Trader Insight


The Versatile DayTrader Goes Both Long And Short

Posted by on 7:34 pm in Stock Trading Tips | 0 comments

The ideal versatile daytrader can make money in all kinds of markets -- bull, bear, or sideways. This is due to the ability of the ideal daytrader to be adept at going both long and short trading strategies. Most traders and individual investors out there only go long stocks like 99% of all mutual fund managers. And I know some very successful traders who only short stocks. Unless you are an institutional trader who is only responsible for buy-side trades or one responsible for short-side trades, it is important for all daytraders to learn how to utilize both long and short strategies. As a contrarian trader myself, I tend to make a majority of my money on short positions during a bull market and in a bear market I tend to make most of my money trying to pick bottoms. Just as I have experienced in the past few weeks, in this current bull market with not much volatility finding good bottom picks is like finding a needle in a haystack. Only around ten percent of my trades have been on the long side. Yes it's still possible for a daytrader to make a nice living going only long stock or going only short but you can ideally make twice as much money at the end of the year if you do both. Why do almost all mutual fund managers fail to beat the S&P 500 benchmark? There are many reasons but in my opinion it is because of their lack of being able to go short. I don't know the exact figures but almost 99% of mutual funds are long funds only. They are forbidden to short stocks and just avoid investing in overvalued companies. Hedge funds on the other hand are able to utilize both long and short strategies and overall beat the performance of the general mutual fund. Many reasons for this outperformance are that hedge funds can be more nimble in securities (getting in and out) and most importantly they can short stocks. When the market goes up, almost everyone makes money going long. But when the market goes south, mutual funds are now bagholders of stocks. The same analogy can be applied to the contrarian daytrader who only gets long stocks. When the market makes new highs, there are little opportunities for him to bottom pick stocks and the trading days will seem long and never-ending. And if you are a trend trader who only gets long stocks, the same applies to them when the market starts falling. Don't be the trader who watches the market in boredom because he is afraid to short stocks or afraid to buy stocks. Learn how to be adept in going both long and short stocks to maximize your daytrading potential earnings. I have often been criticized by other traders that shorting parabolics is not a strategy that anyone should be doing. I know that this type of shorting is "not suited" to those criticizing but if you come join my chatroom, you will witness real-time how much consistent money can be made from them if done correctly as with any type of trade. I compare this saying "not suited" to my type of trading as "I don't trade that way so it must be the wrong way...

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How Do I Find Stocks To Day Trade?

Posted by on 7:17 pm in Stock Trading Tips, Why You Should Subscribe | 0 comments

During my beginning days as an equity daytrader there were many things I did to get trading ideas which I detailed in a previous blog post here. With almost two decades of real professional trading experience under my belt now, my daily routine on how I scan for stocks to trade has evolved quite a bit. As subscribers in my chatroom have noticed by now I don't publish watchlists for the next day's trading. Why? Because watchlists change all the time and from experience you usually don't trade what you plan to watch. I am not saying that preparing for next day's trading is a waste of time. But what I'm saying is that telling other people what you are going to watch tomorrow on Twitter or StockTwits with your 20 symbol watchlist is like me listening to what you are going to do when you win the $500 million lottery jackpot, you won't win so it's a waste of time. I could care less what you are watching because stocks hardly trade the way you envision the next day. An experienced daytrader only needs to watch the stocks the market gives him that day. How is that possible?: by having custom detailed stock screeners. I cannot stress the importance of using stock filter programs. My screeners provide me 95% of all my day trading alerts and trade ideas. The other 5% are stocks that I have kept an eye on from the previous days. So instead of spending hours looking at charts after the market closes, invest in a stock screener to save you time. Or better yet, simply join MookTrader.com and we will alert you real-time in our chatroom to stocks moving on breaking news and more importantly how we trade them. Before starting the chatroom, I would always be the first or one of the first to alert on Twitter regarding a major intraday pop or drop in a stock. These days I only alert them in my chatroom to my subscribers. There are many free stock screener websites out there like Finviz from what people have told me and there are third party software providers that offer such services. I would recommend all full-time traders to write their own stock screening filters to have hired eyes watching the entire market for you. The worst trade is not knowing about it because you just weren't alerted to it. For contrarian and trend traders, I would recommend all to program a DYNAMIC stock filter that spits out stocks making new intraday highs and intraday lows (dynamic meaning it is updated real-time). This is the easiest screener to program and probably the one that provides me the most trading ideas throughout the day. Another great one is finding stocks that make for example 5 consecutive upticks or downticks in a row in less than 10 seconds. The key to any stock screener is weeding out the garbage that it spits out. Be sure to include volume restrictions such as avoiding stocks that trade only 10,000 shares a day and those that have very small intraday price ranges like 20 or 30 cent ranges. As a daytrader, you do not want to get stuck in thin stocks and ones that usually don't have much intraday price range swings. Stocks...

