Archive for June, 2009

 

A strip is a non directional bearish bias long option play. It is comprised of one call and two puts with the same strike and expiration. One may actually structure the trade with a greater ratio of puts to calls depending upon how bearish the trader wishes to design the trade. The risk is the debit in the trade and the reward is theoretically unlimited. Study the risk graph and you will gain insight into the risk and reward of this position. Best, Robin

ECONOMIC REPORTS

MONDAY 6/22

None

TUESDAY 6/23

Existing Home Sales

WEDNESDAY 6/24

Durable Orders, Durable Orders- ex Transportation, New Home Sales, Crude Inventories, FOMC Rate decision

THURSDAY 6/25

Initial Claims, Q1 GDP- Final

FRIDAY 6/26

Personal Income, Personal Spending, PCE Core, Michigan Sentiment-Rev

 

 

EARNINGS OF NOTE

MONDAY 6/22

SWHC, WAG

TUESDAY 6/23

CRMT, ORCL, SCS, KR

WEDNESDAY 6/24

BBBY, DRI, MON, NKE, RHT, RAD

THURSDAY 6/25

CAG, JTX, LEN, MU, PALM

FRIDAY 6/26

KBH, SJR

 

I have recently been working with several traders to help them improve their trading results and it became apparent to me that a vast majority of these traders did not have a trading plan.  I would suspect that this cross section sampling of traders is fairly representative of the larger group of retail traders.  Without a plan, you are destined to be pushed around by the whims of the market.  A lack of direction and continuity in your trading is the result of not having a plan.   Several of the people that I have spoken with have been trading for 20 plus years with spotty, inconsistent profits. 

 So, in an attempt to encourage you to realize the value of a trading plan, I have constructed a Trading Plan Template.  The template is comprised of a series of questions that are designed to make you think about your trading as a business.  Trading is, in fact, a business.  If you enter into business without a business plan you are setting yourself up for failure.  I hope that it gets you started in the right direction.  Best, Robin

Trading Plan Template

General

·     My Trading Day – Outline my typical day and the procedures I follow.

·     What Time Frame(s) Do I trade? – My approach will vary depending upon the timeframe.  Explain.

·     How Much Time Am I Willing To Spend in My Trading Business?

·     What is My Time Horizon – am I trading for monthly income or am I trading for growth and when will I need the money.  Explain.

·     Do I have a thorough understanding of the risks involved with trading?  Explain.

·     Do I have a clear understanding of my risk tolerance?  Explain.

                       My Account

·     How large is my account and what percentage of my account am I willing to put at risk?

·     Is my account qualified or non-qualified.  (IRA or Regular)

·     How will I allocate my capital? (diversification and position sizing)

·     Who is my broker?  Is this the best choice for me?

                     Trading Goals

·     Outline my specific goals and objectives and present justification as to how I am to reach these goals.

·     What strategies and methodologies will I implement in order to achieve my expectations?

·     Do I have the knowledge required to implement the aforementioned strategies?

·     If I am lacking in that knowledge, what is my plan to acquire that knowledge and experience?

                   Account Management

·     What is my plan for capital preservation?

·     When will I make my trading decisions?  (During market hours or end of day)

·     What is my process for performing my due diligence and when will that due diligence be done?

·     Do I have clear and precise entry and exit criteria? Explain.

·     What is the maximum number of positions that I can effectively manage at any given time?

·     Will my time allocation and strategy implementation allow adequate time to monitor my open positions? Explain.

·     Do I keep a daily anecdotal journal to record my trades as well as my emotional response to the trading activity?  Explain.

·     What is my procedure for managing my open positions?

                  Psychology of Trading

·     Is my psychology well balanced regarding the market and how it integrates with the rest of my life?

·     What are my strengths and weaknesses?

·     Have I designed a plan to reduce or eliminate my weaknesses? Explain.

·     Do I have a trading partner(s) to exchange ideas with and to hold each other accountable to our respective trading plan?

·     Have I planned periodic vacations from the trading business?

·     What is my plan for the Market while on vacation?

                       Miscellaneous

·     Do I have a continuing education plan?

·     Who are my resources for assistance?

·     Do those closest to me support my efforts in the Stock Market?

                        Plan Summary

·     Summarize the plan.  The plan must be a “Living, Breathing Document” that will be strictly adhered to.  Include a list of trading rules that must not be violated.

 

 

 

The SPX continues to go sideways right at the 944 swing high from 1/6/2009.  We have a Bull Flag that moved through the 200 SMA on June 1^st and has essentially flattened out since then.  The current breakout high from the flag is yesterday’s high of 956.  A break and close below the 200 SMA and then subsequently the 50 SMA would portend a bearish trend reversal.  930 and 875 are key support levels.  Don’t try and guess direction coming out of a consolidation pattern.  Just wait for the market to commit to a direction and play it accordingly.     

The DOW ended the week with its 9^th narrow range, flat session in a row.  Volume has been decreasing which confirms the lack of short term interest in taking the index higher.   Both the SPX and the DOW are poised to go higher as soon as they poke their heads above the high in the flag with some convincing volume.  The 200 SMA has acted as solid support for the DOW with the next stop on the ‘Bull Train’ at 9088, the swing high from 1/6/2009.   The SPX is targeted for 1007.

The COMPQ looks like it’s forming a rounded top just shy of resistance at the gap at 1905 from 10/6/2008.  This index has been the leader since the March lows and I don’t anticipate that changing.  Look for the index to challenge 1905 soon.

Week over week, the DOW was up 36, the SPX better by 6 and the COMPQ increased by 10.  Learn to make money in the Stock Market!!  Click Here!!