I was looking at the cost of trading spreads this morning as I lamented the loss of the quote spreads. On today's trade there was 4 cents left due to the bid ask spreads on both the buy and sell legs of the spread order I placed.
$16 for the entire trade.
Well, so what?
When I buy at the ask and sell at the bid and if I have to turn around and close the trade by selling my long option at the bid and buying the short at the ask, I double this cost of trading.
Considering that the commissions are $17.95 for the 4 contract spread, the opening bid ask spread is $16, should I close the trade another $17.95 and another $16 for the bid ask spread again...that makes $67.90 to open and close the trade in direct and indirect losses.
That certainly needs to be considered in the mix when it comes time to think about how to close. Letting the trade expire is obviously the best most cost effective method as it cuts this cost in half but is not always going to be an option.
Considering that the total possible loss of a spread trade is much higher than the value of the trade by about one order of magnitude taking this additional cost is a small price to pay to exit a potentially losing trade.
This is why I am concerned with the space I allow between the stock price and the spread strike. The more space that still allows me to see my minimum profit target, the better.
Jeff.
Questrade, My direct access discount broker.
Showing posts with label comments. Show all posts
Showing posts with label comments. Show all posts
Monday, December 14, 2009
Wednesday, October 21, 2009
Optioneer on the way
I sent the first cheque to Strikepoint Trading today so I will be trading some time next week. I didn't get the great USD drop last Wednesday but I made out OK with a $1.085 conversion including fees.
I am looking forward to trading these different strategies that will be available to me through the broker.
Jeff.
I am looking forward to trading these different strategies that will be available to me through the broker.
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.
Thursday, July 16, 2009
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.
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.
Friday, June 19, 2009
This week is a wrap...
I did no day trading today. I did sink all my capital, well, most of it anyway, into a bit of medium term trading.
I pulled some ideas from the past and mixed them with some new ideas and put four positions in play to see what would happen. This will give me some breathing room for some other studying that I want to do on longer term trading. I think that I need a perspective break from the daytrading right now, as much as I hate to miss some of the upcoming potential there will always be some level of potential for daytrading.
That and I think that I need to focus on some stock or sector ETF trading so I am looking in that direction with the longer term stuff. Seeing as longer term is really only a different timeframe this may give me some of the perspective that I look for.
I may still dabble but longer term trading takes, well, a longer time to see how it will work out so I am not sure when I may get back into what I see as my most enjoyable part of trading. Perhaps as I have cash on the sidelines I may pop in here and there as well as keeping up with some level of fake trading to be sure that the game does not change ahead of me too much.
Off for the weekend.
Jeff.
I pulled some ideas from the past and mixed them with some new ideas and put four positions in play to see what would happen. This will give me some breathing room for some other studying that I want to do on longer term trading. I think that I need a perspective break from the daytrading right now, as much as I hate to miss some of the upcoming potential there will always be some level of potential for daytrading.
That and I think that I need to focus on some stock or sector ETF trading so I am looking in that direction with the longer term stuff. Seeing as longer term is really only a different timeframe this may give me some of the perspective that I look for.
I may still dabble but longer term trading takes, well, a longer time to see how it will work out so I am not sure when I may get back into what I see as my most enjoyable part of trading. Perhaps as I have cash on the sidelines I may pop in here and there as well as keeping up with some level of fake trading to be sure that the game does not change ahead of me too much.
Off for the weekend.
Jeff.
Thursday, June 18, 2009
June 18, A break.
I'm taking a bit of a break from blogging all my activities for a bit. Too much stuff going on so I have to cut back on time spent on less productive activities for a bit.
I paid more attention to the last few days and how the trading ranges set up so I did a wee bit of range trading, which I either try to stay away from normally or I just trade for breakouts that never materialize. I traded one for a break out that failed but got close to break even and had two others that made a bit of profit. I see now how to better utilize the TICK. I think trying to concentrate on it as a trade trigger alone is asking for trouble anyway. It may work sometimes but trading should always have an edge, not just sometimes.
