Another day, another two-biter. Oh, yeah, yesterday was a three-biter. Well the principle is the same — no reason not to take a second entry when all the stars align and the signal is good. Which is what happened on NYT:
Unlike yesterday, these were both winners. The second signal occured on massive volume, providing ample confirmation. The exit was obvious to anyone who trades my strategy. If you are into trading double tops and the like, you could have had a nice short after lunch, too. Personally I was long gone by then.
Despite hitting a four-figure profit, that wasn’t my most profitable trade for the day in terms of dollars-per-unit-of-time. That accolade went to MGNX. The scale is a bit off on this chart, so it doesn’t look like much, but this netted well over $600 in under five minutes. So yeah, more than $100/minute. I stress that is not the sort of thing that happens every day. Which is why it made it into to day’s blog post!
Sometimes it takes a few bites at the cherry to get what you’re after. But there’s a fine line between flogging a dead horse and taking legitimate trades. If a trade does not work out but the stock goes on to present a second signal, it’s perfectly valid to take that second entry. And if that doesn’t work out but a third comes along, there’s no reason not to take that as well. Such was the case on QCOM on Tuesday:
If this was a stock that I did not know well, I probably would have let it go after the second failed signal. As it is, I’ve been trading QCOM on and off for the best part of 20 years. I’m not saying I have a feeling about this stock, because that’s mumbo-jumbo and not something to base trading decisions on. But I do have two decades experience of seeing how it moves, which gives me the confidence to keep taking the signals it throws up when they come along.
Of course, the key to being able to keep taking those signals is to avoid blowing up our account by taking a loss on the failed ones. Getting out at break even at worst means we can take those signals all day long until a winner comes along. Ideally we want to cover our commissins, as was the case with the first one. But sometimes slippage means we lose a little, as happened on the second entry. I’ve shown it as break even on the chart because is was a close as makes no difference. 1 lost cent is a small price to pay for the 49 cent win that came next. So although it took some work, QCOM put another $460 (after commissions and that earlier loss) into my account.
Here’s a trade that went much more smoothly:
Pretty textbook stuff. And when I say textbook, I’m obviously talking about my own textbook! All the trades I post on this blog are from the setups in my book. Setups that have worked for decades, and continue to work day in day out. People sometimes ask me if I have any new strategies. Why change a winning formula? This stuff is simple and it works.
Nice trade to start the day. ROKU was rocking, and merited taking the earlier of the two entries. Could have tried holding this to the $50 mark, but with two grand already showing and momentum weakening, my resolve weakened with it. There was a valied entry when it went through the fifty buck mark, with another five hundred dollars on the table for anyone who missed the first go. And there was a pretty good opportunity to take a short trade towards the end of the session too, with a good signal that would have led to another several hundred dollars. Anyway, $2020 profit in under an hour is a good result by anyone’s standards.
Next up, some PZZA. Very easy entry, and the exit was pretty obvious too. On any other day this would have looked like a nice trade, but next to ROKU it seems very ordinary.
Finally, your weekly reminder that I don’t post all my trades here, only those that I think are interesting for one reason or another.
A couple of quick ones. First off, the bottom of a long move down. SNE dropped off a cliff right from the open. It can be tempting when you see a precipitous fall like this to jump in for the ride. That is almost always a bad idea though. We follow strategies for a reason. Jumping in and holding on tight is gambling. With no plan for the trade, you have no idea where to get out. So although we could look at this chart and say, “Heck, we missed a hell of a drop,” the correct reaction is to say, “Followed the strategy and walked away with almost three hundred bucks in ten minutes with negligeable risk.” That’s how we keep from blowing up our account, so we can be around for all the other lovely trades that come along.
Lovely trades like this from MU, which is currently on my core list because it keeps making nice, easy, predictable moves like this:
This was a slower trade, taking about half an hour, but as the tortoise knows only too well, slow and steady wins the race.
I briefly touched on account size in yesterday’s trades post, pointing out that trading a cheap stock can mean large profits even for a relatively small trading account. Here’s a trade at the other end of the spectrum — CHTR — a stock that was, at the time of this trade, priced well over $300.
At first sight, such a high price might make the stock seem untradeable. But one of the wonderful things about trading stocks is that we can scale our position size according to the price of the stock being traded. Typically I trade at least a thousand shares at a time. Even for me though, and even trading on margin, CHTR was a bit rich. That’s fine. I cut my position size in half, which enabled me to jump in and ride the price rise, catching almost $5 a share. Even with my half-regular-sized position, that meant a profit of $2,350 (before commission). More than two grand profit. On one trade. In well under an hour.
