Back to Earth for a moment.
I like planing ahead so I signed up for an entire year of the day trading service to save $1200 as there was a $100 monthly rate increase going in for June 1. Us charter members get to take advantage of this option.
Also in the vein of planning ahead I have been considering tracking the possible stock trades along side of the option trades in order to determine at what point trading the stocks make more sense than the options.
Pros for stocks over options:
-Larger trade sizes will not affect the trade overall
-Hold past profit target with moving stops to secure larger moves
-Smaller losses due to tight stop losses... if used
-Larger profits due to the option delta effect (ie: 50 cent option move = $1 stock move)
-Easier entry due to greater liquidity over options
-Getting into more trades as options run away... the stock may run but the trade is entered already
-Pre and Post market trading to secure profits
-Scaling into and out of positions easier
-Smaller commission rates for comparable underlying control
Cons against stocks over options:
-Larger possible losses due to option delta affect (ie: $1 stock move = 50 cent option move)
-Possible inability to sell certain stocks short
Hmmm.... Perhaps I am using the wrong account for my daytrading. If I used the margin account I might be able to trade the stocks right now. I could move the momentum options into the TFSA now as I have enough cash in there to do that and they are more profitable anyway. I think that I had best think more about this move as what I am doing now is working... besides, I have the momentum stuff well loaded right now and need to wait to unload it before the margin would be free anyway.
I plan to take the first week of July off of trading and that may be a good time to consider this sort of move... although it does not involve moving money, just switch which account I am trading from.
This month I will track the option trades more closely and also track the entry and exit prices for the corresponding underlying securities. I can easily set these trades up in Esignal and run a quick study on trailing stops and stock size comparisons. This will give me a target margin account size to watch for in order to know when I could make the switch without affecting my profits.
I notice that quite often a trade will be called out only to not get filled on the options. We will do one of two things, adjust the limit price up (if limits were suggested) or let it go. In either case it indicates that the stock has usually gone in the direction that was anticipated and, had I just entered a market order for the stock at the time of the call I would already be in a position to take advantage of the move. The downside... I cannot think of a downside in those two cases.
Anytime that a trade may not have been a good call I would be in a losing position whether in an option or stock... so order sizing may be important. Half sizes and scale in as the stock does what is anticipated or just keep tight stops. Often we take on trades that look very good at the start, they move against us, we hold. Occasionally increasing the options is called for but it is easier to add stocks at any point as not only is the commission less, the stock trade cannot affect the rest of the group's trade in any way at all.
While I got a bit rambly here the long and short of it is that I will compare all the trades in June as if trading the stocks as well... especially including those that run away and I would have been in. Then I will figure the cash needed to trade stocks in the quantities needed to see at least the same profits.
At least this gives me another numbers project to keep me busy instead of coming up with new spins on profits or ways to forecast the future returns.
Jeff.
Questrade, My direct access discount broker.
Sunday, May 30, 2010
Forecasting... Ultra Conservative to Hog Wild
As much as I thought that I wouldn't do another forecast to see where I might be using some arbitrary but reasonable numbers I guess I cannot resist. This time I am using my current performance profits and applying three different methods of trade size incrementation.
I need to keep in mind that this is only for the day trading account, tax free, but only one of three current plans in play.
The first choice is to just do what I am doing sticking with the current profit levels for the next 12 months based on 3 contracts per trade. While this is not exciting it gives a certain satisfaction in knowing that I could, if I wanted to, skim off all the profits and use them as an income all on it's own. Of course this is discounting any increase in trade performance or quantity...also discounting any decreases.
Profits in 12 months = $47,925
Keep in mind this would be the forecasted annual income...but tax free or equivalent to about $75,000 depending upon the marginal rate.
Ok, not bad but hard to live off the profits and still grow the account.
Choice two is to increase by one trade per month, as I am sort of doing now although I increased to 4 trades for the last week in May.
Profits in 12 months = $135,789
Much more like it. Even though the number is already great the thing to consider is that in 12 months the monthly income would be a smidge under $18,500 or $224,000 per year. Basically if I stopped increasing my trade sizes at that point my equivalent to taxed income is $344,000.
Considering that it only takes $250 per trade, on average, to increase the size by one contract it is pretty obvious that I can increase the trade sizes faster to get to the larger monthly profit target sooner than 12 months. So let's say I just add 2 per month. The maximum size in 12 months is 24 contracts... so I will have to close trades in lower volume chains in two or three chunks to avoid block trading exits holding up the trade and this may affect my executions a bit... I could shave 5% off the forecasts but I won't right now as it is next to inconsequential.
