Monday, January 23, 2012


After having read a few recent entries in here I have noticed I have gotten a bit on edge. As that comment that attacked me suggested that I am just trying to draw attention to myself, it got me to thinking. My first thought was, "well of course isn't that what anyone doing a blog is doing?" Clearly you are bringing attention to yourself when you have a web site. You try and provide content that is interesting enough to get people to return. This is pretty obvious. However, the other function of doing something like what I am doing here is that it helps me to organize my thoughts. When I peruse the stats for the blog, I see that at even the busiest days I only get about 500 readers, so the traffic is not very heavy. However, that is still 500 people that I can embarrass myself in front of if I am not careful. Further, there are readers from virtually every country in the world now, which is really cool. I can embarrass myself in countless foreign languages, what an opportunity!

I do try and lay out as clearly as I can what I am doing, with the one asterisk being that I hold back a few of my own proprietary tools to protect myself. It is not easy when I am dead wrong on something knowing that many people are reading my views. So, the question that naturally follows is, why do I do this?

The very first reason I decided to do this was that I thought it would help me. There is a big difference between just trading in remote isolation, where only you know the mistakes you make. You can get over them very quickly and move on. When I make them in this forum now, I field questions about them afterwards, so I wind up being in blunder recovery mode much longer. This is actually a good thing because it has a desensitizing effect. I don't like being wrong or losing more than anyone else does, but I have learned to accept it. I know I am going to make poor market calls at times, but I also know that I will recover and make very good ones. Reaching the point where an individual knows this is a big step. This blog has helped me do that. Anyone who is ever going to manage a large pool of money had better be able to handle this aspect of this business. I have no idea if or whether I even have a desire to do that, but I wanted to do some things to help me prepare for that in case I decided to go down that road. This has helped a great deal in that area. 

Today I noticed I was a bit on edge recently, in what I have written. These types of very low volatility environments like we have had the last few weeks are the toughest markets for me to trade. When markets just creep every day in the same direction either up or down, my tools do not work as well as they do in other environments, so I get a bit edgy. You have to know yourself and what your strengths and weaknesses are. As you get older they become painfully clear. I try to use this knowledge to protect me when I know I am in a situation that does not fit my approach very well. I trade smaller knowing it is likely I will have more losses than normal.

The second reason is that I am not aware of another blog such as this where someone who actually trades, calls out what he is doing pretty much live. I have had to modify this some unfortunately to protect myself, once I found the government URL's spending hours reading my posts. I suppose it could have been just someone who works for Uncle Sam who happens to trade, just reading, but one of them looked at virtually every post I had ever made. This has never happened before, and I think it is unlikely that was a trader. In spite of that I still try to stick close to that mantra, and I openly discuss wins and losses. It is my hope that people can learn from this. I think I am accomplishing that based on comments and emails.

The third reason, was to help drive traffic to my web site once I re-opened it if I decided to do so. I don't know at this point if I am going to do that or not, I am leaning toward not doing it. The thought of the government having to approve every single comment I make about things is not a pleasant prospect to me. We have such a strong trend towards big government now that it is just not the right time for this. Maybe in the future if the politics change, this will be different. I know in the old days when I had my trading service that was very successful, it made me feel so good when I got emails from clients telling me about the money they had made in some of the trades. I had one guy who was just a classic. He had an incredible knack for sleeping in and missing trades, and he always seemed to miss the ones that lost. During the last year of my Bond service, there were only a handful that lost the whole year, yet he was able by sheer luck, to over sleep and miss the entries on every single loss! Of course I then had the guy who managed to lose money during a streak of 22 consecutive winning trades in my service. He of course wanted to cancel and was upset with me. It is still only speculation on my part as to how he lost money during the best streak my service ever had. This guy was the driving force behind me shutting it down, I just did not want to deal with people like him. Obviously, he did not follow the trades correctly and yet it was my fault. Ironically during that same time period, there was a good sized hedge fund in Brazil that had caught on to me and wanted to use my Bond system with their clients. We just could not work out all the legal aspects of that venture unfortunately. It was complicated due to his relationship with a US affiliate and I was not a CTA, etc.. The big guy loved me and the one lotter hated me, go figure!

