Thursday, May 19, 2016

Superior Profit Way: Prepared, Patient, Improvising, Flexible, Confident

From the Desk of Sagar Nandi and Superior Profit.

In Superior Profit Way we like to do our homework. It does not take long. Using Sonar (Explorer in Metastock) it takes a Swing trader ten minutes or less usually when he wants to identify a trade.

After we identify potential opportunity, if the time is right (say, following CUE Trading Signals guideline), we take the trade.

Else we wait. And wait. And wait. Until the right time comes - and when it comes, we take the trade without hesitation.

Here area  few real life examples from Superior Profit Traders Community trades of last one week on how we were prepared. And profited from that.

​It also illustrates several useful characteristics of a successful (a.k.a. profitable) trader:
  1. Being Prepared
  2. Patience
  3. Improvising: For example, improvising  on the standard CUE Trade Set Ups  (standard CUE Trade set ups and rules are explained in detail in Superior Profit Books; specifically)
  4. Remaining Flexible
  5. Confidence on Own Trading System (for me, it is CUE Global)

Let us look at them in action in the real life trades that I took in last few days.

Being Prepared and Patient

Three days ago I had run CUE Explorer to scan for potential Shorts. Within few minutes, I had identified stocks in four different industries that might give a profitable trade and shared it in Superior Profit Traders Community here. In that post I had mentioned that it might be wiser to wait. To see if SPY (broad Market) holds support or breaks it - before taking any of these potential Short trade(s).

In short, I was prepared with my analysis outcome. But was not ready to take the trade. I waited patiently to see when and if a suitable entry opportunity arises.

Let us see how these four stocks played out after the original post in Traders Community.

Yahoo (YHOO.O): 

Yahoo did not yet give any signal to take a Standard Superior Profit Swing trade. This is explained in the chart below.

​ Procter & Gamble (PG):

PG went up for one day and then gave an optimal entry opportunity using Fine Tune template as explained in two charts below. This shows how the same CUE opportunity could be traded as Day Trade, Two Day Trade as well as Swing Trade.

​Some Superior Profit Traders might have traded PG in one of the CUE ways mentioned above. I had not taken PG. However, I had improvised on a QQQ.O trade and benefited from the market drop on 18th May - the same day when PG also started dropping. Here is how.



CUE Charts have several easy to use tools - and once someone is used to them, new trades may be improvised; combining CUE Charts with broader Market facts (not judgement or opinion - we try to stay away from that if we can !)..

You may recall that I had already analyzed the broad market to be Bearish in my Market Internal study blog a few days ago.  Based on that and movement of QQQ.O, I could improvise a profitable quick trade using Weekly Options. 

​I had booked profit on most of the QQQ.O Put Options on entry day itself. At more than 100% profit. And I allowed some lots to carry on for next day. Letting profit run - but ensuring it was already a guaranteed Risk Free Trade. The remaining position was stopped out today at a Trailing Protect Profit Stop. Which I had put some distance away from my Entry Price. A net highly profitable trade closed within two days.

Not all the time a Stock moves in our anticipated direction. It does so many times when we follow a roust and disciplined trading way. But not always.

Sometimes market moves opposite to what we anticipated and we have to take small loss, close the trade and move ahead to next trade.

​Some other times we may be flexible enough to switch direction and come out with some profit. Here is exactly that happening with JPM.

Being Flexible

JP Morgan (JPM)

JPM did not turn out as we anticipated.  It moved sideways for two days since we analyzed it and then on 18th May it shoot up - as shown below in CUE Hop On chart below.

JPM going up in itself probably would not entice a Superior Profit trader to display flexibility and switch from intended Short direction to a Long trade on JMP. There were few more facts in play.

On 18th Fed meeting minutes were due at 2 PM. On this day, market struggled to go up. However, Financials were soaring right from beginning of day. As if someone knew what the minutes will say and what its probable impact on banking stocks might be. And were buying up many banking stocks in advance. Resulting them to soar.

Below is the sector wise performance of Dow Jones Industries index as of end of day. Financials were strong from beginning of day itself and closed the day as the strongest sector of Dow Jones.

That observation, along with relatively narrow Stop Loss from Fine Tune Template could lead Superior Profit Trader to switch from Short to Long Direction and make a profitable Day Trade - as explained below.

​This is how the Day Trade would have played out - using CUE Fine Tune Template.

It was a profitable trade. No - I did not take it; I missed this opportunity. And I am not sad about it. I don't try to take every possible Superior Profit trade that comes in the market.

However, did you see in the sector wise breakup of .DJI above that Industrials were poor performer today?

And do you remember that we had DOW in our original Community post being a Bearish Stock? I was watching DOW since I identified it to be Bearish ... and I did take the DOW Short today and profited from that.

Being Confident

​Dow Chemicals (DOW):

Dow had a Bearish Candle yesterday in Daily Hop On (not shown here ... you may look it up on your CUE Charts). However, as the Candle Flow was still Bullish (cyan), one would not enter Short. And  would watch it today.

Today DOW was Bearish (part of Industrials - which were also Bearish as a whole) from beginning of day.

And as broad Market fell, DOW fell even more.

Here I could time the trade well. And could confidently add to my position. Using Weekly Options -I  booked more than 130% profit in a day on partial position - making the entire trade a guaranteed trade a Risk Free Trade. Below snapshot explains the trade.

These trades illustrate the many opportunities that a Superior Profit Trader may encounter and exploit. I have traded these using Options. However, the same trades could be taken using Stocks or ETFs.

Before I end this blog, some further discussion of the trader's characteristics in display here is warranted.

Different Characteristics in Different Trades/at Different Times

We watched several characteristics in action. Being prepared, being patient, improvising, being flexible and being confident.

Being prepared and patient are all good. No further discussion required on that probably. They are essential and useful in trading. And that is that.

Improvising may need a few words. This characteristics come after observing the Market for a while. After trading for a while. It is like in any other skill. Photography. Playing violin. Or in golf. Trying to improvise from the early days of trading career may be frustrating.

Then comes the matter of being flexible and confident. These may be two edged sword. They are indeed useful - and allows an experienced trader to capture more from the opportunities the Market presents. However, they also incorporate the risk of going into the realm of gambling. To chase a trade. Or to break one's own trading system rules. Or doubling down too much into a losing trade. Worse than even that ... to not cut loss if Stop Level is touched.

How to avoid those pitfalls?

Like in the case of  improvising, one may wait for a while before starting to be flexible (to reverse direction in a trade) or to be confident (to add to a losing position).

One might also practice for a while on simulation money first. Before going all out with flexibility and confidence.

With a bit of practice and discipline, trading can be fun. And even profitable.  The above examples illustrate that.


No comments: