Education of this trader, and his tools

The History of a Rock.

This is my first post. I have no experience posting on the internet, my writing has been limited to research reports, development status, scope of work. My background is not wordsmithing, my background is developing things and making them work.

You have used products I have designed, or for which I have led the design team. With that background, and my technical career drawing to (what I thought at the time) was a close, I figured I wanted something to do in my free time other than cruise around the country bothering my kids. Goodness knows, they wouldn't want that. So I dug out my Samuelson, reread that, reread "Techniques of Financial Analysis", read numerous trading books including Alan Farley's "The Master Swing Trader", and went to work.

I immediately lost a lot of money.

When your prototype doesn't work, you generate what we call a Make-From. That is, you take the basic design, modify what doesn't work, and make a few more and test them. I read more books on day trading, patterns, read "trading Rules that Work by Jankovsky, set up my list of rules, and went back to work.

I lost a lot of money. But it took longer. I saw my basic failures were trying to identify bottoms and tops, overlooking the effect of the overall market on individual stocks, and leaving trades far too early. So my trading rules evolved. And evolved.

Then I joined Philsgang. He taught me patience, and the importance of relative strength of an individual stock. I followed him for 4 months without making a trade, then I followed his example. Over the next 6 months, I broke even. Actually, I lost $5000 because I donated that to Phil's charity, Boggy Creek Camp, after my 6 months of breaking even.

Then I bought one of Phil's tools, the X1. It helped me identify support and resistance points. I started to make money. Then I realized that support and resistance were not just inflections of pricepoints, but a combination of things including volume, fundamental and structural factors. Which I had read in Samuelson, but never understood. Until now. I left Philsgang, (but continued to support the charity, more on that later). I started to make more money. Basically I could make a reasonable living at this, so I tried to quit my day job. I was prevented from doing this. So now, just like it was when I was in school, I'm working 2 jobs. Full circle, I guess.

Also, about this time, TDAmeritrade released a trading tool called StrategyDesk. It was similar to the trading tool software Phil uses from his broker, but much more complex and complete. I believe strongly in getting a good trading tool, or set of tools.

I started to get better at identifying support and resistance. I still followed Phil's concepts of starting a position slow, setting a loss point I decided I could afford, and adding as the trade went my way, but just staying home on the trade if it violated what I thought was support.

Then I joined Minyanville (through TDAmeritrade). They taught me that there's a psychological factor, as well as the technical, fundamental, and structural components. And they taught me that depending on the trade environment, the factors have different weights.

Then I joined Traders Anonymous, and they taught me a lot more about the psychological factors, and AmenRa taught me about the 3LB.

Now, armed with the capability of doing appropriate research, my prototypes usually are successful on the first release. I gave up identifying the tops and bottoms, but look for trends, with the help of the 3LB, the structural, fundamental, technical and psychological aspects of making a trade. I am making good profits, and only lose money when I don't pay attention and let my emotions get in the way. This year, I did real well on BIDU, and donated my maximum to St. Jude's, the other Philsgang charity. That donation was made in the name of AmenRa and Rock.

I would like to encourage guys like Thor to invest the time now to learn this stuff, practice it, with small or tiny investments, because later on in life when a new career is needed, this is pretty good. You can take a day off anytime. You can put up a new prototype. You can try something new, every day. It's a wonderful life. If I had to do only my day job, that would surely drive me crazy. Or crazier.
That said, I just wanted to list my set of tools, and how I use them.

0. I have a desktop computer, which has a hardened Windows 2000 OS, 3 Samsung 21" monitors, and a fully synchronized backup notebook running proprietary software and acts as a full mirror. I have one feed on another 19" monitor that has Bloomberg. So I can watch Betty. At around 11PM here, they put on Charlie Rose, so I use the notebook to get the bloomberg.com/tv feed for an hour.

1. TD Ameritrade provides a wealth of tools. I use StrategyDesk which provides almost realtime access to the tape. I have about 30 "Level 1" tables each of which covers sectors of the market in which I have some interest. For example there's one for metals, coals, reits, retail, oils, solar, staples, tellys, homies, transports, healthcare, drugs, financial services, big banks, local banks, eats, bonds, technology, software, semis etc. I can look at the sector ETF (which are hard to find, by the way), and under that, all the stocks I'm interested in that fall into that sector. It's a good tool. It has lots of capabilities I don't use. I also have 3 charts set up. I keep one daily, one weekly, and one daily that has my most important "quick" technical analysis factors: volume, stochastics, momentum, and the "ultimate Oscillator". TD Ameritrade publishes the math for each of their tools, or you can ask them and they will give it to you, and I
have been through the math for these, so I understand what they are telling me. On one of the charts, you will see "relative strength". I intend to develop a post around relative strength, a concept that Philsgang introduced me to, at some future time.

2. I use TD Ameritrade's on-line screeners to find things like fundamentals, or PE ratios, or stock movements. Those screeners run really fast. The StrategyDesk can screen too, but that's very very slow.

3. Every close, I run a screener that identifies all stocks that got traded over 1/4 Billion. I keep that list, and watch the action. Basically, my theory here is that I'm pretty sure when a fund decides to move big money, they have to get sign-off by their management, and each move is considered very closely. So I'm interested to watch those big moves, and what happens.

4. I use http://Stockcharts.com to give me the 3LB charts, and some ticker charts that TDA doesn't have like "percent of stocks above their 50 day moving average" etc.

5. I use Yahoo Finance (http://finance.yahoo.com) to give me quick access to the balance-sheet information I need, found under "key statistics". I use TD Ameritrade when I need to access the full balance sheet. They keep historical ones, as well.

6. I use Minyanville and Traders Anonoymous for psychological input and tips.

7. I use my list of bookmarks to read articles from places like ZeroHedge, SharkInvesting, Mish's Global, The Big Picture, the Chicago FED, and lately the NY Fed. I find the government sites very useful, as they establish structural limitations on and directions to the market.

(OK, here goes!)