Tag Archives: Stocks

State of The Market

It’s that time again. I’ve been quiet on the blogging and videoing front. When that happens, as predictably as the sun rises in the east, I get emails asking how the market is. The last few weeks have seen a rash of these for some reason, and they all say more or less the same thing: how are you trading now the market is so constrained and stocks aren’t moving like they used to?

Here’s the thing: suggesting that stocks aren’t moving like they used to is, to put it politely, nonsense. Sure, markets as a whole go through periods where there is less activity. You can look at an index like the NASDAQ 100 or the S&P 500 and say that it did nothing all day. But that’s a macro view. Zoom in, look at the individual stocks, and you will absolutely find some that have put in stellar moves during the day, no matter how “flat” the index says the market was.

In all the years I’ve been trading, I’ve yet to see a day when there weren’t at least a handful of stocks that offered up easy trades. Yes, there have been days when I didn’t find them in time, but they have always been there.

So here, in an attempt to make a point, I’ll show you five stocks I traded last Friday (29th May). There’s nothing special about Friday. On the contrary, I have chosen it for its very ordinaryness and the fact that because I’m writing this on Monday morning, it’s the last day I traded, so I don’t have to go further back in my trading log!

Let’s have a look at some charts (clicking on them opens larger versions).

HRTX

HRTX 290515Look at that chart and tell me there aren’t active, trending stocks out there. There’s over four dollars of movement in this chart, and on a stock priced at around just $20, which means it doesn’t require a huge account balance to trade a decent size.

I got in this one at around 17.60, and out again at 18.50 when it started going sideways, taking 90 cents profit per share traded. That’s $900 when trading 1000 shares.

Then, because I was still around, I had another go at lunchtime, getting in again at 19.05. I took half off at 20.00 for 95 cents, and let the other half run on, eventually getting out at 20.50, for 145 cents per share.

Profit on that second trade then, was $475, and $725 for the second half, for a total of $1200.

Remember, that was the second trade. Add in the first, and that means $2,100 profit on just this one stock.

But of course, there wasn’t just one stock to trade…

GILD

GILD 290515At first glance this chart looks less smooth than the previous one, but as anyone who’s read my book will be able to see, there was a classic entry signalled early on in the morning. I got in around $112.70 (I’m rounding up and down a cent or two here to keep things simple), and then was out by $112.40. I’ll be honest, I let this one run too long, I let it come back too far.

Result: 30 cents, or $300 profit on 1000 shares traded.

Guess what? This one gave another entry, too. A lovely double bottom, or reverse head and shoulders. Whatever you want to call it, the change in trend was clearly signalled. So I got in again at $112.60 when it took out its previous high after the double bottom was formed, and I rode that sucker up to $113. Again, book readers will know why. That was a straightforward 40 cents, or $400 on 1000 shares.

If I wasn’t as lazy as I am, and traded the afternoon session as well, I could have ridden it back in the afternoon with the clear signals it gave (break of support anyone?), but I am that lazy guy, and I like spending time with my family.

WFM

WFM 290515The range on this chart isn’t as impressive as HRTX, but they can’t all be mega-winners. The chart itself is a lovely long down trend. You could pretty much short anywhere, hang on, and cover for a profit. Me? I was in at $41.95, then out again at $41.65 for a stress-free 30 cents, or $300 on 1000.

There was another easy trade to be had after lunch at around 41.50 based on support and volume. Using the EMA as an exit signal, I could have ridden that down to 41.10 for an extra 40 cents a share, but I wasn’t in front of the screen then. The point is though, that the trade was there for the taking. Another opportunity in this so-called “constrained” market.

QCOM

QCOM 290515I keep this sucker on my core stocks watchlist, and have done for years. It comes and goes, but when its working nicely, it’s a reliable little performer. Bit of a tip for you there. It doesn’t give me a trade every day, but when the signs are good, it’s a banker.

Friday I was in at 70.20 on a classic entry setup, and out at 70.00 for a quick and simple 20 cents per share, or $200 profit on a 1000 shares, in around 15 minutes or so. You’re never going to get rich on trades like that, but they help plump up the coffers.

