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Carl Azbell's  Instablog

Carl Azbell
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Dallas Texas based hedge fund manager, and 10 years of investment banking experience.
My company:
Azbell Capital Group
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  • What Does A Professional Trader Actually Do?

    What does a Professional Trader actually do?

    You'll get tons of people in the industry showing or trying to convince you that professional traders try and approach the markets a particular way; when in fact, the don't.

    There is a lot of mis information out there today--so what is the difference between a Professional Trader and a Retail Trader.

    First, the professional trader trades for profits long/short 1-3 months. The Retail Trader trades for directional day-trading. And what is the approach to Risk? The Professional trader trades to protect their portfolio, and real diversity and proper risk management is the key. In the professional trader's world, the thing you always ask yourself is--what is the Risk? What can I win or lose in one day? For the retail trader, risk is extremely concentrated. Concentrated on 2, 3 maybe even only 4 positions with typically no diversity usually ending either up on the day--or down.

    And what is the approach to return? Professional Traders trade for long term consistent returns because the goal of the Professional Trader is to get additional funds in management. No one will invest in the Professional Trader who is up 10% one month, and then down 10% the next. You need a STRONG track record, and recognizable behavior in good times and in bad. What is good behavior? When your winning, you add to your winning positions, and when your losing, you limit risk, and reduce positions. Those of you who know me personally know that I always start small, and ADD ADD ADD on the winning trades--I preach this all the time, and if you can show this strategy for several years, it will be MUCH easier trying to pitch someone to invest $10 million in your hedge fund.

    The retail trader.....up massively one month, the next--looses everything. What is the outcome? For the professional trader, its all about capital preservation and growth, higher fees and bigger bonuses. What is the outcome for the retail trader, funds generally go to $0, and the retail trader tries again next year.

    The professional trader trades to ensure a basic salary whereas the retail trader trades for EXTRA income. So, if you open your account with $100,000 and even if your good, you'll still have $100,000 because your taking a salary. In terms of growth, professional traders will add when winning, and reduce when losing. The retail trader, takes profit when winning and seeking more risk when losing. What is the result? The hedge fund manager grow their assets under management and the retail traders account goes to $0.

    The difference comes down to the fact that ALL professional traders seek consistent compounded returns.

    If you open your account with $16,000 USD and you get a 25% return per year, or 2% per month on average when do you get to $1,000,000. Einstein called compound math the eighth wonder of the world. You get to $1,000,000 by the end of year 7. One thing is guaranteed thou, the retail trader, who takes $1,000 profit per month, you'll still be at $16,000--or worse, $0. You have two choices, trade like the Professional Trader and reinvest your profits, or keep trading like a retail trader and taking profits along the way.

    So why does the retail trader lose money? Because they do the exact opposite from what the Professional trader does, in every way. Start understanding the fundamentals of asset management, and you too can be a successful fund manager.

    Nov 10 8:49 AM | Link | Comment!
  • The Week Ahead, Options Traders!

    Good evening traders,

    Everything you should know about this week as a Professional Options Trader is listed below;

    Well this week should be VERY interesting. We had a BIG move up Friday, back to $1766.75 on the S&P 500, which puts us back into no-mans land. No mans-land, being the range of $1774 and $1747 which was the high and low from The Federal Reserve day when they last spoke we have been playing this range for some time. In my opinion, I believe Fridays bounce was mostly lighter volume before the Holiday Monday & short covering into the long weekend. I wouldn't be surprised if we finally have a breakdown this week of the S&P 500, but I'm giving my bias to a breakaway to the UPSIDE because of the economic data that comes out this week.

    Inline image 1

    Going forward, we really don't have much to go on, until this range is broken. Next week there isnt any news until Wednesday at 9:30am when we have Crude Oil Inventories released at 9:30AM. This is the change in the number of barrels of crude oil held in inventory by commercial firms. This has inflationary and growth implications and will effect your Crude Oil trade. Crude Oil is still bouncing higher, even thou the trades Thursday and Friday didn't go our way. The problem with Oil trading futures is that the contract prices are $0.50 ranges---I recommend if your going to trade this futures contract, that you also trade a weekly Bull Spread on the contract. This will not only protect you, but I take weekly Option expirations on most everything to hedge against my daily trading.

