This whole last few months I've been going on about the Tax Free Savings (Trading) Account (TFTA) and how I was going to use it for all of my trading. Yesterday I filled out the application and forwarded it to Questrade. They have a method of e-signing the forms, which may be only available to existing customers, that sped up the whole process. All I have to do is fax them a copy of my driver's license, EFT some cash and I should be ready to go in short order. Pretty simple and quick.
So, in reading the details I ran across the phrase "capital gains" when referring to what can grow tax free within the account. It occurred to me that the profit from short selling stocks is not, technically, capital gains and if push comes to shove with the government they are treated as regular income for tax purposes...again, not capital gains.
I used the online help feature and had my answer in a minute. No, shorting is not allowed in a TFTA. I actually should have known this as I knew that shorting was not allowed in an RRSP account either. I was blinded by the fact that I could short in a margin account and the gains looked really promising...my research was lacking.
I quickly went back over all of my previous trades to see how much of my profit would have been from short selling. This was easy enough as I have always kept a long/short profit ratio for all my tracking spreadsheets. Note that this is not a ratio of number of trades, just profit.
Overall I am running about 1:1. So half of my trading profit would not be counted. Seeing as my performance is close to 2% per day I would be just shy of my daily goal if I dropped half of my trades...or my trading profit. I consider that I usually stop at a daily maximum of 6 trades, more often 4. So if I was concentrating on making that many trades and with long only positions I may have been able to make 75% of the trades. So I might have seen 1.5% per day.
My options to adjust my trading plan include:
1) long only trades with the same plan that I have been using, result may be 25% - 50% reduction in profits
2) long in the TFTA, short in margin, result is taxable (max marginal rate) for all short profits so the overall effect would be pretty close to option 1), within 10%
3) variation of option 2) in that all profits at year end for shorts are contributed to my RRSP account whereby the taxation is negated but the downside is that these will be taxed upon withdrawal... perhaps at a lower tax rate at the time
4) variation of option 1) by using only the TFTA, trading my favourite stocks long and shorting the index that they are tracking through the use of a bear Exchange Traded Fund (ETF), result is the same tax free profit potential as I was planning on originally
Well, option 4 becomes the no brainer solution to my dilemma it would appear. In investigating the ETFs I start to wonder if I can trade them exclusively.
This would be easy enough as I just run the bear and corresponding bull ETF side by side with the related index they track and the TSX for the overall market and trade them back and forth. When one is rallying the other will be pulling back which means that one or the other will always be gaining...except in a true sidways market move. The difference in prices will necessitate using different position sizing for each which will look after the scaling according to the size of the move. Roughly a 1% gain in one will yield a 1% drop in the other.
In the interest of keeping it simple I think I will start out with option 1) only and see how it goes. I believe that the stocks I have selected will be seeing some gains over the next while so long positions will be many, I may have to increase my time trading by a bit though. If that does not pan out then I will play with the ETF and see how they work out for trade executions and perhaps mix it up from there.
I will have to wait for my TFTA to get going first as I really want to stay away from any gains in this 2009 tax year.
I should have known it was not going to be such an easy ride and that the testing was not yet complete. Too bad as I would have liked to have had this ironed out earlier. If I do some testing with the expectation of a loss then it will reduce the capital in my account as I cannot just "top it off" after testing is complete. $5K contributed is the limit no matter the trading losses incurred...unless I over-contribute and pay the monthly penalty. Questrade may enforce the maximum as their policy is worded in such a way at that is possible.
Jeff.
Questrade, My direct access discount broker.
Saturday, January 3, 2009
Wednesday, December 31, 2008
Dec 31st and a new toy, TLM
Talisman Energy.
True to form I cannot leave well enough alone. I want options and to see what else works. I have proven my strategy workable for AEM, now SU and I would like to test it on one or two more so I have a total arsenal of four of varying prices to choose from.
I ran a new scan today for stocks between $10 and $30 with a volume over 500K per day. I ended up with about 40 stocks to choose from, cut out all the ishares and ETFs as well as small movers to pare it down to about 5. Then I concentrated on only the ones that had patterns that mimicked AEM, Suncor and the realted indices.
Cameco Corp (CCO) and Talisman Energy (TLM) were the only two that exhibited the qualities that I was looking for. CCO is about $20 and TLM is around $11 so I chose TLM for the ease of trading small if I so decide to really scale it back. Both are energy related, TLM more so...but enough of this boring research, they follow the indices in the intraday and daily scales and that tells me as much as I need to know.
