Wednesday, November 19, 2014

You'll learn more from your losing trades than your winners

After a series of poor trades, I recently went back and read this Dan Zanger quote:

"You'll learn more from your losers than your winners will ever provide."

Now I believe in studying success and I also think you can learn a lot from your best trades and life decisions. In fact, I sometimes think that people put too much emphasis on the value of learning from one's mistakes instead of studying what went right (and the reasons why). 

Having said that, I'm a big believer in journaling your trades and taking the time to honestly examine your results. That includes our missteps, the less than optimal trades, and those flat out wrong or near-disastrous moves that take big chunks of money out of our accounts.

So if you've hit a rough patch in your trading or your investing returns aren't all they could be, maybe it's time to take a good, hard look at your records and figure out what you can learn from your losing trades. You may just improve your long-term results.


Dan Zanger trading quote losers winners learn

   

Tuesday, November 04, 2014

Admit when you're wrong... and profit (Jesse Livermore)

In trading, it's best to quickly admit when you're wrong. 

If you can keep your losses to a minimum, you will be able to preserve your trading capital (along with your mental capital) and improve your odds of profiting from future opportunities.

As Jesse Livermore once said, "I have long since learned, as all should learn, not to make excuses when wrong. Just admit it and try to profit from it."


Can you think of a time when admitting you were wrong saved you from prolonged agony or bigger trading losses? Did you ever turn the situation around or even go on to profit from it? Share your story with us in the comments and on Twitter.
 

Tuesday, October 28, 2014

Twitter's big year: TWTR 2014 in charts

If you follow Finance Trends on Twitter, then you've probably heard me talk about our favorite social media company and its stock (TWTR) quite a bit over the past couple years. 

However, this will be our first (!) post on Twitter's stock performance here on the website. Now that Twitter has reported 3Q earnings, it's a great time to look at the charts and see where TWTR has been in 2014, and where it may go from here.

Let's cut to the chase. Here is a newly updated chart (click to enlarge), showing today's price action post-earnings. 

Twitter TWTR stock price chart


TWTR gapped lower after last night's disappointing EPS report, opening near $42 today. Although TWTR managed to move higher during the day, the price action, as viewed from the daily chart, is rather bearish. The stock is now trading below its 50 and 200 day moving averages and it has moved lower the last 2 days on heavy volume.

Update: TWTR is now down 31% year-to-date while its rival, Facebook (FB, which reports earnings today), is up 48% YTD.  

Facebook Twitter performance charts FB vs. TWTR
FB vs. TWTR charts via Finviz.com


After a poor showing in its first year after IPO, FB turned things around and has steadily moved higher, leaving TWTR in the dust.  

Facebook FB stock chart
 

Although Twitter's revenues are climbing, with large growth in mobile ads and data licensing, Techcrunch feels the company will need to pair those gains with stronger user growth: 

"[Twitter] has a history of beating on its financial goals, and missing, or disappointing on user growth. Twitter has done an excellent job at monetizing its user base, in other words, but has had a harder time growing the base itself.".

But as Twitter co-founder Ev Williams likes to reminds people: 

"Twitter isn't a social network, it's really an information network."

Will Twitter be able to engage new, "secondary" users through TV and apps that embed tweets in their content? Only time will tell. For now, the bearish price action is telling me to find other trading opportunities on the long side.   

Long-time Twitter followers know I've also been bullish on TWTR in the past. 


 

As a long-time Twitter user and observer, I've been alternately bullish or bearish on the company's platform vs. the stock. We can wish Twitter the company a bright and profitable future while taking an indifferent or bearish stance towards the stock. As of now, I have no position in TWTR. At some point in the future, I may turn bullish again.

Disclosure: I have no current position in FB or TWTR.

Monday, October 20, 2014

Stock index and futures performance 2014 YTD

Quick update on the performance of key US stock indices and futures year-to-date, via Finviz.

Coffee (+80%) and Feeder Cattle (+44%) lead the pack YTD, while soybeans (-27%) and cotton (-26%) fare worst. Crude oil is down sharpy from its summer highs, -16% YTD. Natural gas is down 13% YTD. 

Here's the data for stock indices year-to-date: Nasdaq 100 (+8%), S&P 500 (+3%), and the small cap Russell 2000 (-6%) YTD. 



If you want to dig deeper and check out the performance of individual US stocks, try the Finviz screener and adjust the fields in "performance". You can search stocks for YTD performance and sort the results by volume, percentage gains, stock price or market cap. 

Monday, October 13, 2014

Why shorting low-float momo stocks is a big "no-no"

There are some things you just shouldn't do, unless you want to lose a lot of money.

Shorting stocks in an uptrend is one of those things. More specifically, shorting low float momentum stocks in a red-hot industry theme is something you should avoid. Unless, of course, you like paying up for the privilege of imposing your views on the market.

Even on a day like today, when the major indices (SPY, QQQ, IWM) are dropping, people are panicking, and the VIX ("fear index") is nearing 2-year highs, we see low-float stocks shooting to the moon.

Here are 3 such stocks (APT, IBIO, and LAKE) rocketing higher on the fear-driven Ebola theme

Ebola stocks momentum momo APT IBIO LAKE



Note that these Ebola-related stocks were all up 35% or more on a day when the rest of the market was tanking. Still want to step in front of this train? 

As I mentioned on Twitter last week, Ebola stocks are the hot momentum theme of the moment. This is a fear-and-greed play that will result in yet another boom-and-bust cycle. These shares will rocket higher, then peak, and (very likely) plunge lower.


 
We've already seen it happen this year with cannabis stocks, fuel cells, and wearable cameras (in the wake of the Ferguson fiasco and GoPro's IPO). Now the speculative frenzy is focused on companies that might help to protect us from a deadly viral outbreak. 

No matter the industry theme, these low-float stocks can rocket higher once traders and investment funds set their sights on a theme and start buying in earnest.

Here are 2 recent videos (from real chart-focused traders) that explain the pitfalls of shorting small-cap momentum stocks with low share floats. 

1. Steve Spencer at SMB Capital outlines The Risk of Shorting a "Low Float" Stock - DGLY

2. Nathan Michaud at InvestorsLive explains Float Rotation and the similarities between the DGLY and LAKE run-ups. 

If you must short these stocks, wait until each individual name has formed a true topping pattern or entered a new downtrend. Better yet, since most people aren't truly skilled at shorting stocks, wait for the "nonsense" to subside as you sit on the sidelines in cash. You'll probably save cash (by protecting your trading account) in the end. 

Disclosure: No current positions in any of the stocks mentioned in this post. I am long one drug stock (not mentioned here) that may be an Ebola-related stock.

Sunday, October 05, 2014

Winners imagine their dreams first - Joe Montana

Image via totalprosports.com

Hall of Fame NFL quarterback and 4-time Super Bowl champ, Joe Montana, offers his view of the winner's mindset: 

"Winners, I am convinced, imagine their dreams first. They want it with all their heart and expect it to come true. There is, I believe, no other way to live." - Joe Montana

This positive mindset and the visualization of one's future achievements is, in Montana's view, key to self-actualization. 

What is your view? Do you find that a "winning mindset" applies to trading, entrepreneurship, or any endeavor of life where one hopes to excel and reach great heights?

Thursday, July 24, 2014

Confidence and mastery come from hard work and experience

Today's motivational trading quote comes from Dr. Brett Steenbarger (Hat tip: Kirk Report). 

Confidence mastery work experience failure motivation Brett Steenbarger
Image (borrowed + repurposed) via Bruceelkin.com.


True confidence comes from within. It cannot be bought, it must be earned. As Dr. Brett points out, confidence and mastery are the byproducts of effort, failure, and learning along the way. 

"Genuine confidence comes from hard work and experience. Putting in the time to achieve mastery and getting knocked down enough times to know, deep in your soul, that you have what it takes to succeed." - Brett Steenbarger

Self-knowledge may be another aspect of confidence. Is it tied together?

Have you achieved mastery in your field or in an area of life you are passionate about? What did you have to go through along the way? Are you still working towards your goals or expanding your "limits"?