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.

Slow month

This month has been rather slow, or maybe that is just me.

I am in 9 active trades right now, closed a loser and a winner... one closed I reversed the trade to go from a profitable short to enter a long immediately.

I gave some thought to only trading with the trend but found that the historical studies and long term trial period supported the idea of playing both sides of the trade under the majority of circumstances. While this does increase the risk a bit there are entry rules to skew the trades in favour of the "with the trend trades" that, while consistently applied, produce reasonable win rates.

Currently I am at a 75% win rate as I have closed 3 winning trades of four trades taken since starting the trading in my margin account last month. Although I obviously need more trades to make any stat relevant I still have all the back data to support 75% as an acceptable expectation for a win rate.

I just double checked and I am in 5 short and 4 long positions... which just goes to show how undecided the market seems to be... perhaps that is not really relevant as the prices on each stock with fluctuate as they will without too much input from the market overall.

Not much to talk about yet.

Jeff.

Free Time

I have not had this much free time in a while, at least as far as trading is concerned.

I have pared my hit list down to 14 stocks that are active, that means they would be traded the very next time that a setup occurs. I have 6 open positions (five of which are currently showing a paper profit) with 2 or three that I place orders on each day (shorts cannot be GTC, only day orders) and the rest I am actively tracking for the next entry possibility.

With all this free time I am getting other things done that I have been procrastinating on and, when I get free time from that I run another stock or two through my wringer to see how they would rank. Tonight I eliminated a possible tradeable due to some nasty volatility that would have me whipsawed out of trades far too often to be worth the bother. I am sure that it could make a very good candidate under one of my other trading plans but I am being very diligent in sticking to only one for the time being.

I do have another to be added once I finish my analysis of it. I know that I had about fifty from last year, and most worked out very well but they are outside of my criteria now and I need to replace a good chunk of them. I will feel comfortable once I get 20 active stocks in my own portfolio but I will continue to add to that number in order to be able to continue tracking and analyzing my trading plan over a wider selection of tradeable stocks.

All in all I am quite satisfied with things as they stand right now. Being able to run a new stock for suitability in about 45 minutes and end up with a ranking, profitability and next trade setup without having to agonize over charts, read accounting statements, financial reports and check for news events certainly is a nice way to trade.

Jeff.

Adding another pick to my hit list, PKI

The funny thing is that I don't even know the name of the company, the joys of pure technical trading as I don't need to know... although I usually end up finding out something about the companies that I trade along the way. I do enter them in a new feed and every month or so I see if anything interesting has happened.

I am in the process of ranking it against my other picks to see where it fits into my current list of active orders. Halloween sort of got in the way of me finishing though. I expect that it will easily end up near the top of my list that I will likely place an order for tomorrow and perhaps even bump another pick out for now.

I am finally getting around to formalizing my rules and guidelines in order to keep any ambiguity out of my trade decisions and management. It's nice to have a firm set of rules but even nicer when I can refer to them to remind me not to try to do something different... I am prone to trying to "tweak on the fly" and that, often as not, keeps me from sticking with a plan for long enough to make the money that it could have.

I plan to add another 6 or so stocks to my list by the end of the week.

Jeff.

CMC trade closed and the next opened

As noted in my Live Trades window the CMC trade closed Wednesday for $1 and $1.50 targets for the two trades which yields a 6.9% and 10% profit.

I have been involved in regular meetings this week so I was not as on the ball as I could have been with the re-entry into this stock. My entry target was $13.50 (long) and I could have gotten in the same day as the short profit target was tagged but I didn't do so until today.

No big deal... unlike the IRM trade that I missed for the sake of an hour, I find that most trade entries, and exits for that matter, have much longer windows of opportunity.

I re-entered CMC long adding the profits from the short trade to compound the trade size.

A brief note on the compounding effect.

Something that I overlooked when trading options, which was ultimately part of my reason for getting out of option trading for now, was the method used to compound returns based on profits. I won't go into the details other than to say that not doing it properly can easily blow up your account due to not being able to change position sizing in gradual increments.

With stocks, compounding will allow gradual increases in absolute risk following every profitable trade and an easy method to downsize trades in order to minimize risk following a loss.

I'll put up some numbers in my next post.

Jeff.

ROI Optimization... Ignoring Time Lines.

Perhaps my post should have been titled, Near Miss with IRM as this was entered on Monday right shortly after missing the $23.00 high in IRM that day, I just forgot to actually post it:

Today I dropped a stock off of my hit list (CLI) due to it's price being higher than my optimum stock price and added one (IRM) that, had I been one hour earlier I would have gotten into a trade.

Actually I would have been in a nice reversal trade on that one as it hit the previous long position target and the next short trade entry this morning.

Due to my fixed target sizes ($1.50 for less than $20 stocks and $3 for over $20) the optimum trade size is a $20 stock for a long entry and $23 for a short entry. This produces an ROI of 15% and 13% respectively.

A $15 stock can produce a 10% ROI which lowers as the price approaches $20. Anything higher than $23 the ROI just heads down as at $30 it is 10% as well. I figure anything with a 10% or better ROI is fine right now.

A side note on this is that while the stock may be at that sweet spot it will not stay there. The idea here is not to just trade at the $20-$23 all the time but to use compounding in order to grow the position size as the price moves away from that ideal price. Starting out with a higher ROI just gets it moving a little quicker.

Ultimately it is all about the cash-flow more than the ongoing per trade ROI.

Starting with a $1,000 position size and making trades that gain 10% to 15% per trade it adds up.

I mentioned my relative ranking system before so I won't get into details now but the new addition is tied for top spot at 21. I heavily weighted the price factor to favour anything north of $20 decreasing as the price increases to $30 yielding a zero for the last price ranking.

The followup is that I missed a really nice entry on that particular stock at that particular time as evidenced by the chart following:

Note the peak on Monday, probably about an hour before I entered my order firm at $23.00. On Tuesday I considered getting in in the mid $22.95's but decided to hold tight, hindsight.

The previous long entry that I mentioned in my post was at $20 to sell at $23 and short immediately at $23. Had I been long I might have missed the short due to the fast peak as I cannot place a short order while holding a long position without having two separate trading accounts (next year I will do that with longs in the TFSA)

Jeff.