I caught myself still not adhering to my hedges that I should take which left me once again fighting the trend. I’m clearly making it harder than it should be at times. But at least it’s a problem I’m actively working to bring a solution to.

This was the week the March contract stops trading so I had to rollover my positions to the June contracts. I did it all at once, but I see I could have timed it better for better rollover rates.

Of course I “learn” all these things in hindsight, but at least it helps me in not repeating the same mistakes.

Have to focus more on making my hedge trades being  independent from my directional trades so I don’t miss/ignore the obvious cues.

Had a great week for the most part. The gains this week made up for the losses from the prior two. Big gains using directional methods, medium gains via hedging. Missed adding to my profits later in the week due to old habits dying hard. I’ve been finding it hard to engage in hedge trading at times due to my “directional” sense resisting the hedge move as being the “wrong”. Of course the hedge move turns out to be “right” and I missed that additional profit. At least it serves as a reminder to not override my hedge trades. My solution was to make hard rules that I have to follow regarding hedging until it comes more naturally.

I still kind of kick myself for not engaging in hedge/delta style trading earlier, but I would not have been able to do it well unless I first picked up my current set of skills, so it follows my evolution and growth in trading.

On Wednesday Rand Paul staged a filibuster against CIA appointment nominee John Brennan in opposition to his involvement in the US drone warfare program and the fact that neither the President or Attorney General will guarantee that an American citizen could not be killed on US soil via a drone without a trial or due process.

Issues like this reveal the true nature of our government. Here we see bipartisan acceptance of the drone policy with no active reservations against Americans being potential targets of such airborne strikes by executive directive. Only 6 Republicans and 1 Democrat supported this filibuster, meaning the vast majority apparently have no problem with current drone policies.

It’s both humorous and sad that the average citizen will get up in arms over the 2nd amendment, abortion, gay marriage, etc, but are pretty much oblivious to what’s going with American civil liberties being under attack. It makes little sense for anyone to go rabid over the threat of their guns being taken away while basically ignoring the fact that a single executive order can erase them from the Earth no matter how many weapons they’ve stockpiled.

Because the “spinmeisters” of the left and right are pretty much silent on this, it’s easy for them to push this past public perception people. It’s a shame that if folks don’t hear it from “Rush”, talk radio, or the opinions people on Fox, MSNBC, etc, it goes ignored with folks not doing anything to enlighten themselves on the more important and concerning things going on beyond the time wasting “R vs D” fighting.

For reading: Link

The response to Rand Paul?  Other Democrats and Republicans as well as MSM like the Wall Street Journal, were not amused

The top 10 youngest billionaires-

The magic key of entry appears to be among the top crew of a super start up/turned IPO like Facebook, or do it the old fashioned way, inherit it from mumsy and daddy.

__________________________________________________________________

The World’s Youngest Billionaires

By Brian Solomon |

There are 1,426 billionaires in the world this year. They are the wealthiest of the wealthy. But only 23 members of this elite list are under 40 years old, with that exciting combination of money and youth.

Those 23 have a total of $68 billion between them. Eight come from the technology sector, including four from social networking giant Facebook. Nine come from the United States, the rest from countries abroad. Three are newcomers to the billionaire ranks. Read the full list below (ordered from youngest to oldest).

No. 1: Dustin Moskovitz

(AP Photo/Eric Risberg)Age: 28
Net Worth: $3.8 billion

Moskovitz, Mark Zuckerberg’s former roommate, no longer works at Facebook, the social networking giant that he co-founded. A signee of Bill Gates’ andWarren Buffett’s Giving Pledge, Moskovitz bikes to work, flies commercial, and pitches his own tent at Burning Man.

[More from Forbes: The World’s Richest Women]

No. 2: Mark Zuckerberg

Age: 28
Net Worth: $13.3 billion

Few CEOs of any age are under more media scrutiny than Zuckerberg (who’s only 8 days older than Moskovitz). Since taking Facebook public in May 2012, and getting married days later, the hoodie-wearing founder has seen his net worth rise and fall with every fluctuation of the stock price.

No. 3: Albert von Thurn und Taxis

Photo: GettyAge: 29
Net Worth: $1.5 billion

Albert von Thurn und Taxis first appeared in Forbes’ billionaire rankings at age 8 but officially inherited his fortune in 2001 on his 18th birthday. The eligible bachelor is also a race car driver and tours with a German auto-racing league.

