I have a dream ….

After all these years of trading and going through the “coulda-should-woulda” experiences, while working fully time in Management, I realize that the technical knowledge I learned with trading is a strength of mine and will prevent me from losing big. Risk and reward are inexorably tied together. If you want to make big money, then you have to take bigger chances in the market. I hear of the Robin Hooders who made it big. Yes, they can. And if luck is on their side and they have the guts for it, they certainly have done so, or they have busted their accounts attempting to do so. Many of the big and quick money trades are using short term weekly options trades on the big $$$ stocks such as TSLA and AMZN and riding the trade to big money if they were correct on direction. For TSLA and the FANG stocks, it has mostly been trade long using call options.

Yes, I have a dream. It is to make it big; but I am unwilling to take such big risks. That makes the end goal somewhat unlikely I will admit, since risk and reward are tied.

My plan is straightforward… stick to one thing and not give up on it while I do my other daily end-of-day trades and while I work full time. I plan to keep working on being a successful Nasdaq futures trader. My first step is to trade /MNQ micro mini Nasdaq 100 futures with my Roth IRA account. I expect to make $50-$100 on a good day. That certainly won’t make me a quick Millionaire!
But after I feel comfortable that I have a winning system and can successfully grow my account, I will move up to /NQ Nasdaq e-mini futures. That moves quickly and even with one contract, you can win or lose a $1,000 in less than ½ an hour… you don’t want to walk into that buzz saw without total confidence in the system that you plan to trade…

There are an even bigger money-making choices open to you if you can truly be the 1-3% of the people who can master making money on the /NQ … by trading short term weekly options on it. These weekly options are expensive as the Nasdaq is sitting a- t 12,273. Now you are talking of moving many more multiples of money in ½ hour.

Question is
1. Do I have a good system?
2. How much loss can I handle before I can’t take the losses?

One step at a time for me… and my first step is to make sure my brain knows my winning system really well, so that when the system and I incur losses, I do not step away from the system. It is like touching a hot stove, and your brain is saying don’t go back and touch it. But you have to if you want the reward… and that is what day trading is really like. With Nasdaq futures, the market is open almost 24 hours, although there are good times and bad times to be trading. Big money to be made…

/NQ at Friday's closing ...

401K versus Roth IRA - which is better?

An associate at work asked me which is better; saving in a tax-deferred 401K or a Roth IRA where your disbursements are tax-free? His young nephew had asked him the question. While both have their positives, I will say that bulk of my savings is in 401Ks and some that are transferred from a 401K into a Rollover IRA in brokerage accounts. Most of that was a result of my not being aware of a Roth IRA till much later. But would I have changed anything? And recently why did I start a Roth IRA?

The main advantages of a 401K are:

1. You can contribute money directly from your paycheck and if you don’t see the money, it is easier to save it.

2. It is taken out as pre-tax dollars and reduces your tax obligations year end.

3. Companies usually offer a partial match up to 3-5% of your contribution. That is free money one should take.

4. 401K being pre-tax dollars compared to a Roth IRA being post-tax dollars, a larger amount of seed money will multiply and grow much faster than a smaller amount.

5. The contribution limits for a 401K are $18,000 if you are below 50 with additional $6,000 catch up contribution if you are 50 or older. The contribution limit for Roth IRA is $5,500 and for 50 and over $6,500. Additionally you can also contribute to a spousal IRA if your spouse is not earning.

6. Finally, when it comes time to withdraw the 401K money in retirement, most of us will have less income for tax purposes and our tax rates will be smaller than when we were earning money. This is an advantage for a 401K versus Roth IRA.

So why put any money into a Roth IRA?

1. So why did I start a Roth IRA? I plan to day trade futures after I retire. I believe I can take a small amount of capital - as little as $13,000 and generate a $20,000 profit on it. By setting up a Roth IRA, I plan to make this money tax-free.

2. There is no harm in having both 401K and Roth IRA accounts.

The clear winner seems to me 401K. Feel free to comment on this blog post if you agree or disagree but this is how I see it!