Profits in 12 months = $ 209,000
I won't bother to convert this to a pre-tax equivalent, the monthly income is $32,000 and the annual income if I just held water on the trade sizes is $383,000.
Nice. While time will tell how accurate this is I still feel that I am fudging against my future performance as there is an option to trade stocks once I have a certain account size that allows for large enough stock trades to produce similar profits. The best thing about those is that I can use tight stops initially and let trades go with VTSOs to capture greater profits and see lesser losses which should increase my profitability overall.
If I want to go really hog wild and put no cap on trade sizes, just use 10 contract exit orders I could, in theory...as I don't think this would work unless I switched to stocks and I have no real comparison numbers yet... another post.
Hog Wild profits in 12 months = $ 919,900
Trade size is 239 contract per trade, right, trade stocks instead. Annualized income $3,818,000.
OK... so somewhere in there will be where I fall... between about $50,000 and $919,000 in 12 months. How's that for a forecast range?
Jeff.
I need to keep in mind that this is only for the day trading account, tax free, but only one of three current plans in play.
The first choice is to just do what I am doing sticking with the current profit levels for the next 12 months based on 3 contracts per trade. While this is not exciting it gives a certain satisfaction in knowing that I could, if I wanted to, skim off all the profits and use them as an income all on it's own. Of course this is discounting any increase in trade performance or quantity...also discounting any decreases.
Profits in 12 months = $47,925
Keep in mind this would be the forecasted annual income...but tax free or equivalent to about $75,000 depending upon the marginal rate.
Ok, not bad but hard to live off the profits and still grow the account.
Choice two is to increase by one trade per month, as I am sort of doing now although I increased to 4 trades for the last week in May.
Profits in 12 months = $135,789
Much more like it. Even though the number is already great the thing to consider is that in 12 months the monthly income would be a smidge under $18,500 or $224,000 per year. Basically if I stopped increasing my trade sizes at that point my equivalent to taxed income is $344,000.
Considering that it only takes $250 per trade, on average, to increase the size by one contract it is pretty obvious that I can increase the trade sizes faster to get to the larger monthly profit target sooner than 12 months. So let's say I just add 2 per month. The maximum size in 12 months is 24 contracts... so I will have to close trades in lower volume chains in two or three chunks to avoid block trading exits holding up the trade and this may affect my executions a bit... I could shave 5% off the forecasts but I won't right now as it is next to inconsequential.
Profits in 12 months = $ 209,000
I won't bother to convert this to a pre-tax equivalent, the monthly income is $32,000 and the annual income if I just held water on the trade sizes is $383,000.
Nice. While time will tell how accurate this is I still feel that I am fudging against my future performance as there is an option to trade stocks once I have a certain account size that allows for large enough stock trades to produce similar profits. The best thing about those is that I can use tight stops initially and let trades go with VTSOs to capture greater profits and see lesser losses which should increase my profitability overall.
If I want to go really hog wild and put no cap on trade sizes, just use 10 contract exit orders I could, in theory...as I don't think this would work unless I switched to stocks and I have no real comparison numbers yet... another post.
Hog Wild profits in 12 months = $ 919,900
Trade size is 239 contract per trade, right, trade stocks instead. Annualized income $3,818,000.
OK... so somewhere in there will be where I fall... between about $50,000 and $919,000 in 12 months. How's that for a forecast range?
Jeff.
Friday, May 28, 2010
Observing The Targets
I keep changing how I want to calculate my targets and therefore count when I surpass them. While I have tried to be conservative by using overall averages and not counting anything prematurely I do need to keep in mind my overall goal and use my targets accordingly.
My overall goal is to attain a consistent cashflow so using a total daily average is counter productive. Last month's daily average is good for last month but has little to no bearing on this month for more reasons than just my targets. I also expect to be increasing trade sizes at least once per month for a while so counting the averages based on the different trade sized trades might be good, but overly complicated. Once I switch to the next size up I could just restart my average counter.
Therefore, instead of just using an overall average I will be counting the current month's average and I may look at setting up some way of using a 20 day moving average to more closely reflect the true average. Starting over on a monthly basis is troublesome as it can look really good or really bad right off the start due ot the first day or so results. If I can come up with a relatively easy way to move the average I will do that.
After today with the current trades closed and this being the last trading day of the month my current month's average is $210.20 for daytrading only. That translates into $3993.
Last month was $119.30 and $2147 in profits.
That is a 76.2% increase in daily average and an 85.9% increase in total profits.
I only started 4 contract trades this week so there are very few trades based on this yet so the increase is due to just better trades overall. We had one great day too, May 17th, which cleared the $1900 in one day. When next month's averages and profits are larger again they will be due to increased trade sizes... and perhaps better trades again or maybe even more trades... but that remains to be seen.
