Monday, January 20, 2014

Active-Trader - Voodoo Clues - Part One

Welcome back Active Traders and Wealth Builders.

As you already know, I'm too cheap to pay for indicators, particularly $997 for the Voodoo lines indicator plus $47 per month ongoing.  But in my recent experience, the hidden support and resistance lines expressed by the Voodoo lines indicator are just too valuable to ignore.

One of the reasons why I don't pay for indicators (or any of the training classes from Simpler Options either) is that I don't believe in paying for information which can be had for free.  This attitude may be holding back my development as a trader since I have an inner need to figure things out for myself.  As I mentioned in a prior post, the Voodoo lines present a particular challenge since they are so expensive and don't appear to come included in any charting packages like just about every other indicator out there.

Here's what we know about Voodoo lines so far:

1) They are calculated in part with human interaction
2) They are based in part on Fibonacci and/or Elliot wave principles

The above screen grab of Voodoo lines for the symbol SCTY grabbed from a Simpler Options video provides some important clues.  They confirm my first suspicion which is that Voodoo lines are an algorithmic extensions of a low which is selected by the human interpreter.  Note how SCTY ran up then pulled back to form an important  intermediate low which is the lowest red line.

 From that point forward the Voodoo lines are calculated as a sequence of 4 red lines separated by 2 inner lines in green.  The next questions to be asked are:

1) How is the distance between the red lines calculated?  Is it a proportion of the price level alone or a harmonic of the most recent high to the (human selected) low?

2) What is the distance between the red lines and the 2 intermediate green lines?   This one seems simpler to determine since once the red lines are calculated, the green lines to seem to be a fixed proportion between them?

As you can see, I love puzzles like this and I have made some important first steps here.

Check back later for part 2 in my quest to demystify the Voodoo lines indicator.

Tuesday, January 14, 2014

Active Trader - Million Dollar Day Trade

Welcome back Active Traders and wealth seekers.

John F Carter continues to amaze when he gained 1MM on a day trade today in TSLA.  Before I started with Carter,  I did not believe that these types of gains were possible.  Some part of me wants to wake up from this dream and ask myself, is John Carter real?

Most everyone has had the experience where you have an amazing experience in a dream and wake up disappointed to realize that you were only dreaming.  With this sobering realization, you go back to your old understanding of reality and re-assess your dreamtime experience in the harsh light of day.

But John F Carter continue to defy these expectations.  In the cold light of day I ask myself, is John F Carter real?  The answer is yes, and I know that because I shook his hand and met him face-to-face at the Trader's Expo back in early 2013 and described in my blog post here.

The screen shot on the left shows just one part of the story when Carter bought 30K shares of TSLA at an average price of 149.2.  When I joined the room at about 3:15 PM, the shares were  at about 160 netting about 350K on the stock.  He put on a number of other option positions as well and he was so loaded up, he got a call from the Thinkorswim trade desk that he had exceeded his day trading margin limit.

As of the close, Carter went out 20K of TSLA stock which went out in the after hours at 166 netting another 100K on the stock alone.

I made a few dollars on this trade, and enough to pay for another month of Simper Options membership.  But its becoming more clear that the difference between me and JC is squarely between the ears.  It comes down to your relationship with money.  I'm nowhere near JC, let alone in the same ballpark. But its well worth the $150 a month to be associated with this man who continues to inspire with his words, his actions and his example.

Sign up for the free videos at and follow along.

Sunday, January 12, 2014

Active-Trader - Voodoo in BIDU

Welcome back Active Traders and Wealth Builders.

In the world of technical indicators, none is more obscure, more arcane and more steeped in mystery than the Voodoo Lines indicator.  The name itself conjures up images of mystery and the dark arts. John Carter of Simpler Options is a big fan of the Voodoo lines and promotes them directly on his site at this link Voodoo Lines indicator.

Voodoo Lines are also marketed by First Wave Software and according to the site originated from methods pioneered by David Starr. In any case, the Voodoo lines indicator puts a number of line on charts, and the lines represent important support and resistance levels for price action.  Like any other tool, Voodoo lines alone will not make you money, but they will provide one more tool in the process.

