Gee, Think.

I am continuing to read “Intermarket Analysis” by John Murphy. I’m really learning a lot from it. Murphy really reinforces the basics of what Jim Cramer gave me on his Real Money Radio Show. I’m reading Murphy’s book on Constance Brown’s recommendation. She mentioned it in her book “All About Technical Analysis” so I have to give her credit for noticing a good read. I think she may have worked with him at some point.
When I first heard about sector rotation and intermarket analysis I didn’t fully appreciate is importance. First of all I thought that intermarket analysis was really about the influence of global stock markets on the US stock market. It turns out that is really about the inter-relaionships beween 4 major markets in the US as well as the global markets. The 4 markets are commodities, currencies, stocks, and bonds. The trends in each of these markets affects the others. The collection of trends seems to really compose a much more full picture of the invesing and trading environment. I suppose that you can trade or invest without looking at more than one market, but why take a gamble like that?

Time will tell if I can use this new information to my advantage, but it certainly will give me more confidence in my next trade. This extra analysis will take more work though, that’s for sure.

So far I have been negative for every month since I started trading on march first. My total drawdown at this point is 25%. I am setting forth a new goal to net 10% of my account balance between the 1st and last days of each month, starting with July 1st. This is a modest goal
for an options trading account, and one that I think is attainable with 5 hours of work each week. That’s not including the reading I do on the trains of course. At this rate I should be able to write in my trade journal that I am pulling a profit by October 1st. If I can continue at this rate for November and December I will have made a hearty return for the year.
So far this has been an expensive education to receive. It has been stressful, and the reading is demanding, but I’m determined to stay the course.

Today I find myself doing something that has taken years of preparation
in many aspects. However, it’s something that I would never have
guessed I would do during the preparation stage. I was working hard to
learn what I was being taught, but I never knew I would apply it in this
way. How could you know? I know few people who have had their lives
laid out as clear plans before them. Much of life is chance, and the
things you do today could be the preparation that makes you ready to act
on tomorrow’s opportunity.
What are you learning? What do you hope to be ready for?

5 out of 5 stars!!
I have to give this book the highest rating possible. It is a truly
inspiring, envirogorating read.
Its pages are filled with a set of simple lessons that clearly explain
the path to financial security. Teachings along the way include the
importance of determination, self-control, and hard work. This is the
most frank account of how to be successful that I have ever read. I
personally feel motivated to improve the way that I handle money. I
have already been putting 10% of my earnings away, but I am inspired to
do more. This book has ignited my desire to be more industrious and
hard working so that I may provide for a family and secure a comfortable
and enjoyable future.
This book comes with my highest recommendation.

That’s right, It’s ON Now! “Get The Money 2006″ is officially in full
swing. It’s an annual year long event that centers around a rigorous
paper stacking methodology. I’m working with Masterminds Unlimited Inc.
to find the best ways to use money to make money.
I will soon be able to say that I’ve been working to understanding the
U.S. Equity markets and options trading for a staggering two months.
What has this work included? How about reading TheStreet.com just about
everyday? How about reading “All About Technical Analysis” by Constance
So and So. And that’s not all!! I’ve also listened to a 14 disc series
by Freddie Rick from Market Essentials which discusses options trading
in depth. I’ve even watched a couple Darlene Nelson DVD’s on trading
the Q’s. I’ve even made about 5 trades of my own so far. That’s as
many fingers as you have on one hand.
I’m lacking real experience, but I’m gaining knowledge. By December
31st of this year, I hope to be much more experienced and educated about
investing and trading. In fact, I plan on making at least 45% on the
portfolio I manage.
Check back in 7 months for the update.

