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

THE 4TH LAW Make It Satisfying

 The Cardinal Rule of Behavior Change Everyone said handwashing was important, but few people made a habit out of it. The problem wasn’t knowledge. The problem was consistency. We are more likely to repeat a behavior when the experience is satisfying. This is entirely logical. Feelings of pleasure—even minor ones like washing your hands with soap that smells nice and lathers well—are signals that tell the brain: “This feels good. Do this again, next time.” Pleasure teaches your brain that a behavior is worth remembering and repeating.  Conversely, if an experience is not satisfying, we have little reason to repeat it. In my research, I came across the story of a woman who had a narcissistic relative who drove her nuts. In an attempt to spend less time with this egomaniac, she acted as dull and as boring as possible whenever he was around. Within a few encounters, he started avoiding her because he found her so uninteresting. Stories like these are evidence of the Cardinal Rule...
Post a Comment
Read more

THE CONTEXT IS THE CUE

 The cues that trigger a habit can start out very specific, but over time your habits become associated not with a single trigger but with the entire context surrounding the behavior. We mentally assign our habits to the locations in which they occur: the home, the office, the gym. Each location develops a connection to certain habits and routines. You establish a particular relationship with the objects on your desk, the items on your kitchen counter, the things in your bedroom. Our behavior is not defined by the objects in the environment but by our relationship to them. In fact, this is a useful way to think about the influence of the environment on your behavior. Stop thinking about your environment as filled with objects. Start thinking about it as filled with relationships. Think in terms of how you interact with the spaces around you. For one person, her couch is the place where she reads for an hour each night. For someone else, the couch is where he watches television and ...
Post a Comment
Read more