SpikeTrade is a Member-oriented website. We receive many comments from Members, but this one really hit the chords…

There are three basic main styles:1. Trend Following (Position Trading)2. Swing Trading3. Day TradingWithin these styles there are sub styles of trading, counter trend trading, momentum trading, low volatility style, and scalping.I would say the most difficult style is day trading. Day trading can and will have the most emotional turmoil of all the trading and why I believe it is the most difficult style. It requires intense focus and processing of information to make decisions very quickly. One cannot stop to think about what they will do, they must know what they will do the instant they see the action and the discipline to act must be solid. There is very little room for error.Trend following (Position Trading) is likely the easiest of the styles but it is the most boring and many find it difficult to have the patience to wait for trends to form and the patience to sit in trends while they work. It is also difficult to sit thru the drawdowns while trends pull back and one waits to see if the trend will end.Swing trading is the most popular and personally is my favorite style. I would not say it is easy to master, nothing in trading is. It does tend interest most traders as you do not need to make lightning fast decisions and you can take time in the evening to set up trade plans. It can be rewarding quicker than trend following but not necessary to make lightning fast decisions that is required in day trading. I would say the difficult part is the time it takes to sort thru and find reasonable trade set ups. The danger is we get caught trading lots of mediocre trades and churn our accounts.I prefer a mix of swing trading partial position and trend following the balance. I find it works and suits my personality well. I do day trade when the action becomes too volatile and we do not have intermediate bullish cycles in place that is more conducive to my personal style. Not all styles are conducive in all market conditions. There are times our style of trading and the particular system we trade will have us on the sidelines in cash, which can be the most difficult position to hold.For the past several weeks I have been in day trade mode. This does not suggest I sit in front of the computer each day and crank out 10 – 30 trades every day. I use basically the same strategies just on smaller time frames. A the volatility rises we can get the same movement in markets in hours that could take days to occur when volatility is low and bullish cycles exist. This helps control risk by eliminating holding lots of positions overnight. During higher volatile markets we experience many more knee jerk reactions and larger gaps overnight. These gaps can erase existing profits fast or accumulate losses quickly.

While working on SpikeSpeak, I stepped out for a bite to eat. As I walked in the shade on 28th Street, a car pulled over, its driver rolled down the window and started speaking to me in Italian. From what little I understood, he was asking for directions to FDR Drive, a major highway nearby. I answered him in Spanish that he had to turn left on Third Avenue, right on 34th Street, and he’d be there. He was profusely grateful, and somehow his English seemed to improve. He told me it was his first time in New York, that he just finished a fashion show at the Javits center (a major local arena), and gave me his business card. He said he was representing Armani and happened to have a few pieces in the back of his car he wanted to get rid of before flying home.Somehow, being offered cheap Armani goods from a car on a side street, coupled with his rapidly improving English seemed a bit too good to be true. I waved him off and walked. After turning the corner on Third Avenue I stepped into a shop, turned around and looked at the intersection through the window. The light changed, and my new friend’s car drove straight through the intersection, never turning on the avenue in the direction of the FDR, about which he had stopped to ask. Having avoided his hook, I walked to to a very pleasant plate of sushi, sharing a beer with the sushi chef.This was just like the market: when something seems too good to be true, it usually is a fake. When an indicator rings a quiet alarm, like that rapidly changing accent, we better listen. Avoid wishful thinking. The world is full of goodness, but it does not usually take shape of a stranger offering discounted goods. Wishing to believe that we are special makes us ignore warning signs – in life in general and in the markets in particular.

