I was just updating the stats column. I stopped entering them early this month and my previous goal had been 24.45% return after 16 weeks for the CTP plan. That was 1.5% weekly compounded monthly which doubles the capital about every year.
I am 13 days into the day trading plan, no real goal as I am testing right now, but I am at 21%...that's almost 6 times faster than my previous plan goal.
So, for arguments sake I ran a one year spreadsheet using 6% return per five trading day period, and running 40 weeks or 200 days. This is lower than my current by a fair margin as three weeks at the current rate would put me over 25%, so 18% for the same period. I did not compound the return but at the point where the portfolio increases by $5K I roll that back into a second lot for trading purposes...effectively doubling my dollar return at the same percentage return. With 12 weeks buffer, (I like that, 3 months potential holiday), I could add a few weeks if the returns are lower to get to the same point in a calender year.
By the end of the year I will be:
trading 6 lots
profiting $1800 per week
have a portfolio value of about $35,000
Have used little to no margin
I figure that if, (yes I do say if as it is possible for this to not work as planned), I get to the point of trading 6 lots a few things may have to happen.
I will need to...
1- switch to a more expensive stock to keep the lot sizes down for liquidity purposes
2- get more efficient at entry and exits to be able to move the larger trade sizes
3- have more than one stock to trade to take advantage of the lower beta periods of one stock
4- have 2 stocks trading simultaneously to boost my dollar returns and keep liquidity
(only one can trade at a time so a stock that is not in sync would be best)
Crap, if I use margin and I stopped increasing the trade size when it hit $60K (my $30K and $30K margin...keeping in mind that margin in my account is 3x, this is only 2x use) I would end up with $3000 per week and a portfolio balance of $85,500...based on 5% per week instead of 6%...A small fudge factor. That is $3000 per week.
So, dreaming big here for a moment...if I use these numbers and set an income replacement goal of $1000 per week before taxes and left everything else in play I could easily stop working after one year (the soonest I would) then I would be re-investing $2000 per week after the one year. That's living off of $40K and re-investing $80K...I'd balance those a bit depending on needs.
BAH! Got to keep thinking small here for now. No sense in getting grand ideas while I am still a fledging trader here as that is just begging for a huge ego bubble burst and setting me up to get emotional about the trades.
Back on track here, as I have started to track my returns based on a percentage of the daily beta captured I should be able to use this to calculate roughly what I might expect from any other stock. That makes a few assumptions about the stock being as predictable as what I am used to so there may be a paper trading trial time...or not....
JD.
Questrade, My direct access discount broker.
Thursday, August 28, 2008
Daily update.
I was not going to do anything today but I caved and opened my trading software at about 0945h to take a peak. Too bad I didn't follow it from the start. It followed yesterdays pattern, gap up, push up then a quick pullback from the peak in the very next minute and right down over the course of the morning.
I made some notes before doing anything and wrote "expect a short bias today and a possible late rally with the low around the PP". So why the heck did I place a long as the first trade? ...dumb dumb dumb. lost 29cents per share by the time I decided to bail, largest single trade loss since starting this. Forget about possibly having shorted it instead but had I just not traded it, accounting for commissions it was a $39 drawdown. I almost didn't place another trade.
7 minutes later I was into the shorts for a profitable day, too bad about that stinking first trade though, I didn't let it get to me and considered not counting it...but for the sake of accuracy I couldn't fudge it.
4 trades, finished at about 1140ish. $67 net profit, 1.34% return.
Slightly below my average daily net of $84.15 return of 1.68%
Return to date for 13 trading days = 21.88% or $1094.00
Interesting stat, long : short ratio is 1.31:1, the imbalance is due mainly to the general uptrend on the daily chart since the 11th.
Of my 8 losing trades the short losers vs long losers ratio is 1.7:1. I almost expected it to be closer to the long:short ratio.
I made some notes before doing anything and wrote "expect a short bias today and a possible late rally with the low around the PP". So why the heck did I place a long as the first trade? ...dumb dumb dumb. lost 29cents per share by the time I decided to bail, largest single trade loss since starting this. Forget about possibly having shorted it instead but had I just not traded it, accounting for commissions it was a $39 drawdown. I almost didn't place another trade.
7 minutes later I was into the shorts for a profitable day, too bad about that stinking first trade though, I didn't let it get to me and considered not counting it...but for the sake of accuracy I couldn't fudge it.
4 trades, finished at about 1140ish. $67 net profit, 1.34% return.
Slightly below my average daily net of $84.15 return of 1.68%
Return to date for 13 trading days = 21.88% or $1094.00
Interesting stat, long : short ratio is 1.31:1, the imbalance is due mainly to the general uptrend on the daily chart since the 11th.
Of my 8 losing trades the short losers vs long losers ratio is 1.7:1. I almost expected it to be closer to the long:short ratio.
Wednesday, August 27, 2008
Daily update
I tried a speculative day today, a few trades that I would not normally do, some that I would have just to mix things up a bit. I figured that I would need to add a few trades to my numbers today as I figured I would just have more entries due to the playful nature of the day. Had I been actively trading seriously I might have skipped today altogether as it felt like another flat day and many small trades didn't feel like fun...which was the drive for the changeup.
So, 6 trades altogether. Had I been on the ball I would have entered long in the 2-5 minute area as the price came off of the reaction low after the initial gap...I was too stuck on my 20 minute minimum...so I went with that. I missed a $1.24 move which I would have nabbed about 70 cents of...but no trade. Instead I rode the followup roller coaster. I had half expected the price to be trending up after the strong move but the volume petered off and I was not really thinking this through. Anywhere above $61 would have been good short entry points right up to 1023h and holding for a $30 maximum loss allowance would have kept me in if I was looking for intra-day trend trading...but I'm not.
Trades 1 through 3 were not too exciting, between all three I lost $30 net. I gave the price time to settle into a trend, entered one too soon, the other just wrong and the last made a bit of profit.
Interestingly I set a short limit order for $61 at 1035 when I saw that spike in price...missed it by 2 cents...should have just done a market order and I would have been in for $60.95. The volume dropped off in the next few minutes which was a good sign to short soon as the price wallowed about under the trendline. I ended up getting in short at $60.80, rode it down to just below the R1 and exited at $60.38 as it hovered below $60.40 on really low volume... unpredictable. It rallied briefly up to $60.47 (note that R1 is $60.46) so I jumped in as it started to head down at $60.38, my exit price last trade...almost a shame not to have held it through the rally but I am not interested in trying to squeeze out every drop, just taking profits as they present themselves. Even so I should trust the pivot points a bit more and given this a little more headroom as it did not cross the line enough to worry about....hindsight. I exited at $60.10 as the price came off the low of $59.92.
The last trade, #6, was about the same as I watched the price approach the R1 line again and slow down it's upward movement...I jumped in sooner than I might normally except I recalled the R1 acting as resistance once already today...in at $60.31 out at $60.08. Had I been planning to trade for the day I would have re-entered around $60.10 and rode it down for another 30 cents. The rest I think may be a wash but I will not even be looking at the afternoon activity until after hours anyway.
Turned out the afternoon wouldn't have been bad to trade and add to the profits. The blue line is the primary pivot point from yesterdays numbers, the red is the first resistance level R1. R2 is off the chart a bit and first support S1 is below the chart.
Red boxes are the loosing trades and the green are the winning trades.
So, 6 trades altogether. Had I been on the ball I would have entered long in the 2-5 minute area as the price came off of the reaction low after the initial gap...I was too stuck on my 20 minute minimum...so I went with that. I missed a $1.24 move which I would have nabbed about 70 cents of...but no trade. Instead I rode the followup roller coaster. I had half expected the price to be trending up after the strong move but the volume petered off and I was not really thinking this through. Anywhere above $61 would have been good short entry points right up to 1023h and holding for a $30 maximum loss allowance would have kept me in if I was looking for intra-day trend trading...but I'm not.
Trades 1 through 3 were not too exciting, between all three I lost $30 net. I gave the price time to settle into a trend, entered one too soon, the other just wrong and the last made a bit of profit.
