Trader Insight

Trading Nanocap & Microcap Stocks – What To Look For

Posted by on 7:10 am in Stock Trading Tips | 0 comments

In 1996, I started my trading career on 110 Wall Street, NYC as a proprietary equity trader. I was exposed to trading investment grade stocks listed on the NYSE or NASDAQ exchanges with prices greater than $5 and having market capitalizations of over $100 million. My mentors at the firm traded only these and thus so did I. For the next 18 years, small and mid cap stocks were my bread and butter. Mega cap stocks like Exxon and IBM were too liquid for me to tape read so I tended to stay away from them. Then in 2014, I stumbled upon Twitter as a secondary source for financial news. Here I was exposed to the world of nano and micro cap stocks, stocks with market capitalizations of $50 million or less and usually with stock share prices of less than $5, companies which I refer to now as "microturds" or "nanoturds". Twitter was filled with people boasting how they made five figures daytrading companies that financially looked like they would file bankruptcy any minute after the close. If these traders on Twitter could rake in the dough on these type of stocks, why couldn’t I? I decided to dive into trading these shitty companies. Stepping out of your comfort zone makes a great trader even greater. Learning new trading techniques and strategies only makes your potential earnings power grow. The captivating aspect of trading nano caps is the price volatility. These days it seems like there is at least one nanoturd that slowly rises over 100%+ in price each day. Compared to normal stocks listed on the NYSE that kind of move is unheard of. Here’s a list of what I found common to nano cap stocks, a lot of it ain’t rocket science but interesting stuff: 1) The worse the fundamentals, the higher the nanoturd flies when it is pumped. Companies who have going concern warnings on their latest 10-Q filings tend to have more violent price swings to the upside. I began to wonder why and came up with some reasons. First, companies with fundamentals equivalent to the stuff that comes out of my behind are heavily shorted and experience a massive short squeeze when the stock runs upwards paired with new investors/traders/pumpers blindly scrambling to go long on the next hot play. Second, these companies need to raise capital via massive dilutive equity offerings to stay in compliant with Nasdaq listing requirements or just to stay liquid, and "magically" rip up a day before they announce an offering. Note, I wrote magically in quotes. Blatant stock manipulation must be going on when these nanoturds fly to the moon on 10000x normal volume most likely by paid stock newsletter promoters or pumpers in live stock chatrooms or affliates of the shady chop shop investment bankers involved in the secondary offerings. I am really surprised the SEC hasn't cracked down on this because the stock manipulation is so apparent. Another thing about the fundamentals of these companies is that since their businesses are not complex it's very easy to understand the financials of the company when digging through their lastest 10-Q filing. If anyone is interested in reading SEC filings, these companies would be where you would want to start. They are straight forward and easy reading...

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Do You Have The Right Leader-Mentor In Your Stock Chat Room?

Posted by on 11:17 am in Stock Trading Tips, Why You Should Subscribe | 0 comments

Year 2016 is turning to be another dismal year for institutional fund managers on top of a lousy 2015. Some prominent hedge funds are down over -10% already for the year. How has your own trading been? Are you falling prey to the markets like the other sheep portfolio managers? For those who need some guidance and have joined stock chatrooms, an important question to ask yourself now is how has your Mentor/Leader/Teacher (MLT) been performing in your room the past 6 months? If your answer is terrible or not too well, then it may be time to re-think whether or not your MLT is qualified to be leading a team of traders. During bull markets, EVERYONE makes money, even the dumb. Trust me, I have seen numerous uneducated people turned-daytraders during the internet bubble days in the early 2000's make wads of cash. All they had to do is "chase" stocks up and up and sell them to some other people willing to buy them higher. But when things started to unravel and the market woke out of its hysteria, stocks started crashing and 95% of daytraders ended up losing their shirts and got forced out of the daytrading business. It's because they only knew how to do one type of trading strategy: get long blindly and chase things up. I am seeing the similar thing happen in micro and nano-cap stocks the past 6 months. There aren't that many "microturd" stocks shooting up to the moon in this bear market anymore as compared to a year ago when the bulls ravaged the bears. No more easy chasing and no more easy shorting the microturd pops. And the end result is what? Many of these nano/microcap traders are having a hard time paying their monthly bills now just like the long chasers of the internet bubble days. What similarities am I trying to point out in these two examples? 1) One trick ponies do great when times are bubbling for them. But when traders who only know how to trade one type of setup can't find any more trading ideas, they are left in the dust to rot. 2) Traders who cannot adapt or refuse to adapt to changing market conditions are also left in the dust. What is your solution if you fall into one of these two categories? You need to change your MLT and learn from someone who is adept at trading ALL kinds of markets whether it be a bull, bear, sideways, volatile, and non-volatile market. I have stated in numerous blog posts that times of volatility provide a daytrader the perfect financial conditions to make a ton of cash. The VIX has averaged around 20 the past 6 months and around 25 since the beginning of the year - prime conditions for volatility. As my MookTrader subscribers have witnessed over the past 12 months since we launched, I have one of the most consistent P&L track records around, trading both long and short positions. I employ daytrading and swing strategies that work in every kind of market condition. If you are having trouble right now consistently making your P&L screenshot filled with green numbers, then if means one thing: you need a lot of learning and need to find someone who can guide...

