Be Flexible And Catch Stocks Before the Hot Money

This post originally appeared on TraderPlanet.com.

May of 1985 was tough for me.

It was the month of my high school prom and I had Debbie Olson in my sights. I had decided that she was the lucky gal who would accompany me to the dance. The day I was to extend to her this coveted invitation I put on my best clothes, threw an extra handful of Dep in my hair, and slapped on my father’s best cologne.

But I was too late. Phil LaMont had already asked her.

So how did I handle this rejection? Did I run home crying like a little girl? Did I drive my car past her house all night long to see if that jerk Phil was over there? Did I call her number ten times in a row until she answered and then hung up? Not as far as you know.

Instead I asked her sister to go. Unfortunately she already had a date. So I asked her best friend, who apparently already had a date as well. Then I asked her cousin, who although didn’t yet have a date, was restricted by her religious beliefs from dating someone with more than two vowels in their first name. I assume that because she showed up to the prom with a guy named Brad.

The point is, no matter how much you prepare for a certain scenario to play out, sometimes you have to be flexible enough to look for secondary opportunities. This concept works the same way in the markets.

YOUR WATCH LIST

Let’s say you’ve got a stock on your watch list and one day it just gaps up over your buy point. Your gut reaction may be to swear at the screen and run home crying like a little girl. But don’t. What you want to do is to look for secondary stocks related to your target stock that have not yet moved, but soon may in sympathy.

So if you are gunning for a 3D printing stock like $DDD and you miss the initial move, check out others in the same space like $SSYS or $XONE that haven’t moved yet but may be setting up. You might even look at a “cousin” type stock like $PRLB which doesn’t make 3D printers but provides related services.

And it is always a good practice when developing your daily or weekly watch list to make sure you are familiar with and know the charts of two or three “related” stocks for each of your prime targets.

These types of secondary stocks will usually not move as much, and will fade quicker that the primary stocks so you have to be nimble and limit you’re trading to the short term. But if you think ahead and somewhat out of the box you can get into these movers before the “hot money” hits and turn them for a quick profit.

Make sure to check out my free eBook Trading:The Best Of The Best-Top Trading Tips For Our Times  (just click the banner below).

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Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

When The Market Gives You A Pass

Pregnant women should drink alcohol.  And smoke.  Seriously!  And they should be exposed to as much cigarette smoke as possible.

I have a photo of my parents at a baby shower thrown to celebrate the coming birth of a certain “bclund” character, and in the photo both of them are drinking and smoking. And get this; when my mother was at the hospital in the maternity ward, not only could the patients smoke, but the nurses and the doctors could smoke as well.

“Hello *puff* *puff* Mrs. Lund, how are we *puff* *puff* *hack-hack* doing today?”

“Oh just great Dr. Empysema, how about you?”

“Super!  Now, let’s *cough* *sputter* see about getting this *puff* *puff* kid out into the world shall we?”

And I can only thank God that my mother smoked.  If not, instead of being a reasonable six-foot four inches tall, I probably would have been some grotesquely freakish eight foot tall colossus.

I don’t mind being tall, but as far as I can tell it’s never really been a benefit in my life. I don’t think I got any more dates, was hired more often, or picked earlier for sports teams because of it.

Sure, I can get stuff off the top shelf, but I also have to watch my head around low hanging objects, so all in all it seems to be a “scratch” at best.  In fact there is only one time in my life where I can state without reservation that I was able to use height to my advantage.  And it was all thanks to my uncle Paul.

Technically Paul was my great-uncle, being that he was married to my grandmother’s sister.  I liked Paul.  He was my favorite non-blood relative.  A pudgy, short man with glasses, Paul more than made up for his lack of stature with his giant heart and sly sense of humor.

It was always a treat to see him at the holidays, especially on Christmas Eve.  That night was just not the same if he wasn’t there wearing his bright red plaid blazer and fringed Santa hat with bells on it.  And it was at just one such occasion where he gave me the “scoop” on how my height could come in handy.

