Another One Question Interview, this time from Gary B. Smith. I’m sure you’ve seen Gary on various market television programs such as the Bulls and the Bears on Fox News. I interviewed Gary back in April and then he answered a couple follow up questions, too. He also said that the hedge fund he started earlier this year is doing quite well.

Here’s the question for the first round of One Question Interviews:

What trading lesson(s) have you learned from the downtrend that started in May?

Gary:

If you’ve been trading for awhile, hopefully you’ve experienced 99% of any kind of market action and therefore the correct answer should be: “I’ve learned nothing new.” That’s not hubris — and it doesn’t even mean you made money during that time period — but rather the confidence that you’ve tested your methodology in all kinds of market conditions and therefore are rarely subject to any surprises.

That said, every kind of market action certainly reinforces the fundamentals: be patient during flat periods, ride the trends during up periods, and in this recent down turn, don’t be afraid to play the short side!

Again, my mantra remains the same: find a methodology that is profitable through up, down, and flat markets, and then stick to that methodology regardless of what else may be happening.

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Richard over at Move the Markets wrote a nice plugin for Wordpress that scans your post for stocks you’ve mentioned and automatically creates a table at the bottom of the post with convenient links to Google Finance, Yahoo! Finance, and StockTickr for each stock. Here’s a snapshot I took.

Very nice, Richard! If you want to download the plugin for your own site, here’s the link.

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Another One Question Interview, this time from Brett Steenbarger. Brett always has insightful commentary on the markets and his response this time is no exception. I did a full interview with Brett a few weeks ago and I took a look at his book recently as well. I’m almost finished with his book (Psychology of Trading) and I’ll be posting some more comments on it soon. (I think it’s a gem.)

Here’s the question for the first round of One Question Interviews:

What trading lesson(s) have you learned from the downtrend that started in May?

Brett:

The move since early May has driven home for me that these are, indeed, global markets. Behavioral finance researchers remind us that we tend to overweight information that is most salient (i.e., that is right in front of us). That salient information tends to be the market we trade and the time frame in which we trade it. In reality, however, the longer-term drivers of market movements are global movements in currency, interest rate, and commodity markets, as well as monetary/economic conditions.

In a bull market, there is a natural correction of upmoves that creates a pattern of higher highs and higher lows. When, however, we get fundamental shifts in the global markets, those natural corrections can result in something longer and deeper. That is what we’ve seen since May, with the rise in global rates, the unwinding of the carry trades that borrowed money from low-yielding economies and parked them in higher-yielding currencies, the risk aversion and resulting drop in emerging market shares amidst evidence of a slowing economy and geopolitical uncertainty, and continued oil price strength and threats of possible shocks.

The lesson since May is that the big picture does really matter. It’s important to track price and volume, but the patterns that work in one market environment can fail miserably when that environment changes.

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I’ve been meaning to post about this, but just haven’t gotten around to it. I stumbled upon Van K. Tharp’s Smart Trader Blog that he started not long ago (hat tip to TraderMike and his links). Van K. Tharp is one of the gurus I interviewed a while back. He’s also the author of one of the greatest trading books of all time, IMHO, Trade your Way to Financial Freedom.

In his blog’s short life, he’s already posted some excellent thoughts:

• A sobering look at what it takes to trade for a living
• His new Efficiency Trading System
• A post about how trading should be boring (a theme we’ve heard before on this blog).

I’m excited to see Dr. Tharp in the blogosphere!

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To liven things up a bit, I’m introducing a new facet to the StockTickr Interview Series - One Question Interviews. I got this idea from Darren over at ProBlogger. The format will be (obviously) a single question and, like the standard interviews I’ve been doing, I’ll give no limitations on the response length or content (within reason). I’m hoping that these will be more frequent and more applicable to the current market conditions.

I thought I’d start off with Jeff White, a.k.a. the Stock Bandit, who was the first interview we published over four months ago.

Here’s the question for the first round of One Question Interviews:

What trading lesson(s) have you learned from the downtrend that started in May?

Jeff:

I’ve mostly been reminded of a handful of things which I learned in the past, but it’s always a good thing to revisit important lessons. I always try to stay aware of the psychology of market participants, because those emotions largely drive the buying and selling behavior of traders.

