Background:
I have used my TradeSpotting system for the directional trading of Stocks and Options and with good success in the past. I had a very good run for the last 3 months of 2010 where I achieved a 20% increase in my account. I then became quite ill at the beginning of 2011 and spent the rest of that year battling cancer and undergoing chemotherapy so I did not have the emotional, or physical, resources to keep trading these instruments. From about September 2011 though I felt well enough to get back into trading and have spent the time since then focussing on mastering my TS system in the trading of Forex. Given that I am now feeling physically stronger and that I seem to have my FX pretty well under control, I am going to get back into trading Stocks and Options again. I will give you some snap shots and insight into what I do and how I apply TS to trading these instruments.
Trading Methods:
- Directional Trading: LONG:
(2) Or, for more expensive stocks, my preference is to trade the stocks using Options. I will either buy a CALL option as this give a similar gain on any increase in stock price but for a much lower initial outlay.
(3) Or, sometimes, I will SELL a PUT option on the stock. This is like selling insurance on the stock. I receive a premium for stating the price I will happily buy the stock. This will be at a lower level than the current stock price.
(4) I also do OTM Covered Calls at times, or Buy-Writes as they are sometime referred to. My preference is to use this type of trading instrument when my preferred stocks are either ranging or trending up.
- Directional Trading: SHORT:
It is not my intention to teach uninitiated folk about Stocks and Options trading within this forum. This is a huge discipline and one that would be best covered by interested traders elsewhere as I am hardly experienced enough to attempt to do this! My purpose here is to simply show you how I use my TS system to capture price movement in the trading of these stocks or their Options.
My TS Watch Lists:
I have two watch lists of about 50 stocks that I have put together over the last few years. The development of my stock lists is, in itself, a narrative that could fill a book. I track the progress of these stocks through use of a software package (Profit Source from Hubb) where I have my TS criteria loaded.
My 'Prime Watch List of Stocks': My 'Prime List' contains stocks that I am generally happy to own. They are good, dividend paying stocks with historically strong fundamentals. I do look to own these stocks but will only purchase them at a discount. I look to be able to own the stocks at a level significantly below the 'fair value' estimate that is quoted on Morningstar, the site I use to obtain stock and option data and information. I like to buy in at a discount to fair value of about 25% or more.
My 'Seconds Watch List of Stocks': These are stocks that I like but that may not have the same level of strong fundamentals as the Prime Stocks.
I have two watch lists of about 50 stocks that I have put together over the last few years. The development of my stock lists is, in itself, a narrative that could fill a book. I track the progress of these stocks through use of a software package (Profit Source from Hubb) where I have my TS criteria loaded.
My 'Prime Watch List of Stocks': My 'Prime List' contains stocks that I am generally happy to own. They are good, dividend paying stocks with historically strong fundamentals. I do look to own these stocks but will only purchase them at a discount. I look to be able to own the stocks at a level significantly below the 'fair value' estimate that is quoted on Morningstar, the site I use to obtain stock and option data and information. I like to buy in at a discount to fair value of about 25% or more.
My 'Seconds Watch List of Stocks': These are stocks that I like but that may not have the same level of strong fundamentals as the Prime Stocks.
Daily Routine:
Essentially, I update my stocks software at the end of each trading day. I trade mostly US stocks so, for me, that is at about 9 or 10 am Sydney time. I then scroll through the charts and assess each stock and determine whether a TS signal has been generated. This process takes only a few minutes each day. I will then place a forward order on my Interactive Brokers (IB) trading platform to either buy the stock, buy a CALL or sell/buy a PUT option (with at least 3 months to expiry and a suitable 'delta' value: another book here too!). I use the paid 'Premium' service from 'Morningstar' to assess stock and their Option data. This is not very labour, or time, intensive at all which is another reason why this type of trading has huge appeal for me.
Essentially, I update my stocks software at the end of each trading day. I trade mostly US stocks so, for me, that is at about 9 or 10 am Sydney time. I then scroll through the charts and assess each stock and determine whether a TS signal has been generated. This process takes only a few minutes each day. I will then place a forward order on my Interactive Brokers (IB) trading platform to either buy the stock, buy a CALL or sell/buy a PUT option (with at least 3 months to expiry and a suitable 'delta' value: another book here too!). I use the paid 'Premium' service from 'Morningstar' to assess stock and their Option data. This is not very labour, or time, intensive at all which is another reason why this type of trading has huge appeal for me.
2012 Plan:
I plan to monitor and trade my watch list again more closely from April onward of this year. I will report on my progress within this blog.
Note: I consider myself to be a novice with the trading of Stocks and Stock Options. I had some success before becoming ill last year but I'm only just getting back into this form of trading now. I am now monitoring my stocks watch list and the SPY ETF on a daily basis for future trading potential. I participate in Option trading groups where there are traders with vastly more experience than myself. These groups are fantastic places for the sharing of ideas, experiences and information. I have gained a lot from participation within these groups:
I plan to monitor and trade my watch list again more closely from April onward of this year. I will report on my progress within this blog.
Note: I consider myself to be a novice with the trading of Stocks and Stock Options. I had some success before becoming ill last year but I'm only just getting back into this form of trading now. I am now monitoring my stocks watch list and the SPY ETF on a daily basis for future trading potential. I participate in Option trading groups where there are traders with vastly more experience than myself. These groups are fantastic places for the sharing of ideas, experiences and information. I have gained a lot from participation within these groups:
- http://coveredwriter.blogspot.com.au/: Run by Mike Artobello
- An Aussie group called The Spartanzz
The following charts show some of these stocks that have made decent price moves over recent weeks. Like with my FX trading, I look to the ADX and trend line breaks to give me signals to enter into trades. You will see from these examples how it was entirely possible that I was able to make a 20% gain on my account within just a few months during late 2010:
AA: Alcoa: made a run from $9.50 - 11 recently. A 16% increase.
ADBE: Adobe: Has made a run recently from $31 to $34 and looks set to probably break higher from a recent triangle break out. A 9.5% increase.
AMD: Advanced Micro Devices: Has had a run from $6 to around $7.75. A 29% increase!
DEL: Dell Has increased from $16.30 to about $18.40. A 13% increase.
FAST: Fastenal This stock has surged from $44 to about $53, A 20% increase.
HD: Home Depot This has also had a good run from about $40 to about $48. A 20% increase.
KFT: Kraft Has moved about $2 from 37 -39. A 5% increase!
LOW: Lowes Has rallied fro $24 to about $28.50 and looks set to try for another trend line break out and up soon again! A 19% increase!
MGM: MGM Resorts International This stock has rallied from $11 to $15. A 36% increase!
MSFT: Microsoft This has rallied on a triangle breakout from about $27 to around $32. An 18% increase.
MU: Micron Technologies I LOVE this little stock. So do several million other people! It rallied from $7 to $9 recently. A 28% increase. I had a great run with this stock at the end of 2010!
WGO: Winnebago Has increased from $8 to about $10.50. A 30 % increase!
YUM: Yum Brands Moved from $60 to about $66. A 10% increase.
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