Dec 31st and a new toy, TLM

Talisman Energy.

True to form I cannot leave well enough alone. I want options and to see what else works. I have proven my strategy workable for AEM, now SU and I would like to test it on one or two more so I have a total arsenal of four of varying prices to choose from.

I ran a new scan today for stocks between $10 and $30 with a volume over 500K per day. I ended up with about 40 stocks to choose from, cut out all the ishares and ETFs as well as small movers to pare it down to about 5. Then I concentrated on only the ones that had patterns that mimicked AEM, Suncor and the realted indices.

Cameco Corp (CCO) and Talisman Energy (TLM) were the only two that exhibited the qualities that I was looking for. CCO is about $20 and TLM is around $11 so I chose TLM for the ease of trading small if I so decide to really scale it back. Both are energy related, TLM more so...but enough of this boring research, they follow the indices in the intraday and daily scales and that tells me as much as I need to know.

I checked the pre-market posturing for TLM at 5 minutes before the bell and decided that it sould start down and best to concentrate on long positions today...so long as soon as it looks good. Rather than playing the quotes as hard as normal I decided on a technical entry based on the primary pivot point (horizontal blue on the chart) as that looked to be where the price was going to head for very early. I was not disappointed. Long was the play so I ended with two trades, but only because I didn't hold for the whole long move when the price wallowed.

Of course the targets were the 200sma and R1 but I didn't think the 200 would hold. The R1 was at $12.15 so this was the real target for the morning. I set my limit for 400 shares at $11.70. Keeping with the more technical trade I exited on the pullback when it was just above $11.93...volume was very high and the price hovered, usually a good sign to bail if it is on my mind I find.

Trade 2 was a no brainer as the consolidation at about 0950h was getting ready to break. 400 shares at $11.85. I kept in the trade and waited for the 10sma to break or the R1 line to be hit...although the volume dropped off to nothing between 1025h and 1030h...1029h was the best exit. I wasn't paying much attention to the quotes so I was not sure what my exit would have been exactly so I just took the low for the minute I exited at $12.11

These were bigger moves than I was really thinking I was going to get.

Results:

3.74% return on trade

The 400 share trade is part of my plan to have the whole portfolio on each trade, or as close to it as can be managed with even lots...which is why a smaller price stock is actually a better play while the account is small. It lets me play smaller if I need to, scale into and out of questionable trades and take advantage of smaller moves.

So, let's compare this with the possible trades with SU.

This day was not tracking the pivot points as PP is on the chart and R1 and S1 are no where in sight. The same opening was expected though and this is a typical gap fade style of trade. So long off the bottom based on the pre-market quotes. I half expect that I would have missed the first nice trade of the day though so the rest were a fight for pennies and at best 10, 10, 15 and 10 cents per trade. 200 shares is the only reason these were profitable as the commission is $10 per trade (round trip).

Results:

1.2% return on trade...with the fighting for pennies I would have stopped at 4 trades.

Out of curiousity had I managed to get into the first trade where I might have...had there been more technical indicators lining up to make that decision, $23.10 to $23.40, roughly another 30 cents per share. I expect that I still would have stoped at four trades so that is only another 20 cents per trade overall. Still not a bad day and it would have met my goal.

All in all I am looking forward to trying my hand at TLM for about a week as I apply and wait for my tax free trading account to get set up and funded.

Jeff

Consolidation setup today.

Here is another take on the same chart as I posted earlier but looking at the one trade that I missed and let run mostly out before entering.

This is a classic example of a triangle consolidation pattern that is the basis of my old CTP strategy, here is an example of the same strategy in day trading.

In CTP the red arrows would indicate trades entered and exited, basically buy low sell high and short high and cover low. Entering these trades would put me in a position to take advantage of the breakout in either direction.

In today's case the trade would be long only and have been entered at about 1000h as the price hits and bounces off of the S1 green line. Entry around $22.75ish for the prime position, $22.80ish and $22.85ish as secondary entries.

Once the price breaks out the trendline gets established (dashed red) at 1018h and holds as it bounces along at 1025h to R1 when it breaks the line around $23.20. I would choose to exit at R1 though. I could choose to exit half of the position at this point for a guaranteed 45 to 60 cents per share then let the rest ride to $23.35 for 60 to 75 per share on the balance. This takes the chance that the price will drop while I still hold a position.

Profits

Ranging from $80 to $120 depending on entry, exit and scaling strategies.

Yes, this is a hindsight trade but it is only a matter of not having entered this trade at the S1 bounce, just a matter of timing. The consolidation setup would only have been acting as confirmation of my trade, not really part of the entry plan until I have a larger capital to work with. In that case the pattern would indicate adding to the position along the way, scaling into the trade.

I don't normally get into speculating on trades, but, seeing as I am already doing it, let's see what a scaled trade might do here.

Buy at $22.70, 22.80, 22.90 and 23.05, 400 shares average price $22.8625.

Exit half at $23.25 and the balance at $23.35 for a $145 net gain.

Not bad, but I expect I would just buy in all at once at the bottom and scale out instead.

Buy 400 at $22.70.

Sell 100 at $23.10, 23.25, and 200 at $23.35.

Profit of $205 net.

No matter the trade style the fact remains that the trade is a profitable one so there is no sense in trying to speculate on the maximum profitability except for the purpose of getting familiar with differing ideas.

Jeff.

Dec 30th...not trading, just watching

Today I decided not to even track fake trading but to watch the price moves and pay attention to the volume and pivot point importance, we'll see if I can resist.

Chart is at the bottom.

The price opened close enough to yesterday's close for the 200sma to be relevant right away and it did not fail to act as resistance along with the primary pivot point. I decided that this would be a good sorting day to start. The first few minutes resulted in the PP being tested and not broken. I am not positive if I would have entered a short at this point just because it was still early but the volume was low enough that I could have. Just the fact that the volume dropped off as the price climbed higher is a very good indication of a pending reversal.

The first trade tracked

On the bottom, $22.65, the price bounced so cleanly off of the S1 that, had I been in a short trade I would have exited within five cents of the bottom. Either way trade number two was cleanly setup right here as well. I would have considered this a no brainer entry with the 200sma as target one and the PP as target two. Given the way it tested the 200 three times I would have bailed at that point, $22.95ish.

