Month: June 2011

The StockTwits Edge is Here

I finally received the first hard copy of The StockTwits Edge and I can tell you that it looks amazing. Big format, 350 pages of high quality content, focused on the real HOW and WHY in the market; filled with over 100 great looking charts, figures and tables; featuring battle-tested setups for different asset classes and time frames from some of the most prominent figures of the financial web.

It feels good to see the end result of 6 months relentless labor that I, Phil and Howard shared.

Big thank you to all the awesome contributors, who shared in details their hard-earned approaches on the pages of the book. There is something to learn from everyone.

Big thank you to all the folks form Wiley – Kevin, Megan, Mary, Simone, Cristin, who did a ton of work behind the scenes.

Big thank you to Howard Lindzon who took a huge leap of faith in trusting me with managing this project.

If you are interested in more information about this book, you could visit its website or ask me

Interpretation is not Misinformation

Today $SODA lost more than 8% from its value. @firstadopter claims that the reason behind the price decline is misinformation, part of which was distributed via Twitter and StockTwits. While I agree that he makes a good point, he is not entirely correct. Interpretation is not misinformation. Everyone has the right to interpret a message however they like. Differing opinions make the market. You can buy or sell, but you can’t tell the market how to react. Market reaction is a function of sentiment, risk appetite and conviction.

I applaud @firstadopter’s crusade for honesty and transparency, but we have to accept the reality. The market is often irrational. Reaction to news is more important than the news itself. It is not rare to see a stock to sell off after the underlying company reports incredible earnings. It is what it is. You adapt and move on.

Disclosure: Currently I have no position in $SODA. I took advantage of the earnings driven short squeeze in May and I don’t have any troubles buying the stock if it sets up again.

What to Do When the Market is in a Correction Mode

There is no need to be in the market all the time. There are times to be aggressive, there are times to protect your capital. Unlike in sport, in the market the best defense is not offence.

Watch and wait for that fat pitch to come. It always does. If you are a swing trader, I guarantee you that the market will provide at least one great opportunity every week. How do you recognize it in advance? You don’t. Even when all your requirements align in space and time, there will be false signals. You will be wrong at least half of the time. Being wrong is not a choice. Staying wrong is. In the words of Ed Seykota: “If you don’t learn to take small losses, sooner of later you will have to take the mother of all losses”.

Sharp declines are often followed by short-term bounces. This doesn’t mean that you should try to pick bottoms. Even if you manage to properly time your entry, the potential reward of knife catching often does not justify the risk taken. The opportunity cost in terms of potential aggravation and loss of confidence is too high. Multiple consecutive losses, even when small, will frustrate you and blind you for other opportunities that are always around the corner.

During market declines, most stocks correct through price. I prefer to pay attention to those that correct through time (go sideways) and make new 52-week highs. It makes more sense to focus on the stocks that hold the best and buy them as they break out from their recent consolidation.

Granted there are different methods and if bottom picking is your thing, go for it. You can do anything as long as you know how to manage risk.