Day Trading Focus

I would like to own the job title of day trader. To be a successful day trader, you must focus on keeping your losses small and letting your winners run. Unfortunately I have failed to accomplish this. I have allowed myself to be impulsive in a number of ways including:

1. Buying options too close to open when the direction is not clear.
2. Buying call options on green candles and puts on red candles. 
3. Buying in the opposite direction with the first inclination of change.
4. Being greedy and expecting to sell where I can get ahead for the day.
5. Expecting continuation of a sharp movement when the there are signs of a reversal.

Buy low and sell high is the goal when investing in the market. It is near impossible to do that when you buy calls at the top of an upward movement just as it is near impossible to be profitable when buying puts at the bottom of red candles. Most large green candles are followed by red candles and vice versa. It is important to wait for confirmation when buying options. When there is a sharp upward movement after a large movement downward, you must wait to make sure it is not done going down. That might have been your opportunity to buy put options expecting more downward movement. The opposite is true when there is a large upward movement that there might be some downward movement on the way up to a higher point which might present an opportunity to buy calls instead of hoping a put option makes sense.

FACT: If is it the right opportunity, you will be given the opportunity to take advantage of it or it was not the right opportunity. Break even is always better than a loss.

This fact is especially important when buying options near open. At open, there is the most uncertainty for the day and therefore the price of options are the highest. Fear of missing out is very high when trading options but patience is what makes profits by finding the right entry point. Without the right entry point, you are setting yourself up for a loss or break even at best.

Change of direction of a stock might happen once a day or not at all. If a stock opens low, it most likely will not go lower without a test higher. And if a stock opens up, it most likely will go down some before going back up. That first movement might be sharp or it might happen over an hour. Just because a stock acted a certain way, does not imply that another stock will react the same way with similar movement. 

Taking Profits

Being profitable is the key when doing anything. With the stock market and trading options that go to zero, profitability is a must. Many times we set a limit order after entering a position and that limit may be too low or too high. When you have incurred losses, you have a tendency of setting the limit higher than the stock will move in the day. The top of a movement in a day is typically very clear as is the bottom. The top or the bottom of the movement rounds out and the indicators look like it is changing direction. Don't rely only on the indicators only as many times the MACD may show a change before the rounding out occurs.

I believe I covered all of my points. This might not be a good read for someone who is not an stock option trader. I have been depressed and frustrated for so long trading incorrectly. Discipline is the key to being profitable. Typically there is a trade a day that will double or even triple your money. You just must be patient and allow it to present itself. It may not be in the movement that the day starts, but don't expect to see a change of direction because some days it doesn't change for the whole day. 

This might be more of a message for myself, but I am done being depressed and working out of fear. I am angry at myself and determined to do what is right before it is too late. Focus is key along with patience. If it is to be, it will present itself. 

CARPE DIEM!!!

Make More Money Waiting

Making money with the stock market in the long term is a buy and hold strategy utilizing stocks with great dividends like Verizon. When you day trade, you must wait for the right buy signals. If you are not disciplined, you will be buying early and late and selling early and late. When you see certain patterns, you have the tendency to buy expecting that pattern based on the day of the week or just plain wishful expectations.

Not waiting does not only shorten your earning potential, it can cost you for your day profit and create a loss you can't dig yourself out of for the day. Let's break down expectations and timing utilizing JP Morgan activity for the day.

Initial Move for the day

The first movement of the day may not be more than a reaction in the opposite direction from the prior day's movement. If this is the case, the theme is likely to continue from the prior day. Alphabet (GOOGL) was a perfect example of this today.

On the other hand, some stocks like JP Morgan go up and come down in the same day which ultimately create net gains for the day. Today looked similar to yesterday for JP Morgan as it moved sharply up from market open. When that happens, you wait for the pull back to  a near open price to buy calls for the upside. On my chart drawing, I mark it with a yellow "A."

