How I know I’ll Never Be A Great Trader

TIM $14,067 (up $87 on the day, $1,269 on the week)

No positions, 100% cash over the weekend

Today I proved what I have long suspected and openly talked about—I’m good at trading, but definitely not great. I’ve been following QSC and XRM, taking a $130ish loss on QSC yesterd

ay and holding 300 shares short of XRM into today.

After my flight landed at 9:30am, it took me nearly an hour to get back to my apartment and when I did, I saw XRM down a solid 5% to the $5.40 range. I immediately bought to cover my 300 shares (at $5.43 since there seemed to be some support in the $5.35 range), taking an easy 6% gain ($110ish after commissions) on my $1,750 investment. This was a perfect trade from start to finish as I only risked 15%ish of my assets (conservative for me) and I was never really worried because the stock gradually downtrended (quite perfectly) throughout my 2-day holding period. This is a shining example of a PennyStocking play (just wish the trading volume had been greater–not that I was concerned at TIM’s current asset level).

Do I still think XRM heads lower—yes—but I’m not gonna worry about it because I took my 6% gain and I’m out. I know, I know, my target was the low $5 range, but you gotta remember Fridays are difficult days to stay short (as evidenced by XRM’s subsequent late-day bounce (even though it couldn’t hold it)).

My after-hours decision to buy to cover my 500 shares short of QSC yesterday at $4.35 definitely hurt, but it’s scary how well I knew there’d be an early morning spike today and that it wasn’t worth the risk holding overnight. In the afternoon, I actually ended up flipping my negative stance on the stock by buying 800 shares at $4.70 (a rather sizable 27% position for TIM) on the breakout (of the previous day and today’s initial spike). How could I just flip like that? It’s easy–the price action told me to be bullish! In time, I still think this stock trades lower, but I’ve been wrong before and I knew the gradually uptrending price action would scare many shorts into buying to cover, helping the breakout occur.

Well, I was right that the stock did breakout (eventually going to $5+ within an hour), but I got scared out due to the price spread ($4.68 x $4.76?!?! I hate AMEX stocks!), selling my 800 shares at $4.76. It was a puny little $30 gain (after commissions) and at that moment, I realized I’ll never be a great trader—I simply lack the patience/bravado/confidence to profit from my convictions—I’m just a scalper (which isn’t that bad considering it’s how I made my millions in the first place—I’ll just never make tens or hundreds of millions (at least not from trading, hehehehehe). This was a $200 gain if I had the guts to hold and even though the price is now waaay off the day’s highs (making the breakout a fakeout breakout, a very bearish sign (but I’m not risking it)), those highs were still made and they were predictable! TIM Lesson: Friday short covering, breakout and momentum buying all mixed together are a recipe for higher stock prices.

And, this is why I aim to be a great teacher rather than a great trader/investor. More importantly, this is why I think my teaching will create great traders/investors who will make far more money than I ever could/have. And that thought is what drives me.

PS Other stocks I’m watching—CYGT, good buying, volume still anemic, I’m happy I sold TIM out at 11 cents. (If you read my book, you’ll see this is a special situation and is not representative of the stocks I typically trade (I usually stress liquidity/volatility—I only bought TIM in because the risk-reward ratio along with the short-term catalysts made it worthwhile). GSOL—good bounce, glad I’m not a fundamental short seller—I’d lose my mind wondering how this stock could ever go up here. SMRT—hey, it’s still a good short—oh well; risk-reward wasn’t great. CSIQ—hey, you finally managed to hold your daily gains, congrats! Still too steep a chart for me to sleep well at night if I were long.

Warning: Timothy Sykes and the Easter Bunny have positions in CYGT.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider some of these stocks to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.