Tuesday, May 15, 2007

Good Afternoon World

Well one day after me buying it, ONSM seeks a late filing for their 10Q. This news pushed the stock down through my stop. I sold 2000 @ $2.18, losing somewhere around 250.00. That was not at all how I expected the trade to work out. This move has pushed the stock down past long-term support, so I'm glad that my stop was set. But then, surely to throw mud in my eye, the stock has reversed to close almost flat for the day.

Based on Brent's Vector Vest scan (see comments section), I picked up 1000 VRTB @ $5.64 This stock appears to be breaking out of a long base, with volume double or triple the average. Brent also recommended VCC some time back. VCC has also done well, being up today 3.25% as I write.

The market still feels schizophrenic to me, with the Nasdaq taking a drubbing and the Dow chugging on up. I've read that money is flowing into the large caps because they are liquid and will be easy to dump in a recession. I've read that real estate money is still looking for a place to go. I've read that low unemployment means more 401K money going to fund mgrs. who have to put it somewhere (lets put it in large caps since we can sell those easily if we need to). Regardless of what I read, money IS flowing into the Dow, and money IS flowing out of tech. I'm not sure I understand WHY.

I know that I've watched GIGM lose a point in two days, and I didn't sell. I know that CMGI has flashed signs of a sell off, and yet I didn't sell it either. When they are going up, I want to hold them forever. When they sell off, I wonder why the heck I didn't sell them the day before. Both would have made very successful swing trades had I sold them yesterday. Developing an exit strategy, as well as deciding on a time horizon that fits my life and personality is a must. Adding to winners makes sense to me, but it also makes sense to sell when the momo stops and the stock starts to retrace. One cannot do both.

As for the Nasdaq, a test of the 2490-2500 level seems imminent.

19 comments:

Timothy Bryce said...

I enjoy reading your blog, woodshedder. Hooked ya up with some clickies. =D

Tim-

Danny said...

I like your blog shed, you have well thought out musings, and you're definitely honest about what's going on. BUT... you're too ticktarded and it hurts your performance. I have noticed this time after time. Example:

"When they are going up, I want to hold them forever. When they sell off, I wonder why the heck I didn't sell them the day before. "

Talk about market schizophrenia! Yeah, when I have a stock that is going up, I wish the position were larger too. Common lament. The problem with you is that these nuances govern your whole system second by second. You constantly out trade yourself.

You set a stop for a 60 million microcap, ONSM. Do you work there? Is your cousin the boss and he told you something? What would make you think that yesterday, a totally arbitrary day, would be a good time to buy? WHY would you buy this POS? Likely not fundamental reasons. I suspect, you used TA. I would suspect that TA has some relevance on a highly liquid stock, but in a 60 million cap that no one knows...all I can say is I'd be happy to escape with only (250), because Vegas has never been that cheap to me. Then to say, “shucks, to spite me, it ended up flat? Yeah, If only I had picked red at the roulette table. This is the singular reason I can tell you haven’t had great performance this year. You think that both minute-by-minute omniscience AND action are necessary to be a successful trader. They’re not.

You always publicly ponder, sometimes plaintively, what your lack of edge is. What discipline you don't quite have or haven't learned yet--I think the discipline you lack is keeping your finger off the trigger.

If you have 100 million, you can afford to make many 100s, maybe 1000s of scalper trades. If you have 6 figures, you cannot. You 're going to risk $780 per trade (104,000*.0075) to make what? Hopefully, that same .0075 back, which is not a good risk/reward trade off. You have 10 pages of transactions in stockalicious. 13 trades in the last 13 days! With 251 trading days, you’re spending $2500 a year to play ball. That’s a hell of a yearly subscription.

Joking aside, you can't seem to accept that money is money. And a trade that is just for a buck and because of TA reasons ought to be viewed as such. You claim you're willing to lose possibly up 50K before you throw in the towel. Give someone else that money because you will lose it, slowly, with your stops. The key to successful trading is not minute-by-minute omniscience, as you believe. Here are your minute-by-minute smarts doing you a huge disservice in action:

SMHC: Buy high, sell low
http://www.stockalicious.com/stock_journal/345/transactions?stock=swhc#entries
GIGM: Buy high, sell low
http://www.stockalicious.com/stock_journal/345/transactions?stock=gigm&page=1
NIHD: Buy high, sell low
http://www.stockalicious.com/stock_journal/345/transactions?stock=nihd#entries
TIE: Buy high, sell low
http://www.stockalicious.com/stock_journal/345/transactions?stock=tie#entries
VASCO: Buy high, sell low
http://www.stockalicious.com/stock_journal/345/transactions?stock=vdsi#entries

I could keep going. I also know it appears biased I put in no winning trades, like Apple. I didn’t microscope every trade of yours, just your trigger-happy trading problem is so blatant that it was very easy to find copious evidence of overtrading and jumping the gun. Rome wasn’t built in a day—neither are great stocks and impressive gains. My suggestion for you is to stop “trading” as you call it and start “investing.” That means finding companies with strong growth and prospects, and then holding them, letting them appreciate, and not jumping the gun every time some minutia support level is hit. You’ve obviously proven to be intelligent, so put them smarts to use, buy some good stocks, and hold them. In fact, you already did, just you traded out of them. Keep holding MVIS, go buy back BWLD, HANS, AAPL, TIE. Not the most diversified situation, but all are fundamentally sound companies with promising growth (well, MVIS potentially). Check back in 18 months and well see how close to 200K you are. However, if you keep up what you’re doing, I hope you’re serious about what you said in terms of pain tolerance. Lastly, this insanely long comment wasn’t meant to be an attack. If it pisses you off, wait an hour and read it again.

