I stumbled upon a gap trading blog today and it has caught my attention. They are promoting a service to provide historical odds on gaps on certain stocks/funds/indices but they have a fair amount of free information on the "how to" of gap trading. The service is really a number crunching system.
I may give it a try to see how it works, they have a trial membership for a low fee and I get the feeling that they are a reputable bunch (one guy really). I doubt that I could setup a study to get the same information myself...like fancy charting services, there will always be some things that will have to be paid for that cannot be done or is too time consuming to do myself. I don't fix my own cars but I do most renovation projects. I pick and choose where to save money based on my expertise.
The monthly is cheap enough if it pays for itself. I figure that with the 14 day trial (I will see if it is 14 trading days) if it pays for the first month then I will continue with it for a bit.
Gap trading is aimed at playing the gap between the closing price one day and the opening price the next day so the trade is in right off the bell and could be finished in minutes, typically less than an hour anyway. This is one trade per day that a gap fade is highly probable, it doesn't setup every day unless I want to play it both ways, fade or run. I tinkered with this early on but found the initial trades were executed poorly and the volatility was rather large...so my limit order choices and stop setting sucked.
The upside of day trading, which gap trading is, is that the trades are complete and nothing rides overnight, the downside is that a huge loss can be accrued over the day due to a number of trading problems as overtrading is possible. Gap trading eliminates the chance of overtrading as there is only one...maybe two trades likely due to the extreme time sensitivity of the trade style. It is a complimentary trading style to my current setup for the same reasons.
With my final P&F trading strategy, so far, I have not realized a loss. I will, but I have more trades in the green than in the red as I speak. I am hoping that I can close some decent winning trades early to overcome the losers, head games really.
Jeff.
Questrade, My direct access discount broker.
Thursday, July 30, 2009
Wednesday, July 29, 2009
Spreadsheets and paper
I've decided to keep a paper record of my trading activity in addition to the electronic version. I have tried two spreadsheet options, Google docs (slow) and Star Office (need to keep updating a common file to access from elsewhere). Neither option has been ideal, both have their benefits and detriments but either are fine if I am not using them as a first line of entry, paper first then for tracking I'll use the spreadsheets.
The Google doc has a sheet for each stock to track each trade trigger, entry, dates stops and P/L etc. Then the first page references the first line of each stock page so all of the stocks have a single line on page one showing the current activity. This allows a quick scan to see what trades are to be placed when a trigger is up as well as active trades. I don't update them with EOD data, just when I make stop moves, order placements or close trades.
On the stock page when a trade is closed it will be replaced with a new line once a trigger is apparent and the reversal has started toward that trigger. They will also track completed trades, P/L per stock overall, commissions etc. The first page will pull all of the totals from the stock pages as well for an overall performance indication.
I will have two versions of this running, one for the actual trades and one for trades that I was unable to make, usually I expect this to be shorts missed as my margin account is still lacking funding for full blown short selling. I'll get around to adding to this as this trading plan moves along.
Jeff.
The Google doc has a sheet for each stock to track each trade trigger, entry, dates stops and P/L etc. Then the first page references the first line of each stock page so all of the stocks have a single line on page one showing the current activity. This allows a quick scan to see what trades are to be placed when a trigger is up as well as active trades. I don't update them with EOD data, just when I make stop moves, order placements or close trades.
On the stock page when a trade is closed it will be replaced with a new line once a trigger is apparent and the reversal has started toward that trigger. They will also track completed trades, P/L per stock overall, commissions etc. The first page will pull all of the totals from the stock pages as well for an overall performance indication.
I will have two versions of this running, one for the actual trades and one for trades that I was unable to make, usually I expect this to be shorts missed as my margin account is still lacking funding for full blown short selling. I'll get around to adding to this as this trading plan moves along.
Jeff.
Tuesday, July 28, 2009
Zero activity...options?
This is not what I am used to, zero activity. I placed the orders for PXP...that's it.
I am normally quite active during the day, or at some point in the day, researching, studying, trading... this feels more like babysitting.
Now, I have all my charts printed for quick reference...not that I need quick reference, all my orders are in, my positions have stops, I caught up on my reading... now is just the waiting while I see if positions get stopped or orders get filled.
I should perhaps setup a spreadsheet to track my trades to not include anything prior to my current criteria. I might do a Google doc as it will not have much traffic so the slow update time will not be an option...and I won't have to remember to load the changed sheet all the time. I was going to, and did start, an automatic order and stop filling sheet but with all this extra time and no real need for fast throughput I likely won't waste the time finishing it. I was having trouble with the nested logic statements to accommodate the $20 transition to 50cent increments anyway.