Now you are going to let this run until you get 2 consecutive red candles which designate resistance when looking at your daily chart with 5 minute intervals. This is not the time to sell as it must retest the top. When it does, it typically goes slightly higher. You can sell at this mark or place your trade when it retest that mark again. You will know it is a retest when it reaches the same spot, but the stochastic lines have peaked at a lower mark. The second way is based on peaking in the price chart with space between the top of the Bollinger Band (B).

Secondary Movement of the Day

When you have noticed the top has formed. You locate the first out of the money put option and buy at or near the lowest price of the day. Once you are in on the opposite direction, you must be patient and withstand upward movement as long as it doesn't move dramatically above the pre-established ceiling for the day.

Now to determine the exit of this 2nd position of the day, you should look at where the area was that you bought the call option on the first movement of the day. It is almost safe to aim for the point to take your profit and get out. There are many days the reversal is stronger than the upward movement. It is nice expecting it, but if you enter and exit at the right locations, you make profit and are not holding like I did today just to break even.

Further Notes

The strategy works with many stocks, but not every stock has 2 sharp movements in the same day. You can say that most stocks move in one direction and give part back towards the end of the day, but then there will be that one day that it doesn't give back towards the end of the day and you were expecting it. The key is do your research, know your favorite stock tendencies, get in and out to take your profit daily.

Why I Broke Even and Didn't Profit Today

I bought my 8 initials calls at the right moment today. I freaked out with the 2nd large red candle instead of waiting for the retest as I have seen almost every day. Although the stock was higher than where I bought the calls, because the calls were out of the money, I ended up selling at a break even minus commission. I would have been up over $120 if I were patient and sold at the 2 peak.

On the secondary movement, I bought my puts before waiting for the top to form. I have made this mistake before, so you would think I would have learned, but this is why I am writing this blog. No matter if anyone else reads it, I expect it to create a more powerful memory to act appropriately in order to profit off small movements rather than break even or lose money.

So I bought these 108 strike puts in a market order at .48. If I had waited, I could have placed my order to buy them at .36 and would have bought a third more contracts. I did buy more at a lower amount, .44 which is still not .36. I did not panic although I did have 15 contracts with an average cost of .48 that were worth .36. My account was negative $200 at the worst part.

As I mentioned, I did not panic and knew the downward movement was due with all of the red candle following the peak of the day of 109.30. It moved in my direction, but unfortunately the highest these puts were worth today was .54. I did not sell there because I thought it might fall move sharply towards the end of the day. I was greedy and disappointed based on not buying at the right time. If I had bought at .36, I could have sold at .50 with a different of .14 times 20 contracts for a profit of 280 minus commission. Instead I sold at close for .48 to end the day break even minus $20 in commission.

Day Trading with Options Fresh Start Rule

Part of day trading with options is closing out your position by the end of the day. Each day goes by, the options are worth less if the price of the stock opens tomorrow where it closes today. The only time the option is worth more is when it move substantially at open the next day. Most of the time, even if it opens in your direction, you can buy those options for the same price you sold them the prior day. Therefore the odds say, you are more likely to lose money holding options over night. Like anything, holding options over night could work one time, but more times than not it will not work in your favor.

Tomorrow is a new day and as long as you did not buy options based on hope instead of indicators, you can make tomorrow twice as good as today.

Day Trading with Paper Money

I have grown frustrated with Charles Schwab and their lack of comprehensive mobile trading software. I decided to try some alternatives, so I first tried ETrade over a year ago, so my period of discounted trades have come and gone. I did find that TD Ameritrade provides as many tools if not more than ETrade and they provide a free paper trading account.

With TD Ameritrades free paper trading accoun, I bought 5 Tesla 320 call options with February 22nd expiration when Tesla was traded down to 309 as it appeared to bounce off 309 about an hour earlier. I was feeling good about this trade since it closed at 311 on Wednesday.

