Posted on August 19th, 2008 by
Mojo
Between yesterday and today we are down more than 30 points on the SPX. We seem to have hit (at least temporarily) a bit a support.
On bearish day I like to go hunting for bullish stocks that I can trade a discount. What makes a bullish stock? Something trending bullish to bullish / neutral, above the 200 and 50 day moving averages, post earnings, and of course optionable. So go take a buzz through your charts and let me know what you see…
Mojo
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Posted on August 15th, 2008 by
Mojo
I have a great friend and mentee nicknamed the “Hamster”. He’s a Christian attorney in Chesapeake, VA who is one of the brightest, most insightful people I know. I’ve been his mentor for many years and we have become really good friends.
Anyway, I’m celebrating my recent unemployment by vacationing at the beach with several other families about an hour and half from his house. He knew I was still a little bummed out about the loss of my old business and took the time to drive down to see me. He’s one of those cherished and rare friends that cares about me enough to tell me the truth and kick my butt when I need it.
Here are some of the highlights:
- He recommended that instead of immediately moving into trading that I take three months off and do nothing. He could see the terror in my face and he just smiled. “You need time to rest, relax, and recover. You don’t have an income problem you just think you do. And besides, you shouldn’t be trading when you think you need to…”
- “Time is a commodity created by God. Each time you’ve made mistakes in business or trading it was because you were rushing and pushing time too much. When you are earning 3% a month you want to earn 5%. When you earn 5% you want to earn 10%. Slow down. 3% is incredible! When you have an agenda (of becoming wealthy too quickly) the universe will conspire against you. Take enough time to allow God to help you.”
- We talked about my business losses and shifts in my retirement accounts. He said “You still have a lot of wealth. You have a wonderful family who love you, your healthy, with lots of great friends and plenty of time. Focus on what you have and not on what you’ve lost.”
- He said “You’ll be fine. I’ve known you a long time and you always come out on top. If I had $20 million I would give it too you right now and not even think about it. You have talents and skills that most people would love to have. Don’t forget that”.
- Finally he tied all of this up with: “You know most of what I’ve told you today you taught me. Don’t you listen to yourself?? I love you and you must be the dumbest mentor in the world!!!” 
We both laughed, I thanked him, and we said goodbye.
It was awesome… the perfect conversation and exactly what I needed. If you are lucky enough to have a friend like this tell them “Thank you”. God not only creates time but he’s also in charge of creating the people as well. Cherish them both.
All the best,
Mojo
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Posted on August 11th, 2008 by
Mojo
I’m vacationing on the beach and finally got caught up on my past trades. Wow! Did I get crushed in the market in July. Ouchy!
So what happened?? A couple of things all of which were my fault.
1) I was going through the final death throws of my company and about to lay off everyone. It was very tough and very emotional so I shouldn’t have been trading.
2) In the face of this, on expiration Wednesday, my month was up $14K and I had a pretty good shot of turning that $14K into $70K. I was overally concerned with making that $70K instead of trading properly and protecting my capital. Of course, Bank of America rallied and energy (MEE) continued to fall like a stone. In less than 24 hours I gave up $64K.
3) I had a standing rule that I would never put more cash into a losing trade. Well, on Massey (MEE) I didn’t put more cash in but I did increase my risk. So now my rule is to never increase my risk or my cash into a losing trade.
I think its really ironic that last month I broke my goal of making 10% in a month and followed it with losing 10.4% in a month. Geez!
Again I’m reminder that first and foremost I’m trading against myself and then against other traders.
Trade Record
13 trades, 7 wins, 6 losses = 1-to-1 win / loss ratio
avg $ per win: +2,243 avg $ per loss: -10,994
avg % per win: +34.4.8% avg % per loss: -32.4%
Can you see where my problem was?? Two big areas actually. One, I didn’t have a lot of trades but the trades I did have on I only maintained a 1 to 1 win / loss ratio. I’m usually 3 to 1 or better. Two, the 2 major trades I lost on were oversized compared to the others trades and cost me dearly. I lost over $70,000 in just two trades on BAC and MEE. That’s why I’m modifying one of my rules to say “not add more cash or more risk to a losing trade”.
Losing more than 10% in a month means I am reducing my stake and will only trade with $175K. Once I’m up more than 10% over the entire portfolio I may add in addition capital. Until then its more important to not dig a deeper hole and to protect what is not at risk.
