DAYTRADING: The Highs and the Woes
I made it to doc Kronkite's in record time. I was in crisis.
Doc Kronkite is my shrink. He looks like a short Mel Brooks and a tall Barney Fife. But he treats day-traders and their problems. He's been treating me for nine years.
I walked into the reception room, saw the curvaceous, voluptuous and comely Miss Tushbumper who served as doc's er, receptionist. As is our ritual I kissed her milky white cheeks and she slapped me hard while smiling.
I flew into doc's office. He was seated behind his massive oak desk clipping coupons.
"Gee doc," I said "I didn't know you clipped bond-coupons."
He threw an Eberhard Faber #3 pencil at me. As I was pulling it out of my arm he said "Not bond coupons you idiot, Walmart coupons. On the couch lie down already. Assume the position."
As I eased my weary body on his lumpy couch I said "Doc, I think I'm in crisis, you gotta help me."
"Crisis, schmisis. Your're cuckoo is what. Talk on me."
"See doc, I'm looking for a system, something that will tell me which stocks to buy and which stocks to short."
"Mmm" he said, stroking his Freudian-like beard and reaching for a pencil. I ducked. He snorted, said "Continue."
"I read Barrons cover to cover every Saturday. No help. I subscribe to Fortune magazine, Money, the Institutional Investor and dozens of others. Nothing. I get hundreds of upgrades and downgrades that all the brokerage houses issue every day. Got murdered with those. I watch "Wall St. Week" and take notes, read the Wall St.
Journal every day. Nothing. I read Invetor's Business Daily. It's very good doc, helps me spot good stocks.
"Mmm. IBD is good, I read it too and find good stocks. But good fundamentals, while helpful over time, aren't much help when day-trading."
"Then I spent thousands on software that promised to find me five stocks a day guaranteed to move like rockets. A disaster. Then I bought stocks with low price-earnings ratios doc, but they kept dropping too.
"Doc, you gotta help me. I'm in crisis and losing money hand over teakettle."
"Mmm," he said, then pulled a thick tome from his shelf, flipped the pages for a while and said "Ah hah! I've got it."
"Doc," I cried "what have you got?"
"The answer you dunderhead, the answer to your problem. I'm a specialist you know."
"I know doc. So what's the answer?"
"You are suffering from the "Holy Grail Syndrome."
"The Holy Grail Syndrome? Whats that?
"It's what guys like you are always looking for; the system, the way to beat the street; the way to make money without really working at it. But it's good you came to me. I can cure you of this."
"You can doc? That's wonderful. How? Tell me doc, tell me. I'm all pins and noodles."
"The cure goes back a ways, back to the 1920's. Sy Gezundt invented it. It's a method he developed that selects stocks that go up, far more often than they decline."
"Doc, you're a genius. Tell me how it works."
Doc grabbed another Enberhard #3 pencil, whipped it at me. Again in the arm. But I didn't care. I was about to learn all about the Holy Grail."
"Have you ever played poker?" asked the doc.
"Poker, schmoker," I cried. "The Holy Grail syndrome cure, tell me!" I hollered.
As he reached for another Eberhard #3 I said, "No doc, I'll be quiet, I'll listen to your silver words."
"Have you ever played poker?" he said again.
"Of course doc. Played a lot of poker during my formative years."
"Were you successful?" doc asked.
"I was the best poker player around doc. I had a poker face and became good at spotting tells."
"Tells?" asked the doc, "What means tells?"
"A tell doc is what many poker players do that tips off when they're holding a good hand; some look at their cards, see a nice hand and smirk or smile. That's an obvious tell and they don't even know they're doing it. Some, when they have a good hand count their chips, subconsciously preparing to bet heavy. Some pull their ear lobes, some rub their hands. Others suddenly break out in a sweat or get itchy. A common tell is a player who stacks his chips in neat little piles. Spot a tell and you've spotted a strong hand. Yeah doc, I did alright playing poker."
"Good," said the doc. "There's hope yet for you. Forget Barron's, analysts, and all that other nonsense. Think poker."
"Ok doc, I'm thinking poker. So?"
"So you're sitting around a poker table. Game is 5-card Stud. After the third card you've got a pair of three's, one in the hole, one showing. Guy across from you is sitting with a pair of jacks up. You've already got $20 in the pot, $20 invested. Guy with the jacks bets $3. What's your play?"
"I fold doc."
"Why?" he asked.
"I never chase a hand better than mine. Sure, once in a while I'll catch and he won't, but the probabilities are heavily against me."
"Good. Do the same in the market. Work the probabilities. Wait until you have a good "hand", have a good play. Work the strongest sector. If the pharmaceuticals are strong, look for a pharmaceutical. Find one that's in an solid uptrend; the 10 and 20 day moving averages should be rising, the stock should be above the rising trendlines, the stock should not be overbought. The ADX, the MACD and the stochastics should be confirming."
"And that'll do it doc? That'll give me a guaranteed profit?"
He whipped another Eberhard #3 and got me in the other arm.
"No you idiot. There are no guarantees. You play the probabilities when they're in your favor. Over time you'll do well. And always enter a stop order."
"A stop order?"
He reached for another sharp pencil but put it down.
"Yes, a stop order to limit your loss if the trade goes wrong."
"Doc," I cried jumping up off the lumpy couch "You're a genius!"
He looked at me, reached for a pencil. I beat it out the door, grabbled Miss Tushbumper, kissed her hard on the lips. She smacked me of course, our ritual, but my smile remained.
"Tell the doc I'll see him next week," I shouted over my shoulder. "And you too of course."
I pulled her Eberhard #3 from the back of my neck as I flew out the door.
Lee Kramer