401K Monthly Analysis – Hacked! 12/17/16

Our home PCs were hacked, network compromised. That has been the reason I have been unable to post previously. The timing could not have been any worse. The hacker wiped out all the data and program files on my laptop. Metastock was not very cooperative. The technical people pointed me towards sales. The sales person said he was very busy with the sales calls due to Christmas and would call back… not really. And I am doing contract work in a different State than we live in so I had to leave my laptop at home and stay out of the markets while it roared upwards after the elections… this is one part of trading’s mental things… the regret for not participating in a run up that your system would be telling you to go into. Currently I have signed up for a VPN service for protection. I am writing this blog from a hotel using the VPN. As I write this I cannot help but think that Cyber attack is very powerful and can be extremely painful..

Back to the blog…

The S&P500 (SPY) chart points up based on my trading system. So is the Dow Jones 30. See charts for SPY and DIA.  The ETF for the Dow Jones 30 is DIA. The US Dollar is showing strength with the Fed’s interest rate increase. Gold funds are down. The chart on the GLD ETF is falling hard and so are Bond funds – see chart on FGOVX.

Going into one of my previous company’s 401K the top funds selected by my monthly analysis are Royce Opportunity, Fidelity Equity Income, Fidelity Freedom 2050 fund, Spartan 500 fund. Fidelity Govt Income Fund took a big hit. Royce Opportunity requires a long stay in the fund due to the redemption fee for getting out early. More in my next post.

401K Monthly Analysis – No change 100116

“My daily SPY analysis shows a down signal. Chart attached. This is using a custom trading system generated by ICE software for Metastock and using my preferences to customize it. The signal is leading and depends on the indicators selected. All trend following systems are lagging price. If we have profited from the last move up in the markets, this may be a time to pare down and get protective if you are cautious like me. “

-        This part of the blog from previously remains unchanged… On the chart for SPY (see below) I have circled 4 areas. These are times when the red 50 day EMA (Exponential moving average) turned flat/horizontal. Markets don’t stay flat forever and the inevitable outcome is a strong up or down move. The two red ellipses were down moves and the last green ellipse was an up move. There is a good chance that the markets could take off upward with a Hillary Clinton win, as the uncertainty would be gone. I think the Mexican Pesos would also stabilize. With a Trump win there will be more uncertainty and we know the markets roil against uncertainty as well as protectionism… In effect we are now sideways looking for an up or down direction…which does not help in our trading/investing/gambling… I call it trading.

“With my previous employer’s 401K funds, the top funds from the monthly analysis are Royce Opportunity, Fidelity Equity Income, Fidelity Blue Chip Growth and Spartan 500 fund (same as SPY). Royce is actually at the top but it is very volatile, and also has a short term trading redemption fee in case we want to get out within a month. Royce has recovered from its low of $8.46 price to $11.55 now. Considering it was at over $16, it moves around a lot. It is better to invest in Royce when all the stars are aligned as it can drop quickly. The FGOVX that I am still in is going nowhere. Still has an up signal on the weekly chart. “

-        This part of my blog from last month also remains completely the same… rather unusual…   

“I have put in a trade on ITRI at the recent secondary buy signal. Also closed out a nice trade on SHOP in my R/IRA. I hold TLT as a hedge against these trades. Currently I am in FB and MTCH, social media stocks. I have also started taking some longer term put positions on the Q’s in case the market tanks in the Fall before the elections.”

-        Update: I closed my ITRI trade for a handsome (15%) profit just as I did for SHOP previously. I sold FB at a small (3%) loss when I had a down signal but remain in MTCH which has gone up over 15%. I have added MDT stock which is slightly (2%) down from when I bought it. I will continue to hold TLT and my put options as a hedge. I am cautious. I believe the markets will go up but will tip toe in as the other side of the coin is a rapid 10-15% move down..