“Brian, my boy…how the heck are you?  I can’t believe how tall you have gotten,” he shouted as he waddled through the front door.  “You’re even taller now than your dear old mom it seems.”

“Come over here son,” he whispered as he motioned me over to the corner of the room.  “Now is the time in your life where you are going to be able to use that height to get what I call a ‘free pass.’  It’s something you can do when you most need it–when your mother gets really angry with you.”

“But I have to warn you, it can only be used once.  One time!  That is all.  If you try it twice,” he said with a knowing gleam in his eye, “well then I can’t be responsible for what happens to you afterwards.”

With that he turned and stood toe-to-toe with me, and looking up, began to wag his finger at me in mock disapproval.

“Now, how often has this happened to you?” he continued.  “Your mother is yelling at you about something or another and you are just looking down at her thinking, ‘yeah, yeah, yeah.’  Well the next time that happens–and remember, you can only do this once, so save it up for when you really need it—while she is yelling at you, look down, pat her on the head, and gently say, ‘now-now mom.'”

“She will be so taken aback in the realization that her baby boy is now bigger than her that she will forget what she was upset about and let you off the hook.”

“Awesome,” I thought to myself.  As a typical juvenile delinquent male I needed every free pass I could get.

And not too long after that Christmas Eve it did come to pass that I was in the exact scenario that Paul had described.  My mother was yammering on about something I did wrong, and I was just staring at her, eyes rolling back into my head, hoping that my cerebral cortex didn’t snap, when “BAMM!” I pulled out the pass.

And you know what….? It worked!

My mom actually laughed out loud, hugged me, and then shooed me off while mumbling some half-hearted life lesson or something.

It was a nice moment for me, a mini-victory of sorts.  The type you need when you are an insecure teenager who doesn’t yet have much control over the course of your life. But as I looked back on the event a month or so later, I realized how risky my actions actually were.

There was no guarantee that it would work.  That my mother wouldn’t have gone ballistic right then and there in front of a room full of people.  Or that I wouldn’t be grounded until 2020.  In fact it hit me–Paul probably never was taller than his mother–and therefore his theory untested.

Wow….!!!  I got lucky.  I got my “free pass.”  And I decided that I was smart enough not to push my luck and try that same crap again.

Traders often find themselves in a bad spot in the market.  For some reason or another they may have made a mistake, a miscalculation, or took an overly risky position and now find that they are screwed.  Often panic sets in and with that panic an inability to act.  They freeze and stare at their screens in disbelief.  Or worse, turn their screens off and pretend that “this is not happening.”

In most of these instances the bloodletting only gets worse.  But once in a while, once in a great while, the market gives you a free pass.  The market reverses, your P/L rebounds, and you are given that rarest of chances–to get out of your screw up clean and unscathed.

When that happens, in addition to giving some humble thanks to the trading Gods, taking a moment to acknowledge your “pass” and how lucky you were to have gotten it is probably a good thing.

Immortalize that pass by printing the chart of your trade out and taping it over your desk, or better yet, tattooing it on your forehead.  Honor it like some sort of shamanic talisman–in the best Val Kilmer playing Jim Morrison sense–and use it to ward off the evil spirits of bad trading.

Let it remind you not to make the same mistake again.  To never tap the market on its head and try to pacify it, no matter what your favorite uncle tells you.

Make sure to check out my free eBook Trading:The Best Of The Best-Top Trading Tips For Our Times  (just click the banner below).

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Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

Deconstructing A Trade: Trade Like A Surgeon

It’s been a while since I have done one of my “Deconstructing A Trade” videos, but yesterday’s volatility served up a nice day trade that I wanted to break it down for ya.

(click the expand icon in the menu bar at the bottom of each video to watch in HD)

Don’t forget to check out my new trading tips eBook.  Just click the banner below to get it for free.

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Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

Over 200 Market Tips From 60 Traders And Investors

Well, it took eight months, twelve revisions, and two dead goats (don’t ask), but my free eBook finally goes live today.

Trading: The Best Of The Best- Top Trading Tips For Our Times or TTBOTBTTTFOT for short, contains over two hundred tips on the markets from sixty active traders and investors.  But what’s even more important is that the book was designed in a way to always keep it relevant; containing over one hundred links that will take you to the most current content from the contributors.

