CMC surpasses targets this morning

Today my CMC trade has passed the $15.00 target. The trade had called for a possible entry at $13.50 and $13.00 but the $13.00 mark never was hit.

That makes a nice 11.1% gain in about 3 weeks and change.

Now, I have not closed the trade myself yet as I let it run past the profit target, something I am apt to do if I am trading with a trend. I have placed a tight VTSO of 25 cents which puts me somewhere above $15.00 now. I will probably close the trade before the end of the day even if the VTSO is not activated.

The reversal trade for this is coming up for a short at $16.00... I need to double check that entry as I did not think that CMC was going to hit target so hard this morning... so I did not do the chart work to determine the short yet.

Jeff.

Stock trade DE, loss taking and profit making

Seeing as I posted a last winning trade for CVA I figure it only fair to post one that had a losing trade as the last trade... or two.

DE, Deere & Co.

The last trade closed on September 17, 2010 for a $3.00 loss, it was a short sell.

The next to last trade closed on Jul 23, 2010 also for a $3.00 loss and also a short sell.

In both of these cases I may not have taken the trades due to the established up trend but, in the interest of consistency I logged them according to the rules rather than muddying the plan. To be honest I have been considering dropping any shorts against the trends but even some of those have been very good trades. I mitigate the risk by only entering one position and I raise the entry by a dollar at least. This also raises the target considering that the following drop may not be quite as far.

STATS for DE:

24 first entry trades, 17 winners
5 second entry trades, 4 winners

1 third entry trade, 1 winner

$41.00 per share gains (using 100 share trades that is $4,100 for the period from June1, 2009)
Total days in any trade 169 of 483 possible.

I ran the trades at $1,000 per trade initially and rolled the profits right back into the next trade to provide compounding returns. Allowing for the commission structure at Questrade of $4.95 per trade (I just rounded up to $5 for ease of math) the $1,000 would now be $1,717

That is a 71.7% net profit. Like CVA, while consistent, it is well below the average.

Having said that, had I just bought and held the stock on June 1, 2009 at the average daily price of $44.65 it would be at $71.49 now. The gain of $26.84 represents an 60.0% profit. Also, this drive to higher prices is what lead to more losers... 6 of the 7 losing trades were shorts, and one break even of a total of 30 trades. That is still a 73.3% win average even at that.

It is worth noting that I have one stock with a win rate as low as 64% and the ROI is still 35%. I think that is respectable.

Jeff.

CVA, recent profits in this stock trade

One of my recent trade targets hit was in CVA, Covanta Holding Corp.

I had targeted entries at $14.00 and $13.50 to open long positions which were both hit on Aug 12th. A double position. I know I could have watched the intraday and had a better average entry but that is not the point with my trading plan.

Keeping it simple and to not be required to do any chart watching during the day is my goal. I have done a lot of daytrading and the like and, while it can be lucrative, it can be stressful as well.

Exit profit targets were at $15.00 and $15.50.

The first was hit in a few days for the $1.50 per share goal.... 11.1% in 5 days, nice but trades this short are not not always typical, although there were a number that were less than 10 days. I like those for obvious reasons.

The second target was hit on September 24th with an intraday high of $15.52. Another $1.50 profit and 10.7% gains.

The entire trade lasted 43 days.

Over the entire study period this stock was not a great performer using my plan but it was consistent, and that is the primary goal. More consistent stocks over the longer term leads to more relaxed and profitable trading.

STATS for CVA:

9 first entry trades 8 winners

2 second entry trades 2 winners

$12.50 per share gains (using 100 share trades that is $1250 for the period from June1, 2009)

Total days in any trade 325 of 483 possible

I ran the trades at $1,000 per trade initially and rolled the profits right back into the next trade to provide compounding returns. Allowing for the commission structure at Questrade of $4.95 per trade (I just rounded up to $5 for ease of math) the $1,000 would now be $1,931.

That is a 93% net profit. While consistent, it is well below the average.

Having said that, had I just bought and held the stock on June 1, 2009 at the average daily price of $14.24 it would be at $15.41 now. The gain of $1.17 represents an 8.2% profit.

Jeff.

Putting the trade in context, CMC

I have more history on CMC other than just the trade setup that I posted, I have the whole year and change so I thought I should put the stock and activity into context relative to the current open trade.

