Trials

I am running two trials right now, my live real trading and a fake account using live data. Figuring that I can afford to lose all my fake money I threw caution to the wind and took every single trade that setup except ones that were in a real sharp move against the direction of the trade. A little price wallowing or a quick bump into the buy zone were all taken. Trades are all 50 share trades. Stops were moved, generally, $1 at a time once the price convincingly crosses the next dollar point.

At this point I have made three round trades and profited $357, net commissions.

I have 12 positions active for a total capital used of $22,362. I just kept entering trades that setup in alphabetical order from my list. If everything stopped out right now I would be down (-$270) (total net including actual profits) and my paper gains would be $376 (not including realized gains)

Interesting numbers, of all the possible stock trades I have 12 that I did not make as they did not meet my entry price so my scan is running about 50%.

In my real account I used different criteria and have entered 8 trades (two closed). I had to use 25 share trades in my margin account in order to be able to execute multiple trades (it's a small account) and I am using it exclusively for short selling. Current P/L is (-$32.75). Total stopped out loss over all three real accounts would be (-$330.25).

While my two lists have some overlap I specifically deleted any of these duplicates from my fake list. I am not sure what the real difference in performance may be due to...perhaps trying harder with the real money is the factor as it seems to be in day trading as well. I may very well either switch lists, mix them up a bit or just use the same trade entry criteria on my real list with the same stop moves. Most of my stopped out loss would be attributed to my having moved the stops back down yesterday... a larger paper loss is easier to take than a smaller realized loss when I have these trades open and still within their "zone". I would have let them all go had they hit the bottom of the range on my charts.

After all that I probably should have taken all of these trades off the table when they were at least above break even this past week, I was forgetting that we were going into a long weekend. Perhaps the tail end of yesterday's drop was due to traders offloading their positions prior to the weekend and I may see some serious buying on Monday to bolster prices again.

My shorts did well enough at least.

Jeff.

Flexible stops

This morning I checked my trading accounts and saw that my shorts were in good shape so I just left them alone but my long position pre-market quotes were very close to the stop loss settings. This should be expected after the poor employment report this morning...so I cancelled all my long stops.

My thinking:

Employment numbers are released regularly enough that the repercussions may only last a day or two and most of the drop, if there is no other equally bad news, will happen before the market opens.

Stops cancelled and reset after I see that my "worst case stop settings" held...so I just used those for today. This strategy seems to have paid off as my positions have bounced back somewhat.

I waited until things more less less appeared to settle down to buy another long position, which may or may not pan out, it was a good technical trade.

I then took some time to set up my other stocks with entry alert triggers in Esignal. I will get nice sounds indicating that another stock has entered my buy zone and I can monitor them to see if they are good prospects. Perhaps send some limit orders in and set some more alerts to let me know when they fill so I can place stops accordingly...although I am running out of cash to enter more trades with it tied up in six right now.

With the US long weekend here tomorrow I decided to only buy the one and wait and see what happens Monday. I figure that everyone (except those that actually lost their jobs and are still out of work) will have forgotten that the numbers were poor and it will be business as usual.

Oh, I did jump in at 0933h with a day trade in SDS (leveraged bear SPX ETF). Figured I might as well make a bit of cash on the bad news.

Interesting thing about that trade was my different thinking when placing it. A daytrade that I might typically make will have a very tight stop off the start and I may play with the setting often. This time I set it $1 away at first, moved it up a couple of times, then, once the wind came out of the sails of the market selloff, I bumped it right up tight to exit. Good call but the move ended up not being all that big.

I like longer term trading even if it is longer intraday trading. The stop losses are far greater upon initial inspection though... in the long run they are not really as large.

Jeff.

One more trade

I added another short this morning to round me off to 6 active trades, 4 long and two short.

Long sectors are Transport, Industrial goods, Healthcare and Basic Materials (Oil and gas drilling services)
Short are Financial (Insurance) and Healthcare.

These are mostly accidental except for the healthcare short.

I chose to get a healthcare short in to offset my long in the same sector as the long position is wallowing now, sort of a hedge trade I suppose. Even though they are in the same sector that does not immediately imply that they will fallow that index close enough to have to worry much about them moving in lock-step.

So far my new portfolio is in the green overall, 4 up and two down. or 5 up and 1 down, depending on the moves of a close one.

One of my trades has dropped back to a buy level so I consider adding to it as it is a 25 share position...but I decide that I will let it play out first. Afterall, this is a newer trading method so I might just be adding to a loss rather than averaging down.

I made the two short trades in my margin account, the only account where I can short. The balance are in my RRSP account which means that the profits are left to grow.

My next plan is to target the trade sizing ( absolute dollar value) in such a way as to put the smaller priced stock trades into my TFSA account and leave the RRSP for the larger priced stocks. This will allow me to grow my TFSA (Tax Free Saving Account) to the point where it can be skimmed tax free on a profit percentage basis to start covering some of my other out of pocket trading costs. Ultimately that is where I would like most of my trading to end up as all of the profits are tax free completely. In January I will get to add another $5,000 tot he capital base to give me some more trading room...unless I find that I can grow it enough that I don't need it...that would be nice.

Jeff.