    Inline image 2

    Crude Oil inventory has been steadily declining and is now at 1.6M last count which is probably as low as it will get so I expect this number to be higher. It correlates with the chart too, which gives me good confidence that Oil Inventory will start increasing; however, the important statistic to watch for here is that Crude Oil inventory has been constantly higher than expected; however, this time, it should come in closer to expected, which should drive prices higher on Oil. Im rating OIL a BUY still.

    Later Wednesday we have at 1PM we have the Federal Budget Balance which is the difference in value between the federal government's income and spending during the previous month. These numbers have been on par for the last 6 months; however, with the Federal Government shutdown I expect these numbers to be skewed and for the number to come in MUCH lower than expected which will give the economy a false boost. Because of this, Im going to position some S&P 500 contracts LONG because of this. I'll probably hold both contracts HIGHER and LOWER on the S&P this week, at different price levels. Ill look to obtain contracts for close at or above $1790 and contracts for close at or below 1736. You can hold both contracts, just not at the same price level.

    Thursday is trade balance data that comes out at 7:30AM, before the market opens which really wont effect your options directly, but GREAT for currency trades. I'll post some currency trade ideas in email next week. The most important data then is the number of Unemployment Claims which also is at 7:30am, this is the number of individuals who filed for unemployment insurance for the first time during the past week. I expect this number to be significantly lower because of the government shutdown also which could definitely BOOST the economy as well. This data was delayed 9 days because of the government shutdown.

    Those are the biggest news events this week. It could definitely push the S&P 500 higher, and since we had such support Friday, and because your odds of the market going HIGHER after a holiday are something like 80% I am looking to trade this weeks market to the UPSIDE. It should be fun, and Im thinking of doing a $200 trade challenge this week just because we had such a great week 2 weeks ago with a 600% return. I'll email everyone if I decide to.

    Happy trading!

    Tags: SPY, USO
    Nov 09 6:59 PM | Link | Comment!
  • The Market Ahead!

    Good evening traders, Im excited to get back into my fund and start trading again. I've learned so much, personally and professionally. I wanted to talk about my trades for the next week as I see them, both technically, and based on years of market analysis that as much as Id like to say I learned on my own, mostly was taught to me from years of working at the largest investment firm in America (at the time).

    I'm looking to short DELL if it breaks below $14.15. According to the IDC, world-wide PC shipments fell 14%. Yes, I said it right, that's WORLD-WIDE, not just the US. Now DELL hasn't done anything corporate-wide to delegate a 14% decline in business so you would have to revalue the stock at least 5% below current market value. I put a price target of DELL at $13.27 eventually.

    Im looking to BUY JCP if it breaks above $14.16. JCP has been such an up and down story, first they lost the Martha Stewart line, then their CEO and now their former CEO is back in action--I definitely feel JCP is too cheap to pass up, and generally when a CEO is replaced, he will have some exciting news for the companies turnaround--that's why they hired him in the first place right? Look for a BIG move on JCP soon.

    TEWI.OB, if you read my article on Tagg Like Me, this is just another pump and dump penny stock that already got its PUMP and now your just waiting for an eventual crash of the stock to $0. Just look at their SEC filing and find their "ENERGY" headquarters to be located in an office off the highway it the back. Then also look at their only promotion is from PAID sources they created themselves. Also, any website that puts "Investor Relations" on their site is because they are required to do so by the SEC so they don't get sued when they crash to the ground, these things are so easy to spot, just read a few SEC filings. Im going to short about $5,000 worth in the morning when the market opens.

    SIRI, another NEW CEO story, look for the stock to hit a new high. People love SIRI, and the price is too cheap for traders to pass-up. Im going to take 1000 shares in the morning if it opens in the GREEN.

    BAC, looks like by next Friday could hit $13.00. This is strictly a chart pattern play because I day-trade this stock often.

    YELP, looks like will eventually hit $26.49. This was a great $1,000 play for me today, and it looks like $26.49 is a great price target for this loved stock! Don't trade it when there's no volume. Follow the volume moves on this one!

    Those are my trades for this coming week and next week among a few others. Remember most of my trades are 1000 shares per transaction, which is roughly $18,000 to $20,000 per trade.

    Tags: DELL, JCP, PPSI, SIRI, YELP
    Apr 10 8:28 PM | Link | 2 Comments
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