Interestingly I set a short limit order for $61 at 1035 when I saw that spike in price...missed it by 2 cents...should have just done a market order and I would have been in for $60.95. The volume dropped off in the next few minutes which was a good sign to short soon as the price wallowed about under the trendline. I ended up getting in short at $60.80, rode it down to just below the R1 and exited at $60.38 as it hovered below $60.40 on really low volume... unpredictable. It rallied briefly up to $60.47 (note that R1 is $60.46) so I jumped in as it started to head down at $60.38, my exit price last trade...almost a shame not to have held it through the rally but I am not interested in trying to squeeze out every drop, just taking profits as they present themselves. Even so I should trust the pivot points a bit more and given this a little more headroom as it did not cross the line enough to worry about....hindsight. I exited at $60.10 as the price came off the low of $59.92.
The last trade, #6, was about the same as I watched the price approach the R1 line again and slow down it's upward movement...I jumped in sooner than I might normally except I recalled the R1 acting as resistance once already today...in at $60.31 out at $60.08. Had I been planning to trade for the day I would have re-entered around $60.10 and rode it down for another 30 cents. The rest I think may be a wash but I will not even be looking at the afternoon activity until after hours anyway.
Turned out the afternoon wouldn't have been bad to trade and add to the profits. The blue line is the primary pivot point from yesterdays numbers, the red is the first resistance level R1. R2 is off the chart a bit and first support S1 is below the chart.
Red boxes are the loosing trades and the green are the winning trades.
Notice how the price reaches the PP and pretty much bounces along for a bit...depending on the volume and activity there were four points of entry down there and if I had gotten in low enough any one of them could have held for a long trade but that middle one and the last one would have been the most likely attempts...say one 20 cent trade in the middle as the rally failed then a 45 cent trade as the last.
OK, net profit $33...a lot of work for $33 but the stocl only changed 4 cents over the day. A very emotionless day, which is the goal. I am finding that speaking my observations out loud while watching the trades helps to keep me detached and objective.
Net P/L = $33, 0.66% return
Total just crossed $1000 to $1027 which is a 20.54% return. This was my unspoken target to hit to see how many days it would take...12 trading days.
total swing or Beta = $1.70
Captured beta = 54.7%
I had figured that the price was going to stay within the PP and R1 based on the premarket bids, I wasn't too far off as the price remained around that area once it settled down.
JD
pivot points, support, resistance, lines in general...
I have a theory about the various methods of determining lines or zones of resistance and support. The latest that I am using are pivot points. These use a few simple formulae to determine where these lines may be over the course of the day. I understand that they have been used by traders for a long time to determine trading ranges expected over the trading day and have to do with "local" trading and public trading...I understand the idea but I cannot remember it well enough to relate.
I have been playing with lines for a few months now and have found an almost uncanny correlation between historical lines and fore casted price movements. I have also used recent opens, closes and highs and lows to create lines for the following days...they worked well also.
I do believe that no matter how anyone picks these lines, as long as they are based on some historically significant movements, they are a useful tool in trading. It is the consistent use of the same method for determining them in the first place combined with the consistent use as indicators and the familiarity of how the price moves relative to the lines chosen that makes them work. I think that one could draw equidistant lines on the price grid and have good luck as long as the spacing is of some significance.
I'll try to post a bit on pivot points another time as at least these seem to work and have an objective formula to find them...that makes them easier and less prone to erroneous judgment about line placement.
An observation. I was just looking at my 1 minute chart for the last 6 days for AEM and noted the pivot points from yesterday's activity and see that the have some very good correspondance with past action with respect to trading ranges, highs and lows that seem to see support or resistance with these lines.
JD.
I have been playing with lines for a few months now and have found an almost uncanny correlation between historical lines and fore casted price movements. I have also used recent opens, closes and highs and lows to create lines for the following days...they worked well also.
I do believe that no matter how anyone picks these lines, as long as they are based on some historically significant movements, they are a useful tool in trading. It is the consistent use of the same method for determining them in the first place combined with the consistent use as indicators and the familiarity of how the price moves relative to the lines chosen that makes them work. I think that one could draw equidistant lines on the price grid and have good luck as long as the spacing is of some significance.
I'll try to post a bit on pivot points another time as at least these seem to work and have an objective formula to find them...that makes them easier and less prone to erroneous judgment about line placement.
An observation. I was just looking at my 1 minute chart for the last 6 days for AEM and noted the pivot points from yesterday's activity and see that the have some very good correspondance with past action with respect to trading ranges, highs and lows that seem to see support or resistance with these lines.
JD.
Tuesday, August 26, 2008
New performance tracking setup
I just added a third spreadsheet page that allows me to track my results based on the beta of the day as a percentage of the beta captured in the trades. This lets me know how I am doing based on the price movement over the day. So far I am running between 23% and 61% captured. I think that will be more my guide for tweaking the plan rather than focusing on the money.
Hmmm....those percentages are also considering that I only trade for part of the morning and only up to four trades. Now the daily high and low may have many waves in there so I could have a percentage over 100% if I did more trades over the day. I think my target will be 100% but I may have to add an additional trade to get there....NAH, just work on getting better trades going. I really need larger intraday swings though as I seem to be decent on the individual moves, getting out near the peak (trough) but getting in a little late...although that has much to do with my win loss ratio of 28:5 (total losing trades add up $51)
JD.
Hmmm....those percentages are also considering that I only trade for part of the morning and only up to four trades. Now the daily high and low may have many waves in there so I could have a percentage over 100% if I did more trades over the day. I think my target will be 100% but I may have to add an additional trade to get there....NAH, just work on getting better trades going. I really need larger intraday swings though as I seem to be decent on the individual moves, getting out near the peak (trough) but getting in a little late...although that has much to do with my win loss ratio of 28:5 (total losing trades add up $51)
JD.
Monday, August 25, 2008
Rules: the 30 minute rule addendum
Opening Rule Change
My normal rule is to not trade until after the first 30 minutes to let the market settle out a bit. I have toyed with changing that rule if the opening price is very close to the closing price...as today's was. With a gap I need 20 minutes to get my two key moving averages caught up and an extra 10 to let the price settle into a trend or get in sync with the indices I am using for correlation. Without a gap the averages are already on the mark and the indication is that the price does not need a correction by the market makers, orders are flowing well and no automatic orders or programs have been triggered to throw the price into a huge unwarranted swing and this may just be a continuation of the previous day. I think that it would make a difference if the price opens so near a support/resistance area and it holds as opposed to perhaps halfway betwwen two lines.
My normal rule is to not trade until after the first 30 minutes to let the market settle out a bit. I have toyed with changing that rule if the opening price is very close to the closing price...as today's was. With a gap I need 20 minutes to get my two key moving averages caught up and an extra 10 to let the price settle into a trend or get in sync with the indices I am using for correlation. Without a gap the averages are already on the mark and the indication is that the price does not need a correction by the market makers, orders are flowing well and no automatic orders or programs have been triggered to throw the price into a huge unwarranted swing and this may just be a continuation of the previous day. I think that it would make a difference if the price opens so near a support/resistance area and it holds as opposed to perhaps halfway betwwen two lines.
Monday update, Agnico-Eagle Mines
This morning was pretty good, had to really work for it....had to trade right through to 1130h and four full trades.
Net $73
return 1.46%
I added a few calculations to my spreadsheet to give me some better performance indicators and they are, for the first 10 trading days for me (I ended up including last Friday even though I kind of have a no trading Friday rule), as follows:
Gross profit = $1243.00
Net profit = $953.00
Net return = 19.06%
Daily net profit average = $95.30
Daily return average = 1.9%
Trades total = 29
Average profit per trade = $32.86
Average return per trade = 0.66%
Average number of trades per day = 2.9
Totals for the first 10 trading days for me (missed one day in the first week...Friday)
I also added the S&P TSX Capped Gold index as a reference indicator. I was using the TSX but the AEM price follows the gold musch closer...so I will leave both up. Charts monitoring right now are the AEM 1 minute and 3 minute, TSX and Capped Gold 1 minutes. The level one and market depth for AEM. This is easy to do...I have room to add one more chart but I cannot add another quote box without making things too small so I will work that out once I get real comfortable with the one stock.
So the setups were decent but the movements were not large.
Pivot Points as follows:
R2=$60.95 R1= $59.74 PP= $58.68 S1=%7.47 S2=$56.41
The PP for the day was the first price to watch as the price opened at $59.02. The price dropped to a low of $58.70...almost exactly on cue for the PP then rallied right up to R1 and hovered for almost 10 minutes. I waited 28 minutes to trade as the R1 was broken and all my indicators looked good for a long position with a possible target of R2...about $1 away. It made it to $60.55 before the volume dropped off and my indicators weakened. I exited at $60.19 during the second minute of the dropping price. It rallied a bit after but only for a minute or so, nothing convincing.