Here are 5 lessons that I’ve been reminded of since this downtrend started in May:

Shorts work faster than longs. Shorts work quickly (they call them ’shorts’ for a reason!). Stocks can fall of their own weight when bids simply disappear and buyers walk away with disinterest. But when you throw a little fear into the mix, some very swift downside moves occur.

Trapped bulls sell into strength once the market tops out. This dynamic can last for a while as many are inclined to sell at the first sign of strength rather than buy. This in turn puts a virtual lid on the market, and it’s why upside has been so limited.

Broken rising trend lines are significant technical events, and it’s wise to take notice when you see that happen. The RUT is a perfect example. Small caps had been making all-time highs and the trend was so solid until the rising trend line broke in May.

Many traders lack discipline. I have seen several people walk away from trading in the past 6 weeks just because they’ve sustained losses in stocks which they refused to exit, hoping for a rebound that never came. HOPE is a 4-letter word, not a trading strategy.

The market won’t rally far without the NAZ. The NAZ has led the way lower, particularly the NAZ 100. Biotechs, semiconductors, and internets are among the most important sectors in our world today, and when those stocks trend down, it significantly handicaps the market. When those three important groups can start acting better, we’ll have much higher odds of a lasting market rally.

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For the next interview in the StockTickr Interview Series (RSS feed), I spoke with Trader-X. Trader-X is a day trader that is trading for a living. He has a popular blog where he shows many of his trades from the day with charts showing his entry and exit. Trader-X uses Fibonacci retracements and extensions along with candlestick charts find high probability setups.

When I say “high probability”, that’s what I mean. Trader-X says he gets a win rate of almost 80%! Knowing that kind of a hit rate is extraordinary and that other very successful day traders are perfectly content with 45%, I definitely wanted to probe him about that.

Read on for more about how Trader-X uses Fibonacci setups, how he feels about backtesting, and what he gets hate mail about. Trader-X has agreed to answer questions in the comments on this post, so ask away.

Read the rest of this entry »

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For the next interview in the StockTickr Interview Series (RSS feed), I spoke with Andy Swan. Along with his brother Landon, Andy started DayTradeTeam.com, a trading service based on technical analysis, a statistical to trading, and risk control.

In this interview Andy talks about losing an account in the early days, how he thinks of stocks as players on a team, and what he likes best about trading (can you guess? ;-)). Read on for the entire interview.

Read the rest of this entry »

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I saw the news release yesterday that Yahoo! released Yahoo! Finance Badges - little snippets of code that allow you to put charts, news, and quotes on your web site or blog. This is certainly a nice feature that I believe some sites will find very convenient. Believe it or not, the cost of putting quotes on a site is pretty large.

Since it wasn’t all that much work, I went ahead and integrated the Yahoo! Finance Badges into StockTickr. Just look for the Yahoo! Badge link on the top of each page. Clicking on the link will take you to a badge for the stocks on that page as well as the code you can use to put the badge on your site. Here’s the link for the badge for the most recent additions to StockTickr.

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The decision to buy or sell a stock for me depends a great deal on what the stock’s chart looks like. I would certainly feel blind not having a chart to look at. In fact, many of my buying decisions come directly from a chart. I’ll always look at the current chart before adding a stock to StockTickr or taking a position in a stock.

Let’s say you add a stock to StockTickr and then come back in a week to check on it. You can see the current chart, but it’s often helpful to see what the chart looked like when you originally starting tracking the stock. Is the reason you added the stock still valid?

This is the main motivation for adding the most recent feature to StockTickr. When you add a stock to StockTickr, a current monthly chart will be automatically retrieved and stored in your watchlist. This allows you to easily glance at what the chart looks like now versus what it looked like when you originally added it. This will also work even if you add a stock using Email Submit, a.k.a, the StockTickr Email API.

Hat tip to TraderMike and Richard from movethemarkets.com for this suggestion. If there are any other suggestions around this feature or anything else in StockTickr, feel free to leave them in the comments or contact me.

Here’s a screenshot:

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For the next interview in the StockTickr Interview Series (RSS feed), I spoke with Steve Nison. Steve is best known for introducing the now widespread Japanese candlestick charts to the western world. It’s hard to over emphasize the impact candlestick charts have had on many traders - I would imagine many would feel naked without them!

Steve is also the author of two popular books on candlestick charts:

In this interview Steve talks about what turned him on to candlestick charts, how many traders misuse the candles, and how money management (i.e., position sizing) is an important part of trading the markets. Read on for the entire interview.

Read the rest of this entry »

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