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.