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Celebrating Our 1st Year of MookTrader!

Posted by on 4:24 pm in Stock Trading Tips, Why You Should Subscribe | 0 comments

It has been exactly one year since I have launched My original vision for the site was to create a close-knit community where I and any member can share trading ideas with one another. Sharing knowledge only increases one's chances at success in this business. Learn from one another. Even after twenty years as an equity trader (8 years on Wall Street as a prop trader, and the rest as a self-employed trader working from home), there are things I still do not know about the markets. That is why sharing ideas and discussing alternative trading styles that I do not employ only broadens my horizons. For the first 5 years of my trading career which began in 1996, I only traded stocks listed on the NYSE. This was because I was learning about the NYSE specialist and how he controls the buying and selling of the stock. Trying to figure out whether the specialist was long or short was how I developed my unique ability to 'read the tape.' Then as the markets evolved to become more automated by the eventual adoption of electronic trading in the early 2000's and I became adept at trading NYSE-listed stocks, I slowly tried to trade stocks listed on the NASDAQ as well. With more than one market maker involved now in a stock, it was a complete different ball game than trading NYSE stocks. And just two years ago, I started to learn about microcap stocks, more specifically nanocaps - low-priced stocks issued by the smallest of companies with market capitalization of $50M or less. As you can see, I have slowly been trying to learn more and more about aspects of the stock market that I was unfamiliar with as well as adapting to the changes of the markets - from electronic trading to decimalization. The learning process never ends and through the decades I have come across invaluable experience and knowledge. If you are new to trading, think of the MookTrader chatroom as a place of learning and observation. Learn how to make money getting long stocks first and once you are comfortable with that, try to trade on the short side. Watching me trade live is probably the best trading education you can get access to -- 100x more valuable than watching useless DVDs or reading 'Trading for Dummies' books. For veteran traders, think of the chatroom as a place to share ideas and a platform where you can push yourself to make even more money. Being with other successful traders drives me to want to trade bigger sized positions and attain an even higher win/loss trade ratio (if that is even possible since it's so high already). I want to teach others what I know, and possibly learn something new myself too from my subscribers. All MookTrader members should be able to learn and improve on any aspect of their stock trading abilities, whether it be daytrading, scalping, or swing trading by being in the community. I am proud to confidently say one year later that my vision for the is coming to fruition. I have helped changed the lives of many for the better as they realize that potential they now have as a professional daytrader (and the extra stacks of cash they have...