AAPL

AAPL 290515I’ve left this until last because Apple is a bit of a beast. It was out of range for most people for a long time, then they did a stock split and the price came back within reach. Now it’s on the upper-end of reasonable again, but if you size your position to take account of that, there’s no reason to miss out. The smaller size you trade is usually offset by the higher profit the trade can generate.

Because Apple is a volatile little so and so, it needs more wiggle room than lesser stocks. However, the patterns still work, and frankly if you’ve got the nerve, you could almost make a full time living trading just Apple (not that I would ever recommend sticking to one stock. Nothing is a dish for every day…)

So, Apple. I was in at 130.95 (classic entry pattern again) and back out of my short at 130.20. 75 cents a share, or $750 on 1000 shares traded.

And what’s this I see? A nice double bottom and a new up trend. That was heading into lunch, and I was busy with other trades, so I left it alone.

Anyone coming back and watching after lunch would surely have spotted the even nicer double top and break of support that happened early afternoon. That led to a nice trade opportunity with a good 40 cents per share profit to be had.

Summary

I’ve waffled on longer than I intended, but there are a few things I want to summarise here.

  • As you hopefully noticed, these charts all offered more than one trade. If you miss a trade, if a trades turns up a loss, or even if you make a brilliantly profitable trade, don’t then write the stock off as being done for the day. Nothing says you can’t have two bites of the cherry.
  • None of these stocks were difficult to find. Two of them were on my core stocks watchlist. The others presented themselves through my pre-market homework.
  • There are always stocks that move like this, every day the market is open. Find these easy setups, and the trades themselves become simple. I’m not going to resort to a cliché like “shooting fish in a barrel”, but you know, it’s heading in that direction.
  • There were undoubtedly plenty more nice trades that passed me by. These are just the ones I caught.
  • Yes, I’ve cherry-picked the winners for this blog post, because the point I’m making isn’t that I’m some wonder-trader (I’m not), it is purely that there are always nice trades to be had. I made two losing trades on Friday, too. And guess what? The total losses from both of them came to less than $100. If you’ve added up the winners in the charts above, you’ll see the profits were $4,150 for the morning (that’s just the trades I took, not counting the later trades that I wasn’t around for). So even taking those couple of losses, I still made more than four grand in a morning. You could cut the size of each trade by four, trading just 250 shares a go, and that’s still more than a thousand dollars profit.

That’s it, I think I’ve rattled on long enough and made my point. In answer to those asking how have you adjusted your trading in this market? the answer is I haven’t. I traded exactly the same way on Friday as the Friday before, as any Friday (or any other day of the week) a year ago, or ten years ago. And when I’ve finished typing this post, and after I’ve done my pre-market homework for the morning, I’ll be trading just the same way today, as well.

Good trading!

What To Trade?

There are all sorts of things out there to trade – futures, forex, options and stocks being the most common. In this weeks video I discuss the relative merits of each, and why I choose stocks (and recommend them to others) above all else.

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Choosing A Market on A Budget

Jose asks:

“I was wondering what do you recommend I do with a minimum capital of about 1600 dollars? What should I trade?”

Lots of people have this kind of question, so perhaps my reply will be of use to others:

A budget of $1,600 is quite low, but certainly not uncommon. Given that amount, I suspect most people would suggest forex, because it’s easy to open an account with a deposit of that size.

Forex is also easy to trade on massive margin, giving you lots of leverage. If you’re a beginner, that’s a very dangerous thing indeed. Leverage makes it very easy to lose a lot of money very quickly. As traders, our first priority is to preserve capital.

As you probably know, personally I prefer trading US stocks, because I believe they are one of the easiest markets to make consistent profits in.

The sheer number of stocks available, and their predictable nature, means that you can find good high-probability simple trades every single day of the week.

So my recommendation would be to find a way to trade stocks with your budget. A regular account will let you day trade a couple of times a week. If you hold overnight, you can trade as often as you want.

If you can get a CFD account (which depends on where you live), then you can day trade as often as you like. If not, there are other options such as umbrella accounts, which can overcome the 2 day trades per week limit for accounts under $25k.

Having said all that though, your priority should be to learn to trade without risking any real money at all. Make sure you’ve learned the basics, and have a solid strategy ready to trade. Practice that strategy inside out on a simulator, or on paper, and *only* risk real money once you’re consistently profitable.