Yep, that’s right, I got SMACKED. In my Caterpiller options. I lost
50% of the position in four days! How’s that for a kick in the head?
I’m going to try and give the anatomy of what I did so that I might
someday revisit the mistake and learn from it.
I bought into the AUG 90 Calls for CAT, .CATHR at $0.95. I started a
small position here because I am trying to practice what Jim Cramer
preaches, buy in increments. This is on thursday 5/11.
Why did I buy?
CAT just had a great quarter. They are positioned to profit nicely from
expansion into the development of Brazil, Russia, India and especially
China.
Also, I looked at the chart and saw what I thought was a wave pattern.
So I waited a few days until CAT had a down day, then I bought in. I
got 30% of my final position at $0.95 on Thursday May 11th. The next
day, Friday May 12th 2006, .CATHR is valued at $0.75. I’m thinking
“Great! Here’s a chance to average down and lower my cost basis.” I
ended up adding the remaining 66% of my final position at $0.75. This
made for a cost basis of $0.82 per contract.
Those of you who’ve been following the Dow Jones and or CAT over the
past weeks know that thr 11th and 12th of May were thr beginning of 6
straight down days for both. Looking back at this, I should have seen
the decline in Cat coming from it’s chart. Hindsight is 20/20. The
give out in the Dow, however, hit me like a bus.
I watched the Market and CAT with it slide downward Monday, and
Tuesday. You can bet that I was doing some serious homework over those
days trying to find out WHY the market was going down. It was the most
horrible selloff. It seemed like a delayed reaction to the Fed Meeting
on the 10th.
I took the pain for a couple days. I watched the value of my position
shrink to 50%. On Wednesday morning I said “enough is enough” and I
got out at $0.45. This was partly because of an excellent article I
read by someone else who hesitated to take a loss over the same period.
The more I read, the more I believed that the value of my position would
continue to deteriorate. So I sold.
Why did I sell?
In short, I sold because I believed that I let the position get too far
away, and that it might not ever come back. I still believe that CAT is
a great company, but the market is so ugly now. It looked like CAT had
broken out of its wave pattern, and would thus plummet several dollars
at least. I also thought that since the CPI number was too hot, the
likelihood of raising rates, and another sell off on June 10th were too
great.
I’m seeing this as a leson learned, and an inspiration to learn more
about reading charts.

Ya gotta love Jim Cramer’s Real Money radio show. Most weekdays I’m
listening to him on my way to work. He’s mastered stock picking and now
he does it for charity. He gave away $250,000 last year! I wish I
could put that much capital into charity, that’s just amazing. Anyway,
this story espeically is quite interesting, but keep in mind it may only
be relevant until april 25th or so.
http://www.thestreet.com/markets/activetraderupdate/10280524_2.html

I have been studying investing and the stock market for about 6 months
now. That’s not very long considering that I took some days off here
and there. I am learning some amazing things about trading stock and
options that I am surprised I’ve only been self-taught. I never heard
any of these subjects mentioned in school more than two or three times.
Why is there this tremendous knowledge gap?

I’m at it again. I just love being an entreprenuer. Now, I’m definitely not wheeling and dealing for a million dollar buy out, but I am hoping to put something together that can be profitable. More of a lifestyle business. It seems that web design and maintenance is so easy these days. BlueHost.com makes it so easy for me to maintain my site. They even provide a java-based web-launching ssh terminal that I can use to work on my site from a friend’s windows machine! Why doesn’t windows come with ssh these days? Maybe because not enough of their users need it. They have graphical administration interfaces to just about anything you could want to do with your webserver. They also have a lot of built in tools such as a shooping cart. My guess is that they’ve established partnerships with people who provide commonly needed e-commerce software. It looks like it would be pretty easy to set myself up as an etailer. I’m going to try it first for my father who plans to build Adirondack chairs. I’m hoping that learning how to do it once will make it all the easier to do it a second time, and maybe I could turn that skill into a profitable one.

Running e-commerce sites has gotten easier, but I’d venture that attracting attention to a website has become a bit more difficult these days. I’d say that there’s no one to learn it from either, but rather it involves having a great knowledge of what websites are hot, and how to get your products placed there.

Recently my whole perspective on life has changed. I’m now thinking about the future. Just a few short months ago, maybe 4 months back, Iwas primarily focusing on the hour to hour issues ahead of me. After moving in with my long time girlfriend I’ve begun to see things a bitdifferently.

I hope to have a long life ahead of me. This means making all kinds of changes to my habits to become more healthy in body, mind, andspirit. I feel like I’m making steady head way. I’m exercising more,eating better, and devoting time to my personal life as well as focusing on a new job. It’s all good, and I’m in it for the long haul. That means staying healthy.

This new future perspective also means paying attention to how I handle my finances. I’ve been doing a lot of reading lately about financial planning and investing. I’ve read “Smart Couples Finish Rich” by David Bach, and the New York Times Best Seller “Rich Dad Poor Dad”. Both had amazing and mind blowing perspective on money and how to get it to work for you. I’ve certainly learned a lot in the next few weeks, and I think it will have a big impact on my future.

I used to think that money was the root of all evil. Talking about money would make me uneasy. I think that’s because I really lacked any kind of training on how to deal with money. Now, after expanding my perspective a bit I can see what a difference a little planning can make. I used to think that it would be immoral to spend time thinking about money, and how to save it. Now I see it as a personal responsibility, and a necessity. There’s so much more to money than bean counting, and I intend to learn a lot about it over the next coming months.