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The Art Of Taking A Loss

Posted by on 5:28 pm in Stock Trading Tips | 0 comments

It is easy to take profits in a winning trade. You ring the register and figure out how thicker your wallet just became -- a very much enjoyable experience. But the same cannot be said on taking a loss in a lousy trade. To the struggling trader or investor, it means "How much did my brokerage account just go down in value by?", and "Have I made enough money to cover my rent or car payment this week?" -- questions which all induce stress just thinking about them. Losses are unavoidable in daytrading and the key to making consistent big money is to keep the losses small in relation to your winners. I call this the art of taking a loss. It's an important skill that every daytrader and investor needs to master. I still need work on this skill even after 19 years on the job. I am human and some days I tend to find myself reluctantly riding long positions lower and lower even though I know the tape tells me to sell it. "Hope" is what keeps me from taking a loss when I should. I keep on hoping that a big buyer will step in and clean up the sellers in a huge one million share block print (when riding long positions down). Hope in equity trading causes pain so the best way I tend to think of it is take a loss as robotically as you possibly can. Don't think, just do it. Taking losses are hard because you have to admit defeat and no one likes to be referred to as the loser on the trade. Overcoming fear is another key to mastering the art of taking a loss. No one likes to sell out at the dead bottom. There are so many times where I have decided to cut the line and then see the stock rebound sharply immediately afterwards. Fear of selling at the dead low is something that a trader needs to just forget about. When you know the stock is going lower, just dump it without hesitation. Remember that you can always re-buy back in when you feel the stock is on the verge of rebounding. Fear of losing money is part of day trading / investing especially when you are in a long slump. I really can't say much about this but you will need a positive attitude and a few textbook winning trades and setups to regain back your confidence. The more you take losses, the easier it is to do when you have winning trades offsetting the pain. Experience definitely helps in this game. Surprisingly there is a silver lining when taking a loss. I have been in some big positions where I am down six-figures on them. When I decide to just cut and run, my head now becomes de-stressed and it enables me to clear my mind and start fresh. I am able to move on and focus on digging myself out of the hole I just created. Seeing a stock continually descending in price after selling out also reinforces that my tape reading skills are still sharp as I sold because I knew the stock was going lower as sellers still dominate the tape. The art of taking a loss is a skill...

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How To Get Better At Day Trading: Competition

Posted by on 8:26 pm in Stock Trading Tips, Why You Should Subscribe | 0 comments

Looking back at my early days on Wall Street, I can confidently say that one of the most crucial environmental factors that helped me get to where I am today is COMPETITION. With my type of personality, I don't like to be the loser. I want to win. I want to always come in first. At my trading firm Worldco, the company had an intranet system that displayed the TOP 10 P&L's (Profit & Loss) and the BOTTOM 10 P&L's of the day. Everyone at the firm could see how much the biggest traders made each day, as well as how unfortunate the worst traders lost each day. Trader names were not published along with the actual P&L numbers so everyone would try and guess who made what. At the end of each trading session, I eagerly checked the system to see how I fared that day. My daily goal was to place in the top 10, and pray to god not be on the bottom 10 list. To me it was a competition. Make the most money out of the firm's 800+ traders and call yourself Gordon Gecko for the day! Placing in the top 10 each day pretty much guaranteed that you will probably be one of Worldco's top 3 money makers of the year. I think without this Top 10 daily score card to check, I would not have pushed myself to become a better trader. 'Better' meaning after mastering being green at the end of the day at least 9 out of 10 days, I would push myself to trade bigger sized positions while still maintaining a trading profitable consistency. Instead of trading an initial $30,000 position, I would do $40,000. Then when I was comfortable with a $40,000 position, I would do $50,000 and so forth. Of course position size is also correlated to the liquidity in the stock so I am referring to very liquid names that trade 5+ millions shares a day. And later on I would try to trade 2 positions at once, then 3, then 4, etc. Seeing someone make double or triple what I did on the Top 10 P&L list pushed me to become better in two distinct ways. First, it made me realize that it is very possible to consistently make 5-figures a day daytrading with hard work and talent. Second, it made me try and figure out what trading strategies the other successful traders were doing that I wasn't. For example, I used to drive down stocks via 'bullets' (I'll write more about the 'bullets' strategy in a later post) and thought no one could be making more than I was at Worldco. But when they implemented the Top 10 list, I was wrong. I had to do some digging around to see how these other big time traders were making their loot and see if I could replicate what they were doing to increase my earnings potential. For those who are not fortunate enough to trade at a prop firm in New York City, being around other successful daytraders will help you excel. If you don't know anyone who trades, join a stock chatroom like the MookTrader chatroom. You will be exposed to veteran traders and ex-Wall Streeters and they will provide you the competition...

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Making Small Money Each Day But Then I Get Smoked And Lose It All

Posted by on 4:34 pm in Stock Trading Tips | 0 comments

I've heard this question/comment way too many times throughout my trading career: What do I do when I make decent money each day but then one day I lose everything I made the past entire week? It's like a vicious cycle over and over. The above scenario happens to everyone including even the best day traders. The key here is to realize that you can successfully make money each day in general. Losses are inevitable but trying to keep them smaller is what every trader would like. If you can make consistent money trading stocks at least four out of five days a week, questioning yourself if you are right for this job is not something that you should be asking yourself. You have what it takes to succeed. All you need are just better risk management skills and an improved ability to take a loss sooner, to admit defeat on a losing trade. I would say the majority of successful daytraders start like this. They go through a period where they can make a couple hundred dollars a day but then at the end of the week they lose it all on one trade. This certainly happened to me when I started. But over time with experience, your profits will add up more than your losses. If you constantly have a big losing trade where it wipes all your profits for the week, try changing how you ride losing positions. Take the losses faster and understand why that trade was such a dog. Knowing that you can bounce back after getting hit by them only makes you a stronger and more sophisticated trader. Always keep a positive outlook and know that you can make money! - Hubert...

