TradeR:R

Saturday, September 30, 2006

followup on last post re: QQQQ

As you can see from the chart below... it's good to get confirmation on what you see before believing it... and in this case confirmation has not happened. a new support may form and then retest or break the high... or not.

Click on the image to enlarge:

Friday, September 29, 2006

QQQQ Ascending Triangle

The Nasdaq is really choppy again today.

Here's an interesting view of the QQQQ from the 30 min chart:

(Click on image to enlarge)



Happy trading!

Thursday, September 28, 2006

9/28/06 wrap up and bias for tomorrow.

I managed 3 trades today, and managed to make money in the process. 2 were losers, but both were small losses (-0.6R and -0.91R). My one winner was +1.62R. I came out ahead... yet another day of trading that rewarded risk management and money management via position sizing.

Here are the story telling charts:

I was short on this one (click on the chart to enlarge):



I was short on this one too (click on the chart to enlarge):



The other losing trade was a short on QQQQ in the afternoon... based on 5 min stochastics and the candle formations on the 30 minute chart. I thought there was a good possibility price would reverse but it didn't.

Bias for 9/29/06...
I can't get a clear read using my usual indicators but based on the charts I'm looking for more consolidation or down drifting... but as the saying goes:

"The market can stay irrational and exuberant longer than you can stay solvent." In other words... despite my bias or preference - THE MARKET IS ALWAYS RIGHT.

Do not trade based on information from this website... do your own research. However, if you have comments, suggestions, jokes, or a blog you'd like me to check out then let me know!

What I learned about trade management today

I had a good trading day today. Yes, a bit of money was made, but more importantly I've experienced a shift in thinking about makes any given trade a success. More specifically I'm deepening my understandinng of the camp that believes that consistantly managing trades by one's system is more important than making a profit on any given trade. In fact thinking about the profit or loss of any given trade while I'm still in the trade is detrimental to my success.

So... when is it helpful to think about the profit/loss of a trade? Before and after each trade - but not during. Today I took the simple step of deleting the "open positions" display box from my trading screen. How does this help? It helps me to concentrate more fully on the chart and managing the trade by the chart... not the profit or loss that's occurred.

If I've done my stop determination and risk/reward calculations before I enter the trade then I've already "rehearsed" and internalized the worse case scenario which is my stop loss (always 1R). Ok, now I'm free to really concentrate on the important thing - which is managing the trade once I'm in the position.

Now when I enter a trade all I have to do is watch the price and chart action to determine which aspect of my trading system is currently in play. When the position is closed... then I look at the profit/loss.

Here is an excellent posting on this subject from a different angle: Trading to win and trading not to lose - by Brett Steenbarger.

And here's another link talking about the same thing: Avoid Tangifying Your Positions.

Those of you who read Trader Mike's Blog (I do) have probably already read these articles... but I'm posting em here too because I think they're important.

Wednesday, September 27, 2006

Strategy Lab - Ko

I've been following the stock trading/investing contest on MSN for a couple years now. I gotta say I love it that the current leader of the contest (with a 48% gain thus far) is not your typical fundamental investor that is usually found in this contest. He uses technical analysis and describes his styls as

"straight arbitrage and momentum-type plays based on various types of trading scenarios. I watch for general market sentiment and sector-momentum indicators."

Here's the quote that sums it all up:

"The trick is to identify which stocks have the most potential for the easiest gain with the lowest risk."

Here's a link to the contest: Strategy Lab

Bias for 9/28/06

I'm looking at a down day for the QQQQ tomorrow... that's my bias and I'm sticking with it for the day.

Wrap up for 9/27/06

Blah blah blah.

I executed one trade today (a short on the QQQQ in the morning)... lost 1R (R is usually 1% of my capital)... and decided that I've made enough crappy calls recently and the best thing to do would be to sit on my hands and watch the market roll around like a pig in choppy slop.

Most of the trades I've done with real money are not dummy trades so I thought this would be a good time to try a few virtual dummy trades and see if it's a good fit for my trading arsenal. My results were:

4 triggered dummy trades
2 winners (1.21R $544 and 2.27R $1075)
2 losers (-1.07R -$480 and -1.08R -$490)
total winnings $1619
total losses $970
net winnings $649

Here are the charts of the trades:
(Click on the charts to enlarge them)




Tuesday, September 26, 2006

9/26/06 Wrap up... bias for the morrow

The press is raving about the continuation of the rally today... and it was a nice one... but I gotta say I'm not impressed enough to be overly bullish tomorrow. This market may have some steam left in it, so I wouldn't go rushing into a bunch of short positions, but I don't have a strong indication one way or the other going into tomorow's open.

