what to do with $1000

AAPL, GOOG, & PCLN continue fall from peak after subtle expected pop.

So in my two earlier posts I first analyzed and came to a long waited gut conclusion with these weekly faster and bigger moves that the top peaks of a few fat stocks looked like they were ready to sell off. Particularly Apple (AAPL), Google (GOOG), and Priceline (PCLN). I predicted a pop after the quick fall on Monday for all three stocks to having a buying opportunity especially on AAPL Tuesday. On Tuesday and Wednesday the stocks popped up. Then I planned on Thursday into Friday, if I was correct about the possible new downtrend starting to begin, to show after the initial quick trade on Tuesday. Today, all three stocks got hammered except GOOG.

However, with GOOG I find an exception because it hasn’t moved back up as quickly like AAPL and PCLN. GOOG seems like it is a turtle slowly going down a hill whereas AAPL and PCLN are like college frat kids jumping off into deep blue lagoon abysses. 

After Wednesday I initially thought GOOG out of the three would have been the best practice trade to follow in and trade on real money, but after two seeing all three continue to fall I’d say it’s safe that all three are in for a short-term stock price correction.

Now on Friday even the MSFT did well in earnings I don’t think it’s going to affect my stocks. All three stocks will likely fall another 10 points into next monday.

Currently here are the 3 practice put options I have in play:
(bought on close of the 16th – the better trade would have been the close on the 18th)

AAPL 555 MAY PUT @ $20.44 / currently at $16.55

GOOG 610 MAY PUT @ $19.40 / currently at $19.50 (still likely the weakest and best put play)

PCLN 655 MAY PUT @ $20.50 / currently at $12.17

And I’m going to add an QQQ NASDAQ index put option due to how heavily these 3 stocks can weight on the QQQ index because it is ALSO at it’s peak high which has been squatting at the price of $65-67.

Buy QQQ 66 MAY PUT @ $1.42 (close of 4/19/12). QQQ’s are slow but likely the least amount risk out of these 3 larger options as seen just by the movement of the options except for Google because it hasn’t moved much only slowly falling. However, if GOOG continues to drift downwards it could have a sudden couple of big falls.

Starting again with $1000 to trade options with…

I begin again on my big school tuition journey funding my OptionsXpress account with $1000 to trade options with. The real question I ask myself is am I learning from my mistakes? Will I prevent myself from getting into bad trades? Will I wait for when everything is “right” and all “probabilities” are in my favor to trade a Call or Put option? I guess I’ll find out after trading over 20 $1000-2000 funded start trades. Actually more like less than 10 that I can think of.

My trading plan:

First I’m just going to let the money sit in there until I’m 100% certain a trade will work because the story of the market and stock should show and tell me when and how to trade a stock. Just waiting and not overtrading should help me, not that I over trade, but sometimes even only doing 1-3 trades a month feels like over trading.

Secondly I only deposited $1000 so I couldn’t trade a bigger trade then $1000. If I can’t double or triple my $1000 then I shouldn’t be trading anything larger such as a $5000 or $10000 trade.

Any profits larger than $1000 off the $1000 trade I’m going to withdraw them back into my bank account. Why? This will prevent me from trading more than a $1000 trade because knowing thyself I will trade bigger trades with my profits and likely blow them off. Keeping myself on a $1000 trades will in some way discipline myself (which taught) until I can master just trading $1000 constantly. I may only be able to by two contracts at a time. This is OKAY. I’m use to being cheap trying to make it rich and buying tons of contracts just to run out of time and lose all my money on one trade, which happens commonly.

If and that is a BIG if I can manage not to lose my $1000 on any trade I’ll just get good at trading small number of contracts until I know I’ve fixed many of my previous and ongoing mistakes.

Losses – If I’m only trading with $1000 I’ll have to cut my losses quickly or else I’ll have to fund my account again which I don’t ever want to have to do again. I want this $1000 to go and work very hard for a very long time. Since I’m still working it will be hard to sell out of the market so I will be using limit stops more often or not trade at all until I have a clear view of what thet market is doing and react to it.

I’ve traded $1000 into $10,000 and up to $40,000 within months so I believe I can do it again, except I will be keeping trades exactly at $1000 so I will only be able to see profits in my savings account which will go towards paying off debt. It would be really nice to see my account over $40,000 again, but that can wait. My goal is to just be able to not lose money and stay profitable trading in the money with at least 2 months of time like I know I should be doing, but haven’t been doing.