The Wrap 12/19/11 Q&A


I wanted to spend a little time answering some questions from you guys as it never hurts to rehash. These are some questions that I have received over the last week or so and hopefully it will help everyone.

Q-Why don’t you usually trade the first hour the market is open?

A- I am rarely if ever a buyer or a short seller during this time. It used to be 30 minutes, but with the insanity of this market an hour works better. I use the first hour to my advantage though. If I am long and the market gaps up, I will sell some, if I am short and the market gaps down, I will cover some. Never push on a string, pull on the string, let the market work for you. Most highs and lows for the day are made in the first hour, then retrace, you will often times “buy the top” or short the bottom” and get a bad execution. Trust me, I made all the mistakes. If you miss an idea, so what, most of the time it will come back to a better buy or short zone. By the way, unless I tell you differently, I don’t stop out in that hour either, even if it the price goes through the stop. The price will normally come back or improve entirely.

Q-Sometimes a stock will stop but it’s still on the P&L. Why?

A- Trading isn’t a perfect science and as many subscribers who have been with me for a long time know I will give some stocks some “wiggle” room. If you are not watching the market tick by tick like me and cant get to a screen all day, then I suggest you use the stops that are on the P&L every night. This can cut both ways, but usually a stock will rebound, unless on certain days when the market is in an extreme violent downtrend and being sold aggressively.

Q- Why don’t you ever trade the pre-market?

A-It’s for idiots. Illiquid and irrational.

Q-What type of money should I throw at a given idea?

A- Everyone is different and I don’t know all the different situations. I will absolutely tell you never to go all in on any one idea. Sometimes there is a lull and there aren’t many ideas, but when the market gets active there will be many. Try and keep your powder dry for when the market gets going up or down. Cash is good and you don’t always have to be a player. You will make most of your money when the market heats up and you are in several different ideas, so be liquid and stay patient. I can go two or three days without doing a meaningful trade. If you make a trade, try and think that there will be three or four ideas behind that one. People that blow up ALWAYS get too weighted in one idea.

Q-Why dont you ever recommend options?

A- For the most part this is an equity site, however many folks option my ideas. Stay away from option if you are new. I guarantee you will be penniless in short order.

Q- Sometimes I cant get a borrow on a short. What should I do?

A- Just let the taxi drive by without you, there will be others.

Q-Sometimes I hold on way past your stop and i get crushed.

A- Stay as close to the stop as you can, they are there for a reason and act as a good line in the sand.

Q- I can’t get on the chat room all the time, but sometimes notice there is an idea on the chat room that isn’t on the P&L?

A-True. I am a a pretty good multi-tasker, but sometimes the market is moving so fast that I only have time to get it on the chat, only because it is quicker. It’s rare, but it happens.

I hoped that helped. Fire in any questions that I may have missed and and I will address them next week. I updated the P&L, so please check it out.


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