A little something for everyone this week, as I clean up miscellaneous items of interest.
Item No. 1: Day Traders Beware!
Don't know whether many of you caught
The Wall Street Journal
from last week, but this story should have been on page 1. The column appeared in section B, and was entitled "Block Trading Inc. Faces Complaint over Day Trading."
Now, that's interesting for a number of reasons, not the least of which being that
was a fairly renowned firm in the day-trading arena. In fact, I recall its chief exec gloating in
just a while back about all the loot he was bringing in.
But let's chalk up its demise to a competitive environment. Of more interest was this sentence:
According to the complaint, the firm's marketing material describes the "unlimited earning potential of day trading," even though only one of the Boston office's 68 accounts made money during the year it was open. (Emphasis added.)
It gets worse. Apparently, that one profitable account was owned by a trader who was trading other Block clients' accounts, but who was allowed to "
allocate trades to either his account or the other customer's at the end of each day.
" (Emphasis added.)
So, if these allegations are true (and they are still unproven), it's damn scary. One profitable account out of 68, and even that one was probably rigged? I don't know about you, but that's what I think about as the "quit your job to be a day trader" ads seem to grow exponentially.
Item No. 2: I Was Wrong, but I'm Still Worried
Silly me, thinking that
AMZN would run into trouble! Recall from a few columns ago that I had the temerity to
suggest these two bellwethers would run into trouble. A quick view of each chart says incorrecto, Gary B.!
No, they barely paused, and instead continued to ramp up.
OK, being wrong is one thing, but let's say I'd actually acted on my prognosis? Well, then I'd have gotten stopped out quickly, of course, but sometimes a failed signal indicates you should switch immediately to the other side. In fact, if you did that, you'd have two winners right now, and be long in some pretty bullish charts.
Still, I'll pass on both for now. We're in an environment where
EBAY is up 40 points in two days. Or was it 400 points? I'll be the first to say, then, I have no idea what's going on with stuff like this. Trust me, I'm not raining on the Internet parade, but c'mon, doesn't it smell just a little bit like mania?
Item No. 3: Why Trading Is Tough -- Chapter 24, Part 9
APC. But, in this bullish environment, it was acting just fine. In fact, it felt like a winner. And then -- whammo! -- catch this headline.
There goes the bounce, there goes my stop loss being hit, and I cover at the high of the day.
And, salt in the wound, the stock ends up going
by day's end.
Forget about day trading being tough. Any kind of trading is tough.
Item No. 4: The Essential Question
I received an interesting email the other day from reader
Dear Gary: I enjoy reading your columns the way I'd enjoy reading the primary sources for an advanced astronomy course. Enjoy the subject, respect the science. But what can it do for me when all I want to do is look at the night sky (or invest for the long haul)? In other words, is there a good way for a nontrader and nontechnician to make use of your stuff?
Hmmm, in other words, outside my niche, what good am I? Well, I'm glad John asked now, rather than a year ago, because I think -- or at least hope -- I have a better sense of what I'm trying to do with my writing.
First, of course, is that I'm trying to discuss technical analysis from a home trader's point of view. If I also educate, clarify and enlighten, then those are bonuses. But, as most readers know by now, it's I who am often educated, sometimes by you all and sometimes by my own mistakes. So, perhaps the sharing is the real education.
But, I'm hopeful you've also seen a growing theme in many of my columns, and that is, I strive to make Technician's Take a nice place to visit even if you don't know anything about TA. Yes, I could make these columns dry, lifeless discussions, dissecting MACD and stochastic algorithms. Boy, what fun that would be.
But, instead, if I can also make you laugh occasionally (either with me or at me, it makes no difference!) and make Technician's Take an enjoyable read, while at the same time doing all that educating and enlightening stuff, then that's probably even better.
Finally, I'm fully convinced the elements of success in trading are no different than the elements of success in anything else. Patience, hard work, discipline, enthusiasm and really knowing your craft will make you a great trader. But these same attributes are demonstrated by my wife as she rises up the corporate ladder, and by my children as they mature into solid students and athletes.
So, Technician's Take as metaphor for life's great lessons? Well, I wouldn't go that far. Let's just say if you know nothing about TA but you're still reading, then I'm doing my job!
Gary B. Smith is a freelance writer who trades for his own account from his Connecticut home using technical analysis. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. This column, Charted Territory, appears every Wednesday. Smith also writes Technician's Take, which appears every Monday, and TSC
Technical Forum, which appears every Saturday.