This chapter starts right out with an introduction of chart types and why one is better than the other. Good basic discussion, very useful for the beginner. I remember being baffled by candlesticks back in the day. Tim does a solid job of describing how candlesticks work and why they are the best for a day trader. After that Sykes goes into a lot of the basic indicators and does a good job of explaining how indicators can be useful but should be totally secondary to price and volume. You can use all kinds of indicators but often they just get you into trades that you probably would not have taken had you simply watched the price action. I agreed with him on this for sure. I almost never use indicators for entries. I will from time to time use them for exits, just as a way to “pick a spot” whether it be a profit or a loss.
Next up is a “fundamental” discussion about finding trades based on press releases and SEC filings. Not a ton of depth here, but that is not necessarily a bad thing. Tim explains how to find and do a cursory read of filings and news, which for a day trader is pretty much all you need. Unless you are on a longer more swing timeline, typically the headline and a quick skim is all you need to make a trade decision. Also a good lesson on not getting to biased on news or filings. Reminder that price action is all that really matters. Often new traders will get stuck in the “This press release is bullshit” and hold short or “The news is to good for this not to go up” and endure pain or big losses. In my opinion the news is just like indicators, help it guide your decisions, but never get too committed either way.
Lot of discussion in this chapter on a big win $EKSO and a big loss $ISCO good info though in my honest opinion it goes on a little long. But that being said I know the stories and was there live for the $EKSO trade so it was redundant to me. Tim walks through the mechanics of a trade as well as the thought process so I think it is solid instruction. Just tough for me to get into it because I knew all the details already.
My favorite part of the chapter was the last third. Great detail in being disciplined and forcing yourself to not only write a plan but commit to it, in writing if possible. This is something I have gotten maniacal about over the last few years. I had never really picked this up from Sykes, I myself more learned it from Nate at Investors Underground. But Tim does an AWESOME job of laying out how and why to build a plan. This segment was easily my favorite so far in the whole DVD, great for ANY level of trader I think.
Overall a good chapter. I do need to criticize the rambling on and on about the $EKSO and $ISCO trades, but there are nuggets of info in there. The chapter was saved in heroic fashion by the plan discussions.
Rating: 3.5 out of 5 (probably would have been a 5 out of 5 with less rambling on $EKSO and $ISCO)
-Point and figure
Line – not very useful, only shows closing price
Bar – Better – shows HOD and LOD
Candlestick – best
-breakdown of what makes candlesticks best
-description of how they work
Point and figure – Neither Tim nor I understand them…
-MACD,RSI, Fibonacci, Moving averages etc
-Simplicity is usually best, price and volume is all that really matters
How to find the best stocks to trade
-More LQMT breakdown
-Valid discussion for how and what can happen on penny stocks with news.
Good advice on not chasing.
Beginning of breaking down SEC filings/press releases
Breakdown of SIMH trade, similar to LQMT breaking out on good news – real contract
Chat room playback of SIMH – terms etc
Breakdown examples of press releases moving stocks. SIMH example
LQMT and SIMH summary
-Contract winners can be buys on day 1 and 2
-Sell into big moves – take gains
-Don’t worry about nailing the top, catch the “meat of the move”
Description of usefulness of Profit.ly to track trades
Always be scanning for big gainers.
-then do quick research of news
-there are better resources but yahoo finance is still the go to
Only in penny stocks can you make such huge percentage gains with no or low leverage.
-BUT you need to be patient and wait for the best plays.
Recap of Illinois Superconductor $120K profit in one day when Sykes was in college
-good example of a Friday squeeze.
-stock making new highs on a Friday afternoon with news – solid buy R/R
-Funny recap of “Below Deck” episode
-LOTS AND LOTS of discussion of EKSO, probably too much…
Good discussion/breakdown of EKSO financing
Always review trades, think about what you did right and wrong
EKSO – ISCO review
-buy penny stocks breaking out, especially on Fridays with stories
Good advice on not being first, piggy back moves already in play whether long or short.
More discussion of having plans.
-Conviction of sticking to YOUR plan
As a starter control your size, prepare to scale in.
Discussion of overnight and risks and rewards
Good tips to avoid mid day
Always go in with a specific plan
-play the trade out in your mind, with all the options
Fine to trade penny stocks on the long side, but NEVER believe them, 99% fail.
-NEVER become a bag holder.
Good description of former runners being good shorts because of long term bag holder selling.
How to plan
-What is the right position size?
-When do you cut losses?
-When do you take profits?
-What will you do if it goes nowhere?
-DECIDE THIS BEFORE ENTRY.
-Think about risk to reward.
-DOCUMENT IT, note card, text document etc
Risk to reward 3-1 minimum
-Do the math, if you want 30 cents gain, set stop at 10 cents.
-$1 a share loss for $3 in gain
Good discussion of risk to reward and position sizing
Leverage discussion explanation
How to plan a trade, reverse engineering LQMT trade
Came back to ISCO trade, “ok” commentary, but really dragging on about this trade and what could have been or should have been. Decent commentary just overly redundant and too long.
—In Closing good content to the plan discussion, but just went on waaaay to long.