[this post came from Jeff P, one of our Spikers – AE]Last week I had lunch with fellow Spiker Mike Brenke. I’ve known Mike since we both became Spikers the same quarter in 2006. We live about 10 miles apart and talk often.Over the past 6 months or so, he has become a different trader. I can tell it in the way he talks and more importantly, you can see it in his results. The story of his recent evolution is very instructive and interesting and I encourage him to tell it as his story is not mine to share. However, as often happens in life, a single comment he made to me has refocused my direction and led to this entry.He was telling me about the changes in his focus and thought processes when he paused and said, “You know, I think it can be of great benefit to clear all your assumptions and consider how you would train someone to trade if they were starting with no experience.” Wow, that was a very profound thought! I’ve rolled it around in my head for a few days and I’ve decided that I would take this approach, but I would be my own student!I decided as an initial experiment, I would imagine sending a message back to me when I began trading from me, “Future Jeff”. This message contains 7 ideas that I wish I had known at the beginning. Perhaps learning them properly, at the beginning would have prevented the need for the market teaching me over the years, in some cases more than once!No single trade will make your career so don’t let a single trade end it.Ah, the eternal quest for the home run! A trade which may make 1000 dollars could make 2000 with twice the size. 4000 by going on margin. If you buy the bottom and sell top, as we all do, the sky is the limit!Trading is not like winning the lottery. A successful career is made over years and contains many losses. A prerequisite for making it is not evaporating your trading account. Never put yourself in a position where one trade can wipe you out. Always have a stop loss in the market and keep your position size at a level where even the company going bankrupt doesn’t leave your account the same way. Survive, then thrive!No trade can be made unless you can explain why you are making it and what will take you outMaking a trade is such an easy thing to do. Make a few mouse clicks and suddenly, you are in a trade! It’s exciting and fun! It’s so easy to do, you may be in a trade with the only explanation being “I think it will go up.”Well, that is not adequate. Not only do you need to have a plan prior to entry, it needs to be clear enough to explain to another person. Ideally, another trader could take your plan and execute the trade the way you intend. If it’s not clear what condition will put you into the trade and why and similarly, what takes you out at a profit or loss, then you are not trading responsibly but instead are gambling.Understand Price ActionMost traders spend their development years looking at tons of different price based indicators most if not all of which are derivative of price action. The signals produced certainly have value, but a key to interpreting them is understanding the overall market structure. A MACD histogram divergence will have different meanings if the price is trending up rather than down.My trading has improved as I’ve reduced the number of indicators I consider and instead focus more on the structure of this market and how the price is reacting.Think about the risk firstIt is our nature to look at a trade and consider how much money we can make. That is certainly a necessary part of the trade evaluation process; however it is not to be done in a vacuum.Survival and ultimate success in the market is determined by the risk one takes. A trade which makes 10% if it works is a reasonable bet if you have to risk 3% on it but not so much if you have to risk more than 5%.At this point in my career, I determine my entry and protective stop first so that I’m not tempted to tweak those values to improve the odds.Expect, accept and plan for the losing tradeThe losing trade can be difficult to swallow. A big losing trade not only slams your account but it also can be devastating to your confidence.All traders take losses. If you know they are coming and expect they will happen from time to time, it’s easier to keep them in perspective. It will also reduce the chance that you will fall victim to the twin mistakes of moving your stops further away ( or pulling them completely) or averaging losers thinking the position will now have to move less to get profitable.Ultimately, these actions come from an unwillingness to take losses. The attitude needs to be developed where losses are just part of the cost of doing business and a losing trade is one of the statistical group that just didn’t work out.Trade Often – Trade SmallI remember Alex once saying that at the beginning of a career is when a trader is at their worst and the key is to survive and improve. Much of the prior writing will help in the survive aspect, however to improve one must trade and analyze the results.As you begin, or recover from a down period, you aren’t going to produce life changing income. So trade small. Make sure the amount risked is all but trivial. Get a track record of trades and once success is established, move up the risk a little and repeat. Keep making progress and keep performing post mortems on your trades! That will help you improve the quickest and get you back on track when things start going wrong.Pick a single stock and look at it every day If you follow one particular market day in and day out, over time you will see most every situation play out. That alone has great value, but even more important is that you will see it in context. You will see topping patterns after following it during a long uptrend. You will develop a deep perception concerning when it is over or under sold.A good selection for this is a market proxy such as SPY or a conglomerate such as GE. If you have a particular favorite you want to follow, but it is a bit focused such as Timberland, I say by all means but I would strongly suggest adding a GE or SPY or another along those lines.Each trading day look at the weekly, daily and at least one intra-day time frame. Not only will it further your education, it may lead to some nice trading opportunities!ConclusionAfter several days of thought, these are the best suggestions I have. However, I suggest that you each go through this exercise and document any ideas you would share if you could train yourself at the onset. Feel free to post the ideas to the blog and if this grows, I may talk to Alex and Kerry about combining the thread into a single document.Jeff P

