Confessions of a noob

Discussion in 'Professional Trading' started by mgabriel01, Nov 10, 2007.

  1. support gets blown out when big fundamentals come out, GRMN is no longer a trending stock because they may be fighting for their life by entering a bidding war for a mapping company. Support only has meaning when when everything is status quo. GRMN can continue to get hammered depending on future news and no one is gonna pay attention to some little point on a stock chart if the news keeps coming out bad for them.
     
    #11     Nov 11, 2007
  2. Understood
    That makes perfect sense
    I appreciate the feedback

    So my first trade tanked because I made it on the day this news came out


    interesting....
     
    #12     Nov 11, 2007
  3. WestWall

    WestWall

    Ok noob, its your lucky day…

    Support may be found near the area of 77 and again at 60. Beyond that, the area between 60 and 40 is a congested mess, and I don’t see it passing though there unless there is some sort of some catastrophe. However, don’t get me wrong, I am not implying that GRMN will move this low - I’m just deciphering the chart for you.

    The recent drop took out several small bases and multiple pivot lows. Technically, I would consider GRMN to be in the initial stages of a down trend, and look to enter a new short position after the next small rally. However, GRMN is a little too extended at this time to really consider that course of action…

    …I would never take a short position in which the intended entry-to-target movement passes through a pivot-low that formed after being so extended to the down side. It would be a type of low odds play that I‘ve explicitly banned from use in my business plan.

    So again, and to the contrary; with GRMN being so extended, I would actually look to go long GRMN over the previous day’s high, after a reversal bar has formed of course, considering my breadth and sentiment internals justify that course of action, along with my broad-market and sector analysis… Anyway, the initial target would be an approximate 50% retracement back up the prior decline, or possibly the 20MA as a guide - Stop goes under the previous days low, as any further decline would negate the strategy…

    …However, I wouldn’t really take this course of action at this time either, and I‘m sorry for going in circles, but the recent decline in GRMN was not fluid enough to justify a counter-trend position anyway.

    So in conclusion; I wouldn’t hold a position in GRMN overnight any time soon, but I don’t think Invest Tools taught you anything about trading intra-day, other than probably to scare you away from the idea, most likely because they don’t teach it…

    -------------------------------

    As for you’re question about support;

    Basically, support & resistance is typically found at prior pivot highs and lows, areas of congestion or dense sideways movements, or in the vicinity of gaps which have not yet been retested or filled.

    A price moving downward to retest a prior pivot-high is less likely to hold than a price moving down to retest a prior pivot-low. There are different types of support, some more significant than others.

    Plus, if an issue has already traded fluidly right though a previous area of support or resistance, you can basically assume that the area has been negated.

    So don’t be fooled by any educational material about support and resistance that resembles something like a chapter out of a geometry book about triangles and zigzag lines, its never that simple.

    -------------------------------

    ... by the way, you mentioned Invest-Tools ; and it seems as if you've only been to a free Invest-Tools event, or maybe an intro course. I certainly hope that you have not paid too much money for what you know. Here are some things to look out for, be warned:

    If they tell you how its SO EASY! then walk out. If they suggest that the only reason you wouldn't pay for their advanced courses is because you're "scared" or a "loser" then walk out.

    If they suggest that you get into credit card debt in order to afford their courses, and even offer to help you have your credit limit increased - as if getting in debt is a rout towards financial freedom… give them the finger, with both hands, and walk out.

    If there’s some guy in the audience that claims to have a Series 7, or be a broker, or something like that, and the teacher (salesman) keeps going back to him and saying things like "they didn't teach you this, huh?" like the guy is some kind of expert, and even he doesn't know the things that Invest-Tools teaches… the guy is a plant, call them on it, and walk out.

    If they try to offer you a discount if you sign up for multiple courses at once, but do it in a high pressure way, like ITS NOW OR NEVER! FULL PRICE AFTER THIS! ...do not take the deal. If you're going to do anything, take their first advanced course, see how it works out, and go on from there. Don’t let them suck you in too deep.

    But the truth is, if you want to really be a self-directed investor, don’t attend any seminar that teaches you a method dependent on their own proprietary software or website. Always ask yourself; just what the hell am I going to do when their nice little red and green lights all turn black? Where are you going to get your nice little arrows when the CEO of Invest-Tools Enron’ifies the company, eh?

    You should be able to use eSignal, RealTick, MetaStock, or what ever… with any compatible broker… and it shouldn’t matter. You should always have a way of finding opportunities on your own. If one service doesn’t perform, you want to be able to move to a competitor without it totally negating your entire investment method. Do not get enslaved to their “Investo-Software 2.0” or what ever they call it.

