Spreads and fills.

A few years ago I found out that spreads and fills can be a bitch… and they still are.

I’ve been realizing that my fills have been shitty.  Schwab says I’m filled in FEED at $11.48.  BUT, I check again and I got it for $11.61.  Now, .13 cents isn’t much, but it is damn annoying.  Plus, for my risk terms, that .13 cents is about a 1% spread deduction.  Granted FEED is not the most liquid stock, but it’s not like I’m asking for 20,000 shares or anything.  Oh well, life in trading.

Anyway, as a trader there are innumerous things you may have to pay attention to, as a day-trader spreads and bad fills can leave you underwater before the position is even on, not to include commissions as well!

Sorry, just bitching.

By the way, I have three positions on, all longs.  PHRM, FEED, and AKS.

History.

As a major in History (Finance minor), I have many opinions on history and how it is presented.

Sadly, most people do not understand history except for what they have learned in High School and on the History Channel.  Nothing against the History Channel, but High School history is near worthless.  Dates and historical figures, memorize and puke it back up for the test and forget.  Typical history, and what most people believe it to be, simply dates.

WRONG.  In my upper level courses, my Professors do not even know most dates, nor do we study them really, at all.  What we learn is historiography (yeah it’s real), which is the study of how history is studied (lol).  Weird, yes, but interesting to see the bias of the past, the norms, and the characters at the time.

Take Abe Lincoln the “Emancipator”.  Let it be known, Lincoln only wanted to stop the spread of slavery and would have actually permitted it to continue within the South if the South would’ve stopped bitching about the expansion of slavery into the newly acquired territories (from Louisiana Purchase and the Mexican-American War).

Honest Abe has left some nasty quotes behind for us historians to analyze, take this for example.  In an on-going debate with Douglas, Lincoln at Charleston, Illinois in Sept. 1858, said this:

“I will say then that I am not, nor ever have been in favor of bringing about in any way the social and political equality of the white and black races … I will say in addition to this that there is a physical difference between the white and black races which I believe will for ever forbid the two races living together in social and political equality.” (Gienapp, 50)

This is what ABE LINCOLN stated.  Just goes to show how the politics and social constructs of the time majorly influences the outcomes of history.

Food for thought… more later, surely.

Source : Gienapp, William E. The Civil War and Reconstruction: A Documentary Collection. W.W. Norton: New York, 2001.

Gaps. Edwards and Magee.

Gaps are when no shares changed hands.  Gaps will most likely close, “eventually”.

Intraday Gaps – “Significance is often greater than that of many interday gaps.”  Thus, in the daily charts we will not always see the gap that may have broken over the continuation pattern (i.e., flag, rectangle) buy point.  More specifically, “Practically every emphatic breakout move from a strictly defined Rectangle or Right-Angle Triangle is attended by a gap, but only those few show up on the charts that occur at the day’s opening gong”. (Edwards and Mcgee, 230)

One of my dream trades is to find a “day-trade” that is first at 1:3 Risk/Return; which I hold overnight (and perhaps over a few weeks/month), that turns into a 1:70 R/R.  Which, in laymen’s terms, means if I risk $100 dollars on said trade, the end profit would be $7,000.  Or if you risk $1,000, for you ballsy nuts (punny), you’d make $70,000 in a month. 

Even better, you pyramid into said position and compound into the position… that’s my dream trade.  Granted, 1:70 R in one month is freaking near insane.  Thus, my dream trade.  Maybe one day I will be consistent with this style… dreaming. Don’t forget to add that $20 buck round-trip commission for our friends at Schwab.

 Quoted material taken from…
Edwards, Robert D. and John Magee. Technical Analysis of Stock Trends, 7th Ed.  Amacom: New York, 1997.

 By the way, my main trading style thus far are gappers (intraday), usually up (long).  I have a nasty long bias when trading… which I’d like to end, abruptly.

 More to come on gaps… maybe all four, but I prefer breakaway gaps and continuation/runaway gaps.  More on this tomorrow.

-Dan

Technical Analysis

My preferred trading style above all else.  My first few years of “investing” were fundamentally based, technical analysis seemed like a bunch of voodoo and nohting else.  Sadly, I let this bias steer me from technical analysis for those eyars, until a few key insights on why the lines on the charts mattered and just from screwing around with dozens of methods, technical analysis started to make sense.  It wasn’t until I realized the potential of technical analysis to provide strict entry and exit terms, as well as an opportunity to control my risk.  Although it seemed wrong, what?  you put a line on a chart and if it goers over that line you buy…?  whaattt?  i thought you bought stocks that were supposed to be cheap…?

Sorry, starting to ramble… to the point!  I was lucky enough to pick up Edwards and Magee’s Technical Analysis of Stock Trends from my campus library (totally stunned they had it) and checked it out.  It is a must read for anty technical analyst or aspiring trader, or someone that is interested in awesome things.  It does an excellent job at explaining why the patterns work.  Over time I will write what I learned here as well as quote Edwards and Mcgaee (probably extensively).  So, be prepared to finally understand why said patterns work.  My preferred pattern is the flag, which will be the pattern most likely to be noted.

Quote from A Writer’s Life

Saw this and thought it could easily relate to a trader’s life as well..

“I like to write, for one thing. And I live in fear…writing is how I pay the bills and if I am not writing, I start worrying about ending up boiling hamburgers at McDonalds while my wife sells her body on Sunset.” (Lee Goldberg)

This was in response to a question on how he can write so much.  While writing constantly does not have many consequences, trading constantly does.

I can not tell you how important it is not to over trade while learning how you trade.  I used to day-trade up to ten times a day, my commission structure was golden so I just went at it.  Then my family and I moved our accounts to Schwab and my account got decimated by the $20 round trip commissions.  Yeah, it’s not that expensive until you realize I was trading on a $20,000 account and trading up to tens times a day ate away at my profits and just added to my losses.

So,  I stopped trading and I am still adjusting to swing trading and barely day trading (at the moment).

Anyway, always remember that in one really screwed up trade, you could be one step away from flipping burgers at McD’s.

Hoenig.

My link to the side, yeah, the Jonathon Hoenig one, yup, click it.  Read through the archives (which will take you a considerable amount of time) and you will have a perpective on the proper way of position trading (alliteration unintended).  This man is a Capitalist Deity in my opinion, I freaking love the guy.

So, forgive my bias, but he is a must visit.  Look through his comments, I always get a laugh reading them.  Seriously though, there is a wealth of information sitting there, for free, use it!

I will be taking much from Hoenig in this blog since him and Ayn Rand are my biological parents.

“When a stock drops from $50 to $25, I’m not of the mind that says it’s a great indicator it’s headed up to $60 anytime soon. ” – Hoenig.

 By the way, just as important for position trading is the Phantom of the Pits link.  I will comment on that later.

Bee-u-tee-ful.

Finally finished most of my links (blogroll) up.  Forgot how tedious it was getting a blog up and running.  But, all those links are mainly professional traders and are INVALUABLE sources of information.  Most of these guys have enough information where you can learn to trade for free, thus I recognize the links that had major influences on my trading.

 Hope they help.

testing one two three

here we go..

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