Hindsight would have me follow my altered rule (see next post) and enter long as the price bounced off of the PP after seeing some indication of a continued rally, this in the first few minutes. All the indications were for this rally to run but I held fast, or pretty close, to my 30 minute rule. Otherwise I might have jumped in at one of the three long entry points at 6 mins, 9 mins or 18mins (my actual entry). The ideal were the first and last as they were the farthest from any line of resistance and on top of support while the second was at the midpoint...not as strong a trade.
Second trade I jumped the gun a bit as I did not wait for the price to convincingly cross below the R1 to short ($59.68) but it turned out OK as I rode through the rally (potential loss was never larger than $20) and made it to $58.94.
Trade three I misread as the price approached the PP again I went short as I should have waited it out a little longer for a higher probabilty long trade...lost a couple of dollars there...$27 net.
Trade four was a squeaker as I entered short at $59.40 at 1057h right after a brief consolidation with a slight downtrend, the highest trading afterward was $59.48 but the consolidation was not quite done. I kept plotting the downtrend line and seeing it continue so I stayed in...the longer a consolidation continues the less likely it will do what I might expect...or at least the odds approach 50% so as long as the price keeps doing what I expect...heading down, albeit slowly, I stayed firm. I exited after a nice pullback to a low of $59.04 at $59.13 for a net $17 gain, not much but it did eventually give me a profit move. This trade turned into a "get a good exit" trade rather than a real winner.
As I write this the price is sloshing about within a 50cent range on lowish volume so I don't expect any great things this afternoon.
Keeping in mind that this is as close to trading as I can get without actually hitting the buy/sell button and using the worst trade entry at the given spread when I decide to enter and exit the trade. I am looking forward to trading and posting these or similar figures for real next week. Today was a bit of a test to see if trading on the Pro vs Elite software package would make any appreciable difference...I didn't see any. The look was a bit different but the numbers are all mostly there, the execution for a single stock will be clean. When I step up to two or more I will need to upgrade...if I feel the need to trade simultaneous stocks...I don't know that I will need to though.
JD.
Net $73
return 1.46%
I added a few calculations to my spreadsheet to give me some better performance indicators and they are, for the first 10 trading days for me (I ended up including last Friday even though I kind of have a no trading Friday rule), as follows:
Gross profit = $1243.00
Net profit = $953.00
Net return = 19.06%
Daily net profit average = $95.30
Daily return average = 1.9%
Trades total = 29
Average profit per trade = $32.86
Average return per trade = 0.66%
Average number of trades per day = 2.9
Totals for the first 10 trading days for me (missed one day in the first week...Friday)
I also added the S&P TSX Capped Gold index as a reference indicator. I was using the TSX but the AEM price follows the gold musch closer...so I will leave both up. Charts monitoring right now are the AEM 1 minute and 3 minute, TSX and Capped Gold 1 minutes. The level one and market depth for AEM. This is easy to do...I have room to add one more chart but I cannot add another quote box without making things too small so I will work that out once I get real comfortable with the one stock.
So the setups were decent but the movements were not large.
Pivot Points as follows:
R2=$60.95 R1= $59.74 PP= $58.68 S1=%7.47 S2=$56.41
The PP for the day was the first price to watch as the price opened at $59.02. The price dropped to a low of $58.70...almost exactly on cue for the PP then rallied right up to R1 and hovered for almost 10 minutes. I waited 28 minutes to trade as the R1 was broken and all my indicators looked good for a long position with a possible target of R2...about $1 away. It made it to $60.55 before the volume dropped off and my indicators weakened. I exited at $60.19 during the second minute of the dropping price. It rallied a bit after but only for a minute or so, nothing convincing.
Hindsight would have me follow my altered rule (see next post) and enter long as the price bounced off of the PP after seeing some indication of a continued rally, this in the first few minutes. All the indications were for this rally to run but I held fast, or pretty close, to my 30 minute rule. Otherwise I might have jumped in at one of the three long entry points at 6 mins, 9 mins or 18mins (my actual entry). The ideal were the first and last as they were the farthest from any line of resistance and on top of support while the second was at the midpoint...not as strong a trade.
Second trade I jumped the gun a bit as I did not wait for the price to convincingly cross below the R1 to short ($59.68) but it turned out OK as I rode through the rally (potential loss was never larger than $20) and made it to $58.94.
Trade three I misread as the price approached the PP again I went short as I should have waited it out a little longer for a higher probabilty long trade...lost a couple of dollars there...$27 net.
Trade four was a squeaker as I entered short at $59.40 at 1057h right after a brief consolidation with a slight downtrend, the highest trading afterward was $59.48 but the consolidation was not quite done. I kept plotting the downtrend line and seeing it continue so I stayed in...the longer a consolidation continues the less likely it will do what I might expect...or at least the odds approach 50% so as long as the price keeps doing what I expect...heading down, albeit slowly, I stayed firm. I exited after a nice pullback to a low of $59.04 at $59.13 for a net $17 gain, not much but it did eventually give me a profit move. This trade turned into a "get a good exit" trade rather than a real winner.
As I write this the price is sloshing about within a 50cent range on lowish volume so I don't expect any great things this afternoon.
Keeping in mind that this is as close to trading as I can get without actually hitting the buy/sell button and using the worst trade entry at the given spread when I decide to enter and exit the trade. I am looking forward to trading and posting these or similar figures for real next week. Today was a bit of a test to see if trading on the Pro vs Elite software package would make any appreciable difference...I didn't see any. The look was a bit different but the numbers are all mostly there, the execution for a single stock will be clean. When I step up to two or more I will need to upgrade...if I feel the need to trade simultaneous stocks...I don't know that I will need to though.
JD.
Friday, August 22, 2008
Friday the non-trading day
One of my rules has been to avoid trading on Friday's...that was when I was measuring results daily. I may change that rule now that I am into the daytrading. It was a slightly lower volume day and the price showed that by chopping around a bit more on the minute scale...perhaps the spreads were a bit larger but I never checked the intraday once today.
I did log in aftermarket to get an idea of what I may have missed. The morning was poor as it had gapped down about half of yesterdays' gap up and it looked like it tried to rally but failed at the S 1 pivot point from yesterday...hit it as resistance three times between 10 and 11. Once things got rolling the stock price mimicked the TSX well so it was a good indicator. So the gap yeasterday was essentially closed today.
Possible trades were many and small until after lunch. Estimated entries working the chart blind by minute would see me in long at 1004h for a 50cent gain then I would not have traded again until 1316h for a short gain of 90 cents...based on the flailing about for most of the AM I would have skipped the rest of the day anyway...
...having said that the setup for the afternoon short was nice and there were about six peaks that could have produced 20 to 40 cent gains per trade, too much work for a small position trade though. Worth noting (I'll stick a chart in here somewhere) the 200SMA on the minute chart swooped in after 1200h and acted as a resistance zone to correspond with the S1 pivot...what exactly drove the price down doesn't really matter as it dropped to $57.63 from about $59.70. That is one of those setups that I would jump on early as the price dropped below $59.30... basically where the low resistance of the morning was broken and it would be a keeper as it blew past the S2 pivot and stayed below the 30SMA all the way down.
I didn't have the time today to trade and certainly not the way the day progressed so I will not count this potential gain in my fake results... it would have been a $120 net day, certainly not my largest but a good day. 2.4% which is slightly above my goal range. I would take that.
I did log in aftermarket to get an idea of what I may have missed. The morning was poor as it had gapped down about half of yesterdays' gap up and it looked like it tried to rally but failed at the S 1 pivot point from yesterday...hit it as resistance three times between 10 and 11. Once things got rolling the stock price mimicked the TSX well so it was a good indicator. So the gap yeasterday was essentially closed today.
Possible trades were many and small until after lunch. Estimated entries working the chart blind by minute would see me in long at 1004h for a 50cent gain then I would not have traded again until 1316h for a short gain of 90 cents...based on the flailing about for most of the AM I would have skipped the rest of the day anyway...
