Well, even though I laid out the plan as clear as day in last night’s Tape Talk, if I am dead honest with myself I didn’t anticipate we would give back Friday in one day. Sure, it was possible but if I really, truly ask myself if I believed it would happen I would say ‘no.’ Despite this disbelief, I laid out a plan and I’m sticking to it. Therefore, I have done the remount.

First off let me say that it sure is nice to be back! I have definitely missed bantering about the internet discussing the pleasantries of life, liberty and the pursuit of stock gains. The last few months has been the culmination of a work in progress for close to a year with the launch of our first no-load mutual fund, the Tatro Capital Tactical Apprecition fund (TCTNX). It is beyond exciting but it was a tremendous amount of work and as we approached this Monday’s launch the legal advice was to lay low so I thought it best to disappear for a bit while we tied up all the loose ends.

Tape Talk, typically produced each Tuesday, Thursday and Sunday on Tickerville will resume this week with the last being nearly two months old. I’ve appreciated my trading associate Kipp standing in for me on StockTwits.TV as he will continue to do whenever I’m detained however I will resume a more regular schedule there taking you through all the longer term swings I’m playing day in and day out. Writings on Minyanville.com and Forbes.com will again commence and a new upstart, Dough.Pro, I have invested in recently will actually launch today featuring some of my content as its lead.

So what does this mean for the Qman? Well, the launching of a fund was the result of a strategic business decision made early last year for a variety of reasons. Management of this mutual fund will be my primary focus so any trades discussed are trades I am actually taking in the mutual fund for share holders. If you ever desire to learn more about the fund you can e-mail me for a prospectus and application. The website and our fact sheet are currently awaiting approval from FINRA and will be available soon. The fund is available direct, will be on the Schwab platform in a week and through other brokerages very soon.

At the end of the day I just wanted to say it is good to be back and Thank You. I appreciate all the wonderful e-mails I have gotten over the last several weeks questioning my lack of content and the encouragement as we neared our launch.

Stay tuned for some exciting stuff starting today!

Most traders, at some point in their life, have an experience with a variety of different stocks. Odds are that a person’s first-ever trade was a blue chip company, seeking to simply buy low and sell high. Also, at some point, a trader may have had an experience with a small cap, thinly-traded issue or regardless of the market cap, a momentum name. Based on the character of the stock in question at the time of our involvement we will tend to associate the movement with the category. For example, if I own General Electric (GE) for six months watching it move within a 3% range, I’m going to surmise that blue chips are slow to move and boring. On the other hand, if I snatch up a Uranez Energy Corporation (URZ) as I did yesterday and subsequently realize almost a 12% return within a few hours, I’m going to categorize the momentum group as high flying and volatile.

What’s on your MP3 Player? Oh, don’t have one? OK, what stations are programmed into your car stereo? Why do I ask? Well, this will often times give you a great indication of the stocks that fit your personality. Fixated on the constellations? Well odds are, ‘slow and large’ are for you. Classical music all the way? Yup, definitely the more predictable in nature with a small slice of momentum for the occasional crescendos in life. I’m a salad bar kinda guy. You see, in my MP3 player or car stereo I have it all. There’s nothing I love more than a little World Report or Car Talk from NPR. However, only one dial over is K-Love, a Christian Radio station. Next to this is classic rock where I’ll always keep an ear out for a little George Thorogood or Led Zeppelin. The last two buttons? Oh well, R&B followed but Thugged-Out Gangsta Rap, of course. Hey, don’t judge! In short, depending on the mood I’m in, dictates the type of music I’ll listen to.

But here’s the big question. Who wouldn’t want a 12% mover in one day? Why would anyone on earth settle for an Intel Corporation (INTC) when they could have an Anadigics (ANAD)? Are there those out there with blue chip personalities, playing hip hop type stocks? You bet there are and I know many, personally. Connie Corbett, a dear friend and Tickerville member, is the consummate gentleman. Of course, this doesn’t mean that momentum or small cap traders are not gentleman but you get the point. Connie is a Winegrower by trade, a skywatcher and classical music lover, a cook and has an incredible knowledge of Woody Allen movies. Want to take a guess at what type of stocks Connie trades? Closed Fund, Dividend-producing ETFs you say? Nope, not even close. Connie trades uber-momentum. Whereas, I would have a hard time playing a sub-100k-share-traded issue, Connie embraces it.

So is Connie the exception to the rule? Or is Connie playing where he shouldn’t?

