How Preparation Can Transform Your Trading
Interview with Jim - Jennnes Capital
Huge thanks to Jim who found the time to give us some insight into his successful process as well as share his thoughts on current market conditions. Think this will be very helpful to all readers!
@jennesscapital, is someone I have been following closely for quite some time now - he is an extremely well-informed and experienced trader who has been in this business for a long time and knows how best to handle different market environments.
The invaluable chart posts to twitter are not all, Jim also frequently shares his thoughts and insight into his system - offering a valuable perspective through a veteran trader’s mindset as well as which areas of the market may warrant more attention than others:
Background
In 1994 I was a struggling financial planner/salesman for American Express a few years out of College. I read a book , Den of thieves by James Stewart and I was instantly drawn to the excitement of Wall St. and made the move to NYC to pursue my dream and live with some of my college buddies. I lived in a studio with 4 other guys, and the excitement quickly waned as I was brought back to reality. Luckily 1 of my roommates was working as an assistant trader on an institutional desk and brought home a copy of Market Wizards. I read it and again fell in love with the idea of trading and stocks. I was hooked.
It took me a couple years, a pay cut with some risk, but my big break came through networking with my circle of friends and landed a job working for Sherwood securities as an assistant/ trainee. I worked the order desk for a few months, learned to deal with pressure, and people under constant stress. Basically human nature as it related to trading. I had thick skin and did well and got moved to the top producing desk as the junior guy. It was an amazing opportunity as I learned to trade the beta technology names of that time in a hyper growth market. (JNPR SCMR EMLX QLGC PCLN) I also noticed an older gentleman using a ruler to chart stocks on printed out bar daily graphs from IBD. I was fascinated by what he was doing and luckily he saw my interest and took me under his wing where I learned to really chart stocks.. Little did I know he was a very successful options and stock guy who had made millions trading. That was my overall start to the business and stock charts..
Dan Zanger Influence
The next bit of luck came from handling order flow driven by Dan Zanger. Dan was a trader in high beta stocks that were leading the market.. No one I dealt with in execution was quite like Dan. Most know him now from his very popular site chartpattern.com. He was incredible, very directional and aggressive and almost always on the right side of the move. I consistently lost taking the other side of his trades as a market maker. I started to ask my salesman who this guy was and subscribed to his site. Needless to say, I learned everything I could from Dan for years, in his newsletter and chat and by going to a few of his seminars.
The Importance of Learning
Unfortunately what came next was a really nasty tech stock bubble burst and bear market. I watched my firm be sold to Deutsche Bank at the height of the bubble, only to be decimated within 6-8 months down to a skeleton staff. The good times were over. The business never really recovered. I spent 2000-04 studying, learning to remake myself into a real trader trying to lose the skills I needed to make markets, which were very different than true trading decisions. In 2004, I left to start prop trading with Generic and I have been trading for myself since to this day. I have seen some great times and some very dark times, but through it all I am fortunate to be able to make a living doing what I love.
Preparation Is Key
In trading, the thing we control most, no matter the current environment, is how we prepare. No matter what edge you bring to the table, you are only as good as your stock selection, your setups that drive those stocks down the funnel to the ultimate decisions you make on them. To me, a large part of my edge is a derivative of how well I am ready in my prep. Confidence is so important when making trading decisions. And the more prepared I am, the more well thought out a price scenario and opportunity I have planned for, the easier it is for me to execute my plan. Because trading is so dynamic, and how freely opportunities show up, it is sometimes easy to think you will be able to execute simply and be able to take advantage of the situation. That is usually when you will veer off plan and make trading mistakes like FOMO/ chasing price. So for me to do this right it all starts with how well I prepare.
I will always start my preparation for the week in a similar way. I review the charts I printed out from the prior week. I look for the ones that made the best moves on each trading day. I want to make sure they were in my game plan on that given day. Then I ask:
If not why?
Did I trade it right?
How was my grade of the opportunity?
Did I size it right?
Was I confident making the decision and in execution?
I will usually find 3-6 trades I will go over in detail that I would like to take a deeper dive into. All of my best processes are the direct result of looking into my good trades, my mistakes and my misses. Understanding you can not trade every situation correctly, but you can learn something from almost every one of them. Then let them go! (which is important)
Stick To The Process
You do not have to be perfect in trading just good enough. You will never be complete as you will be in the future. Embrace the struggles and be resilient. The best traders I have worked with (some making well over 20 mill) never leave their process. They are relentlessly consistent through the good and bad.
This is a sample of 1 of my trade reviews for 2/14/23 of last week (1 of my better ones on the week):
PLAN COMING IN:
Be prepared for shakeout into 20$ round and 20 day band catchup. As a 1st test after a huge volume breakout. In terms of my strategy, its an A level opportunity. Simply a must play. Demands A level initial size w appropriate stop.
Does price respond to an A level opportunity to quickly confirm?
YES
Multi frame look should standout like this.
All of your best trades should come from situations that fit your plan, prep work, and personality. It should also be in the right merchandise, (in play) or leaders.
WHY AI? Because of the bid AI has had, the volume, the recent move, MSFT investment in Chat GPT etc. perfect in play candidate.
So how should you plan a trade before while it is setting up? I am currently in a little bit of CFLT I traded this successfully over the last 2 weeks, from a tweet level I put out as it was setting up after earnings.
Current chart:
So what's my plan? If the 20 days continue to hold right, I will be adding.
Currently though, the market is vulnerable for a little more pullback potentially, as is CFLT 0.00%↑ as it is only 2 days down off $30 resistance after big move off earning lows. Ideally, I want to have the bulk of a trade entered at my A area which would be the 200 day into a retest of the 50ema area.
In this range I would be looking for exactly what I need to see to confirm my plan and take it on as an A opportunity.
These are a few examples of how I review my trades and a little of the process I use. I wish you all good luck and good fortune in your trading. Enjoy the journey, and think big. Most of us doing this have no idea what is truly possible doing this fully right. Belief is truly a powerful multiplier.
Take care,
Jim (Jenness)