...having said that the setup for the afternoon short was nice and there were about six peaks that could have produced 20 to 40 cent gains per trade, too much work for a small position trade though. Worth noting (I'll stick a chart in here somewhere) the 200SMA on the minute chart swooped in after 1200h and acted as a resistance zone to correspond with the S1 pivot...what exactly drove the price down doesn't really matter as it dropped to $57.63 from about $59.70. That is one of those setups that I would jump on early as the price dropped below $59.30... basically where the low resistance of the morning was broken and it would be a keeper as it blew past the S2 pivot and stayed below the 30SMA all the way down.
I didn't have the time today to trade and certainly not the way the day progressed so I will not count this potential gain in my fake results... it would have been a $120 net day, certainly not my largest but a good day. 2.4% which is slightly above my goal range. I would take that.
The blue circles are the trade entry areas that I used. All those choppy peaks could have been shorted (to stay trading witht he overall trend down). That would match an aggressive method as that would put me in the trade short and only covering as the price bounced or showed signs of weakening selling pressure...this would have left me in the trade from the last peak as it plummeted through any support for a $1.60 or so profit. The true daytrader would have been in and out of this stock quite a number of times with a larger position for some decent profits...say 500 shares for 6 trades leading up the the drop for a total of $2 ps gain BEFORE hitting the big drop....perhaps a $3.60 ps gain at 500 shares for a a cool $1800 less commisions of maybe $80. I'm not certain that the volume today would have supported daytrades much larger than 200 shares though.
My aim is lower with 100 shares so I need slightly larger moves. This means that I am working harder for any gains. I hope, in the long run, that this hard work (if you can call this hard work)pays off when I can put larger positions in play, use the same strategies.
One thing that I need to investigate further is the difference in the action between the morning and the afternoon. The morning is quite choppy with more smaller sporadic but tradeable moves and high initial volume. I suspect limit orders and stop orders are triggered and this may drive a large part of the morning move...it would appear that a lot of people are losing money here...and some are making a killing. If I had to guess I'd say that most of this action is from small traders trying to get an early position or trying to dump (intentionally or not) and the bigger guys are just sopping up the remains...just a guess so far though.
JD.
Thursday, August 21, 2008
Today's trading and some extra stuff.
I traded this morning between 1000h and 1100h, three trades. I was dead wrong on the first one (impatience to get in as I had set and cancelled three trades already...seems to be a common thread here, first trade losses). I lost $0.14 per share on a short sell but by getting out as soon as the trade started doing something I didn't expect and, although my loss was small even that could have been avoided.
So I spent the rest of the time more conservatively and placed two more trades long for $0.59, ($0.31 and $0.28) per share profits...had I played the same two trades more aggressively (or perhaps without interruptions) they would have been one trade and the take would have been $0.79. Worth noting that had I held the first bad trade these figures would have been losses not gains as the price ended up going up rather than down.
The morning was pretty flat anyway and there was not much profit to be had without really working a number of very small trades...I stop at four trades but called it a day at three today. Worst day of the last week and a half...all 100 share trades so my net today was $15...wow...but that is still a 0.3% return for the portfolio. That puts me at 15.02% since last Monday or $760 based on my $5,000 capital.
I never looked at the final chart, and won't right now but I would bet it was a slim day or even a small down day...I'll look tomorrow morning out of curiousity.
Worth noting that for AEM at the open it gapped overnight up $2.50 then jumped another $1.40 in the few couple of minutes. While it would have been nice to have been long overnight it is not in my current plan to try to read the overnight gaps.
There was a nice short trade right there to catch the reaction to the opening impulse as it dropped back to the opening area again but it was a three minute window from open to drop if I remember correctly, quick anyway. I chose to wait the first while out though as the peak did not correspond with any indicator I was using and it was too soon. What did happen is the stock price ended up wallowing around for almost the first 30 minutes while the TSX caught up...once it was caught up the prices corresponded nicely and all my indicators were in line...even so I jumped the first trade thinking everything was already in synch...wrong-O.
Two other comments:
I am finding that gaps are less likely to "fade" of late. Certainly not enough to try to trade for a fade or even a continuation. No real predictability here at all.
Waiting for the first 30 minutes before trading (20- 30 anyway) allows the moving averages and averages based indicators to get in line. I use a 10SMA, Bollinger Band of 20,2 and a 30SMA so if the price gaps much more than a few cents it can take as long as the period of the averages to get the indicator to mean anything relavant. I won't wait for the 30 necessarily and the smaller the gap the quicker these become useful...in fact I was considering keeping four stocks in my daily hit list and only trading the one that had the smallest gap so I could capture more of the morning in trading...letting it ride those few extra minutes seems to get a more consistant result though as my first trades are not so hot lately. That and I am specifically trading one stock to let familiarity work for me.
JD.
So I spent the rest of the time more conservatively and placed two more trades long for $0.59, ($0.31 and $0.28) per share profits...had I played the same two trades more aggressively (or perhaps without interruptions) they would have been one trade and the take would have been $0.79. Worth noting that had I held the first bad trade these figures would have been losses not gains as the price ended up going up rather than down.
The morning was pretty flat anyway and there was not much profit to be had without really working a number of very small trades...I stop at four trades but called it a day at three today. Worst day of the last week and a half...all 100 share trades so my net today was $15...wow...but that is still a 0.3% return for the portfolio. That puts me at 15.02% since last Monday or $760 based on my $5,000 capital.
I never looked at the final chart, and won't right now but I would bet it was a slim day or even a small down day...I'll look tomorrow morning out of curiousity.
Worth noting that for AEM at the open it gapped overnight up $2.50 then jumped another $1.40 in the few couple of minutes. While it would have been nice to have been long overnight it is not in my current plan to try to read the overnight gaps.
There was a nice short trade right there to catch the reaction to the opening impulse as it dropped back to the opening area again but it was a three minute window from open to drop if I remember correctly, quick anyway. I chose to wait the first while out though as the peak did not correspond with any indicator I was using and it was too soon. What did happen is the stock price ended up wallowing around for almost the first 30 minutes while the TSX caught up...once it was caught up the prices corresponded nicely and all my indicators were in line...even so I jumped the first trade thinking everything was already in synch...wrong-O.
Two other comments:
I am finding that gaps are less likely to "fade" of late. Certainly not enough to try to trade for a fade or even a continuation. No real predictability here at all.
Waiting for the first 30 minutes before trading (20- 30 anyway) allows the moving averages and averages based indicators to get in line. I use a 10SMA, Bollinger Band of 20,2 and a 30SMA so if the price gaps much more than a few cents it can take as long as the period of the averages to get the indicator to mean anything relavant. I won't wait for the 30 necessarily and the smaller the gap the quicker these become useful...in fact I was considering keeping four stocks in my daily hit list and only trading the one that had the smallest gap so I could capture more of the morning in trading...letting it ride those few extra minutes seems to get a more consistant result though as my first trades are not so hot lately. That and I am specifically trading one stock to let familiarity work for me.
JD.
Wednesday, August 20, 2008
today's trading
I almost went for real trading today but figured I would have some interruptions and I couldn't pay as close attention as I would like for the 1.5 hrs needed.
I kept the trading software in the background and placed some fakers again and did a comparison to what I would have done had I had the open time slot.
I figured it would be a good day for long trades in this stock today.
With interruptions: (so I had to exit more often than I would have liked)
first was a short (thought I might catch a quick impulse...actually itchy to get a trade in really, I should know better)
Short 0959h - net loss $0.19 ps
Long 1008h - net gain $0.30 ps
Long 1021h - net gain $0.15 ps
Long 1008h - net gain $0
Total net gain $0.26 ps
Uninterrupted:
Short 0959h - net loss $0.19 ps
Long 1008h - net gain $0.89 ps
Total net gain $0.70 ps
I didn't stick around after 1045h to be able to let it ride longer...it may have gained more but I had to get out when I did.
Not a stellar day but still a 1.4% portfolio gain day...in theory. 0.54% with interruptions.
JD.
Tuesday, August 19, 2008
Paring the list to the bone.
Lately I have been concentrating on four stocks. I realized that I might be able to handle trading two at the same time. I also realized that, amoungst these four that I short listed, most looked like the move roughly the same...some a bit more some a bit less.
I was trying to get familiar with a very few stocks to be able to make trading decisions on the fly and be more consitant in the gains...or at least to knew when getting out was prudent.
I have since changed my mind on that strategy and decided to go with only one stock. I chose the one that I have checked the most often...initialy because it was first alphabetically, second because it follows the TSX nicely and third because the price is small enough for me to trade 200 shares should I desire to. It wasn't the most profitable but was the most consistant in my trials.