If this monotony is going to be a regular thing, as well as having extra buying power available due to not as many orders in play I think I may look into trading "in the money" options as well. I will wait to see if my P&F chart trading works first though. Of course, I could use the same charting to trade those options as well...now there is an interesting thought...P&F charting in order to play options instead of stocks. Less capital needed, stay away from the extrinsically valued options and just trade the highly correlated, long term, in the money options.
I did investigate options in the past but considered them useless for my purposes as I needed to be able to make stock "predictions" in order for the option trading to be of value. I also know more about option trading now than I did then.
I am normally quite active during the day, or at some point in the day, researching, studying, trading... this feels more like babysitting.
Now, I have all my charts printed for quick reference...not that I need quick reference, all my orders are in, my positions have stops, I caught up on my reading... now is just the waiting while I see if positions get stopped or orders get filled.
I should perhaps setup a spreadsheet to track my trades to not include anything prior to my current criteria. I might do a Google doc as it will not have much traffic so the slow update time will not be an option...and I won't have to remember to load the changed sheet all the time. I was going to, and did start, an automatic order and stop filling sheet but with all this extra time and no real need for fast throughput I likely won't waste the time finishing it. I was having trouble with the nested logic statements to accommodate the $20 transition to 50cent increments anyway.
If this monotony is going to be a regular thing, as well as having extra buying power available due to not as many orders in play I think I may look into trading "in the money" options as well. I will wait to see if my P&F chart trading works first though. Of course, I could use the same charting to trade those options as well...now there is an interesting thought...P&F charting in order to play options instead of stocks. Less capital needed, stay away from the extrinsically valued options and just trade the highly correlated, long term, in the money options.
I did investigate options in the past but considered them useless for my purposes as I needed to be able to make stock "predictions" in order for the option trading to be of value. I also know more about option trading now than I did then.
Sunday, July 26, 2009
The active trading list expands
I keep waffling between sticking to ten stocks on my hit list and all 50+ stocks from my visual scan last week. I looked over my 10 list and looked over my 50+ list, why should I myself to ten stocks? I figure that, as long as I am organized, there is no reason that I cannot place trades up to my cash (and margin) balance in each account.
Pros to using all 50+
-more trade setups at any particular time = more money in play
-more trades = smaller loss allowances per trade
-more selection for sector rotation or just diversification
-feels like I am doing more work toward trading, no boredom
-better selection of price ranges to use in the varied size of my accounts
Cons
-overly complicated if not organized well
-should there be many trades selecting which ones are best could be an issue
-possible over exposure to one or two sectors
-lack of familiarity with any particular stocks
Pros to using 10
-easily managed trading
-familiarity with stocks and their tendencies
-always enough capital to take all of the trade setups (with the exception of a lot of shorts)
Cons
-small sample base to use for studies
-fewer trades means that cash may be sitting unused
-leads to larger position sizing to get money working more often
-boredom as there may be little activity some weeks
Well, there is no glaring point that stands out for or against either method so I feel that it is more of a personality issue. I liked the daytrading, kept me active while keeping me from too much studying after trading hours. Daytrading is hard to work on when not trading even though I do reading and whatnot to keep up to date with some of the blogs that I follow.
This trading method reduces the intraday work, by close to 90% and allows most of the studying and trade determination to be done on weekends or evenings...even placing the trades can be done after or before hours.
The only one real drawback that I see is having money in play overnight and, especially over a weekend. I am more prone to gaps. Now, I am hoping that gaps will more often than not go in my favour only because the support levels that I am using may tend toward a favorable move but I am realistic enough to know that news sometimes forces gaps in either direction without regard to previous history.
I am setting up to use the full 50+ list for active trading. I have printed all the current P&F charts to use for manual notating. I can scan through the charts and see the setups in about 10 minutes. A quick note for each stock's trigger and a separate note for each one approaching it's respective trigger to setup trades.
Today I have 12 stocks nearing a trade entry. I have four active positions, two of which I may just liquidate to free up the cash as they are not on my new list. I will need to determine which ones are actionable based on account balances. My short sells are restricted due to the small margin account and most of the setups are shorts...shame.
It comes down to the fact that the trading decisions are pretty simple to make based on using support and resistance on a P&F chart so there is no reason not to be able to make more. Exits are cut and dried as well so there really is no trade management to mull over. Trigger, trade, scale in, stop set. The only hassle is knowing when and where to move stops but even that can be cut down to two or three strategies depending on the chart pattern.
Jeff.