The QQQQ has been in the oversold territory for almost 2 weeks on the daily chart according to several technical indicators, and now the weekly charts are in that range too. Weekly charts are also bumping into a resistance range from a consolidation back in February and March.

In short we're due for a pullback this week or next at the latest. Looking at the weekly chart of the QQQQ one can see that the market has been traveling in on a nice steep but tight trajectory since the 4th week of July. That line has to zag sometime.

9/26/06 Wrap up... bias for the morrow

The press is raving about the continuation of the rally today... and it was a nice one... but I gotta say I'm not impressed enough to be overly bullish tomorrow. This market may have some steam left in it, so I wouldn't go rushing into a bunch of short positions, but I don't have a strong indication one way or the other going into tomorow's open.

The QQQQ has been in the oversold territory for almost 2 weeks on the daily chart according to several technical indicators, and now the weekly charts are in that range too. Weekly charts are also bumping into a resistance range from a consolidation back in February and March.

In short we're due for a pullback this week or next at the latest. Looking at the weekly chart of the QQQQ one can see that the market has been traveling in on a nice steep but tight trajectory since the 4th week of July. That line has to zag sometime.

Monday, September 25, 2006

9/25/06 Wrap up

The market blew out the downside run first thing in the morning so it could then get back to business as a bull rally... and what a rally it was.

From the posts I see on other bloggers sites, I see that traders were in line and ready when the trades started materializing. Take a look at what TraderX did today... Classic Dummy Trades.

What's gonna happen 9/26/06? I don't know, but my indicators are looking for an up day... so that's my initial trading bias for the day... and as today showed by example... it's good to have an initial bias, but important to be able to perceive the change in market sentiment during intraday trading... and trade accordingly.

P.S. This is a blog. I'm not a financial advisor. Don't enter/exit trades based on what you read here. Do your own research.

Mid Day report 9/25/06

What whiplash this morning's chart brought:



Falling gas and oil prices... elections nearing... the market is up on any bit of good news these days.

The morning free fall lasted until about 10:15am EST... at which time the market had gone down enough to justify my indicators having a down bias for today... but at which point the market was over sold and falling gas and oil prices was good news enough to spark a nice rally. Typical of the market's behavior lately... rally on any bit of good news... and there really isn't much bad news to argue with the market's direction any way.

Will the rally hold? Will we flat line the day? We'll see.

The markets are definately not boring today.

Sunday, September 24, 2006

Trading related links I've been enjoying lately

Everyone should know what they're core trading philosaphy is... here's a great example of one:Trade The Market Core Trading Principles

Dummy Trading is really getting popular... starting with the chairman's famous tutorial: Trading for Dummies tutorial I reccommend you bookmark this tutorial.

Ugly chart is now posting a Dummy a Day.

If you need help finding these kinds of trade set ups... check out what TraderX has to say about it: Finding gap openings

Have a great day!

Thoughts and bias before the 9/25/06 trading week.

Last week was a tough trading week for me in terms of winning less than losing... BUT it was also a real testament to my use of risk management techniques in that I did not acually lose all that much, and I'm still profitable over all for since the time I started this blog. So I've lived to trade another day.

So where is the QQQQ/$NDX heading tomorrow? My indicators say down (as in opening price > closing price) for the day... is this a long term trend? I don't think so. We've got a ways to go before we break the current up trend.

Wednesday, September 20, 2006

Wrap up for 9/20/06

Today was my day for the market to remind me of a few fundamental trading truths:
1) Betting on the trend is safer than betting against it.
2) Trading on FOMC day is difficult at best and hazarous at worst.
3) The market doesn't care whether or not it touches my systems price target before it reverses. Thus it's a good idea to tighten stops or exit as the indicators and market factors start to converge against my position.

As noted in a post from earlier today, I closed out my QQQQ short position with a -0.096R loss... after it had posted gains of up to +3R yesterday before close. That's what I call 'paying tuition.'

Where to focus your thoughts when trading.