In future I may go back to one or two of the others if this one changes it's pattern or response to the market in general.
So... the winner is ....
AEM - Agnico-Eagle Mines Ltd.
Trading between $50 and $60 right now.
Average daily swing greater than $1.50
60 days in the last four months the swing was greater then $2
Considering the average swing is about $1.50, that makes it about 2.7% swing.
Trading the first week 9 trades no losers
CNQ was the largest swinger at around $2 but the price was around $75 which is a 2.7% swing as well. It made more sense to have a smaller priced stock to allow more flexibility in position sizing rather than a larger price swing seeing as the performance is so similar percentage wise. Of 8 trades 3 were losers. It doesn't move as cleanly.
IMN was lower priced and higher swings but half the volume traded...just didn't feel as predictable in the moves, wider spread too so the slippage might be greater.
JD.
I was trying to get familiar with a very few stocks to be able to make trading decisions on the fly and be more consitant in the gains...or at least to knew when getting out was prudent.
I have since changed my mind on that strategy and decided to go with only one stock. I chose the one that I have checked the most often...initialy because it was first alphabetically, second because it follows the TSX nicely and third because the price is small enough for me to trade 200 shares should I desire to. It wasn't the most profitable but was the most consistant in my trials.
In future I may go back to one or two of the others if this one changes it's pattern or response to the market in general.
So... the winner is ....
AEM - Agnico-Eagle Mines Ltd.
Trading between $50 and $60 right now.
Average daily swing greater than $1.50
60 days in the last four months the swing was greater then $2
Considering the average swing is about $1.50, that makes it about 2.7% swing.
Trading the first week 9 trades no losers
CNQ was the largest swinger at around $2 but the price was around $75 which is a 2.7% swing as well. It made more sense to have a smaller priced stock to allow more flexibility in position sizing rather than a larger price swing seeing as the performance is so similar percentage wise. Of 8 trades 3 were losers. It doesn't move as cleanly.
IMN was lower priced and higher swings but half the volume traded...just didn't feel as predictable in the moves, wider spread too so the slippage might be greater.
JD.
Lines of Support and Resistance
See the previous posting's chart and commentary as I charted lines of resistance and support for AEM. I was looking to try to set up a system or method to pick these lines out easily and plot them in some useable format for morning daytrading and was having some difficulty. The lines were good, historical lines would follow through with some relevance for future moves but I could not come up with any good method other than just charting them in.
I seem to stumble over things while working on my plans that are relevant so often it is almost un-natural. I think it has to do with the fact that I am looking at a plan and see something similar so I pursue it. Often it clarifies or simplies what I was trying to get to. This was no exception.
I ran across somone using Pivot Points (PP) since plotting that last chart. I have used them yesterday and today during my fake trading and have very good success. I'm not certain if the prices follow these lines or the lines follow the prices but they verge on being a leading indicator...somewhat prescient and at least as reliable as my historical resistance and support lines.
Monday I pulled $1.43 per share out of the market and today I pulled $1.23. I stopped at four trades Tuesday to track but I went ahead and faked two more while on the phone and pulled another $1.06 per share out. I made one losing trade (-6 cents per share).
NOTE: I didn't get this post done until Thursday night so this was as of Tuesday.
Total net gains this week based on 100 share trades = $196.00 or 3.9% portfolio gain
Total net gains for last week = $523 or 10.4% portfolio gain (no trading on Friday)
Total net gains since starting this plan = $719.00 or 14.3% portfolio gain
Keeping in mind that I eliminated variances between real trading and fake trading by testing the trades and losing money in the testing to determine how these get executed. These are fake trades but very accurate fake trades. This would not work the same for 1000 share trades but will for 100 or 200 share trades in a liquid stock.
Even so, assume the worst and this is twice what I might expect.
JD.
I seem to stumble over things while working on my plans that are relevant so often it is almost un-natural. I think it has to do with the fact that I am looking at a plan and see something similar so I pursue it. Often it clarifies or simplies what I was trying to get to. This was no exception.
I ran across somone using Pivot Points (PP) since plotting that last chart. I have used them yesterday and today during my fake trading and have very good success. I'm not certain if the prices follow these lines or the lines follow the prices but they verge on being a leading indicator...somewhat prescient and at least as reliable as my historical resistance and support lines.
Monday I pulled $1.43 per share out of the market and today I pulled $1.23. I stopped at four trades Tuesday to track but I went ahead and faked two more while on the phone and pulled another $1.06 per share out. I made one losing trade (-6 cents per share).
NOTE: I didn't get this post done until Thursday night so this was as of Tuesday.
Total net gains this week based on 100 share trades = $196.00 or 3.9% portfolio gain
Total net gains for last week = $523 or 10.4% portfolio gain (no trading on Friday)
Total net gains since starting this plan = $719.00 or 14.3% portfolio gain
Keeping in mind that I eliminated variances between real trading and fake trading by testing the trades and losing money in the testing to determine how these get executed. These are fake trades but very accurate fake trades. This would not work the same for 1000 share trades but will for 100 or 200 share trades in a liquid stock.
Even so, assume the worst and this is twice what I might expect.
Total net gains this week based on 100 share trades = $98.00 or 1.95% portfolio gain
Total net gains for last week = $261 or 5.2% portfolio gain (no trading on Friday)
Total net gains since starting this plan = $360.00 or 7.2% portfolio gain
Either way, if the trading proves half as consistant as it has I would be happy with the results as I am trading with half of my available buying power right now. So doubling the trade size can result in slightly better than double the returns (commission only paid once) which puts me back to where I was with the firts calculations. Considering that this could be an income replacement strategy, at a 1% to 2% return daily (quite doable) based on a $20,000 trading account that could produce $200 to $400 per trading day which adds up to $40,000 to $80,000 per year. Using the new TFSA and adding the full $5K per year allowance that makes this a 4 year plan with no tax implications, the downside is no margin is available in a TFSA so it may be a toss up...lose 30%+ to taxes or loose the 3x leverage power of the margin account. I really like the tax free aspect.
But I digress, this is my personal hope that the trading is profitable enough to turn into a real "business" sometime. I may have alluded to that in the past on this blog, I cannot recall.
JD.
Monday, August 18, 2008
AEM, Agnico Eagle Mines daytrading
This is a 2 day, 5 minute chart for AEM showing the four support and resistance lines that I found.A - the closing price on the 13th, a major line
B - seemed to be a minor line from the 13th
C - The opening price on the 14th, a major line
D - another line established on the 13th, fairly major possibly...turned out it was.
Keep in mind that these lines are really just zones and a lot can happen around them. They do not indicate a point where a price will do anything in particular but an area or zone where the price is more likely to do something .
I place red arrows for resitance and green for support.
The original plan that I had would have had me attempt to buy the stock at the price right as the market opened, about $55.45 and take advantage of the first impulse move toward the closing price on the 13th, about $57.00. The price jumped to about $56.60 in the first minute then dropped back to $55.70...too fast to try to do anything with I have found so I have given up on that plan.
Using line A and C as guides I entered a long position at 945h at $55.85. On the 1 minute chart with better detail their is a drop to near line C and the price follows the 10 sma line trending up from there. I ended up getting out of the trade at $56.50 for a $65 gain.
The second trade would have me in again long at 1047h at $55.80 as the price appeared to bounce off the C line and headed back up. I got out at $56.00 when the price failed to head up convincingly.
Had I been trading past 1100h the line C became very important as the price ranged between it and B for an hour...once it convinvingly broke the C line down it would have made a good short entry...probably around $55.30. Using the upper Bollinger band as a guide for a stop limit would have worked well as the price stayed below this line and hovered around the D line for two hours then headed back down for an end of day exit to gain about $1 per share. But that is all hindsight, I likely would have covered at $54.60 as the price headed back up over the D line at about 1345h. A lot of this depends on wht the 1 minute chart looks like as the moving averages and the Bollinger band are faster moving at the smaller scale.
That is a short blurb on the above chart.
Thursday, August 14, 2008
Why daytrading?
First, let's assume that there is time to do day trading, 1 to 2 hours per trading day at the beginning of the day is all that is needed, perhaps as a minimum. Without that the whole idea is useless.
I was thinking at lunch why I ended up back at the day trading doorstep. I like the minute by minute decisions, figuring out the trades on the fly, the instant results, good or bad, not having to worry about the next day opening taking out a stop order, over night gaps etc...but those aren't the reasons. I had actually tried to stay away from daytrading intentionally and am back almost by accident.
