Skip to main content

 “Rome was not made in one day.” —French Proverb


Learn to judge your trades based on how closely you followed your trading fundamentals. The following is a trade that MoneyMaker made in August 2009 in AIG and judged by the seven fundamental principles. (See figure 2.1). Your goal every day should be to make One Good Trade, and then One Good Trade, and then One Good Trade.

Proper preparation: AIG had a strong move from 34 to 37 on heavy volume in the last 30 minutes of the Close the prior day. The next day, AIG gapped up above the high from the prior day on news that AIG’s founder would work with the current CEO to help rescue the company. Levels: Res: 41.50, 42.25. Sup: 40 Average Volume: 38m Short % of float: 20% 52-week range: 6.60–99.20

Hard work: On the Open, the stock consolidated in a range between 40 and 41.50. AIG began to consolidate around 10:45 AM in a tighter range close to 41.50. I noticed, however, that the stock could not hold above 41.50. When 41.50 finally started to hold, and buyers stepped up, I bought 3,000 shares.

Patience: Got long at 41.58 as soon as I saw buyers step up and hold above 41.50.

Have a detailed plan before every trade: The plan was to get long as soon as buyers stepped up and held above 41.50. I would scalp part of my position initially but if I saw significant buying above 41.50, I would buy back the shares I sold and hold a core until there was a reason to sell. Conversely, if the stock traded below 41.45, I would exit my long position and re-evaluate.

Discipline: Sold half of my position between 41.70 and 42.00. Held a core and bought back the shares I sold when the stock got above 42.00. Held a core to 50, when I sold.

Communication: I shared this level with the desk.

Replay Important Trades: When the stock held above 41.50 and then 42.00, I could have held more size for a bigger move. I knew that there was a high short interest in the stock and the shorts would be squeezed if the stock continued its upward momentum. The stock also gave a clue the prior day into the Close that it had the potential to explode. I actively traded most of my position catching 20–50 cents at a time, but after seeing offers being paid aggressively and buyers stepping up, that should have given me confidence to hold a larger core. 

Comments

Post a Comment

Popular posts from this blog

Maximizing Your Profits with Scoring

SETTING YOUR MAXIMUM INTRADAY TRADING LOSS First things first: set a max intraday trading loss. There will be days when you just do not have it. Why do you think coaches pull their players when they are not playing well? They are more harmful on the field than off. When you are underperforming, you are hurting your team and your trading business. You need a system to yank yourself over to the bench. A stop loss is your answer. TRADING BASED UPON THE TIME OF DAY A good trader makes note of what time of day it is, when he trades most profitably, and adjusts his trading to fit such times. Your numbers at the end of the month will not reflect your true trading potential. Make the most trades with the most size during the trading periods that statistically are most profitable for you. Money saved during your weaker trading periods is money earned. Consistency The fact is that most trades you make will start working for you right away. But the new traders also hold stocks that are trading ag...
Post a Comment
Read more

Self-Discipline

One must gain mastery over self the person who is not master of himself can never be master of others. Lack of self-mastery is, of itself, the most destructive form of indefiniteness. By mastering the three appetites responsible for most of one's lack of self discipline. The three appetites are (1) The desire for food, (2) The desire for expression of sex, (3) The desire to express loosely organized opinions. When a man becomes master of these three appetites, he has developed enough self-discipline to conquer easily those of lesser importance. Self mastery contempates sufficient control over the appetites to enable one to feed them what they need and withhold food not needed. Take the desire for physical food, for example. The majority of people are so weak in self discipline they fill their stocmachs with combinations of rich food which please the taste but overwork the organs of digestion and elimination. They pour into their stomachs both quantity and combinations of food which...
Post a Comment
Read more

Where thought prevails, power may be found!

If you think you are beaten, you are; if you think you dare not you don't; If you like to win, but you think you can't, it is almost certain you won't, If you think you'll lose, you've lost, for out of the world we find success begins with a fellow's will it's all in the state of mind. If you think you are outclassed, you are - you've got to think high to rise. You've got to be sure of yourself before you can ever win a prize. Life's battle don't always go to the stronger or faster man, But soon or late the man who wins is the man who thinks he can. No one knows what hidden forces lie dormant within you. You, yourself, do not know your capacity for achievement, and you never will know until you come in contact with the particular stimulus that arouses you to greater action and extends your vision, develops your self confidence, and moves you with a deeper desire to achieve. The most important turning points of life often comes at the ...
Post a Comment
Read more