New Trade - DOW

"The blessing of the LORD brings wealth, and he adds no trouble to it."

Proverbs 10:22

I've gotten into another blessed trade, and there'll be no trouble getting profits from it.

Here's the chart for DOW:

Ideally, I should have gotten in on Friday instead of Monday - however, since I don't live in an ideal world I had issues - namely internet connection issues. This brings up a very relevant topic. Once you are trading LARGE AMOUNTS OF CAPITAL, then it would be most necessary to have at least one, if not two, wireless air cards for your computer. I would lean towards having two different air cards from two different wireless providers IN ADDITION to your normal internet connection.

This may sound insane, but I have had MULTIPLE instances where I was either in a trade that I desperately wanted out of, or wanted to get into a trade and could not because my wireless connection was going bezerk.

I personally know of a few traders that have multiple wireless services so they never get into a bad situation. The feeling of complete helplessness is not a happy experience and once you are trading large amounts of capital you could be at risk to lose major money if you can't trade properly due to something as stupid as internet connectivity.

Okay, back on the topic of this trade. So, I got in because we had 2 (actually 3) closes above the last significant high. This tells me that where the sellers USED to be (i.e. the last significant high) that they are no longer a force at that price because the buyers were able to have 2 consecutive closes above that price. Yes, the sellers are still around, however the majority are probably backing up and going to possibly defend the next "line in the sand" (i.e. resistance). We've gotta pull up a 3 year chart to find this next line of resistance. Here's the chart:

The next level of resistance is approx $36. So, I'm going to look to take profit just shy of that - around 35.75ish.

I bought a January Call Option for $3.25. My target is around $35.75, my stop is 2 levels below, around $28.80.

Since NOBODY but GOD knows what's going to happen, then we just wait and see what happens. Remember, we have the edge of probabilities in our favor, and more importantly, we've got GOD!

My Trading Style and Philosophy

If you've either followed this blog since day 1 (you poor soul) or if you've just scanned through the trades here and there, I'm certain you noticed that overall my trading style seems to be schizophrenic at best.

You are completely correct, however it's been that way since I first started trading. I learned many different styles of trading and it's taken a VERY LONG time to determine my overall trading style and philosophy.

But, I've come into some MAJOR REVELATIONS over the past six months or so. First of all, I believe that the high/low system that I trade is a gift from GOD. If you don't believe in GOD, then I'm sorry - but you're wrong, as there most definitely is a GOD and he wants us to be blessed.

Secondly, I needed something to go with my high/low system that would work "in between" my high/low entries. This second style of trading can be called "flags" or "pullback" trading.

So, I got my trading systems finally in order. At some point in this blog I will expand on each system. However, if you pay close attention, you should be able to understand most of each system before I explain them.

But what I really want to harp on right now is the BIGGEST SECRET TO TRADING SUCCESS OR FAILURE: YOUR MENTAL STATE!!

What's your mental state for the pictures below? I.e. - what do you see??

I just got done reading an e-book titled "Trading In The Zone" by Mark Douglas. I WISH I READ THIS BOOK BEFORE I EVEN STARTED LEARNING ABOUT TRADING.

By and large, this is the absolute best book I have read about trading. It does NOT teach you how to trade - there are plenty of places elsewhere to go for that. What it DOES DO is teach you how to get your mind right, just like this guy was trying to do in the movie:

Anyway, here's the bottom line of the book - you WILL NEVER know what direction the market, and your trade, is going to go. Only GOD Himself knows that. You may THINK you know, but you don't.

Since you don't know for ABSOLUTE CERTAIN which way the market, and your trade, is going to go, then the best thing you can do is trade with an edge. "An edge" is your specific trading system (like the one I'll explain here at some later point in time). Once you have an edge, then you know that over time, your edge will give you profit. You MAY NOT PROFIT on every single trade. You SHOULD EXPECT losses. However, over time and with lots of trading, your edge will continue to steadily put profit into your trading account and that account should be growing CONSISTENTLY.

So, when you trade, just remember these things:

1. You don't know where the price is going to go

2. You may profit or you may lose money on any trade

3. In the long run, with many trades, you'll have net profit

4. Don't worry about "being right"

5. Take every trade you can that meets your system's rules

6. Don't get emotional, either way, on the outcome of any trade

This may sound a bit odd, but experienced traders reading this know what I'm talking about. As humans, we want to "be right". However, as we try to "be right" we get hurt emotionally and financially when things don't go our way and this leaves mental trading scars which hinders us in the long run. We have to quit trying to be right and instead focus on following our system (that has an edge) and look to consistently making profit in the long run.