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My Beginning Days On Wall Street

Posted by on 6:39 pm in Stock Trading Tips, Why You Should Subscribe | 0 comments

Not everyone graduates college with a Finance major. I certainly did not as I studied Biology/Genetics (was a pre-med major). My favorite class I took at Cornell, and my only finance class, was Investment Management 101 during my 2nd semester senior year. That class jump-started my curiosity of Wall Street and encouraged me to forgo my earlier childhood dream of becoming a doctor. My parents paid for my college tuition so I was extremely fortunate to not have any college debt post-graduation. Straight out of college with only a Bachelor of Arts and still very wet behind the ears, I went head first into a career on Wall Street. I landed my first job as a stock broker at First Cambridge Securities on NYC's Park Avenue mid-town during the summer of 1996. I didn't know any better at the time but it turns out that this firm was a chop shop like the ones in the Boiler Room movie but with a little more sophistication. Every morning I would wake up at 4:50am EST and take the Long Island Rail Road from North Bellmore to Penn Station and then subway to the office. Each way was a long 2 hour door-to-door trip, so 4 hours was wasted each day on just travel alone. What can you do when you're only getting paid $200 salary per week? You live humbly and keep your head down and just do it. I didn't want to burden my parents anymore so life was tough. My boss, who coincidentally graduated from Ithaca College which is right next to Cornell, taught me the tricks to cold-calling whales -- an arsenal of rebuttal lines, how to be aggressive on the phone, and how to get around the annoying secretary. Doing this for 3 months straight from 8am to 4:30pm taught me how to talk more assertively and more confidently. But I didn't see a future in this as it wasn't enjoyable for me so decided to look elsewhere for a job in the finance industry. Cornell's online JobTrak, which is similar to today's Monster.com, advertised a position opening for a Proprietary Equity Trader at Worldco LLC located on 110 Wall Street, 22nd floor -- no experience required. Sounded perfect! I immediately landed an interview with my brother the same week and trekked down to Wall Street for the very first time in my life. My interviewer was this charismatic guy named Walter Scott Bruan. If I had to describe him in two words they would be "financial preacher." He was very emotional and intimidating when he talked using his entire face and body to show his full expressions. Walter provided me the enthusiasm and drive to want this job. Anthony and I started our new jobs a few days later. Worldco was small back then in October of 1996. Only a handful of veteran traders were there who were probably friends of the Bruans, the brothers behind Worldco and PTJP Partners. So the access to knowledge was just a tap on the shoulder away. I learned a lot from informal discussions I had with these veterans ranging from very specific trading strategies (especially a strategy called "bullets" where I ended up making 80% of my money in the first few years) to how to use floor...

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What I Did As A New Day Trader To Familiarize Myself With The Stock Market

Posted by on 10:58 am in Stock Trading Tips | 0 comments

It can be accurately said that I had little knowledge about the global financial markets when I started my job at Worldco as a newly hired proprietary equity trader. Yes I did have a small brokerage account my parents hooked me up with when I was in high school but that was about it. For people reading this who don't have a finance background or a million bucks to their name now, we are in the same boat. I started with just a fascination with Wall Street -- how you could make money out of nothing -- and wanted to give day trading a shot. Each morning at my desk I would ask myself "Which stocks should I be trading today?" and I constantly feared the fact that I was now trading my own account and against people with decades of experience. Finding ways to get to know the market and individual stocks were the utmost priority for me when I started out. Here are the things I did when I was a rookie daytrader that I believe helped me get comfortable with the stock market, and prepared me for trading each day: Read the Wall Street Journal. Get the paper or get a wsj.com subscription. You have the smartest financial writers posting columns in here. Understand what is going around in the world financial markets and learn some basic economics by reading the articles. Read this daily before 9:30am EST. The most important parts of the paper are the front page articles and Money & Investing sections. Watch the stocks mentioned in the WSJ as they will probably be the most actively traded stocks for the day and observe their price movements. Read Barrons each weekend. There are some interesting stock specific articles in here. I also kept track of their most up and down stocks for the week for next week's trading ideas. Keep a trading journal. As a newbie trader, it is important to write down after the close each day what trades you did and why they worked or didn't. Reflect upon your success or failure for the day. Also write down stock tickers in here if you are following them. You tend to forget some stock tickers along the way because you are just overwhelmed with information as you start. For trading tomorrow's market, watch the stocks that moved the most percentage-wise (both up and down) today. This will give you something to watch if you don't know which stocks to follow that day. Look for continuation of strong upside or downside moves and if any of the strong moves that happened yesterday were too frothy and see if they correct today. Get up on time and don't be lazy because most of you will be working from home. Your bed is so warm and during the Winter it's hard to wake up when the sun don't shine yet. The early bird catches the worm applies here especially when you are just starting out. After you get some experience, you can then be a bit lazier like myself these days. Turn on CNBC while you are trading. Try and understand all the financial jargon they are spewing out. Sometimes you can also trade the CNBC pumps and dumps they mention every now and then....

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How Long Does It Take A New Day Trader To Make Money?

Posted by on 7:32 pm in Stock Trading Tips | 0 comments

If you are a veteran profitable daytrader, you may not have to read this. But if you are one of the many new fresh blood that are trying to learn how to daytrade this post is for you. The goal of daytrading is simply to make money! Learn how to trade the markets wisely and you can be set for life being your own boss working conveniently at home. Answer to no one except the trading gods and you will never have to pull a work all-nighter ever again. How long does it take for a newbie to make consistent money daytrading? The answer varies by individual of course, but to give you a ballpark idea, it took me SIX months. When I started my career on Wall Street, I sat in front of my ILX quotron and NYSE DOT machine and experimented with all different types of trades -- long trades, short trades, trade with the trend trades, trade against the trend trades. I didn't know what to trade each day because I was not familiar with any of the stock tickers. I had no clue what kind of business or industry each stock ticker represented. And I was a Biology/Genetics major in college and not a Finance or Accounting major. Honestly, 90% of the time I had no idea what I was trading. However over time I learned how stock ticker $XYZ acted, whether it was a wild swinging fast-moving stock or a slow non-volatile one. Daytrading really isn't about understanding the fundamentals of a company inside and out. It's understanding the mechanics of buying and selling in that stock that day -- figuring out if there will be more aggressive buyers or more aggressive sellers and then taking a position from there. For the first 3 months as a beginner prop trader at Worldco, I lost money each week. I saw my $25,000 account shrivel down to $10,000. Was I discouraged? Yes of course. It felt like I had no reason to be here. I just got preyed upon most days. It's kind of ironic to say this but the key to learning how to daytrade is by losing money, as long as you understand why you were red in the trade. It's just as important to also understand why you made money in a trade too. When you start out in this business, losing money teaches you very valuable information on what not to do next time. It helps you develop your own trading rules to follow by. The hundreds of losing trades over these first 3 months taught me a lot. And with the words of advice from the veteran traders at Worldco with decades of experience, something clicked and I started to end green each day. After 6 months, I dug myself out of my hole and started taking a paycheck home every two weeks on payday. I collected 90% of my trading profits back then (and eventually 99.9%). From there, my earnings grew each month until I was making 7-figures at the age of 26. I have seen people turn profitable in as little as a month as compared to my 6 months. I have also witnessed a case where a guy lost all his money in the first two weeks but...

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What Exactly Is A Parabolic Move In A Stock?

Posted by on 7:23 pm in Stock Trading Tips | 0 comments

You'll often hear experienced traders say to one another "Hey, check out this parabolic move in $XYZ." What exactly is a parabolic move (aka a "para") and why is it so fascinating among stock traders? A perfect para is a steep one-directional move in a stock that looks like panic buying/selling. It is usually accompanied by rising volume which peaks at the apex/bottom, and then a sharp reversal in price direction with decelerating volume. There are many reasons why a stock may para. Some of them may be: 1) an institutional fund carelessly executes a large order to be purchased at the market, 2) company specific news or rumors hits the wires, and 3) buy stops/sell orders get triggered one after another when resistance/support levels get breached. Please see the following example in $PNW stock: Why do day traders like myself look for parabolic moves? They are fairly easy to trade to scalp some fast money in a short amount of time. Sign up at mooktrader.com and learn more on what all the signs of a parabolic move mean and how you go about successfully trading them. - Hubert...

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Why It’s Possible To Take Money Out Of The Stock Market Consistently Each Day

Posted by on 8:15 am in Stock Trading Tips, Why You Should Subscribe | 0 comments

The stock market can make people filthy rich. For day traders, it's very possible to consistently make money each day. Why is that? It's because the stock market is inefficient. What does stock market inefficiency mean? It means that it takes time for stocks to accurately price to where they should be trading at. Some stocks get overbought and some get oversold -- in other words "mispriced" in relation to their true intrinsic value. One example of a market inefficiency is when I trade an extremely low volume (one that trades 500,000 shares or less) $20 $XYZ stock and a fund just instantly dumps 100,000 shares of the stock at market just to liquidate a position. Since that equates to around 20% of the stock's normal trading volume, this order will move the stock violently. The fund doesn't care what prices he will be executed at and just needs to liquidate the $XYZ position. What usually happens is the stock will "flash crash" down a buck or two on this market order because no buyers are alerted of this huge block of stock being sold instantly. It's called a flash crash because in just a matter of seconds, a stock goes down 5 to 10% in price. Nothing has changed fundamentally about the company but a seller has just come in and has artificially oversold the stock. This is a prime example of a market inefficiency that can be easily profited from. Daytraders can take advantage of this and quickly buy the stock after it has flash crashed and ride the stock back up to possibly where $XYZ was at before the fund dumped its shares. Take a look at an actual flash crash in $PG stock before: It dropped almost $10 points in a matter of a minute because sellers piled over one another and just dumped stock at market. But the recovery was just as rapid making it an easy money trade if you were able to get long the stock during the crash. Not every flash crash is as violent as this one but you can get the jist of the concept. Time is on a day trader's side. It creates an opportunity for fast acting traders to take advantage of the markets to consistently pull wads of greenbacks out each day. But first you need to know and learn how to spot these examples. Watch me and other veteran day traders trade live in the MookTrader chat room and you will learn what you can do to have an edge in the markets by recognizing and exploiting these market inefficiencies. - Hubert...

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Inspirational Email I Received From A Trader

Posted by on 9:12 am in Stock Trading Tips, Why You Should Subscribe | 0 comments

I had never really used Twitter before and my good trusted friend @DaytraderJM kept touting to me how TweetDeck is a great informational tool for real-time news alerts. I decided to give it a try and began posting up my trading activity and alerts on Twitter about a year ago just for fun. A year later I have gotten a nice following and you guys have given me the inspiration to start the MookTrader trading community. To my surprise one day I received an email from a Mr. C Hagan. I didn't recognize the name at first so I continued reading the email wondering what this was about. "Hello - Judging by the way you trade something tells me you used to trade at Lions Group Trading… Are you Hubert Tsai ? Anyway, I’m interested in more info regarding the chat room. Thanks … BTW: Hubert or not, your trading is impressive. I’m a contrarian (but more of a swing trader) as well, and if you’re Hubert I think I learned it from you. 🙂 Anyway - Thanks for the daily Tweets on your trading. All the best for the New Year…" I replied back to Mr. Hagan and he replied back with this: "Hello Hubert - I was with LGT AFTER all the WorldCo stuff. You and a guy named David, your brother Anthony, with a bunch of other traders came up to Columbia to recruit. You guys were probably just breaking from WorldCo then. I went back to school late in life and was there finishing a degree and decided to give the day trading a shot after I graduated. I traded directly in front of you and Anthony (I was a little older than you guys & used to be an actor if that jogs your memory.) Anyway… I remember one training session that you led after market close. It was a day that you said you had just lost $50,000 ! I love it, losing $50,000 in one day and it was like water off a ducks ass…LOL - I always remember what you said that day: “ If the stock goes against you, BUY/SELL MORE ! HAVE SOME BALLS! “ LOL - I guess I loved that advice because now that’s exactly what I do only on more of a swing basis. I must have run across you on Twitter because I trade KNDI a lot. Love the story for helping with the pollution problem in China and nice backing from the Gov’t. Company’s rep got ambushed on FastMoney the other day…but it’ll climb again 🙂 I started noticing your style and then remembered how you always used to call the guys who would solicit you on the phone: “MOOKS !” LOL - Then I saw that you follow your brother Anthony and knew it had to be you. No worries… I’m not in touch with anybody from my trading past and haven’t blown your cover to anyone. I live in ******* Nevada now near Las Vegas. I let my licenses (7, 55, 63) go awhile back. I got frustrated day trading. I wanted to be able to hold longer with no pressure of getting out of the position. I did make money (not as much as you !! Only bought a motorcycle, not...