401K Monthly Analysis – A Down Signal? 9316

My daily SPY analysis shows a down signal. Chart attached. This is using a custom trading system generated by ICE software for Metastock and using my preferences to customize it. The signal is leading and depends on the indicators selected. All trend following systems are lagging price. If we have profited from the last move up in the markets, this may be a time to pare down and get protective if you are cautious like me.

With my previous employer’s 401K funds, the top funds from the monthly analysis are Royce Opportunity, Fidelity Equity Income, Fidelity Blue Chip Growth and Spartan 500 fund (same as SPY). Royce is actually at the top but it is very volatile, and also has a short term trading redemption fee in case we want to get out within a month. Royce has recovered from its low of $8.46 price to $11.55 now. Considering it was at over $16, it moves around a lot. It is better to invest in Royce when all the stars are aligned as it can drop quickly. The FGOVX that I am still in is going nowhere. Still has an up signal on the weekly chart.  

I have not started analyzing my current employer’s 401K funds but I will soon as I am aggressively saving there…

I have put in a trade on ITRI at the recent secondary buy signal. Also closed out a nice trade on SHOP in my R/IRA. Credit goes to Motley Fool for the pick...I hold TLT as a hedge against these trades. Currently I am in FB and MTCH, social media stocks. I have also started taking some longer term put positions on the Q’s in case the market tanks in the Fall before the elections.

401K Monthly Analysis - Higher 8716

The market continues to ignore any disappointing news and head on higher. Brexit gave us a reason to pause but we are over that it seems. SPY is pointed up. So is QQQ and the Diamonds (DIA) Dow Jones 30. See charts below on SPY and QQQ. The market is not concerned with the US elections. I suspect that is because the outcome is likely less uncertain based on recent polling.

My previous employer’s monthly analysis shows that the top funds to be in are Royce Opportunities, Fidelity Blue Chip Fund, Spartan 500 and Fidelity Income fund. Royce is a very volatile fund and has a short term redemption fee charged if you get it and get out in a month. It is fund that you have to commit leaving money into.

I am ready to start my next experiment in trading. I have been trialing my automated trading program (Bandit) with real-time data and simulation money on a VPS and the performance over a year has been very positive. It is now time to turn on the real thing. I will not be looking over my shoulder at it… it will be running on its own with a stop loss and take profit levels for about 2 ½ hours each day in the morning trading Nasdaq futures… Let us see how well real-time performance does vs forward simulation. 

401K Monthly Analysis – Summer Rally or Not 7/4/16

My daily SPY analysis shows an exit down signal; which I interpret as Up; but the market has been trading sideways for a while. The resolution to the sideways move will either be up or down. With Brexit, we saw volatility spike and then quietly ebb away. Fade the down move the market said. So here we are again at a sideways situation. What can I squeeze out of the charts for clues? And what are they telling us right now?

Gold has been steadily moving up. I have to believe that based on the chart for GLD shown below. NUGT, the Gold Miner’s ETF has gone nuts. Over the last few months it has moved up from the 20s to 144. Talk about a big move…  And the bond funds have also gone up. See chart for TLT, 20 year Treasury bond fund ETF, below. And stocks? Well they are also holding their own. But something has to give. We can’t have Gold, bond funds and stock funds all harmoniously going up. They don’t like each other…Which will give ground?

Looking at the chart for SPY I see a slight divergence between the indicator peaks, (red line) and the SPY’s peaks (blue line). SPY has gone up but not convincingly. So here I go again. I will be cautious and stay on the side lines. If we breakout then the market will rip and I will be crying about missing the Summer rally for sure!

With my previous employer’s 401K funds, the top funds from the monthly analysis are Spartan 500 fund (same as SPY), Fidelity Equity Income and Fidelity Growth Strategies. Royce is actually at the top but it is very volatile, and also has a short term trading redemption fee in case I want to get out within a month.  

I have not started downloading and analyzing my current employer’s 401K funds. But I will next month. I am putting as much money as I can into my 401K every month; all into a docile fund.