Think about any casino. Sometimes their edge is really small. For example, sometimes you can find slot machines that payout 97% of what they bring in. This means that the casino's edge is only 3%. However, think about the volume of money that goes through one of these machines. It must be THOUSANDS of dollars a day if not more - and that's just ONE machine. No wonder Las Vegas can offer such cheap hotels, food, entertainment and comp you when you are playing - they are making their money in the long run. They want people to stay at those machines because in the long run they win with their edge.

Put in the opposite view - if you ran $100 through that same machine, then statistically, you'll come out with $97. Not bad, but you still lost $3. Yes, some people hit jackpots on their first pull of the slot machine, but you don't know how many people before and after will go away losing massive money to those same 97% machines. It's all about the long term.

And that's the way you need to think as a trader - long term trading with an edge.

BBY - target hit, profits taken

BBY hit it's target today:

Since it hit the target, I took profits. I originally bought the January 39 Call Option for $4.69 and sold it today for $6.30.

This gave me a profit of $162, and more importantly, an ROI of 34%, in 16 trading days.

Just the type of trades I'm looking for. Nice and steady.

New Trade - PCX

After taking profit on BBY today, I looked for a new trade and found one - PCX:

As you can see, the prices were in a downtrend, then reversed and now are in an uptrend. Yesterday, the stock broke it's resistance. One of my rules is a 2 day's close above resistance to get into a bullish trade - I got that today and therefore took my entry.

I bought a January 14 Call for $2.15 and am looking for price to get up to it's target - the next level of resistance overhead around $17.50 or so.

I always put my mental stops (NEVER physical stops) 2 support levels below the current price. My definition of "support levels" basically means - where the bulls came in the last 2 times to drive up price. Sometimes it's tough to decipher, however in this example it's fairly obvious.

So, from this point, I've got my target and I've got my stop. There are a few other things that would get me out such as:

1. A significant pop up in the stock within a very short time period, thus resulting in decent ROI obtained quickly.

2. Prolonged stagnation (sideways movement) over a period of weeks. If this were to happen and I got within a month of expiration, then I'd close the trade at some point before hitting the target or stop.

3. If I have profit and the markets start to either physically start into a downtrend, OR there's a major stoch or MACD divergence on all 4 major markets.

Of course, I don't know what's going to happen, but I've got the edge on my side for a profit - so that's where my money is.

New Trade - CMCSA

Until I took profits in SMH today, I had the max amount of trades on for my account according to my rules. After taking profits in SMH, I quickly looked for my next trade and went with CMCSA - you gotta take the trades as soon as you can, it's the way to keep active and build your account. Here's the chart:

I actually had a valid trigger for an entry on the 2nd close above the old resistance/new support, about 4 days ago - however at that time, I was maxed out on my trades. If I could have gotten in on that day, I would have been profitable today and on my way to greater profits.

However, I liked today's entry because it's a combo of both my styles of trading. It's a combo of 2 day's close above resistance (or a recent significant high - for bullish), and it's a close above the high of the low day (i.e. sort of like a bull flag or simply a pullback).

My target is only about $1 away, but that should be enough room to give me a decent ROI. I have to go out to a 3 year chart to find the next level of resistance above this current price action. Here's the chart and the target:

I went long a January 20 Call, which cost me $1.63. I put my mental stop (I don't use physical stops) on in yellow. So now, with plenty of time, we let the price go where ever it may. And, I just sit back in patience and peacefulness.

SMH - target hit, profits taken

SMH wasted little time in hitting the target - thank you LORD. Took profits today.

In 6 trading days this trade made $94.00 for a 42% ROI. Like I've stated before, I don't concentrate on dollar amounts. I concentrate primarily on target areas and I gauge my trading my %ROI.

I'm satisfied with this trade. I'll keep SMH on my watchlist to look for the next entry.

New Trade - XLU

Here's a new trade - XLU:

Just looking for a bounce off support up to recent highs. Easy enough.

Bought a January 30 Call for $2.03.

I'll take profit once we get to those recent highs, or will take a loss once the trend changes. Either way, I'm in like....