A TMUS Two-Biter

Just time to post one trade today, which actually turned out to be two. The first one failed miserably, as we can see from the chart.

The golden rule, as we know. is to never let a winning trade turn into a losing one. So when after entering, momentum evaporated, it was time to get straight back out with just a few cents. Taking $100 covers the commisision and leaves enough profit for a nice lunch somewhere, which is better than losing money on a trade that didn’t work out. Stop loss orders are for emergencies only — we never want to actually let them get hit!

That wasn’t the end of the story though. There was no reason not to keep watching TMUS (and plenty of reasons to think it had further to fall), so when momentum picked up and it headed south again, it was worth jumping on board. With a nice target easily hit, and a more decent chunk of the profit pie banked, it was time to get out.

For those less lazy than myself, there were further opportunities to make some money from the continuing fall in price later on.

Late Lunch Earns $1,040

Viacom was on my list but spent most of the morning faffing around on (relatively) low volume doing nothing very interesting at all. Then, just as I was about to call it a day, this happened:

Volume and momentum picked up, and we were off to the races. The downside to this late trade is that I had to work past midday, which is rarely a winning situation. The upside was more than a thousand dollars profit on the trade. So there is that.

There were smaller trades to be had as well. Here’s one such example

Another relatively late trade for me. And one that broke the rules. What is it they say about rules? Something about having to know them so you know when to break them. Strictly speaking, although this was a late trade in terms of the hour, it was an early entry. But the support and the triangle and the price action all conspired to suggest that there was little to be risked by getting in early on this one. Just as well too, because waiting for the ‘correct’ entry would have made this already modest win even more modest.

Trade, Wednesday 20th March 2019

Just got time to post a very quick one from Wednesday. Here’s AMD, which is a reliable old core stock:

All standard fare. Exit was on momentum drying up. Those off-chart factors are so, so important.

Find two or three easy trades like this each day, which is easy when you have thousands of stocks to choose from, and there’s a good living to be had from a few hours work each day.

$1,420 of Bread and Butter (Trades)

As I mentioned in my post Want To Make $200k A Year?, most trading profits come from bread and butter trades rather than stellar winners. Stacking up consistent regular profits can lead to a decent full time income. Tuesday’s trades were all of the bread and butter variety. Let’s start with DERM:

This stock is a bit lower priced than I tend to look at usually, but as we’ll see there were a few of these cheaper ones making moves. The entry was a regular setup (and a lovely ascending triangle too, if you like those), and the exit was when momentum dropped off a cliff.

Next up, here’s another cheapie — MIK:

This was even more bog standard. $500 profit for a ten minute trade is certainly not to be sneezed at, but neither is it going to set the world alight.

Finally here’s a old friend core stock, MU:

Standard setup, and if I’m honest, I was a bit late on the exit here. Could have squeezed a bit more out of it had I got out at the obvious target, but there we go, sometimes you’re looking at the wrong thing at the wrong time.

My point though, is not about my shoddy exits. It’s about the fact that these three trades, bread and butter stuff, as simple as it gets, add up to a profit of $1,420 on the day. Well, on the morning, because I was all done by lunchtime, naturally.

If you traded for four mornings a week, 48 weeks a year, and made consisent profits like that, you’d be making about $272k a year. Not taking into account the bigger winners that inevitably come along as well.

I don’t post this to boast or brag, but because I know a lot of people who read this blog are struggling with the discipline necessary to suceed at trading. I was there too, once. It can be hard to keep going, especially when “star traders” are posting four-figure profit trades day after day (yes, I’m guilty of posting those too, sometimes). But you don’t need to make those kind of trades to make good money. Consistency is the key. Take a little out of the market day after day, and it all adds up. Hopefully this post provides a little motivation.

Making Money From Facebook

If there’s one company whose problems I definitely have no qualms about profiting from, it’s Facebook. Here’s a trade from Friday:

It’s all fairly standard fare. A regular entry, quick drop with a price target in mind, and when it wobbled a bit around that target, I took half off. Why not all? Because my target was quite conservative given how the price had been falling from the open, and because there was no conviction in its efforts to rise again.

That meant I had half my position left to take some profit from the second part of the move. That one did end with a positive upswing, so it was time to get out, with a total profit on the trade of $820 in about fifteen minutes or so.

It’s all about the momentum with these setups — it has to be there to confirm an entry. As long as it’s still there, I stay in. The chart only ever tells half the story, the rest plays out on the tape. People often forget that.

Trade, Thursday 14th March 2019

It’s been a busy week. BA had some tradeable moves again yesterday, but the huge swings from the first two days of that news cycle seem to be behind us. With the USA grounding the fleet as well, the worst news for Boeing is probably now behind us (unless they find a fault that affects older models of the 737 as well, I guess).

So just one quick trade to post today, because it was a four-figure win of the type I said don’t come along every day. Here’s DG:

The setup wasn’t quite as clean as I like, so I was very vigilent on the exit button. In the event though, momentum was there and the trade worked out exactly as the strategy suggests. Exited after hitting the target, seeing momentum dry up, and the price starting to rise.

Just over a thousand dollars. profit in ten minutes or so on this stock. So it was one of those dull bread and butter trades that turned out to be more…brioche? I’ll stop with the metaphors!

$4,580 Profit From One Stock

Let’s look at something other than BA, which although it had another massive move, was less interesting than it has been for the last couple of days. Here’s what happenend on ROKU:

This was a three-biter, and two of those bites were pretty chunky. The first was a classic entry, but the momentum wasn’t really there and the price didn’t follow through. As one of my golden rules is to never let a winning trade turn into a losing one, I got out with a modest 10 cent/share gain, taking just $100. Not a good win then, but crucially not a big loss, meaning we live to fight on.

There was another possible entry about twenty minutes later, but again the momentum was lacklustre and having seen one trade not work out, I was waiting it out to see if something better would come along.

Something better did come along about ten minutes later. Volume ramped up, momentum took hold, and down we went, taking more than two thousand dollars on a trade that lasted about ten minutes.

The third and final bite at the ROKU cherry came about fifteen minutes later and the drop was even more precipitous, giving us another couple of thousand dollars and change in another ten minutes The exit was when momentum dropped away to nothing. A retracment was highly likely, and having made more than four and a half thousand dollars already, I was quite happy to get out and call it a day. Besides, it was getting on for lunchtime!

Here’s one more:

Not so exciting, but a simple, standard setup with a good regular target (easily hit), which made for almost five hundred dollars profit. Like ROKU, the trade only lasted about ten minutes. Yes, there was more to be had earlier, but as we all know by now, it’s about taking the easy middle.

The Boing Carnage Continues (Trades)

Given the worsening news for Boeing (large parts of Europe banned the 737 Max from their airspace on Monday), the stock was another obvious candidate for trading. Yesterday I wrote about the ethics of profitiing from a disaster, so I won’t go into that again today. Here’s the chart:

Knowing that this was highly likely to produce a trade, I stayed out of other stocks, keeping my capital free for BA, which is priced much higher than anything I would normally select to watch. That meant I could go in with a 500-share position. So although the trade made a bit less than yesterday’s, the larger position made up some of the difference. As we were into day two of this story (and, if I’m honest, because I had more capital at stake), I was a bit more cautious and scaled out, taking half off as soon as things faltered and we were at a natural exit point, and the other half off when it was pretty clear the run was over — at least temporarily. There was more to be had later on, but when trading something outside of my comfort zone, I prefer to stick to the basics that I know work everywhere. Besides, more than two thousand dollars profit on a single ten minute trade is more than enough — no need to get greedy.

The trade itself was fairly textbook then. And although less profitable than yesterday’s in final dollar value, for anyone who counts (the largely useless) profit-per-minute stat, it was actually about twice as profitable.

Getting out of BA relatively early meant I had funds freed up for DKS, which came along right after

Another textbook setup, though the exit was on the failure of a target rather than hitting one. Again, if counting dollars per minute in the trade, this was in the $100/minute territory, which is nothing to be sniffed at.