IIO said...

The naz-dow divergence is making me want to buy some QQQQ puts!

Woodshedder said...

Danny, I appreciate your comments.

I don't know how long you've been reading the blog, but I've conceded to the fact some time ago that something has gone wrong. I'm currently in 50% cash and have been half cash for a couple of weeks.

When I was trading more successfully, I was using more a combination of TA and FA. On average, I was holding stocks longer and trading less. I have been pondering whether neglecting FA lately has been a bad development.

ONSM was chosen because I've done research on it in the past, because ONT has been moving, and because I felt they would announce ER date soon, and it would move the stock, as well as TA. Your point was well made, but I still feel compelled to explain my rationale.

My comment about being willing to lose 50% was in reference to trading a future mechanical system, which would be backtested and show a statistically significant probability of being profitable, as well as the probability of a large drawdown. I would never discretionary trade my account down 50%. Believe me that I do not plan on trading the account down past where it started this year.

All that being said, some traders can be very profitable swing trading, and paying attention to minutia support levels. It just turns out that it doesn't seem to work out very well for me.

I am currently researching mechanical systems and software to help test mechanical systems. I hope to make the transistion to a purely mechanical sometime this year. I am also doing some work on my own psychology in order to pinpoint what changed, what kind of system is best for me (I think that short term, pure TA system is probably not so good :) and determine exactly why I am ticktarding myself.

grant said...

Just to reiterate a little of what Danny illustrated.

Stoplosses unless used correctly are far from being *risk management* they in point of fact become a guaranteed way to lose money.

Too many traders mistakenly believe that stoploss discipline defines the successful trader.

Once you complete your research into mechanical systems you will discover the effective use of the stops.

Currently they are adding to the underlying problem.

jog on
grant

Woodshedder said...

Ducati,
If you feel so inclined, I would enjoy an email from you with possible contact info for your mates that are using a mechanical system. Specifically, I am interested in what software they used to test their systems before trading them.

grant said...

Woodshedder,

Amibroker, Tradesim, Metastock. The first two are the testing platforms, everyone speaks very highly of them.

John in Adelaide will help you out I'm sure. His system is the one that is on public display.

jog on
grant

Woodshedder said...

Tim, thanks for those. I do appreciate it. That's the most I've "earned" in one day in over a month! It almost makes it worth it to continue to blow the account up, all the while exposing my psychological flaws, live for everyone to revel in.

mdawsz said...

I would never put on a trade without first establishing some price level at which I cut losses to limit further damage. To neglect this simple measure of protection is absurd.

grant said...

mdawsz,

To the man with a hammer, everything looks like a nail.

jog on
grant

mdawsz said...

Now you're speaking in riddles? Please dumb it down for me.

Woodshedder said...

Ducati- I can't find John in Adelaide. What is his site?

grant said...

Woodshedder,

He doesn't have a site, I'll e-mail him later and ask him if he can help you out.

Send me a contact e-mail that he can use.

jog on
grant

grant said...

mdawsz,

Simply that a "stoploss" is one of many risk management tools. It is appropriate, or correct in some situations, but inferior in others.

If all you have is the stoploss [hammer] that is all you can use, thus every situation becomes a nail.

jog on
grant

grant said...

Ok, got it.
You can delete it now if you want.

jog on
grant

brent said...

Hey Wood,

Good luck with VRTB. I will hold onto my shares as long as the 50 dma stays above the 100 dma. I know "Fly" hates this shit but it gives us "Secondary" guys a chance. I use this as a mental stop. If you haven't read "Secrets for Profiting in a Bull or Bear Market" by Stan Weinstein, I suggest you do. It is very simply written and that is why it is my favorite book on TA. The way I have set up VV mimics his simple TA rules. Having the Relative Value
as another variable to watch only strengthens my conviction on stocks that are moving from a "Base" stage to a "break out or Uptrend" stage on double the average volume break out. I like to keep it extremely simple like Buffett. Vectorvest Timing Indicator is saying stop buying stocks and use caution. I adhere to this timiing indicator very strictly when adding positions or lightening up. I added to my QID position as a hedge today and will add or lighten depending on how the market acts.

Danny said...

hey woodshedder,
I knew you were mostly in cash.

Also, most of my comments were from my own failed expirience trading, and my newfound success with investing. So I'm glad you received my comments as trying to help, because that's what they were. I found me market timing was costing me a shitload, mostly in commissions, and now I primarily buy and hold> I strongly feel you should resume your empahsis on the fundamentals. I am about 80% driven by fundamentals and 10% TA. The other 10% is based on my proprietary blend of voodoo and rain dancing.

indypass said...

TU flag resolving as it should. another flag is ripe on GDP.

Woodshedder said...

indy, ONNN also making a nice flag here.