It is my belief that Connie has struck a balance, understanding his style and molding it to his personality all the while playing the stocks that can actually reward him sooner than next year. You see, it is my belief that not a single person if asked would opt for 12% in a few months over 12% in a few hours. The problem is the association that we make with these stocks due to our past experiences with them.

Like a bad church experience that taints a person’s view of organized religion, at some point my guess is most traders venturing into the world of small caps or momentum stocks have been burned and burned good. As the old saying goes, ‘fool me once shame on you, fool me twice, shame on me.’ I believe most natural and educated reactions are simply to avoid the group altogether. I have seen this time and time and time again but it typically plays out in a variety of different ways.

Many will simply avoid the group, sticking only with large, liquid names. They feel much better about losing their money slowly and over time and therefore it takes many months if not years to return to the same conclusion that possibly their execution and/or entire strategy are the issue for their lack of progress. Others have the game down well and understand that they need volatility to make money. These calculated thrill seekers will usually gravitate to the Emini S&P contract or ‘ES’ as it is commonly referred to. Others will adopt the leveraged ETFs looking to avoid individual company ‘surprises’ all the while exposing themselves to something that actually moves.

However, I feel strongly that there is a middle ground worth exploring. If you have a solid strategy that gives you your edge, be it pattern recognition or the like, understand quantifiable risk and possess a profit-taking strategy, why not embrace the volatility of key individual stocks with a much larger leash and therefore a longer time frame?

Let’s take Merge Technologies (MRGE) for a moment. If you pull up this chart you will see a recent 30% move followed by consolidation. Yesterday, this stock moved higher by 2% and still didn’t really find any legs. A breakout here would be nothing short of a 10% move and then some. When reviewing a stock like this most will immediately be reminded of past momentum failures. A quick 10% rinse or a 15% correction is entirely possible and therefore something to definitely cringe at. However, what if you pull back this chart quite a bit. In fact, bring back the chart all the way to 2009 and notice the longer-term consolidation from the July 2009 peak. Notably, the $1.00 move doesn’t look so daunting does it? However, if this is now breaking from a two-year pennant, is the same $1.00 as a stop too far away? Considering that a move to recent highs would be $1.00 away ($4 to $5) a real break out of this pattern could yield another $2 or even $3. Meaning, that to risk $1.00 while attempting to gain $4 or $5 is an excellent risk to reward. Ah, but a $1.00 stop on a $4.00 stock is a bit ridiculous, right? Wrong. The $1.00 stop is well within the confines of the movement here and probably conservative.

Now, many of you who trade with me in Tickerville each day are saying “Didn’t you just take that with a .15 stop?” and the answer is yes, however, I did so to try and capitalize on a very, very quick move and not to play the larger pattern in question. A better example may be the Uranez Energy (URZ) discussed earlier and the fact that upon entry, my stop was placed at $2.50 or over 30% from where it closed yesterday. Too far? Not when the stock has the potential to move double digits in a few hours.

In summary, if you find yourself with a past experience that taints your view of momentum or small caps, I strongly suggest that rather than shunning this group altogether, you seek to swing these names with a purpose. Move into a name that has the potential to move but do so with a plan that keeps you in during a normal shake. Take the position in a method that does not require you to sit in front of the computer for eight hours straight. Take the position so that you can actually stay in for a huge run.

For the first time in years, momentum is working in a big way. Stocks are trending and despite the shakes back and forth, many are offering excellent opportunities for those with a plan and an edge. Embrace these opportunities and let them work. Blend a little Hip Hop with your Mozart!

At the time of this writing Quint was long URZ and MRGE

Ironically, do you know what this means? Absolutely nothing. That’s right, understanding that statistic serves one purpose and one purpose only. If we place any sort of expectation on the market, it will prove us wrong, time and time again. Sure, along the way you may get a thesis right here or there but the simple fact is the market is a random set of variables with no two instances ever being the same. Like snowflakes, it makes absolutely no difference how similar the days, weeks, months, may feel, no two are ever the same.

When it comes right down to it, I’ve executed the month of October terrible. On a scale of 1 – 10, I give myself a negative 5. I mentally fought the run, I passed on solid opportunities and sadly I felt good about capturing small gains on the short side, when I missed the entire frikin’ steak or the main course on the upside.

Now, do not mistake my admission to believe I’m going all in here. On the contrary. My read is still quite cautious but as setups transpire, cautious or no, I will play them. If we reverse, I’ll play that too. I’ll focus on the edge that I have, the edge that I’ve used and the opportunities before me. I will refocus on blocking out the noise. Not just the noise that sparks fear or greed but the noise that also sparks a contrarian view.

