Investing for everyone

As a full time trader I always struggle how to come up with a system that the average person with a 401k or other savings can use and invest as safely as possible with the least amount of time and stress. I understand that for most people following the markets and dealing with stocks is akin to trips to the dentist, necessary but uncomfortable, long stretches of tedium with sharp hits of pain and then hopefully a nice clean smile.

I just read an interesting article on Warren Buffett that attempts to reverse engineer his technique for stock picking. If the results are correct, the article comes up with a stock screen (using a free online screener, finviz) that combined with a very basic understanding of technical analysis could produce a simple strategy.

So you would end up with a hybrid fundamental and technical system for stock picking for long term investing. Here is the article, and a super simple suggestion for understanding technical analysis. Combine these two parts with a 7-10% stop loss rule and one would be 90% of the way there:

Click on this for the seeking alpha article.

Click here for the amazon link to a very basic technical analysis book.

It was a good swing trading environment from June, but with the pullback here, elections looming, Euro and Asia news, mixed signals from the dollar, bonds, and vix, etc., holding for traders is more difficult right now. The good news is that earnings season started this week, and these morning gappers have acted very well. JBHT NPSP STM STEM ECL were all very tradeable today even though the market has been soft. Yesterday GOV PVTB FAST CLWR FOLD were all pre-gappers that offered trades. My swing trade hat is off and my daytrade on. I will swing but only positions with good cushion from my entry.

SPY chop

The market is just chopping around in a range, a real mess. Seems a market only for scalpers or long term holds with wide tolerance. Best to wait for some direction. If you are holding any longs (or shorts) for an extended period, plot them with the SPY and make sure they have their own independent momentum, and are not just chopping around with everything else.

Here is a possible scenario...

trading edge in FB

Here is an overlay of the SPY and FB that I took on Friday. Is there an edge here? Might consider waiting for a divergence to give some indication.

keep on keeping on

Still here, still trading, always adapting. Been very light trading in the morning, with 1/4 size and a "right or right out" mentality. I have been making more successful trades in the afternoon after things shape up and the direction of the day becomes clear, so have shifted accordingly. It seems the market is all about headfakes in the morming. I remember a time when most my trades were morning gappers, and what you saw was what you got, but that is not working so much for me now, so mostly sticking with unusual high volume stocks and playing breaking news. I was 2 seconds away from getting DRIV, and missed LEAP and PCS entirely. I took PFE but got wick'd and didn't get back in, but I did get AVP. I was late and missed the initial move, but took the second break and it worked instantly. One good trade makes up for a stretch of tight misses.

Initial spike trade - OCZ

OCZ came up on my scanner last week with a big volume and modest price spike. Part of the trade was a simple break of the high of the spike, but I also got into some at the low of the initial pullback, based on some reckoning on where it might dip to and how much I was willing to risk. I should state, which I did not in the chart notes, is that my calculated stop was just below the base created before the spike, around a 6.66 stop, about .10 risk, figuring a successful hod break would take it to test 7.

JPM trade

Pressed for time so just marked up the chart and blurted out some stuff. I did not call this one out live. I trade with people who are much much better than I at entries and have a higher success rate and actually move markets on the thin ones, so I mostly keep quiet unless I can offer something that was missed. The room is busy, I am pretty new there, and I feel only the best traders should be taking up the roll. Plus, this type of trade moves so fast that an entry call out is not really actionable by anyone else. Anyway, here goes: