Lessons learned from other traders

1.) Lessons learned from Tuesday's CAF

David Hanson pointed 2 very good things to ponder when trading. For those who were not able to attend the CAF last week let me share to you those things, probably not the way he told it, but how I understood it and how it stuck into my mind.

Trade Confidently and Cautiously!

This was an advice David got from a fellow trader (forgot his name): Trade Confidently and Cautiously!
Trading confidently definitely saves you form having second thoughts during trading. For my case, usually second thoughts is one of the reason why I'm either shaken out of a good bullish move or dilly-dallying when to sell on a bearish move. The fact that I had second thoughts means I don't have a very good basis for executing a trade and so I wasn't trading confidently.

While confidence is important in trading, the other side of it, trading cautiously is just as important. Riding the break out or bull run without knowing your possible exits points or "plan B", is just too much confidence, without caution.

Make a business out of your trades

David also suggested to treat trading as if it is a business. Just like in putting up a business, you gotta have a business plan, and for trading, you definitely must have a trading plan.

Just sharing a thing that also stuck in my mind: The usual advise given when attempting to expand a business is to create a system that can be replicated. From my experience, I attempted to grow my trading "business" by increasing my fund. The problem that I encountered was that I didn't have a system that can be replicated in a different scale. The trades that I did in a small scale did not work well when I increased my fund. So creating a system that I could replicate is still a challenge for me. For now, I went back to having a small fund because that is what works well for me for the mean time.

2.) The Double Support Trailing Stop

I also came across a post from nix's blog Lone Voice (http://fromlonevoice.blogspot.com/) about "The Double Support Trailing Stop" by Rob Hana (http://quantifiableedges.blogspot.com/).

I find the post very informative, specially if you need to create a system for trading. It converts your "when to sell" gut feel in a bullish move into a replicable action. And since its replicable, you can back test it to see if it fits you.

StockWatch (Feb 25-29, 2008): PSEi, RLC, MEG

PSEi (Chart: Daily Resistance: 3170/ 3320 Support: 3000/2950)

The initial descending triangle formation that was spotted last week was broken down on the first day of trading but was able to recoup the loss and successfully close above the support line of 3170. However the support at 3170 was short lived as the index broke down last Friday with a huge spread. The TP for the breakdown is around 3000, which is also a psychological support. The next support is at 2950, the previous low. The interesting part is that if support at 2950-3000 holds, then the index is a possible candidate for a double bottom, a reversal indicator from the recent decline of the stock market from October 2007, but ofcourse this remains to be seen. The bad part of it is that if support doesn’t hold, and proceeds to takeout the support at 2870 from the previous low of August 2007, then we have ourselves a grim picture of a breakdown from a double top, but judging from the RSI level, I think the grim picture of a breakdown from a double top would be very small as the index is still currently near oversold level. For now, the trading strategy would be more of staying on the sidelines until a bounce happens. Keep watch also for other stocks that might be forming a double bottom, a falling wedge pattern or showing signs of a bullish divergence.


RLC (Chart: Daily Resistance: 12/14.50 Support: 11.25/10.50)

RLC is one of those stocks that are displaying a double bottom formation. Looking at its past movement, we can see that it has formed a H&S formation from Sept-Dec of 2007. It brokedown from this formation by the second week of December and has since been moving downwards. The target price of the breakdown from the H&S formation has been reached at 11.25 and was able to rally back to a high of 14.50 before moving downwards again. Currently, it seems that this stock might be forming a double bottom assuming that support at 11.25 holds. If support at 11.25 is broken, the next support is at 10.25 which is the support line extending from Aug 2007 up to Jan 2008. If it bounces from this support line, watch out for a bullish divergence formation for the MACD and RSI. As of the moment, both of the indicators still has the possibility of forming a bullish divergence. If it does bounce from support at 10.50, this gives more credibility to a possible falling wedge formation with resistance at around 12. For the bottom fishers, 10.50 would be a better level to get in and cutting immediately if it goes below 10.

MEG (Chart: Daily Resistance 2.44 Support: 2.20/1.90)

MEG is also one of those stocks that may be displaying signs of bullish divergence. Looking at the previous movements, the stock brokedown from a symmetrical triangle (or could also be a H&S formation) last Jan 2008 and has since been moving downward. From mid January, the price action moved sideways and as of last Friday it has recently broken down again from the sideward channel. Considering the symmetrical triangle where it initially brokedown from, it has now reached the TP of 2.20. But considering the sideways channel where it recently brokedown, we can still see further possible downward movement down to the 1.90 level. As of current this is a candidate for a bullish divergence as the price has formed a lower low, while the MACD and RSI is still way too far from creating lower lows, which means there is a higher possibility for the MACD and RSI to form a higher low. We can confirm the bullish divergence by an MACD crossover of the signal line.

In Retrospect: JFC

JFC

The breakout from the small downward channel for JFC was a bull trap. The price moved lower than the support to as low as 46.50. It is currently approaching another support level at 46. If support at 46 holds, then we might be able to see a pull back towards 48-50. The possible H&S and ascending triangle formation is still intact, so this stock still has hope, but not for now, we’ll just have to wait till the 52.50 resistance is broken.

Trading Blogsite: Lone Voice by Nix

Here is another trading blogsite that I frequently visit, titled Lone Voice(http://fromlonevoice.blogspot.com/) by Nix.

Read more, learn more!

ATCSI’s February CAF:An Absolute Date with the Philippine Stock Exchange

Absolute Traders will be having their monthly CAF this Feb 19 titled: An Absolute Date with the Philippine Stock Exchange.

Click on the link for more details.

http://www.absolutetraders.com/content/view/334/