How I Make a Living Trading Stocks

I would like to thank Rachel, Betty, Orry, Abraham, Carissa, Daliah and the rest of the staff at Goldman Brown Business Media Inc. to thank. The theme of the Expo was education, and it turned out to be a great success.

Setting the Rules

Here are some tips on how to extract information from the tables I will present in the book. As for Nasdaq stocks, I'll use one of the other four order execution routes listed above, depending on the situation I'm presented with.

Evaluating Risk/Reward Ratio

I left this field open and made a little note to set the stop loss at 3/16 below that trading day's low depending on where I enter the stock. My target price will be 24 and my stop loss will be placed 1/8 point below the low of the day.

The Early Warning

Today was one of those days and MSTR shareholders were unhappy. I was very disappointed that I didn't initiate any of the business I had planned for today, I felt like I was a bride who had been planning her wedding for the last twelve months and then didn't have the guts to show up.

FOMC Meeting

The stock was trading at 293 before the announcement, and now it was down to 275. I noted that the stock could fall hard if things turned around, so I sold at the first sign of weakness.

Working on My Golf Swing

In this case, it was the Dow that crumbled, so I cashed in my chips and took my profit off the table. The ax usually spends more time on one side of the internal market (best bid or best ask), than on the other side of the internal market.

CHAPTER (

The Running of the Bulls

I thought the stock could go to 148, which is the next resistance level, and maybe 160 if it breaks out, as seen in the chart above. This is not the usual growth in value for a stock like CSCO, so I felt the risk/reward of holding the stock overnight was not worth it.

Learning from Beginner Traders

DAY SIX

The stock found good support at the 41 level, consolidated and started moving back. 1 tried to add to my position, but the stock was very strong, and I could not get a fill.

When the Guru Speaks, We Should All Listen

I would be guided by the market as to what it wants to do, rather than trying to dictate to the market what it should do. I was very upset and the market was starting to look very ugly, so I took a short break. Go there and get money from the market!” I have found this method to be very powerful.

Awakening of the Bears

The Nasdaq continued to decline and found some support at 4500 where it formed a double bottom pattern. The Nasdaq broke the low of the day and I sold my positions for a total loss of $708. It was another brutal day for the bulls, with the Nasdaq down J86 points from yesterday's close.

Sitting on My Hands

After the 186 point drop on the Nasdaq yesterday, I expected futures to drop big this morning. While my son, Jordan, sang the tunes of "Let's go fly a kite" from the classic movie, Mary Poppins, and I tried to figure out how to get the kite in the air when there is no wind, the Nasdaq managed to rally and closing the day up 114 points from yesterday's close (21 points from the open). Thursday was my first losing day, trying to catch the market bottom and get stuck.

DAY ELEVEN

I traded several times that day, and I remembered how the 90 level held up, and from then on, the stock rose to 94. The last bell just rang and the Nasdaq had just suffered its worst point drop ever. Things don't look good for the bulls unless Reno decides to free Willy.

Record Volatility

This rally did not last long at all, and the Nasdaq broke through the lows again. The Nasdaq continued to decline, trading at 3650, well below its 200-day moving average. They will focus on the fact that the Dow was down 504 points and the Nasdaq was down 584 points.

Technical Problems

It was trading at 73 this morning; b u t now, I was not able to buy back my position, and the stock was trading at 78.2100, from the high value of the basket to the sale price of the basket is completely normal. He never told me he was in the stock before he sold it, and after the stock had already dropped back to 75.

Sitting Tight

It was trading at the high of the day and I fell that the stock could go back to the high of 190s. CHKP rose to 169 which seemed to be a good support level for the stock. He sold the stock so hard that it almost missed the low of the day.

Thank God It's Friday

The bulls won the battle today as the Nasdaq closed in the green for two days in a row. The Nasdaq was down 349 points that day, so 1 was very glad I didn't lose a lot of money. I was able to turn the day around, but I gave it all back on my basket trade.

DAY SIXTEEN

It wasn't a home run, but it was a good start to the final week of the challenge with four winners. From the time I closed my positions until the closing bell, the market went straight down and closed all the way down for the day. The best bid for KLAC as shown on the level II montage is 81 for 100 shares on REDI ECN.

Nasdaq Looking for Support

I still had KLAC on my main order entry screen at level II and when the Nasdaq hit the support level at 4138, KLAC tried to bounce at 87 or so. However, it was the Nasdaq chart that prompted both the entry and exit of this trade as shown above. The bears are still in the driver's seat as the Nasdaq lost 132 points from yesterday's close.