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Every Trader Should Know Their Stock Positions’ Average Costs

Posted by on 2:57 pm in Stock Trading Tips | 0 comments

As a result from time spent on Twitter and in my stock chatroom tweeting trading ideas and reading people's responses, it is very alarming to me that most traders do not know how to calculate their average position cost in a trade (their breakeven point) --- and yes even some traders who have more than 5 full years of trading experience! Shocking right? If a trader buys 1000 shares of $AAPL at $127, he or she knows that their breakeven point is $127 minus commissions/fees. But once a trader sells a partial amount like 300 shares, most traders do not know how to calculate their breakeven point on the remaining 700 $AAPL shares afterwards. And if you continue to add to the position, then exit partial, and add, and then exit, figuring out your average cost on the entire $AAPL trade is now even more of a headache. How do you figure out your average cost? Take a look at my sample trading excel spreadsheet. You are all welcome to download it and use it for your own trading bookkeeping. The basics of calculating your average price on a trade is fairly simple. Let's go back to our $AAPL example. To make matters simple let's assume I have zero trading commissions and fees. If I buy 1000 shares at $127 and then sell 300 shares at $128 for a profit, my average cost on the remaining 700 shares will be $126.57. The $300 profit on the 300 share exit is now reflected back into the remaining 700 shares. $300 profit divided by 700 shares = $0.43 / share. So now my average cost on the remaining 700 shares = $127 - $0.43 = $126.57. I can sell the remaining 700 shares at $126.57 and net $0 on the entire $AAPL trade. This is now my new breakeven point. On long positions, profits on partial exits DECREASE your average price on the entire trade, and losses on partial exits INCREASE your average price on the entire trade. On short positions, the opposite happens. Knowing your breakeven point on a trade helps you figure out when you want to exit it. Don't depend solely on your trading platform to give you an accurate average cost because most trading software do not, especially when you are constantly daytrading around a core stock position. Use an excel spreadsheet to record all your individual trades and figure it out to the penny. This is what I do on all my trades and recommend every day trader to do the same. -Hubert...

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Don’t Be A Cocky Trader

Posted by on 6:02 pm in Stock Trading Tips | 0 comments

One of my life philosophies I try to follow these days is to be a humble and modest person. Keep your chin high but don't brag about your success or act arrogant. When I was in my early 20's working on Wall Street making as much money as Fortune 500 company executives, I was all wet behind the ears to this new money wealth game. I acted pretty arrogant and my proprietary trading success at such an early age was getting to my head. Now in the 40's, married with kids, I can look back and see that I was "young and stupid" by acting so pompous. These days I take on a more humble approach to my life and my trading skills. I try not to 'brag' about how much I made on trades and certainly don't want to act like the invincible daytrader. I know the markets can always humble you with a big loss so there is no point to feel overly confident about your trading skills. I usually find that when I do feel that daytrading is so easy, I end up getting smoked. After a big trade emotions can take over and I admit sometimes I do tweet some bragging rights. Everyone is human and we always do some things we reflect back on that we wished we hadn't. One of the reasons why I don't like to post up P&L screenshots on Twitter is because I don't want to brag about the money I am making. I'm making nowhere close to being 'liquid' as Gordon Gecko quoted in WallStreet, but enough to make the average American wonder if he or she has the talents to be a successful day trader. I don't feel like I have to prove myself to anyone and keeping it humble makes me feel better and more focused. There are times I do relunctantly post P&L screenshots on Twitter but those are more for marketing purposes for the site. I know there are differences among bragging, sharing, and rewarding yourself with your success. For example, when I bought my Ferrari 360 Modena back in 2000 it was to me more of a show-off buy. I wanted people to know that I was banking big. I would even purposely leave my keys resting on tables to let people know I had money. These days if I were to buy another Ferrari it would be to just reward myself for my success. I would keep the keys in my pockets instead of on the table and still act like a regular good honest guy. I know there are very young successful traders who subscribe to the MookTrader chatroom. This post is for them. Don't be so cocky if you are making it big trading. Keep yourself humble and live a life that you can look back on and smile at. It will make you a more focused trader too. - Hubert...