After trying larger time frames and styles of trading I have found that the loss allowance for a trade must be fairly large with respect to my working capital. With day trading I can limit my losses and can even work a bad trade back to breakeven if I am careful and quick...not always though.
Like any of my other trials this still has some testing to go before I can call it successful. I would still like to return to the CTP plan that I set out earlier but I cannot do that until I have more capital to work with.
Worth noting, I have mentioned in the past that price patterns are similar from timeframe to time frame...a one minute chart looks very much like a daily chart if you remove the scales of time and price. Working these one minute charts gives a very quick representation of how the price moves. Support and resistance lines work well, trending patterns, consolidation triangles volume, MACD and almost any other indicator or technique are all useable. The advantage is that doing this in a one minute scale gives me experience doing lot's of trades and making lot's of decisions quickly. One 2 hour session is similar to trading a stock on a daily basis over the course of 4 months...compressed learning curve. I think that this may be a valuable learning tool for those interested in doing any sort of trading if only for that compressed learning.
I may try to get a chart up here tomorrow to show one stock that I faked today and some of the support and resistance lines that were key in making trades and how they can be used to make good entry and exit decisions.
JD.
I was thinking at lunch why I ended up back at the day trading doorstep. I like the minute by minute decisions, figuring out the trades on the fly, the instant results, good or bad, not having to worry about the next day opening taking out a stop order, over night gaps etc...but those aren't the reasons. I had actually tried to stay away from daytrading intentionally and am back almost by accident.
After trying larger time frames and styles of trading I have found that the loss allowance for a trade must be fairly large with respect to my working capital. With day trading I can limit my losses and can even work a bad trade back to breakeven if I am careful and quick...not always though.
Like any of my other trials this still has some testing to go before I can call it successful. I would still like to return to the CTP plan that I set out earlier but I cannot do that until I have more capital to work with.
Worth noting, I have mentioned in the past that price patterns are similar from timeframe to time frame...a one minute chart looks very much like a daily chart if you remove the scales of time and price. Working these one minute charts gives a very quick representation of how the price moves. Support and resistance lines work well, trending patterns, consolidation triangles volume, MACD and almost any other indicator or technique are all useable. The advantage is that doing this in a one minute scale gives me experience doing lot's of trades and making lot's of decisions quickly. One 2 hour session is similar to trading a stock on a daily basis over the course of 4 months...compressed learning curve. I think that this may be a valuable learning tool for those interested in doing any sort of trading if only for that compressed learning.
I may try to get a chart up here tomorrow to show one stock that I faked today and some of the support and resistance lines that were key in making trades and how they can be used to make good entry and exit decisions.
JD.
The fake trade...dollars and cents
I managed to keep my money in my pocket this morning and do some live fake trading.
In order to make things more interesting, seeing as I had no money on the line I traded three stocks simultaneously...that was interesting.
My hit list consists of four stocks selected from my short list of 10, which I posted in The Turnaround a few days ago and I just reposted to keep it separate on The Short List
My hit list had AEM, CNQ, MG/A and SU.
As a result of today's activity I dropped MG/A from my hit list and added CM. I like the trending pattern of CM (CIBC) and didn't like the choppy action of the MG/A and found that it didn't really track well with the TSX...one of my indicators I use for deciding when to exit a trade. CM, doesn't follow the TSX well either but it is more consistant.
My CM fake trade was entered at about 1015h for $59.60. I would have placed a VTSO of about 30 cents at 1100h to let it go on autopilot and checked in at 1200h I would either place a 50 cent VTSO or just sell for $60.80 for a $110 profit (only 100 shares traded).
Considering that I missed the nice initial moves due to reluctance to enter the trades until I got more familiar with the price movement and indicators along with the three stock monitoring I don't think I did too bad. That and I was fighting the urge to put money down...I had to close the order box in case I got twitchy. $127 net commissions with six trades...add the CM trade bumps it to $227 net.
AEM for $16 net
CNQ for $77 net
SU for $34 net
CM for $100 net
Goal number one is to not lose money. I only had one actual losing trade for SU. The others were just not moving that much at the time. Maximun was three trades per stock.
I was done trading at 1100h except for the CM VTSO...which does not need me to monitor it.
Checking the previous moves before I started tracking trades there was another $350 net fudging against me already or even $175 if you cut that one in half again. 10 additional trades. Had I been using my money there might have been 3 or 4 trades that I would not have entered and those were the $10-$30 trades...bad entry but no loss accrued.
For sake of argument let's take the two worst stocks today, AEM and SU...$50 net gain, add the average of the previous possible trades...at the worst case $43.75 ($175/4) and the total is $93.75.
Based on my $5K capital (which is not that high anymore due to my playing) I would have seen a 1% - 1.9% portfolio gain for the one day gain. Translated into simple annualized returns that grows my portfolio to over $10K in one year assuming that the 1% return is the average daily return and assuming that I do not use any of the growing capital to trade larger lots or higher priced stocks for larger moves.
So much for the "would have"s. I will fake it again tomorrow and perhaps go real on Monday and see what happens.
JD.
In order to make things more interesting, seeing as I had no money on the line I traded three stocks simultaneously...that was interesting.
My hit list consists of four stocks selected from my short list of 10, which I posted in The Turnaround a few days ago and I just reposted to keep it separate on The Short List
My hit list had AEM, CNQ, MG/A and SU.
As a result of today's activity I dropped MG/A from my hit list and added CM. I like the trending pattern of CM (CIBC) and didn't like the choppy action of the MG/A and found that it didn't really track well with the TSX...one of my indicators I use for deciding when to exit a trade. CM, doesn't follow the TSX well either but it is more consistant.
My CM fake trade was entered at about 1015h for $59.60. I would have placed a VTSO of about 30 cents at 1100h to let it go on autopilot and checked in at 1200h I would either place a 50 cent VTSO or just sell for $60.80 for a $110 profit (only 100 shares traded).
Considering that I missed the nice initial moves due to reluctance to enter the trades until I got more familiar with the price movement and indicators along with the three stock monitoring I don't think I did too bad. That and I was fighting the urge to put money down...I had to close the order box in case I got twitchy. $127 net commissions with six trades...add the CM trade bumps it to $227 net.
AEM for $16 net
CNQ for $77 net
SU for $34 net
CM for $100 net
Goal number one is to not lose money. I only had one actual losing trade for SU. The others were just not moving that much at the time. Maximun was three trades per stock.
I was done trading at 1100h except for the CM VTSO...which does not need me to monitor it.
Checking the previous moves before I started tracking trades there was another $350 net fudging against me already or even $175 if you cut that one in half again. 10 additional trades. Had I been using my money there might have been 3 or 4 trades that I would not have entered and those were the $10-$30 trades...bad entry but no loss accrued.
For sake of argument let's take the two worst stocks today, AEM and SU...$50 net gain, add the average of the previous possible trades...at the worst case $43.75 ($175/4) and the total is $93.75.
Based on my $5K capital (which is not that high anymore due to my playing) I would have seen a 1% - 1.9% portfolio gain for the one day gain. Translated into simple annualized returns that grows my portfolio to over $10K in one year assuming that the 1% return is the average daily return and assuming that I do not use any of the growing capital to trade larger lots or higher priced stocks for larger moves.
So much for the "would have"s. I will fake it again tomorrow and perhaps go real on Monday and see what happens.
JD.
The short list
My Trading Stock Selections
I have selected a list of some of the most volatile stocks on the TSX following these criteria:
- an average daily swing of $1 or more, often more than $2 and as high as $4 or more.
- volume greater than 200,000 shares a day traded...the higher the better
- priced between $40 and $75, this let's me have the option of trading two at once
- The price regularly does most of it's moving in the morning, off the start
Of all the stocks available I ended up with 10 on my short list.