I am also trying something a bit different, actually it is a medium term trade idea. I have accumulated a list of stocks that are reasonably big players that I see other traders trading intraday or these are used to gauge market sentiment. Either way they are fairly common and reasonably fluid issues.
I plan on putting all of these stocks (McDonalds, Morgan Stanley, General Electric, Dupont, Johnson and Johnson, 3M, etc.) on a page in my Esignal software. I am working on a script to monitor these for certain significant milestones and trends in order to do some swing trading and sector rotational style trading, perhaps a bit of hedging as well.
It would be fairly easy to even scroll through these one by one to watch for certain patterns and price positioning as well. I have been only trading full lots due to a restriction in Questrade that would not allow me to place a part lot stop loss. I figured that, seeing as the stop loss was a market restriction altogether, I should try a partial lot stop loss in the NYSE...surprise surprise! I am able to stop loss partials.
Now I will be trading in my TFSA using part lots of various companies with appropriate stops in place for each. I may even let them trickle into my other accounts if I can keep enough capital free for daytrading...although even there I could use smaller position sizing as the main restriction I have been considering was having to use lots of 100 shares which can, in slumps or testing periods, draw my account down. Live and learn.
Today I bought McDonalds (MCD) due to the significant 200DMA test. It was not ideal but I wanted to place with an order setup and test the stop loss order entry. I placed a limit order lower than my eventual entry which I should have just left in play. Due to impatience I replaced it with a market order, only to see the price drop 20 cents shortly afterward. Unlike day trading a drop of 20 cents in a medium term trade means next to nothing as my stop loss is a full $1 away. I sort of wanted to be in the trade today even though I likely could have gotten a better price tomorrow.
Jeff.
I paid more attention to the last few days and how the trading ranges set up so I did a wee bit of range trading, which I either try to stay away from normally or I just trade for breakouts that never materialize. I traded one for a break out that failed but got close to break even and had two others that made a bit of profit. I see now how to better utilize the TICK. I think trying to concentrate on it as a trade trigger alone is asking for trouble anyway. It may work sometimes but trading should always have an edge, not just sometimes.
I am also trying something a bit different, actually it is a medium term trade idea. I have accumulated a list of stocks that are reasonably big players that I see other traders trading intraday or these are used to gauge market sentiment. Either way they are fairly common and reasonably fluid issues.
I plan on putting all of these stocks (McDonalds, Morgan Stanley, General Electric, Dupont, Johnson and Johnson, 3M, etc.) on a page in my Esignal software. I am working on a script to monitor these for certain significant milestones and trends in order to do some swing trading and sector rotational style trading, perhaps a bit of hedging as well.
It would be fairly easy to even scroll through these one by one to watch for certain patterns and price positioning as well. I have been only trading full lots due to a restriction in Questrade that would not allow me to place a part lot stop loss. I figured that, seeing as the stop loss was a market restriction altogether, I should try a partial lot stop loss in the NYSE...surprise surprise! I am able to stop loss partials.
Now I will be trading in my TFSA using part lots of various companies with appropriate stops in place for each. I may even let them trickle into my other accounts if I can keep enough capital free for daytrading...although even there I could use smaller position sizing as the main restriction I have been considering was having to use lots of 100 shares which can, in slumps or testing periods, draw my account down. Live and learn.
Today I bought McDonalds (MCD) due to the significant 200DMA test. It was not ideal but I wanted to place with an order setup and test the stop loss order entry. I placed a limit order lower than my eventual entry which I should have just left in play. Due to impatience I replaced it with a market order, only to see the price drop 20 cents shortly afterward. Unlike day trading a drop of 20 cents in a medium term trade means next to nothing as my stop loss is a full $1 away. I sort of wanted to be in the trade today even though I likely could have gotten a better price tomorrow.
Jeff.
Monday, June 15, 2009
Monday, June 15...frustration sets in
There are days when I wonder if the frustration is worth it...today I vent.
Don't get me wrong, I enjoy trading, the analysis, the watching market activity.
