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Course And Heading 05/27/19

It is very difficult to determine the direction of the market so I am maintaining a safe heading to start the week:
No new long positions planned.No new short positions planned.Hold existing positions.Trading Tide Levels:
Mid Tide (S&P closed at 2826 on May 24, 2019 coming off a Low Tide of 2801 on May 13, 2019 and a High Tide of 2954 on May 1, 2019)Spring/Neap Tide (VIX is around 16 this morning)Subscribe to 10KT NewsletterLearn More About 10KT
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This is for informational purposes only and the information provided does not encompass all possible or probable outcomes and nothing posted here is an indication of future results. Nothing in this blog is a guarantee or promise of future investment returns and investing in stocks or bonds carries risks including losing your entire investment. I do not recommend, advocate or endorse any third-party links, resources or advertisements of any kind. Any investment decisions are recommended to be in conjunction with a Certified Fina…

The VIX & The Tides

The CBOE Volatility Index (VIX) is a market index that represents the market's expectation of 30-day forward-looking volatility. A high VIX high volatility and a low VIX = low volatility. In 10KTrades terminology, VIX can be illustrated by "wind speed (knots)" or by the types of Tides.

For some perspective, back in December when the market was very volatile, the VIX rose to 36.20. Since then the markets have been much calmer and the VIX has been around 13.

When the VIX is high expect volatility (high winds and turbulent seas) and trade accordingly. Likewise a low VIX might offer a little more stability so adjust your Captain's Log accordingly.

Trading Tide Levels (at the time of this post):
Tide is moving lower (S&P is approaching the previous Low Tide of 2801 on May 13, 2019)Neap Tide (nice sailing wind, VIX is at 16.79 knots)Subscribe to 10KT NewsletterLearn More About 10KT
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This is for informational purposes only and the information provided does no…

Practice, Practice, Practice

I cannot emphasize enough how I need to be prepared to lose my entire investment. Every boat can sink. I cannot trade what I cannot afford to lose. That said, there's a saying "a ship in port is safe, but that is not what ships are built for (Grace Hopper), so if I want to "play in the game" then I must practice while in port.

Practicing while in port is like installing a rudder, engine, sail or simply working on your boat before you head out to sea. You would never set sail without a way to control your boat or keep it afloat, why treat your money any different?

I love movies about underdogs, stories about overcoming adversity and winning despite the odds. It should come at no surprise that I love the Rocky movies. One of my favorite quotes was when Rocky's trainer, Mickey Goldwin, says "For a 45-minute fight, you got to train hard for 45,000 minutes, 45,000! That's ten weeks, that's ten hours a day, ya listenin? and you ain't even trained one!…

UPDATED: New Position: $STLD Trade #100

In accordance with maintaining diversity, I added another position to the $STLD Trade today and the first position will likely be taken out by a STOP-LOSS. Lose money on the first trade and hope to make it back on the second trade. If I can win a few more than I lose and enjoy doing it then I will achieve success. Practice, practice, practice.

Current Low Tide: $27.44

Prior $STLD Low Tides:
December 27, 2018: $28.91October 26, 2018: $38.12Trading Tide Levels:
Tide is moving lower (S&P is approaching the previous Low Tide of 2801 on May 13, 2019)Neap Tide (VIX is at 16.79)Subscribe to 10KT NewsletterLearn More About 10KT
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This is for informational purposes only and the information provided does not encompass all possible or probable outcomes and nothing posted here is an indication of future results. Nothing in this blog is a guarantee or promise of future investment returns and investing in stocks or bonds carries risks including losing your entire investment. I do not r…

Diversify, Diversify, Diversify

I should NEVER put my eggs in one basket! $WCOM Trade #4 serves as a constant reminder of this important lesson.

I watch about 50 stocks and funds and target 8 of them to trade. I've found 8 to 10 stocks (24 - 30 "boats" (I will have up to 3 positions in any one stock)) is about my limit in order to deliver a decent return on my effort. The 37 other stocks that I watch but do not target serve as potential replacements for the 8 target stocks.

When I set sail, I diversify by launching several boats/several courses. This gives me plenty of options should the conditions worsen. So let's say the weather and conditions are favorable to launch a cruise (which usually means it is storming at the dock), I dedicate no more than 25% of my trading funds to any one stock or fund.

A good captain weathers the storm he or she cannot avoid and avoids the storm he or she cannot weather (unknown author).

