SD'S -'GET 'ER DONE' IN 2012

[sd]

Starting a new thread for 2012.

"Get 'er Done" is the motto- copying some Southern redneck comedian in a flannel shirt that used to be on the comedy channel . Could still be on ...for all I know.....
As I mentioned in the close of the 2011 thread- I had lost money during the course of the year. Approx a 7 % net loss, year to year. The dow ended up with a 5 % gain for the year, so that's a 12% differential!
I think that is an outstanding smaller loss than what it should have been given the potential for really getting my butt kicked for trading without a solid systematic approach in a really choppy market. I believe the lifesaver in this past year was trading using a 60 minute chart for signals.
In the days ahead I would hope to be able to better define both my trading limitations, and an approach to the markets that is more than random intuition..
Part of the rationale of this thread is that it would hopefully be beneficial to other traders . I think by 'sharing' one's methods or ideas, it should encourage others to challenge, or be challenged ../.... and ultimately be beneficial for all parties in that they learn in a shared experience.

To that end, I would say to the other members of this board, is that this board will greatly benefit by your participation in sharing your own ideas and trading approaches.

I would like to encourage others to give feedback, or challenge anything posted. On this thread or elsewhere's -
put forth a separate thread.
\
There are less than a dozen active members on this board. All of whom are experienced in 'trading' one way or another-
While i advocate one method of trading, and I have a periodic glimpse of how a few others trade, it would be beneficial to all of us if we could commit to elaborating on the Why we believe a trade will work, and perhaps a target or /and a stop-loss-

In my personal trading, I know i gain when I am more focused and disciplined.
It would be a great motivation if others could find the time to discuss their trading experiences in some depth.

Good Luck in 2012!
SD

[blygh]

My problems with trading this market are fundamentals vs established trends and old saws. It looks like we had a Santa Claus rally and now the January effect (usually associated with people funding Roth IRAs) The debt is unsustainable, Europe is a basket case, aggregate demand is down, fear is pervasive - baby boomers are fleeing the growth market in favor of interest and dividends, six million more homes may be foreclosed on (and there will be no recovery until housing recovers - it is too big a part of the economy 5-8%) . What about playing inflation fears? My wife has VIPSX (Vanguard Inflation Protected Securities Fund ) - up 13% last year and there is NO inflation. If anything we have deflation in many areas. I tend to play the exceptions where there is low elasticity of demand - health care, energy, food. I am short emerging markets, technology, consumer discretionary. I am neutral on transportation (although I made money on the rails UNP, GWR, WAB) natural resources, industrials. Should we play the January effect ? I am skeptical. What about election year (the market up 88% of the time)?? But I am probably going to GO Away in May big time.
Good luck i 2012
Blygh

[sd]

Hi Blygh,
I agree with you in the aspects of our debt, Europe a mess,
baby boomers (self included) bonds and dividend payers in the retirement account. and also housing to an extent.
Those items, and lack of resolution. would seem to be enough for a logical investor to consider going long the market as an unjustified gamble. Ergo, money under the mattress.
You have a greater grasp of the interrelationship of market forces than I . Your understanding of these forces would seem to drive the direction of your trading , likely would give you the conviction of your beliefs. ideally, this is also reflected by a similar market assessment- And should give you a winning edge. I would like to develop a better understanding of what I'd refer to as a trading based on an underlying macro belief- A 'Theme' trade.....

There's been some changes in investing/trading over recent years that perhaps defy some of the 'Old Saws" , or have caused structural changes in the way the market behaves.
Flash Crash,(that's a new trading term) ;
machine trading certainly affects the marketplace on a day to day basis;
Leverged ETF's -reportedly influence the market?

The world today is so seemingly directly interrelated, that what is seen as affecting the life of a citizen in China, or perhaps Italy- is reflected in the markets across the world by traders with a macro global outlook.
I heard this week that stocks are trading in locksteps with one another, much higher correlation than "normal" and that is simply a market assessment of the macro influences on a certain market segment or sector.
I think that in the long term, it only makes sense that solid fundamentals should always win out, but there's no telling when that fundamental basis will be realized by the markets. It is a matter of interpretation. - "Eventually" can be a long time and have a wide % downside.
I would confess that my trading focus is not based on any conviction of what the 'fundamentals' may suggest- as I believe trading the fluctuations as reflected by a price chart is the way to approach a market that does not necessarily respect a fundamental theme.

Go away in May- Let's go and have a BBQ- Burn a yard bird or two over some mesquite - Yes- one old saw that may have legs.....

Thanks for posting! Please feel free to jump in anytime , and add or suggest- or simply disagree-

And good luck in 2012! SD

[sd]

On the AAPL position:
Title: When to Sell, When to Buy

That's up to each person's approach to the market-and their assessment ( belief) of where a position is heading.
As I start off the New Year, I'm trying to approach my EOD small time swing trading with a bit more discipline and analysis, and will post a few charts .
I use the 60 minute chart in my EOD trading, adjusting trades in the evening after the day job. The advantage of a 60 minute chart and trailing stops is it captures a good portion of an upmove while not allowing much in the way of a pullback.
The disadvantage, is that a 2,3,4 day or so loss of momentum (normal retracement in a trend) will often see it stop out on what would be viewed as a bullish flag on a daily chart. That few day downturn has often resulted in a sharp price retracement in many stocks this year. However, the recent volatility of the past year has convinced me that exiting on price weakness early had been the best course of action in many trades, and that has worked decently in some prior AAPL trades this year. It also requires a quicker re-entry if Price action suggests it. The more frequent trades is not an issue if one uses a low cost broker- $1/trade/100 @ IB.

'When to Sell" can be difficult if one does not have a target. Often, we will take a profit relatively quickly when it is presented, to "lock it in" , while we would potentially allow a greater % loss on our stop side. That seems to be quite a common theme in trading in general- The past year of volatility also has tested many traders with a baptism of yo-yo price swings and lack of a defined trend.

As I look at the AAPL chart Friday, what's not to like? pushing the prior high with a good solid block of buying volume for the entire day and no sign of price weakness- closing at the high bar for the day. Often, though, a high volume solid bullish day is followed by a small pullback , consolidation of price. Understanding that, my raised stop to $419 is below the P Sar stop and under the fast ema. Essentially just beneath the low of the gap day.
No telling what 'news' will adversely affect the market come Monday-
But while price is solidly trending higher, and doesn't seem intimidated by the prior highs as resistance-, the price action suggests I do what I can to allow AAPL to potentially 'Run" a bit higher- I don't want to Sell until I can chew out a decent % gain or weakness forces me out. Yes, price could gap open Lower on Monday, below my stop-
but there is nothing in the price action suggesting that that fear is in the stock at this time. Note that prior peak moves in price prior to a pullback often come with large climax volume and a price extended above the ema.
Everyone has a different approach-- and most traders are undecided as to 'when' they will lock in profits on a trade, then see that profitable trade roll over and the profits disappear. (Been there, Done that).
So, one can sell at a target, one can sell a partial position to lock in a gain and then tightly trail price higher, or one can trail the full position very closely, with the potential of a gap down. Or some combination - If one is ready to sell and lock in profits,
The attached charts are illustrative-Perhaps a reader will be inspired to similarly review their own trading approach in greater detail .
Good Luck,
SD

[sd]

Thinking of taking a UGL long trade -buy-stop above resistance .
Chart attached, along with some GLD charts.

The UGL chart also looked at trending price with volume as a potential signal for consideration of identifying potential reversal of trend moves..
Obviously, most of those reversal trades, one would have been pretty nimble to make money- and i don't think my EOD approach would have worked- My DZZ trade worked out well- going WITH the trend-
SD

[sd]

Filled on the spike $85.45-Friday Had a buy-stop waiting and just saw that it filled this Sunday pm. Stop is $83.88 with SAR.
SD

[sd]

when one goes against the primary trend, they are fighting momentum. Betting early that one is entering on a reversal of trend trade that will be successful requires a willingness to have a tight stop should the position resume the downtrend.
the EPV trade has been downtrending- and price has suggested a reversal of trend for the past 3 days, bumping up against a downtrend line.
I'm applying a buy-stop entry if price moves higher and breaks above the trend line-
Acknowledging that a reversal of trend trade is fighting momentum, I think it is prudent that one has a well defined stop-loss in place, willing to commit, and perhaps consider a reduced position size on the entry. This is part of a money management approach . To understand that a reversal of trend trade is not the same Risk as a continuation of trend trade.
Reversal of trend - entry size is a max of 2/3 position size,

[sd]

Title: TRADING ONE'S BIAS- chart

swing trade-
Bias in one's willingness to trade in one direction-
For me, trading a price trend reversal is a riskier trade than trading in the direction of the trend. logic and discipline should suggest that one focus trades to those perceived as their higher probability set-ups .
However, like a moth to the flame, I do find I will take a trade based on my Belief about the larger market direction, and I likely look harder to find a chart reason to support that trade.
Both the EPV and EFU trades I took Friday going into the close are very similar-
Both were prompted by the news of the day of the impending European additional downgrades that reportedly have already been "priced" into the market.
My Bias is that Europe is indeed in trouble, and that as 'measures' they take fail, the situation should deteriorate further. Reportedly the market already knows this- the downgrade wasn't a surprise to most-

As an EOD occaisional swing trader, (full time day job) I look at a daily chart for trend but rely on a 60 minute chart for what I perceive are "opportunities" in the price action - earlier exits on potential weakness, and earlier entries.

While this swing trade may fail and stop-out, I view elements in the price action that suggest this trade has potential.
I entered near the close- Downgrade news was known/expected, and Friday's price action was indeed weak. Why take the trade?
Bias- perhaps emotionally this trade fits my belief about the condition of the European market (dangerous to trade on one's "beliefs alone).
The price chart-
price has been downtrending on the higher time frame, recently put in a new low, had a failed first rally off that new lower low that looked promising but failed to hold.
Price rolled over and pulled back below the fast ema, pulling back-but higher than the swing low. it tried to move up, failed, and pulled back again to that higher low. Potential short term support at that level, and then made a gap move higher Friday,
touching the prior swing high level.
The move lost momentum (market knew the News?)
and yet I purchased EOD still despite the relatively weak price action, and weak buy volume.
No self recriminations-just an explanation of my thinking at the time
My stop is directly below the price lows-
I'm relatively optimistic that this second price rally off the higher lows could have some substance- A second rally move often succeeds where the first fails, and i like the minor support of the 2x higher lows.
Good Luck, SD

[sd]

Applying a 60 minute chart has worked decently in AAPL over some recent trades-
What is noteable is recognizing when the "expected" does not happen and price does not behave as anticipated.
While bailing out on AAPL last week on perceived weakness- a strategy that pretty much worked previously, price action changed, and instead of focusing on where I might take a reentry lower, I'm preparing to buy higher off this bullish flag pullback.
SD
60 min chart first:

daily chart- note the Price Action Difference compared to prior highs.

[ira85]

SD,
I appreciate your comments about trading your bias. You are much more disciplined in your trading than I've ever been. Reading your posts has helped me see how I often trade on half-baked ideas. I have been expecting bad things to happen in Greece and for that to send shock waves around the world. Might happen. But it's not much of a plan for trading.

I also appreciate your post that you lost 7% last year. It's a pretty good record in a tough year. I saw these comments today that put your numbers into perspective . . .
Equity Mutual Funds lost 6% in 2011, according to Lipper Research Services.
Hedge funds lost 5%, according to COO Connect.
Hedge funds suffered their second-worst year on record in 2011, according to an index maintained by Eurekahedge, an independent research firm that specializes in hedge fund data.
Mutual fund all star managers Ken Heebner, Bill Miller, and Bruce Berkowitz have performed poorly of late, under-performing by a wide margin.

Comparing your performance against the Dow is unfair. You trade a much broader market. The S&P is the standard for most equity comparisons and it was flat last year.