I checked the pre-market posturing for TLM at 5 minutes before the bell and decided that it sould start down and best to concentrate on long positions today...so long as soon as it looks good. Rather than playing the quotes as hard as normal I decided on a technical entry based on the primary pivot point (horizontal blue on the chart) as that looked to be where the price was going to head for very early. I was not disappointed. Long was the play so I ended with two trades, but only because I didn't hold for the whole long move when the price wallowed.
True to form I cannot leave well enough alone. I want options and to see what else works. I have proven my strategy workable for AEM, now SU and I would like to test it on one or two more so I have a total arsenal of four of varying prices to choose from.
I ran a new scan today for stocks between $10 and $30 with a volume over 500K per day. I ended up with about 40 stocks to choose from, cut out all the ishares and ETFs as well as small movers to pare it down to about 5. Then I concentrated on only the ones that had patterns that mimicked AEM, Suncor and the realted indices.
Cameco Corp (CCO) and Talisman Energy (TLM) were the only two that exhibited the qualities that I was looking for. CCO is about $20 and TLM is around $11 so I chose TLM for the ease of trading small if I so decide to really scale it back. Both are energy related, TLM more so...but enough of this boring research, they follow the indices in the intraday and daily scales and that tells me as much as I need to know.
I checked the pre-market posturing for TLM at 5 minutes before the bell and decided that it sould start down and best to concentrate on long positions today...so long as soon as it looks good. Rather than playing the quotes as hard as normal I decided on a technical entry based on the primary pivot point (horizontal blue on the chart) as that looked to be where the price was going to head for very early. I was not disappointed. Long was the play so I ended with two trades, but only because I didn't hold for the whole long move when the price wallowed.
Of course the targets were the 200sma and R1 but I didn't think the 200 would hold. The R1 was at $12.15 so this was the real target for the morning. I set my limit for 400 shares at $11.70. Keeping with the more technical trade I exited on the pullback when it was just above $11.93...volume was very high and the price hovered, usually a good sign to bail if it is on my mind I find.
Trade 2 was a no brainer as the consolidation at about 0950h was getting ready to break. 400 shares at $11.85. I kept in the trade and waited for the 10sma to break or the R1 line to be hit...although the volume dropped off to nothing between 1025h and 1030h...1029h was the best exit. I wasn't paying much attention to the quotes so I was not sure what my exit would have been exactly so I just took the low for the minute I exited at $12.11
These were bigger moves than I was really thinking I was going to get.
Results:
3.74% return on trade
The 400 share trade is part of my plan to have the whole portfolio on each trade, or as close to it as can be managed with even lots...which is why a smaller price stock is actually a better play while the account is small. It lets me play smaller if I need to, scale into and out of questionable trades and take advantage of smaller moves.
So, let's compare this with the possible trades with SU.
This day was not tracking the pivot points as PP is on the chart and R1 and S1 are no where in sight. The same opening was expected though and this is a typical gap fade style of trade. So long off the bottom based on the pre-market quotes. I half expect that I would have missed the first nice trade of the day though so the rest were a fight for pennies and at best 10, 10, 15 and 10 cents per trade. 200 shares is the only reason these were profitable as the commission is $10 per trade (round trip).
Results:
1.2% return on trade...with the fighting for pennies I would have stopped at 4 trades.
Out of curiousity had I managed to get into the first trade where I might have...had there been more technical indicators lining up to make that decision, $23.10 to $23.40, roughly another 30 cents per share. I expect that I still would have stoped at four trades so that is only another 20 cents per trade overall. Still not a bad day and it would have met my goal.
All in all I am looking forward to trying my hand at TLM for about a week as I apply and wait for my tax free trading account to get set up and funded.
Jeff
Tuesday, December 30, 2008
Consolidation setup today.
Here is another take on the same chart as I posted earlier but looking at the one trade that I missed and let run mostly out before entering.
This is a classic example of a triangle consolidation pattern that is the basis of my old CTP strategy, here is an example of the same strategy in day trading.
This is a classic example of a triangle consolidation pattern that is the basis of my old CTP strategy, here is an example of the same strategy in day trading.
In CTP the red arrows would indicate trades entered and exited, basically buy low sell high and short high and cover low. Entering these trades would put me in a position to take advantage of the breakout in either direction.
In today's case the trade would be long only and have been entered at about 1000h as the price hits and bounces off of the S1 green line. Entry around $22.75ish for the prime position, $22.80ish and $22.85ish as secondary entries.
Once the price breaks out the trendline gets established (dashed red) at 1018h and holds as it bounces along at 1025h to R1 when it breaks the line around $23.20. I would choose to exit at R1 though. I could choose to exit half of the position at this point for a guaranteed 45 to 60 cents per share then let the rest ride to $23.35 for 60 to 75 per share on the balance. This takes the chance that the price will drop while I still hold a position.