The second trade tracked

$22.95 would have been my limit order entry for this next short trade and I expect I would have missed the initial entry so close after my exit... I would have seen it hit shortly thereafter and rode it down to the S1 area and bailed around $22.70.

The range

This day is trading between the S1 and 200sma so far which only has a little more than 30 cent spread, not a large target so entries and exits must be quick as 30 cents can dry up really quick. Small targets can be fun to trade but are not worth the effort when they start to get too small. This is one reason why trading a smaller stock can be good as the position size can compensate for the small moves and the cost of commissions.

The third trade tracked...eenie meenie minie moe....

My next trade was to be another short starting above the 200sma, $22.95 most likely, but the price did not show the signs of slowing down. Once it broke both the 200 and PP the entry may be for a long at $23.05, at least that would be the plan. It pulled back to just under this and I would have been filled at my price...or lower which is always nice to see.

Note that I am typing this as the maket progresses so it is a live blog in that sense, at this point the quotes are about 3:1 asks in the range which usually indicates a good time to close the trade as there is more selling pressure than buying BUT the price is not wavering much so I would stay in and see where it goes, R1 is near $23.30, the next target. I see the volume slumping as the price stops climbing so I would bail as the bids are at $23.25, my most likley close price.

Profit

Just to work out the profit on this one trade, entry and exit difference is 20 cents X 200 shares is $40 less $10 commission for a net gain of $30. Based on the value of the trade this is a 0.6% gain.

Watching for the next trade to be a short as the price hovers under the R1 except it looks like a good uptrend right now so I would wait for other signs before placing an order or I would check my gains and see if I even wanted to do any more trading.

Estimating the three trades (assume that I missed the first big drop and didn't get in on the large gain at 1000h) I would be seeing 65 cents per share x 200 shares = $130 less $30 commissions for a $100 gain...roughly 2% gain based on trade value.

Profit protection

This is the point where I would exercise a few of my rules. I have made my goal for the day, I should not let greed interfere with my decisions, do not try to place a trade and hope that the price does what I expect...or want it to do. So I resist the urge to apply more trades and just watch what the price actually does for a bit. It turns out to be uptrending after wavering below R1 then finally breaking through. Based on the quotes and the volume it looked like it might drop off but the indices I use looked like it would hold and gain. Not enough correlation to really make a confident trade anyway.

Interestingly it broke at $23.38 and dropped to $23.10. I was right but my timing was off a bit. I may have held it through the 8 cent gain (my short would have been targeted at $23.30 as an entry) and made some profit but I likely would not have. I didn't really watch close enough to see if I would have nailed the top on this one.

Now that the stockcharts have caught up with my trades (or not trades if you will) I have the chart to post. I only labelled the trades I did end up tracking (I cannot help it). So, following is the intraday minute chart for the first part of the day. Pivot points are blue green and red horizontal lines, the 200SMA is green.

This turns out to be a pretty classic trading day. Starting at the PP, dropping tot he S1 as clean as can be then rallying right up to the R1. The rest of the day can wallow around all it wants as this is the activity that I like to capture. I feel that the trading follows these pivot points prior to the lunch hour more closely than afterwards. I will try afternoon trading after getting some serious gains going in the morning first. I expect that PM trades will be slower progressing and VTSO will be more usable as a trading tool as a result.

Jeff.

Dec 29th trading

Today was interesting as everyone is home and doing stuff so I decided that no real trading would occur, too many distractions...that and I am satisfied to continue fake trading to be sure that I am up on the tendancies of Suncor as it is still fairly new to me.

The only pivot point that I placed was at $22.99, blue horizontal line. It worked well as support so far. I am curious to see how the 200sma (green) interacts once it catches up with the price around 1300h. I would love to be able to say it will act as support and there would be a few long trades right afterwards but that is only a best guess and could easily be wrong. The best plan would be to watch the price and volume tendancies and see where the quotes lead the price and decide my trades based strictly on the activity at the time. It would not be good to get stuck in a long bias, this is the trap of emotion trading by trying to be correct rather than just trading the action.

Over all I exceeded my goal by a reasonable margin today. Total net was 1.32%.

I finished trading at just the right time this morning. I was considering doing some more but often the late morning is a bit of a wash, which is was this morning. The afternoon mught be nice and swingy but it is holiday time yet so the price my not be as volatile overall. Not worth the effort of playing having already met my daily goal.

Jeff.

Christmas Eve Day trading.

Today is Christmas Eve day and there was not much going on at work so I thought I might see how the market would fair on this pre-holiday day. I did not know that the market was going to close early, although I should have expected it, closed at 1300h. Not that this affected my trading as I am usually done by 1030h anyway but it can affect the outlook for the day and I would probably choose not to trade on a half day market.

Here is the chart anyway. I took three trades and met my goal with a 1.26% return on the trade value. Considering that the price is dropping this return on trade is lower then my return on portfolio...but that doesn't really make that much difference in the long run.



The pivot points were just on the edge of the chart, $21.45 was S1 (green) and $22.33 was P (light blue) while the highest price off the bell is dashed red.

The price gapped down this morning so this was the reverse of yesterday's gap up. The price closed the gap, but did not hold it. If this were the end of a normal day, and tomorrow was a trading day, I might expect an open very near to the close and a downtrending day. With the holidays here now trading is suspended until Monday so a lot can happen in the news with regards to oil so Monday will only be known when Monday starts.

A quick note about this type of open, or any time that a price shoots quickly in one direction but does not hold it. I have noticed that this high (or low) price spike very often sets an intention or direction. I have often seen that as soon as the price gets back to where it started it slowly inches toward the spike price. I have made quite a few trades in the direction of the spike and used the high price as the possible target. While it is only an impression I feel that it is a surer trade than a gap fade but a lot depends on the setup.

Trade one was pretty good and it met my daily goal right off the start but I figured I should at least try a couple more trades. The second lost a couple of dollars as I misjudged that small blip down and exited just before it hit. I managed to time the third, a short, pretty well and catch the quick pullback. The final trade should have happened at ?? and there were two prime entries marked by the arrows...I think I must have fell asleep to have missed that one or perhaps I was looking at something else. It was actually later than my normal quitting time so I suppose I can be excused.