Sweet Dream or a Nightmare

DAY EIGHTEEN

At one meeting of the Orange County Day Traders, a trader told one of these stories. The day trader who just got "the talk" from the guy standing next to me cursed him and walked away. As you can see, when QCOM fell to a new intraday low at 11:50, the Nasdaq was well above the low of the day.

Traffic Jam

I felt very lucky to get out of the trade unscathed as my cable connection was now completely lost. I didn't want to trade in my backup machine which is connected to DSL because it seemed to be slow as well. My cable connection came back around 1pm and I carefully watched the market for a high percentage of trades.

Cash is a Position

The Nasdaq, which was up as much as 145 points for the day, managed to reverse direction and close 93 points.

DAY TWENTY

The index failed to do so and broke sharply at 11:00 a.m. to hit the low of the day. The lunchtime rally was not convincing for the simple reason that the margin selling was not over yet. I knew this trade wouldn't count as part of the stats for the challenge, but I just had to do this trade.

Thank You, But No Champagne for Me

The Secret to Success

Many of the subjects in these reports were inexperienced and untrained, and had not yet learned the fundamentals of their chosen company. No business can survive without a solid business plan that is strictly followed. Yet we don't see sensational stories in the media about all the small businesses going bankrupt every year in other industries due to the same lack of planning. But despite all this, I was making a comfortable income each week throughout the challenge, amid some very tough times in the market.

Challenge Summary

The table on the next page is divided into four weeks, and a number of dollar amounts made or lost on each trade, 1 executed. Most of the battle takes place in the gray shaded area where I expect the number of winners and losers to be very close. By using the areas on the table and the total, we can learn a lot more about our trade.

EPILOGUE

Bonus Pack

Tips, Guidelines, Rules and Case Studies

For example, if you buy stock XYZ at 75 and your price target is 95, and the stock is trading at 90, you cannot let the stock fall back to 80. In this case, you must stop at 87-88 1/2 depending of stock volatility. The next day, the stock rose in the morning and traded above 39 1/4, and continued at 42 3/8.

Classic Times

Many professional traders like to buy a stock when it is trading higher than the previous day's high. I use both methods but prefer to buy stocks at intraday support levels as you saw in the challenge. I prefer to buy the stock at the price level of the morning highs set between if the stock was trading significantly higher than the morning highs prior to this latest drop).

APPENDIX A

Unfortunately, I was unable to use this strategy successfully during the challenge time period for the obvious reason that the bears controlled the Road. Another classic system in a bull market is when a stock opens and starts to fall quickly in the first fifteen minutes of the day, I will look to buy it somewhere around the previous day's high or close. Next, if the stock is able to trade back to a higher level than the opening price, then it is showing strength.

Plans, Records, Stats, and More

This latest case study from AMZN shows many classic setups that can be used effectively in a bull market. This was the only area of support you could find on the chart, so once the stock pulled back to that price level, it was a bargain. After the challenge period, I am convinced that bulls make money, bears make money, and pigs get slaughtered, because I truly believe that you can play both sides of the market, even against the general trend, and still make money if you act smart .

Trading Record by Security 3/20/00-4/19/00

APPENDIX

Creating a Constant Watch List

VRSN MRVC NXTL CREE CNXT RATL

Creating Baskets

Real-Time and Overnight Scans

The formulas for the scans on the previous page have been published in the Stock Trading Wizard book. The companion is free for everyone and includes updated formulas that you can use with various third-party scanning software.

Basics of Level II Quotes

Direct Access Order Routing and My Setup

Non-subscribers may not post bids and offers on ISLD, but may enter an order to buy or sell from an ISLD subscriber who 1S posts a bid or offer for a stock through a SelectNet priority order. ISLD subscribers are similar to market makers in that they can post bids and offers. I can also use both INCA (Instinct) and REDI (Redibook) ECN to post bids and offers through my MB trade order entry software.

Advanced Features of MBTrader™

Stop Limit Orders via the ARCA ECN '

Conditional Orders

Change Orders via the ARCA ECN

Reserve Orders via the ARCA ECN

I thought it would be great if we could add a CD-ROM to this book that would contain the trading platform I used for the challenge. MB Trading has agreed to bear the cost of producing a CD-ROM and provide it as an additional learning tool for readers. The CD-ROM is provided for informational purposes only and without any warranty.

Resources for the Active Trader

Once the challenge was officially over, I spoke to the owners of MB Trading and told them how impressed I was with both their software and customer service. We felt it would benefit the reader to see the actual platform Tony used for all his dealings in this book.

GLOSSARY

It is important that the volume bars form a concave pattern as the volume fell as the stock moved higher to the high and started to rise as the stock price falls from the high. It is done by borrowing the stock from a broker (if he has one) and selling it. To close the position, a purchase of a share is made and the share is returned to the lending broker.