Month: August 2011

10 Reasons You Will Love The StockTwits Edge

Tomorrow marks 1 year since I joined StockTwits. Many of you don’t know that last July I emailed Howard Lindzon with an idea for a book that will leverage the knowledge and the experience of some of the best traders and investors on StockTwits. He liked it and invited me to join his team. One year later, the book is already a reality. Here is what makes it special and why you would benefit tremendously from reading it:

1. Practical and straight to the point. Trading and Investing are about making money. We all love the timeless investment classics – Reminisces of a Stock Operator, How to Make Money in stocks, How I made $2M in the stock market, but most of them focus only on psychology. None of them actually talks about the real HOW and WHY in the details. The StockTwits Edge does.

2. Saves time. You don’t have to read all chapters to benefit from it. We don’t talk about one great trade/investment that will likely be never repeated. We teach how to find repeatable patterns and how to manage the position yourself.

3. There is something for everyone. There is not one right approach to the market. In The ST Edge, we offer over 40 market perspectives differing in style, time frame and asset class.

4. Unique structure. Most of the chapters follow a strict framework – background, market philosophy, detailed step-by-step presentation of the favorite setup, an example of an executed trade/investment where the featured principles are applied.

5. It is written by real traders and investors who put their own money at risk on a daily basis. You have seen most of them in action on the StockTwits stream. The book gives you the opportunity to gain deeper understanding of their thinking. You could actually follow up and communicate with them on the stream.

6. Very solid read. It is not something you can read in a day. It is not even something you can read in a week either and catch all the insights. How much you will get from this book is a function of your experience. Someone with three years of experience will see the presented concepts in totally different way than someone with just one year of experience.

7. It is focused on actionable setups. You don’t need to wonder any more what to look for. All steps for finding trading/investing ideas are explained clearly and succinctly. You will get an insight into what factors are actually important for the different market styles and why they are important.

8. It is one thing to know chart patterns. Knowing the psychology behind the patterns is a totally different level of understanding. We asked all contributors to explain the underlying psychology behind each step of their equity selection and risk management process, so the reader can gain better understanding.

9.  Each setup is described via an example, specifying when to enter, how much to risk, where to exit and why. Straight to the point.

10. Huge educational value, summarizing hundreds of years of collective experience, shared in 46 chapters and over 100 charts and tables to better visualize the presented market concepts.

Naturally I am biased as I have a chapter in the book, but the truth is that I would never endorse it if I don’t believe in it.

This book is truly unique and I believe in every word I said here. I gained tremendously from my contact with more than 50 traders and learned a lot as we worked on their chapters. Now, that hard earned knowledge is neatly packed in a state of the art hard cover book for you to consume at your convenience. For me personally, The StockTwits Edge is worth its weight in gold and then some. It is a worthwhile addition to the library of any trader, who is looking to improve his/her skills and market understanding. Let’s face it. There is always something left to learn.

Don’t take my word for granted. You can judge for yourself by reading the short excerpts from the book that we post on its dedicated website: thestocktwitsedge.com

The quality of our lives is defined by the choices we make every day. I will be honest with you. I am writing all this out of respect to all the efforts that more than 50 people gave for this project to come to fruition. Your purchase is not going to change my life in no way, but it might change yours.

Enough said.

Good trading,

Ivanhoff

Correlation 1.0 Market

Another 6.5% loss for $SPY, following 7% drop last week and 4% decline the previous week. The charts of the three biggest banks in U.S. – $BAC, $JPM, $WFC look like the Niagara Falls. The $VIX is up 150% for the past three weeks. If this is not panic selling and forced liquidation, I don’t know what it is. As a reference point, take a look at the performance of some of the worst periods for the stock market over the past 15 years.

We are overdue for a bounce technically, but it could easily get worse before it gets any better. The market needs a catalyst to rip higher. It could be news for another edition of quantitative easing. There is nothing else left actually, for both Europe and U.S.

They say that liquidity trumps fundamentals. It is true. The problem is that mood trumps liquidity and currently the mood is dark, for various reasons. During periods of forced liquidations, no price is too low, no stock is too cheap, at least from my perspective.

Value investors live for selloffs like these and if they have any capital left after trying to short the momentum rockets over the past 2 years, they must be stalking for new buys. Valuation is not a catalyst for me, so I stay on the sidelines. Most I’ve done over the past 2 weeks, has been intraday and overall I haven’t managed to appreciate my capital. Probably because I was foolish enough to go against the trend and buy as I should have been sitting on the sidelines or shorting. Sometimes is hard to follow your own advice. I rarely make money being short, so I rather not to.

What is the game plan for the rest of the week? We are still in a correlation 1.0 market, meaning that if the market continues to fall, most stocks are likely tumble and if it bounces, most will follow to the upside; therefore I will focus my attention to two trading vehicles: $SSO and $VXX. If I do anything, I would risk 1/4 of my usual position as the current volatility has elevated significantly the daily range.

The main goal during bear markets is to survive and protect capital. There will be better times to be aggressive.

Biggest One-Day Decline Since the Flash Crash. What to Expect from Here

The $SPY is down 7% for the last 5 days. The fear is finally back in full force. It is worse than the Flash Crash of May 2010 as back then the drop and the recovery happened too fast for most people to react. The current market action can only be compared to the Fall of 2008. Back then, the only way to survive financially and mentally, was to go to bed with 100% cash every night and trade intra-day as it was not atypical for the market averages to move 5-6% in either direction in one session.

Today’s sell-off was caused by forced liquidation, meaning that institutions are selling not because they want to, but because they have to. Margin calls. The reason behind the decline does not make losses hurt less. A loss is a loss just like a profit is a profit, disregarding the underlying reason.

A few people on my stream asked me what to do here. I can’t tell you what to do, because I don’t know your financial situation. I can tell what I am doing.

It is too late to tell you that you have to sell when you can, not when you have to, because chances are that if you have to do the second, there won’t be enough liquidity to meet the supply. Even if you are a long-term investor, you need to use stops or at the very least stay out of margin, so you don’t become a forced seller. Forget what you know about the company and how bright its future is. Value is what you think you have. Price is what other people are willing to pay for it. If your positions are causing you stress, close them. Life is too short to cause yourself unnecessary headaches.

It was a correlation 1.0 day, during which individual catalysts did not matter and all stocks were hit. Some held better than others and are still trading above their 20-day MA. These are the stocks I am watching for a trade as they are likely to break out first when the market bounces. Some say that just because there are still people talking about a bounce, it won’t happen. Guess what? Today I saw more people panicking and waving the white flag than anything else. The market has never moved in a straight line for a prolonged period of time. Even in the Fall of 2008.

I expect a sizable bounce within the next 5-10 days, which will be shorted as the technical picture is already broken and it will take long time before it heals. My expectations are not based on wishful thinking. They are based on knowing market history and having experience. With that in mind, I realize that trading is a game of probabilities, meaning that anything is possible and no scenario should be excluded. This is why I close all initiated positions at the end of the day. There is no other way I can control risk at this point. My main goal is to preserve capital, so I can take advantage of the intra-day volatility. Live to trade another day.