A note about the rest of the day. Normally when the price hits the 200 it does some decent moving using the 200 sma as resistance or support creating a nice string of reasonably probable trading options. Today, perhaps due to the short day, created a very tough chart to make anything without fighting for pennies, not worth the hassle.

So, all in all this trial is working out very well. I am staying away from edgy stuff, sticking with SU which is turning out to be a pussycat and playing tight as if my money was on the line although I always play it that way.

Jeff.

Picture perfect gap trading

On Friday I decided to start practising with Suncor as my day trading subject.

Today I was thinking about trading it for real but I had a glitch or two with my platform as I was considering entering a trade, lost connection and upon startup the charts would not update. I restarted the platform and the charts were back but the bids were wonky. I have had this happen before and I usually just shut down but I thought it might be a good exercise in trading with a handicap. It means that I have to track the bids closer as they are not up to date were they should be. A real PITA. The charts are correct and SU, being a slower mover may give me time to make decisions... Here is how that went.

This was such a nice example of how to play targets that I had to capture it and post it here.

Green line I placed as yesterday's close $22.30 (from my broker account chart)
Red line was the primary pivot point for the day $23.04
Dark green is the 200SMA
S and L are short and long positions taken

The overnight gap up was interesting in that it spanned the 200SMA line so I would have expected the gap to close and therefore I considered shorting very early. I usually like to wait and see what starts to form first, just to make sure.

My trades are pretty obvious as were the targets. The shorts were closed as the 200SMA was hit, I did not wait for bounces or hoping for it to cross the 200 for a big hit, just taking my targets. Even the third short I closed early. The one long was rather speculative but worked well, I didn't hold for the red line as I just bailed as soon as the price hesitated then went short almost right away.

At the end of the above chart the price started a nice consolidation then promptly offered a very nice 200 sma bounce and cross. Seeing as today is a short day I would have been playing for more shorts. The price did not even hesitate at the green support so I expect that I would have let it go...as I type this the price is still heading down and considering the next support level is $21.11 I would have liked to have been trading yet. This last bit is hindsight but I know my plan and I know I would have been on this ride for at least a few cents had this been my fourth trade...although I have been adding the fifth lately. I see that at $22.oo the price turned a hair more than I like....So out I would have been as there was lots of trading at the $22.00 mark.

Stats for Friday and Monday were 6% net return combined. Today bumped that up to 9.12% net. The last move that I did not actually track would have dropped 55 cents more had I got in at the resistance area...for another 2% for the one trade. I don't like banking on those sized single trades, though they are nice.

So, my target would be nicely beat as I saw 9 days worth of trading in three days.

While I don't expect DTing Suncor to be this easy all the time, it does look promising.

Jeff.

Re-forecasting the plan based on Suncor.

I based my day trading goals and forecasts on a stock under $50. I had picked AEM as it looked like it might stay under this figure until January even though, being a gold mining company, I expected it to appreciate as this market slump progressed...gold being the normal haven when money is floundering. It has gained earlier than I anticipated though...which is fine.

So I switched my sights onto one of my alternate picks, Suncor Energy, SU.TO as they are hovering around $25 now. Today I tried them on for size as a daytrade and found it is a smoother performer than AEM and has a lot of similar qualities. A lot of the smoothness comes from a higher daily trading volume combined with a smaller price.

I re-ran my spreadsheets to accomodate this price and realized something that I had missed the value of a smaller price in the formation of my trading plan.

Three things emerged:

-the compounding effect was accelerated
-more shares are able to be traded sooner
-partial orders can be placed still using even lots

Compounding

My strategy considered that I was going to start trading 100 shares per trade, an even lot, and therefore the price had to be under $50 due to Tax Free Savings Account (TFSA) being treated as a cash account and limited to $5000 deposit in the first year. I picked a stock that was close to $50 as the larger the price often the greater the daily swing between high and low prices.

This leads to the idea of growing the size of trade by even lots which means I could not increase my trade size except in $5000 increments, roughly. I based my forecast on this premise.

Switching to a $25 stock lets me increase my trade size by $2500 increments. My return is based on a percentage of the trade value rather than the portfolio value as I will only ever be gaining returns on the trade no matter the portfolio. This advances my first substantial goal by about a month and a half, that of doubling my money.

More Shares

This is simple, 100 more shares mean the 1 cent gain is a $2 gain and the commssion is still the same. It also means that a loss is magnified equally. I have run figures on larger trade sizes over my trial periods and it served to increase my returns by greater than 2X due to the static commission rate.

Partial orders

Having positions of 200 shares lets me decide to close half of the trade while letting the last half run if I choose...this lets me take advantage of a run in price while cashing out to secure a profit should the price not run or even pullback before I exit the balance of the trade.

The next to final word

SU is a slower moving stock, seemingly, which lends itself well to a more relaxed trading environment. Decisions do not have to be so quick, larger position sizing is easier to manage and quicker to attain through growth. Although these are great advantages not having time to think, due to AEM's volatility, created an instinctive pattern to my trading style and I was able to time exits very well, I just needed to work on my entries as I had time to plan those and they have been my weakness all along, getting in when I know I should be in.

I made a change to my spreadsheet today that I will have to work out so I will post something about it later. It will have some accommodation for fluctuating stock prices and trade sizes tied to the prices and portfolio balance.

Jeff.

VTSO and stop order executions

The Stop Order

(In order to keep some of these older posts current I will comment on the VTSO and stop loss orders here. I have found out that the stop loss and VTSO are no longer available on the TSX market, this has nothing to do with the broker as the exchange just does not support these orders. I had, in the past, placed and had VTSOs work fine so I am not sure at what point this changed.)

(from a previous post)

A Stop order is an order to sell a stock when its' price hits a preset price to lock in a profit (profit protection) or to limit a loss (stop loss) when the price drops. The reverse is true for a short position.

Once the order is triggered it becomes a market order which is an order to sell the stock at whatever price it will go for. The only problem with this is that it COULD sell for less than anticipated due to market conditions...I have had it happen once or twice when the difference was more than just a few cents. There are other concerns but they are less of a concern than not setting a stop at all.

While this is true, generally, I will clarify a few things.

Quotes vs price for market orders.

