Buy Low Sell High, Limit Your Downside, Take Profit Often (In normal market I would let my profit ride but not this market right now)

Someone commented on an article posted on ZeroHedge yesterday and I quote "the market is so rigged and non-efficient that no position makes sense, and that taking any position is just gambling with cheaters at the table". Indeed, the market has become a roulette game, a market where its liquidity is powered by HFT's fast churning machines and algorithms. It seems each day the market decides on a fresh start and off she goes up and down (collective greed or fear), fundamentals aside. Dotcom bubbles deja vu. It is news snippet driven, and that 99% of the time is a rehash of someone's else post on twitter. Pre-market volume has dried up as no one dares to make the first move for fear of getting whipsawed once the bell rings. One never knows what is around the corner and which HFT or hedge fund will be calling the shots during the first 10 minutes and every minute after that. It is the biggest casino in the world.

Can a savvy stock picker still manage to come out ahead? perhaps. Traders and hedgies are pushing the envelope ever so slightly until it falls off the table, especially those who are playing catch up compared to their peers (or is it their bonus). There are two sticky notes on my walls staring at me that read "Buy Low, Sell High and Take Profit". I am learning to cut my loss early if I am wrong footed, usually this means within the next hour or close out my trade before the close. Cash is safer with me than parked on a stock in this volatile market environment. Increasingly many are talking of a market tipping over and heading south. For most fund managers, the reality is there is really no other place to park client's money if their mandate is to stay mostly invested (and doing with much trepidation) and as such equities are marching on at relentless pace. However, lately we are beginning to see signs of cracks.

I keep reminding myself that trading is simple, there is no need to over complicate one's trading strategies. Get out of something that is not working, has not worked, and stick with what works and has worked in the past. I have a handful of biotech and drug recovery companies I buy (and Sell) and that is working right now and I thank my lucky stars. I also own individual small miners as proxy to SLW, GDX and their underlying ETFs (SLV, GLD). I have been able to profit from these smaller names trading alongside the bigger names. I am still selling puts and calls to balance the volatility on my portfolio. The last few months, I tried to profit off short term momentum of a stock candidate. I am not buying any blue chips or utilities or any other hot shot that are all sitting at 52 week high. When the market crushes, I will have my pickings there.

If you are looking for a good book on the HFTs, read this book Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market

Good luck trading

A good week

Like many of you out there, after watching your portfolio ride the gut wrenching ups and downs of the stock market in August and September, I swore I was never letting that happen again. Watching the market gyration, it was dizzying to say the least, like being on a boat in high seas. In today's trading environments where HFT and hedgies are always ready to pounce and the shorts lurking around at every S&P resistance, I have pared back my holdings and abandoned Buy and Hold. Financial markets have clearly changed and they are so interconnected that today there is really no place to hide. Markets go up and down together, one can no longer hide say in Emerging markets if US markets and European markets took a hit. Yes, you can still hide out in fixed income, but at some ridiculously "obscene" low interest rate if you are lucky, going backward with your money. I am better putting my money under my mattress at least I know where they are or storing them in physical gold.

So I operate now on the new mantra of keeping a position for only a few days, often just overnight or I would close out end of the trading day. I hate doing all that reporting on my tax returns but that seems to be the ONLY way I will be in control of my portfolio. It has stopped going backward and it is now growing steadily. The market is now driven by headlines, rumors, speculations and fundamentals is not a place to hang one's hat on right now.

So with that backdrop, I wanted to say that last week was finally a good week. The market chart is a 3 day chart. If we get a big rally (short covering induced most of the time), that rally may extend itself a bit more the second day after the media and all the smart people chime on it. Those sitting on the fence may decide to jump in so as to not miss the boat. Unless we have more positive news from day 2 to day 3, that rally usually fizzles out as longs get scared and took profit. On a market down day, it works pretty much the same way except the inverse. I watch market sentiments closely.

This past week, I decided to sell cash covered puts at or before 10:30am when market got sold hard from the open into European close, I then bought them at the end of the rally as shorts covered and was able to lock in the gains. I like not tying up my cash overnight as I never know what events are going to be brewing in Asia and particularly Europe that might affect the market. I also unloaded my last LVS position that I held for a few days for a nice profit on Friday. I had gotten out of my other LVS position the Friday before for a 8% gain. I did not like how LVS traded the whole week and Level II confirmed my fear. It went nowhere and had trouble breaking and staying above 45 convincingly (China's less than good numbers did not help). It does not mean we won't see it rally above 45 or 46 next week, such is the market today and everyday is a brand new day. The broader market also rallied on low vol. My gut feeling said to get out and reassess Monday morning.

What do I watch daily during market hours? without a doubt the EUR/USD and AUD/USD crosses. I have this feeling that a lot of traders pair trade currency and SPY as well as GLD concurrently and watching the currency chart gives me a heads up. I normally have the Dailyfx real time new feeds with the live forex chart next to Ameritrade Command Center on two separate screens and that format works well for me. I am up early, by 5am. With my home made latte in hand, I watch Bloomberg for overnight and early news and at 6am, I switch to CNBC and catch up on live actions and news/insights from the bond pits. The TV is really just in the background with my ears tuned to it. (Not to digress, but I bet the market gyrations would be cut in half if there is no CNBC seriously, everyone seems to be have an opinion on where the market and their favorite stock would trade and sometimes I think it became a self fulfilling prophecy). Aapl makes up some 9.5% of Nasdaq volume so I watch it closely for signals that market may turn one way or another on cues from Nasdaq. (shouldn't Nasdaq do something about this so we even out?)

I enjoy trading and watching the markets and how the financial world managed to self destruct with the subprime crisis. It is an interesting world we live in today. One thing is for sure, I am guarding my hard earned money like a hawk. My cash is safer in my hands than anyone else's !!!