In an account with real money, I was actually short (sold with expectation of profit by depreciated premium) a 280 strike Put Option with a March 1st expiration that I sold the day after Tesla reported earnings when it was at 307. I felt good about that strike price going to 0 because Tesla just bounced off 280 in the previous week and it didn't appear to want to move lower than 300 the day after earnings. The premium was still high because it was the day after earnings so I received over $814 for a strike price 27 points away!

As Tesla moved up for the next couple of days, the premium fell. When Tesla moved up to 324, this option that I was short was worth around $320. Tesla moved between 318 and 324 before moving lower on this past Wednesday when I bought back the Put Option for $226 as it appeared that Tesla was going to move lower. I decided that I took most of the time depreciation out of the option and would cover it so I could sell another one when Tesla moves lower.

More news came out after Wednesday's close that would negatively impact Tesla's stock price so I felt good about covering the Put Option that I was short on and hoping to find another time to sell the same strike option. That time came on Friday when the FANG stocks opened higher and moved down quickly. Tesla opened lower and moved up slowly. When shorts were in control of Tesla in the past, Tesla would move lower on Friday. This time it didn't want to move lower and kept trying to move higher.

When Tesla was at 305 on Friday, February 15th, I sold another 280 strike Put Option for $585 with a March 15th expiration. I like this expiration because it shows a level of recent support which means that even if Tesla moves lower over the next month, it will be affected by time decay on top of negative option movement since I expect Tesla to move back up to 320 in the next week.

Unfortunatly, I checked my paper trading account with TD Ameritrade after the market closed on Friday and found that the trailing stop order I placed Thursday afternoon for the 320 strike 2/22 expiration Tesla calls executed Friday morning at 9:33 am when Tesla was trading at 304.

I clearly would not have wanted to sell it there and creates a new learning lesson. Thankfully it was with paper money and didn't hurt financially.

LEARNING LESSON: Do not place a trailing stop with a GTC (Good till Cancel) ever without an additional trading condition like price. You may not place an order and not monitor it and expect to profit.

I still have more time with the paper trading account with TD Ameritrade and expect to practice with it more this coming week.

Schwab Needs So Much Improvement

After leaving the investment company that I was with for over 12 years and my father passing away, I decided I was going to actively managed my families funds. I have experienced some good and some bad as I started with Charles Schwab. Initially I was very impressed with the tools available through their website and trading tools with their computer software, StreetSmart Edge, and mobile application along with investing with artificial intelligent portfolios in ETF's with no fees. Unfortunately I have found the real truth elsewhere.

I have shared my experience trading with a friend. I recommended he use ETrade due to their tools and didn't recommend opening an account with Schwab. I decided to stay with Schwab so I can manage my mother's account and participate in lower transaction cost. Unfortunately Schwab has me very frustrated because their mobile application is horrible and does not provide the ability to use trailing stops. Only the full blown StreetSmart Edge, which is only available on a Windows 10 PC or a Mac, is capable of doing complete entry and exit strategies on the one platform.

I do have a Windows 10 computer that is awesome, but would like to be able to be free and not attached to it at all times during the day trading. I use my Samsung phone and tablet for doing work
and would prefer to use it for trading also. The mobile application is extremely slow and I have found using the mobile website to be better for some things. Charts are not practical on a mobile device through Schwab. I have had a tendency of using Yahoo Finance (not instant updates) or ETrade to view charts with indicators through the day when I am mobile.

When I am mobile, I have found that I can access my computer at home via a remote desktop application and use the StreetSmart Edge software on my home computer through my mobile device. This is not fun as my connection with the internet is strong for the most part, but may lose connection with my computer at  home or experience a lag that causes me to miss clicking on the correct button at the correct time. The mobile device only views a portion of the home computer's screen which makes it difficult to click when you are actually moving the screen and vise versa.