The price a stock has traded at is history as soon as the trade is made. This means that the price you just saw on the chart may not be the price you will trade at. The quotes, on the other hand, indicate what traders are willing to pay (bid), or accept (ask), for the number of shares indicated.


This is the uncertain future.


Any automatic stop order uses the quotes to determine when the order gets triggered, not the price. So a stop order to close a long position set at $34.00 will trigger and become a market order when the bid hits $34.00 or less. The last traded price could still be well above the $34.00 mark but the market order will likely execute at $34.00 or perhaps less.



This is what the stop order does, it goes by the quotes not by the last traded price.


Virtual Trailing Stop Order (VTSO)


This can be a handy device if used properly. I have tried a number of methods to employ the VTSO and really have found none to be very good mainly due to me having a very tight loss stop in mind. Basically, I was not really using then properly even though they worked reasonably well and I was able to make some decent profits with them. I'll mention the profitable uses later.


In the VTSO you set the price difference you are looking for when you place the order and it adjusts the stop based on the last traded price. Other than this ratcheting of the order price it is the same as a stop order.


For example, you are in a long position and the price is at $34.00 and you determine that you want to sell if the price drops 50 cents. In Questrade's Questrader Pro you select the VTSO box and enter 0.50, it will set the stop at $33.50 immediately and you will see the order in the account box to sell at $33.50. The first time I did this I had to call to verify that is how it worked as I did not want to accidentally sell my position for 50 cents, that would have been a real bummer to find out the hard way.

Interestingly the stop order does not appear with the correct price until a trade has occured.


Now when the price moves up to $34.50 the stop price automatically ratchets up to $34.00 and will not go back down. This continues as long as the bids never drop to 50 cents below the highest price since the order was placed.


Keep in mind that the stop is set by the price but triggered by the bids. This can be a problem at the opening of the market, especially now with the volatility that we are seeing. The bids can be way off of the actual first trade price. Today on a stock that is around $50 I saw the bids over $2 higher than the actual open price...it can be lower just as easily and if the market opens and that low bid stands for the first second you will become the first trade of the day as the VTSO is hit, passed and executed at the fastest possible price.

I have had stops and VTSO's in place overnight and had to either cancel or change them to allow for a huge gap between the price and the quotes for fear of having my position closed prematurely.

It is worth noting that pros in the market, big players, will intentionally drive the price down to a point where most safe traders might have placed stops in order to have those stops executed. This is actually a strategy to "clean out the stops" and garners a better price for them from the flood of market orders that get executed as a result. When this is obvious it makes a very good point for a daytrader to jump in with a long position trade to catch the resulting rebound of the price.

There are good technical stop positions that are sort of "traditional" to watch for. I have learned to place a stop then adjust it a bit farther out from where I first considered it as my stops often get nailed to the penny and I miss out on further gains.

For the record, this is partly why I have migrated to daytrading as there is no stop order in place, or at least not one that is likely lto get hit unless I want out of the trade at that price. I should be placing a worst case stop for each trade opened just in case my connection fails but I am lazy as it takes and extra step and I would rather watch the price move along and exit quickly than have another step between me and a clean exit, even though it can only be one click to cancel.

The profitable applications of the VTSO for me were the longer day trades. I have not used them recently though. What I did was forecast a move of a stock price early in the day, place the order to buy then place the VTSO at a certain distance from the price. If my stop was hit then I was wrong and wanted out anyway, if the price moved up then my stop moved along with it. I might use a 20 to 50 cent VTSO for these. I would set these and shut down my platform and go for lunch or do what ever I might do in the afternoon. then check them at the end of the day. Depending on my confidence I might let them go overnight. I got lucky doing that once with a $6 gap up in price the next moring...I actually thought that there was a problem and could not figure out why my account balance jumped so high. As soon as I did I dumped the stock as it should not have been so high, I was right. That was when I realised how easily I could have been on the wrong side of the gap and lost as much as I gained, at least on paper, until I sold.

I now consider these to catch some of the afternoon runs that take hours to resolve,
I have yet to try them again though. One of my primary tenents is to remove emotion from the trade, that was the main reason I used the VTSO, that and time management.


Final Comment:

I don't recall if this option is available in the basic browser platfomr or the Webtrader, it may not be. I do know that they will not allow limit or VTSO's in anything other than even lots of 100 shares...it's been a while but limit orders might also not be allowed for odd lots either. In any case this is something that you should check with your broker about as some even charge different commissions based on the order type.

I will be considering stepping up to the Questrader Elite in February as it gives some more automation and alerts that might be nice to have as well as for different methods of entering trades right form the quotes.

Jeff.

The overview, goals and targets

Perhaps I mentioned before that I like to do spreadsheets and I set up auto filling fields and various columns to... well ...let's just leave it that sometimes the more complicated the better. The first one that I set up to get an idea of the potential of my trading blew me away when I realized exactly what my initial, attainable and realistic small goal would produce. I still use it as a benchmark for all of my trials of trading strategies.

So instead of going on about those sheets I will cut the whole thing down to a few, or not so few, guidelines, goals and targets.

Rather than explain the premise behind, or the validity of each of these points, suffice it to say that I have proven the majority through a variety of trials both real and on paper but all with live data. Basically, no historical chart work. While I did some of that in the past I realized that it is not as valid as it seems as hindsight lifts the fog of the future just enough to make it not as uncertain as true real time testing. Everything that I have based my day trading plan on has been live.

Should anyone reading happen to find error, disagree or just want some further clarification let me know by commenting here or emailing.

Guidelines and rules:

I place $5,000 into a trading account and never add cash to it again
I use a tax free trading account to never have to pay taxes on the proceeds
I trade for 40 weeks of the year (three months of “buffer” in case I fall short of my targets)
I trade four days per week (160 days of a possible 260)
I trade only in the morning (my best time for alertness)
I trade a maximum of 6 trades per day (more have proven less profitable)
I trade one stock from a selection of only four (why make it complicated?)
Limit orders for entries, market orders for exits...so far
No margin use (starting in January)
Even lots of 100 shares traded
Trade size is capped at $45,000 per trade in year two, (I think I can use less and still meet the goals)

Performance:

1% per trading day on average. (I am currently at a 1.26% daily average return)
I am not trying for a quick large win here, just plugging away with a profitable strategy.