The greatest thing about this game is tomorrow is a new day. Heck, today is a new day. The only tragedy is being stubborn and not learning from mistakes. That, I will not do.

Lets go get ‘em

As we go through the development of a exploring various approaches to trading, goals from that approach and systems selected to facilitate those goals, I will attempt to apply a consistent thread to my writings so as to achieve better consistency in the discussion, at to bring a bit more “life” to a fictional construct.   As such, I will pick up the present article on demonstrating position sizing from the end of a previous article where I discussed a hypothetical trader embarking on a full time trading career.  As you may recall, our trader had accumulated a year’s worth of living expenses, which were held in a separate, liquid account such a money market, and had available trading capital of $250,000.

In looking at position sizing, I will further break the example of our mythical trader down into a swing trading example and a day trading example.  We will develop a position- sizing example for each off of their differing approach.

First, our swing trader.  Our swing trader is seeking to hold overnight positions and has found a system which he has backtested to verify that it produces a positive expectancy over time.  Expectancy is a different topic, but for simplicity this means the expected magnitude “R” returns over a series of trades, times the percentage of positive versus negative trades (% of time “correct”) yields an overall positive R per trade.

Our swing trader has decided to risk 1% of his equity per trade based off of his confidence in his backtested system and/or historical results.  Given that his equity is $250,000, he will risk $2,500 per trade entered.   To bring this further to life, he entered the recent Tickerville INTC trade on a break above the $21.35 level on March 16th (his entry was $21.40) and selected a stop below the general $19 range level from Dec-Feb at $18.90.   Our swing trader’s risk per share on the trade was thus $2.50 per share.  Given that our trader was willing to risk $2,500 per trade or 1% of his equity, to find the proper position size for the trade we would divide the overall equity risk per trade of $2,500 by the risk per share of $2.50 to get a purchase size of 1,000 shares.  At $21.40 per share our trader would allocate $21,400 of his $250,000 in capital to the INTC swing trade.

Next, let’s examine the same trade from the perspective of our daytrader.  Our daytrader is also beginning with an identical starting capital amount of $250,000.  She is also deciding to go long a position in INTC on the March 16th break of $21.35, and for our purposes, her entry is also $21.40.   Our daytrader however is playing a multi-day reversal pattern system and is placing her stop at $21.00, just below the previous day’s low.  As such, her risk on the entry of the trade is $0.40 per share.  Our daytrader has also selected a 1% of capital risk threshold per trade, also $2,500, just like our swing trader.  Our daytrader then calculates her position size as follows.  She divides her $2,500 risk per trade level by her $0.40 risk per share amount (derived from her entry and stop) and arrives at an initial position size of 6,250 shares.   As such, our daytrader would allocate just over ½ of her capital, or $133,750 to her trade.   To many this may seem like excessive risk to allocate such capital levels to a trade, and a trader may very well want to develop other capital per trade constraints to their trading parameters, but a pure position size calculation for our daytrader’s system would yield this position size.  Her risk is somewhat mitigated by the fact that she will use a hard sell stop on all trades entered and will liquidate all positions prior to close to avoid news or other risk factors which may gap her holding through the stop during non-trading hours.   It would be my opinion that the risk entailed by such a concentrated position sizing without concrete and automatic risk control measures would be akin to trading capital suicide given the emotions involved in the dynamics of such a system.

Now let’s take a quick peek at how our INTC entry turned out initially for our two traders.  First, our swing trader is likely still in the trade today.   1R for our swing trader is $23.90, and INTC has topped out to date at $22.75, yielding a max trade profit to date of 0.54R.  Our daytrader quickly reached 1R in her trade as INTC traded through $21.80 which was her entry ($21.40) plus her risk ($0.40).   Since she is not holding overnight risk, she was likely able to close out her INTC trade at somewhere between 1R and 1.5R since INTC closed trading on 3/16 at $22.01.

This is a simple example of how trading approaches can vary position sizing quite significantly for two traders with identical capital ($250,000) and risk per trade (1% of capital) trading system metrics.   You can also readily imagine how the differences in these position sizing systems would impact how our two traders would develop further aspects of their systems such as deciding how quickly to take profits, and how much to take, when a trade moves in their favor, and how they might choose to manage the positive trade via raising stops when certain positive or negative price action occurred after entry.

Many commentators stress the importance of position sizing to trading to the relative success and failure of a system via relative returns from any given expectancy.  I echo these observations and believe that carefully tailoring the position sizing approach to a trading system is essential to meeting the goals you develop for yourself from trading that system.