So the next step was to find a Windows based tablet or laptop that I could use for trading and everything else. Costco has a current sale on a Surface Pro 6 bundle with type cover and stylus bundle, so I took advantage of it. The Surface starts up very quickly and works great. When I logged into StreetSmart Edge, I loaded my saved layout after connecting to my TV as an extended wireless monitor. It was fast, but blown up!

I have 4 different company charts on the 2nd screen, but I could only see 2 and a half of the charts. On the main screen, the chart I have to the right was hidden under the account details and watch list. After further investigating, the TV was set to 150% and the main screen of my tablet at 200%. So I changed both to 100% and the display on the TV looked perfect, but the tablet screen print was so small I could not make much out. This was not working out too well.

In another attempt to try to make it work is using the browser version of StreetSmart Edge. I already knew that the it would not work in Chrome as I tried it on a Chromebook in the past. I also tried it on Firefox. It said that it works in Internet Explorer, so I figured it would work in Microsoft Edge. WRONG!!! This is really bad since Microsoft is trying to get rid of Internet Explorer for good.

On top of that, Schwab's StreetSmart Edge software is buggy. The later in the day, it slows down. I have called their technical support, got someone in trading who had to transfer me to someone in technical support, and then they want you to install a browser add on so they can look into your computer. They have backed up my StreetSmart Edge layout, wiped StreetSmart Edge clean and restored my layouts. This typically works better for about a day. After that it is slow again.

I have tried to find different ways to salvage my relationship with Schwab, but ultimately it feels like they don't want to be in a relationship with me as their tools have not improved and actually worsened. I have tried to make an egg into an orange and it has not worked. I feel insane doing the same thing everyday expecting a different result.

I don't know why it has taken me so long to finally come to the determination about wanting to leave
Schwab. I know that ETrade and TD Ameritrade have the tools available on all platforms that are available on StreetSmart Edge with very little to no lag time. I have an old ETrade account and opened a paper trading account on TD Ameritrade. I will contact Schwab first to find out what they are going to do to improve on the situation. I will then contact TD Ameritrade to see if I can negotiate lower sales commissions.

Profitable Options Trades on Friday

Friday marked the end of a long week of earnings. This also marked a year anniversary of when negative fluctuation began. We received the same news as last year from the FAANG companies of Apple, Amazon, and Google (Alphabet) where they produced strong earnings, but mentioned higher cost. This year it is different as we have a Federal Reserve that appears to be easing, trade war is simmering and stocks were far over sold in the last quarter of 2018.

Moving into 2019, companies started quickly providing earnings warnings. Apple was the first to do it on the first day of trading on January 2nd. They went down hard and shot up after that. Apple was the only one to actually drop after the warning. Skyworks went up after the warning and up further after annoucing lower than expected earnings. That doesn't make sense to me.

What also doesn't make sense in how Alphabet goes down either the day after announcing earnings and again for the rest of the week. Alphabet did report earnings on Monday, went down some on Tuesday despite falling hard on Wednesday and Thursday. I did see it bottom early on Friday and bought a call option expiring the following Friday. Check out my chart to the right.

Expedia was a big mover after reporting earnings on Thursday after the close. I saw it run up near it's
52 week high and when the market opened on Friday it came straight down. I noticed that it bottomed just above 129 by 9:45am to I bought a couple 132 calls for next week. I failed to sell them at the peak as I was greedy and expecting it to go higher. I would have been up 260 if I sold them when they were worth 4 a calls. I have that chart to the right also.

The third trade I took part in on Friday was Boeing calls. I bought next weeks 405 strike calls near open. I should have sold when it peaked quickly to take a quick profit because that is typically what Boeing does on a Friday. Or I could have bought a Put near the quick morning peak and sold it for a profit when it bottomed around 11:30am. That time would have been the best time to buy call options on Boeing as it went
straight up from there. I sold my calls earlier than I noted on this chart because I sold them at 1pm and did not expect it to go higher from there. If I held until close, I would have made the same profit as if I sold in the first 10 minutes of the day.