Pros to using all 50+
-more trade setups at any particular time = more money in play
-more trades = smaller loss allowances per trade
-more selection for sector rotation or just diversification
-feels like I am doing more work toward trading, no boredom
-better selection of price ranges to use in the varied size of my accounts
Cons
-overly complicated if not organized well
-should there be many trades selecting which ones are best could be an issue
-possible over exposure to one or two sectors
-lack of familiarity with any particular stocks
Pros to using 10
-easily managed trading
-familiarity with stocks and their tendencies
-always enough capital to take all of the trade setups (with the exception of a lot of shorts)
Cons
-small sample base to use for studies
-fewer trades means that cash may be sitting unused
-leads to larger position sizing to get money working more often
-boredom as there may be little activity some weeks
Well, there is no glaring point that stands out for or against either method so I feel that it is more of a personality issue. I liked the daytrading, kept me active while keeping me from too much studying after trading hours. Daytrading is hard to work on when not trading even though I do reading and whatnot to keep up to date with some of the blogs that I follow.
This trading method reduces the intraday work, by close to 90% and allows most of the studying and trade determination to be done on weekends or evenings...even placing the trades can be done after or before hours.
The only one real drawback that I see is having money in play overnight and, especially over a weekend. I am more prone to gaps. Now, I am hoping that gaps will more often than not go in my favour only because the support levels that I am using may tend toward a favorable move but I am realistic enough to know that news sometimes forces gaps in either direction without regard to previous history.
I am setting up to use the full 50+ list for active trading. I have printed all the current P&F charts to use for manual notating. I can scan through the charts and see the setups in about 10 minutes. A quick note for each stock's trigger and a separate note for each one approaching it's respective trigger to setup trades.
Today I have 12 stocks nearing a trade entry. I have four active positions, two of which I may just liquidate to free up the cash as they are not on my new list. I will need to determine which ones are actionable based on account balances. My short sells are restricted due to the small margin account and most of the setups are shorts...shame.
It comes down to the fact that the trading decisions are pretty simple to make based on using support and resistance on a P&F chart so there is no reason not to be able to make more. Exits are cut and dried as well so there really is no trade management to mull over. Trigger, trade, scale in, stop set. The only hassle is knowing when and where to move stops but even that can be cut down to two or three strategies depending on the chart pattern.
Jeff.
Thursday, July 23, 2009
Timing is everything
I am watching, loosely, the market today and seeing a surge above a resistance line in the S&P500...and most market indices I expect...that has me wishing that I was in the trades that I have orders for. Today alone would have seen, so far, about $6 per share.
My shorts were not well timed and I am rethinking my shorting strategy to take more of an overall look at market dynamics, or sector dynamics. I have an idea for using some sort of sector rotation to bias my trading direction and to determine which stocks to be trading at any given point. Still in the mulling over stage.
Taking a step back, all of the orders that I have are contingent upon a bit of a reversal or pullback in order to get executed based on my criteria. While I know this is bound to happen I am biding my time by looking back at the triggers that I started with this week and going back to the point in time when those triggers were initially more relevant. When I placed the orders the triggers had already been hit and I was hoping for a little last minute pullback into my trading range.
Now that the triggers have mostly run out, the next reversal that can trigger my initial trade entries will be on a new column of "O"s which advances up the trendline. This point on the chart for the last trades that I missed would have worked out as follows...based on my scaling into the trade method assuming that I had started as recently as July 1st and I used all my picks including BMI and SFG:
Current stop out value = $1185 (close to real value)
Closed trades P/L = $30 (one winner, one stopped out full and one small winner)
Paper value about = $1885
Due to my stops being at least $1 below the active price the actual paper value of my portfolio would be higher. Given the market sentiment I might be inclined to cash out for that extra and wait for the next triggers...at least on the stocks that are very near target values and may turn soon.
This gives me more motivation to hold out for my entries. It is worth noting that 3 were 30 shares, 7 were 60 shares, and 1 was 90 shares, The one that stopped out was the 90 share trade which is also the one that I see I would not have entered due to the chart pattern and due to the lack of shorting inventory, now I know. The numbers for the trades are about what I would expect.
Off to lunch now.
Jeff.
My shorts were not well timed and I am rethinking my shorting strategy to take more of an overall look at market dynamics, or sector dynamics. I have an idea for using some sort of sector rotation to bias my trading direction and to determine which stocks to be trading at any given point. Still in the mulling over stage.
Taking a step back, all of the orders that I have are contingent upon a bit of a reversal or pullback in order to get executed based on my criteria. While I know this is bound to happen I am biding my time by looking back at the triggers that I started with this week and going back to the point in time when those triggers were initially more relevant. When I placed the orders the triggers had already been hit and I was hoping for a little last minute pullback into my trading range.
Now that the triggers have mostly run out, the next reversal that can trigger my initial trade entries will be on a new column of "O"s which advances up the trendline. This point on the chart for the last trades that I missed would have worked out as follows...based on my scaling into the trade method assuming that I had started as recently as July 1st and I used all my picks including BMI and SFG:
Current stop out value = $1185 (close to real value)
Closed trades P/L = $30 (one winner, one stopped out full and one small winner)
Paper value about = $1885
Due to my stops being at least $1 below the active price the actual paper value of my portfolio would be higher. Given the market sentiment I might be inclined to cash out for that extra and wait for the next triggers...at least on the stocks that are very near target values and may turn soon.
This gives me more motivation to hold out for my entries. It is worth noting that 3 were 30 shares, 7 were 60 shares, and 1 was 90 shares, The one that stopped out was the 90 share trade which is also the one that I see I would not have entered due to the chart pattern and due to the lack of shorting inventory, now I know. The numbers for the trades are about what I would expect.
Off to lunch now.
Jeff.
Tuesday, July 21, 2009
Scanning for Cherries
OK,
So trying to nail 10 stocks out of thousands is a little like trying to pick 10 best cherries out of a cherry tree...there are far more than 10.
I ran a new scan this morning and came up with 51 possible stocks to choose from. Not bad for a first paring even though I am sure there are more.
I took about five minutes to view the small chart page (candle glance on Stockcharts) that places 20 per page. These are larger than thumbnails and with P&F charting the patterns are dead simple to see. I pared 51 down to ten. That is my criteria right off the start. I can view ten per page without having to "next" to see the rest so it is easy.
In this case I was trying to come up with one that fits all my criteria, is in an uptrend and near a price trigger to trade and one or two others that are just trending nicely long or short.
Two have shown up on previous scans and they made the cut to ten. Then I got all excited and had some extra time to work on this...I changed my scan criteria and opened up the pipe...full tilt.
All US stocks (NYSE, NASDAQ, AMEX) between $10 and $45 with over 1,000,000 average shares per day traded.
Almost 700 selections. I pared them down to 51 (funny that number comes up again).
Comparing them to my current 10 selections is interesting. Not all of the ones on my trading list are on my 51. 5 are on both lists, 3 didn't make it based on volume and the other two based on not ideal chart patterning.
Now these visual scans are based on a smaller P&F chart so I need to expand these 51 to see the larger picture and determine if they still stand up to the test. I may modify my list, drop the lower volume stocks and the non-conformers. I have not actually traded these ones yet so I have no history one way or the other.
I'll post a list tomorrow once I get things nailed down. I will only have ten active trading stocks but I will likely keep up to 30 available as backups...perhaps set them up as sectors so I can rotate them based on that or even just to be sure that I don't get too heavy into one or two sectors. I'm not sure which way to go as either sector rotation or sector diversification, if not traded correctly, can be a problem.
Jeff.
So trying to nail 10 stocks out of thousands is a little like trying to pick 10 best cherries out of a cherry tree...there are far more than 10.
I ran a new scan this morning and came up with 51 possible stocks to choose from. Not bad for a first paring even though I am sure there are more.
I took about five minutes to view the small chart page (candle glance on Stockcharts) that places 20 per page. These are larger than thumbnails and with P&F charting the patterns are dead simple to see. I pared 51 down to ten. That is my criteria right off the start. I can view ten per page without having to "next" to see the rest so it is easy.
In this case I was trying to come up with one that fits all my criteria, is in an uptrend and near a price trigger to trade and one or two others that are just trending nicely long or short.
Two have shown up on previous scans and they made the cut to ten. Then I got all excited and had some extra time to work on this...I changed my scan criteria and opened up the pipe...full tilt.
All US stocks (NYSE, NASDAQ, AMEX) between $10 and $45 with over 1,000,000 average shares per day traded.
Almost 700 selections. I pared them down to 51 (funny that number comes up again).
Comparing them to my current 10 selections is interesting. Not all of the ones on my trading list are on my 51. 5 are on both lists, 3 didn't make it based on volume and the other two based on not ideal chart patterning.
Now these visual scans are based on a smaller P&F chart so I need to expand these 51 to see the larger picture and determine if they still stand up to the test. I may modify my list, drop the lower volume stocks and the non-conformers. I have not actually traded these ones yet so I have no history one way or the other.
I'll post a list tomorrow once I get things nailed down. I will only have ten active trading stocks but I will likely keep up to 30 available as backups...perhaps set them up as sectors so I can rotate them based on that or even just to be sure that I don't get too heavy into one or two sectors. I'm not sure which way to go as either sector rotation or sector diversification, if not traded correctly, can be a problem.
Jeff.
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