[More from Forbes: Newcomers To This Year’s Billionaires List]

No. 4: Scott Duncan

Age: 30
Net Worth: $5.1 billion

Duncan is the youngest of the four children who inherited the massive fortune of late energy pipeline entrepreneur Dan Duncan, founder of Enterprise Products Partners. Today the company owns more than 50,000 miles of natural gas, oil, and petrochemical pipelines.

No. 5: Eduardo Saverin

REUTERS/Edgar SuAge: 30
Net Worth: $2.2 billion

Facebook co-founder Saverin renounced his United States citizenship in 2011, news of which broke days before the company’s IPO and drew accusations of tax evasion. Saverin, immortalized in The Social Network as Mark Zuckerberg’s onetime best friend, settled a lengthy legal battle with Facebook, apparently receiving a 5% stake. A Brazilian citizen, he now resides in Singapore and invests in startups.

No. 6: Huiyan Yang

Age: 31
Net Worth: $5.7 billion

Yang, the daughter of the founder of real estate developer Country Garden Holdings, is once again China’s richest woman. Her father transferred his stake to the Ohio State grad before the company’s IPO in 2007.

No. 7: Fahd Hariri

Hariri brothers, from left: Ayman, Saad and Fahd (Photo: AP)Age: 32
Net Worth: $1.35 billion

Hariri is the youngest son of slain Lebanese Prime Minister Rafik Hariri. He graduated from the Ecole Spéciale d’Architecture de Paris in 2004. While still a student, he ran an interior design studio on the outskirts of the city, and sold furniture to clients in Saudi Arabia.

No. 8: Marie Besnier Beauvalot

Age: 32
Net Worth: $1.5 billion

Marie, along with siblings Emmanuel, 42, and Jean-Michel, 45, inherited French dairy giant Lactalis, producers of popular Président brie among hundreds of other cheese, milk and yogurt brands.

No. 9: Sean Parker

(REUTERS)Age: 33
Net Worth: $2 billion

Parker is revamping his much hyped start-up, Airtime, with the hopes that the video chat site will have the impact of his other Web companies. At 19, Parker skipped college to disrupt the recording industry with music swapping site Napster. He served as Facebook’s first president at age 24.

No. 10: Ayman Hariri

Age: 34
Net Worth: $1.35 billion

Hariri is the son of slain Lebanese Prime Minister Rafik Hariri. He’s involved in running Saudi Oger, one of Saudi Arabia’s biggest construction companies, and the source of the Hariri family fortune.

This is the week Future March contracts are rolled over to the June contracts. Each contract period runs for 3 months and there’s a transition period as the old contract comes to a close and the new contracts ramps up in volume.

Prior to rollover, the forward contract has lower volume and the price spread between the bid and ask is typically worse than the current contract.

However, volume in the forward contract starts increasing as it gets closer to contract expiration of the current quarter, which means better pricing.

The golden period is during rollover week as well as the following week as the next quarter Future contract becomes the main one with increasing volume and the old contract starts winding down. Both contracts have heavy volume, giving both of them great price spreads which allows easy hedging between the two contracts with no price spread discrepancies.

This stands out all the more to me now that I’m employing hedging in my methods.

As I explained in my trading update for the week, had a great week going into Wednesday, where that strong reversal and run up sunk my boat for this month’s returns. You win some you lose some. But like I also said, I learned quite a bit from the month’s experience which I think will prove instrumental in moving to higher levels trading to eclipse last years performance.

The chart basically shows you the strengths and weakness of my directional trading. When I’m right in the direction I can get explosive returns, but when wrong I can get shut down or stung. What I learned this month should help greatly neutralize the problem of getting the direction wrong while keeping all the benefits when getting it right, which is why I’m so excited going forward.

Ironically, if I had gotten the direction on Wednesday right, I would have had big gains this month, but less understanding of how to correctly apply hedging, leaving me more vulnerable for future losses. This gives you the paradox of trading – losing days can prove to be MUCH more beneficial than winning ones if they help you to identify and correct any weaknesses. Many traders make the mistake of trying to put aside and forget their mistakes instead of thoroughly analyzing them to see what can be learned going forward.