And speaking of money, the Voodoo lines do not come cheap.  They are not bundled into any trading platform and the base price is $997 plus $47 per month ongoing.  Its clear from the documentation that the lines are not calculated locally, but are transmitted over the Internet from a server.  Its also clear that human interaction is involved in creation of the lines, since they are not available universally for all stocks, rather from a selected sub-group of stocks.  Also, there is human activity involved in updating of the lines which accounts for the $47 per month ongoing update charge.  Carter indicated in a recent video that the lines do not change over time, but based on the description, historical highs are lows are included in the calculation, so they must change when new historical highs are lows made.

Since I'm too cheap to pay $997 for a technical indicator let alone the $47 ongoing charge, so the Voodoo lines represent a particular challenge for me.  In the past, I have been able to reverse engineer some of my favorite indicators (such as Range Bands), but that relied on having the indicator calculated locally, and being able to manipulate the underlying data to understand its affect on the calculations.  That clearly won't do for Voodoo lines, so that presents an intellectual challenge, and I love challenges like this.

In any case, John Carter made a call for higher prices in BIDU on Tuesday 1/7/2013.  Having found support at the fire line (red) area at 167.44, and a TTM squeeze on the daily charts (not shown) Carter was expecting a move up to the first Snow Line at 182.44 and then a move symmetrical to the prior low-high swing to the second snow line at 191.23.  I was able to get positioned at the blue bar by selling the 175/180 PCS for a credit of 2.25.  I covered it the next day for 1.70 and pulled out a quick $55 for a total of $4 in commission paid.

Note how quickly the entire move was thrown back.  I have seen a lot of that lately with another good example being Chipotle (CMG).  Carter made a call on Wednesday for higher prices in CMG.  With the stock at about 536, we bought the 525/545 call credit spread for a debit of 10.0.  Almost immediately the next day the stock shot up and traded as high as 548 before selling off and closing not far above the breakout point at 538.   I was able to close that trade out at 12 for a 2.0 or $200 profit the next day.  Its amazing how quickly profits come and go with options and you have to be able to grab them while you can.

I have some ideas how to calculate Voodoo lines for stocks making new all-time highs so I'm going to start with that and see how it goes.

Have a great week ahead.

Wednesday, January 1, 2014

Active-Trader - 2013 wrap-up

Welcome back Active Traders and Happy New Year!

Also Happy Birthday wishes are in order since this blog officially turns 4 years old today. Thanks to all my loyal blog readers for joining me on my journey toward financial independence.

2013 ended in spectacular fashion with the Dow and SP-500 closing at new all-time highs 5 out of the last 9 sessions.  It was a fantastic year to be an equity investor with the Dow Jones Industrial average returning 26.5%, and the SP-500 returning 29.6% putting in their best performance since 1995.

The environment continues to be favorable for stocks with historically low interest rates thanks to our friends at the US Federal Reserve.  The Fed has been conspiring in favor of equity investors for a good long time and particularly since October of 2008 when the Fed Funds rate dropped below 1% in the thick of the financial crisis.  And all indications are that the next chair of the Fed will continue the easy money policy well into 2014 and beyond.

As for my own performance,  my returns came in well short of the broader market indexes but still respectable with just over a 19% return in my taxable account and nearly 17.5% in my tax-deferred 401K retirement account.  I didn't do as well in some of my other accounts and I still seem to be afflicted by Small Account Syndrome.  Here are the moves I have made to position myself favorably for 2014:

- All Forex accounts have been closed and funds collected

- My TradeStation account is setup and funded to minimize commission costs and execute The Ultimate Trading System which has been churning out some winners lately.  I will do most of my active trading and income generating strategies in this account.

- E*Trade will continue to operate the bulk of my assets and will be used for more passive investing and indexing with Exchange Traded Funds as well as my tax deferred retirement fund.

- As for personal finance, I opened up new credit card with Capital One which pays 1.5% cash back for all transactions all the time.  If this card performs as advertised, it could result an extra half percent reduction in expenses as compared to the cards I use now which pay 1% cash back.   This will no doubt lead to increased returns for Capital One Financial (COF) a recent pick of the Ultimate Trading System.

Overall, it was an excellent year financially and I and I am well positioned to achieve my long-term goal of financial independence.

Thanks for reading and I wish you all good health, happiness and prosperity into 2014 and beyond.