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Nice little basing-at-the-high pattern on NEE. It’s a strong stock that has been somewhat immune to the market volatility. It’s been on my long term buy candidate list for a while now. Sure looks poised to make another leg up. I will probably swing trade it with a stop below the base. It’s such a nice setup, I just wanted to share.
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Well forget that one. It’s a broken pattern. Too bad. It looked set up to move higher, but it’s moving down hard against a market that’s moving higher with some force. NEE, you’re dead to me now.Originally posted by BlueWolf View PostComment
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Rant about short selling, day trading, and other matters.
I don’t know why, but I had this strange compulsion to share some perspective with you about short and long trading amongst a few other trading related topics. Please bear with me as I rant a little.
What triggered my compulsion was watching TLRY, a stock that traded as high as $300 just over a year ago, trade below $20 today. I had shorted this stock in the $200’s in Sept, 2018, and I had a decent return in just a couple of days. I shorted it again in December 2018, when it broke down through it’s descending triangle, and I once again had a very nice return on a trade that only lasted a few days. Having said that, this stock illustrates why it is so hard to make big money going short. Let me illustrate.
Let’s say you sold 50 shares short when the stock hit $300, i.e. you established a $15,000 position. Then today, you finally covered at $20. How much did you make? Well, you bought the shares at $20 for a total cost of $1,000. Deduct $1,000 from the proceeds you received when you sold short, i.e. $15,000, and you end up with a $14,000 profit (minus commissions and interest on a margin position). This is about a 93% return on your original (risked) capital. That’s certainly a good return, but, then again, this stock went from $300 to $20! That doesn’t sound like enough of return, but short sales are unfortunately capped at a 100% return. To really illustrate how much more you can make by going long, let’s flip the scenario and say TLRY went from $20 a little over a year ago to $300 today. How much would you have made had you gone long?
In the long scenario, you invested, i.e. risked, $15,000 in the stock at $20 a share. Hence, you picked up 750 shares. Now the stock rises to $300 and you sell. At $300 per share you would have received $225,000 for your 750 shares. Your profit, i.e. $225,000 - $15,000, would be $210,000. This equates to a 1,400% return. So in a short scenario, you make $14,000 and a 93% return whereas in a long scenario you make $210,000 and a 1,400% return. As you can see, a short seller just cannot make the same kind of money that a buy and hold long term investor can. This isn’t to say that I don’t short sell because I do, although I only short on very brief time frames. In terms of the big picture, however, my major gains always come from long term buy and hold positions.
So what about day trading? Well, I was a full time day trader at one point in my life, and I just couldn’t make enough money doing it to justify it as a my primary work. I got into it because I had health issues that made driving to jobs that were typically 30-50 miles away and also traveling problematic. Fortunately, one of the companies I had done work for offered me a job in which I could telecommute (I was a software engineer). I jumped at it because the pay was better than I could make day trading. Look, I know there are people out there that (purportedly) make huge money day trading, but in all my time doing it, I never met any of them. I didn’t even know anyone that knew one of these people so I can’t honestly say that I know they exist. A lot of people on the internet claim to have made huge amounts of money day trading, but I think the vast majority of them are lying. I worked with two of these people in my time. I won’t say their names, but their initials are O.V and G.C., and they made almost all of their money by offering services and training to day traders, not from day trading itself. Haven’t you ever wondered why these self anointed trading gurus would spend time offering services when they were making huge incomes from their trading? The answer is, they weren’t making much money trading. The truth of the matter is that the vast majority of day traders burn through all their capital and are forced to quit. Of the ones remaining, most are eking out small profits, and they end up quitting too. A few .. very few .. are generating enough income to support themselves. If there are trading whales getting rich just from day trading, I haven’t seen or even heard about them personally. My best guess is that if there are people out their making huge amounts of money day trading, they are probably 1 in 10,000, or more likely, 1 in 1,000,000.
I just wanted to share a little from my experience as a trader. I haven’t told anyone here this before, but I have a chronic illness and I’m pretty sick. I don’t know if I have one year or 10 years left. It’s OK though, because I’ve had a pretty interesting, although difficult, life. I’m not looking for sympathy, though. It’s more like redemption. I enjoy sharing what I’ve learned over the years because it just might help someone somewhere. When I was working full time, I used to teach computer science courses at night for a university extension system. Those are some of my proudest moments. I enjoyed not only teaching because it allowed me to share my experience with others. Along the way, maybe I didn’t just teach my students how to develop software, maybe I helped a few of them avoid some of the traps and pitfalls of working in high pressure business environments (Oh the stories I could tell!). I hope so. So take this rant in the spirit it was intended, i.e. to offer some helpful advice based on many years of trading and investing experience.
Cheers and best of luck with your trading and investing.Comment
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Sorry about your health situation. It would be easy to trivialize a situation I have no experience with but three men I kind of watch are Warren Buffett, Charlie Munger and Art Cashin Jr. Buffett once said if the people you love love you you are a success. Both Buffett and Munger say you have to maintain a good attitude and both stay as active as possible. Munger at 95 still gets to annual meetings in his wheelchair and they certainly do their best to present a happy attitude. Art Cashin Jr. still manages to get to the NYSE daily though he looks very thin and apparently can no longer use his right arm. I always find his commentary worthwhile (https://www.cnbc.com/art-cashin-on-the-markets/). But everybody's situation is different. You certainly are still mentally sharp. Try to keep getting after it.Comment
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Dear BW! Thank you for sharing your vast experience, your very human problems, your positivity, your humor. Your advice on trading types is greatly appreciated and mirrors the smaller experiences I also have had, especially with day trading, which led to nervous exhaustion and wasn't worth the small return. I have recently moved to a senior living campus that offers independent living and 3 more levels of care, if needed. My trading is still like yours - a mixture of short term and longer term - but it is on-going daily. The remainder of my days are filled with romping, conversing and dining with retired professional men and women. They have just elected me to the Resident Council and I am due to give an informal talk about my life in January. I send you warm and heartfelt best wishes. You are indeed a blessed and courageous person.Comment
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Thank you Louetta and Riverbabe for your kind words. I really like the community hear, and it’s due to people like you. We have some really sharp and caring people on this site, which is one of the best kept secrets of the web. I look forward to your future posts, as long as my brain has some semblance of coherence. Now, where did I put my glasses?Comment
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Hit a nice day trade today on my long watcher. I have attached an annotated 5 min chart to show how the trade developed. To be honest, I went into the day expecting a little pullback and thinking one of my short watchers would trigger, but I ended up trading my long watcher BYND. Don’t get many day trades with this much profit, but I got lucky, and the chart made it relatively easy.
5 Minute Annotated Chart for BYND
https://www.dropbox.com/s/fyif6xn7ak...%20AM.jpg?dl=0Comment
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Several of my short watchers hit at the open today. I had a particularly fortunate trade shorting SPR. It had gapped down at the open, which is always tricky to play, so I ended up trading off the one minute chart. I have included an annotated chart to show how I played it.
Annotated One Minute Chart for SPR:
https://www.dropbox.com/s/tykkm6ce0m...%20AM.jpg?dl=0Comment
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I was caught a little off guard today by the market gapping up, so I went to my LT high interest watchers to find some potential long day/swing trades. I ended up taking a shot on SPLK, which worked out well for me, although there were quite a few stocks that had nice bounces to the upside. I have included a 5 min chart to show how I managed this winning trade.
Annotated 5 Minute Chart for SPLK:
https://www.dropbox.com/s/tifojkqzlg...%20PM.jpg?dl=0Comment
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Here is a trade I tried today that didn’t work out. Not all of them do. The key is to pick trades with a low risk/reward ratio and to be disciplined about honoring your stops. I have attached a chart that shows how the trade went.
Annotated 5 Minute Chart for ZUO:
https://www.dropbox.com/s/y9opmtfeh9...%20AM.jpg?dl=0Comment
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In case anybody is interested and wants to see an example in real-time, there is really nice cup and handle pattern on RDFN right now. I mean, it’s textbook. There’s also sort of a cup and handle pattern on DDOG. This one, however, doesn’t have the characteristic ramp up before the pattern.Comment
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Originally posted by BlueWolf View Post
Interesting. Used to spend a lot of time reading about that kind of thing in IBD.Comment
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I found another interesting example of a powerful pattern today in SPCE, which is showing a pronounced island bottom. Optimally, you’d like to see this pattern at the end of a protracted downtrend and in this case, it’s not. Still, when it’s this well formed, it can be a strong prognosticator of bullish things to come.Comment
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