What books do you recommend?
I have read over 100 books on trading and frankly, most have been a waste of time. A few that I have liked include The Market Wizards books by Jack Schwager, Entries and Exits by Alexander Elder, Thomas Bulkowski’s chart pattern books, Alan Farley’s trading setup book (if you can get through the horrendous writing style) and Technical Analysis for Dummies by Barbara Rockefeller.
I would spend more time going through historical charts than reading books. Flip through at least 100 charts every day. Look at past winners. Understand price movement, momentum, sector analysis, volume and patterns.
You don’t talk as much as you used to about psychology. Do you focus less on it?
Not at all. These days I focus more on psychology than I do the markets and setups. At this point, trading analysis comes easily to me. It takes me about 10 minutes a day to analyze the indexes and key sector charts to come up with a theme for the next day. The hard part for me, considering I have a ultra-competitive, addictive personality and am prone to taking gambles, has always been the pyschological aspect.
Creating a simple, balanced lifestyle and adopting a Zen-like approach to trading has helped. I also focus more on research than obsessing over current positions. I force myself to let my initial trade analysis do the job, and only exit at my preset stop or target.
Earlier in the year you metioned you wanted to start trading options. Have you put on any trades?
Not yet. I have done some reading and am starting to get a feel for the vehicle. I hope to put on my first options trade sometime this year. I know a few of the trades I have made would have made much more money had I went with an option strategy.
Are you still as bearish on gold as you were before?
I am standing aside the gold trade right now. Remember my analysis was short term (and profitable), when I made my trade. Now we are getting mixed signals. Price action still looks bearish, but I am seeing some indicator divergences in GLD. For instance, RSI broke out recently. Gold stocks like BVN and GOLD are acting more bearish than GLD. These might be better trades, although they are currently very oversold.
What sectors are the best right now?
It’s tough to say what’s “best”, since strong sectors like energy might not currently be good long trades. I’ll just list areas that I am watching closely, both for long and short setups:
Energy, Coal, Financials, Steel, Natural Gas, momentum tech stocks, recent earnings breakouts and breakdowns, Railroads.