I just noticed that today's numbers bump me well into the $21,000 mark overall.
Jeff.
My overall goal is to attain a consistent cashflow so using a total daily average is counter productive. Last month's daily average is good for last month but has little to no bearing on this month for more reasons than just my targets. I also expect to be increasing trade sizes at least once per month for a while so counting the averages based on the different trade sized trades might be good, but overly complicated. Once I switch to the next size up I could just restart my average counter.
Therefore, instead of just using an overall average I will be counting the current month's average and I may look at setting up some way of using a 20 day moving average to more closely reflect the true average. Starting over on a monthly basis is troublesome as it can look really good or really bad right off the start due ot the first day or so results. If I can come up with a relatively easy way to move the average I will do that.
After today with the current trades closed and this being the last trading day of the month my current month's average is $210.20 for daytrading only. That translates into $3993.
Last month was $119.30 and $2147 in profits.
That is a 76.2% increase in daily average and an 85.9% increase in total profits.
I only started 4 contract trades this week so there are very few trades based on this yet so the increase is due to just better trades overall. We had one great day too, May 17th, which cleared the $1900 in one day. When next month's averages and profits are larger again they will be due to increased trade sizes... and perhaps better trades again or maybe even more trades... but that remains to be seen.
I just noticed that today's numbers bump me well into the $21,000 mark overall.
Jeff.
Tuesday, May 25, 2010
Cashflow target
I keep waffling about when it comes to deciding on how to calculate my daily averages so I decided to make it an average cashflow based on the individual averages of the three systems I am using now.
Daytrading is straight profits divided by trading days = $164.67
Momentum options profits divided by trading days there = $302.34
This way my current cashflow is actually $467, not over $500 like I first suggested. This is a truer statement reflecting the cash per day that I am currently enjoying overall rather than some sort of average of the whole. It doesn't work out to based on total profits over the total timeframe that I have been trading.
Jeff.
Daytrading is straight profits divided by trading days = $164.67
Momentum options profits divided by trading days there = $302.34
This way my current cashflow is actually $467, not over $500 like I first suggested. This is a truer statement reflecting the cash per day that I am currently enjoying overall rather than some sort of average of the whole. It doesn't work out to based on total profits over the total timeframe that I have been trading.
Jeff.
Another milestone
Today I cleared the $20,000 mark overall as it was almost a $1,000 day in just the daytrading.
I find that the day trading is more an overnight thing more and more as we open positions specifically to hold for a day or two... or more. We closed a losing trade today as it was not really going anywhere, down about 15% so it was a lot better than holding it until expiry, which happens with a handful.
This is the first day using 4 contract trades. John is starting to cater to the group's requests more now. Getting a little more heavy handed with people who are not learning and are taking up more then their share of bandwith, increasing the subscription rate to reduce the numbers a bit and giving some guidance about relative sizing (go big, medium or small on the trades).
The last item is good as I consider 3 contracts pretty much the minimum so this lets me run 4 as standard size, 3 for the small and maybe bump to five for larger trades. When I get to 5 and 6 contracts the smaller will still be 3 but the larger may be 7 or 8.
All in all today was mostly uneventful, as if I can remain blase about neatly surpassing the next milestone. Time to set a new batch so I have more to aim for, although I find that I get a little lazy while thinking about the actual profit number. I need to remain focused on cashflow goals and money at risk targets to stay on the ball. Time to setup a couple of new spreadsheets to let me track monthly profits from the momentum options. I won't worry about the longer term stuff until later.
As the month draws to a close my daily overall average is over $510 (depending on how I figure the number of days overall), my daytrading average is up to $215.
Jeff.
I find that the day trading is more an overnight thing more and more as we open positions specifically to hold for a day or two... or more. We closed a losing trade today as it was not really going anywhere, down about 15% so it was a lot better than holding it until expiry, which happens with a handful.
This is the first day using 4 contract trades. John is starting to cater to the group's requests more now. Getting a little more heavy handed with people who are not learning and are taking up more then their share of bandwith, increasing the subscription rate to reduce the numbers a bit and giving some guidance about relative sizing (go big, medium or small on the trades).
The last item is good as I consider 3 contracts pretty much the minimum so this lets me run 4 as standard size, 3 for the small and maybe bump to five for larger trades. When I get to 5 and 6 contracts the smaller will still be 3 but the larger may be 7 or 8.