And comparing yourself against Warren Buffett might be interesting. How'd you do compared to the much acclaimed oracle?
Berkshire Class A ended the year at $114,755 per share, a drop of 4.7 percent from its 2010 close.
You modestly under-performed the S&P 500, much like Buffett. Not bad!! Thanks for all the insightful, educational posts!! -ira

[sd]

I appreciate your response IRA and the comparisoms.
Losing just a little bit more than the other guy -
I can only fault myself on not doing better than the market benchmark- I realistically don't have any large sums to transfer or reposition- I should be the nimble - step in trade and lock a profit-
I will confess that I 'believe' in this 60 minute chart as a basis for my trading is definitely the way to proceed- I think the real application needs to occur this year.
I just got my butt kicked on my "bias 'trade EPV-
and I will make the distinction in trading on stocks in the direction of the trend, and trading because it suits one's bias- belief- about where the market "should" head.

My short term approach did an excellent job to get me to reenter AAPL on the flag breakout- on a continuation of the uptrend- only gave up $2/on the move from 422 to 424 entry- That's insurance.
This past year has indeed been a year of volatility and change.

I truly believe that if one can trade the price action and ignore the bias- one will be rewarded., I need to focus on what's working to succeed, not on what's maybe trying a reversal of trend.
I think the biggest flaw in this approach is my selection of what to trade- If I stick to taking trending trades, I suspect I will have a great 2012-
Guessing the price reversals combined with personal sentiment doesn't cut the mustard- Eventually one may be proved correct , but it comes at a higher cost than I care to pay.
Perhaps compared against benchmarks it wasn't that bad- but I have to believe if I did some better initial selection- and chose trades from trending stocks- I'd have kicked some butt-

I think it is time to narrow the field to stocks that are now trending higher , as it seems there is a definitive market rotation occurring-

Thanks for your encouraging input IRA!- SD

[dg]

According to some things I've read recently, the US dollar has lost approximately 30% of its value during the last 3 years. How is that not inflation?

[sd]

I would think a 30% loss in purchasing power is certainly inflation-
My wife comes back from the weekly trip to the grocery store wondering how is it possible that she NOW spends so much on what used to be the 'basics' .
We essentially also are seeing wage deflation, as wages- at least in my industry- have been flat- with no cost of living raises for the past 3-4 years.
Combine that with reductions in healthcare coverage, reductions in employer match of the retirement plan, and we certainly have ISSUES on several fronts.
It's that pesky rebalancing of wealth effect!
I'd feel frustrated, but nothing I'm sure compared to those folks that have retired & are on tight fixed incomes.
10 year investor returns- flat- lost decade-
I better get diligent with my trading!
SD

[bankedout]

If you buy the super basics (think bulk rice) inflation is tame. However there are so many categories to purchase in life where inflation is strong. I guess you invest in the strong inflation categories and attempt to purchase goods and services for yourself, your family, your house, etc. in the low inflation categories when possible or practical.

[dg]

Here in southern NH, I find that meat prices have shown this inflation to be real. Three years ago, chicken thighs went for $0.99 - $1.09 per lb and now are $1.49 per lb. Beef cuts priced then at around $4.50 per lb now go for $6.50 - $9.50 per lb. My favorite bricks of sharp cheddar from Vermont (Cabot) went for $7 then and $13 now. And my favorite Tasters Choice instant coffee (better than yours fresh brewed) went from $8 to $13 per large container.

And look to your own history over the past 3 years with gasoline and heating oil. Yet my social security checks have remained unchanged until now due to "no inflation."

Who has eyes but cannot see? The so called recent stock market rally is a fraud! One has to wonder when we will hit the hyperinflation point of no return. Will Europe trigger it; or will we? There are a lot of folks camped out in large towns across the country concerned by the fact that 1% of the people have 33% of the wealth and 40% of the people have 0.3% of it combined.

In this country, outsourcing and corporate raiders have ruined our economy. (I understand that Mitt Romney managed one of the alleged corporate raiders personally). I lost my job years ago to corporate raiding of AVCO by TEXTRON (just a couple of months prior to vesting in the retirement/medical/dental bennies promised us for years) as did many others.

So the question becomes, how do we re-employ America? Perhaps we need to scrap the employment concept by large companies as the major means and instead employ ourselves. In many cases that may mean living more like our ancestors did 200 years ago. In other cases, it may mean setting up ma and pa stores and services. In still other cases, we may need to invent new forms of products and services that we can provide and barter, unique to our local community environment. Time for Americans to put on their thinking caps! Time to "get 'er done!"