When I have a bad day, I learn from the poor ideas to avoid certain setups. I learn better how to judge and move stop settings. I get just that little bit more comfortable with the whole plan and execution. I have been getting better at entries and not entering when I shouldn't. I feel OK about the fact that I had a down day.
Good days, they speak for themselves, who can feel down on a good day?
But there are days that are in between. I know that missing a move is expected and there is little chance of catching every move over the course of the day. As I do not trade for a living (far from it yet) and I do other work during the day, I have interruptions in trading. I work trading into my schedule as I can. This is a huge problem with respect to trading for a profit.
This leads to a day like today.
Last week was a range week and I watched and learned. I made some trades and lost some trades, noted how the volume affected Friday's trading and how the week slowed right down to that day.
Without getting into the whole analysis I was planning my trades around a drop in the market today below the low of last week. In that I was not disappointed.
To keep the story short I placed a trade with a too tight stop, I see that now and should have seen it at the time...lesson leaned. I watched as the price did not come back to the entry I wanted...I actually set it well but hesitation had me miss it. I tried twice more unsuccessfully, only due to other issues interfering with my attention on the charts. By the time I could concentrate I entered a trade against my TICK timing and at a point in the pattern where a reversal was at least as likely as a continuation.
I fell prey to the "trade for the sake of being in a trade" trap. Frustration at missing trade entries clouded my judgement.
I knew that the trade was likely to go against me but I "hoped" that I would be wrong (HUH?) and the trade would go in my favour.
So I hope that I learned this lesson...although this is a recurring theme in my trading, that I miss some of the best moving days, even though my plan is sound.
I am going to have some lunch and review my plan, my setups and my mindset for the day to see if I can make some decent trades in the afternoon.
Jeff.
Don't get me wrong, I enjoy trading, the analysis, the watching market activity.
When I have a bad day, I learn from the poor ideas to avoid certain setups. I learn better how to judge and move stop settings. I get just that little bit more comfortable with the whole plan and execution. I have been getting better at entries and not entering when I shouldn't. I feel OK about the fact that I had a down day.
Good days, they speak for themselves, who can feel down on a good day?
But there are days that are in between. I know that missing a move is expected and there is little chance of catching every move over the course of the day. As I do not trade for a living (far from it yet) and I do other work during the day, I have interruptions in trading. I work trading into my schedule as I can. This is a huge problem with respect to trading for a profit.
This leads to a day like today.
Last week was a range week and I watched and learned. I made some trades and lost some trades, noted how the volume affected Friday's trading and how the week slowed right down to that day.
Without getting into the whole analysis I was planning my trades around a drop in the market today below the low of last week. In that I was not disappointed.
To keep the story short I placed a trade with a too tight stop, I see that now and should have seen it at the time...lesson leaned. I watched as the price did not come back to the entry I wanted...I actually set it well but hesitation had me miss it. I tried twice more unsuccessfully, only due to other issues interfering with my attention on the charts. By the time I could concentrate I entered a trade against my TICK timing and at a point in the pattern where a reversal was at least as likely as a continuation.
I fell prey to the "trade for the sake of being in a trade" trap. Frustration at missing trade entries clouded my judgement.
I knew that the trade was likely to go against me but I "hoped" that I would be wrong (HUH?) and the trade would go in my favour.
So I hope that I learned this lesson...although this is a recurring theme in my trading, that I miss some of the best moving days, even though my plan is sound.
I am going to have some lunch and review my plan, my setups and my mindset for the day to see if I can make some decent trades in the afternoon.
Jeff.
Thursday, June 11, 2009
Trading Journal
I have hit upon a nice comfortable method and setup to do my trade journalling on paper now. As much as I like having the nice charts I don't think that they are going to be as much of a reference as I thought they might. I see that Esignal has expanded the historical archive of intraday data, or are in process, so I can always refer back to any trade based on my journal entry. I may print the odd one or still notate them and log them here as well if I think they will be important reference.
This feels like a transition for me as I start to really see the nuances and interaction of the markets. Touching on the topic of too much information, I now find that blog posts are mostly confirmations of things that I am already doing or am trying to do in my trading. I am still struggling witht he execution of the trades, getting in just right and setting stops according to where they really should be. It's getting there.
Today's trading was disappointing only in that I was unable to capture the moves that I wanted to catch and saw setting up. I missed one to hesitation, one to interruption, one to away at lunch and one to lack of confidence in my trade idea at the time. All learning points though.
Having said that, saying my trading was disappointing is a little misleading in that I only had one losing trade of the four that I placed. The disappointment was not being there on the longer rides. One trade in particular I moved my stop intentionally to capture the momentum move that had just occurred from my entry BUT had I left my stop just 5 cents lower I would have doubled my profits... no big deal as the plan was the plan.
All in all I think I did well enough to consider it a successful day and it could easily have been profitable given more action on my part.
Here is a decent trade for today that I could have rode farther but still came out ahead on. The stops I need to work on but if I chose to just exit at better than break even I would be doing better. I just would rather work on slightly longer term trades than the short, almost scalping style of trades. There is, ultimately more money in holding for the moves.
TICK chart:
This feels like a transition for me as I start to really see the nuances and interaction of the markets. Touching on the topic of too much information, I now find that blog posts are mostly confirmations of things that I am already doing or am trying to do in my trading. I am still struggling witht he execution of the trades, getting in just right and setting stops according to where they really should be. It's getting there.
Today's trading was disappointing only in that I was unable to capture the moves that I wanted to catch and saw setting up. I missed one to hesitation, one to interruption, one to away at lunch and one to lack of confidence in my trade idea at the time. All learning points though.
Having said that, saying my trading was disappointing is a little misleading in that I only had one losing trade of the four that I placed. The disappointment was not being there on the longer rides. One trade in particular I moved my stop intentionally to capture the momentum move that had just occurred from my entry BUT had I left my stop just 5 cents lower I would have doubled my profits... no big deal as the plan was the plan.
All in all I think I did well enough to consider it a successful day and it could easily have been profitable given more action on my part.
Here is a decent trade for today that I could have rode farther but still came out ahead on. The stops I need to work on but if I chose to just exit at better than break even I would be doing better. I just would rather work on slightly longer term trades than the short, almost scalping style of trades. There is, ultimately more money in holding for the moves.
TICK chart:
Chart for SPY for the same period:
This was a typical PP200 trade with a TICK timed entry. The only thing better would have been a launch off of the black previous day high at the same time. As it was all of the moving averages were converging and lending seeming support to the price activity. The volume picked up after I was out as the price crossed the high line. I didn't get back to actively watching the chart until after the nice climb to the top started enough that I was price chasing and would need to large a stop to feel comfortable.
Jeff.
Bloggers and Twitters overload
I am following a few, very few, bloggers and Twitters now. Even amoungst the few that I follow, in addition to a general twitter list for the market that I trade, I find a lot of regurgitation of posts and tweets. Sometimes it is not uncommon for one to be posted and three or four others will copy and paste...some with acknowledgements, some without. Some are more prolific at it than others... or maybe the word is blatant. It's fine to share information but there is so much overlap anymore that I find myself linking to articles and blog posts that I have already read, usually the original.
Maybe I should be linking all this stuff too?....Nah!
This makes finding original material hard to find and wastes time reading the tweet or blog that does the linking.
Oh, well. That's the internet for you.
Jeff.
Maybe I should be linking all this stuff too?....Nah!
This makes finding original material hard to find and wastes time reading the tweet or blog that does the linking.
Oh, well. That's the internet for you.
Jeff.
Tuesday, June 9, 2009
June 9th, Scratched the day
I am not working on honing my range trading skills, I am playing with my TICK entry to catch reasonable trending. I don't need day long trends to capture what I am looking for but it appears that low volume ranging is just different enough to throw off my trading ideas.