Profits
Ranging from $80 to $120 depending on entry, exit and scaling strategies.
Yes, this is a hindsight trade but it is only a matter of not having entered this trade at the S1 bounce, just a matter of timing. The consolidation setup would only have been acting as confirmation of my trade, not really part of the entry plan until I have a larger capital to work with. In that case the pattern would indicate adding to the position along the way, scaling into the trade.
I don't normally get into speculating on trades, but, seeing as I am already doing it, let's see what a scaled trade might do here.
Buy at $22.70, 22.80, 22.90 and 23.05, 400 shares average price $22.8625.
Exit half at $23.25 and the balance at $23.35 for a $145 net gain.
Not bad, but I expect I would just buy in all at once at the bottom and scale out instead.
Buy 400 at $22.70.
Sell 100 at $23.10, 23.25, and 200 at $23.35.
Profit of $205 net.
No matter the trade style the fact remains that the trade is a profitable one so there is no sense in trying to speculate on the maximum profitability except for the purpose of getting familiar with differing ideas.
Jeff.
Dec 30th...not trading, just watching
Today I decided not to even track fake trading but to watch the price moves and pay attention to the volume and pivot point importance, we'll see if I can resist.
Chart is at the bottom.
The price opened close enough to yesterday's close for the 200sma to be relevant right away and it did not fail to act as resistance along with the primary pivot point. I decided that this would be a good sorting day to start. The first few minutes resulted in the PP being tested and not broken. I am not positive if I would have entered a short at this point just because it was still early but the volume was low enough that I could have. Just the fact that the volume dropped off as the price climbed higher is a very good indication of a pending reversal.
The first trade tracked
On the bottom, $22.65, the price bounced so cleanly off of the S1 that, had I been in a short trade I would have exited within five cents of the bottom. Either way trade number two was cleanly setup right here as well. I would have considered this a no brainer entry with the 200sma as target one and the PP as target two. Given the way it tested the 200 three times I would have bailed at that point, $22.95ish.
The second trade tracked
$22.95 would have been my limit order entry for this next short trade and I expect I would have missed the initial entry so close after my exit... I would have seen it hit shortly thereafter and rode it down to the S1 area and bailed around $22.70.
The range
This day is trading between the S1 and 200sma so far which only has a little more than 30 cent spread, not a large target so entries and exits must be quick as 30 cents can dry up really quick. Small targets can be fun to trade but are not worth the effort when they start to get too small. This is one reason why trading a smaller stock can be good as the position size can compensate for the small moves and the cost of commissions.
The third trade tracked...eenie meenie minie moe....
My next trade was to be another short starting above the 200sma, $22.95 most likely, but the price did not show the signs of slowing down. Once it broke both the 200 and PP the entry may be for a long at $23.05, at least that would be the plan. It pulled back to just under this and I would have been filled at my price...or lower which is always nice to see.
Note that I am typing this as the maket progresses so it is a live blog in that sense, at this point the quotes are about 3:1 asks in the range which usually indicates a good time to close the trade as there is more selling pressure than buying BUT the price is not wavering much so I would stay in and see where it goes, R1 is near $23.30, the next target. I see the volume slumping as the price stops climbing so I would bail as the bids are at $23.25, my most likley close price.
Profit
Just to work out the profit on this one trade, entry and exit difference is 20 cents X 200 shares is $40 less $10 commission for a net gain of $30. Based on the value of the trade this is a 0.6% gain.
Watching for the next trade to be a short as the price hovers under the R1 except it looks like a good uptrend right now so I would wait for other signs before placing an order or I would check my gains and see if I even wanted to do any more trading.
Estimating the three trades (assume that I missed the first big drop and didn't get in on the large gain at 1000h) I would be seeing 65 cents per share x 200 shares = $130 less $30 commissions for a $100 gain...roughly 2% gain based on trade value.
Profit protection
This is the point where I would exercise a few of my rules. I have made my goal for the day, I should not let greed interfere with my decisions, do not try to place a trade and hope that the price does what I expect...or want it to do. So I resist the urge to apply more trades and just watch what the price actually does for a bit. It turns out to be uptrending after wavering below R1 then finally breaking through. Based on the quotes and the volume it looked like it might drop off but the indices I use looked like it would hold and gain. Not enough correlation to really make a confident trade anyway.
Interestingly it broke at $23.38 and dropped to $23.10. I was right but my timing was off a bit. I may have held it through the 8 cent gain (my short would have been targeted at $23.30 as an entry) and made some profit but I likely would not have. I didn't really watch close enough to see if I would have nailed the top on this one.
Now that the stockcharts have caught up with my trades (or not trades if you will) I have the chart to post. I only labelled the trades I did end up tracking (I cannot help it). So, following is the intraday minute chart for the first part of the day. Pivot points are blue green and red horizontal lines, the 200SMA is green.
Chart is at the bottom.
The price opened close enough to yesterday's close for the 200sma to be relevant right away and it did not fail to act as resistance along with the primary pivot point. I decided that this would be a good sorting day to start. The first few minutes resulted in the PP being tested and not broken. I am not positive if I would have entered a short at this point just because it was still early but the volume was low enough that I could have. Just the fact that the volume dropped off as the price climbed higher is a very good indication of a pending reversal.
The first trade tracked
On the bottom, $22.65, the price bounced so cleanly off of the S1 that, had I been in a short trade I would have exited within five cents of the bottom. Either way trade number two was cleanly setup right here as well. I would have considered this a no brainer entry with the 200sma as target one and the PP as target two. Given the way it tested the 200 three times I would have bailed at that point, $22.95ish.
The second trade tracked
$22.95 would have been my limit order entry for this next short trade and I expect I would have missed the initial entry so close after my exit... I would have seen it hit shortly thereafter and rode it down to the S1 area and bailed around $22.70.
The range
This day is trading between the S1 and 200sma so far which only has a little more than 30 cent spread, not a large target so entries and exits must be quick as 30 cents can dry up really quick. Small targets can be fun to trade but are not worth the effort when they start to get too small. This is one reason why trading a smaller stock can be good as the position size can compensate for the small moves and the cost of commissions.
The third trade tracked...eenie meenie minie moe....
My next trade was to be another short starting above the 200sma, $22.95 most likely, but the price did not show the signs of slowing down. Once it broke both the 200 and PP the entry may be for a long at $23.05, at least that would be the plan. It pulled back to just under this and I would have been filled at my price...or lower which is always nice to see.
Note that I am typing this as the maket progresses so it is a live blog in that sense, at this point the quotes are about 3:1 asks in the range which usually indicates a good time to close the trade as there is more selling pressure than buying BUT the price is not wavering much so I would stay in and see where it goes, R1 is near $23.30, the next target. I see the volume slumping as the price stops climbing so I would bail as the bids are at $23.25, my most likley close price.
Profit
Just to work out the profit on this one trade, entry and exit difference is 20 cents X 200 shares is $40 less $10 commission for a net gain of $30. Based on the value of the trade this is a 0.6% gain.
Watching for the next trade to be a short as the price hovers under the R1 except it looks like a good uptrend right now so I would wait for other signs before placing an order or I would check my gains and see if I even wanted to do any more trading.
Estimating the three trades (assume that I missed the first big drop and didn't get in on the large gain at 1000h) I would be seeing 65 cents per share x 200 shares = $130 less $30 commissions for a $100 gain...roughly 2% gain based on trade value.
Profit protection
This is the point where I would exercise a few of my rules. I have made my goal for the day, I should not let greed interfere with my decisions, do not try to place a trade and hope that the price does what I expect...or want it to do. So I resist the urge to apply more trades and just watch what the price actually does for a bit. It turns out to be uptrending after wavering below R1 then finally breaking through. Based on the quotes and the volume it looked like it might drop off but the indices I use looked like it would hold and gain. Not enough correlation to really make a confident trade anyway.
Interestingly it broke at $23.38 and dropped to $23.10. I was right but my timing was off a bit. I may have held it through the 8 cent gain (my short would have been targeted at $23.30 as an entry) and made some profit but I likely would not have. I didn't really watch close enough to see if I would have nailed the top on this one.
Now that the stockcharts have caught up with my trades (or not trades if you will) I have the chart to post. I only labelled the trades I did end up tracking (I cannot help it). So, following is the intraday minute chart for the first part of the day. Pivot points are blue green and red horizontal lines, the 200SMA is green.
This turns out to be a pretty classic trading day. Starting at the PP, dropping tot he S1 as clean as can be then rallying right up to the R1. The rest of the day can wallow around all it wants as this is the activity that I like to capture. I feel that the trading follows these pivot points prior to the lunch hour more closely than afterwards. I will try afternoon trading after getting some serious gains going in the morning first. I expect that PM trades will be slower progressing and VTSO will be more usable as a trading tool as a result.
Jeff.