A lot of traders dismiss paper trading saying it doesn’t accurately represent the emotional and psychological challenges of live trading. That’s true, but that also means if you aren’t profitable paper trading, you have very little chance of being profitable in live trading.

In summary then: Learn the basics, then pick a strategy and practice it on paper until consistently profitable. Then open an account and start trading with that real budget. If you follow those steps in that order, the choice of market will already have been made by the time you get to the opening an account bit.

Hope that helps.

Where’s Harvey?

I know, I know, it’s been ages since I’ve posted anything! There are two main reasons for this:

1. The markets, as always, are so full of wonderful trades, sometimes it just doesn’t leave time to post.

2. I ran out of things to say.

That second one is the main issue. My last series of videos reached a natural conclusion with the final Let’s Get Practical film.

Doing more live trading videos isn’t really where I want to go, because they are of little value (they’re all the same after a while) and because they cost a lot in lost revenue while recording them (for various reasons I won’t bore you with).

Doing more content-based videos I think gives more value, but I want to make sure they are genuinely useful. So if you have suggestions for topics you’d like me to cover, do get in touch and let me know.

Anyway, back to trading. As I mentioned, the markets are awesome right now. I keep getting emails asking “Does your strategy still work?” or “Are you still trading?” etc.

Listen: a properly developed strategy that is based on fundamental market mechanics (or “price” as I prefer to call it!) will always work. My strategy, as anyone who’s read my course knows, is based entirely on price, not some wonder-indicator that only works in market that happens to be doing one particular thing – be that going up down or sideways.

As long as prices move, the strategy works. And prices move every day the market is open. All you need do is find the stocks whose prices are moving the most on any given day.

There are various ways of doing that, but here’s a really really simple one you can use right now: Pick 25 Nasdaq 100 stocks that fit in your price range.

In other words, make your daily watch list, a list of 25 stocks that come from the Nasdaq 100 list. Pick stocks that are trading within your price range as defined by your money management strategy. For example, stocks priced between $10 and $30.

It’s hardly scientific, and it’s certainly not the most efficient way of selecting a watch list. But as many people try and over complicate things, it’s as good a way as any of “dumbing down” and actually getting started (on paper, naturally).

Here are three trades from Monday that were Nasdaq 100 component stocks:

AAPL:

AAPL-190410

Ok, possibly a bad example I know, because it’s a high priced stock. Don’t forget though, with dynamic sizing you can make most stocks fit most budgets. So if you can’t trade 1000 AAPL shares, why not trade 100? It moves so well you can still make a good profit with smaller size.

Mondays trade went something like this (numbers relate to the circles on the chart):

1. Entered a short position.
2. Covered the short for +$0.50 (= $50 @ 100 shares, or $500 @ 1000 shares)
3. Took another short
4. Covered here for +$1.50 (= $150 @ 100 shares, or $1500 @ 1000 shares)

So even trading just 100 shares, there was a straightforward $200 profit to be had. For those who prefer the afternoon session, have a look at that lovely rally in the last couple of hours – easily $2/share to be had there (so another $200 profit if trading just 100 shares).

Right, next one:

AMZN:

AMZN-190410

1. Took a short
2. Covered for break even
3. Took another short on the break of the very obvious support
4. Covered for +$0.70 (= $70 @ 100 shares, or $700 @ 1000 shares)

And again, a lovely rally in the afternoon session, worth another $1/share without any trouble.

One more…

EBAY:

EBAY-190410

1. Took a short here
2. Covered here for +$0.20 (=$20 @ 100 shares, or $200 @ 1000 shares)

Ebay is a much lower priced stock, so although the profit per share was much lower than the other two, you could easily trade larger size to make up for it.

So there you have it – three Nasdaq 100 stocks providing simple trades. Now Monday was a particularly easy day to trade, but the point is there are easy trades like this every day – if you look for them.

New Year: New Goals

Happy new year to all! With the holiday season over, and ‘back to work blues’ kicking in for many, here’s my take on the start of a new year.

In this video, I also reveal my recipe for finding those easy-to-trade stocks out of that great big universe I mentioned in the last film.

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