Make sure to read the “What’s The Value Of This Book,” and “How To Use This Book” pages in order to get the most out of it.

So go ahead, what are you waiting for?  Just click the banner below to get it for free.

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Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

The Best Of The StockTwits Network 2-23-13

Let’s be honest, you could pretty much throw a dart any day of the week at the StockTwits Blog Network, and end up hitting a post that is better than 99% of the other stuff out there that passes as financial blogging.  So to say these are “The Best of….” is a little disingenuous; let’s just say these are some of the posts from the last week that caught my attention and I think will interest you.

RSI Buy Signal – the Simple Approach 1nvestor

Consensus Is A Shallow Pullback All Star Charts

Stock Market Video Analysis for Week Ending 2/22/13 Alphatrends

I Want To Be Like Google When I Grow Up Altucher Confidential

Is Healthcare Inflation Simmering Down? Crossing Wall Street

Declining Breadth Needs To Be Watched Downtown Trader

Check Your Wallet For Your Next Trade Dragonfly Capital

Sentiment Unwind Dynamic Hedge

Cable Drops to Fresh Lows FaithMightFX

Mark Cuban On Story Stocks Ivanhoff Capital

The Greatest Trading Book Ever Joe Fahmy

Don’t Expect Follow On Offerings From Sprott Any Time Soon (PHYS, PSLV) Kid Dynamite’s World

Are you swimming upstream? Raghee Horner

What is happening to the metals? — a chart update Peter L. Brandt

CFTC Sues CME-Why This Matters Points and Figures

Zillow CEO Spencer Rascoff Goes To War For $300b Home Improvement Market The Basis Point

This Market Rally Hates You and Everything You Stand For The Minimalist Trader

Allow me to enlighten you… The Reformed Broker

What’s The Deal With Oil? The Armo Trader

“Don’t Fear The Sequester” ValuePlays

The View; Below The Lower Bollinger Band ZorTrades

BlackBerry 10 Launch Marred by Lost Clients AlphaVN

The Playboy Leveraged Buyout, Two Years Later Sizemore Insights

And what you may have missed this week on bclund.com

Why France Sucks And We Rule bclund

Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

Where The Market Is Going Next

This post originally appeared on TraderPlanet.com.

The markets have been on a tear over the last few months and although at times it seems like this relentless bull market will never stop surging higher, yesterday’s bearish engulfing bar on the SP-500 reminds us that it’s not “if” but “when” a correction will come.

So let’s step aside from all the madness: take the pause that refreshes, and see where the market is likely to go in a correction, while still maintaining its overall up trend.

SP 1
Yesterday’s bar was the ugliest since we broke out to new highs in mid-January.  That breakout area around 1475 looks like to most obvious support/re-test level.

SP 2
However, the key to where support comes is will have to do with how fast a correction takes place.  A more rapid descent can take it back to 1475 support, but a slower, more orderly decent could take it higher up on the trend line that connect the 11/16 and 12/31 lows.

Sp-3

Finally, don’t count out the possibility that we could have an extended pullback that could take us to the longer term trendline connecting the 11/28/11 and 11/16/12 lows.  Believe it or not, that pullback could take us down anywhere from forty-five to eighty-five handles and still keep us in an overall uptrend.

Remember, even if this is the beginning of a multi-year bull run (which I think it is), the market won’t go straight up.  It will have peaks and valleys along the way, and pulling back a bit to see where it currently is, and where it is likely to go, will make your job as a trader and investor that much easier.

Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

Why France Sucks And We Rule

Back when I was a young man I once made the mistake of going to Europe during the month of August.  Ready for two weeks of drinking, partying, and hot sex with (female) Euro-models, all my hopes were dashed when I arrived in Madrid on the first day and it turned out to be a ghost town.

In effect the whole city had gone on vacation, as is the custom in European countries during the summer.