One’s ego has a tendency to dismiss errors as flukes, but the key that a lesson hasn’t been learned is when the same mistakes are repeated. I was stuck in that loop for the longest time until I was finally able to move forward. Just another reason why trading has its difficulties.

If all goes as planned, this may be the last dramatic/volatile “roller coaster type” chart of performance made…..we shall see!

February Performance Vs Indices

The market continued it’s expanded moves this week and took no prisoners. The moves were very sharp and dramatic – basically straight up or down with little opportunity to safely enter a move once it started.

On Monday at the opening bell, the market basically collapsed and went into free fall mode. As I already had a long outstanding short position, that suited me fine as the market fell lower and lower in waterfall like fashion. At the end of the day, all my losses for the month were erased and I was looking forward to capitalizing on the rest of the week.

During this time I’m also trying to make use of hedge/delta trading where I take on both long and short positions, and that worked out favorably as well. Monday was a very good day.

Tuesday the market was relatively calm but still had some sizable swings. Trading today wasn’t nearly as good. Every trade was profitable, but I failed to maximize the returns due to bad analysis and planning on my part. I was expecting the market to move lower, but it drifted higher instead. As a result I missed closing some short positions for much larger gains. Another good day, but it could have been much better.

Wednesday I was expecting the market to head lower when it decided to surge higher with the same ferocity and strength it went down with on Monday. More bad planning by me in that I thought the market had a little more down side before reversing. Hedging saved the day as my losses were less severe due to counter positions, but I still gave a chunk of profit back to the market needlessly.

Thursday, I’m looking for a reversal back down, but the market continues to show strength. I’m applying my hedging strategy to try and work through my bad position, but my wonderful brain threw some more bad analysis on the pot, or I can chalk it up to still learning, since I messed up my hedge as the market reversed and I wound up buying too many contracts when I should have been selling. The market falls and at the end of the day I’m stuck with a hedge and a main position that are both negative, but losses are mitigated since they supplement each other.

Friday hits, and I’m back on track with the right analysis and planning. I anticipate the market rally, and start reducing my short positions as the market went lower in the morning. I wound up closing them too soon as the market went lower than I imagined, I could have closed them out with smaller losses.

The market looked weak enough to start getting me worried that I was wrong in my analysis again, but it soon started moving up, then took off higher with strength. Hedging was working well today to add additional profit to make up for most of the losses.

I had so many gain and loss trades that I didn’t know my actual net return for the week until I tallied all the numbers. Losing trades beat the winning ones for a net loss this week. If I had stopped trading on Tuesday, the week and month would have been positive, but where is the fun of being safe? Is there a “YOLO” for traders?

Checking my stats, this is my 3rd straight losing week, which hasn’t happened since July of 2011. That’s an amazing stat to me, since I remember the days when positive days/weeks were few and far between, and shows me how far I’ve progressed.
 

The good, better, and best news is this week taught me how to better use hedge or delta neutral trading which I’m realizing could be like adding rocket fuel to my returns.

My old style was pure directional trading. When I correctly determine the direction I can usually capitalize well on the returns. The problem is when I don’t get the direction right, or jump in too soon, my results can suffer- which points to some of the more volatile roller coaster like returns in the past.

I’ve been meaning to take up hedging/delta neutral trading, but I had a problem taking on an opposite position to my main position. To me , it felt like I was making a “bad” trade since I felt confident of the direction the market was taking.  Working though this week’s problems helped me to see how to best use it with no reservations and better effectiveness.

For purely delta neutral trading, you don’t care about market direction as you are just profiting from moves in the market , hence the name “delta neutral” trading. Of course the more accurate one gauges the market range will result in better performance.

I find that I can employ my directional strategy with hedging to make profit on both the main trend and counter trend. The best part is if I get the direction wrong, if done correctly, it will be far easier to switch over to the right side with minimal losses since the position is hedged, and can easily be converted to a full delta neutral position. If I get the direction right, I now have the opportunity to make gains in both directions. In the past I’ve posted horror stories trying to be cute and taking a counter position, thinking I would switch back to the main position after I took a small profit, only to see the market move strongly against me so I wind up losing money being on the wrong side when I KNEW the right side to be on. With hedging, this scenario is a thing of the past.

My new methods mean I will no longer get stuck in bad positions like I was the last several weeks and most of February. It means I don’t have to worry that much anymore about using stop loss orders since the hedge will cover that. Couple that with my new intra-day trading progress, and it looks like a performance breakthrough is on the horizon.

The one drawback is that the new methods will require more action on my part to take advantage of both the trend and counter trend.

Last week CNBC and Fox Business interviewed a young actress turned day trader.

Both vids say similar things but I think CNBC’s is a bit more detailed:

CNBC:

Fox Business:

What stands out is that she’s only 16 and clearly seems to have a good grasp of trading.

She even has a website where shes discusses her ideas and explains stock trading/investing terms at the beginner level: http://foxonstocks.com/

Of course she’s new and may run into difficulties over time, but all traders young and old have to deal with that. Right now she’s performing well and using her Hollywood PR contacts to help put her in the public eye. Since she isn’t selling any services, I don’t see anything amiss or shady with her actions. In fact I think it’s a good thing if it helps younger people take an active interest in the market. Most people don’t have much insight into how to invest or trade so the more people that learn, the better off they will be with managing their savings as well as planning for bigger things like home purchase as well as retirement.

What stood out to me was some of the visceral negative comments from others who claim to be traders. Some of the comments I’ve seen were just downright nasty saying she hasn’t proven herself and doesn’t know the meaning of what it is to be a successful trader.

All the time I’m thinking she’s just a kid- why would anyone be that upset over a kid trader who’s not selling anything so there’s no scam that I see in the making? I would think that she would be congratulated by traders as getting involved at such an early age but apparently many feel jealous or threatened by her publicity.

I’ve noticed this on many trader boards – many traders seem to take delight in cutting other traders down or telling them to give up.

I would think a kid would merit some type of grace period, but apparently others don’t agree.

Honestly though, I think those who spew such negative messages are likely not very good traders themselves and are trying to feel superior by attacking others.

Here’s an example conversation I had with one such “Hater Trader” after I noticed he was “tweeting” challenges to Rachel Fox to “prove” if she’s really good or not. All I did was ask him to give her some slack due to her age. He gets increasingly arrogant and doesn’t care how old she is, but things take a nasty turn when the spotlight goes back to him:

Note: (Reads from bottom up): http://stocktwits.com/soulfire/message/12022761#12022931

Two words for him: How embarrassing!

Can you believe that guy?? His avatar suits him quite well.

This kind of arrogance/mindset is one of the main reasons why the failure rate among traders is so high. All that mental energy spent in trying to tear someone else down instead of building one’s own skills up.

I recommend checking out Rachel’s sight for those new to investing since she does a decent job explaining things from a beginners perspective.

The self imposed “doldrums” are over as the market resumed moving and this time I was focused on taking advantage of it.

After the holiday on Monday, the market opened up higher Tuesday and to my chagrin, kept moving up and making new multi year highs throughout the day. Since I was net short, and maintained my position as the market crept up the last few weeks, my net P/L was now starting to take a serious hit, even by my higher risk standards. According to my analysis the market should have turned back down but here it was continuing to move higher. Seeing the market do this felt like the Road Runner breaking the laws of reality:

 While this was going on my trading position felt like this:

Not a nice feeling or position to be in, and my less experienced self would have likely given up or perhaps pulled a Wile E Coyote and try to join the crowd by going long. However, my more experienced self is more familiar with how the market operates – it tries to knock out all the retail positions (shorts) before turning the market down, and it does it through this type of psychological warfare.

I’m now at the limits of declaring my analysis wrong, and the market is starting to move beyond that so I have to decide if I am really wrong and reverse my position, or just exit and reassess my analysis. I look over my analysis and redo it from scratch over and over and all signs are pointing to an imminent reversal, so I decide my best option is to start exiting and re-enter at a higher level if the move up continues.

My analysis has also once again reminded me that I shorted way way waaaay too early and if I had known then what I figured out the last few weeks, I would have been long enjoying nice profits instead of losses and would now be piling in short with no worries. But like I said in previous posts, had the market not tripped me up, I wouldn’t have discovered the holes in my methods which allows me to make the needed changes to fix them.