The time line:

January 2009, week one.
TFTA setup with Questrade, $5,000 deposited, may take a week or two to get going.
All gains return to the account for growth, even any over performance returns for the time being.

Week 26
Double my money the first time.

Week 40
Tripled my money (this could be as early as October)

January 2010
No additional contribution to the TFTA even though I could put $5K more in, at this point it will only make the difference of about a month or two before I can start drawing back out of the account.

Week 49
Quadrupled my money, I stop noting these marks at this point as I concentrate on cash flow.

Week 56
Returns are at $1000 per week

Week 72
Returns are $1800 per week

December 2010
Plan changes from growth to cash flow and investments
Account balance is $62,000
Investments for dividends are started, still within the TFTA umbrella
Income is $900 per week, investments are $900 per week

December 2011
Annual “wage” has been $36,000 tax free
Investment account deposits have been $36,000
Total account balance less any investment gains or dividends is $98,000
Should I remain working the balance would be $134,000, with $72,000 of that in investments for dividends

Alterations possible:

There are some circumstances that may have me trading more than the 40 weeks per year.

- should I fall short of my goals by the annual targets

- at the end of year two I could have the option of continuing to work a regular salary job or just concentrate on trading alone for my income and portfolio growth, I may trade more as a result

- should interest rates start to rise again I will probably step up mortgage and credit payments

- should my wife decide that she would like to settle out her current job and take on something that pays less but may be more enjoyable for her

- expenses like schooling for the kids kicks in after year three


All in all while this starts to sound like the ads that I see claiming huge returns for little effort, I must say that there has been lots of effort and time put into what looks like a rather simple plan. Countless hours of chart studying, research, trials and lots of emotional roller coaster rides to get to the point where I am now. My three year return on the original investment can be over 2000%. This has been a year in the making now. I have had some fun with this whole trading game but it is time for the games to end and the serious business of trading to begin.

I am looking forward to actually placing this plan into effect in the next few weeks. I consider this my biggest New Year's resolution ever, though I am not one to make resolutions as almost none ever get followed through, I think this will be an exception.

Jeff.

Quiet day today

Back to the four trades today. One small loser and not too much on the profits.

AEM opened up quite a bit and is doing some settling. I expect it to drop back to at least opening prices by days end but who's to say. Yesterday I thought that an overnight short position might have proved promising...although I would not have seriously considered it. I would have seen a $3 per share loss pretty soon in. I did miss out on the initial boom but the spread was large and the volatility was way up so I did not feel comfortable placing anything. I did one in my head that I would not have actually placed, but just curious if I called it right and I would have been out $1 per share in two minutes. The early morning rush is not the best time to play.

0.71% for today, 9.81% overall for the month of December, considering the Monday drawdown that isn't too bad as it still meets my 1% per day average goal (1.23%)...of course that is based on a 4 trading day week so 4% per week is the target.

I will not likely trade tomorrow and we will see about Friday when it arrives.

I would pop in two more trades but I am tired today and not on the ball.

A note about the volume in the quotes. I like to see a huge buying or selling pressure in the quotes, as I did today. At one point the asks had 223(00's) at one price, $44.25 I think. The price didn't do much moving for a few minutes, the asks stayed firm and started to sell. Normally I might expect that a large volume ask like that might drive the price down as someone is offloading shares but they were selling and the price didn't budge much. I have in the past used this as a cue to go long just as the asks are drying and the buyers are slavering for more and there is often a nice quick rally as the asks retreat into the 1's and 2's. This one was interesting as the R1 was at $44.38 so I really think that some astute trader was just selling into the top of the rally expecting the price to meet resistance at the R1 line. That wsa really why I only watched this one as I kind of expected it to drop afterwards also.

It did drop off a bit but rallied right on through afterwards. My last trade caught some of that as I entered long at $44.20 and bailed at $44.40, no stomach for holding anything this morning so not much more than break even on this one.

Interesting side note. The one training outfit that I would consider actually paying for their program suggests to trade for a month and aim for break even. I understand their thinking in not wanting new traders to try to hold positions for that big run that may not (most likely not for new traders) materialize. I must admit that I have been guilty of holding too long even after trading and knowing not to expect big things every time.

Jeff.

Questrade and customer service, my take.

First off, I am not affiliated in any way with Questrade other than I am client.

I have no experience with any of the other brokers at all so I have nothing to compare against. I see a lot of people asking about brokers and services and what to look for and what to watch out for so I thought I might clear up a few things with regards to my experience with Questrade.

The first criteria I had when I was looking to get started trading were low commissions, low balance requirements and easy direct access to the market.

A secondary consideration, actually it was hardly a consideration at the time, might have been customer support...I hesitate to call it customer service as I do not need service, just the odd question or clarification. Service is a value added thing to me. I was not looking for value, just troubleshooting if needed.

I set out to try everything and see how it worked, then ask questions as I needed along the way. I even have options setup in my account but have no desire to actually try them out now, no need.

I found the different browser and downloadable platforms easy enough to use, I liked the no additional fees, the free services with certain quantities of trades, reasonable numbers given the services rendered, generous margin allowance, online chat help.

I also like the CDN and US combined account. I have traded US stocks by mistake though, my bad, but the transactions were completely transparent as the account buying power is displayed in US and CDN funds at the same time...so i don't think there is an conversion fees.

I have had opportunity to place calls twice, both times I was answered in a reasonable timeframe and my questions answered well enough. I have used the online chat help often and, except for one case, received timely information as well. Email help is slow but there, I would call or chat first though as it takes days to get a response and they are pretty much regurgitating what is already on the site when the answer does come.

They offer no frills direct online trading. Executions are quick and slippage is minimal. Connections are mostly pretty solid. I have made mention of technical difficulties the odd time but I believe most of them have been ISP or internal LAN issues, mostly.

So, the bottom line, if you need coddling and advise, go elsewhere. If you are a "do it yourself" trader or want a clutter free experience, then give them a try. If you are a DRIPPer and are looking for a broker to get certificates through, try elsewhere as the certificate fee is very steep.

From the odd comments I have heard about other brokers I have been surprised at some of the fees levied and some of the commissions for what little service is actually provided, it's a jungle out there.

There is still this nagging VTO issue though...I am afraid that I have not taken the time to try it out or to call to see what is up, if anything. To be honest I could see them being dropped as the market is so volatile that I think they would be a liability to any new trader out there, I know they didn't do me any favours and I was not playing in this market action.

Various stops

I ran across an interesting idea while surfing the net this evening.

I like using stops, mental stops now, manual trailing stops a while ago, and I used virtual trailing stops (VTSO) extensively early on. So far, while they all have their place in trading, I like the mental stops the best...although they get me in trouble more frequently than I would prefer. So I need another tool to keep me on track as I don't want to have to place a hard stop order.

So I am now going to include a cute little idea that I should have come up with before.

Time stops.

I know that once a trade is entered there is a certain expectation of price movement within a certain timeline. This is one thing that I have been trying to pull out of my trading lessons lately. Today, for example, I had a number of trades that I should have pulled the plug on once I realized that they were not going anywhere quickly, or more appropriately, they didn't do what I expected when I expected.

I know I needed another indicator or trigger to help me get out of the game while the getting is not too bad, if not good.

Now, I think that closing the trade at a certain time is not always the most prudent method if the price has started moving as expected. If it has not but it has not gotten bad enough to cut according to loss allowance, technical indicator or it is just moving horizontally then when the dinger goes.... The thing about prices that keep not really moving is they tend to get less predictable. Waiting for the price to move as expected leads me to not see other setups that might tell me that the trade is going to reverse. Sometimes I catch these and reverse the trade, sometimes I at least get out before the plummet but not always. Time stopping would have solved these issues and made my decision for me.

So now to decide how long a time stop to use.

Jeff.

High volume trading, for me.

I decided to have another go at high volume trading today. I tried it once before and it was a dismal failure. This time I didn't do so bad. I gained in straight performance but lost in the end due to the commissions.

I won't give a blow by blow but there were 13 trades, done by shortly after 1100h. I grossed 0.63% but netted (-3.6%) or so.

The long and short (punny,eh?) seems to be that there is a mentality that lets me think that I can get away with more speculative trades as I have more trades to make up for any small loss...it just does not work that way. I got sloppy.

Largest loss was 33 cents off the start, not a nice way to set the tone and my largest gain was 42 cents. I think that if the earlier trades had gone better I might have stopped after reaching my goal.

Trades before commissions

(-0.33)
+0.28
+0.22
(-0.04)
+0.29
(-0.19)
+0.00
+0.42
(-0.20)
+0.13
(-0.05)
(-0.13)
(-0.21)

Average losers : -(0.164) per trade
Average winners : +0.225 per trade.

At this rate I would hit zero at 491 trades due to commissions... theoretically, assuming that the stats remain the same and I lose as often as I win. The worst thing about today was at no point could I have stopped and even broke even after commissions.

The one thing that did come of the morning was a little more nimble action on the limit orders. I got some good entries where I wanted them even if not all moved the way that I wanted. I almost played with the trailing stops but I never got the price far enough in the green to let me dink with the order settings.

I should get into the habit of setting some sort of stop at the time the order is placed in order to keep from taking a horrendous loss should a connection drop out and the price do something weird before I can get back in to exit the trade. I have mentioned trying this and it would feel good that have a real stop in place sometimes even if to keep me from letting a profit turn into a loss as I move the stop up to trail the price.

Each day I feel more and more comfortable with the prospect of trading. I do not get the same butterflies and sweaty palms that I can recall from the beginning. Today I was rushed getting my pivot points plotted amd I had two interruptions that I can blame for one loss and for one premature exit, but that looks like it is just part of the game for me I guess.

Comfort and calm will prevail and this leads to the patience to let the prices come to me. Missing an entry is no big deal and not worth chasing a price to try to "get in" on the upcoming move.

Quick notes about a couple of trades. One was a nice setup that I got in on, my second or third trade, and I missed out on the $1 or so move due to someone asking me questions, divided attention, so I got out earlier than I would have liked and gave up about 60 cents possible profit. I jumped on the short at the top...might have been one false start or I might have my trades in the wrong order, but I picked up a nice pullback playing against the newly established uptrend. I cannot help but play against momentum moves as they lose their drive. The pullback is so sweet and easy as long as the getting out is timed very well as these are very quick small targets, keeps me on my toes. They can reverse very fast if not careful but in and out fast is the plan so there is no holding them to see what happens. I held one or two of those today.

The switch at the bottom is my downfall, I can call the bottom and get out but getting the reverse trade in right away tends to escape me...I would love to be able to enter a double trade but Questrade does not allow it through the platform.

It would play like this....enter a long position of 100 shares, ride the momentum, then place a sell for 200 shares at the peak, perhaps a limit order. This would exit the long position and short sell 100 shares automatically. Then as the price swings to the extreme again, place a buy for 200 shares to cover the 100 short and buy 100 long...repeat until satisfied.

This would work well for me as I like to time the peaks and troughs to catch the next rally or pullback if the target is large enough. It works the same as my old CTP as I would be at the bottom of a rally should the price break the pattern in my favour, and if not I reverse the trade while taking a profit...the other advantage would be trade reversal on the fly...exit a move against me to still catch the remaining momentum.

I think that a discount broker cannot do this due to some chance of one part of the order not being filled, ie a short position entered and the long not exited due to timing or market sentiment. I already know I am not allowed to hold a long and short at the same time or sell more shares than I have. Oh, well, I still have to play it normal I guess.

Jeff.

ETF technical, HXD.TO

I was curious how the various ETF's were fairing, this one in particular. I was working on an ETF hedge entry plan that would make trading the opposing ETFs (bear vs bull) in such a way as to make them a risk free and guaranteed profit trade similar to a collar trade in options trading...sort of. I dropped the idea as too complicated but I may take it out and dust it off another time.

Meanwhile...

HXD.TO, Horizons BetaPro S&P/TSX 60 Bear plus.

Here is a five month daily chart, ending in September as the rest is just more volatility.

The blue trend line was the downtrend that I placed back in the early spring, I have not touched this chart in months. The yellow was the mean, roughly. While it was broken back in April I was going to watch the upper line. The SMAs are 10 - red, 30 -blue and 200 -green. The lower trend channel line is not present due to some idiosyncratic StockCharts isssue, but it was below the mean about the same as the upper is above. Had I been playing my CTP strtegy I would have been buying in the mid $15 range and targeting for the breakout.