So in that light I decided to just watch and not even track any trades later in the day. I noticed how the TICK and SPY price danced and have more information that I did before the day started. I did try to do some back charting to see if I could fit some hindsight trades into the activity and even that was tough. The TICK did not range wide so the triggers were very tight. The spread between the average high and average low as down to less then 300 points. Triggers work best when they are farther apart.
I did note that during these times the moving averages could be used for entries based on the TICK, not in the same manner, just use the TICK as a reference for an extreme price move to get a lower entry. There were a few such trades that I saw set up but did nothing with...unfamiliarity.
Golf tomorrow so likely no trading at all. My luck the market will decide on a direction and have a large trending move day.
Jeff.
So in that light I decided to just watch and not even track any trades later in the day. I noticed how the TICK and SPY price danced and have more information that I did before the day started. I did try to do some back charting to see if I could fit some hindsight trades into the activity and even that was tough. The TICK did not range wide so the triggers were very tight. The spread between the average high and average low as down to less then 300 points. Triggers work best when they are farther apart.
I did note that during these times the moving averages could be used for entries based on the TICK, not in the same manner, just use the TICK as a reference for an extreme price move to get a lower entry. There were a few such trades that I saw set up but did nothing with...unfamiliarity.
Golf tomorrow so likely no trading at all. My luck the market will decide on a direction and have a large trending move day.
Jeff.
Slow start to the day
Oscillation.
The TICK and SPX are oscillating about zero and all of the moving averages respectively.
Of course I would decide to trade on a slow starting day. Volume is on the low side of the last 10 day average for the period, there is no commitment, just a lot of wallowing.
First trade I left more room than I should have but I was not sure that the price was going to pullback, I broke even. Second trade I lost half of my loss allowance at the stop but my order was filled poorly losing me the other half plus some.
I will now wait it out and see which way the market moves as I will not knowingly try to trade such a tight range. At least not yet. I would like to see some directional activity.
Worth noting, my entries were at good points so at least I have got some of the hesitation out of the picture. This at least allows me to set my stops at good chart points rather than out in the breeze hoping for the best.
Jeff.
The TICK and SPX are oscillating about zero and all of the moving averages respectively.
Of course I would decide to trade on a slow starting day. Volume is on the low side of the last 10 day average for the period, there is no commitment, just a lot of wallowing.
First trade I left more room than I should have but I was not sure that the price was going to pullback, I broke even. Second trade I lost half of my loss allowance at the stop but my order was filled poorly losing me the other half plus some.
I will now wait it out and see which way the market moves as I will not knowingly try to trade such a tight range. At least not yet. I would like to see some directional activity.
Worth noting, my entries were at good points so at least I have got some of the hesitation out of the picture. This at least allows me to set my stops at good chart points rather than out in the breeze hoping for the best.
Jeff.
Monday, June 8, 2009
Casino play
I spent some time at a casino on the weekend...too much time actually, but that is a whole other story. My wife kept insisting that I go and play figuring that it was "my thing". I tried the slots, no fun there. I would sooner just play a decent video game that had some user interface other than a play button. So I checked out the card tables, craps, roulette and baccara. Cards were the draw. I played some War (and old high low card game that I used to play as a kid just for fun) and found that the odds were definitely not in my favour...it wouldn't be there if there was a decent chance for a player to win anyway. Even though I zeroed out it was fun and I played for some time in the green.
Someone asked me what I thought a good gambler was, they were joking but I figured a good gambler left with a smile on their face no matter if they won or lost. Of course that implies that they were playing with money that they did not need, just like in trading. In gambling, the game is the fun, winning is a bonus, that is were gambling and trading differ, one of the points anyway.
This gave me pause to reconsider where I am in trading. Am I enjoying the game too much? Should I be leaving it alone? I decided to follow trades today rather than actually placing them, use the quotes for entry prices, move my stops on the charts, watch the patterns and levels and see where I would be on a fake trade basis in real time again. Of course, at this point, I decided to place one real trade in the middle and I picked the wrong one to do that with, small loss, so I stayed out for the rest. That one trade actually didn't really follow my rules that I am using for the faking...go figure. This is a day to review these rules closely and watch the results so I can get them on some sort of written reference card.
What I noticed at the casino was that I played with a similar outlook as I have when I am trading. I am aware of my loss allowance, I know when I am up or down, I have a target that I would take profits off if I were ahead and I will walk away at a certain point.
No, I am not going to try to figure out a method to make money gambling at cards... I may return to play another time but certainly not in the near future.
Meanwhile I am tracking today's activity and moving my chart stops along the way. I am reminded of the number of times I say, "in order to trade someone else's system you have to make every trade and be able to observe their loss allowances", and what not. Today I think of those times and I realize that I need to apply them to my trading system...loosely calling what I am doing a system for now, more just a method. I need to follow it for each and every trade as trying to cherry pick a trade or three does not stack the odds in my favour. I seem to have a knack for picking the wrong ones, or just not actually following my method and entering at the wrong time. I shoot myself in the foot, so to speak.
So, the rest of the week, when I can trade, I will be following what my plan is.
I'll post today's charts later.
Jeff.
Someone asked me what I thought a good gambler was, they were joking but I figured a good gambler left with a smile on their face no matter if they won or lost. Of course that implies that they were playing with money that they did not need, just like in trading. In gambling, the game is the fun, winning is a bonus, that is were gambling and trading differ, one of the points anyway.
This gave me pause to reconsider where I am in trading. Am I enjoying the game too much? Should I be leaving it alone? I decided to follow trades today rather than actually placing them, use the quotes for entry prices, move my stops on the charts, watch the patterns and levels and see where I would be on a fake trade basis in real time again. Of course, at this point, I decided to place one real trade in the middle and I picked the wrong one to do that with, small loss, so I stayed out for the rest. That one trade actually didn't really follow my rules that I am using for the faking...go figure. This is a day to review these rules closely and watch the results so I can get them on some sort of written reference card.
What I noticed at the casino was that I played with a similar outlook as I have when I am trading. I am aware of my loss allowance, I know when I am up or down, I have a target that I would take profits off if I were ahead and I will walk away at a certain point.
No, I am not going to try to figure out a method to make money gambling at cards... I may return to play another time but certainly not in the near future.
Meanwhile I am tracking today's activity and moving my chart stops along the way. I am reminded of the number of times I say, "in order to trade someone else's system you have to make every trade and be able to observe their loss allowances", and what not. Today I think of those times and I realize that I need to apply them to my trading system...loosely calling what I am doing a system for now, more just a method. I need to follow it for each and every trade as trying to cherry pick a trade or three does not stack the odds in my favour. I seem to have a knack for picking the wrong ones, or just not actually following my method and entering at the wrong time. I shoot myself in the foot, so to speak.
So, the rest of the week, when I can trade, I will be following what my plan is.
I'll post today's charts later.
Jeff.
Tuesday, June 2, 2009
The average trader fails at trading...better than 80%
I just read an older post from Dr. Brett Steenbarger's blog site concerning the failure rate of average traders.
It boils down to what I have said all along, that a high number of traders fail. I have been using 93% as my benchmark, perhaps that may be a little high. It is nice to see that there is actually a study that did some decent number crunching to confirm this.
So, in Dr. Steenbarger's post he poses the question "So what keeps new traders coming to an arena in which far fewer than 20% of participants are profitable after costs?"
In answer he suggests that "...individual day traders may place too much confidence in their ability to read market patterns out of the gate."
OK. I consider myself confident enough in my ability to learn how to read and understand chart patterns, market forces and a host of other market variables in order to create an edge in my trading to end up producing profits to justify my time spent in this learning process. That is probably the key, spending the time studying. I did start out a little over confident and had a number of wake up trades, both large winners and large losers, to realize that it was not as easy as it looked.
I would suppose that I am a little farther than "out of the gate" now and, seeing that I have been trading for well over a year and have not blown my account up, I suppose I have demonstrated my ability to manage risk where I can be fairly confident in not blowing it up in future. I have have not firmly set myself in profit mode as I recognize that I still need some tweaking in my trade management. Once I can get things down and I see some consistency, which is slowly getting there now, then I will start to ramp things up and review my capitalization levels.
I know that I have gone off half cocked a few times in my blog about being there already, when I sit back and ponder my situation I usually see the light and pull my horns in a bit. Some of my previous plans would have worked out nicely but did not suit my style. They may be tweaked in future once I have a consistent trading base to work from.
Jeff.
It boils down to what I have said all along, that a high number of traders fail. I have been using 93% as my benchmark, perhaps that may be a little high. It is nice to see that there is actually a study that did some decent number crunching to confirm this.
So, in Dr. Steenbarger's post he poses the question "So what keeps new traders coming to an arena in which far fewer than 20% of participants are profitable after costs?"
In answer he suggests that "...individual day traders may place too much confidence in their ability to read market patterns out of the gate."
OK. I consider myself confident enough in my ability to learn how to read and understand chart patterns, market forces and a host of other market variables in order to create an edge in my trading to end up producing profits to justify my time spent in this learning process. That is probably the key, spending the time studying. I did start out a little over confident and had a number of wake up trades, both large winners and large losers, to realize that it was not as easy as it looked.
I would suppose that I am a little farther than "out of the gate" now and, seeing that I have been trading for well over a year and have not blown my account up, I suppose I have demonstrated my ability to manage risk where I can be fairly confident in not blowing it up in future. I have have not firmly set myself in profit mode as I recognize that I still need some tweaking in my trade management. Once I can get things down and I see some consistency, which is slowly getting there now, then I will start to ramp things up and review my capitalization levels.
I know that I have gone off half cocked a few times in my blog about being there already, when I sit back and ponder my situation I usually see the light and pull my horns in a bit. Some of my previous plans would have worked out nicely but did not suit my style. They may be tweaked in future once I have a consistent trading base to work from.
Jeff.
Friday, May 22, 2009
TICK timing gets complicated
In an effort to simplify the trade decisions based on the TICK values the chart gets more complicated. This is typical of trying to find something that is "fool proof".
I added moving averages of the high and low values a while ago. I started with the 390 minute (1 trading day) and now added 195 minute (1/2 a trading day) to get an average range of the TICK values. I am toying with the 100 minute now but I think it is too short for my purpose. Ideally the period should match the average duration of an intraday trend, so I figured that a decent trend is about 1/2 a day long.
I had Bollinger Bands on for a while but did not find them very useful in any consistent manner. The moving average high low band gives a range that seems to be reasonable. As the 15 crosses the 30, say on the way up, I start watching for an entry. Using the 195 band I wait for a low spike through the low band and, if the chart does not contradict this move, place a trade.
More generally the bands can act as a trend indicator. As the MA cascade nudges one side of the range it is time to start watching for a reversal or consolidation. The idea here is that I might already be in a trade from the other direction and this would lead to a tightening of the stop or an exit, depending on a number of chart and market factors. Determining whether the market will likely trend, or even the direction of the first major move would be a bonus in that this system would act as a confirmation of that call. Of course, if I could make that call consistantly I would not need to bother with this whole TICK notion.
As much as I would love a mechanical system to be able to crank out trades and profit I don't see that happening here. There will always be a factor of market analysis, chart reading and discretionary trading involved that would be far to complicated to actually try to program. The best I could hope for is some method of alerting that a decent setup is setting up.
Market is about to open. Friday before the long weekend should prove a slow market as volume is probably going to be light. If the spread is 2 cents or more on a regular basis I will likely leave trading until next week and concentrate on studying today.
Jeff.
I added moving averages of the high and low values a while ago. I started with the 390 minute (1 trading day) and now added 195 minute (1/2 a trading day) to get an average range of the TICK values. I am toying with the 100 minute now but I think it is too short for my purpose. Ideally the period should match the average duration of an intraday trend, so I figured that a decent trend is about 1/2 a day long.