The fourth reason, is that trading is such a solitary business, I was hoping to meet some other traders in other parts of the world to exchange ideas. That is also happening, so mission accomplished on this one. This is a tough business, and it is nice to know others that pursue it. I only have two local friends that trade, and neither of them is profitable, and they basically do it with a passing interest most of the time. They have good skills in other industries. It is nice to know you are not alone when you have bad trades, or just need someone to bounce something off.

With all this aside, I apologize for my being a little too "chippy" recently. I am still going to poke fun at myself for being an attention whore since I still love that take.

I was watching the America's funniest home videos show last night and saw one that made me laugh so hard I literally was worried about a heart attack. We all have had these times when something is just so funny too us we can't control ourselves. The video was of a high school cheerleader wandering out onto the field where the banner was that the team would ultimately run through when they came charging out of the locker room. It was being held on either side by a couple of groups of people. It was a big banner and was sagging a little in the middle. The gal walked up to check out where it was sagging a little, and right at that moment the whole football team charged through the banner ripping it to shreds and just trampling the cheerleader. It was almost like a cartoon. She wound up being fine by some miracle, but it was just incredibly funny the timing of her curiosity. I have had this same feeling trying to short stocks during this incredible up move.

The CTAS trade was finally exited today for a loss of 1.02 a share, so now I am on the board finally with a loss. Two others were exited with small profits, WY and SHAW. The 1.02 was more than the two wins combined by a little, but basically an overall scratch. I think this does in a way justify this method, but tells me I need to enter the trades a little better. I am finding that once the overbought condition gets to the extremes I am looking for, that I need to place the orders as limits above the prior days close by a certain percentage. Trades will be missed doing it, but it does insure about the max level of overbought something can get before it reverts to the mean. Extremes do not get pushed too much more than what we have now, so this again is an excellent test of the worst case scenario. If that worst case scenario is barely losing any money, that is very very good. We are not that extreme in terms of price but more so in the way of amount of time where we have had no meaningful pull backs at all.

When we look at charts we do see periods like this at times, so this will happen again. This is why I am glad this happened right out of the gate.

This chart shows the entry and exit in the CTAS trade. I believe this is about the worst case scenario from this method. If you just look at the daily chart of the DOW it is a miracle any of these have worked in my opinion. I have two others I am sitting on now, one is a profit and one is a loss at this point.

As for futures, I am still trying to find a way into the short side of the energy markets, but have not gone in yet. I think Heating Oil is the weakest, yet Crude is a better setup from a pattern standpoint. Maybe I will take some of each, I am not sure yet.

This is Heating Oil and it is just meandering down here. My short term indicators are showing we may bounce here, and it that were to happen I think this would be good to go. You can see how low the POIV is here, telling us there is distribution going on here. I would like to get in sync with that if possible. I did get stopped out in the Soybean Oil trade which resulted in a profit of about 1/3 of what I had. I am trying to ride some trades longer this year so this type of thing is going to happen from time to time. I just don't think you can ever get rich scalping, you have to catch some big ones. To catch big ones you have to give trades a little room, and that results in this happening.

Here is the Bean Oil trade, entry and exit. One good thing about exiting on stops is that it takes the second guessing out of things. If I leave myself too much room to second guess sometimes I do that and it is counter productive.

Other than that, as long as the stock market just goes up and up,  most other markets are going to rise. We are so overbought, we could decline sharply for a day or two at any moment, but it is any one's guess when that will happen. The corrections on these types of moves tend to be very sharp first days down that gets everybody out, then they resume going up again. I will be trying to buy into that sharp day or two down when it comes.

Good Trading


Squire said...

Every trader has been on edge due to the melt up. I have left my screen for the day in anger twice over the last two weeks at little intra-day movement after the opening.

Anonymous said...

