The long term uptrend in the stock market is still in place.
This is not the stright up parabolic move of 2013 where the 5 day ema and 10 day sma worked as a trend filter. This year indexes are trading in a wider range with the 21 day ema and 50 day sma are the key lines to watch for pull backs and swing long entries.
This is a fast market and requires buying dips fast, there are no follow through days either way, quick retracements then bounce backs are fast. Rarely are we even down two days in a row.
Short side traders have been getting hurt when they short into weakness right before a snap back or try to short strength and the market goes yet higher. Swing trades from the long side have the best odds for success.
$QQQ is the strongest index and $IWM is the weakest.
$IWM has met resistance at both the 21 day ema and the 50 day sma last week.
Buying $IWM at the 30 RSI would be a very high probability long if we get there.
Buying $SPY at the 50 day sma is a very high probability long set up if we get there.
$QQQ at the 21 day is a high probability set up if it dips again.
With all the headline risk with Ukraine and Israel and volatility expansion we may get some of these levels, we’ll see.
The best traders wake up every day excited. They can’t wait to get to work. Passion transcends monetary reward.
— Mark Minervini (@markminervini) July 18, 2014
Obama preview: Terrible tragedy, will be further costs for Russia, those responsible must be brought to justice, gotta go, have 1PM tee time
— Reinman_MT (@reinman_mt) July 18, 2014
— 1Bavarian (@1Bavarian) July 17, 2014
— Tony Parker (@Toknees) July 17, 2014
It’s important to distinguish the difference between a rising “market” and a market that is rising in earnest; easy dollars vs.hard pennies
— Mark Minervini (@markminervini) July 17, 2014
@EddyElfenbein not many billionaires are pessimists.
— Mike Valletutti (@marketmodel) July 16, 2014
CALIFORNIA BOARD APPROVES $500-A-DAY FINES FOR WATER WASTERS, No tax for breathing yet though
— zerohedge (@zerohedge) July 16, 2014
"One of the allures of this business is that sometimes the greatest ignoramus can do very well." – Michael Steinhardt
— Andrew Selby (@DontTalkStocks) July 16, 2014
Trading is like BlackJack/Bets are about equal in size & press when odds increase thats the edge/lets not get to excited beyond that
— DK1 (@canuck2usa) July 15, 2014
I mean nothing goes up forever I just BTFD until my hand gets caught in the cookie jar and then I will stop doing it
— DK1 (@canuck2usa) July 15, 2014
Everytime I BTFD get trolled by BEARS…come on its not personal….I have zero room for negativity on my Stream…your time will come
— DK1 (@canuck2usa) July 15, 2014
I can make it more complicated if you like, but then I'd have to charge you more.
— Jon Boorman, CMT (@JBoorman) July 15, 2014
We could have a 5-10% pullback to the last swing low and 200-day. Or we could just keep going higher. Have a process that allows for both.
— Jon Boorman, CMT (@JBoorman) July 15, 2014
A quick reminder about what the market did after Greenspan warned about Irrational Exuberance pic.twitter.com/NsTNzeR0dH
— Joseph Weisenthal (@TheStalwart) July 15, 2014
Yellen is carefully watching the bubble she is creating
— zerohedge (@zerohedge) July 15, 2014
"I don't like this market, financials are so weak." "I don't like the internals, the financials are the only thing keeping the $SPY green."
— Irrelevant Investor (@michaelbatnick) July 15, 2014
Best way to profit from the coming correction? Sell a newsletter.
— Irrelevant Investor (@michaelbatnick) July 15, 2014
@SJosephBurns and if its tuition..you better be taking class notes.
— Ron Sjostrom (@ronsjostrom) July 14, 2014
CYNK volume traded 0. Should be up at least 50% on that.
— zerohedge (@zerohedge) July 14, 2014
— AAPL Tree (@AAPLTree) July 13, 2014
#NED 2:0 after 15min. Brazil getting CYNK'd again.
— △ (@mnycx) July 12, 2014
3 lies about the stock market: 1. It's easy to beat the index. 2. It's impossible to beat the index. 3. You should care about the index.