In addition to dedicating no more than 25% to any one stock, I also leave port at…

New Position: $STLD Trade #100

It has been 1,336 days since the last voyage with $STLD. While sitting at the dock, $STLD hit an all-time High Tide of $52.10 on May 17, 2018 but it has also receded to $28.91 since then so a positive return wasn't a sure thing (never is).

This is another classic example of avoiding the "what could have been" psychology as knowing we returned to port (sold a stock) for a modest gain that ended up tripling in price within 968 days after buying it can be quite frustrating. In this case, the $STLD winds just kept blowing and blowing in the same direction and I chose not to chase it.

I have got to have the right temperament if I want sail around the ocean competing for returns. I could have just as easily regretted setting sail (purchasing $STLD) in the high $30s or low $40s during that same time. It's easy to play Monday Morning Quarterback and second guess every decision after things happen. But every trade is unique with different timing, tides, prices, conditions, ec…

The Right Mindset

Throughout my life I've occasionally thought about what it would be like to be extremely financially wealthy but I've never been driven by greed or had an appetite for extreme money and possessions.

I think not driven by greed is important to successful trading (success as defined as low stress, enjoyable and profitable). Of some of the primary contributors  to happiness such as career, money/financial, social/community, health, sense of purpose and entertainment/family, my family has always been by far the key to my happiness.

I think finding happiness from a source other than money/financial is a key to trading stocks. There have been some very "red" trades and dark moments throughout the years that could have been tough to stomach. Fortunately, my emotions have remained very steady whether I've made money or lost money.

Ironically, I do not like to gamble at casinos or bet on sporting events. Despite the fact that I think the stock market is one big gamble, I …

Buying Stock On Margin

Buying stocks on margin is when you borrow money from your broker to borrow stocks. Recently, the interest rate TD Ameritrade was charging was 9%. That is 9% in addition to the commissions and fees you pay to trade stocks.

I've paid a small fortune in margin interest expense over the years and even more in commissions and fees. Subtracting the commissions, fees and margin interest expense and my returns dramatically improve. As such, I tend to try to avoid buying stock on margin as the risk does not seem to be worth the reward. I already pay enough in commissions and fees, having to overcome interest expense in addition to the commissions and fees is really challenging.

Trading Tide Levels:
Mid Tide (S&P closed at 2859 on May 17, 2019 coming off a Low Tide of 2801 on May 13, 2019 and a High Tide of 2954 on May 1, 2019)Spring/Neap Tide (VIX rose to 17.63 this morning after closing at 15.96 on May 17, 2019)Subscribe to 10KT NewsletterLearn More About 10KT
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This is for…

The Fees And Costs Of Trading

When you trade, each transaction typically has a commission fee charged by your broker and when you sell a stock you also typically pay a regulatory transaction fee.

My first trade on January 27, 1999 I paid a commission to TD Ameritrade of $13 to buy the stock and another $13 plus a Regulatory Fee of $0.18 when I sold the stock. Most recently, I have been paying a commission of $6.95 to TD Ameritrade each time I buy or sell and the Regulatory Fee when I sell stocks.

During my lifetime of trading I've paid a lot in commissions and regulatory fees. The hope is that the fees enable me access to powerful trading tools that, in turn, enable me to obtain a better return on my investment which covers the cost of the fees.

Trading Tide Levels:
Mid Tide (S&P closed at 2859 on May 17, 2019 coming off a Low Tide of 2801 on May 13, 2019 and a High Tide of 2954 on May 1, 2019)Spring/Neap Tide (VIX rose to 17.63 this morning after closing at 15.96 on May 17, 2019)Subscribe to 10KT Newsletter

WCOM Trade #4 The Titanic

Ah, WCOM Trade #4 The Titanic

Trade Rank: 104

In the book, The Intelligent Investor by Graham, the following is entirely TRUE: "Once you lose 95% of your money, you have to gain 1,900% just to get back to where you started. (page 12, 2006)."

WCOM Trade #4, a boat the size of the Titanic, began April 29, 1999. The first of 356 purchases was for $83. The last sale was at a whopping price of $1.721 on May 30, 2002 - nearly the entire cost of the stock - OUCH!

I bought and sold the Titanic all the way down for 1,127 days. STOP-LOSSES were used several times but as it dropped lower and lower I kept on buying it, each time thinking that each lower entry price was better than the last. Talk about an education by fire! WCOM turned out to be one of the biggest accounting scandals of our time, joining the likes of Enron as a fabrication of manipulated, fraudulent financial strategies that ultimately destroyed shareholders, employees, families and friends.

These scandals teach and remin…