That brings a huge reminder to take your profits early and do something else for the rest of the day. The stock of your choice must go higher than previous morning high for your option less than 2 weeks out not to depreciate due to time decay.

/As usual, I hope this helps someone. I am still trying to refine my skills and be profitable in larger amounts every day. My main issue is buying too early and not waiting for a confirmation on the proper entry point. I did it on Alphabet and Expedia on Friday, but failed to do it correctly on Boeing which made taking the largest profit not possible since I got burned earlier when the MACD and the Stochastic Indicators peaked and I didn't sell.

IMPORTANT LESSON: Many times you can profit in less than an hour. You will not make more by holding longer. This is not a job and you do not make more watching it go down. You actually lose and will lose twice as much as you could have gained if you don't get out at the right time. Take your profit and run!

Profit From a Mostly Positive Day in the Market

The Nasdaq finished the day up which makes 5 in a row lead by Facebook, Apple and Amazon. Facebook opened higher and ran up for 6 today. That makes 20 points since I said it was a screaming buy at 166.50 after earnings.

Apple had a morning dip that created a buying opportunity for those who had not got in yet you could have bought it today for 207.55. It ran up for a new high today and would have been nice for someone buying Call Options a week or two out.

Alphabet (GOOGL) is in a trading range as I mentioned last week. It closes Friday on an up swing at 1238 and opened today at 1242 pointing down. I bought Put Options near open and should have sold them on the first dip at 9:45am for the best profit of 3 points. That was the maximum price for the 1230 Put Options even though it dipped to 1230 and change a little after 11am. At that point it was time to reverse direction as Alphabet would go positive for a moment a little after 1pm. I bought 1240 Call Options a little early and sold a little early too. I was still profitable  but I could have made twice as much.

I am looking for more downward movement on Tuesday and a recovery to begin late Wednesday afternoon. That doesn't mean that I will trade that way as I will read the market and what happens. We will probably hear something funky from President Trump that will create a huge movement in both directions one day this week as usual. 

Thurs/Fri Bull Market Runnin'

• Thursday was a continuation of Wednesday afternoon's sell off after the Federal Reserve made their meeting conclusions. By 11am, everything turned around and took off all the way until close. 
• Boeing (BA) went down to 319 when I saw it as a screaming buy so I bought 2 Call options with a 320 strike price. I sold too early for 5.50 when BA was at 325 because BA ran up to 330 by the end of the day.
• Alphabet/Google (GOOGL) fell to 1006 whe I bought 3 calls and it ran up to 1030 and closed at 1026.
• Apple was continuing it's run up which was fueled Friday morning when it was announced that Warren Buffet's Berkshire Hathaway accumulated 75 million shares in the 1st quarter of 2018. On Friday's market open, Apple was the strongest positive influence in the market and everything rallied throughout the whole day. You could have bought a call on almost anything and done great.
• Home Depot (HD) opened at 183 when I saw you could buy the 185 strike price calls for .17 and when it hit 186 around lunch time you could have sold those calls for 1.20. So if you bought 10 for a total of $170, you could have sold for $1200.
• Even Tesla had a great rally to finish around 296.
• Alphabet hit 1018 within the first few minutes of market open on Friday. I bought 2 1025 calls for 2.90. I sold them when GOOGL hit 1040 for 15, but if I held a couple more hours until 3pm, I could have sold for 25. $594 into $5000!
• I advised a friend to buy a 1030 strike price on GOOGL. If I knew he bought it, I would have told him to sell for $10 minimum which would have been a 85% profit for one day. Instead, I thought he bought a Boeing option because it was still low when GOOGL started climbing and I told him to sell it around 3.5. He sold the GOOGL option that would have been worth 20 by the end of the day. He did not specify what he owned or I would have told him to sell for a higher price. 
• Day trading is fun and profitable when you follow the technicals, avoid making emotional trades/non-trades, and follow a discipline.