— Doctor Daniel Crosby (@incblot) July 15, 2014
— △ (@mnycx) July 13, 2014
Five Reasons Why People Fail In Life
Blaming others for your own mistakes, laziness, and bad decisions is a sure path to failure. Success only blooms from the fertilizer of responsibility for yourself and your own results.
Arguing with someone when you are wrong instead of learning is a path to failure because instead of growing you are declining, you are rejecting lessons and staying where you are and stagnation is never a great place to be.
Trying to be a teacher when you are really a student is caused by your ego and stops growth and initiates defensive walls that can not be breached. The best teachers and masters of a craft are life long students not arrogant in their current knowledge.
Losers talk too much why winners are busy doing. Losers talk much about the future while they do little to change themselves in the present moment. Winners are too busy doing to talk much unless it is really needed.
Losers love to focus on the past, the wins, the losses, and the injustices and unfairness while the winners are focused on present actions that will lead to the future results they are after. Losers focus on past blame while winners focus on future results.
It was great to have the honor to interview these two market wizards. I appreciate them both taking time off from their trading and giving my readers a chance to ask some questions.
All of these are questions submitted from my facebook trading group. Many of the members are huge fans of the ‘Market Wizards’ book series and of their interviews in those books.
Questions for David Ryan
1. David, what are some of your daily habits to keep your state of mind in check to be the most effective trader that you can be? For example, what are your mornings like? What are the first three things you do as you prepare for the markets?
ANSWER: My mornings start off a lot differently than a most traders. I actually read the Bible. Going over the values and principles contained in the Bible gets me in the right mindset to eliminate the emotion that can lead to poor decisions. Let me give you just one example from Proverbs 13:18 “Poverty and shame will come to him who neglects discipline.” If you don’t use a disciplined approach to trade the markets you will never make any progress. From there I look at the futures and the news that could affect my stocks. I have also set alerts and have made lists of stocks that I am watching that could be potential trades. Because the markets open so early on the west coast a lot of my preparation occurs the prior afternoon and evening before when I compile my action lists.
2. David, which is your first choice of analysis: Technical or fundamental analysis? Where do you begin?
ANSWER: Most of the time I start with technical analysis. Once I see a stock that is setting up the right way then I move on to its fundamental characteristics. A stock should have strength in both areas. The big moves are created by large earnings increases. Stocks that set up technically and breakout but have little in the way of earnings usually don’t make very big moves.
3. How do you get a clear understanding of a chart to help you make the right trading decision? Every chart reader has a personal bias if they already have a position in the stock or an opinion of what should happen next. What are your recommendations to traders who take trading signals from charts? How do you look at a chart and see the signals through the internal noise.
ANSWER: You have to carefully analyze the chart to make sure it has all the correct price and volume characteristics. The way you learn what to look for is by studying the moves of some of the greatest winners. When I first started, I would spend hours looking at the daily and weekly price movements of those stocks to get ingrained into my mind what was a proper set up. I would also study the entire 18 month move of a great winner to see its price and volume characteristics throughout the entire move. What does it look like coming out of a base, during the middle of the move and as it is topping out? In each phase of the move, the stock has distinct ways the price & volume are acting. The trader’s job is to make sure they know how to identify those phases. That is done through studying the entire move of a great winner.
4. David, how has the stock market changed since you were featured in ‘The Market Wizards?
ANSWER: There is a lot more noise and movement in the market with high speed trading and computerized algorithms, but the stocks that have the biggest moves continue to have the same characteristics. When I was featured in “Market Wizards” most investors did not have personal computers set up for trading. I was working off a dumb Bunker Ramo terminal that had no charting. I would look at a paper chart in Daily Graphs that I updated in pencil during the week. The moves intraday were not as fast and the reactions after earnings were not as large as they are today.
5. Both you and Mark Minervini won the U.S. Investing Championship with triple-digit returns and little drawdown. Do you think there are similarities in your trading that allowed you both to perform so well?