Here's a link to a Van K Tharp posting regarding where one's attention should be focused when trading... not on the profits or the losses... on the solution.

This is an item I am working on mastering in my trading.

Reply to Damien's comment on Trailing Stops and R

Thanks for the comment.

Certainly your advice to tighten stops on perceived risk would have helped me on my last QQQQ short position. In fact both of the factors you mentioned (along with the impending FOMC announcement today and the sky high Call/Put ratio at close) weighed heavy on my mind at close yesterday (9/19/06) when my position was between 1-2R in the black at the end of day... and then the market gap up on the opening today and I ended up closing my position at a -0.096R loss. That's the kind of trade that certainly makes me look at my exit strategy execution with an eye for improvement. Had I followed my own advice to tighten stops when +2R was reached I'd have a tidy profit today.

My idea behind tightening stops at +2R was to eliminate trade exits like the one I just experienced. I'd rather have a +2R gain than a loss any day... but I do agree with you in that the best way to tighten (or not) stops once a position is profitable is to base the decision on perceived risk... which is ultimately what I failed to do in this most recent QQQQ trade.

The other idea I'm trying to implement by tightening stops at +2R is to make sure than my average gain is >= +2R. I've had too many trades swing into a nice +2R or greater profit only to swing back and I end up getting less than +2R return... I want to eliminate that habit.

Consider this scenario:
10 trades
10.00 = starting capital to trade with
5 trades win at 2R
5 trades lose at 1R
R = 1%
Each entry = 1 (so each loss =.1, each gain =.2)
5 wins = gain of .2x5=1
5 losses = loss of -.5
Net Gain = .5
Total capital at the end of 10 trades = 10.50

1. I know from my trade history statistics that most of the trades I enter have an average profit target of 4R.

2. I know from my trade history statistics that price hits my profit target just over 50% of the time.

3. I know from my trade history statistics that about 70% of the trades that don’t hit the profit target do at least touch the 2R profit level.

It is based on the above scenario and 3 facts about my trade history that have prompted me to think of ways to improve my exit strategy, especially when it comes to factoid # 3.

Tuesday, September 19, 2006

Trade plan for 9/20/06 QQQQ

This plan is regarding the open Short position I have in QQQQ - entered on 9/18/06 (see trade post from that date for the entry details.)

If the open is about the same as the 9/19/06 close then I'll take my chances with letting the stop slip a bit. I expect it would be reasonable to expect price to test support of my short position between 39.95 and 40.10. Anything above 40.10 and I'm exiting the trade. I would be disapointed to be stopped out at that point because I could have captured another $1000 in profit earlier in the trade... on the flip side, If my bias is correct then my target price will bring more than twice the profit. Either way it's a profitable position.

If the open gaps down then I'll get more aggressive about tightening up the stop and not complain if I get stopped out before my price target is hit (IF it does get hit).

If the open gaps up... I'm wrong at 40.10 or greater... so that is the early exit zone.

QQQQ/$NDX Bias for 9/20/06

Down... yet again... but with caveats...

Caveats:
1) FOMC announcement at 2:15pm.
2) The overall daily trend is still up... this is likely a mere consolidation movement.
3) The CPC ratio is through the roof at market close today... and extreme readings can be bullish.



None the less, my bias indicators are pointing down for the morrow.

So... be careful... Do your own research... Don't trade based soley on what my humble opinion is.

Market wrap up for 9/19/06

It sure is fun to watch the market move in the direction of my trade. I did have a few moments of hesitation as to whether or not I should exit my short of the QQQQ today... I decided to stick the day out with my trailing stop system outlined in yesterday's post.

However, I'm nervous about price closing so close to my stop (only 0.09 ticks below my stop)... If price opens anywhere near today's close, there is a good chance I'll get taken out in the morning volatility. Being stopped out there wouldn't be all bad. My trade would end up with a profit of about 1.6R (a gain of about 0.85%), but my goal is to end trades when profit >= 2R. Today price touched point off on points where my profit would have = 3R, but I stuck to my guns because I want to see how well this trailing stop system works. Tough call... stick with a mechanical trailing stop that's not based on the chart anymore (it kind of was when it started)... or toy with it to match what I see as the logical support/resistance points on the intraday chart? I'm going to have to think about this one and study the charts a bit more before I decide on a plan of action. I will post on this again later today when I have a plan.

