Bear Call Spread-23 Feb 07

Sell Mar 100.00 call$0.85
Buy Mar 105.00 call$0.30
Return $0.55
12.36%

Technicals: The stock hit a 52-week low of $49.25 back in March and then began a long-term rally that resulted in January 52-week high of $109.45. This new high was the result of the prices breaking out of a Symmetrical Continuation Triangle. This chart pattern is considered to be a bullish signal as it indicates that the current uptrend may continue and that is just what took place. As the target price was hit the stock has reversed direction slipping back below a former area of resistance. In other words, when prices did finally come back to test old resistance as new support the stock failed to find support and has now fallen below its 30-dma as well as the trendline. The stock trades in the services/casinos & gaming industry which is trading near its yearly high prices. However, its fundamentals are weakening. The MACD’s are showing a sell signal while the Stochastics are revealing a buy. We’ll expect overhead resistance around the $96 level to hold and keep prices below the lower strike price over the next few weeks.

Spread-19 Feb 07

FFIV

Bear Call

Sell Mar 80.00 call$0.85

Buy Mar 85.00 call$0.35

Return $0.50

11.11%

Technicals: The stock bottomed out in August at a 52-week low of $40.55. After that low, prices reversed direction and began a long upward trend that resulted in a January 52-week high of $80.85. The stock didn’t participate in Wednesday’s strong rally after Ben Bernanke announced that inflation was in check. It makes us wonder if a possible Head and Shoulders Top pattern may be forming on the price chart. We won’t know for sure until the pattern is complete. The stock trades in the technology/computer networks industry which has been trending sideways for the last few months. The MACD’s are flat on the sell side and the Stochastics are also pointing towards selling pressure.

Trading is Tough

Trading is hard. We aren’t talking about paper trading; we’re talking about taking your own hard earned money and risking it to test what you believe to be true. Trading is stressful. Real trading is difficult, and it can physically drain you. You could be soaring emotionally as you watch your trade profiting; then the next day, you may hit the depths of despair as another or even the same trade turns against you.

It’s during these times when a trade moves against us that we feel like giving up or we lose our focus and start aimlessly trying to make back our loss anyway we can. When I was a young inexperienced trader, if I found that I lost money trading a particular stock then I would be even more aggressive trying to get that lost money back. Of course, this resulted in more losses and more frustrations. What made it even more frustrating was that I knew of some other traders who were profiting off this same stock. I finally had to learn that I needed to stop trading that stock and go find one that I will succeed at, otherwise I won’ t have any money left to trade with. This can also be applied to trading systems. Why were others making a profit when I wasn’t? How come two different traders trading the same stock or system get so radically different results?

We all have our own personalities that make us uniquely different from others. Certainly you will have strengths, but you will also have weaknesses. Understanding yourself as a person is the single most important factor in deciding whether you succeed or fail as a trader. If you do not understand yourself, you cannot succeed, if you’re a stubborn person, you will find that this personality trait doesn’t work well when a trade is moving against you. Refusing to admit that you are wrong can be a very costly lesson. Make no mistake about it; your personality has a major influence on how you trade. It is more important than the broker you use, the stocks you trade or the latest and greatest trading software available. In Market Wizards, Jack Schwager suggests that the single most important element of a successful trader is in having a trading plan that fits your personality.

often get questions as to how I trade, and sometimes I have instructed my friends on what I do. However, when they try it, it doesn’t always work out as well as it does for me. If you find that what you are doing in your day to day trading isn’t working for you, then you need to adjust. Just because it works for your trading partner, doesn’t mean it will work for you. You may need to try several different trading instruments or trading plans until you find one that better fits your personality and then once you have found it, stick with it and don’t deviate from it. One of the most difficult aspects of trading is sticking with your trading plan. You will find yourself re-entering the market after a string of losses with the thought, "This time I will stick to my plan. I will not get sidetracked."

In theory, it seems relatively simple to make a trading decision based on a particular approach and then to stick to that plan. However, in practice, it can be difficult. Many obstacles and psychological hurdles are ready to trip us up at the very first opportunity. After back testing a trading system and proving to own satisfaction that the approach will work, we start out with a great deal of enthusiasm. We step forward with the very best of intentions; yet so often we find ourselves changing our plans in midcourse and losing out on what could have been a very profitable trade.

So what makes you think you can succeed? The market is littered with the corpses of those who thought they could beat the market with the latest technical indicator that has worked for the last 5 years. Then failed the next year, or when you tried it. Everyone's looking for the perfect system, the foolproof method, the quick solution, the get-rich-quick scheme. I have news for you — they don't exist. So you think you can succeed in the toughest market of all? What makes you any different from anyone else?

The answer is very simple — it's you. It is important for us to stay the course, but at the same time it is also important for us to remain flexible enough to change direction if the need arises.