ANSWER: From what I have seen in how Mark operates, we both work with a similar approach to trading. We are looking at the same stocks and have similar buy points, and we both cut losses very quickly when a position is not working out. What Mark does so well for those that follow him on Minervini Private Access is that he is very, very disciplined in executing his strategy. The key to success in the markets is discipline no matter what system you use. Using a strategy and being disciplined employing it eliminates the emotion from the buy and sell decision.
6. What parts of your system do you have to change as the markets change over time, if any? I haven’t changed much at all.
ANSWER: I still look for the same types of stocks, but I might be a little bit more careful about my entry points. I tend to buy a few more positions on pullbacks then I did in the past. More stocks these days, breakout then return to the breakout point before starting the real move higher.
7. What were the biggest issues you have seen the average investor face for consistent returns? Was it discipline, focus, proper position sizing or something else?
ANSWER: Discipline, time and hard work are the keys. In all the seminars I’ve given over the years, I have laid out exactly what I look for and how I have achieved my success. The challenge for the investor is to take that information and enact that in the same way. It also takes time to work at it. It took me 2 years to master CAN-SLIM and I was working at the company that developed the system! You have to make a lot of mistakes first before you can become successful using the system and a lot of people don’t want to do that. If you take the time to study the greatest winners, learn from your mistakes and be very disciplined you can achieve great success.
8. How did you get started in your journey to fund management and do you have any advice for people that want to go that route.
ANSWER: I took a different route than most coming from the institutional brokerage side. After William O’Neil started Investor’s Business Daily, the firm needed additional income to support the paper, so the company started a mutual fund. I was recommending stocks to our institutional clients at the time. O’Neil moved me to the new entity and I became the portfolio manager for the New USA Growth Fund for 5 years until it was sold. If I was going to do it again, I would find a well-run mutual fund company that had some successful aggressive growth funds and do what ever I could to get in the door to get a job. One key is to find some successful investors and learn from them. Be willing to start at the bottom and work your way up.
9. For someone starting out new in trading what would be the first piece of advice you would like to give them from the experience you have had in the markets…. what according to you is the most basic principles for a trader to understand as they begin their journey at point A.
ANSWER: The most basic principle to be successful is that you have to love what you do. It is hard not to be successful because you will spend the time to find the way to win. You will continue on even when others are giving up because you have that fascination with what you do.
Questions for Mark Minervini
1. Mark, please tell us a bit about the mindset of the professional trader. What is it that gets you at it early and motivates you all day long?
ANSWER: Well, I can only speak for myself, but I guess it’s the same thing that got Michael Jordan up to practice everyday; the love of the sport, or in my case, a passion for trading. How many people do you know that have big success for any length of time doing something they hate?
2. What is the maximum number of positions you will have open? What percentage of your equity will you commit to any single position?
ANSWER: I don’t like to have more than 25% in any one position and I don’t generally have more than 10 or 12 positions. I want to be concentrated in the best names and not spread out all over the place . I want to be able to know my stocks intimately; fundamentals as well as technically, and when I get a winner, I want it to be sizable enough that it makes an impact on my performance.
3. How much of trading do you believe is science and math, how much do you think is an art?
ANSWER: It’s similar to playing poker; you need to know the math, but it still comes down to skill, and knowing your own style inside out; your strengths and your weaknesses. That’s the beauty of trading, it’s not pure science; if it was, computers would run everything and there would be no edge to exploit. Real people with emotions are what make it a horse race. Trading combines analytical analysis with real-life competition. It’s an awesome arena!
4. What was your first initial amount of capital you started with, and for context what year was it you started?
ANSWER: In 1984, I started with a few thousand dollars. I later added some money to bring my account up to 30k. It took time to build my account to a substantial amount of capital, but once I had a few big years, the compounding really started to take effect. I ran that account up over thirty-four thousand percent.
5. What benefited your learning curve the most? Trial and error, trading books, a mentor or something else, and what do you recommend for new traders?
ANSWER: My skill developed as a result of lots of reading and trial and error. There were few options with regard to learning how to trade in the early days. Nowadays it’s much easier to readily find information; getting a talented mentor is much easier as well.
6. Mark, you seem to have a long bias. Do you ever short and if so what makes you comfortable to do so? Which basic criteria?
