I stumbled upon a gap trading blog today and it has caught my attention. They are promoting a service to provide historical odds on gaps on certain stocks/funds/indices but they have a fair amount of free information on the "how to" of gap trading. The service is really a number crunching system.
I may give it a try to see how it works, they have a trial membership for a low fee and I get the feeling that they are a reputable bunch (one guy really). I doubt that I could setup a study to get the same information myself...like fancy charting services, there will always be some things that will have to be paid for that cannot be done or is too time consuming to do myself. I don't fix my own cars but I do most renovation projects. I pick and choose where to save money based on my expertise.
The monthly is cheap enough if it pays for itself. I figure that with the 14 day trial (I will see if it is 14 trading days) if it pays for the first month then I will continue with it for a bit.
Gap trading is aimed at playing the gap between the closing price one day and the opening price the next day so the trade is in right off the bell and could be finished in minutes, typically less than an hour anyway. This is one trade per day that a gap fade is highly probable, it doesn't setup every day unless I want to play it both ways, fade or run. I tinkered with this early on but found the initial trades were executed poorly and the volatility was rather large...so my limit order choices and stop setting sucked.
The upside of day trading, which gap trading is, is that the trades are complete and nothing rides overnight, the downside is that a huge loss can be accrued over the day due to a number of trading problems as overtrading is possible. Gap trading eliminates the chance of overtrading as there is only one...maybe two trades likely due to the extreme time sensitivity of the trade style. It is a complimentary trading style to my current setup for the same reasons.
With my final P&F trading strategy, so far, I have not realized a loss. I will, but I have more trades in the green than in the red as I speak. I am hoping that I can close some decent winning trades early to overcome the losers, head games really.
Jeff.
Questrade, My direct access discount broker.
Thursday, July 30, 2009
Wednesday, July 29, 2009
Spreadsheets and paper
I've decided to keep a paper record of my trading activity in addition to the electronic version. I have tried two spreadsheet options, Google docs (slow) and Star Office (need to keep updating a common file to access from elsewhere). Neither option has been ideal, both have their benefits and detriments but either are fine if I am not using them as a first line of entry, paper first then for tracking I'll use the spreadsheets.
The Google doc has a sheet for each stock to track each trade trigger, entry, dates stops and P/L etc. Then the first page references the first line of each stock page so all of the stocks have a single line on page one showing the current activity. This allows a quick scan to see what trades are to be placed when a trigger is up as well as active trades. I don't update them with EOD data, just when I make stop moves, order placements or close trades.
On the stock page when a trade is closed it will be replaced with a new line once a trigger is apparent and the reversal has started toward that trigger. They will also track completed trades, P/L per stock overall, commissions etc. The first page will pull all of the totals from the stock pages as well for an overall performance indication.
I will have two versions of this running, one for the actual trades and one for trades that I was unable to make, usually I expect this to be shorts missed as my margin account is still lacking funding for full blown short selling. I'll get around to adding to this as this trading plan moves along.
Jeff.
The Google doc has a sheet for each stock to track each trade trigger, entry, dates stops and P/L etc. Then the first page references the first line of each stock page so all of the stocks have a single line on page one showing the current activity. This allows a quick scan to see what trades are to be placed when a trigger is up as well as active trades. I don't update them with EOD data, just when I make stop moves, order placements or close trades.
On the stock page when a trade is closed it will be replaced with a new line once a trigger is apparent and the reversal has started toward that trigger. They will also track completed trades, P/L per stock overall, commissions etc. The first page will pull all of the totals from the stock pages as well for an overall performance indication.
I will have two versions of this running, one for the actual trades and one for trades that I was unable to make, usually I expect this to be shorts missed as my margin account is still lacking funding for full blown short selling. I'll get around to adding to this as this trading plan moves along.
Jeff.
Tuesday, July 28, 2009
Zero activity...options?
This is not what I am used to, zero activity. I placed the orders for PXP...that's it.
I am normally quite active during the day, or at some point in the day, researching, studying, trading... this feels more like babysitting.
Now, I have all my charts printed for quick reference...not that I need quick reference, all my orders are in, my positions have stops, I caught up on my reading... now is just the waiting while I see if positions get stopped or orders get filled.
I should perhaps setup a spreadsheet to track my trades to not include anything prior to my current criteria. I might do a Google doc as it will not have much traffic so the slow update time will not be an option...and I won't have to remember to load the changed sheet all the time. I was going to, and did start, an automatic order and stop filling sheet but with all this extra time and no real need for fast throughput I likely won't waste the time finishing it. I was having trouble with the nested logic statements to accommodate the $20 transition to 50cent increments anyway.
If this monotony is going to be a regular thing, as well as having extra buying power available due to not as many orders in play I think I may look into trading "in the money" options as well. I will wait to see if my P&F chart trading works first though. Of course, I could use the same charting to trade those options as well...now there is an interesting thought...P&F charting in order to play options instead of stocks. Less capital needed, stay away from the extrinsically valued options and just trade the highly correlated, long term, in the money options.
I did investigate options in the past but considered them useless for my purposes as I needed to be able to make stock "predictions" in order for the option trading to be of value. I also know more about option trading now than I did then.
I am normally quite active during the day, or at some point in the day, researching, studying, trading... this feels more like babysitting.
Now, I have all my charts printed for quick reference...not that I need quick reference, all my orders are in, my positions have stops, I caught up on my reading... now is just the waiting while I see if positions get stopped or orders get filled.
I should perhaps setup a spreadsheet to track my trades to not include anything prior to my current criteria. I might do a Google doc as it will not have much traffic so the slow update time will not be an option...and I won't have to remember to load the changed sheet all the time. I was going to, and did start, an automatic order and stop filling sheet but with all this extra time and no real need for fast throughput I likely won't waste the time finishing it. I was having trouble with the nested logic statements to accommodate the $20 transition to 50cent increments anyway.
If this monotony is going to be a regular thing, as well as having extra buying power available due to not as many orders in play I think I may look into trading "in the money" options as well. I will wait to see if my P&F chart trading works first though. Of course, I could use the same charting to trade those options as well...now there is an interesting thought...P&F charting in order to play options instead of stocks. Less capital needed, stay away from the extrinsically valued options and just trade the highly correlated, long term, in the money options.
I did investigate options in the past but considered them useless for my purposes as I needed to be able to make stock "predictions" in order for the option trading to be of value. I also know more about option trading now than I did then.
Sunday, July 26, 2009
The active trading list expands
I keep waffling between sticking to ten stocks on my hit list and all 50+ stocks from my visual scan last week. I looked over my 10 list and looked over my 50+ list, why should I myself to ten stocks? I figure that, as long as I am organized, there is no reason that I cannot place trades up to my cash (and margin) balance in each account.
Pros to using all 50+
-more trade setups at any particular time = more money in play
-more trades = smaller loss allowances per trade
-more selection for sector rotation or just diversification
-feels like I am doing more work toward trading, no boredom
-better selection of price ranges to use in the varied size of my accounts
Cons
-overly complicated if not organized well
-should there be many trades selecting which ones are best could be an issue
-possible over exposure to one or two sectors
-lack of familiarity with any particular stocks
Pros to using 10
-easily managed trading
-familiarity with stocks and their tendencies
-always enough capital to take all of the trade setups (with the exception of a lot of shorts)
Cons
-small sample base to use for studies
-fewer trades means that cash may be sitting unused
-leads to larger position sizing to get money working more often
-boredom as there may be little activity some weeks
Well, there is no glaring point that stands out for or against either method so I feel that it is more of a personality issue. I liked the daytrading, kept me active while keeping me from too much studying after trading hours. Daytrading is hard to work on when not trading even though I do reading and whatnot to keep up to date with some of the blogs that I follow.
This trading method reduces the intraday work, by close to 90% and allows most of the studying and trade determination to be done on weekends or evenings...even placing the trades can be done after or before hours.
The only one real drawback that I see is having money in play overnight and, especially over a weekend. I am more prone to gaps. Now, I am hoping that gaps will more often than not go in my favour only because the support levels that I am using may tend toward a favorable move but I am realistic enough to know that news sometimes forces gaps in either direction without regard to previous history.
I am setting up to use the full 50+ list for active trading. I have printed all the current P&F charts to use for manual notating. I can scan through the charts and see the setups in about 10 minutes. A quick note for each stock's trigger and a separate note for each one approaching it's respective trigger to setup trades.
Today I have 12 stocks nearing a trade entry. I have four active positions, two of which I may just liquidate to free up the cash as they are not on my new list. I will need to determine which ones are actionable based on account balances. My short sells are restricted due to the small margin account and most of the setups are shorts...shame.
It comes down to the fact that the trading decisions are pretty simple to make based on using support and resistance on a P&F chart so there is no reason not to be able to make more. Exits are cut and dried as well so there really is no trade management to mull over. Trigger, trade, scale in, stop set. The only hassle is knowing when and where to move stops but even that can be cut down to two or three strategies depending on the chart pattern.
Jeff.
Pros to using all 50+
-more trade setups at any particular time = more money in play
-more trades = smaller loss allowances per trade
-more selection for sector rotation or just diversification
-feels like I am doing more work toward trading, no boredom
-better selection of price ranges to use in the varied size of my accounts
Cons
-overly complicated if not organized well
-should there be many trades selecting which ones are best could be an issue
-possible over exposure to one or two sectors
-lack of familiarity with any particular stocks
Pros to using 10
-easily managed trading
-familiarity with stocks and their tendencies
-always enough capital to take all of the trade setups (with the exception of a lot of shorts)
Cons
-small sample base to use for studies
-fewer trades means that cash may be sitting unused
-leads to larger position sizing to get money working more often
-boredom as there may be little activity some weeks
Well, there is no glaring point that stands out for or against either method so I feel that it is more of a personality issue. I liked the daytrading, kept me active while keeping me from too much studying after trading hours. Daytrading is hard to work on when not trading even though I do reading and whatnot to keep up to date with some of the blogs that I follow.
This trading method reduces the intraday work, by close to 90% and allows most of the studying and trade determination to be done on weekends or evenings...even placing the trades can be done after or before hours.
The only one real drawback that I see is having money in play overnight and, especially over a weekend. I am more prone to gaps. Now, I am hoping that gaps will more often than not go in my favour only because the support levels that I am using may tend toward a favorable move but I am realistic enough to know that news sometimes forces gaps in either direction without regard to previous history.
I am setting up to use the full 50+ list for active trading. I have printed all the current P&F charts to use for manual notating. I can scan through the charts and see the setups in about 10 minutes. A quick note for each stock's trigger and a separate note for each one approaching it's respective trigger to setup trades.
Today I have 12 stocks nearing a trade entry. I have four active positions, two of which I may just liquidate to free up the cash as they are not on my new list. I will need to determine which ones are actionable based on account balances. My short sells are restricted due to the small margin account and most of the setups are shorts...shame.
It comes down to the fact that the trading decisions are pretty simple to make based on using support and resistance on a P&F chart so there is no reason not to be able to make more. Exits are cut and dried as well so there really is no trade management to mull over. Trigger, trade, scale in, stop set. The only hassle is knowing when and where to move stops but even that can be cut down to two or three strategies depending on the chart pattern.
Jeff.
Thursday, July 23, 2009
Timing is everything
I am watching, loosely, the market today and seeing a surge above a resistance line in the S&P500...and most market indices I expect...that has me wishing that I was in the trades that I have orders for. Today alone would have seen, so far, about $6 per share.
My shorts were not well timed and I am rethinking my shorting strategy to take more of an overall look at market dynamics, or sector dynamics. I have an idea for using some sort of sector rotation to bias my trading direction and to determine which stocks to be trading at any given point. Still in the mulling over stage.
Taking a step back, all of the orders that I have are contingent upon a bit of a reversal or pullback in order to get executed based on my criteria. While I know this is bound to happen I am biding my time by looking back at the triggers that I started with this week and going back to the point in time when those triggers were initially more relevant. When I placed the orders the triggers had already been hit and I was hoping for a little last minute pullback into my trading range.
Now that the triggers have mostly run out, the next reversal that can trigger my initial trade entries will be on a new column of "O"s which advances up the trendline. This point on the chart for the last trades that I missed would have worked out as follows...based on my scaling into the trade method assuming that I had started as recently as July 1st and I used all my picks including BMI and SFG:
Current stop out value = $1185 (close to real value)
Closed trades P/L = $30 (one winner, one stopped out full and one small winner)
Paper value about = $1885
Due to my stops being at least $1 below the active price the actual paper value of my portfolio would be higher. Given the market sentiment I might be inclined to cash out for that extra and wait for the next triggers...at least on the stocks that are very near target values and may turn soon.
This gives me more motivation to hold out for my entries. It is worth noting that 3 were 30 shares, 7 were 60 shares, and 1 was 90 shares, The one that stopped out was the 90 share trade which is also the one that I see I would not have entered due to the chart pattern and due to the lack of shorting inventory, now I know. The numbers for the trades are about what I would expect.
Off to lunch now.
Jeff.
My shorts were not well timed and I am rethinking my shorting strategy to take more of an overall look at market dynamics, or sector dynamics. I have an idea for using some sort of sector rotation to bias my trading direction and to determine which stocks to be trading at any given point. Still in the mulling over stage.
Taking a step back, all of the orders that I have are contingent upon a bit of a reversal or pullback in order to get executed based on my criteria. While I know this is bound to happen I am biding my time by looking back at the triggers that I started with this week and going back to the point in time when those triggers were initially more relevant. When I placed the orders the triggers had already been hit and I was hoping for a little last minute pullback into my trading range.
Now that the triggers have mostly run out, the next reversal that can trigger my initial trade entries will be on a new column of "O"s which advances up the trendline. This point on the chart for the last trades that I missed would have worked out as follows...based on my scaling into the trade method assuming that I had started as recently as July 1st and I used all my picks including BMI and SFG:
Current stop out value = $1185 (close to real value)
Closed trades P/L = $30 (one winner, one stopped out full and one small winner)
Paper value about = $1885
Due to my stops being at least $1 below the active price the actual paper value of my portfolio would be higher. Given the market sentiment I might be inclined to cash out for that extra and wait for the next triggers...at least on the stocks that are very near target values and may turn soon.
This gives me more motivation to hold out for my entries. It is worth noting that 3 were 30 shares, 7 were 60 shares, and 1 was 90 shares, The one that stopped out was the 90 share trade which is also the one that I see I would not have entered due to the chart pattern and due to the lack of shorting inventory, now I know. The numbers for the trades are about what I would expect.
Off to lunch now.
Jeff.
Tuesday, July 21, 2009
Scanning for Cherries
OK,
So trying to nail 10 stocks out of thousands is a little like trying to pick 10 best cherries out of a cherry tree...there are far more than 10.
I ran a new scan this morning and came up with 51 possible stocks to choose from. Not bad for a first paring even though I am sure there are more.
I took about five minutes to view the small chart page (candle glance on Stockcharts) that places 20 per page. These are larger than thumbnails and with P&F charting the patterns are dead simple to see. I pared 51 down to ten. That is my criteria right off the start. I can view ten per page without having to "next" to see the rest so it is easy.
In this case I was trying to come up with one that fits all my criteria, is in an uptrend and near a price trigger to trade and one or two others that are just trending nicely long or short.
Two have shown up on previous scans and they made the cut to ten. Then I got all excited and had some extra time to work on this...I changed my scan criteria and opened up the pipe...full tilt.
All US stocks (NYSE, NASDAQ, AMEX) between $10 and $45 with over 1,000,000 average shares per day traded.
Almost 700 selections. I pared them down to 51 (funny that number comes up again).
Comparing them to my current 10 selections is interesting. Not all of the ones on my trading list are on my 51. 5 are on both lists, 3 didn't make it based on volume and the other two based on not ideal chart patterning.
Now these visual scans are based on a smaller P&F chart so I need to expand these 51 to see the larger picture and determine if they still stand up to the test. I may modify my list, drop the lower volume stocks and the non-conformers. I have not actually traded these ones yet so I have no history one way or the other.
I'll post a list tomorrow once I get things nailed down. I will only have ten active trading stocks but I will likely keep up to 30 available as backups...perhaps set them up as sectors so I can rotate them based on that or even just to be sure that I don't get too heavy into one or two sectors. I'm not sure which way to go as either sector rotation or sector diversification, if not traded correctly, can be a problem.
Jeff.
So trying to nail 10 stocks out of thousands is a little like trying to pick 10 best cherries out of a cherry tree...there are far more than 10.
I ran a new scan this morning and came up with 51 possible stocks to choose from. Not bad for a first paring even though I am sure there are more.
I took about five minutes to view the small chart page (candle glance on Stockcharts) that places 20 per page. These are larger than thumbnails and with P&F charting the patterns are dead simple to see. I pared 51 down to ten. That is my criteria right off the start. I can view ten per page without having to "next" to see the rest so it is easy.
In this case I was trying to come up with one that fits all my criteria, is in an uptrend and near a price trigger to trade and one or two others that are just trending nicely long or short.
Two have shown up on previous scans and they made the cut to ten. Then I got all excited and had some extra time to work on this...I changed my scan criteria and opened up the pipe...full tilt.
All US stocks (NYSE, NASDAQ, AMEX) between $10 and $45 with over 1,000,000 average shares per day traded.
Almost 700 selections. I pared them down to 51 (funny that number comes up again).
Comparing them to my current 10 selections is interesting. Not all of the ones on my trading list are on my 51. 5 are on both lists, 3 didn't make it based on volume and the other two based on not ideal chart patterning.
Now these visual scans are based on a smaller P&F chart so I need to expand these 51 to see the larger picture and determine if they still stand up to the test. I may modify my list, drop the lower volume stocks and the non-conformers. I have not actually traded these ones yet so I have no history one way or the other.
I'll post a list tomorrow once I get things nailed down. I will only have ten active trading stocks but I will likely keep up to 30 available as backups...perhaps set them up as sectors so I can rotate them based on that or even just to be sure that I don't get too heavy into one or two sectors. I'm not sure which way to go as either sector rotation or sector diversification, if not traded correctly, can be a problem.
Jeff.
Monday, July 20, 2009
Forced Short Covering
Well, what a pain.
I just received a call from my broker telling me that I have to cover my SFG position because they have a buyer and they are short short inventory...at least they called instead of just closing my trade. I have heard of that happening in the past with other brokers.
This is the first time I have run into any issue with selling short and I had done a fair amount of it a while back, in fact it has been my favorite trade type.
So I have until 1400h to cover my 50 share position...at some loss.
I just placed a VTSO for 10 cents which gets me a better price than the high today at least.
I will track it as if I held the trade through...actually, they mentioned 1400h when I asked what the deadline was...perhaps they will just cover it at that time regardless of what I do. If that is the case I am best to leave the VTSO run and just let it go. I probably won't though as if I close it myself I might get an extra $5 on the trade...no big deal really but a buck is a buck better in my pocket.
This brings into question the efficacy of short selling as a trading strategy for some stocks. Obviously SFG is off my list for shorting now. I would have preferred had they bounced my initial short sell though... I would have just selected another stock to trade instead of SFG.
I think there may be a list ora method of finding out how thick the inventory is for shorting for future reference. I didn't think to ask the CSR at the time, I was just trying to wrap my head around having to cover a trade in a negative position...I was even giving some thought to adding to the position in the vein of the scaling in method earlier... glad I didn't do that.
Jeff.
I just received a call from my broker telling me that I have to cover my SFG position because they have a buyer and they are short short inventory...at least they called instead of just closing my trade. I have heard of that happening in the past with other brokers.
This is the first time I have run into any issue with selling short and I had done a fair amount of it a while back, in fact it has been my favorite trade type.
So I have until 1400h to cover my 50 share position...at some loss.
I just placed a VTSO for 10 cents which gets me a better price than the high today at least.
I will track it as if I held the trade through...actually, they mentioned 1400h when I asked what the deadline was...perhaps they will just cover it at that time regardless of what I do. If that is the case I am best to leave the VTSO run and just let it go. I probably won't though as if I close it myself I might get an extra $5 on the trade...no big deal really but a buck is a buck better in my pocket.
This brings into question the efficacy of short selling as a trading strategy for some stocks. Obviously SFG is off my list for shorting now. I would have preferred had they bounced my initial short sell though... I would have just selected another stock to trade instead of SFG.
I think there may be a list ora method of finding out how thick the inventory is for shorting for future reference. I didn't think to ask the CSR at the time, I was just trying to wrap my head around having to cover a trade in a negative position...I was even giving some thought to adding to the position in the vein of the scaling in method earlier... glad I didn't do that.
Jeff.
Thursday, July 16, 2009
Maximum Loss Allowance revisited
The next issue I need to consider is how much emphasis that I should put on my preference to having most of my capital in play at any given time.
Does 10 stocks allow this as they cycle in and out of trades?
I am currently using 50 shares per trade and 100 if the price is around the $20 mark. Should I find that this plan works well but only has half the stocks in play at any given time I will need to consider upping to 100 share trades.
Maximum Loss Allowances (MLA) and compounding effects come into play here.
My MLA has typically been very small, $20 for some daytrading and $50 to $100 for previous medium term trading. Previously I was considering that $5,000 was my capital base to work with and 2% would be $100.
So, 2% capital risk per trade was my setting. I now consider that I am working with $15,000 (three accounts combined) so my 2% rule takes me up to $300. On a 100 share trade that is a $3 allowance per share which is about what I need in order to use P&F charts for entry and stop settings. Of course if I get a better entry then my MLA for that trade gets smaller as the stop does not move.
My effective MLA right now is 1% as I am using 50 shares. My main reason is to allow more trades to prove the plan first.
Perhaps a point to consider would be to up my MLA rate to 3% should the plan prove to be successful enough. This would effectively increase my position sizing by 50% and negate requiring as many stocks, as long as the ones that I am trading keep me far enough into the green to weather higher losses on the stopped out trades.
In order to take advantage of compounding I need to get new profits working quickly. So a $300 profit should be able to go towards building my working capital, which needs to be actively in play to be working...which brings me to the issue of how much emphasis to put on staying in play most of the time.
I think for the time being I should not concentrate too hard on this. Just get the ten stocks working in their various cycles, perhaps have a few in the wings to parachute in when one or more lose the nice patterning and just worry about making the trading plan work, figure out the edge and go from there.
Jeff.
Does 10 stocks allow this as they cycle in and out of trades?
I am currently using 50 shares per trade and 100 if the price is around the $20 mark. Should I find that this plan works well but only has half the stocks in play at any given time I will need to consider upping to 100 share trades.
Maximum Loss Allowances (MLA) and compounding effects come into play here.
My MLA has typically been very small, $20 for some daytrading and $50 to $100 for previous medium term trading. Previously I was considering that $5,000 was my capital base to work with and 2% would be $100.
So, 2% capital risk per trade was my setting. I now consider that I am working with $15,000 (three accounts combined) so my 2% rule takes me up to $300. On a 100 share trade that is a $3 allowance per share which is about what I need in order to use P&F charts for entry and stop settings. Of course if I get a better entry then my MLA for that trade gets smaller as the stop does not move.
My effective MLA right now is 1% as I am using 50 shares. My main reason is to allow more trades to prove the plan first.
Perhaps a point to consider would be to up my MLA rate to 3% should the plan prove to be successful enough. This would effectively increase my position sizing by 50% and negate requiring as many stocks, as long as the ones that I am trading keep me far enough into the green to weather higher losses on the stopped out trades.
In order to take advantage of compounding I need to get new profits working quickly. So a $300 profit should be able to go towards building my working capital, which needs to be actively in play to be working...which brings me to the issue of how much emphasis to put on staying in play most of the time.
I think for the time being I should not concentrate too hard on this. Just get the ten stocks working in their various cycles, perhaps have a few in the wings to parachute in when one or more lose the nice patterning and just worry about making the trading plan work, figure out the edge and go from there.
Jeff.
Out of Synch
I find that my entry into the stocks of choice was mistimed somewhat...at least in so far as I had wanted to get into some trades fairly quickly. While most of my picks are good contenders in the consistent trending department they were just past their trigger points, as indicated in the previous post.
So I reset the triggers for some of these stocks, others remain where they were for the time being as they have not technically reversed yet.
I still only have one trade active, the SFG short, and I hover near the GNK entry for another short. Some of my long entry triggers are now on to the next column on the P&F chart.
My conundrum now is that I see some great possibilities in the short department as the market gives a little surge creating some short term over bought conditions in downtrenders, the classic swing style entry, just using different style charting to see it easier. I have to decide if I want to throw more cash into my margin account for this purpose or not and then go looking for three more stocks in downtrends to fill the bill and top off my stock list to 10.
Jeff.
So I reset the triggers for some of these stocks, others remain where they were for the time being as they have not technically reversed yet.
I still only have one trade active, the SFG short, and I hover near the GNK entry for another short. Some of my long entry triggers are now on to the next column on the P&F chart.
My conundrum now is that I see some great possibilities in the short department as the market gives a little surge creating some short term over bought conditions in downtrenders, the classic swing style entry, just using different style charting to see it easier. I have to decide if I want to throw more cash into my margin account for this purpose or not and then go looking for three more stocks in downtrends to fill the bill and top off my stock list to 10.
Jeff.
Wednesday, July 15, 2009
BMI got the axe and closed.
Today I got a nice little run up in the price of BMI. Went from about breakeven to close for $1.42. It popped to $2.00 up and I raised my stop but I happened to be checking my trades when I saw a large drop materialize...so I raised my stop again to $40 and got closed at $39.92...lost the extra 8cents due to the spread and the other 50 cents due to leaving it a chance of recovery.
I missed a nice short by 2 cents as I placed a limit order for GNK at $23.00...$22.98 was the high so far. I almost just market ordered it but decided to stick to my plan. It popped back up to $22.95 later and may yet hit $23 by day's end... but I doubt it as it is liking the $22.65 area.
I have a nice little harem of 7 stocks in action now, only one active trade. I think that I will even that up to ten for now which gives me a nice range of sectors and prices to keep some semblance of diversity. Some of the picks ended up from the signal service I tried but only as a result of being at the right price and point in the current trend.
I was finding many overlaps when I was running a parallel trial earlier and have determined that the service was really only giving signals based on P&F charting patterns. I don't know what criteria they used to keep the number of signals down but it does not matter as the best result should be gained from being familiar with a handful of stocks anyway. This makes it easy and quick to review the charts on a daily basis to determine what the next trade will be ahead of time. I hardly need a signal service to tell me what my basket of stocks are doing at any given time.
Last note about signal services, perhaps I already mentioned this sometime but they must be treated like any other indicator. There is no magic, not that I really expected any, and they must always be traded according to your own rules of entry and loss allowance.
Jeff.
I missed a nice short by 2 cents as I placed a limit order for GNK at $23.00...$22.98 was the high so far. I almost just market ordered it but decided to stick to my plan. It popped back up to $22.95 later and may yet hit $23 by day's end... but I doubt it as it is liking the $22.65 area.
I have a nice little harem of 7 stocks in action now, only one active trade. I think that I will even that up to ten for now which gives me a nice range of sectors and prices to keep some semblance of diversity. Some of the picks ended up from the signal service I tried but only as a result of being at the right price and point in the current trend.
I was finding many overlaps when I was running a parallel trial earlier and have determined that the service was really only giving signals based on P&F charting patterns. I don't know what criteria they used to keep the number of signals down but it does not matter as the best result should be gained from being familiar with a handful of stocks anyway. This makes it easy and quick to review the charts on a daily basis to determine what the next trade will be ahead of time. I hardly need a signal service to tell me what my basket of stocks are doing at any given time.
Last note about signal services, perhaps I already mentioned this sometime but they must be treated like any other indicator. There is no magic, not that I really expected any, and they must always be traded according to your own rules of entry and loss allowance.
Jeff.
Tuesday, July 14, 2009
BMI gets the axe.
I mentioned that BMI (Badger Meter Inc) might remain on my list of potential stocks to trade...I changed my mind.
I like a stock that has a very narrow bid/ask spread for a few reasons:
1) at the open there is less chance of a tight stop getting hit due to a wide spread
2) market order executions are more predictable, a penny here or there
3) wide spreads are indicative of low volume...or low volume creates wide spreads, whichever
My attention was too scattered over the past couple of weeks to really take note of the stocks that I was playing with or I would have realized that BMI is traded a bit thinly for my normal selections. The day is almost out and it has only traded 131K shares. While it is not too bad it has been brute in the morning as the bid/ask has been very wide right up to the last moment, today was a better day as my stop was wide and there was a $1 pop in after hours trading that pulled the last traded price up to $40. Alas it did not lead to a great jump in price. At least there is only about a 6 cent spread now.
Off to find some more selections to work with. Looks like PLCE and COP might be next in line.
My back testing takes forever but it gives me some feel for the stock leading up to the current period. I was doing a full year so perhaps I will cut it down to the last quarter or so. That is the most pertinent time anyway as trading patterns could shift over a year.
I am liking only having to loosely monitor prices during the day. Today I went ahead and set two limit orders for COP and PLCE to see if I would get in...very close. Within 12 cents on PLCE and COP may yet get nailed as it is at a daily low right now...23 cents off my order.
I will wait for my prices though, absolutely no price chasing in this plan.
Jeff.
I like a stock that has a very narrow bid/ask spread for a few reasons:
1) at the open there is less chance of a tight stop getting hit due to a wide spread
2) market order executions are more predictable, a penny here or there
3) wide spreads are indicative of low volume...or low volume creates wide spreads, whichever
My attention was too scattered over the past couple of weeks to really take note of the stocks that I was playing with or I would have realized that BMI is traded a bit thinly for my normal selections. The day is almost out and it has only traded 131K shares. While it is not too bad it has been brute in the morning as the bid/ask has been very wide right up to the last moment, today was a better day as my stop was wide and there was a $1 pop in after hours trading that pulled the last traded price up to $40. Alas it did not lead to a great jump in price. At least there is only about a 6 cent spread now.
Off to find some more selections to work with. Looks like PLCE and COP might be next in line.
My back testing takes forever but it gives me some feel for the stock leading up to the current period. I was doing a full year so perhaps I will cut it down to the last quarter or so. That is the most pertinent time anyway as trading patterns could shift over a year.
I am liking only having to loosely monitor prices during the day. Today I went ahead and set two limit orders for COP and PLCE to see if I would get in...very close. Within 12 cents on PLCE and COP may yet get nailed as it is at a daily low right now...23 cents off my order.
I will wait for my prices though, absolutely no price chasing in this plan.
Jeff.
Monday, July 13, 2009
Patience and the Nitty Gritty.
I have two trades that I still have open one from last week and one from last month.
My other trades ended up in the red overall so I am not overly impressed with the method that I was using...that was the test of the service. Even had I exited the few that did turn green at the peak I suspect that I would have ended negative for the test anyway. That is not anywhere near enough of an edge to sway me into using this particular service. Of course, I shouldn't have been surprised.
So on to the next more serious trade plan with a healthy sprinkling of patience. Now that I am using all of my own picks and entries I don't mind getting into the nitty gritty of what I am really doing...so here it goes...
I went through some back testing of the two trades that I am in right now and found how the particular stocks seem to work with respect to my indicators...more on those another time.
Badger Meter Inc. (BMI)
This stock moves well and has a nice pattern of observing various support and resistance levels far more often than breaking them. Volume levels are clean and well delineated and the price ranges often enough to produce a good number of trading opportunities. It's a keeper in my arsenal of stocks to trade.
There have been 26 trade setups in the last 12 months. 8 did not meet the entry target, 2 were losers (less than $2 ps) and the rest were up $55.50 ps.
I bought it on Friday at $38.50 based on a signal, but not mine. It was a buy under $40 but I had it down as a buy under $38. $38.50 is not too far off and the price entry has some reasonable trend support so I will play it out. The up target is $44.00.
Lincare Holdings (LNCR)
LNCR is the other longer term trade, it is a short placed on June 30th at $23.30. This one is a slow mover and I would not have traded it had I realized that it would tie up capital for so long to make it's moves. I did not do all of the back testing that I would normally plan as I doubt that I will continue tracking it. It does trade decent volume and I wouldn't mind so much holding it as a long position but it is in a serious long term downtrend right now....has been for almost three years and it has only moved $15 overall with a large drop of $12 in 2007 that took 6 months to finish.
Wider stops, more patience...I should check to see if I am going to get hit with a dividend payout soon.
The down target is somewhere just south of $20 and I will cover this trade rather than letting it go much farther.
That's it for active trades and I have nothing else tested yet. This is where the patience comes in. I will not just enter a trade until I have done the one year back test and determined that the stock is a good candidate. I plan on having a number of stocks, perhaps forty, to choose from at any given time. They will all have pre-set entry targets and use rule based following stops.
I estimate that I can choose a stock in a few minutes after doing a scan for my criteria. It should take about an hour to do a back test so I may only end up with a few per week to add to my list.
At some point in the future I will set these up with a semi automatic trigger program but I need to see some returns to justify the necessary time investment involved in writing that kind of software.
Jeff.
My other trades ended up in the red overall so I am not overly impressed with the method that I was using...that was the test of the service. Even had I exited the few that did turn green at the peak I suspect that I would have ended negative for the test anyway. That is not anywhere near enough of an edge to sway me into using this particular service. Of course, I shouldn't have been surprised.
So on to the next more serious trade plan with a healthy sprinkling of patience. Now that I am using all of my own picks and entries I don't mind getting into the nitty gritty of what I am really doing...so here it goes...
I went through some back testing of the two trades that I am in right now and found how the particular stocks seem to work with respect to my indicators...more on those another time.
Badger Meter Inc. (BMI)
This stock moves well and has a nice pattern of observing various support and resistance levels far more often than breaking them. Volume levels are clean and well delineated and the price ranges often enough to produce a good number of trading opportunities. It's a keeper in my arsenal of stocks to trade.
There have been 26 trade setups in the last 12 months. 8 did not meet the entry target, 2 were losers (less than $2 ps) and the rest were up $55.50 ps.
I bought it on Friday at $38.50 based on a signal, but not mine. It was a buy under $40 but I had it down as a buy under $38. $38.50 is not too far off and the price entry has some reasonable trend support so I will play it out. The up target is $44.00.
Lincare Holdings (LNCR)
LNCR is the other longer term trade, it is a short placed on June 30th at $23.30. This one is a slow mover and I would not have traded it had I realized that it would tie up capital for so long to make it's moves. I did not do all of the back testing that I would normally plan as I doubt that I will continue tracking it. It does trade decent volume and I wouldn't mind so much holding it as a long position but it is in a serious long term downtrend right now....has been for almost three years and it has only moved $15 overall with a large drop of $12 in 2007 that took 6 months to finish.
Wider stops, more patience...I should check to see if I am going to get hit with a dividend payout soon.
The down target is somewhere just south of $20 and I will cover this trade rather than letting it go much farther.
That's it for active trades and I have nothing else tested yet. This is where the patience comes in. I will not just enter a trade until I have done the one year back test and determined that the stock is a good candidate. I plan on having a number of stocks, perhaps forty, to choose from at any given time. They will all have pre-set entry targets and use rule based following stops.
I estimate that I can choose a stock in a few minutes after doing a scan for my criteria. It should take about an hour to do a back test so I may only end up with a few per week to add to my list.
At some point in the future I will set these up with a semi automatic trigger program but I need to see some returns to justify the necessary time investment involved in writing that kind of software.
Jeff.
Friday, July 10, 2009
Three ring circus
I was running three separate trials to test some theories and a service.
1) a "unique" signal service that provides a stock call for possible trades
2) a parallel self generated scan that produces stock picks in a certain range
3) a plan based on longer weekly period moving averages
I chose to use my account for the signal testing figuring that perhaps a pre-tested system might generate some real profits, which would be cool and be "easy" for some modest gains. My plan was not to stick with this unless it was wildly successful... which I doubted it would be.
Now, I have tried out a few systems in the past when they have had "free trials" and I have always cancelled and either been refunded or just not billed. I must say that they have always been good about the cancellation and have been above board when it comes to processing and responding. It's too bad the performance was not up to the claims.
So far anything that I have tried I have not really written about as they were just for my curiosity and none were anything to write about, nothing has changed. In all cases I wanted to see how they worked and get inside the system, do a bit of comparative backtesting and some real time testing. What I have found is that any system is only another indicator like any other. Some claim to have the "secret" to making money in varying quantities but none are more than that. I really knew this all along as nobody can forecast what a stock is going to do.
Curiosity.
I am down to # 3) a plan based on longer weekly period moving averages. I am adding the Point and Figure charting to this to supply some entry and stop settings and using the averages more as a general guide to help with the trade direction bias.
I am down to a one ring circus now and I already feel the calm as a result.
Jeff.
1) a "unique" signal service that provides a stock call for possible trades
2) a parallel self generated scan that produces stock picks in a certain range
3) a plan based on longer weekly period moving averages
I chose to use my account for the signal testing figuring that perhaps a pre-tested system might generate some real profits, which would be cool and be "easy" for some modest gains. My plan was not to stick with this unless it was wildly successful... which I doubted it would be.
Now, I have tried out a few systems in the past when they have had "free trials" and I have always cancelled and either been refunded or just not billed. I must say that they have always been good about the cancellation and have been above board when it comes to processing and responding. It's too bad the performance was not up to the claims.
So far anything that I have tried I have not really written about as they were just for my curiosity and none were anything to write about, nothing has changed. In all cases I wanted to see how they worked and get inside the system, do a bit of comparative backtesting and some real time testing. What I have found is that any system is only another indicator like any other. Some claim to have the "secret" to making money in varying quantities but none are more than that. I really knew this all along as nobody can forecast what a stock is going to do.
Curiosity.
I am down to # 3) a plan based on longer weekly period moving averages. I am adding the Point and Figure charting to this to supply some entry and stop settings and using the averages more as a general guide to help with the trade direction bias.
I am down to a one ring circus now and I already feel the calm as a result.
Jeff.
Thursday, July 9, 2009
To niche or, not to niche?
My dabbling in longer term trading has changed the way that I view all trading, even the intraday stuff. In the past I knew that trading based on multiple time frame was necessary in the long run and now I have managed to inadvertently get to one of those stages. I was daytrading in the minute time lines then I changed that to 30 minute and daily with the longer term stuff and now I am investigating the weekly, which I played with a little while back with no real conviction.
Today (and a couple of other times) I entered an intraday position based on either news or just what appeared to be the current trend. My previous two trades were small profits as a result of letting the stop sit where it should be to start considering the longer time frames, I just made sure to close out before the end of the day.
Today I placed a long trade in SPY around 0945h and set the stop below the overnight low range which was near the previous day close price. I have watched as the price has ranged between 60 or 70 cents over the morning, leaving a few opportunities to make some small profits on closing the trades at the repeated high of the AM. I decided to leave these in order to just play the longer game. This is as much a mental game as anything else right now as I left the position open for four tests of the low price then moved my stop tight when the price reached the first support/resistance line at about noon.
So, three "daytrades" for three and all profitable, even if marginally.
Perhaps I was just in the wrong frame of mind all this time and I should return tot he day trade?
No, I like the longer term as well as the shorter term trades. I figure that I will be better served by keeping a wide array of experience in the market active. I know many suggest finding a niche and sticking to it but a niche edge in trading can evaporate in a slight change in market dynamics so I would rather have a broader approach that allows me to pick and choose what works and what does not given the ever changing circumstances. The key will be to recognize what is best for any given timeframe and market condition.
The never ending game.
Jeff.
Today (and a couple of other times) I entered an intraday position based on either news or just what appeared to be the current trend. My previous two trades were small profits as a result of letting the stop sit where it should be to start considering the longer time frames, I just made sure to close out before the end of the day.
Today I placed a long trade in SPY around 0945h and set the stop below the overnight low range which was near the previous day close price. I have watched as the price has ranged between 60 or 70 cents over the morning, leaving a few opportunities to make some small profits on closing the trades at the repeated high of the AM. I decided to leave these in order to just play the longer game. This is as much a mental game as anything else right now as I left the position open for four tests of the low price then moved my stop tight when the price reached the first support/resistance line at about noon.
So, three "daytrades" for three and all profitable, even if marginally.
Perhaps I was just in the wrong frame of mind all this time and I should return tot he day trade?
No, I like the longer term as well as the shorter term trades. I figure that I will be better served by keeping a wide array of experience in the market active. I know many suggest finding a niche and sticking to it but a niche edge in trading can evaporate in a slight change in market dynamics so I would rather have a broader approach that allows me to pick and choose what works and what does not given the ever changing circumstances. The key will be to recognize what is best for any given timeframe and market condition.
The never ending game.
Jeff.
Monday, July 6, 2009
All in.
I am now up to five long and two short positions.
My plan has me going "All in" but not by increasing my position sizing just yet. That would place the loss allowances needed to start these trades too high, or I would tie myself down to only a few possible trades due to needing the price to get closer to my stop setting before entering.
Right now all my trades are 50 shares. Maximum loss allowance of $150 ($3 stops) even though most will come in tighter than that. At 50 shares I can get three shorts in my margin account, 6 or 7 long in my RRSP and 2 or 3 in my TFSA. This allows for some diversity as well as bringing my active trade quantity up to give me some data to work with for determining how successful this trading may turn out.
I think I will add some cash to the margin account and put up with the fact that there will be income tax owing as a result. Once I get my TFSA built up then I should be able to avoid having to do that in future. I just like the idea of having 3X margin available in addition to the shorting capabilities.
So, here's to going all in.
Jeff.
My plan has me going "All in" but not by increasing my position sizing just yet. That would place the loss allowances needed to start these trades too high, or I would tie myself down to only a few possible trades due to needing the price to get closer to my stop setting before entering.
Right now all my trades are 50 shares. Maximum loss allowance of $150 ($3 stops) even though most will come in tighter than that. At 50 shares I can get three shorts in my margin account, 6 or 7 long in my RRSP and 2 or 3 in my TFSA. This allows for some diversity as well as bringing my active trade quantity up to give me some data to work with for determining how successful this trading may turn out.
I think I will add some cash to the margin account and put up with the fact that there will be income tax owing as a result. Once I get my TFSA built up then I should be able to avoid having to do that in future. I just like the idea of having 3X margin available in addition to the shorting capabilities.
So, here's to going all in.
Jeff.
Misjudgment and the learning curve.
Trading using the P&F charts in the manner that I am now involves some new ideas for me when it comes to holding positions and setting stops.
With regards to stop setting I need to move the stops according to my rules, generally move them $1 at a time when the price moves past the higher dollar or 50 cents if the price stalls and consolidates to preserve that 50cent per share previous move. Also set the stop to my target price shortly after it is crossed as I do not want to give back my target profit once achieved.
This first change in thinking and stop setting would have had me out of positions for a profit before Friday, not all, but at least two of my longs. Now I am selling them off at a loss instead.
This past employment report being so negative it has affected the general market enough to throw off some of my chart triggers and stops and make me consider tracking both the market and individual sectors on their own charts to co-ordinate long and short position entry depending on the correlation between the stock traded and the sector/market it is in.
More work.
Having said that I am treating this as a buying opportunity as some of my stocks have met their trigger prices due to this news and they may not have otherwise. I have two limit orders in now. None of my short targets are setting up as they have mostly dropped now. I'll likely have to give them a couple of days to return to normal. I'd hate to short a couple of stocks only to have them bounce through my stop.
I would liked to have been tracking P&F charts back when all this started in the initial downturn. I may go back and look at it in that timeframe just out of curiosity sometime.
Jeff.
With regards to stop setting I need to move the stops according to my rules, generally move them $1 at a time when the price moves past the higher dollar or 50 cents if the price stalls and consolidates to preserve that 50cent per share previous move. Also set the stop to my target price shortly after it is crossed as I do not want to give back my target profit once achieved.
This first change in thinking and stop setting would have had me out of positions for a profit before Friday, not all, but at least two of my longs. Now I am selling them off at a loss instead.
This past employment report being so negative it has affected the general market enough to throw off some of my chart triggers and stops and make me consider tracking both the market and individual sectors on their own charts to co-ordinate long and short position entry depending on the correlation between the stock traded and the sector/market it is in.
More work.
Having said that I am treating this as a buying opportunity as some of my stocks have met their trigger prices due to this news and they may not have otherwise. I have two limit orders in now. None of my short targets are setting up as they have mostly dropped now. I'll likely have to give them a couple of days to return to normal. I'd hate to short a couple of stocks only to have them bounce through my stop.
I would liked to have been tracking P&F charts back when all this started in the initial downturn. I may go back and look at it in that timeframe just out of curiosity sometime.
Jeff.
Saturday, July 4, 2009
Medium term trading and daytrading combined now
I decided to keep all my trading to together in journalling and in action as that seems to be the way it is working out now. Thursday I did a little bit of daytrading as the bad news came out for the US employment figures, I rode SDS for a small gain as the market adjusted downward.
Either my concentration on medium term timelines or stop loss setting has sunk in..or what I don't know. I entered the day trade and left a $1 stop in place...HUH? ... that certainly is not my normal stop loss for day trading... perhaps that has been part of my problem all along with stop setting though. I seem to like this longer timeframe for trading.
I will sort of start from scratch over here for my current trading as I just spent a fair amount of time reviewing all my real trades, fake trades and did a little bit of speculative backtesting based on my new plan in order to set some rules down... I'll work them out later.
Jeff.
Either my concentration on medium term timelines or stop loss setting has sunk in..or what I don't know. I entered the day trade and left a $1 stop in place...HUH? ... that certainly is not my normal stop loss for day trading... perhaps that has been part of my problem all along with stop setting though. I seem to like this longer timeframe for trading.
I will sort of start from scratch over here for my current trading as I just spent a fair amount of time reviewing all my real trades, fake trades and did a little bit of speculative backtesting based on my new plan in order to set some rules down... I'll work them out later.
Jeff.
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