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Derisk Losing Positions When You Are Up Huge

Posted by on 6:15 am in Stock Trading Tips | 0 comments

Every trader has a huge day once in a while. When I say 'huge' I am referring to a trade or a bunch of day trades where I end up making 10 times+ what I normally reap on a normal trading day. Last Friday May 1st I had one of these huge days. I was long 16,000 shares of $ENOC coming into that Friday (it closed Thursday at $11.05). I've actually been swinging this core position for two months after it tanked down to the $11's and have been adding and selling a little here and there bringing my average price for the entire position to $10.93. That Friday $ENOC announced a deal with $TSLA and the stock shot up +33%. I sold 10,000 shares from $13.90 to $14.56 and decided to swing 6,000 shares still as I continue to believe $ENOC is fundamentally undervalued even before this Tesla partnership news. With other positions, I was up a cool $58,000 for the day by 9:45am EST. Not all my swing positions are winners at first. I was also swinging for the past few days longs 7,500 $AKRX and 8,000 $AERI. My average prices on those 2 positions were in the red for a minimum of 1 dollar. But since I was up huge Friday, I decided to re-risk my losing positions. I sold all my $AERI long for a net $7,993 loss and sold 2500 $AKRX for over a dollar loss from my average price. Being up big allows me to get out of losing positions where I am not really comfortable holding without feeling getting smoked. $AERI was trading very poorly that Friday. The $XBI and $IBB biotech ETFs were trading up strongly on $GILD news but $AERI was not participating in the biotech rebound. This gave me even more reason to take the loss. As for my $AKRX 7,500 long position, I was more comfortable holding this one so I decided to just trim the position to be only 5,000 shares. Taking losses when you are enjoying being Fort Knox for the day is much easier to do than when you are deep in the red. It makes an opportune time for you to start fresh and to enjoy your winnings. Sell your losers, or at least trim some to a more comfortable size, and move on. This is what I do to stay sane as holding losing positions and watching them trade tick by tick moving against you is extremely stressful. It also allowed me to get back into $AERI that same Friday $.65 cheaper too :). Keep in mind that what matters is your OVERALL P&L. If you have any realized big winners one day, don't be afraid to take some losses on the positions (whether they be swing or intraday) that keep you awake at night. This derisking strategy definitely helps me feel recharged after a huge trading day and lets me start fresh the next morning without having to worry about any uncomfortable losing positions. - Hubert...

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Borrow Fees: What Are They And How To Calculate Them

Posted by on 9:25 pm in Stock Trading Tips | 0 comments

If you believe a stock has had an overextended run to the upside, initiating a short position in it would be the ideal trade. On the logistics side on being able to short stocks, it requires a few more steps as compared to getting long stock. Aside from having a margin account, shorting a stock requires having your broker "locate" the shares for you to short -- you are borrowing someone else's shares and selling them with a promise of returning them back in the future. Stocks are classified in either 2 categories when determining shorting eligibility: ETB and HTB. ETB - Easy to Borrow Easy to borrow stocks are stocks that your brokerage house has plenty of shares to lend to short sellers. These stocks are usually widely held in accounts at the broker or can be borrowed easily through your broker's trading counter parties. There are no additional borrow fees to trade these securities short. HTB - Hard to Borrow Hard to borrow stocks are stocks where getting locates are difficult and sometimes impossible. This may due to extreme volatility of the stock, or just simply no available inventory of the stock due to its low float or overwhelming demand by short sellers. Since the inventory of available shares is extremely low and the appetite from short sellers creates a huge demand for these shares, brokers charge hard to borrow fees for shorting these securities. How to calculate HTB fees? Hard to borrow fees are usually listed in percentages. For example lets say $XYZ stock has a HTB fee of 20%. What this means is that you will get charged 20% interest on your short position annually for being able to borrow the shares. If I had a short position of $50,000 in $XYZ, my daily hard to borrow fee would be = $50,000 x 0.20 / 360 days = $27.78 / day In some extreme instances HTB fees can be as high as 300%! Be sure to take into account any possible HTB fees when shorting stocks. The fees vary by broker in each security and some brokers do not charge HTB fees if you close out the position intraday while some do. -Hubert...

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