This concludes a year for me blogging. Over this time I posted over 700 posts, 250 trades, answered several thousand emails, had a record of 10 winning months vs. 2 losing months, and help a few people along the way.
Update on Goals for 2008
Health - I came close to hitting a previous high weight of 232 lbs. I’m sure this is a function of my stress, lack of exercise and lack of discipline throughout the month. I don’t think its an accident at all that my trading and health are suffering together.
Give $25,000 to charity - We have given away $9,000 given so far this year.
Produce $250,000 in personal income (outside of my business and retirement) - I went full time as a trader just last week. I think the $250,000 goal is a bit aggressive for my trading account ($175K). My plan is to use my futures trading (not from my 5K account) to replace my salary and use options trading to increase my account size and wealth.
Pay off $125,000 of personal debt - So far we have paid down $42,000 in personal debt.
Study for and receive my Series 65 (Investment Advisor) license - Fail. I know, I know I have to stop trading long enough to get my license. Sheez!!
Insanemoney.com - Things are going well. I plan on updating the blog side to include a welcome video, a highlight tab showing some of the favorite posts, and will add some of the trade entries I’m doing without updates.
Raise $1,000,000 of investor funds - Haven’t started yet. I need to complete my license first.
Make 3% a month in options - Fail. I’m thinking about moving this up to 5% a month.
Lessons learned:
1) Over the past couple of months I’ve missed the responsibility of having all of my trades be public. Being public I think makes me a better trader. What I would like to do is to go back to posting my entries and updates for all of my trades inside the Trading Team forum.
2) I need to be careful to not allow my profits from futures trading to blind me to my options trades that are going against. Several times I felt like I was doing well because I was making money for the day when in reality it was my futures making more money than my options were lossing.3) I need to keep my spreadsheet up to date on a daily basis so that I can more easily spot trades that are moving against me and adjust them sooner.
Plans for August
I have only one week of vacation for August and will be “back in the saddle” full time. With all of the pressure of producing my monthly income from my trading I want to be sensitive to not allow that to screw up my trading and to make sure that I keep focused on protecting my capital first and producing income second.
All the best,
Mojo
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Posted on August 6th, 2008 by
Mojo
On Tuesday, post FOMC we continued our rallied closing up almost 3% for the day. Will the rally continue? I think so but my opinion doesn’t matter. Let’s take a look at what the chart is telling us:
A couple of weeks ago we broke above overhead resistance. One week ago we established new overhead resistance and we are sitting right below today. I thought it was interesting how we closed just underneath.
What’s next?? That’s thousand dollar question… If we can close above this overhead resistance today or tomorrow I think we will see the rally continue.
What are your thoughts?
Mojo
PS - Notice how completely useless the MACD is here.
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Posted on August 5th, 2008 by
Mojo
Several stocks and indices are showing buy signals and I’m working on my timing. Ideally, as a full time trader I want to my futures and directional trades to cover my income and use my options trading for wealth building. Well, one of my ETFs broke out today… XHB. Take a look at this chart:
Just before 10am it set a high of day (HOD) and then retraced. After 2pm, post fed announcement and the major markets were still holding up I went looking for something breaking out. Once this closed above the previous HOD I went long buying a Sep 15 call for 3.40. Based on tomorrow’s action I will likely go ahead and sell the Aug 19 call for +.40 bringing my cost basis down to $3.00. If it closes above 19 for August I will make a 25% ROI in 9 days.
Mojo
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Posted on August 4th, 2008 by
Mojo
Well, its finally here…. As of this morning (Monday) I’m officially a full time trader! I’m not sure what to expect. I’m disappointed that I don’t have more capital and that I haven’t done a better job of trading over the past 30 days. I’m nervous and wondering if this is the right choice or should I go get another job. Who knows!?!
All of that aside, I’m excited to be going full time. YEAH BABY!
Mojo
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Posted on August 1st, 2008 by
Mojo
OK, here’s the update. I sent in some additional funds to get my account up to $5K. The week of expiration I got toasted pretty good with all of the volatility and ended with an account balance of right around $4,000. I went back through each trade and decided to increase my stop, decrease my size (to make room for my stop), and set a daily profit goal of $150.
That’s been working pretty well for this week. I had three winning days, two losing days generating a total gain of +412.00 on $4,000. Not great but I’m happy with it.
I’m going to work on my rules a bit, do a little more backtesting, and see what else I can improve on. 10% a week is good, now I just need consistency.
Have a great weekend!
Mojo
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