All in all today was mostly uneventful, as if I can remain blase about neatly surpassing the next milestone. Time to set a new batch so I have more to aim for, although I find that I get a little lazy while thinking about the actual profit number. I need to remain focused on cashflow goals and money at risk targets to stay on the ball. Time to setup a couple of new spreadsheets to let me track monthly profits from the momentum options. I won't worry about the longer term stuff until later.
As the month draws to a close my daily overall average is over $510 (depending on how I figure the number of days overall), my daytrading average is up to $215.
Jeff.
Monday, May 24, 2010
Position sizing...nay sayers
In reverse order:
I had an online acquaintance inquire about my trading and I ended up sending links to the three services that I am currently used, two of which are responsible for the trade setups that I used to make my current profits and one is new. After some online research they decided that I was in the minority of those who trusted and used this provider and actually made money. All I can say is that the ones who cannot make money using these services need to revisit their ability to pay attention to instructions and be able to execute trades quickly while sticking to some one else's plan. I have always said that when trading someone else's plan you would have to be willing to work the plan as it is laid out 100%.
Nuff said.
I decided to check out the profit potential for both of the services that I am using after having heard that one individual has cleared $100,000 since starting in March. Seeing as I wrote March off as a learning month (due to some of my erroneous trade decisions I about broke even) I just used April May to date for the day trading service but used all of the option momentum trades since inception, Mid March, about 42 trades that I was able to make over 47 days.
Using 10 contracts for every single trade (only because there was a period that 10 was the recommended max due to liquidity issues).
Day trading would have been near $23,500 and would have needed the $25,000 to manage this off the start. Now, with the profits I would not have had to keep that full amount in play but it is still near to doubling my money in less than two months.
The momentum trading would be at $57,480 and would have required about the same start up $25k. The final profit figure has me not only doubling but more than tripling my money by a good margin (2.3 times or 230% profit) in barely more than two months.
Total profit of $81,207 based on a $50,000 account is a 162% increase overall.
So, seeing as I am not really about the ROI I would look at the cash flow and it doesn't take much math to realize that $80,000 in roughly two months could look after a lot of things and still have lots of room to grow the trading account and start a nice investment account on the side.
Daily return for just the momentum account = $1723
Daily return for the day trading account = $734
Oh, this assumes that I keep the 10 contract position sizing throughout the period. I would expect that I would be moving the contract sizes up at about half the rate of account size increase to reduce the relative risk of the trades while still growing the account base and allowing to skim the profits as if using them for an income, which would be an ultimate target anyway.
Either return as a stand alone figure meets my daily minimums and then some.
Maybe not 'nuff said until the numbers are up like that.
Jeff.
I had an online acquaintance inquire about my trading and I ended up sending links to the three services that I am currently used, two of which are responsible for the trade setups that I used to make my current profits and one is new. After some online research they decided that I was in the minority of those who trusted and used this provider and actually made money. All I can say is that the ones who cannot make money using these services need to revisit their ability to pay attention to instructions and be able to execute trades quickly while sticking to some one else's plan. I have always said that when trading someone else's plan you would have to be willing to work the plan as it is laid out 100%.
Nuff said.
I decided to check out the profit potential for both of the services that I am using after having heard that one individual has cleared $100,000 since starting in March. Seeing as I wrote March off as a learning month (due to some of my erroneous trade decisions I about broke even) I just used April May to date for the day trading service but used all of the option momentum trades since inception, Mid March, about 42 trades that I was able to make over 47 days.
Using 10 contracts for every single trade (only because there was a period that 10 was the recommended max due to liquidity issues).
Day trading would have been near $23,500 and would have needed the $25,000 to manage this off the start. Now, with the profits I would not have had to keep that full amount in play but it is still near to doubling my money in less than two months.
The momentum trading would be at $57,480 and would have required about the same start up $25k. The final profit figure has me not only doubling but more than tripling my money by a good margin (2.3 times or 230% profit) in barely more than two months.
Total profit of $81,207 based on a $50,000 account is a 162% increase overall.
So, seeing as I am not really about the ROI I would look at the cash flow and it doesn't take much math to realize that $80,000 in roughly two months could look after a lot of things and still have lots of room to grow the trading account and start a nice investment account on the side.
Daily return for just the momentum account = $1723
Daily return for the day trading account = $734
Oh, this assumes that I keep the 10 contract position sizing throughout the period. I would expect that I would be moving the contract sizes up at about half the rate of account size increase to reduce the relative risk of the trades while still growing the account base and allowing to skim the profits as if using them for an income, which would be an ultimate target anyway.
Either return as a stand alone figure meets my daily minimums and then some.
Maybe not 'nuff said until the numbers are up like that.
Jeff.
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