    AND NEVER FORGET:

    (and I’ll probably get a lot of heat for this one from other traders here…)

    The MACD, Stochastic, RSI, CMF, PPO, CCI, and the hundreds of other price indicators are completely worthless. Pure garbage! One hundred percent crap! I mean seriously, they’re worse than Cramer… Tell you what, how about I teach you eSignal Formula Script, and you can invent the *GOLDEN INDICATOR* for us all …seriously, they don’t work, and its obvious, just think about it.

    They’re all derived from price and volume, and they cant tell you anything that pure price and volume can’t tell you in a far superior way. Learn to perform your analysis based on the price and volume itself, not ridiculous filters.

    Don’t be fooled, indicators only appear to work well after the fact, on nice hand picked charts. They are handy in regard to scanning though, they can help a computer zero in on opportunities for you, but you, as the end user, still have to observe the price action and volume in order to make desisions.
     
    #13     Nov 13, 2007
  4. Thanks for taking the time to offer so much feedback!

    ( I will spend the next day or so researching the terms you used so I actually know what you're explaining)

    I'm on the path to coming to my own conclusions about how to be effective and make some money trading

    It clearly ain't a 1 day or even 1 year process - but I've learned a hell of alot in the last 3 weeks from the posts of generous folks like yourself

    After my first paper trade using the investools method - it was pretty plain that MA's MACDs and Stochastics ain't gonna cut it

    So I am learning the fundamental elements of trading step by step.

    As for Investools - I sank 995 bucks into the 2 day course --- I posted some observations under the 'investools anyone?' thread on Elite Trader

    I don't begrudge them the 995 bucks - it got me fascinated in the subject of trading . But I don't think I need to spend any more money with them

    A friend of mine took the same 2 day road-show class and he actually did plunk down $25K on the spot for the Ph.D. set of classes...

    It struck me as odd that anyone would 'ever' pay 25 thousand bucks for 'anything' sight-unseen but hey ---- its his money

    He and I get together for beers once a week --- and I'll be curious if he acquires enough trading skills to recover his $25K in the first year


    Anyway ---- thanks again for the advice. Its a pleasure to know there are folks out there who will share what they know

    and one more question if you don't mind.......

    What would you recommend as a 'first read' on options trading?

    thanks again!
     
    #14     Nov 13, 2007
  5. WestWall

    WestWall

    Damn, 25k is a lot of money to pay up front. I really do hope it works out for him, although I fear he will only end up in a long frustrating battle to get his money back. I wonder how much it would have cost had he waited.

    I’m curious though, just what exactly do you see in that chart that would imply buying calls in GRMN? Would you mind explaining your thought process? I’d like to get a grasp on just what exactly they’re teaching you guys.

    …

    As for a good first read on options… I’ve never read a book specifically on options. So I really couldn’t tell you. However, a book about options isn’t going to be a good first read all together.

    You might want to start with a book that focuses more on the psychology of trading, one that teaches you how to think in a professional mind set. This aspect of trading is much more important than most traders realize, most traders also fail.

    If you learn nothing else, learn the importance of using stops. Learn that hitting your stop and immediately exiting a position at a loss is actually a good thing… and that hitting your stop and not exiting your position, that’s the bad thing. Further more, if you hit your stop, and don’t exit immediately, but then you get lucky and the trade turns profitable, that’s the worst thing that can happen to you! DON’T TRAIN YOURSELF TO FAIL!

    Tools and Tactics for the Master Day Trader by Oliver Velez and Greg Capra is an excellent book for this purpose. Unfortunately, there’s not a whole lot in regard to the practical application of trading strategies in the book, which pissed a lot of people off. So expect some mixed reviews on this one… but the first half of the book on psychology, that’s what I want you to focus on anyway. Then again, if you had read the second half of this book, which is the more technical half, you would have never even thought about buying calls on GRMN.

    Odd thing is, I actually found this website by searching the internet for this very same book. I was going to buy a copy for a friend so he could give me back the one I loaned him, go figure…. I did a review on it too.

    Next, you’re going to want to read a book that’s purely technical; Technical Analysis of the Financial Markets by John Murphy is a good one. Its about 550 pages, but its worth it. Read it, read the whole thing; and don’t read just half, and then wait a couple of years to read the second half like I did. Martin Pring is a good author too.

