...and more time passes....

I have not been idle on the trading front.

I've still been trading but almost none of it has to do with the CTP plan as I set out. I do believe that it is a workable plan on its' own, I just cannot help but tinker and tweak. Usually I end up with something very different than what I started out with. I tried out some different order types, looked at options trading, tinkered a bit with more daytrading and I am currently working on an Exchange Traded Fund (ETF) hedge plan to reduce the exposure to risk by playing a Bear fund aginast a Bull fund in the case of a reversal. I managed to get invited to a 1/2 day workshop which was really a marketing seminar for a trading course but they did drop some interesting tidbits and demonstrated their trading plan in short term day trades with live market and money. I had also joined a website as a 45 day trial member and went through all of their video material on stock and options trading.

Basically I am still learning.

I have found that there really isn't much else out there that is not already available for free if you know where to look.

The kicker is that you can do all the reading you want, know all there is to know about trading, not that I do yet, and still not be a successful trader. You have to trade to become successful...practise just like anything else.

Even so every piece of information I find all leads back to a few basic principles, most of which I found myself and have already posted here.

1) trading must be without emotion

2) loss management is more important than profit, trade to not lose and you will win

3) stick to the plan

I might add a new one that I sometimes have trouble with:

- when the circumstance changes and the trade is not doing what you expect...get out.

I have had many trades that gave me the opportunity to take a small loss, break even or even come out slightly ahead as I realized that the trade is not doing what I thought it should but I chose to adhere to my stop setting. What I failed to realize, in some cases, was that my stop setting was placed according to my Maximim Loss Allowance (MLA) and not necessarily where it should have been. What I mean is a stop should be selected after analyzing the movement THEN the purchase price set and if the Profit/Risk is acceptable make the trade. The stop should have some reason for being where it is other than I think I can afford a certain loss figure.

Back to the ETF for a moment. I opened a trial account with my broker using a more advanced trading platform...handy stuff but if you can trade you can trade with almost anything so I am just playing. It allows $100K play money credit, long positions but not shorts. So I picked 10 ETFs on the TSE, 5 Bear funds and 5 corresponding Bull funds. Basically the bull fund follows the index it is referring to, for example the HXU follows the TSX/S&P 60 and the HXD follows the same index inversely. There is a ratio to figure for this but I won't get into that now.

The theory is that buying an relatively equal number of shares based on price movement in each of the bear and bull funds of the same index will counter each other and you will always break even. I bought $38,000 in the 10 funds on Wednesday. Today I am down $159 ...three things affect that number though.

1) the aftermarket bid/ask quotes throw it off a bit

2) the ratios I came up with were rough, that could throw it off a bit

3) The relationship between bull and bear may not be constant

Still, the variance over 2200 shares is only 0.4%...close enough to prove the point that the funds can be played against each other. I'l leave that simer for the next week and see how far off it is and do a comparison fund by fund.

I'll post the strategy once I get it fleashed out and simplified. I may not use it but it looks like an interesting theory.

JD.

It's been a while

I've been busy, life gets in the road sometimes.

So I have not been able to ge the time to keep my blog up to date.

I have changed a few things...maybe tweaked is a better term as I have not made any substantial changes to my plan. I'll post updates as I can in the next week or so.

I entered a few trades recently that did not work out well. I should know better than to trade energy and income trusts...they have never treated me well. I also let emotion get invloved which ended up in larger losses than I set out when I entered the trades initially, lowered stops to stay in the trade longer anticipating the rally then never materialized. I may or may not list these on the blog in all their glory failure...I will probably at least note the major notables and charts of the trades. I am not even sure where my stats stand right now, I'll try to work on getting those up to date later as well.

That's all for tonight.

JD.

Stock picking revisited

I mentioned my stock picking criteria early on. I have since changed them to provide more, and lower priced stocks to choose from.

The original: $10 to $30, greater then 200K shares per day volume

The new criteria: $5 to $30, greater than 40K shares per day volume

I have the $30 still as it is good to see the stocks that are downtrending early on even though I probably wouldn't trade them long or short until the $20 mark. I wonder if I should do the same for the under $5 range..perhaps go as low as $3 to watch for ones that might be on their way up. Much lower than that and the margin use rules change as the broker considers anything under $2.50 as penny stocks.

The lower price and volume expands the selection and has:

PROS
1) allows some exposure to stock with smaller prices that will allow for tighter stop setting off the start
2) perhaps a little more price volatility
3) I am only trading single lots or 100 shares at a time I am not terribly concerned about not being able to sell when I need to, liquidity should not be an issue at 40K average volume for small trades
4) the lower prices allow more trades to be entered simultaneously

CONS
1) I might not get my ideal price
2) at $5 I would not likely short the stock, limited to long positions at the lower price
3) lower volume MAY make shorting less possible depending on share availability through the broker...I honestly don't know if 40K will be low enough for that to happen
4) perhaps a little more price volatility, good and bad I guess

Worth noting: Lowering the prices to this point would actually allow someone who was interested in starting out with $1000 to actually be able to make a go of it. Staying under $10 might be possible and using margin wisely could allow four trades if they averaged $7.50 at the entry price, more if even lower prices were used. Price movement is price movement afterall, whether it is at the $200 per share or at $5 per share.

All in all this has increased the selection somewhat as I started out with 256 stocks to narrow down to about 17 that were showing signs of being in a tradeable pattern soon to add to my list. For the record that takes about 30 minutes to do with the stockcharts.com candle glance view. I just jot down the ticker symbols of the charts that look good and enter them into a list then view them in a 10 per page format using my default 2 year period with a MACD indicator for reference and a few moving averages. I do get duplicates but I usually am familiar enough with my current list to catch them before they make it into my working list.

The list now has about 140 stocks, 10 or so are higher priced than I will trade but I am watching them...financials mainly. I have only traded about 12 using my plan...about 35 previoulsy traded and most of those are still on this newer list. I will try to keep it at less than 200 as anything larger then that may be to unwieldy to manage efficiently. Some will get pruned along the way and some will get added.

JD.