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Thursday, January 05, 2006
Market Recap
In yesterday's pre-market update, we said that the NASDAQ and S&P would probably make new highs before this rally comes to an end. Yesterday it was the S&P and today, the NASDAQ made a new 52 week and 4 year high. It was the standout index today with a 13 point gain. The Dow managed to gain 2 points while the S&P was flat. With that said, we need to see strong follow through tomorrow and end the week strong. The last few times the indices have made new highs, they have reversed quickly and headed lower. In other words, they failed their breakout attempts. We need to keep in mind that this could happen again, and we need to have our stops in place to protect our capital. Right now, we are 100% long with every position in the green. Things are looking good but we need to be ready if the market suddenly reverses course.
Accepting Responsibility
I received an email last week from a former member who left us. Their specific reason for leaving was the NTES trade. Hmm, what about those GOOG and ISRG options we recommended? Funny how they only remember the few bad trades. I did not reply to the email but it did get me thinking about how I would answer this person if they were sitting with me in my living room and asking the same question. People seem to be a little more civil when talking face to face. I may have answered with something like this:
You find a near perfect set-up, meeting all the requirements of your trading plan. The stock is at your established entry price, you click on the buy button, and it's done! You have now entered the stock market and you feel the rush. Your cash has now been put to work for you and hopefully it will make you more cash. Whether or not the outcome is positive or negative, the responsibility of the trade is yours and only yours. If you should lose, don't blame “them” because there is no “them”.
“They won't move the stock”
“Why are they holding this stock down?”
“Why did they take out my stop and then take the stock up right after?”
We have heard all these excuses before; you may have even used them yourself. However, if your stop was taken out and the stock moved up right afterward, maybe you placed your stop in the wrong place. You see, it is not the market makers or the specialist that is the blame for a bad trade, it is the trader who must recognize that they made the mistake and there is nobody else to blame. It is true, the game is rigged and the market makers and specialist have a great advantage over us, but we know that going in and if we chose to play, we must accept this fact. If you were a specialist on the floor of the exchange you would do it too. What they do may not be fair but it is legal and as long as it is legal, we have no reason to complain.
The Whole World is Wrong When it Doesn't Go Right
It is human nature to blame everything bad that happens to us on something or someone else. If the desired result does not happen, it must be the fault of anyone else but us. “We are right and the whole world is wrong.” Believe it or not, some people have this attitude. If your house was demolished in the hurricane five years ago and then again last year after you re-built it, who is to blame? Do we blame the hurricanes or do we take the responsibility for the decision to live in a hurricane zone? We can't blame a hurricane for destroying our house if we chose to buy in that location.
Some people refuse to take personal responsibility for anything anymore. These days, an individual can drive up to a McDonald's restaurant and spill hot coffee in their lap and then file a law suit because the coffee was too hot. As if McDonald's was to blame because a customer was clumsy enough to spill coffee in her lap while trying to drive with one hand and drink with the other. Or some people will file a lawsuit because our children are getting fat due to the excessive consumption of hamburgers. Not because we as parents continue to take them to the fast food restaurants. It is our choice to take them there to eat, yet we sue the companies for making our kids obese. The decision to take our children to these fast food places is made out of our own free will. We have no right to blame these places because we don't like the result of the consumption.
When an individual considers taking some course of action, they will compare the perceived positives and negatives of taking such action, and if the positives outweigh the negatives, they will proceed with it. Even a prisoner of war, under extreme conditions of torture, will talk only if they decide they want to talk. No torture method will force them to talk unless they decide that the negatives of not talking and being tortured outweigh the positives of not revealing the desired information.
Tunnel Vision
This same rationale can be applied to trading. When you take a position, it should be because the probable outcome of taking the trade outweighs the potential negatives of the trade not working in your favor. Novice traders never consider the negative potential of a trade and will base their decision on a constant bias towards only the positive. They have tunnel vision and can only see one way. They do not plan ahead in case they might be wrong. It is easy to blame specialists, market makers, or other events like negative news or an analyst's downgrade for our losses. But it was us in the first place that decided to take the trade. Are earnings about to be released? It is our responsibility to know this and its possible implications. You and only you are responsible for the outcome of any trade you make. Understanding this is a big step towards professionalism.
Stockcharts Listing
Please vote for us once a day at Stockcharts.com.
http://stockcharts.com/def/servlet/Favorites.CServ...
Thank-you for voting!
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts we have annotated for each stock listed in the past.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings you can either use this link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
For New Members:
Please take a moment to read the "How To Use The Bulletin" link at the bottom of the Bulletin page on the website. It is critical you understand how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
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