Hedge Fund LIVE - An Interactive Trading Community

Tag Archives: Technical Analysis

A Guide To Controlling Your Profit and Loss (P&L): Lose The Ego and Find Your Self.

A Trader Confuses Their Ego With Their Self

My ego took over; I gave my entire month back in two days and then proceeded to go negative on the month. Today I began the journey back, booking $10,000 of profit. I despise my ego. I am not talking about the “ego” that is high on itself; I am talking about the ego that intentionally sabotages your self-discipline. I am talking about the ego that I am in a battle with. Until the ego is eliminated, one’s abilities trading or otherwise will forever be limited. The ego represents attachment. Attachment breeds greed and emotion. When one is attached, they fear losing that which they are attached to. Suppressing the ego as a trader is perhaps the most difficult of journeys. As a trader, one is constantly measuring self worth by a number on a screen. A trader is attached to the number on the screen. In the Yogic tradition we are taught to “be in the present”. Nowhere is that more true than in trading. The dichotomy for me is that a trader’s ego predominantly exists in the present and it is always attached to the screen. As such, the present is one long internal battle. It is the “self” that I strive to be. As the self, I will realize that the emotional swings I experience when my ego prevails are not a true reflection of me, but actually the antithesis. I lost the battle last week. That is behind me and I continue my journey. But how does a trader rationalize no attachment to the changing value on his monitor, yet at the same time the trader’s entire focus is on maximizing that value. One can only conclude that the present is about the decisions not the number. The trading decisions must always be made from an unemotional and unattached

A trader's ego is both a reflection and a number on a screen

position. The Profit or Loss will then be what it will be. While the mind may be elated by profit and distraught by loss, neither is a reflection of the self. It is not the changing P&L that is affecting a trader emotionally. It is the mind’s and the ego’s attachment and perception of that value that destabilize the individual. Control the ego and you control the emotions. Control the

A Trader Searching For His Self

emotions and you control the decisions. Discover your “self” and you are in control of your ego; you are in control of your trading. As I said before the number will be what it will be. But you certainly will improve the odds by finding your “self”. I am still looking; please let me know if you find mine. I can be reached at HedgeFundLive.com. Thanks.

What’s Next..

Markets need to breathe, and we’ve had some blow off the last few days.
E-Mini S&P finished Friday up 3.5 at 1279.75 which was 8.25 pts. off the high and 6.5 from the low.
The close below the 9-day moving average is a negative short-term trend indicator.  The next
downside support is at 1272.25, and then 1265.50.  Resistance is 1287 and 1295.

Nasdaq really gave it up at the end of Friday, but I believe there was a lot of options expiration trading that contributed to the move.

Overall I am still bullish, as indicated by positions: Long 10 e-mini S&P and long 23 emini NQ and net $411,000 in equities positions.  I am long BAC HCBK and WFC, short small DB because its had a powerful run-up.

I plan on being opportunistic this week.  I will be paying close attention to sectors where I see money flowing into or out of, and don’t expect to ‘broad stroke’ the market.  CEO Jeremy Frommer said numerous times this week that its been ‘fast money trading’, not institutional money flow.  I will be on the lookout for where they are putting their money to work.

GOOG: buy-write strategy

GOOG broke to fresh two year highs yesterday, above the 630 level. The stock reached as high as 643 before falling back the 630 level, which now acts as support. A simple strategy to take advantage of this is a buy-write strategy: 1. Buy the stock, GOOG probably won’t plummet anytime soon; 2. Write calls, preferably at or above the 650 strike (out of the money). The calls are overpriced right now, and expire this week. This makes for a quick options play, with downside risk limited to the loss on the stock price (if it goes down) minus the premium received from the calls. If you take this trade make sure to remain close to delta neutral, rebalancing the shares for the next few days will be key.

Market Predictions, New Years Resolutions and The Year that was 2010…….All Employees Must Wash Hands and Read This Blog

Saad - Vintage 2010 "He is our future at Hedge Fund Live"

This will be a long year. Barring an extreme exogenous event such as a major terrorist act or an all out collapse of the European union, I expect the market to end strongly this year. I expect it to be a slow steady grind all year as opposed to a gappy volatile run. I also expect a number of records to be broken, such as most consecutive days in a row up on the S&P. As such I expect to

New Years Resolution - Spend More Time With Saad

see a near 1400 close on the cash. Let me be specific about the European Union. A difficult restructuring of sovereign debt, even a loss to some senior lenders, even a bailout of Spain does not fall into exogenous events. In-fact these events are expected. The open issue, is how orderly the Union deals with the problems.