I loved the convergence of all of the averages and the trend line as this just screamed "buy, buy, buy!" as the price hovered about the 200, then broke and tested it as support twice on the way up.

It's charts like this that make me want to drop day trading and return to the swing style of trading...maybe another time. Even currently the price is bouncing along the 50 sma nicely with five tests as possible buy in points over the last four months.

The best part, for those who like traditional trades, is that this does not need to be shorted to play the other side. Just plug HXU.TO into yur charting software and you now have the inverse of the same ETF, the Bull. Because the price is smaller for it now the averages work slightly different. One could just ratio the prices and buy one when selling the other to stay in a trade and keep the money working constantly while even overlapping the exit and entries a bit for a bit of a hedging factor. Just dump the one that moves the wrong way.

Back to HXD for a moment...Because this is tied inversely to the TSX this is not so much a chart of this fund as the trends would work exactly the same on the index chart that it tracks, inversely. The volume on this means nothing as there is no underlying value so it only indicates that more people are interested in the ETF as it relates to the TSX, not for it's own sake.

I have had trouble with the idea of ETF's for some time due to their derivative nature but they can make an interesting trade none the less. Some of them are priced reasonably for anyone to play around with.

Just another tool in the tool box.

Jeff.

The gap fade

Today was a great day to play the longer term day trade, in fact I thought it might be best to just place a short at the earliest peak and let it run... but I don't have the patience for that right now. It certainly would have been a good application for some sort of moving stop but probably not a VTSO as that would have gotten hit pretty early in the day.

The setup was classic. I entered my pivot points, 15 minutes, checked the trading price of gold in other markets, 45 seconds and decided that the day was going to be a huge gap up and run or a fade...given the size of the gap and the trading of late I was putting my money on the fade.

This is an example of why I like the day trading arena. Time spent researching...45 seconds... as the pivot point setup is a technical tool. I know of traders who get up early, 4AM, to research the markets, check out scans to determine what stocks they are going to trade, set those stocks up in their platforms, then wait anxiously until the market opens and hope that all that time spent is worth it.

Most, in fact the vast majority of those traders are not trading right now either because the market is not reacting as they think it normally should (whatever normal is) or they have lost a lot of money and cannot stomach it anymore. A percentage I keep stumbling across is 3% of all traders ever make it consistently. With the influx of online traders right now that makes a lot of easy money available for those 3% that know how to pull it out of the market.

I feel that the research adds a bias to the idea where the price is going to go.

Consider that it can only really do one of two things, in the big picture. It can go up, it can go down, it can wallow around and churn while not really going anywhere. So all the research and watching for a slightly better then one in three guess is not my idea of a good time.

If I am wrong off the start, I lose a few bucks then change my plan. I have not invested a lot of time in deciding which way it is going to go so I won't get caught in the trap of wishing and wanting it to go my way, I have no way, I just follow the price action.

For the record, the gap up was a guaranteed move, there was next to a zero percent chance of it not jumping at least $2 off the start given the price of gold, and it went over $3. The aftermath was just a hunch and best guess. I would put a 70% or better chance of an overall fade in the current market for such a jump. Had it gapped down I would have put a similar chance of the gap NOT fading and the price continuing down, under similar market circumstances.

Back to the day.

The gap started a quick momentum move in the direction of the gap which quickly peaked and fell, the first short entry ...which I hesitated on and missed...no big deal (which is one of the other reasons I like day trading, the next setup is only minutes away, not days).

Truth be told I fumbled the first couple of prime entries, the first short, the resulting long for the rally, then the very next short...I need to close my door so nobody can chatter at me while I watch these setups but mainly I need to tailor my limit order entries to not be quite sot tight as I try to squeeze every penny out of the starting price. I refuse to chase the price, I want it to come to me, so I miss a few and usually by pennies.

I ended up 1.07% net gain, still meeting my goal but missed at least that much off the start.

Shorting the top would have me closer to 2% after just riding it until sometime after lunch. The day is not done yet but I doubt that I will trade any more as the action is slow and unpredictable now...although it may still drop to fill the morning gap, just not for sure.

I won't speculate as to how much I really might have made had I hit the trades that I setup initially as I just didn't make them.

Just another fun day in the market.

BTW, I was done by about 1030h. Another reason I don't like the typical DTing "idea". I make my money or take my losses for the day early and get the heck out, I have other stuff to do for the day... although I would love to hit a really nice day for letting trades run and sit it out to make some serious cash...another time though.

Jeff.

Questrade and the TFTA

I have given up differentiating the difference between real trading and fake or paper trading for the rest of this month here. My entries are the same either way and my exits are very close as well. I don't really want to have any tax implications for this year as I apply all my energy towards fine tuning my trading in preparation for the Tax Free Savings Account coming to Questrade next month. They are referring to it as the TFTA (Tax Free Trading Account) as they are offering all the same tools for trading as their regular account...with the exception of margin I expect.

I will be tracking them separately and combined still but I need to get my headspace around the whole trading game, all of the trades not just two subsets.

Here are the links for the general release and a Q&A about the government rules. Questrade is being pretty liberal with it but I am not familiar with any other offerings.

Pamphlet

The original link again


Jeff.

VTSO or mental stop order

I still have not gotten around to testing the viability of a VTSO in day trading yet. I feel that the volatility would have me out of trades too often but I like the idea of a safety in case I had to walk away from a trade.

I used VTSO's extensively when applying my CTP plan earlier in the year and found that they were too quirky. One steep day (this was medium term trading) and the VTSO is brought up too tight to the price and an exit was inevitable.

Alternately I can set a stop order as a safety, and just modify the order as needed to follow the price. I do this mentally and execute a market order to close the trade so using a stop will do the exact same thing and give me the security of knowing that I have an order in place should I have a glitch in my platform which makes exiting impossible, it has happened on occasion.

Normally I choose a price to exit based on the quotes, not the actual trading price, and often I will exit a trade immediately upon seeing a certain indication of a turn. This would mean having to cancel the order in place and placing a market order to close. I have had cancel requests take a long time, in the scale of DTing 10 seconds can seem like an eternity and can make the difference of giving up as much as 60 cents per share of gains. This means there is a chance that I cannot place a market order right at the moment that I want it... I will have to experiment and see if this is an issue of more concern than the possibility of getting stuck in a trade. Usually I see these points approaching so cancelling the order ahead of time should not be an issue in most cases...modifying the order might be quicker than cancelling it too.