I had Bollinger Bands on for a while but did not find them very useful in any consistent manner. The moving average high low band gives a range that seems to be reasonable. As the 15 crosses the 30, say on the way up, I start watching for an entry. Using the 195 band I wait for a low spike through the low band and, if the chart does not contradict this move, place a trade.
More generally the bands can act as a trend indicator. As the MA cascade nudges one side of the range it is time to start watching for a reversal or consolidation. The idea here is that I might already be in a trade from the other direction and this would lead to a tightening of the stop or an exit, depending on a number of chart and market factors. Determining whether the market will likely trend, or even the direction of the first major move would be a bonus in that this system would act as a confirmation of that call. Of course, if I could make that call consistantly I would not need to bother with this whole TICK notion.
As much as I would love a mechanical system to be able to crank out trades and profit I don't see that happening here. There will always be a factor of market analysis, chart reading and discretionary trading involved that would be far to complicated to actually try to program. The best I could hope for is some method of alerting that a decent setup is setting up.
Market is about to open. Friday before the long weekend should prove a slow market as volume is probably going to be light. If the spread is 2 cents or more on a regular basis I will likely leave trading until next week and concentrate on studying today.
Jeff.
Wednesday, May 20, 2009
Timeline for a trading learning curve
I keep reading articles written by long time traders or training people that state that getting up to profitable consistent levels takes some time...as in years.
I find this interesting as I know that I am not consistently profitable even though I might have expected that I might be able to pull it off by now. I keep finding more and more to learn and more and more to get familiar with. Even if I get up to speed on a plan the market is likely to change on me and I would need to be flexible enough to be able to alter my plan to accommodate that shift without losing my shirt in the process.
Start small and increase position sizing in small amounts (although that is hard to do when trading even lots and starting with one, one more lot is a small amount but it is doubling risk right away).
Don't expect profits for months, get to a trading level of breaking even on trades and consider that a good starting point.
As a new trader I could easily be dissuaded from my path of attempting to get into trading seriously without some level of professional training...but I am too bull headed to give in so I persevere. Pro training is expensive enough to be a deterrent itself. Then again, at what point might it have been more cost effective to just take the training in the first place...but then there is no way to know which training outfits are worth the expense unless you have gotten wet in trading and have a feel for what style suites the best.
I'll keep plugging away at my plan.
Today was a very good learning experience. Even though I ended down I ended on a profitable trade that I setup in the late afternoon, waited for the trade to come to me, entered where I wanted and exited close to my target. That one was from a lesson in choppy market trading and breakouts that I knew before but now have more of a handle on some of the indications that a breakout is worthy of a trade. This after playing in the surf too long today though.
Charts in another post later perhaps.
Jeff.
I find this interesting as I know that I am not consistently profitable even though I might have expected that I might be able to pull it off by now. I keep finding more and more to learn and more and more to get familiar with. Even if I get up to speed on a plan the market is likely to change on me and I would need to be flexible enough to be able to alter my plan to accommodate that shift without losing my shirt in the process.
Start small and increase position sizing in small amounts (although that is hard to do when trading even lots and starting with one, one more lot is a small amount but it is doubling risk right away).
Don't expect profits for months, get to a trading level of breaking even on trades and consider that a good starting point.
As a new trader I could easily be dissuaded from my path of attempting to get into trading seriously without some level of professional training...but I am too bull headed to give in so I persevere. Pro training is expensive enough to be a deterrent itself. Then again, at what point might it have been more cost effective to just take the training in the first place...but then there is no way to know which training outfits are worth the expense unless you have gotten wet in trading and have a feel for what style suites the best.
I'll keep plugging away at my plan.
Today was a very good learning experience. Even though I ended down I ended on a profitable trade that I setup in the late afternoon, waited for the trade to come to me, entered where I wanted and exited close to my target. That one was from a lesson in choppy market trading and breakouts that I knew before but now have more of a handle on some of the indications that a breakout is worthy of a trade. This after playing in the surf too long today though.
Charts in another post later perhaps.
Jeff.
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