That said, the art of investing, the sport of trading and the millions of athletes that run the race, have just finished a strong season. It is time to rest a bit. Warm up, practice, and take a few lay up games. Reassess the competition and the ever-evolving landscape of the sport. While I believe the market moves higher over the first quarter, I expect it to be a modest 3% - 6%. It may seem odd to refer to this as modest, but the times they are a changing.

I am looking forward to a consistent trading environment with ample opportunity for singles and doubles and an occasional triple. The time for home runs is behind us for now. Low concentration and high diversification. 2X to 3X leverage on any extreme move.

Saad and I make new friends

On the long side of the market I am looking for 2 types of names. Names that have been beaten up in the past 6 months due to earnings, margins and business or consumer related issues. BBY, CSCO, Bank Names, YHOO, GNW, THOR to name a few. I still believe that the fundamentals of these types of companies remain intact, and that an improving economy and a grind higher market will give you the biggest bang for your buck in these names. Secondly, I will be looking for LBO related names and Merger and Acquisitions plays. Names that should be taken out, names whose independent business models can be taken no further but can be absorbed into a broader infrastructure that can reshape the companies direction. SVU, IMAX, PLCE, STX, AONE, GAIA, TTWO, GME.

On the Short side I will be looking for names that have been on a tear, where expectation far exceed the reality of the trading levels. I will be looking to sell bubbles and high short interest names. Names trading near 52-week highs that I believe fast money will shift out of. CLF, LULU, XOM, QCOM, KSS   etc etc etc.

As I said in my previous blog, my plan is to take trading and things in general day by day for the next couple of months. Life, day by day. We have had a strong opening performance for the firm MTD, up over $150,000. The chemistry on the desk is evolving, and while it has taken a year to get here, the progress over the last month has been remarkable. Caroline remains my trusted right hand. Jeff Tynik and Zach Guterman, have truly come into their own as traders. They will have long productive careers ahead of them. Betty Lee has transcended both trading and business and is an integral part of the Business execution plan. The return of Mark Moskowitz, and addition of Jach Shuman have substantially added to the collective intelligence. Saad and Judah have built a foundation for our business and have proven to be

Saad wears a special brain cover when programming

one of the most unique pairings in entrepreneurial history. Kandace and Lamont have allowed me to see through my vision of merging media with a trading desk. They have added a touch of class to a previously raw process. Dean’s consistency and discipline anchor us all. His wisdom and broad perspective help us stay grounded and true to our discipline. Marc Schwartz’s trading prowess and leadership are cornerstones of our profitability. His grounding and calmness under volatile and difficult trading and business environments help us control losses and maximize gains. My intention is to add 2 to 3 more individuals to the collective, as well as fully fund 5 – 10 university desks and integrate their perspectives as well into the broader collective.

As we enter year 2, I am left with a number of business thoughts.

Without vision there is no business.

A business begins with an idea, but the vision takes time to come in to focus.

It needs experience to grow.

It needs failure to have clarity.

It needs success to have direction and focus.

My vision for the business while broadly consistent still changes on a daily basis. Each challenge causes reflection and reevaluation. I see a merger of media and finance, an intense website and an intense trading desk, transparency and real time investing, real time education and real time experience, and collective intelligence imbedded in a proprietary trading environment. Collective intelligence that is exposed to and thus strengthened by the website’s membership community.

Saad is making the mustache cool for kids of all ages

The first year has had many setbacks and expensive mistakes. I would not change a thing. All has been as it should have been. While at this nascent stage I am approaching the business day by day, I am significantly more confident with the future. I look forward to the challenges that are ahead of me.

Pumped up to teach again

I love to trade, anyone who has listened to me speak on the topic or sat next to me on a desk knows this fact. I have also learned that I love to teach trading and my passion for teaching is equal to trading.

I don’t understand why this has surfaced later in my life, but there is something rewarding about sharing information, helping people to better themselves and seeing the results of our collective hard work. This is most likely the reason that I am back at Day Trade Well and doing my own thing as opposed to being at a prop firm.

So I am very excited to be back in this role and if you have watched me the last two days I am excited to fill up this empty room with traders. Please feel free to send in trade chats or you can email directly [email protected] if you have any questions about my trades or my teaching.

I look forward to helping you all improve in your trading.

Upside Breakout: (URZ)


An upside breakout occurs when the price of a security breakouts out through the top of a trading range.  This indicates that prices may rise rapidly over a period of days or weeks in an almost parabolic move.