Is It Ethical To Profit From A Plane Crash? (Trade)

I’m only posting one trade from yesterady, but it’s a biggie. And it raises a question of the kind that often comes up on these kinds of trades

Boeing openend with a massive gap down. For anyone reading this blog in the future, that’s because on Sunday (the day before this trade was taken), a Boeing 737 Max aircraft operated by Ethiopian Airlines, crashed, killing all 157 people on board. It was the second aircraft of this type to crash in less than five months. Within 24 hours, several airlines had announced they were grounding their 737 Max fleet pending the crash investigation. By all measures, this was a major incident, so it was inevitable that when the markets openend on Monday morning, BA would open down. What we didn’t know was where it would go next.

As day traders, we don’t need to know whether the stock is likely to go up or down on the day, we just want to know that it’s going to move. Preferably with good volume. BA was an obvious candidate for any stock day trader’s watch list on Monday.

As a stock, it did not disappoint, making (relatively) huge gains, even though it still closed down on the day. As far as my own strategy goes, it gave a perfect set up and blasted through several potential exit points without taking a breath. When two targets coincided and when the momentum took a break, I was out.

BA is a much higher priced stock than I would normally trade, but as I have talked about before, dynamically sizing your position to take account of the high price is one of the advantages of trading stocks. I had cash tied up elsewhere, and I don’t know BA as a stock at all, so I went with a fairly conservative 300 shares. The half-hour trade netted a final profit of $3,444.

Ethical Trading?

Here’s the inevitable question though: is it ethical to profit from a disaster? Is making more than $100 a minute profit from the fact people died something to be proud of? Or even just comfortable with?

Everyone has to make up their own mind, but here’s my take. The accident happened. It’s terrible, awful, and of course my thoughts are with the families of those who where killed. I hope beyond hope that the cause is found and that it helps engineers reduce the risk of such a crash ever happening again. But the fact remains the crash has happened. It’s in the past. We can’t change that. We cannot bring back the dead. Trading the resulting stock price movement is not going to alter what has already occured.

The wild swings in Boeing’s price were inevitable. They were going to happen whether or not people like me traded them. To shift a stock the size of BA the amount it moved requires institiutional amounts of money. It takes hedge funds and pension funds pulling out to cause such a drop. After that, algorithmic trading kicks in. It’s going to happen whether we like it or not. So we can either put our fingers in our ears, avert our gaze, and try to pretend it’s not happening, or we can accept the inevitable and get on with our job.

The job of trading almost always, if we think about it, involves acting on good and bad news. Stock prices move for a variety of reasons, but the big moves happen in response to news. Factory closing? The stock price will probably move. Do we stop to think about the people who will lose their jobs as a result of the closure though? Probably not. Just as we probaby don’t stop to celebrate the good news events that are disconnected from our own reality. We just watch the chart and trade the moves.

As horrific as a plane crash is, it is a news event and most of what happens subsequently is inevitable. So I see nothing wrong with continuning to do my job. There’s nothing to be gained from ignoring it.

Did you make money from BA yesterday? If so, perhaps consider donating some of your profit to people who can make a difference, like the Red Cross or Save The Children.

The Opportunity Cost of Shorting Apple

It’s been a while since I posted an Apple trade on here.

AAPL is a stock that moves far and fast. It’s not for the faint hearted, but when you get to know it you find that actually, beyond the very short term whipping about, it moves as predictably as any other stock.

The high price can be something that puts off a lot of traders, which is understandable, but it’s not a reason not to trade the stock. Here I traded 1000 shares, giving $880 profit in ten minutes (exiting when it failed to hit the target — just!) But a smaller account could trade 500 shares, or even just 250, which would still have yielded $220. Sizing our position in relation to the price of the stock is one of the great advantages of trading stocks over futures.

But that’s not the whole story of this trade. We need to look at another trade I took on BZUN:

This was another ten minute short, taking a clear entry and exiting when it just kind of petered out. In relation to the price of the stock, this trade was way more profitable than the Apple one above. Had I not had cash tied up in Apple, I could have increased my size four-fold on this one, turning a $450 profit into an $1,800 one (as opposed to $1,320 for the two trades combined). So actually that seemingly nice Apple trade actually cost me $480 in lost profit. Opportunity cost is real.