- Agnico-Eagle Mines Ltd. (AEM.TO) - Average daily swing >$1.5, 60 days >$2, ~$50
- Inmet Mining Corp. (IMN.TO) - Average daily swing >$2, 21 days >$4, ~$50
- Suncor Energy, Inc. (SU.TO) - Average daily swing >$1.5, 47 days >$2, ~$50
- Teck Cominco (TCK/B.TO) -Average daily swing ~$1.5, 40 days >$2, <$50
- Addax Petroleum Corp. (AXC.TO) - Average daily swing ~$1.5, 39 days >$2, <$50
- Canadian Pacific Railway (CP.TO) - Average daily swing >$1.5, 36 days >$2, <$75
- Imperal Oil (IMO.TO) - Average daily swing > $1, 34 days ~$2, ~$50
- CIBC (CM.TO) - Average daily swing ~$1, 35 days >$2, <75
- Magna Intl, Inc. (MG/A.TO) - Average daily swing ~$2, 40 days >$2, <$75
- Canadian Natural Resources (CNQ.TO) - Average daily swing >$2, 30 days >$4, ~$75
Of these CNQ and IMN are my favourites as they average over $2 daily swings and have swings as large as $4 often...having said that I have not traded them for real yet.
Keep in mind that stocks in the $100 and higher range swing far more than these but it really restricts the cash available and a larger swing means that a loss can add up quicker than I might expect.
Wednesday, August 13, 2008
To day trade...or not to daytrade...I'm afraid that is the question...
My initial plan was to call the price move off the start, place a trade, ride or close and enter the reverse trade to capture most of the rest of the move. This was not really day trading as there was to be little to no technical analysis and it looked REALLY good ...in theory.
I now see that was a pipe dream for a good number of reasons.
So, now I am directly into the daytrading realm...once again. I believe that I am better prepared for it this time as last time I was really green and I think lucked out for the most part.
Having said that, this is not something that I would suggest anyone try. It is very cut throat, more so than trading over longer time periods even if a lot of the same rules apply. I may continue to blog my results and whatnot but there will be little usable by any who are not of the daytrading mindset.
If anyone reading happens to be doing some day trading, drop me a line.
JD.
I now see that was a pipe dream for a good number of reasons.
So, now I am directly into the daytrading realm...once again. I believe that I am better prepared for it this time as last time I was really green and I think lucked out for the most part.
Having said that, this is not something that I would suggest anyone try. It is very cut throat, more so than trading over longer time periods even if a lot of the same rules apply. I may continue to blog my results and whatnot but there will be little usable by any who are not of the daytrading mindset.
If anyone reading happens to be doing some day trading, drop me a line.
JD.
The day after...lessons driven home.
True to form I could not fake trade yesterday or today...in fact I entered trades on three different stocks.
Lessons:
1) Pay attention, the prices can move very fast off the start
The first trade was a small loser. I had my eye on the next trade in another stock most of the time as I expected it to move better so I exited for a loss...I was going to trade both but the prices are just a bit too high to allow me to do that. Just as well.
Back to the lesson. I entered a long position with CNQ...one of the larger movers and wasn't paying attention. To be honest I think I was talking to someone and was distracted...cost me $120 as the price dropped.
Entered long at $81.00
Gained to $81.23
Dropped to $79.80 before I got out
Reverse trade as a correction short at $79.73 10 seconds later
I was on the ball then....losing $120 tends to do that to me.
Price dropped to $78.60 over the next 20 minutes
Covered as the price rose to $79.09, up $64.00, would have sooner but again, price moved fast.
It really looked like a gap continuation rather than a fade...of course the price only went 23 cents higher and dropped like a stone....so much for the continuation.
It should have gone like this:
Entered long at $80.50 (this stock is on my early hit list now, second minute trades)
Gained to $81.23 and headed back down
Dropped to perhaps $80.60 before getting out, MACD and volume indicated $81.23 peak likely
Reverse trade as a correction short at $80.60 to $80.40 seconds later
Price dropped to $78.60
Covered as the price rose to $79.09, ($131 gain)
There were enough indicators to tell me not to enter the long trade when I did (decreasing MACD with increasing price, decreasing volume...classic "ready for the short" stuff) but I was still thinking of the indicators off the start that did say to go long.(price jump off the start after a $1 gap, worth at least a try...but would be a break even call as the price should fade)
Lessons:
1) Pay attention, the prices can move very fast off the start
The first trade was a small loser. I had my eye on the next trade in another stock most of the time as I expected it to move better so I exited for a loss...I was going to trade both but the prices are just a bit too high to allow me to do that. Just as well.
Back to the lesson. I entered a long position with CNQ...one of the larger movers and wasn't paying attention. To be honest I think I was talking to someone and was distracted...cost me $120 as the price dropped.
Entered long at $81.00
Gained to $81.23
Dropped to $79.80 before I got out
Reverse trade as a correction short at $79.73 10 seconds later
I was on the ball then....losing $120 tends to do that to me.
Price dropped to $78.60 over the next 20 minutes
Covered as the price rose to $79.09, up $64.00, would have sooner but again, price moved fast.
It really looked like a gap continuation rather than a fade...of course the price only went 23 cents higher and dropped like a stone....so much for the continuation.
It should have gone like this:
Entered long at $80.50 (this stock is on my early hit list now, second minute trades)
Gained to $81.23 and headed back down
Dropped to perhaps $80.60 before getting out, MACD and volume indicated $81.23 peak likely
Reverse trade as a correction short at $80.60 to $80.40 seconds later
Price dropped to $78.60
Covered as the price rose to $79.09, ($131 gain)
There were enough indicators to tell me not to enter the long trade when I did (decreasing MACD with increasing price, decreasing volume...classic "ready for the short" stuff) but I was still thinking of the indicators off the start that did say to go long.(price jump off the start after a $1 gap, worth at least a try...but would be a break even call as the price should fade)
2) Stick to the loss allowance for the day
I set a daily loss limit of $50...might be a bit low but I didn't stick to it...either day. So I am down about $300 or so after two days. That's a little much.
Seeing as I really needed to get a handle on how the order entry works I consider this a cheap lesson. Now I know. Placing an order off the start is not successful. I tried that today and it seemed like forever between hitting the order button, waiting for the order to be received, accepted then executed. It made a $50 difference on a trade that I was attempting to enter...that is not a good way to start.
New Rule
New rule will be to wait until the few three minutes after before placing a trade to miss the rush at the gate. I may even set on eto wait three minutes AFTER deciding to place a trade before actually placing it...and only if it still looks like a good trade at that point. I may go from a 1 minute chart to a 3 minute chart as a result...
Where I am now:
I can now tell what my entry price is going to be based on the bid ask quotes to within a few cents so I think I will do some fake trading now to get a better feel for how the trades fare. I was getting great results doing historical blind testing but there is a certain level of detachment that affects actually figuring where and when to place a trade. There is also the factor of doing these tests on 10 stocks at once. Seeing as there is no way to monitor that many trades at once in this timeframe with my current software I will restrict my studies to three stocks which I will select on the weekend after checking over my historical test results for the last two weeks. I will further restrict my actual trading to just one of those stocks. Once I am comfortable that I can execute consistantly profitable trades then I may pick up another.
I still see that the best time to trade for the largest possible price moves is early in the day...preferrably before 1000h or 1030h. So that is up to one hour of trading. If a trade goes longer than that it will be best to set a VTSO and let it go...once Questrade fixes the VTSO software issue as it doesn't work right now.
The next best time might be near the end of the day but only sometimes and the idea is not to let the trade go overnight as there are large gaps from the closing price to the opening price and it looks like there is no way to predict those...big possible losers.
JD.Monday, August 11, 2008
The turn-about...early morning day trading
Well,
It appears that I have come almost full circle in my search for a successful method to trade and make some money.
My current project is another run at daytrading with a few variations. Over the last 6 months I have had the chance to read about some day trader's great losses, other claimed huge profits and the more moderate line that you can't make a living trading but they have a decent system that makes them some money.
Of all of the things that I have gathered in my perusing, here is the list of those that I felt were of most use to me:
It appears that I have come almost full circle in my search for a successful method to trade and make some money.
I have ended up with a rather long entry this time but bear with me. The following entries will be shorter as I decided to cover more stuff with a new plan all in one go this time. I also went through a "should have" which I don't like to do, but it is a bit more than just speculation as the only difference between not doing it and pulling the trigger was a 30 second hesitation and a drive to follow my plan as it unfolded this morning...yah I kicked myself but I also realize that these will happen again and hopefully they will be firmly in my sights.
I started out with long term value investing as the goal...too slow among other things so it didn't work out. My next foray ended up with me trying my hand at day trading with limited success. Then came swing style, counter trend, position and a number of variations in between. While the plans were mostly of my own concoction they shared common elements with these other styles of trading. Some worked, some didn't work so well. Most were restricted by my start up capital, very small loss allowance or my exuberance.