Important Characteristics

Duration: The duration of the trading range for which the breakout occurred will provide an indication of the strength of the breakout.  The longer the trading range the more significant the break.  Although, if a stock breaks out from a narrow trading range the break is considered more explosive and reliable.

Target Price: In this case, a bullish breakout, look for the next level of resistance as your target.

Moving Average Trend: Look at the direction of the moving averages for confirmation.  If the 50 SMA (Use for shorter term trades) reverses course from down to up when the stock is breaking out you can feel confident of the move up to the next level of resistance.

Volume: A strong spike on the day of the pattern confirmation is a strong indicator in support of the potential for this pattern.  The volume spike should be significantly above the average of the volume during the duration of the pattern.  The volume during the duration of the pattern should be declining on average.

Example:  (URZ)

Upside Breakout: (URZ)

Hillside Scans update

We wanted to keep you up with the progress on the the Hillside Scans we have been posting on HFL since 11/29/10. The 6 scans that we have been running have outperformed the S&P by 29.73%.In getting to that number, you need to understand that some of these Scans are meant to be shorts (Downtrend w/ stochs above 80,declining money flow,strong volume decliners). So as an example, Declining money flow is -8.21% vs the S&P but for our purposes , we would be up 8.21% since we would be short those names.In looking at the data, we decided to start trading the scans LIVE as a “pair trade”. 6 days ago we set up the following pairs..1) Uptrend w/ stochs below 20/Downtrend with stochs above 80 2)improving money flow/declining money flow 3)strong volume gainers/strong volume decliners….We run the scans daily at around 3 PM and we enter all our orders as MOC orders (Market on close)..No matter what happens, we keep the positions for 5 days and exit them on the close the same way..The results so far have been mighty impressive as we are up 20.57%. With the market in an uptrend, one might have thought that the longs would be far outperforming the shorts but its been quite the opposite.The longs are up only .22% but the shorts are up 20.35%.As a reminder, you can see all our data in the ANALYSIS section of HFL under Hillside Scans……Feel free to respond back to me with any questions and i will be keeping everyone up top date as to our results……

S&P Technical Analysis and Charting In December = “CHART THIS MOFO”

S&P Technical Analysis - Emotionally Disturbing Process

The lines on the charts over the month of December represent emotions not technical’s. I can feel the emotion in the air. It is end of a long and difficult year as we emerge from the worst financial crisis most of us have ever seen. We have a long way to go before we find our way back to our highs, but it is time to put the emotions behind us. From the close of 12/9/2010 till the close of 12/14/2010, four trading days we gained 11-½ point in the S&P cash. Today we lost 65% of that gain. For the total five days we gained a whopping 5 points.  In the last 3 days our portfolio gave back 65% of the gains we had made for the month going in to Monday morning. My team will give me numerous answers as to why. But the bottom line is, that it has been an extremely difficult market to trade, as certain names have moved significantly while it appears the underlying market has been stable. But, alas, the names we were long, were for shit, and have crushed us these last few days. So be it. I am quite Zen about the whole thing, though Dean seems to feel differently. Schwartz, well I can never quite tell what he is thinking, but in either case I kind of feel like WTF? They both think that the market and the fluctuations in the P&L psych me out. Not true. We got into a heated debate as to my use of the word “APPROCH”. Again WTF. I will pick another word if that one doesn’t work for them. As the Buddha said  “However many holy words you read, however many you speak,

S&P Technical Analysis - Marc Schwartz and Dean Machado face me down

what good will they do you if you do not act on upon them?” Now I am not saying my words are holy, though every so often i do……..But either way the time to analyze your methodology, to reassess your strategy, to rethink your “APPROACH” meaning the way you size in to a position and how rapidly you do it, is when you have strong hands. Even a novice knows that when one is losing money it is time to reassess, but the professional knows that when they are on a run, half of it is luck, the other half is skill. But when the luck runs out, all the skill in the world will not compensate. No run lasts for too long. Luck arrives randomly and leaves unexpectedly. Reassess your “approach” or whatever other word you want to use, before your luck really runs out.

Dean and Marc, was that any better?

Hillside Scans

Over here at Hillside Funds, we spend a lot of time on our automated trading.As part of our daily routine, we end up doing a lot of number crunching and analysis. Going forward, we will be posting daily On Hedge Fund Live a section called Hillside Scans. This catagory can be found in the ‘ANALYSIS” section. On the close every day, we will run our scans and list the stocks that fit our criteria. We will then watch them , on a day by day basis, and see how they perform. In addition, we will compare their performance to the S&P 500. Most of these scans will be self-explanatory (Strong Volume Gainers) and if you have any questions, feel free to post.