Monday, December 29, 2008
Dec 29th trading
Today was interesting as everyone is home and doing stuff so I decided that no real trading would occur, too many distractions...that and I am satisfied to continue fake trading to be sure that I am up on the tendancies of Suncor as it is still fairly new to me.
The only pivot point that I placed was at $22.99, blue horizontal line. It worked well as support so far. I am curious to see how the 200sma (green) interacts once it catches up with the price around 1300h. I would love to be able to say it will act as support and there would be a few long trades right afterwards but that is only a best guess and could easily be wrong. The best plan would be to watch the price and volume tendancies and see where the quotes lead the price and decide my trades based strictly on the activity at the time. It would not be good to get stuck in a long bias, this is the trap of emotion trading by trying to be correct rather than just trading the action.
Over all I exceeded my goal by a reasonable margin today. Total net was 1.32%.
I finished trading at just the right time this morning. I was considering doing some more but often the late morning is a bit of a wash, which is was this morning. The afternoon mught be nice and swingy but it is holiday time yet so the price my not be as volatile overall. Not worth the effort of playing having already met my daily goal.
Jeff.
The only pivot point that I placed was at $22.99, blue horizontal line. It worked well as support so far. I am curious to see how the 200sma (green) interacts once it catches up with the price around 1300h. I would love to be able to say it will act as support and there would be a few long trades right afterwards but that is only a best guess and could easily be wrong. The best plan would be to watch the price and volume tendancies and see where the quotes lead the price and decide my trades based strictly on the activity at the time. It would not be good to get stuck in a long bias, this is the trap of emotion trading by trying to be correct rather than just trading the action.Over all I exceeded my goal by a reasonable margin today. Total net was 1.32%.
I finished trading at just the right time this morning. I was considering doing some more but often the late morning is a bit of a wash, which is was this morning. The afternoon mught be nice and swingy but it is holiday time yet so the price my not be as volatile overall. Not worth the effort of playing having already met my daily goal.
Jeff.
Wednesday, December 24, 2008
Christmas Eve Day trading.
Today is Christmas Eve day and there was not much going on at work so I thought I might see how the market would fair on this pre-holiday day. I did not know that the market was going to close early, although I should have expected it, closed at 1300h. Not that this affected my trading as I am usually done by 1030h anyway but it can affect the outlook for the day and I would probably choose not to trade on a half day market.
Here is the chart anyway. I took three trades and met my goal with a 1.26% return on the trade value. Considering that the price is dropping this return on trade is lower then my return on portfolio...but that doesn't really make that much difference in the long run.
The pivot points were just on the edge of the chart, $21.45 was S1 (green) and $22.33 was P (light blue) while the highest price off the bell is dashed red.
Here is the chart anyway. I took three trades and met my goal with a 1.26% return on the trade value. Considering that the price is dropping this return on trade is lower then my return on portfolio...but that doesn't really make that much difference in the long run.
The pivot points were just on the edge of the chart, $21.45 was S1 (green) and $22.33 was P (light blue) while the highest price off the bell is dashed red.
The price gapped down this morning so this was the reverse of yesterday's gap up. The price closed the gap, but did not hold it. If this were the end of a normal day, and tomorrow was a trading day, I might expect an open very near to the close and a downtrending day. With the holidays here now trading is suspended until Monday so a lot can happen in the news with regards to oil so Monday will only be known when Monday starts.
A quick note about this type of open, or any time that a price shoots quickly in one direction but does not hold it. I have noticed that this high (or low) price spike very often sets an intention or direction. I have often seen that as soon as the price gets back to where it started it slowly inches toward the spike price. I have made quite a few trades in the direction of the spike and used the high price as the possible target. While it is only an impression I feel that it is a surer trade than a gap fade but a lot depends on the setup.
Trade one was pretty good and it met my daily goal right off the start but I figured I should at least try a couple more trades. The second lost a couple of dollars as I misjudged that small blip down and exited just before it hit. I managed to time the third, a short, pretty well and catch the quick pullback. The final trade should have happened at ?? and there were two prime entries marked by the arrows...I think I must have fell asleep to have missed that one or perhaps I was looking at something else. It was actually later than my normal quitting time so I suppose I can be excused.
A note about the rest of the day. Normally when the price hits the 200 it does some decent moving using the 200 sma as resistance or support creating a nice string of reasonably probable trading options. Today, perhaps due to the short day, created a very tough chart to make anything without fighting for pennies, not worth the hassle.
So, all in all this trial is working out very well. I am staying away from edgy stuff, sticking with SU which is turning out to be a pussycat and playing tight as if my money was on the line although I always play it that way.
Jeff.
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