After the market closes Tuesday and goes into electronic after hours, the market is still ticking up higher, but I’m aware of how the market applies pressure to people so I’m trained to not let it affect me as much. The key comes from having a plan of action. I already know what my actions will be and I’ve already accepted the losses so I’m not biting my teeth in hope/fear.

Wednesday comes and the market opens and begins to slowly drift lower, but that doesn’t stand out since that’s how it’s been behaving the last few weeks- drift or drop lower then reverse and move higher. Most people were expecting it to continue to do the same, while I was waiting for it to finally break the pattern and fall. To add to the drama, the market drifted down EXACTLY to a main support level just prior to the Fed releasing their minutes of the prior month. I knew the market was likely to move big either way after the minutes were released. I was ready to close some of my positions if the move up happened. All my senses were saying the move would be down since the crowd of people positing messages had all been conditioned to be bullish, predicting the market to keep moving up, and the vast majority of Bears had given up by now. So I waited, then the minutes were released.

The market danced and moved around the support area enticing and scaring both Bulls and remaining Bears with what it was planning to do. It was faking and reversing in both directions below and above the support area. Then it finally decided, and BOOM:

The market proceeded to drop like a proverbial rock. The move down is strong and steep and doesn’t allow people to safely enter new shorts at this point, which is why I’m always hesitant in exiting positions. You may not get a chance to get back in. Watching the drop reduce the red in my P/L balance was a welcome relief. The market loves to play these games time and time again – just when one side has been thoroughly discouraged and the other side is euphoric, the market will reverse- only now most retail Bears are out of the market and don’t recoup their losses and most Bulls are in and now it’s their turn for pain. The people who typically walk away with profits are the pros- which is why it’s so important to get in their mindset to avoid being roadkill.

Now that the market has finally taken a sizable drop – my real work begins as I’m now able to start trying out what I’ve learned about micro day trading the smaller moves. This also means I will start actualizing my losses as I buy/sell since my short average price in is still underwater compared to where the market is at, but by doing so I will average up in price so I won’t have to wait until my original level is reached before making any profits. This points to another mistake many traders make including myself at times – letting one’s P/L affect current trades. One’s trading should be independent of it. The old me would just wait and wait until either the market reached my price level and I was profitable or I was proven wrong- meanwhile, watching the market gyrate in big moves back and forth, wasting time and realizing I’m missing all these opportunities. Now I intend to trade all these moves and not miss out.

I’m also adding a new financial weapon to my arsenal – the hedge. This requires I establish both long and short positions in my account for risk reduction. I’ve done this for option spreads, but not for my trading in general. I’ve been meaning to do it for a while but I had a hard time figuring out how to implement it, but these past few weeks helped with that.

If done right, hedging can flatten out the losses and increase profits, and if done wrong will have the opposite effect. If I hedge well, in due time my roller coaster P/L months will be a thing of the past. Of course hedging requires a good understanding of where the market is headed to get the greatest advantage from it.

On Thursday the market continues lower and I’m actively trading both sides of the market, and faring well at it. I reduce my short position while adding longs shortly before the market starts heading back up. So instead of giving up all the gains made by being short, the losses are limited by the long positions. Now the light bulb goes off and I understand why I should have been doing this much sooner. I would have had far smaller losses had I done this while the market had been moving against me all this time.

I have to laugh because more experienced traders in this area will go “Duh…of course!” But hey, I’m learning as I go and I had to figure out how to use it. This is another major change that if done right will move me to higher levels of trading that will easily eclipse last years returns.

Friday hits and amazingly, the market fakes me out into getting rid of my long positions too soon and now being too unbalanced on my short positions as the market moved higher. I felt like a linebacker on the football field telling a receiver that I’m onto him now and he won’t get passed me again, then he does it quickly and easily…doh! Post trading analysis at the end of day made me feel worse since it was something I should have seen and correctly acted on. Oh well, can’t win them all – the market tricked quite a few folks that day- and that’s what makes trading a challenge.

As a result I gave back a portion of the big gains I made the prior two days, but still had a great return for the week. My actualized losses look horrible but the net P/L has improved nicely, which is what really counts. I figure maybe one more week of actualized losses before hopefully switching back to actualizing gains.

I have to say this has been a very good learning month for me so I take the losses as fair tuition.