Monday, a NYC investment banker I’m know began negotiations with three Slovenian scientists who may have invented the world’s most efficient street lamp. Thursday evening, my wife and I made Chicken Marbella for a brilliant young Indian/Brit banker who searches the globe looking to spend millions of pounds on cleantech and products like the Slovenians’ street lamps.Somewhere after the chicken and a bottle of pinot noir, the conversation with the Brit shifted from cricket and soccer to the Slovenians. Soon the ideas bounced across the globe, and all around the cleantech industry from biomass fuel generation to smart grids, from peak load management to zero energy homes. All of them part of the biggest, most powerful megatrend in human history.Since I own a mechanical engineering firm that works in the energy efficiency and cleantech industries, I am deep into this subject, which a few perceptive social-economists are referring to as the Third Industrial Revolution. Not to get too pedagogical, but industrial revolutions occur at the nexus between new communication technology and new energy generating technologies. The first was the nexus between the printing press and the steam engine, the second occurred in the later part of the 19th century with the invention of analog communications, and carbon-based energy generation. The 3rd IR is at our doorstep with the nexus of the Internet and renewable energy and smart grid distribution.What does any of this have to do with making money and trading stocks? Well, if someone had told you in the 1970s that the world was about to enter the information technology era, and that maybe you should buy a few shares of those new companies with odd names like Microsoft and Apple, would you have figured out a way to make a buck? If not, then gardening may be a better fit than trading.Just to give you some context. California’s 2010-2013 energy efficiency cycle is worth $3.6 billion. New York launched its own effort this year with a $1.5 billion initial cycle. The Feds poured about $250 billion into the energy efficiency and cleantech industries as part of the American Reinvestment and Recovery Act

[ this message comes from David C, one of our high-performing Members ]In the profession of trading or stock speculation nothing is guaranteed – there are only probabilities. A primary key to having a winning trade is picking the correct direction of the overall market. Nearly all stocks move with the market. Make an error at this point and a positive trade becomes much more difficult to manage while a losing trade becomes a much higher probability.I am seeing a disturbing trend among traders these days. It is a core problem that will eventually lead to an equity blowup and an end of their trading career. I am talking about not admitting when you are wrong.What we have to remember is that it is okay to be wrong, it is part of the trade so to speak. Even if you are a phenomenal trader, you will still be wrong -perhaps one-third of the time. Again, this is okay.What is not okay, is NOT admitted that you were wrong and taking the loss. Letting the loss get bigger and bigger because you want so badly to be RIGHT. If you do this, you will not be a professional trader for long.Do not let your ego get in the way of trading. Do not let any personal bias get in the way of trading. Do not double down on a losing trade. Do not lower your stops on a losing trade. Trading is, in my opinion, the most difficult profession to master. The “Mind” part of trading or controlling your mind and emotions, and that is what makes trading so difficult.Keep it simple – when you are wrong, Get Out. You have virtually no chance at success if you do not follow rule #1.David C

Old friends are special–we have history, and a depth of shared experiences that enriches the relationship. While its true with humans, I’m referring to agricultural were I spent so many hot, back breaking days of my youth harvesting California’s fruits and vegetables. I’m also referring to the agricultural sector of the stock market where I’ve traded the stocks–CAG, ADM, POT, etc. for several years. The stocks reflect the industry– slow grinders responding to the demand/supply patterns. Now, after a huge bull run from 07-08 and a subsequent crash that left the sector in tatters, the stocks are starting to show life again. Take a look at POT–similar to other ag chem stocks–huge run in 07, subsequent crash, and a year plus of sideways base building. Notice the elongated L, Alex’s Fallen Angel pattern. Notice how FI on the weekly chart is edging up from a shallow position–generally a sign that the institutions are accumulating stock. All things considered, POT should eventually see 175 again. We’re far too overbought on the dailies for new buys, but put POT and the rest on your watch list and pay attention when price on the dailies get oversold. The stocks in this group aren’t flashy, but they tend to trade consectively like the oil stocks used to, so you can rotate from one to the other, selling those that are temporarily overbought, and buying those that are temporarily oversold.

[ This post comes from Kim B – a SpikeTrade Member and a Ph D who in her previous life was an animal behavior researcher.