My current project is another run at daytrading with a few variations. Over the last 6 months I have had the chance to read about some day trader's great losses, other claimed huge profits and the more moderate line that you can't make a living trading but they have a decent system that makes them some money.
Of all of the things that I have gathered in my perusing, here is the list of those that I felt were of most use to me:
- there are certain times or even days that are better for trading than others
- get comfortable with a few stocks
- get to know them and how they tend to react to certain market shinanigans
- be consistant
- set strict loss guidelines
- set goals that are not too out of reach
- treat trading as a business, not a hobby
It's hard to know whether I came to these realizations myself or read or heard them along the way.
So, to the trading....Stock Selection
I have selected a list of some of the most volatile stocks on the TSX following these criteria:
- an average daily swing of $1 or more, often more than $2 and as high as $4 or more.
- volume greater than 200,000 shares a day traded...the higher the better
- priced between $40 and $75, this let's me have the option of trading two at once
- The price regularly does most of it's moving in the morning, off the start
Of all the stocks available I ended up with 10 on my short list.
- Agnico-Eagle Mines Ltd. (AEM.TO) - Average daily swing >$1.5, 60 days >$2, ~$50
- Inmet Mining Corp. (IMN.TO) - Average daily swing >$2, 21 days >$4, ~$50
- Suncor Energy, Inc. (SU.TO) - Average daily swing >$1.5, 47 days >$2, ~$50
- Teck Cominco (TCK/B.TO) -Average daily swing ~$1.5, 40 days >$2, <$50
- Addax Petroleum Corp. (AXC.TO) - Average daily swing ~$1.5, 39 days >$2, <$50
- Canadian Pacific Railway (CP.TO) - Average daily swing >$1.5, 36 days >$2, <$75
- Imperal Oil (IMO.TO) - Average daily swing > $1, 34 days ~$2, ~$50
- CIBC (CM.TO) - Average daily swing ~$1, 35 days >$2, <75
- Magna Intl, Inc. (MG/A.TO) - Average daily swing ~$2, 40 days >$2, <$75
- Canadian Natural Resources (CNQ.TO) - Average daily swing >$2, 30 days >$4, ~$75
Of these CNQ and IMN are my favourites as they average over $2 daily swings and have swings as large as $4 often...having said that I have not traded them for real yet.
Keep in mind that stocks in the $100 and higher range swing far more than these but it really restricts the cash available and a larger swing means that a loss can add up quicker than I might expect. I watched a trader make three trades on one stock that was $164 or so and make over $700 trading with 100 share lots over a 1.5 hour period....without breaking a sweat. I picked up a lot just from watching him do this. Consider that he was using $16,400 to trade (could have been $6000 and margin) so the return for the day was 4.26% (based on margin use it could be 11.6%).
On a side note, this same trader only trades four stocks...ever...and makes decent money doing so and has been doing this for over two years. He is familiar with the stock enough that he can tell what it might do under certain market conditions.
PLAN A
So, my original plan was to buy the stock as close to the opening of the market as possible to get the first trades at the opening price, take my chances with the price move, cut it short if it went against me and let it run if it went in my favour. Pretty simple sounding. I was assuming a 30-40 cent loss and the gains would be in the neighbourhood of $1 or more...roughly 3:1, not bad even if I could nail 50% of the opening moves correct. Doing the math, for every 10 trades I would make at least $5 per share and loose at most $2 per share traded...net minimum $3 over 100 share trades is $300 less commissions ($10 per completed trade) leaves $200. that only averages out to $20 per trade and maybe two trades per day...not very promising.
The Returns
Looking at the percentage returns this looks a little better. It boils down to $200 per week, working with $5000 capital that is 4% per week. Ignoring compounding for now that is 208% per year assuming the odds stay the same and the average is 10 complete trades each and every week.
The Scrub
The downside...I tried getting these entries and I could not. For any number of reasons my trades are always delayed long enough to not get the opening trades and the price moves VERY fast in that first few seconds. Fast enough that a loss can accumulate while I think about pushing the sell button if I did get the order filled. Didn't leave me feeling all warm and fuzzy.
OK, Plan B.
Wait for the first minute to settle out and see what it is doing. Well, this puts me in the position of true day trading as I am now watching a chart while the price moves to determine if I should buy or not...and when. I was trying not to do this as it can be time consuming....which is why I decided to pick volatile stocks with large morning moves in the first place...gets the job done early.
So...I call the trade in the last 5 minutes leading up to the market open (the research) as I can see the bids and asks as they move around. This gives a clue as to where the price is likley to go off the start. So I ready myself, watch the market open and wait for the first minute to pass. What the price might do, and how I decide when to buy or short is more complicated than I can get into now...suffice it to say that making hundreds of practise trades over the last six months has shown me many things about how a price moves. I might also add that these same patterns that I see in one minute increments are apparent in daily increments as well...they are just happening faster so there is not much time to decide if it will follow the emerging patern through.
I'm afraid that this is where the fun is.
Within the first fifteen minutes I will have either made the first trade entry or I may have passed on the stock alltogether. I will always have at least two ready to go but for now I will concentrate on the first one that moves as I like.
Today's Initial Trade
Today was interesting as I entered a short order for AEM and made a net $44 (had I followed my rules that would have been $127, but I was more interested in making a quick buck this morning than letting it ride a bit and only breaking even). The alternate trade was MG/A, I was going to buy long, AEM looked like the better setup so I only watched MG/A
MG/A ranged almost a full $1.50 in the first minute...there was no way I could get in fast enough to ride that. Even if I did it then dropped right back to the bottom and $1 down farther. I could have shorted at the top and rode it down covering near the bottom so I could have seen a $150 to $250 profit depending on my timing...I left it alone, too fast for me right now. My gut screamed to go long at the new bottom though...and I watched it sit there for thirty seconds. I had decided to stick with AEM, a decision I soon came to regret....15 minutes later I would have been up $250...and $300 by 1000h or so. I would then have just set a Virtual Trailing Stop Order (VTSO) for 50 cents off and let it go at that point or just closed for a nice profit. I checked afterward, had I VTSOd I would have automatically closed the trade in the afternoon for a tidy net $512 profit.
Well. Obviously I can't pick them all right...I wouldn't mind a few of those though, which is the joy of this new plan. I can choose to trade every day, time permitting, or particular days of the week and if I am consistant I will get to ride these roller coasters when they appear. It would appear that most of the trading will be done in the first 30 minutes and anything beyond that will be letting a trade go on autopilot with the VTSO set appropriately to allow a certain minimum profit from that point on...Usually I would do this after the first $1 move in my favour then set the VTSO 30-50 cents off the current price as it continues along.
I made a second trade on AEM slightly later, entry was off so I got out too soon, lost a bit of my gains so counting commissions my day was up 0.12%...that's all of $6. Although it is too much work for such a small gain it is still a simple 31% annualized return...more than many other types of investments out there are likely to gain.
I'll update my original CTP goal and recalculate it to date and see if I can catch it. GAME ON!
JD.
Monday, August 4, 2008
ETF hedge trading
Well, I think that this idea is just plain too complicated to pull off easily without having a fairly heavy duty trading platform. I still think that it has merit and I will adjust my fake trading account to drop the losers and let the winners run and see where I end up. I may work on it another time.
Meanwhile I have come up with another plan that I think is more workable, has nothing in common with my previous CTP plan and, once again, requires no research into company politics and accounting. I do believe in the CTP plan, I just like to play, and I will fall back to it once I am finished playing unless something else turns out to be more profitable.
It invloves using the most volatile stocks (I have eight selected out of a posible 127) at the most volatile times within certain price ranges and with very strict rules. I have tried to put into writing a couple of times and I just cannot get it clear easily...so rather than spending time trying to put it down now I will work it for a bit and see what works and post it another time.
JD.
Meanwhile I have come up with another plan that I think is more workable, has nothing in common with my previous CTP plan and, once again, requires no research into company politics and accounting. I do believe in the CTP plan, I just like to play, and I will fall back to it once I am finished playing unless something else turns out to be more profitable.
It invloves using the most volatile stocks (I have eight selected out of a posible 127) at the most volatile times within certain price ranges and with very strict rules. I have tried to put into writing a couple of times and I just cannot get it clear easily...so rather than spending time trying to put it down now I will work it for a bit and see what works and post it another time.
JD.
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