Monday, September 18, 2006

Integrating trailing stops and R

I've been experimenting with several exit strategies... I've read everything I can about them from the links of various blogs... Trader Mike especially.

Here's my latest take on it for my system:

My goal is to create a system that:
1) Never loses more than 1R (unless of course the market gaps against you or you are unable to get the order filled).
2) Gains are greater than or equal to 2R on average.
3) Allows enough price swing action to not stop out pre-maturely due to price volatility.

Here is the system:
When entering a trade set initial stop loss to 1R (I call this point -1R).

When price reaches a profit level of +1R then set a trailing stop equal to the number of ticks between the +1R profit level and the -1R Initial Stop loss. I often add .01 cent to this number if it will help get the stop over a key resistance level that might get hit during an intraday price swing.

My experience thus far has been that this is an effective mechanism for my swing trade stops (not so good for some of my intra day trades though). It allows enough intraday price action that I only get stopped out if I'm really wrong... and since it's a trailing stop I often get stopped out at a point better than -1R (or even a small profit)... thus it should help lower my average system loss to less than 1R.

Once price reaches into the +2R profit or better territory, then I tighten up the trailing stop based on the intra day chart support and resistance. The idea at this point in the trade is that I don't mind being stopped out on intra day volatility if it's at +2R or better.

Let me know if you have any questions.

Bias for 9/19/06 $NDQ/QQQQ

Down.

I see a few reasons to be nervous about this position... starting with the fact that there is an announcement from the Fed on Wedensday. I hope to be out of the short QQQQ trade I entered today by then. Also more volume moved up than down today in the NASDAQ despite the fact that more stocks moved down than up. My screens are pulling up more long candidates than short. However my main bias indicators are bearish for the short term... and I do mean short term... a few days at most is my guess.

Don't trade based soley on what you read here. Do your own research. Let me know if you have any insights you'd like to share.

9/18/06 Swing Trade

As posted in the trading plan: I looked for an opportunity to enter a short position on the QQQQ this morning. I resisted the urge to enter at market open... and waited until after 10am to pull the trigger. I was going to wait until after 10:15 am but the 15 minute chart was looking good and price had moved up enough that my risk management system would allow a stop at 4 cents above the previous daily high intra day high - and if that happened then my analysis would be wrong and I'd be glad to be stopped out at 1R. The advantage of entering in this mannor is that I worry less about intra day price swings stopping me out of a position even though I may be right about the swing trade direction.

Trade data:
QQQQ
Entry Time: 10:09:49
Trade Type: Short
Initial Stop Loss: 40.49
Price Target: 39.32
Risk (R) = 1% of total available trading capital.
Risk:reward = 1 : 4.57


I'll post the results when the trade closes.

Sunday, September 17, 2006

9/18/06 trading plan

I'm going to be looking for a nice entry point for a short of the QQQQ tomorrow (9/18/06). If I can get in and the high of last week holds - then my profit target is 39.32. I'm not going to enter at market open. I'm going to wait until the opening volatility has calmed a bit. Probably around the 10:15 time period is when I'll get serious about finding an entry opportunity. If I don't like what I see then I won't get in.

Friday, September 15, 2006

Wrap up for 9/15/06 and bias for 9/18/06.

Well I pretty much got my behind whooped at the opening bell today... as the opening bell opened higher than my stop loss for my swing trade from yesterday. So I took a 1.85R loss (0.92%). Never again will I enter a swing trade during the later half of an options expiration week... In fact I just added this rule to my trading rules.

I spent the rest of the day executing quick trades for small profits. I've been able to eek out a profit today and yesterday using quick SMA + support/resistance reads... but after reviewing my stats and trade journal I see that I would be better served to exit even faster. I keep getting a few ticks up into profit and then lose 1/2 of the profit because I'm waiting for just one more bump up.

The trades that really get under my skin are those that are profitable and then quickly evaporate into a loss because I'm waiting for that last bump up. The waiting is not generally suited for this style of trading... it's been difficult for me to internalize this because I find the opposite to be true in my swing trading.

Many times I've decided to exit a swing trade before my target is reached so I can lock in the profits... only to watch price shoot right to or past my target. So... recently I've employed a system of using a very loose trailing stop based on the chart. This has worked well for me in the times that it has been triggered - price did not swing back and hit my target afterwords.