I love your commentary.....and have learned a lot about the mechanics of psychology and incorporating that component into the fundamental and/or technical aspect of trading or investing(dependent on the type of trade).

Thanks for allowing me to learn through your sharing of your various approaches/setups.

Best, Dave

Vikas said...

I think your posts are great, I found your blog over the weekend and read through all your january posts the same day :-)

And you're right, the market is definitely due for a correction. Do you know who Tom Demark is? He predicts that the S & P is going to run upto 1338-1342 levels before correcting about 11%. Whats your take on this?

Alain said...

'... just drawing attention...' it seems that was a person outside of trading business or without full understanding.

Chris has proven several times, to be one of the world' most successful traders. Other successful traders have high regard to him too.

I think he could launch a service and charge X-amount for his service. Instead he shares his thoughts for free with us.

Likely, less knowledgable people feel more attracted by fancy web sites and journalists posting some stock trades. Well, that may be their place. There will always be some missing the point...

Chris Johnston said...

Thanks for the nice comments

Yes I know who Tom Demark is, I have read all of his books. I love his sequential technique and have used it many times over the years. As far as levels in price go, I am not any good at that. I do think we have an uptrend that will go higher from here after a pullback, so maybe that is how we get to his levels?

Anonymous said...

The fact that you say you don’t even know if you have a desire to manage large blocks of money should be telling you that you don’t have that desire. If you had any desire it would be in the forefront of your mind.
Forget the bozos who want to blame you for their losses or pass judgment with their labels. They are the losers in trading and in life.
Today’s politicians and government agencies and our public school system have conditioned people that “it is someone else’s fault” (just look at the blamer in the white house) but that they will take care of us if we just reelect them. For that reason, win or lose traders today are going to blame you especially the younger ones who have spent their lives in this conditioning system of “someone did it to me” and “someone owes me”. Ironically these G-men and politicians are the biggest “attention whores” on the planet, witness the current Repugnican debates to say nothing about the narcissist in the WH. When it’s good news he is responsible; when it’s bad news or a failed green investment he pushed for, then it is someone else’s fault.
It’s always the “little guy” who will get upset because he succumbed to all the trading system headlines that he could strike it rich in commodities AND he is usually trading with money he CANNOT afford to lose – two giant errors on his part. Too many people today can't think or don't want to think because that would also mean taking responsibility.
We older folks hate to blame ourselves but we learned early on that we are responsible for our decisions and that no one else can be blamed. As someone once said: it doesn’t matter what happens to you, what matters is what you do about it. Sadly too many people take that to mean “sue the bastard”.
I have been following your blog now for about 6-9 months and I have yet to take a trade you have mentioned was in a “setup” mode. Why? Because they (the charts) did not fit my setup criteria nor my entry methods. What your blog does for me is alert me to what you believe is an opportunity to buy or sell. From there I add them to my watch list and use my own methods. It’s the same reason I have never purchased a black box system – I cannot trade something I do not understand. And “understand” is the second thing I love about your blog. It’s not the trade selection that matters most but the process - the analysis, how you arrive at the point of taking a trade. That's what I value. I cut and paste your thinking several times a week into a “CJ” folder which is a collection of ideas about your trading style and philosophy. That is worth far more than the monetary gains. As the old Indian proverb goes: “Give me a fish and I eat for a day; teach me to fish and I eat for a lifetime”.
I couldn’t be happier with your blog. Well I suppose I could if you wanted to send me some of your winings you ole “attention whore” Like Wall St though I only want the winnings - give someone else the losses. Ha Ha
Thanks for all you do and keep it up.
Don in Virginia

farmland investments said...

Investing in trendless markets is indeed quite difficult. They may be little moves up or down, but they can still lose you money. Don't let negative comments get to you, you write good serious pieces, and 500 readers per day is not half bad!

Chris Johnston said...

Don, I feel like I wrote that comment myself. Thanks for the kind words maybe you can be my ghost writer?

Chris Johnston said...

even tougher for me than trendless markets are trends like we have now in stocks that just slowly creep day after day