Hedge Fund Live Comes To Westchester

Jeremy can really take a punch. I haven’t seen anyone take more hits and keep coming back for more since Chuck Wepner the “Bayonne Bleeder” got knocked upside the head by Muhammed Ali.
Time and again he would corner someone…  “Hey Tim, when are you going to post a blog”? TIm would respond, “I’m following Steve’s lead”. JEREMY: TIm,what about blocking out a time for a show and putting it on the schedule?” TIM: “I will work my way into it “.  JEREMY: Tim, if you want me to f-off just tell me.TIM: Jeremy F-off.  JEREMY: Ok TIm, but you know Steve already has a show on the schedule so maybe you want to schedule one.TIM: Ok Jeremy I will get to work on it when I have some time.  JEREMY: Great TIm ,I will be back in 10 minutes and we can work on it.      or the next one…….
JEREMY:Hi Morris, how about we video a segment with you right now? You can tell us what you think about the Sephardic perspective on trading.  MORRIS: Huh???? JEREMY: Yeah you know, give the HFL audience a chance to get to know you. MORRIS: Uh ,I don’t usually do interviews.. its not really my comfort zone.  JEREMY: Morris, just make believe your at a bar mitzvah and someone sticks a camera in front of you and you have to congratulate the family.  MORRIS: Jeremy, I have to go the bathroom.. I will be right back.JEREMY: Thats ok Morris, the stalls have doors so we can just take the audio for now and do the video afterwards and dub it in back at the home office. Tynik, work with Morris!
And on to the next one……….JEREMY:Jerry, Tim ,here’s some notepads. Every time Cliff speaks write it down. If he makes any faces videotape it. Start noticing his mannerism’s and sayings and post it in his glossary. Don’t worry about the market… Cliff is good enough to trade without you and this is how you can really provide value to him.JERRY AND TIM: Jeremy, if we do that ,he’s definitely going to fire us!!  JEREMY: No way!! he told me that this is what he wants you guys working on.
And to the next………JEREMY:Jared, good blogs.. you need to do some more and coordinate everyone elses blogs and glossaries in your room……… Jared would never say no to anyone and obliges dutifully. Jeremy moves on to Perry’s room and Jared turns to Steve his boss and asks,” Who was that?????
And the next…………JEREMY:Hey Darren, you want to work on a blog?DARREN: No! JEREMY: When do you think you can start?? DARREN: Soon as I start making some money! JEREMY:Darren ,we recently did a study of all trader bloggers and we found that trading p&l improved by 300 percent for each blog a trader wrote.DARREN: Ok ,I will try and work on one when I can focus on it. JEREMY: Darren ,if you want to tell me to f-off just say it.DARREN: F-off Jeremy. JEREMY:No, not to my face Darren just write it as part of your blog!!
And next…………JEREMY:Nice blog Jody. Now thats some good content. Great stuff. How about you Jonathon ? JONATHON:I don’t blog! JEREMY: It doesn’t have to be about stocks. Whats your favorite movie? JONATHON:I don’t go to movies!  JEREMY:How about TV shows.. do you watch Entourage? JONATHON:I don’t have cable.. JEREMY: Well, maybe network shows then. JONATHON:  No TV!   JEREMY: Jonathon, you seem kind of quiet.. do you consider yourself introverted?  JONATHON: Huh???   JEREMY: You know are you a loner….  JONATHON: Well, im not going to come to the office and go postal or anything if thats what you mean!! JEREMY: Thats great stuff Jonathon, let’s get that on camera.
Next……….JEREMY: Cliff, would this be a good time to do an interview?  CLIFF: Not really Jeremy ,it’s 3:45 and I have 12 million in inventory and i need to get out by the close. JEREMY: Ok, I understand.. how about if we just do yes or no questions??  CLIFF: No Jeremy! JEREMY: Come on Cliff, you can just blink your right eye for a yes and your left eye for a no. CLIFF:No Jeremy! JEREMY: Ok, I will pick you up at your house tomorrow and I can interview you in the car.  CLIFF: For a blog?  JEREMY: No, I want to record it. CLIFF: You mean an audio? JEREMY: No, I want to video you. CLIFF: I don’t like to do video Jeremy.  JEREMY:Perfect, then I will meet you at the office and we can do it there instead!
JEREMY:Sam, I am so pumped about this business… your guys are the best we are going to make hundreds of millions on this project!!!                How can you argue with that logic?