Testing needs to be done.

Jeff

Week wrap

In the interest of keeping ahead of any work stuff that comes up I had decided to not sequester myself and remain available during themorning trading times. I also do not let trading take priority so I will fake trade if something else is going on at the time rather than being stuck in a trade that I may have to leave.

So, I now realize that will not work. In order to actually realize real gains I will have to shut my door and only trade for the period. I suppose it is no different than taking 5 smoke breaks over the day, except I don't smoke so I don't get that time off.

Anyway, today is a case in point. 3 trades in 30 minutes done by 1000h. I left the fourth and last one go and didn't even fake it even though it slipped for one last dollar as I might not have traded it for real so I didn't count it, too far into a slide for my comfort even with gains to play with. 5.37% net return. I almost made the trades but had people looking for stuff or was on the phone. I am satisfied with the faking in the sense that it re-affirms my actual trade strategies so I am in good standing as far as keeping my edge is concerned.

I did cheat and place one last trade at about 1030h. The only reason that I did was that I had seta limit sell at $34.00 earlier, dropped in to take one last look at the morning activity and saw the setup at the right moment, called the short and let it go for a bit, caught 35 cents of the slide so worth the effort. My daily gain was bumped to 6.27% net.

Combined real and fake trading for the week is 11,42% net even after considering my 4% loss on Monday while getting my feet wet again. I still count that loser day even though I half expected it to be a loss before getting in. Just finding my edge.

Jeff.

The perfect setup

Today I concentrated on the perfect setups.

I like consolidations that are overdue for a move. Triangles, horizontals, descending, ascending ...whatever. I like to set the limit on the far side of the trend so the worst thing that happens, if I am wrong, is slightly less than break even. Even a small move in my favour but one that looks like it might not go anywhere is still good for a gain. This was the premise of my old CTP trading plan earlier in th eyear, except on a daily trading basis rather than a minute basis. Now I need to work on fast charting as I don't have the luxury of playing with the charts overnight. Spot those trends quickly, identify the pattern, plot the trend lines and make the trade. I miss a few because I am a minute or two late and the move has already started without me.

Even so, all that chart reading I did before has paid off well.

I made four trades today but only one was a real trade. The others I had interruptions distracting me so I would not actually enter the trade...as I mentioned in the past I do not like to be in a trade when there is potentetial to have to leave it.

Of course the two winning fakers were nice smooth sliders and I garnished 80 cents per share on each. One was a break even. The only real trade, I choked on (the mental stop was pennies too tight) and gave up 60 cents of the 90. Still a 0.5% net gain for real.

So a combined 4.80% return. I will be glad when I can dedicate the time in the morning to trade exclusively until about 1100h. There will be no fake trading then and all, or most of the gains will be real.

If anyone is reading these do keep in mind that I am not currently writing in a manner that lends itself to learning anything from these posts. It is as much for me to feel that I am being accountable if only to myself.

December trading begins, days one and two.

I got back in yesterday but I seemed to have lost a little of my edge.

I still have Agnico Eagle Mines as my target stock, AEM.TO with trade sizes of 100 shares.

I popped two decent biggish losses in the mix, only biggish (over $20) because I let them go too long, both would have been small profits if I had exited when I said I was going to. The rest were small losses. (-4.74%) for the day, nice. This was more a "jump back in and see what happens day". I didn't anticipate gains.

Today I faired better. One trade, +1.39%. I caught a small 72 cent slider for 52 of the cents. I just watched and called this like I would have in the past... For the record this would have me stop for the day as it is already 0.39% over my daily goal...unless I saw a nice setup taking place...today looks like a wallowing day though. Had I been on the ball yesterday I should have been able to do better as the price slid pretty well. All in the fun though.

This leads to a rule review.

Daily losses should be cut closer AND next day trading must not be performed to try to recoupe a previous loss...it MUST stand alone as a daily goal otherwise emotion gets in the way...I would have placed additional trades this morning and I can almost guarantee that they would have been losers on some level due to the wallowing. This rule needs to be used even for individual trades.

I learned that one on my high volume testing day a while ago...12-16 trades with about a $400 loss for the day, one trade fed the next which fed the next and only a very few were well placed and gained, and even those were just luck.

I updated my spreadsheet today while waiting for the next trade setup, which is not materializing at all, to calculate my returns based on my actual account balance running as I enter the trade data. This gives me a more accurate picture rather than just going from a preset balance all the time. It makes the gains look better but makes the losses look worse...all in all it is real and adds a certain amount of compounding if I always meet my goal based on the current balance... Headgame with the numbers at this point though.

An interesting observation about setting the return percentages off of the running balance. This will serve to move me into higher volume trading gradually and automaticcally. As the balance grows the trading either has to be more profitable per trade (which is not really the goal) or just more trades per day, then on to larger sized trades as time progresses. I consider it a built in training tool, kind of like increasing the weights at the gym. The other factor is that this can serve to attenuate the trading frequency and curb any chance of overtrading...which is what leads to losses often. Headgames, if I follow this to the "T" then my results will determine how my trading practices develop.

I did massage my combined (real and fake) sheet to match as well. I pop the odd faker in the mix as I see a speculative move setup and call it but don't quite have the balls, or un-interrupted time, to actually place the trade...or perhaps I hesitated that moment before the change starts. I changed it to allow fake trades on the same days as real trades. This gives me a real performance, pure fake performance and combined performance numbers. If the fakers outstrip the real then I should pay more attention to my gut calls.

Followup to the trading, about 10:45 the wallowing came to an end and I was not really there to trade the first slide right off of the pivot point for the day... $41.20 was my target entry with the PP of $41.24...not that they always work out that close but it did today, I had that price in my order box often. Generally the price remained bracketed between yesterday's low and today's early morning high. I usually try to pick some points that look like they may be significant from the previous day price, usually the close or high/low prices in addition to the pivot points, just gives me some targets and references. They don't always work out to be resistance or support but can very often prove so.

That's about all for today. Just a little rambling.

Jeff