    Get a grasp on technical analysis, learn to interpret the charts well, then move on to options. Trading is exciting, and I know your really eager to get in on it, I know I was. Don’t jump right in though, take it slow, and do it right.

    Good luck
     
    #15     Nov 15, 2007
  6. Well...
    I'm fortunate I don't have to quit my day job while I educate myself.

    So thats a plus


    As for GRMN --- it was a 'test' of the 'system'
    Laughing.... 'if it was real life I damn well should have been better prepared

    The basic Investools method as I understand it is a
    'what to buy'
    'when to buy'
    'when to sell' strategy using a proprietary scoring system

    They use a scoring system to identify potential stocks, assigning a + or - value to variable such as:

    Uptrending Industry Group
    Favorable Relative P/E Ratio
    EPS Growth
    Company Growth Ratio
    Cash Flow Growth (5 Year)
    Debt/Equity Ratio
    EPS Rank
    and a few others....... (they call this Phase 1 Analysis)


    Then they do what they call Phase 2 Analysis which is a second scorecard using
    Estimates
    Financials
    Price Pattern
    Volatility
    Valuation Analysis

    ...so thats the 'what to buy' portion of the program

    the 'when to buy' scorecard determines entry points and exit points using:

    30 Day MA
    MACD
    Stochastics
    Volume


    Its a 'place your trades before the market opens - and ride them till the system indicates a sell' kind of system

    --- they caution people not to try to day-trade this way


    So I cranked the system and out came GRMN.
    I bought 1000 shares on paper and made 500 paper-bucks

    that seemed positive


    So I tried with November 07 calls the morning the news came out on the possible bidding war for Tele Atlas

    and promptly lost 7000 paper-bucks



    so what did we learn grasshopper?

    #1 - figure out how options work before you try to trade them
    #2 - read the news

    I would say my level of sophistication has increased noticably since the GRMN calls fiasco last week ---- which puts it still well below an ants belly

    but hey - gotta start somewhere


    so I waded in again yesterday with an option trade on FSTR
    (I got FSTR from cranking the lever on the Investools system)

    I bought 1 paper contract Dec 07 Calls (ATM) @ 4 bucks

    They went to 8 and I sold them at the close

    so I risked 400 paper-bucks for a period of 1 trading day
    and made 400 paper-bucks for my trouble

    and what did we learn from this grasshopper?
    #1 - Set a target for a reasonable amount of money to make on a trade. And when you make it. Get out

    Your thoughts?
     
    #16     Nov 15, 2007
  7. buybig

    buybig

    WESTWALL,

    please crituqe my charts..

    im curious.

    i follow BASIC indicators because many others do.. psycohlogy/herd mentality..

    as for indicators on entry/exit, pure trash.

    support lines and trend lines hold the key in my opinion..

    point and figure for a long term trend..

    I see a theme.. the older the indiactor/method the more people using it, the more validity it carries.. psychology/herd mentality

    im learning real quick that "swing trading" is trash.

    :)

    "#1 - figure out how options work before you try to trade them"

    options are a whole different world. watchem and understand the greeks.
     
    #17     Nov 15, 2007
  8. My parents got sucked in by investools and it sparked my interest in trading so I read the books which give you such limited information all of which, plus more, can be found on the internet for free. I did my research and found out it was basically a farse this was about a month or two ago. I found myself in the same position as you about a month ago and have begun the long road of trying to understand the markets. Ordered some books that will keep me busy well through out the first of the year. In the process my time management has become impeccable balancing school, work, and the extra reading from Alexander Elder. Kind of odd, my GPA has been brought up and my study habits have been on key because of trying to learn a bit about these markets. Keep it up I know I'm trying to.
     
    #18     Nov 15, 2007
  9. Well youre doing better than me so far
    I have been at it for 2 months and have not concluded its a farce yet (Investools that is)


    But we wont go down that path here. There is an existing thread for commentary on Investools (Investool Anyone?) on ET


    The first book I bought (yesterday) is:
    Technical Analysis of the Financial Markets - John Murphy


    What was yours?
     
    #19     Nov 16, 2007
  10. OK
    So I bought 350 shares of BSC @ $99.5

    I put a stop loss in at 90

    So I have $3,345 at risk
    I will sell at 104.5 in order to make $1672


    Simple reasoning
    BSC is downtrending (lower highs, lower lows) but it is also being pounded in sympathy with the sector

    It bounces up after each pounding
    So I am expecting at least one more bounce



    Thoughts?
     
    #20     Nov 16, 2007