Thursday, October 26, 2006

My best trade of the last 3 weeks.

Ok... I definately fall into the camp that feels we have a lot to learn from looking at failed trades, but every now and then it's nice to have a look at the ones that go perfectly too.

I wish every trade looked like this one:
(click on the image to enlarge)

Wednesday, October 25, 2006

Not gone... just taking a break

In addition to this being an FOMC announcement week... I just needed a break... so I'm taking it.

I'll be back next week.


Thursday, October 19, 2006

10-19-06 wrap up

I've narrowed my daily watchlist down to only include stocks with volume of at least 1,000,000 shares per day, and a current volume ratio of 2/1. I did this because while I was finding some good set ups that looked to have a reasonable risk/reward ratio I was having too much trouble getting good order fills on more thinly traded stocks. The net effect of bad order fullfillment is usually a badly skewed risk/reward ratio, and I found myself left with the options of either keeping my original stop to see if price would follow the chart trend (but if I was wrong I'd end up losing more than -1R), or cutting my position to bring my R:R into balance (but paying more commissions in the process).

Blah... trading is hard enough without having to face that choice several times in a day.

I'll leave the thinly traded stocks in my screens for longer term positions, but no longer for my day trades.

I had a decent trading day despite all the pre-options expiration choppiness.

Wednesday, October 18, 2006

10-18-06 wrap up

not much to wrap up for me today. I was in the midst of managing my first trade when my wife came in the office handed me our 8 month old son and announced that she's not feeling well - so I had Daddy Duty today... impossible to give trades the necessary attention with a baby on your lap.

Oh yeah, I lost on the one trade I made. -1R.

Tuesday, October 17, 2006

Well aint that interesting?

Voting with your wallet

Short term technical trader STILL beating the pants off the professionals in stock contest. Nah... technical analysis doesn't help at all ;-)

Dummy Wisdom... Maybe the problem is that most people are too smart to be good dummies. Thanks to Dummyspots for this list.

Rules rules rules... so many rules... yet... they are useful. Thanks to TraderGav for this list.

Oh my god... The Scorpions are going soft rock.

10-17-06 wrap up

An interesting thing happened with my trading statistics today... I finished the day with a negative R return... BUT I made money on the sum of today's trades. Just goes to show you that while R and Expectancy are useful statistics, they do not tell the whole story.

How did this happen? Simple... I had one trade where my risk capital (R) was much greater than the other trades of the day - AND on this trade I had a paltry return of 0.45R.... however the amount of dollars returned on this trade was much greater than any other trade I made today because I risked more dollars than usual.

This is how I end up getting $94 on a 0.36R return on one trade and $544 on a 0.45R return on another trade.

So is R really useful? Yes, because R tells us how much I win versus how much I'm willing to lose on any given trade... and over time (the total of all my trades up to this date) my average R had better be larger than 1. Why? Because if my total R doesn't stay above 1 then that means that I am more suseptible to losing my total winnings when a losing streak comes along.

For example if I have 10 trades that all are profitable but less than 1R return on average (say 0.5R), then all it takes is 5 losing trades of 1R to lose all my winnings.

Ok, with that thought... have a happy day.

Monday, October 16, 2006

One trade and out.

I entered one trade this morning... which stalled out and reversed to my stop. Since I had no profit as the afternoon arrived I'm going to obey my new risk management rule and not trade this afternoon.

I'm seeing another advantage of this rule... If I'm going to have a down day, I'd rather it be 1R down than 3R down... and today I'm only 1R down.

As I read on one of the blogs the other day (sorry I don't remember which one... I read several every day - Probably Trader X, Move The Markets, Ugly, Mike or Maoxian) I didn't see any good set ups this morning so I

A) enjoyed the day off... took my wife out to lunch.
B) forced a trade to happen and lost money.
C) took advantage of this opportunity to try out some new trade ideas in my virtual account.

If anyone knows where I read this let me know and I'll put a link in for the real quote.

Sunday, October 15, 2006

The ever evolving list of risk management rules

I spent some time tonight analyzing my trades by time of day. What I've discovered is I'd be more profitable if I didn't trade in the afternoon... but I've had a few great afternoon trades so I don't want to knock out all afternoon trading. My compromise is to only trade afternoons if I've had a profitable morning.

...and since I've never published this list... now's as good of time as any.

