after Trump's comments. Altough it might become a good buy opportunity if it pulls back to the 50 or 200 SMA

I decided to implement some extra risk management into my trading. In the past I was donde with limiting my risk per position to 1% of my trading account. This allowed me to take small positions and thus take more positions at the same time. This in turn led to overtrading as I tried to capture every trade that catched my eye, even though it wasn't an optimal setup.

But then the inevitable happened. A losing streak and many of my multiple positions became loosers. So instead of having a big loss because of too much risk in a single position, I had a big loss because I had too much risk at the same time. Although the % loss of my account wasn't big, it had a psycological impact in me, seeing so many of your positions turn red and become losses.

So I decided to keep my maximum risk % of total trading account at 3%. This will usually mean that I will have a maximum of 3 positions at the same time. But when a position is clearly going to be a winner and on it's way to my profit target I might move my stop loss to break even and thus enabling me to take another position if the opportunity presents itself.

I know this little rule will help me keep a tighter risk control and avoid overtrading.

BTU making a cup and handle pattern with the last pullback. It showed good strength the past days and I expect it to go up and break the recent high, possibly above 3.00. Energy sector conditions will be critical for this setup.




CLF another energy play. It's flagging above the recent breakout area and seems likely to continue
upward.




NES, another flag setup. It hasn't close green yet, but when it does I expect it to resume its way up.




Another Oil play, OAS, of all this is the one that I like the least because of the range. It's forming a nice pullback and setting up for a breakout but there's a previous support area from early in the year which might act as resistance at 12.00.

Good Karma & Profit.

I've been reading many trading books this year and I thought that it would be a good idea to create a series of post about the most important lessons that I learned from those books and share it with other traders.

I will begin with one of the trading literature classics: Reminiscences of a Stock Operator by Edwin Lefevre. This book relates the story of legendary trader Jesse Livermore during the early 1900's.

Lessons:

1. Trading is Hard.Those who believe that trading is easy money always end up losing. Becoming a profitable trader is one of the most difficult endeavors any man can take; the road will be full of dificulties, frustration, losses and more frustration, but that's the only way to really learn and master the game of speculation.
2. The Market is Always the Same. While it might seem that the markets have radically changed from the time of the story, the truth is that the game of speculation has always been the same. That's because it's made up by the same players: Speculators, Insiders, Suckers, Manipulators, Bankers, Companies, etc. The shape of the market might have changed, but it's ways remain the same.
3. You have to learn to lose.  Jesse Livermore lost many times during his career, sometimes even millions of dollars in a short time. Knowing how and when to take a loss is vital for a trader.
4. Stock manipulation has always existed. Stock manipulators and promoters have always existed and will always exist. You have to be wary against extremely bullish or bearish articles, be wary against articles promoting that XYZ is the next big runner and even those who claim that their simple, easy to learn strategy will make you a millionaire! 
5. Trade your own way. Jesse Livermore hated the tips. Don't rely on someone else for your trades. You might take an idea from someone and see if it matches with your trading style & strategy, but never, never, never trade someone else tips blindly. The way to become a succesful trader is to find your own strategy.
6. Market conditions and general trend are more important than you think. Livermore started to have more success as a trader whe he began to pay attention to market conditions and general trend. From the book: “Obviously, the thing to do was to be bullish in a bull market and bearish in a bear market. Sounds silly, doesn’t it? But I had to grasp that general principle firmly before I saw that to put it into practice really meant to anticipate probabilities. It took me a long time to trade on those lines.” Sometimes many traders try to trade against the trend, losing many times. 
7. Big Money is made with big positions and big patience. Livermore realizes at some point that in order to make big money and go to the next level on his trading, he would need to stop beign a "piker" and and bet with bigger positions. This is true, but is also quite dangerous to do. Before you do it, you have to be ready and that means that you MUST have a winning strategy and enough capital to sustain the losses that will certainly occur.
8. Price Follows the Path of Least Resistance. Just like water, stock prices will go where theres is less resistance. It is your job as a trader to find that resistance and trade against it, that's the way that you gain an edge in the market.
9.  Sometimes, the worst enemy of a trader is himself. Traders are challenged with many psycological challenges along the way. External pressures, can wreak havoc in a trader's performance. So a trader must always come to the market with the right mindset and knowing that himself is not an obstacle to success.
10. Most traders fail.  This was perfectly clear by the end of the book, when the author mentions how Livermore and other legendary trader were unique in their own ways and even them made huge mistakes. Only a few will be able to beat the stock market and even them will likely fail at some point. Trading is a tough game.
    

    
    

Investors Live is making a raffle to win a blazing fast trading pc + 1 year suscription to IU + both of their educational DVD's Tandem Trader & Texbook Trading.

I definitetly wouldn't mind improving my current station so I'm in!. 

Here's the link, and of course, the more people you invite the higher your chances!
Win a new Trading PC!

Recently, while looking through the "Resources" section in the Lance Beggs site, a trader who was featured in Chat with Traders  (Incredible how one thing leads to another) I found the site of Adam H. Grimes, author of "The Art and Science of Technical Analysis",  who offers not only a very useful blog and also a podcast, but  also a completely free and very sound trading course.

In the world of trading its very hard to find quality educational resources that are free, but as Lance Beggs recommended it I took it. So far it's very good and I want to recommend it to any trader that wants to improve. You only have to register and thats all, no fees, no payments. He even give you a huge amount of homework to practice. (No joke here, theres a 70 page chartbook that you have to analize in the first section. I'm still doing it.)

So here's the link and enjoy!

The other day I stumbled upon this interview with Tim Grittani and found it pretty interesting and inspiring.

One of the ideas that he shared and reallystuck with me is that he began to become consistently profitable when he started to focus on one single pattern/strategy before moving on to others. So that's going to be the way that I'll be approaching the markets from now on.

I share with you the interview so that you can also learn and get inspired by this incredible skilled trader.

Yesterday I joined Investors Underground.
I considere this as another step in my progress and education as a trader.
Later I'll be writing a review of the service just as with the other services
So far I like that they're focused on learning how to trade instead of announcing trade alerts.
They've got 3 chatrooms: Momentum, Swing & OTC/Subpenny trades.

I must say thay I also got a nice discount by signing up for their "Free Tour" and asking for a promo code; so they gave me the same discount as their last Christmas promo, which it was 30%.
So if you're considering joinin, be sure to ask for a discount!

Recently a friend of mine shared with me this awesome seminar by Mark Douglas, author of "The Diciplined Trader" & "Trading in the Zone", both books on trading psycology which I recommend to anyone wanting to improve their trading performance.

Anyway, this long seminar is almost as a video synthesis of both books with real examples of how to solve trading problems provided by the very attendants of the seminar.