A while back I posted some portions of an email exchange I had with another trader friend that is still refining his trading business. I received a number of comments asking for me to do more of this. I just wrote him another email and thought I would share it..for what its worth.
The question was why did I go long TLT today..what is my target..did I buy stock or options..why didn’t I short TBT. Here is the TLT daily after the close.
The email to my friend was as follows:
On TLT there is a big old support line that goes all the way back to the beginning of last year at 118. When an oversold stock pokes down below a line like that and starts back up immediately there is a very high probability of it continuing for a few days or maybe a full recovery. This is one of the highest probability trades I know. It’s the inverse of a failed breakout
In my trading account at TD Ameritrade they don’t give access to shorting the leveraged long ETFs so I cannot short TBT. In fact I have very little interest in those leveraged ETFs and really don’t trade them much except under certain intraday into the extended hours situations. I can short TBT in my Interactive Brokers account but really don’t use that account much. Can you short the leveraged long ETFs in Tradestation? I do know why IB lets me but TDA doesn’t and can explain sometime.
I did the TLT trade with options to define my risk if I woke up on Monday and for some reason they gapped down big. As far as a target, I didn’t have any but I do have one rule with options. If I can get a 30% gain in a day I take it. Then I look to re-enter. When I bought the options I put a 30% gain sell order in immediately then I left for the day. I came back after the market closed and saw the trade executed while I was gone and I was out with my nice gain…easy money. 10 contract at 30% was $210 in my pocket. This was a small cash flow trade that was intended to help pay the weekly bills which are modest in my new lifestyle. That trade paid for the groceries we bought as well as the other items we bought at Lowes while I was away in the afternoon.
I trade to make money, I trade high probability setups that I like and I really don’t care what or how other twitter people are SUPPOSEDLY making their money. The more you read of your guys the more you will sit there questioning yourself. There was a short period of time last year before you were looking for a new place to live that you turned everything off and did your own trades and were making money. I could sense you felt excited, proud and confident. You should go back to that mode and do your own thing and learn what works for you. You know everything you need to know now, in fact many times more that some of the best traders. Until you figure out what works for you on your own you will not make money. You will be in a mode where you win some and lose some and probably break even. That’s a good hobby to fill the time but I prefer to do this to make money.
Maybe for you its a learning situation (but again I don’t know what else you need to learn) but I wonder why you spend time trying to figure out why a twitter guy is in NFLX puts. You shouldn’t care. If it doesn’t look like a short then go long or do nothing. I was long, it didn’t work and I pulled it with a few cents gain. Just remind yourself that the twitter guy you mentioned put on a big short position in FB and got his head handed to him and his rationale for the trade was a lockup expiration…that’s not a reason to take a trade for a pro. He’s an author that makes money from books and from what I have seen a poor trader. The only good trades he makes are things I never saw an entry for and just mentioned after the fact. Maybe I don’t read all his stuff and he posts his exact entries in real-time so I’m sorry if I missed it. I don’t read twitter much. For me twitter is entertainment, especially now that I don’t have a TV to watch football. The majority of “people” I actively follow on twitter are news sources to see whats going on in the world.
You made some good trades this week so should be happy, that’s all that matters. Did you write about them in a trading journal? Write to yourself why you took them, how you managed them, how it felt when you booked the gain or loss and what you would do different next time. Even if you never go back and read what you wrote again, you will be reinforcing the right behavior for next time. There are hundreds of good setups every day..to make money you have to execute in a way you feel comfortable. Do that instead of reading the CWS tweets, or trying to figure out why another twitter guy is doing something.
I fell asleep at 8 last night and already have my 8 hours now..maybe I can get a few more before the sun rises.