Following up on a bit of a different tack from the self-analysis piece written recently, I want to go over what precisely sparked the entire dialogue about looking over one’s trades. In a conversation I was having with a fellow trader, he was very disappointed in himself because he’d lost money on the day and I’d ask him to see what it is he’d done wrong in his worst trade of the session. Well, as it turned out, had he not done the trade, he’d have been profitable. He purchased HGSI at 30.30 (the high of the day) when the stock had just run 25 cents on low liquidity on no news in a neutral market. So, he did not wait for stagnation, he had no trigger to buy the stock other than hope, and if wrong he could not exit very easily if he had a sizable amount of shares. Putting aside all that, he held the stock for over 20 minutes and ended up taking a 21 cent a share loss on average. As I told him, the only thing that basketball, baseball, and football have in common is that they have a ball; running with the ball in basketball is an infraction, but is encouraged in football. Same in the financial world. Many people never understand that trading and investing are entirely different. Within the trading realm, there are subsets of trading such as swing trading to day trading to microtrading. No matter which style of trading one chooses, one must abide by the rules of that style. Well, if one holds winners for 2-3 minutes on average, but will hold losers for 20 minutes on average, that will cause that person to lose time and again overall. Thus, if one is to use the style of trading I employ (using what I do as an example because it is the style I know the best), one must not only take profits on winners, but takes their quick lumps on their losers. Amazingly enough, this is not even my focus here. Instead, I have a two-pronged thought. First, it is not the hard mistakes that tend to get us. The esoteric mistakes that tend to be hard to figure out and are one-off events usually don’t hurt us over time. However, the easy mistakes- things like not following self-imposed rules, things like leaving two minutes after the close routinely in not doing some self-analysis of trades done, things like not doing basic preparation- those are the easily repeatable behavior patterns that can destroy traders when not rectified. And it’s shameful when things like that are not rectified because those behaviors are so simple to correct. Second, it’s not a matter of trading massive size on any one stock or trading a lot of stocks which gives most traders success. Rather what tends to work for successful traders is doing fewer trades but doing those trades in some degree of size. If I love an idea and there is plenty of liquidity present, why would I take a tiny position in it? So, I take size in the trade ideas I love and rarely do much of anything else at any time. It’s a matter of stepping up to the plate when right…not scrambling to do this aforementioned abominable HGSI trade and hope for the best. So, when analyzing your trades, sometimes you will not be able to figure out what you did right or wrong. But, if there is a pattern there in which you consistently are making the same mistake or doing the same thing right, learn from it, drill it into your head, and apply it to your future trading.
Markets overseas were nicely higher overnight with Tokyo up 0.5%,m Hong Kong 1.6%, and the European bourses ¾% to 1% across the board. Commodities are higher anew as well with gold up 0.5% and oil surging another 1% or so. The euro is notably stronger on vague rumors of a Greek bailout as well as stringent comments coming out from Greek officials as well as various economists. Futures as well as big caps are showing a lot of resiliency in the early going which will likely lead to a positive open. Look for the strength to hold if not feed on itself a little all day on quiet volume. Look for relative weakness plays as well as distinct A-B-A2 plays in big caps particularly if there are any rumblings of a solution to the Greek problem.
Reiterating-
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
AMZN- closed near a high
DGIT- closed near a high despite announcing a share offering
WYNN, LVS, MGM, BYD- closed just off of highs, but entire sector was very strong
PIR- closed near a high after announcing earnings
FUQI- closed near a high
CEDC- sold Polish distribution business to Eurocash SA
CVX- sees 1st quarter earnings above 4th quarter earnings
SLM- closed near a high
EK- closed near a high
DCTH- closed near a high
USEG- closed near a high
ABK- great earnings
PALM- takeover rumors from a Chinese website that HTC may acquire the company
TIVO, NFLX- NFLX announced strategic distribution agreement with 20th Century Fox
LIWA- announced share offering at 8.05, but will use proceeds in immediate-term to build a new smelter
MEE- claims the West Virginia mine is self-insured
BTH- great earnings
Bad-The following stocks have bad news and/or a weak technical pattern
HUSA- closed near a low in a complete reversal despite denying all charges posted on an Internet website on Wednesday
CRZO- announced growth strategy, but share offering as well
FRX- closed on a low after the FDA voted against its lung drug
AIG- closed near a low
JCP- closed on a low after posting same-store sales
ZEP- closed near a low
JOEZ- poor earnings
STZ- poor earnings
Earnings:
FRI APR 9 BEFORE
STZ
Good luck today.
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
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