A quick note about the changing profit targets. While I had to go back to the charts to see how the target limit orders would have filled it was based on the trades that were dictated already. I do wish that I had actually placed on thee trades and made some real cash... too busy with other plans. The primary entries would not change and most of the second and third would not either but I wanted to check the executions. Seeing as in any case where the primary hit full target the 2nd and 3rd would, necessarily, have also hit their targets as they would have been at lower prices.

CMC- Commercial Metals Co.

40 Trades since June 2009 (these are divided between 1st, 2nd and 3rd entry targets)

First Entry = 19 74% hit profit target

Second Entry = 16 81% of these hit their profit target

Third Entry = 5 80% of these hit their profit target

Not every target is a full target as there are some that the targets are set tighter on due to the next entry being so close, playing the short term moves in both directions can do that. Basically, one exit for a long position is at the same price as the next short entry price so the trade essentially flips. The key is in selecting valid targets.

I plug in a trade value of $1,000 and consider that the trades are all simple with no compounding therefore the trade value of $1,000 is always the same.

Total Profits = $1,781.00

Then using a starting trade value of $1,000 and compounding the profits into the very next trade.

Total Profits = $ 4,885.50

Unlike other speculative and subjective back testing these are firm numbers, now they are adjusted for my commission structure with Questrade so figure in 40 round trades worth if yours are higher. I used $5 commissions or $10 for the trade in and out. It's actually $4.95 for up to 495 shares.

Also worth noting, if I were actually in the trades and was putting money on the line every time I would be able to get better entries and exits in many of the cases but I am using my firm rules based system for both entry and exit for the sake of objective consistency.

Jeff.

New targets for stocks under $20

In my data analysis I have found an interesting bit of information having to do with entry prices and profit targets specifically for stocks priced under $20.

I had posted entries for CMC at $14.50 and $15.00 as a short sell and posted the targets as $13.00 and $14.00 respectively creating a $1 and $1.50 gain. I will be changing that.

Basically any trade will have three possible entries for stocks under $20:

Considering a long trade rather than the CMC short above for demonstration purposes:

(BTW CMC scooted back above the $14.50 first entry target today.)

Entry 1 - $17.00 Profit target - $18.50 Gain - $1.50

Entry 2 - $16.50 Profit target - $17.50 Gain - $1.00

Entry 3 - $16.00 Profit target - $16.50 Gain - $0.50

Full stop at $15.50 without extenuating circumstances

A full trade hitting the targets would gain and average of$1 per share overall.

A full stop will lose and average $1 overall.

If each entry were 100 shares that would be a $300 gain or a $300 loss.

In crunching the numbers for the trades I have so far found that over 75% (this is not an average, this is the minimum taken from the poorest performing stock) of the first entries hit their target profit of $1.50. It led me to wonder why I should limit the second entry to a $1 profit when, 75% to 92% of the time the larger profit gets hit which means that the lower profit also gets hit on the way past. In fact it will hit between 86% and 100% of the time. The same goes for the 3rd entry although if the third entry gets hit the average of the first getting hit afterwards is between 72% and 80%.

It is worth noting that no matter the entry the Maximum Loss Allowance will always be the same. Therefore it would be prudent to increase the profit potential, given the odds of success, in order to skew the trades in favour of better gains for capital risked.

In that vein I left the entries alone and changed the exits to allow a full $1.50 for each trade entered. This results in an average $1.50 overall compared to the average $1.00 overall.

For the same entry of three trades at 100 shares that would be a $450 gain or the same $300 loss.

I like a profit / loss ratio of better than 1:1 and this at least makes it 1.5:1. Add that to an over 72% win rate for just these larger trades and that really adds up fast.

Jeff.

First live trigger, CMC short

CMC, Commercial Metals Company

Of course the first live trigger that I post is a short sell, and it also was hit last Monday... which makes this "not so live" but still active. This one has been a solid short five times this year alone. Now the price being around the $15 mark makes it a smaller per share target but every profit is a profit.

The setup had been for an entry to sell to open at $14.50 and a second position at $15.00. Both orders were filled.

Profit targets are $13.00 for position one and $14.00 for position two giving $1.50 and $1.00 per share respectively.

Stops to be set at $16.00 for both positions.

Assuming that the targets are hit and based on the average entry price of $14.75 and the average exit price of $13.50 the ROI would be 8.5%

Loss would also be 8.5% for a profit loss ratio of 1:1.

This one is still active and orders may yet be filled for $14.50 today. I would set the stop at $15.75 at this point.

Jeff.