ANSWER: Yes, I do short. I would want the general market to show signs of distribution and then I would usually short past leaders that were broken.
7. Mark: In the ‘Market Wizards’, you are quoted as saying “Being wrong is acceptable, but staying wrong is totally unacceptable.” Being wrong isn’t a choice, but staying wrong is.” Can you please elaborate, perhaps incorporating specific trading stories in your past where you had to learn these lessons the hard way or the easy way?
ANSWER: It simply means that everyone makes mistakes; that’s unavoidable. But not correcting a mistake or minimizing the damage of a position gone wrong is completely under your own control. The big mistakes start out as small mistakes that were allowed to get out of hand. You must realize that big losses are a choice and take responsibility for controlling them.
8. Mark, from your years of experience trading successfully and mentoring other traders what is the most important thing for a new trader to avoid doing in order to be a professional trader?
ANSWER: Avoid losing money. That may sound like I’m joking, but I’m not. Lose the least amount possible when you’re wrong. Get good at that and your 90% there. If you buy correctly stocks with good upside potential and lose little when you’re wrong, you should be able to make a lot of money trading.
9. What was the best ‘Aha’! Moment you had in your trading career, was it technical or psychological?
ANSWER: It was when I read How to Trade in Stocks by Jesse Livermore many years ago; a great little book that crystalized my thoughts.
10. What were your hardest obstacles to overcome to get to where you wanted to be?
ANSWER: Becoming 100% disciplined and taking 100% responsibility for my trading and for my results. Taking responsibility is not taking blame, it means knowing what you have control over and cultivating the ability to respond to every situation.
11. What do you believe separates the trader that just gets lucky from the trader with real trading skill? What makes the difference and how can you tell?
ANSWER: Time. Luck runs on short legs. Getting lucky only lasts so long. Traders with skill stand the test of time, while those at the right place at the right time eventually get in the wrong place at the wrong time and don’t know how to deal with it. As the saying goes: “A fool and his money were lucky enough to get together in the first place”, or “A fool and his money will soon part.”
12. When if ever, do you use leverage?
ANSWER: When I first started trading and had little money I used margin, but I don’t use leverage anymore.
13. How do you determine position sizing and how do you set your initial stops?
ANSWER: I keep it simple. I don’t want to risk more than 1.25-2.50% of my total equity on any one trade. Knowing that, I back into risk based on a maximum position size of 25% and no more than 8-10% stops on any one trade.
14. What rules do you follow when you are going through drawdowns?
ANSWER: I cut back my position sizing and I cut back my overall exposure. The bigger the drawdown the more I cut back. I tend to cut back very quickly if things aren’t going my way with trades. When trades are working, I step on the gas and go for bigger gains.
15. Mark, I will ask you the same question as I asked David. For someone starting out new in trading what would be the first piece of advice you would like to give them from the experience you have had in the markets…. what according to you is the most basic principles for a trader to understand as they begin their journey at point A.
ANSWER: Find a style that makes sense to you and fits your personality, and then commit to it fully. Don’t try to become a jack of all trades, become a specialist and master a specific approach. Keep in mind that it’s going to take time, so don’t get discouraged if you don’t knock the cover off the ball right away, or if you experience some set-backs. Anything worthwhile takes time and effort, and nothing great comes to those who give up and quit.
16. How can my readers learn more about how you both trade and how to make consistent profits in the stock market? What books, resources, or teaching services do you both offer now?
ANSWER: Well, of course my own book Trade Like A Stock Market Wizard is my way of sharing my own knowledge and experience to everyone. For those who want to really dive in and take their trading to the highest level, David and I will be instructing together at this year’s Master Trader Program workshop which is coming up in October. You can find the details at www.minervini.com.
Thanks to the following members of “New Traders, Rich Traders” on facebook that came up with these questions, I believe they did a great job: Zack Loven, Brian Chang, Jason Tylor, Mohit Jhanjee, Matthew Smith, Zac Lim, Aaron Smith, Yong Lee, Oscar Castanon, Doug Gregory, Rob F. Smith, Timothy Clayton, Guruprasad Venkatakrishnan, and Ray Fatal.