OK my bias for Monday QQQQ is down. This is the 3rd day in a row I've been saying down and obviously I've been wrong... but like I always say... it's just a bias... it's not something to blindly trade on.

Thursday, September 14, 2006

Wrap up for 9/14/06 and Bias for 9/15/06

My bias for today (see yesterday's post) was wrong in a purist sense, but it did point right the way for trading today non the less. The Nasdaq 100 topped out with a new high but did so on declining volume and it closed considerably lower than the high. The candlestick formation is almost a shooting star. I'm sure all kinds of oscillator type indicators are showing a negative divergence with the daily range of price.

I scalped a few small trades in the morning:
4 profitable - 3 losses = small but positive gain of $245. None of the losses were more than 1R. The wins ranged from 1R to 2R.

Finally this afternoon I got in short on the QQQQ at a point I feel comfortable holding for a swing trade.
Entry Time 2:26:23
Entry Price 40.03
Position = Short
Target = 39.09
Stop Loss = 40.23
Risk:Reward = 4.7 : 1

I'll post the results of this trade when the position is exited.

So if it's not obvious by now... my bias for tomorrow is down... however, my indicators aren't pulling for an open > closing any more than they are pulling for open < closing... just down in general. So I'll make no predictions on that front for tomorrow.

Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

Wednesday, September 13, 2006

Wrap up for 9/13/06 and Bias for 9/14/06

Charles E Kirk is taking tomorrow off from trading and after looking at my indicators I'm starting to believe that's a good idea for me too. Today was a volatile day in my trading universe... and I'm sorry to say I did a poor job of sticking with my guns and ended up making measely profits on a few morning trades (PAYX, CTSH) and then when I realized I had exited hastily I made the classic mistake of executing a couple "keeping up with the Joneses" and "Grudge" trades.... and so ended the day with a loss.

For those of you who are wondering what I'm talking about:
"Keeping up with the Joneses" - trying to hop on the momentum train after it's taken off, usually resulting in an entry near the end of the run.

"Grudge" - missing the signal for a nice big move and trying to buy in on a reaction.

The only real difference between the two is your emotional state... Joneses is almost panic, and Grudge is pissed off. Neither of those emotions is helpful to trading in my experience.

I'm still up for the week, but I don't like the looks of tomorrow.

.... and so without further delay... Here's the Bias for QQQQ/$NDX 9/14/06:

Neutral or Down... My indicators are more bearish than bullish but they are not triggering a short. If I had to put money down on it right now (9/13/06 3:39pm PST) I'd say QQQQ open will be higher than close regardless of intraday price fluctuation. But again my indicators are not all the way in the signal zone so I'm not going to blindly follow that bias... and neither should you. Do your own research and risk calcuations.

Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

Tuesday, September 12, 2006

My stats as of today

%Win 50.5
%Lose 49.5
(note: trades that are break even are not counted toward win or lose)

Edge Expectancy (of all my trading regardless of set up) 0.21

Expected Return 54.25

I'll try and post these numbers every month so we can see if there is any progression.

Bias and stock watch list for 9/13/06

Bias for 9/13/06 is for a long day on the QQQQ. Price will do what it does intraday but if I had to put my money on it now I'd say close will be higher than open. If I'm wrong, well then I'm glad that I don't trade blindly on my bias indicators... and neither should you.

Stocks to watch on 9/13/06:

PAYX, APOL, BRKS, INFY, LCAV, LEAP, NETL, NVDA, RTEC, SMTC, SSCC, SBUX, UCBH, VSEA

Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

About my trading style

My universe is limited to the NASDAQ 100.

I trade several different day and swing set ups. All technical.

I look for 1:3 Risk:Reward opportunities or better, but will trade as low as 1:2. For useful information on Risk:Reward go to Tradermike.net

I enter each day with a long/short bias for the NASDAQ and NASDAQ 100. I use the bias as a starting point when looking for trading opportunities (i.e. if my market bias is long I look for long opportunities)... however I keep in mind that although a day may close as a long day (open < close) the intra-day range often runs contrary to the bias for a good portion of the day... and sometimes my bias is simply wrong.

I have a written set of rules that govern my trades. They are applicable to all my trading set ups and time horizons.

I use statistics to analyze my trading style, and use this information to make adjustments to my rules and/or trade set ups. The aim is to always learn and improve.

I enjoy trading.