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Tape Reading – What Is It?

Posted by on 8:56 am in Stock Trading Tips | 0 comments

Due to the gaining popularity of technical analysis (analyzing stock charts) used by traders and investors, most daytraders these days use only their complex stock charts (aside from stock specific news) in determining when to buy or sell stock. For example, if the stock looks like it is going below the 200 moving day average, they sell. And if the stock lifts above the volume weighted average price for the day, they get long. Success at executing a profitable trade using only technical analysis is a coin toss at best in my opinion while hardcore chart technicians will disagree with me. Most of my trades ideas come from reading the tape. Well, what is tape reading? Reading the tape is a term originated by traders who used to sit by their ticker tape machines. These machines provided the lastest price quotes and trades in securities on paper, where today all this information is displayed electronically on quotron software. Think of the CNBC scrolling ticker bar on the bottom of your televisions as a ticker tape. But back in the early 1900s, the tickers and prices would be constantly printed on a scrolling piece of paper. Traders would read and analyze this tape and figure out which way their stock or the market would be heading. Well how is that possible? Tape reading is a skill not many traders have. And to be honest, it is very hard to teach because of its abstractness. It incorporates the analyzing of real-time stock trades and orders, through the stock's trades whether it be at the bid price, the offer price, or somewhere in between. Volume size of the trades are also taken into account when tape reading. A trader must also observe the market makers in the stock and how thy fill each trade at the advertised bid/ask spread. So the sum it up, tape reading is a highly calculative way for a trader to determine whether it is an opportune time to buy, sell, or short a stock based on the analysis of a stock's trades and orders. From my experience, tape reading was easiest to apply on NYSE and AMEX stocks before the advent of electronic trading and the uptick rule. This was because NYSE and AMEX stocks traded only through one market market, the specialist. And if you could figure out if the specialist was long or short the stock through tape reading, you could easily make a ton of money. All you had to do was go long the stock if you thought the specialist was long too, or short if you thought he was trying to keep it down. Nowadays with electronic trading, there are more market makers in a stock so it's a little harder to understand the tape. One example of a simple form of tape reading is this. In a thinly traded stock $XYZ, let's say you are long 1000 shares. The bid/ask is $30 x $30.10 / 1000 x 1000 shares. You decide to get out fast and execute an order to sell 1000 $XYZ at market. You broker fills you at $30.01. Why did you get filled at $30.01 instead of $30? Maybe because there is a hidden buyer in the crowd not showing himself and wants to scoop up shares quietly....

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How To Trade Stocks In A Volatile Market

Posted by on 8:55 am in Stock Trading Tips | 0 comments

An equity daytrader's goal is to profit off intraday price swings in invidivual securities. The greater the intensity of intraday price fluctuations (bigger stock price swings up and down) and the higher frequency of spotting these situations are a daytrader's dream. More volatility = More profits to be made! So how do you trade stocks in volatile markets? I trade with the same caution as I do in slow markets but I will try to trade bigger sized positions during times of extreme volatility. So if I normally start off with a $60,000 buy position, in extreme markets I will try to initiate a position of $80,000 or even $100,000. Why? Think of it like a hot blackjack table. Yes ... trading is not gambling if you know what you are doing, but when you anticipate a hot streak or are in a hot streak, the payoffs are fantastic. You would normally want to bet more per hand when the cards are being dealt your way. The same goes with stock trading. The conditions for a hot streak in the stock market are when the markets are volatile. Be confident and trade bigger sized positions in times of volatility. A great indicator of stock market volatility is the CBOE Volatility Index (VIX). The VIX is a popular measure of implied volatility of S&P500 index options and often referred to as the fear index or fear gauge. The higher the VIX number, the greater the volatility of the markets which usually signals that the stock market will fall. My best trading months throughout my career were usually those when the VIX was at 30 or 40+ everyday. And in October 2008 when the VIX went over 60, I scored my personal best trading month ever. I averaged a consistent $20,000 to $30,000 in daytrading profits (I trade at home by the way)! The reason why I was able to make that kind of money was because I was trading double or even triple my normal dollar amount positions and there were so many good trades to jump into each day. Of course all this can happen if you are a profitable and consistent daytrader to begin with. When you can end up green almost every day trading, it means that you need to "man up" when the markets give you a golden opportunity when the VIX stays above 30+. - Hubert...

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