These are rules that guide my risk management

1. If no profit from morning trades - then no trading in the afternoon
2. If no set ups by 12:30pm - then no trading in the afternoon.
3. know what my target price is before entering trade.
4. Know what my maximum acceptable loss is before entering a trade. Base this value on risk:reward of the trade at hand.
5. Only enter a trade when reward:risk is => 2:1
6. 1R is never more than 1% of my total available trading capital. If it is then decrease position size until 1R is less than or equal to 1% of my total account.
7. Do not enter a trade on the 3rd bar of a break out.
8. Scrap entry if the bar immediately following the signal bar does not trigger an entry.
9. Do not trade before 10:15 EST.
10. Do not enter a swing trade Wedensday, Thursday , or Friday of options experation week.
11. Do not trade on FOMC announcement days. Close all open positions by close of day before FOMC announcement.
12. If a trade could be considered a wash if a loss occurred… trade only if maximum data points are in favor of the trade.
13. If a loss is taken on a stock - do not trade that same stock again that day.
14. 1st stop = 1R. This is my stop loss (Never to exceed 1% of total available trading capital).
15. If I enter late for any reason (i.e. can't get filled at my ideal price) - then I should set an aggressive stop when 1st resistance is met… don't let winners turn into losers.
16. If stopped out of a position w/a loss then pull analysis level all the way up to the weekly level and work down through smaller time increments (daily, hourly, etc…) and have a good feel for what the market may be attempting before entering a new position. Do not just re-enter the same position at the same level soley on the hope that the entry timing was wrong... have a workable bias for minute, daily, weekly.
17. Don't hold over weekend.
18. If the stop slips on more than one trade in a day, STOP TRADING for the day.
19. If there are 2 losing trades in a day with one of those losses due to a missed stop and I'm down for the day STOP TRADING for the day.
20. If there are 3 losing trades in a day. - STOP TRADING for the day.
21. If I'm down $1000 or more for the day STOP TRADING for the day.

Friday, October 13, 2006

10-13-06 Wrap up

My trade stats posted on Stocktickr don't reflect the actual results of my trading because one of the trades I made this week was on a stock they didn't have in their data base (INAP)... and unfortunately that was my worst trade of the week... so instead of a small profit of $242 which is shown by my stocktickr record I'm actually down for the week about $200. The good news is I'm up for the month about $1500. Not big time winnings, but I'll take it over big time loses.

Here is a link to my Month to date trading record: TradeR:R trading record

Today was no fun... I have yet to break my habit of losing on Thursday and Friday. I'll have to spend some time this weekend looking closer at my trades from those days.

Thursday, October 12, 2006

My best teacher

I've been making a habit of looking closely at all my losing trades, and I'm convinced that I've learned much more from that than from looking at the winners.

Looking at the charts from today's losers I see signs of an over confidant trader. When the trades roll easy for a few days it's too easy to get bored and over confidant, and if you have a day with no ups (at least at the stocks on my watchlist) for over 1/2 the trading day - it get's too easy to start trying to force trades. The catch is... I can't force anything to happen in the market.

I've spent all this time learning how to recognize and act on good set ups - and how to manage my losses, and how to exit my winners... only to throw it away when I get bored or over confidant.

Best to remain humble and bored until a good set up comes along.

10-12-06 wrap up

Today's trade stats:
-2.32R return
Win rate = 40%
Win/loss = 2/6
Expectancy = -0.46

Not a good trade day for me. I'm most disapointed with my breaking of 2 of my system rules:

1) 3 losing trades and I'm done for the day - I went for one more trade after losing 3 over the course of the day.
2) Never trade off of one time frame only - I make my best trades when I'm taking a set up from one time frame and finding an entry signal on a smaller time frame (for example, see a set up on a 30 minute chart and find the entry on the 15 minute chart).

Thursday is living up to it's reputation of the last 3 weeks for me as being a difficult day to trade. I hope tomorrow doesn't keep the trend up as being the worst trade day of the week for me.

Wednesday, October 11, 2006

wrap up 10-11-06

Today's trade stats:
2.67R return
Win% 66.7%
Total trades today 3
Expectancy 0.89

I missed most of the day due to sleeping in and meetings. Looking at the nice rally up this morning (after a daunting gap down open) I wish I had been around to trade this morning as well.

My first trade was ill timed as I entered in the 1/2 hour before the release of FOMC meeting notes... it was a long on ADTN which I quickly exited as I watched the QQQQ crash down through key support, so I ended up with a -0.88R loss on that one.

My second trade was my best trade of the day. I waited for a pullback on the QQQQ and shorted at 41.61 with my stop at 41.71. I put almost all my trading capital into this position since I felt the odds were high (given the sudden break and high volume) that price would continue down. I monitered my position on the 1 min chart and finally exited at 41.37 for a gain of 2.4R or 24 cents/share.

My 3rd trade was again on the QQQQ. I went long at 41.45 and placed my stop at 41.38. I exited when price stalled out at 41.53 for a gain of 1.15R or 8 cents a share.

I hope your trading day was a profitable one.