I could have traded even smaller, cutting my position in half again and still made more than a grand off this single trade. The beauty of higher priced stocks is that a modest percentage move in the price makes for a large dollar-value change. Bigger move / smaller position size. It all evens out, or, as was the case here, we come out ahead.
I definitely wouldn’t recommend high priced stocks to anyone getting started because, frankly, we have to have our psychology locked down tight or we aren’t going to be able to hang in there as the price whips around in whole dollar amounts. Besides, there are always plenty of trades on more modestly priced stocks to be had. Like this one on HRB:
Here we are back in twenty-buck territory. Does that mean we’re restricted to smaller profits? Not at all. Trading just 500 shares (which we could do with a sub-$3k account), this trade would have netted $300. My regular 1000 share position size pulled in $600. And if our account can handle it, there was plenty enough volume here to double up and take $1,200 on this trade.
Hopefully these two extremes traded on the same day, more or less at the same time, show that whatever our account size, there are always good profits to be had from the stock market. Every day.
Here’s one of those trades where it was a no-brainer to go for the slightly earlier entry. Even a more conservative later entry would have netted a nice profit. As it was, the earlier entry made for well over a dollar a share. profit Trading just 1000 shares that means $1,500 in the bank for a trade that lasted less than half an hour.
On a cheap stock like this you can trade 1000 shares with a modest $5k account. By my reckoning (please bear in mind that I failed math in school, though it’s never stopped me being a trader), that’s a 30% return in half an hour. Obviously such calculations are meaningless in the realm of day trading, but they can be fun sometimes.
For anyone looking later in the day, there were at least two more good trades to be had to put even more in the pot.
Here’s one more from Wednesday. GNTS, much later in the day. A similarly low priced stock, accessible to small trading accounts. The trade was much slower and I had to hold through lunch, which I rarely do but sometimes you have to do what you have to do.
MU brought home the bacon again. This was an earlier entry as the signal was so clear and it met my early entry criteria. Yes, the stock moved further south, but I don’t care about picking tops and bottoms — that’s hard and the success rate is low. Much easier just to take an easy chunk out of the middle, using clear signals.
This trade on CRON was a much longer affair, lasting most of the morning. I scaled out of this to let the second half run risk-free, and what a run it was. Took more than a dollar on the second chunk. Again, keeping risks low and signals easy.
Simple setups and not being greedy meant that between these two trades alone, profit was more than a thousand dollars for the day. (These weren’t my only trades; I only post a selection of interesting ones here).
Sometimes a trade exit isn’t so much about a specific signal showing up, or a specific target being hit. Rather it can be a lack of either of those things. When you get to know how stocks behave, how patterns repeat, and understand the fundamental meanings of certain price points, you can use a failure of those patterns or points as a signal that a move has come to an end. Such was the case with this trade on PYPL on Friday. A ten minute trade that put more than four hundred dollars in the bank, with an exit that will be obvious to anyone who trades my stocks strategy.
Another ten minute trade netting over five hundred dollars was this from WDC.
Again, an exit defined almost as much by something not happening than something happening. This one was very clear to see on the time and sales though — momentum swung around and it was obviously time to get out.
Yesterday I wrote a post (7 Reasons Why You Don’t Want My Daily Stock Picks) in which I mentioned that having a good list of reliable core stocks can take some of the pressure off building a decent watch list each day. Here are two trades from Thursday that were both watch list stocks.
The first is QCOM, a stock that has been putting food onto my family’s table for more than a decade. It took two bites at the cherry to get some profit out of it. The golden rule is to never let a profit turn into a loss. The first trade started out okay but momentum petered out. Rather than hold and hope, we exit with just enough to cover the commissions. As long as we’re not losing, we can take entries all day until we get a decent one.
As it happens, the second entry was decent, and netted $300 profit in under fifteen minutes. Now it’s fair to say that a good daily stock pick can net a much bigger profit, but my point is that with a few core trades a day you can make a decent living while getting better at picking daily stocks.
My second core stock for Thursday is AAPL. This can be a volatile beast, but if you can hang on for the ride it often puts in some nice moves. Once again I scaled out of this. Taking half off early means the other half is effectively running risk-free — it’s paid for. Yes, it reduces the overall profit, but it’s worth it for the risk reduction. $575 banked in about half an hour.
To re-iterate my point then: sure, core stocks rarely put in the stellar moves that you can find in good daily picks. But these two core stocks provided $875 profit between them, all before lunch. That should be enough money to keep most traders going while they get better at picking daily stocks.