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Some people walk into the market as if it were a casino. Trading in a sense is like gambling because luck is somewhat involved in almost every trade. But it differs from gambling because you could beat the house.

In a casino, every game is designed in such a way that the house will always be the winner. For example, I were the house and you were a gambler. We play a game. My odds of winning is 51% and yours is 49%. Mathematically speaking, if you keep playing the game, you will lose in the end. Plus, the house has much more money than you. I can tolerate a string of losses without any problem and you can not. I know that you will give back all your profits plus your own money if you keep playing. If you lose, you will keep playing because you want to get your money back. If you win, you will keep playing because you want more. It is as simple as that.

Most gamblers do not have any gambling plans. Even if they do, their plans will never work because the house always will have an edge over them. But in trading, it is possible to have a system that can consistently beat the house/market). Yes there is manipulation in the market. But a stock will eventually go where it should go. In addition, a stock,even if manipulated, normally gets swept away by the general market. It is not hard to manipulate one stock. But it is close to impossible to manipulate the whole market due to its shear size. So I believe trading is more fair than any game in a casino.

Here are 2 questions to test if you are a gambler or a trader

1. Do you have a trading plan that includes your entry, exit and position size for ever single trade of yours?
2. Does your trading plan above produce a positive expectancy regardless the market cycles?
    

If your answer to the first question is No, then stop the gambling you call “trading”. You might just donate your money to a charity.

if Yes to the first but no to the second, it is fine. You are a losing trader for the time being. If you work hard enough on your system, you might come up with a good one. But you must quantify your expectancy.

If Yes to both, congrats! You are all set for the rest of your life.

Do you think that buying new highs works?  I heard both good and positive answers from other traders. When I back test a theory(system), I tend to spend most of my time looking for holes.  Look at the chart below.

Every time you buy a new high such as A,B and C, you would meet a bad reaction immediately. Those reactions were big enough to knock out most stop losses placed by short term swing traders.  If you took all the trades at A,B and C, your confidence in trading POT would be severely shaken.

Click on the image to have a better view

Another month just passed. The market just kept moving up, which perhaps annoyed a lot of people who like to buy on dips. Some stocks shoot up like a rocket, which is violent, quick an fast. Some zigzag up, which is slow but steady. Some are totally dead such as DRYS and STP. By “dead”, I mean “flat”. They are basically stuck in a range. Regardless how they behave, they have one thing in common. They are all hard to trade.

For me, it is a mediocre month. I made a bit over 2k, which is enough to cover our monthly expenses. One reason is that I took a few days off near the month end. My trading is actually getting to a very boring point, where I do not have windfall profits or big losses anymore. It is a good thing though. As I mentioned many times before, if you want to trade for a living, you need to eliminate your draw-downs. Otherwise, you will NEVER make it.

My ideal monthly target is 3500 to 4000 or about 50k a year. I think it is slightly higher than the average salary in the US. And it is certainly not a low income in where I live, Durham, NC, which is a small town. This is one good thing about trading for a living. You do not have to live in NYC, Tokyo, or Paris. Instead, you can live somewhere in Texas where 200k buys you a 5 bed room single family house. I know some of my readers reside in India and China. Imagine what you guys could buy with 50k USD in your countries, which I think have a purchasing power of 150k-200k in the US.  Think about it. It is not fair for us, :(.

3 months into 2010, I still have issues using up all my capital. It looks like that all I need is 50k in my account for now because I normally have positions worth 40k-50k at one time. If I need to buy a bit more, I could tap into the leverage. With my risk control, I should not have any issues. Daily leverage from Tradestation bears no interest. So I will use it at will.

I have pulled 100k out and put it in my account with Interactive Brokers, in which I swing trade Forex.

The solar sector seems to have been active lately. It has been pretty weak for most of the time during this big rally. Let’s take a look at some active ones.

Trina Solar Limited (TSL)

It is a Chinese company.  The recent move was caused by the upgrade from Credit Sussie, which is based on a price reduction of about 10% in the third quarter 2010 due to the German feed-in tariff reductions, and a revenue increase for 2010 to over $1.3 billion for Trina. You can see the source here

Click on the images to have a better view

Technically speaking, I believe it will face a tremendous amount of selling pressure from the bulls trapped in the previous rally.

 
CSIQ(Canadian Solar Inc)

This company is actually based in China.  Nowadays, stocks with some Chinese background still perform slightly better than others.  The chart is basically pretty much like TSLs’.

FSLR(First Solar, Inc)

The is perhaps one of the most depressed solar stocks.  But it has been kind of firming up lately.

 
Among these 3 guys, FSLR perhaps is the weakest.  Both TSL and CSIQ have better weekly than FSLR.   All these guys are active stocks and good for short term swing trading in either directions.  Both bulls and bears can make some money from here.   Bulls might still get a few legs up from here.  Bears might short into the weakness when they run out of steam.  I believe they are actually very good short candidates.  Anyway, I am slightly biased toward shorting in general.