Six to eight weeks of vacation, 35-hour work weeks, and retirement at fifty-five is how they roll in most of the Euro zone, and most notably in France.  Sure, this may seem like a nirvana to the working class, but in practice it lends itself to making a country less competitive, though that is not the politically correct thing to say.

Well one CEO isn’t mincing words as to why he is keeping his company out of France. Titan International Chairman Maurice Taylor recently declined to reconsider buying a former Goodyear tire plant in that country and elucidated his reasons in a letter to French Interior Minister Arnaud Montebourg;

“I have visited the factory several times,” Taylor wrote. “The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three and work for three. I told the French union workers this to their faces. They told me that’s the French way!”

Keying in on the French Unions he continued;

“Goodyear tried for over four years to save part of the Amiens jobs that are some of the highest paid but the French unions and the French government did nothing but talk.”

“Sir, your letter says you want Titan to start a discussion,” he wrote. “How stupid do you think we are? Titan is the one with the money and the talent to produce tires. What does the crazy union have? It has the French government. The French farmer wants cheap tires. He does not care if the tires come from India or China and these governments are subsidizing them. Your government doesn’t care either. ‘We’re French!”’

No word yet as to if Jerry Lewis will be sent over to mediate this conflict.

French Workers Who Talk for 3 Hours Don’t Cut It, Titan Says (Bloomberg)

Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

Was The iPad Invented In Italy In 1904?

I get a kick out of this.  From a department store ad in Italy way back in 1904.  Looks like the little school girl has an iPad tucked under her arms.

Ipad Poster

Mele selling iPads? (International Poster Blog)

Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

How To Turn $400 Into $150K

This post originally appeared on TraderPlanet.com.

A couple of weeks ago I watched a trader turn $483 dollars into over $150,000 in three days.

He was trading OTM weekly options in $NFLX going into their earnings announcement, and despite how much of an outlier event this seems at first glance, I am starting to think that there might be more to weekly options than meets the eye.

Most people are familiar with the Market Wizard series of books by Jack Schawager, which provide a rare glimpse into the world of some of the greatest traders. Although the profiles are interesting, one of the major takeaways from those books for me is how many of those traders made their initial market fortunes.

EXPLOIT INEFFICIENCIES
Not an insignificant number of them made their money trading products like options, forex, and futures when they were new and pricing inefficiencies existed, which they then exploited. That is where I think weekly options are right now.

STILL NEW
Weekly options are still relatively new and that fact combined with their extremely short life span I believe is providing a window of time where smart and aggressive traders can use them to garner outsized returns.

The irony is that most successful traders stay away from weekly options because they feel too much like a gamble. Traditional money management concepts that are used to trade equities or even longer dated monthly options don’t really work with weekly options. With those products you are trying for a 30-40% win rate and taking minimal losses on the other 60-70%. However with weekly options the win rates are more like 5-10% and you are likely losing your whole investment on the other 90-95% which are losers.

However, just a few wins in weekly options can more than make up for you losses; even if those losses are 95%+ of your trades.

BREAK IT DOWN
Though it’s more like a lottery win, just for fun let’s look at that risk/reward ratio on that $NFLX trade. It comes out to 1:310, which means you would, in theory, only need to win once out of 310 trades to break even. Yeah, crazy right?

But I have also seen a lot of 10, 20, 50, and even 100 baggers from weekly options traders as well. There is something going on with weekly options right now that I don’t think will be there in a year or two as more participants begin to use them and pricing inefficiencies disappear. I don’t know exactly what the strategy is for playing them successfully, but I am working on it, and you should probably be doing the same thing as well.

Who knows, if you figure it out in time, you may end up in a future edition of Market Wizards yourself.

Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

Trading Desks From Around The World

The folks over at the Online Trading Academy were nice enough to include me in their post about the different setups traders use.

Here’s mine…

13-brian-lund

Ever hear of “do what I say, not as I do?” Well this setup is a great representation of that. The FEWER screens you can use in your trading the better. I just got in the habit of having multiple screens before I knew what I was doing, and now I am stuck with them, but simpler is always better.

Trading Desks from Traders Around the World (Online Trading Academy)

Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.