Tuesday, October 10, 2006

wrap up for 10-10-06

My stats for today:
1.33R return
Win rate 100% 3/3
Expectancy 0.44

A modest yet profitable day. I had a couple mandatory meetings during trading hours so I was forced to cut my most profitable trade prematurely and returned for the final 1/2 hour of trading only to manage a quick 2 tick move on QQQQ. I coulda/woulda/shoulda bought earlier and made more like a 10 tick move but I was overly cautious since I had to catch up on the intra day market action.

Here's the chart for my best trade of the day (the one that I cut short prematurely).
Click on the image to enlarge:

Happy trading and remember to avoid the abyss

Monday, October 09, 2006

Ugly puts it all in perspective

This is hilarious: The Ugly Show

Charts charts charts

Here's an update from last week's chart analysis of the QQQQ:

No real change on the monthly view:
(click on image to enlarge)

No real change on the weekly view:
(Click on image to enlarge)

The news on the daily chart is that last week ended on a narrow range inside bar with the lowest volume of the week. Today price broke through the top of Friday's trading range and today's volume was even lower, but it was a semi-holiday. Although stochastics are in the over bought territory and the market has consolidated over the last 3 trading days I don't see a top yet. Maybe tomorrow, maybe next week, maybe next month... not today though.
(Click on image to enlarge)

The 60 minute chart is interesting... It just looks so ready for a big volume move. Up or down. The other thing about the 60min chart is the decreasing volume spikes since Oct 4th.
(Click on image to enlarge)

What's the market going to do? Break a lot of hearts whichever way it goes. It seems many are bullish and many are bearish... and many are moaning about missing the rally.

Do your own research... don't buy or sell based on what you read here. I post so I can have a public record of my thoughts and trade habits... keeps me honest... but I'm not posting to act as a financial/investment advisor.

10-9-06 my trading statistics

I'm digging This very reasonably priced service makes the chore of keeping track of my trade statistics much easier in several ways... ok I'm not trying to be a commercial... but I used to keep track of these things manually on a spread sheet and now I simply log on and the information is there at the end of each trade.

For example:
My performance for the month of October including today:
10.11R return
Win% of trades = 60.87%
Expectancy = 0.44
Profit = $1,773.17 (yes that includes taking broker fees out, but not taxes)
Trades = 23
Shares traded = 45,500

Today's performance:
0.64R return
Win% of trades = 33.3%
Winners = 1/3 (proof that proper money management via entry selection, position sizing, and hard stops can help you make money even if you lose 2/3 trades).
Expectancy = 0.21

Based on a view of my trading statistics by day of the week I know that Monday's are typically not my best trading days... Wedensdays are my best... and Friday's are my worst.

Thursday, October 05, 2006

wrap up 10/5/06

In the zone yesterday... not so much today.

I went 3/8 in trades today... for a total of -3.06R today. Not too bad considering today was an extremly difficult day to trade QQQQ. I'm still up 10.89R for the week with a profit of $1,825.04 on 17 trades.

The QQQQ was totally range bound for the day. Looking back on the charts there are a few things that pop out at me:

1) QQQQ is making intraday highs on lower and lower volume with each move up. That's not what bulls want to see. (see the chart).
2) There was really only 1 good tradeable long today on the intraday QQQQ, and it required use of shorter than 30 minute time frame on the chart. (see the chart).

See you tomorrow!

Wednesday, October 04, 2006

Links to ponder

Proprietary trading firms feeling the heat from SEC and NASD.

Will drinking help my career as a day trader?

Bernanke: housing is showing a ``substantial correction'' and inflation will recede slowly over time.

Wrap up for 10-4-06

A good day for trading... and from what I gather from other blogs I read... a good day was had by most.

I was 6 for 6 today in the green with a return of 8.76R. If only every day could be this good.

I stuck with my favorite workhorse (QQQQ) for all my trades today, and found myself trading off of shorter time frames, even the 1 min chart. When I'm in the zone trading such small time frames is not stressful, and today I was in the zone. I didn't bother keeping track of profits during the trades, I focused on making each trade the most effictively managed trade that I could. I did exit pre-maturely on one trade and almost late on another (I came out ahead anyway), but I'd rather exit early with money than exit late with a loss.

Tuesday, October 03, 2006

10/3/06 wrap up

Maybe today's blog should be "warp up" rather than "wrap up".... that's what the QQQQ/$NDX did on the intraday charts... only to stall out in the afternoon and finally break down after being range bound for about 2 hours.

Happily I caught both moves. 2 trades. 2 winners. If only everyday could be this good.

Click on the image to enlarge.

Sunday, October 01, 2006

QQQQ chart analysis

Here's my analysis of the QQQQ Daily chart:
(click on the chart to enlarge)

Here's my analysis of the QQQQ Weekly chart:
(Click on the chart to enlarge)

Here's my analysis of the QQQQ Monthly chart:
(click on the chart to enlarge)