As you can see, it is all but impossible but to scratch the surface of the discussion of position sizing in this format.  I invite you all as traders to delve into this area and honestly assess the role position sizing plays in your trading, and to make sure that you seriously consider at least understanding this dynamic as a trader, if you do not have a position sizing methodology to go along with your other trading system aspects such as expectancy and risk per trade selections.

Accommodations

While clearly you are free to stay wherever you would like. For Tickerville Subscribers we’ve negotiated a $139.00 per night rate at Mandalay Bay. Moderators and Speakers will be staying here and this will be where all events will be held. This room block is limited so do not delay, you may reserve your room HERE.

Seminar Friday, October 15th

Admission to the seminar for Tickerville subscribers is Free. Seminar will begin at 9am and is scheduled to run until 4pm. We will pack this time with individual presentations as well as a moderated discussion.

Reserve your Seat by dropping us an E-mail HERE.

Cocktail Reception Thursday, October 14th

Attendees are invited to join us for a cocktail reception to meet and greet on Thursday evening 8pm – ? (Location to follow TBA)

Annual Dinner / Awards Ceremony Saturday, October 16th

For Tickerville subscribers only, our third annual dinner and awards ceremony is sure to be fantastic. Join us on Saturday evening for a meal at Border Grill as we enjoy some time together away from the chaos of daily market activity. It is during this time when we will announce this year’s Trader of the Year award along with a few other special awards never given before.

Dinner Price which does not include your beverage- $80.00 per person

Seats

One Person $80.00 Two People $160.00

Our Speakers:

Quint Tatro is President and Owner of Tatro Capital, LLC, a fee based investment advisory firm located in Central Kentucky. Tatro Capital manages both individual accounts and a multi-strategy hedge fund. Quint is regarded as one of the ‘streets’ foremost technicians and has frequently made quest appearances on such shows as CNBCs Fast Money and Fox Business’ Happy Hour. Quint’s body of work including both print and video may be found on such sites as Forbes.com. Quint is proud to be releasing his first book from Prentice Hall in November.

Mike Bellafiore is the author of One Good Trade: Inside the Highly Competitive World of Proprietary Trading (Wiley) and co-founder of SMB Capital, a proprietary trading firm in NYC. SMB has been recognized for offering an outstanding intraday equities training program. Bella’s blog offers new and developing traders ideas on how to improve their trading. Mike will share the lessons the market has taught him over the past twelve years, wrapped inside of trading stories and his own trades.

SMB Capital regularly appears on CNBC’s Fast Money. SMB’s training program has been highlighted on the TV documentary ‘Wall Street Warriors.’ Every Sunday night at 8:30 PM EST Mr. Bellafiore hosts the educational internet show SMB University on StockTwits TV. Mike’s trading techniques were noted in ‘The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist,’ written by Dr. Steenbarger. Mr. Bellafiore was a guest speaker at the 2009 and 2010 International Traders Expo in NYC. Mr. Bellafiore has also been published in SFO Magazine.

Mr. Bellafiore is a graduate of the University of Connecticut School of Law and a former member of the University of Connecticut Board of Trustees. He has traded his own account professionally for more than a decade.

Brian Shannon is a full time trader (with 17 years of experience), educator and author of the highly regarded book Technical Analysis Using Multiple Timeframes. Brian is best known for his technical analysis videos which are the #1 most subscribed financial videos on Youtube. Brian is an investor, senior contributor and advisor of stocktwits.com.

Prakash Sawlani has been part of Tickerville from its early days in 2007, becoming a moderator on the premium side in 2009. Prakash specializes in day trading with an emphasis on understanding the intricacies of trading psychology and seeking to capitalize on them.He believes in always being on the lookout for new ideas as the market is a living organism that is continually evolving.He resides in suburbs of New York city.

QuasiD – Having been a member of Tickerville since its inception, quasi d is primarily an equities and etf swing trader. Quasi is a dedicated part-time trader who has traded for his own account since 1995 and has actively traded through the tech bubble and bust, as well as for the entire decade of the 2000′s. He has traded with and been mentored by Quint Tatro for approximately 5 years and is fully integrated into the Tickerville ‘Boot Camp’ style of trading and risk management. He is an avid student of the psychology of trading as well as macroeconomic trends and cycles, personal finance issues and real estate investing. Outside of the trading world, Quasi is a licensed attorney with an undergraduate degree in Economics. He lives with his wife and three children in Austin, TX.

Zone Bones (Trader of the Year 2009) is a versatile trader that is known for his flexible momentum style. Zone has a gift for finding young, undiscovered names and riding them to their full potential.

~ Bill

Seats

One Person $79.00 Two People $158.00