5 active trades

I am up to five active trades today. Four long and one short. I should have closed one out at the $2 mark, but it is still in play so I will hold it and perhaps consider doubling the position if the chart looks right...it is only 25 shares now so taking it to 50 is not a big stretch.

P&F charts have a default setting of a 3 point reversal before a new column is started, $1 per point for stocks between $20 and $100. My target is $3 initially then running a tight stop beyond that point with an eye to exiting before a weekend to avoid a gap against me on the following Monday. X'x and O'x each represent $1 in movement which makes stop setting easier than penny raises. This is certainly an interesting plan and different than anything else I have played while being similar to my CTP method.

I still have more room so I will see what opens up tomorrow and perhaps enter another short and two more longs...if they materialize.

I have about 40 stocks setup on my watchlist right now. The ratio of long to sort setups is about 3:1, which is interesting. I expect that this ratio will change as the market shifts between up and down trending in general. I could run a back test scan to see if that holds for the recent downturns...but I want to play in the future, not the past.

Tomorrow is a holiday (Canada Day) and the US markets are open so I will check in a few times over the day, which is the advantage of longer term trading. Make the order, set the stops and walk away until the next day.

Jeff.

Very small position issue

I pulled back to trading 25 share positions for testing and have found that it creates an interesting problem...I am willing to just hold it almost no matter what so profit and loss have no real meaning.


Normally I get a little antsy when a profit builds up and I sell too soon or I the reverse I jump out just before the low turns. This is not so much a dollar gain/loss issue...or so I thought.


In my current small sizing I have seen my positions hit $2 per share and was willing to hold it open and perhaps just move my stop up...after all, $2 is really only $50 gain less my $10 commission...$40. Had I been holding 100 shares I would have sold at the $2 mark to lock in gains of $200 rather than let it hold, or even sell half.

It almost seems as though a 25 share position is just too small. I know it takes 40 cents to break even due to commissions so I have no choice but ride the price action out longer, that was sort of the plan. My next step was to bump up to 50 shares as this still allows me to hold a few trades simultaneously, part of my diversity planning.


It turns out that my two current trades are creeping back down and I seem to be quite willing to let them go for a while yet to see what happens.

More trading to take place today.

Jeff.

Mixing it up with P&F

The last week has been an interesting week for a number of reasons, but I will focus on one today.

Lately I have been looking at volume by price as well as extending my timelines into weekly charts for some trending analysis. I have always stood by the idea that price tells the whole story and trading can be performed without regard to the fundamentals of the underlying company...I still do so that has not changed.

I have resisted using Point and Figure (P&F) charts for some time. Someone suggested that I look at them but I couldn't drag my eyes back to such a primitive looking chart after playing with the nice graphic presentation of the candle charts with all the great tools and overlays. I didn't get them at first glance so I discounted their usefulness.

I finally broke down and looked closely at the P&F charts. Although I may regret not doing this earlier I don't think that I would have appreciated what the charts were about before.

The key is that P&F charting is only price dependant not time dependant. I choose to add the volume levels in as I think that they add to the information available.

Here is a chart that I picked from a scan that I ran for possible trade setups. I scanned for stocks that had a new box that day, which indicates that the price has gone past the established range.

NIKE:
The current price is in red to the right. The trendlines are placed automatically, the volume below represents the volume for the particular row of Xs or Os while the volume on the side represents volume at those particular price levels. These can give more credence to a support or resistance level as large volume at a higher level could indicate that sellers are agressively selling at that level ...there is some interpretation involved here.

To trade based on this chart the entry price would be in the low $49 range, stop at $47 perhaps.

Here is the candle chart for the same time period:

The previous low in May was $48.76 so if that price was to act as support then the $49.00 would be a good entry price with a tight stop. The key would be to keep the stop tight as anything below that May low would likely be followed by even lower prices.

I'll clarify a plan for entry and stop settings in another post.

Jeff.

Getting ahead of myself

I should know better than to start from scratch with any trading plan. I have some proven medium term stuff that has served well enough for a launching pad that I really don't need to start all over again...but that is just what I did. That and I was playing with two plans (three if you count the daytrading) at the same time.

Sometimes I am my own worst enemy.

Then, in my exuberance, I entered some trades to do some testing in one plan. Exuberance or impatience... almost the same thing here.

The "plan" was a pre-packaged indicator "service" that I thought I would give a whirl. I had looked at it in the past and discounted the triggers as too scattered to be profitable in the long run. While I was sort of right, I see that I would have to select a fixed number of stocks to trade and use the indicator on those stocks for long AND short trades. I cannot short in my registered accounts so I can only play one side of the market and there are a lot, an awful lot, of whipsaws in the system. I am sure that it could work but the platform they use is slow and is not very flexible. No custom chart notations at all so I would end up having another package to do anything other than what the service provides.

That one boiled down to an attempt to provide "no-brainer" trade entries for a swing trade system. I can manage any number of ways to enter swing trades using standard charting, I just have not gotten back into it yet as I am having too much fun in day trading.

I won't go into any details about plan 2 and what I was trying as I think it has some serious merit but just needs a lot of work. Suffice it to say that one plan is along the lines of longer time frame sector rotation using ETFs and their relative mid term performance. I need to work on timing... and some serious number crunching. I know the theory is sound and this is a method that used to be used with certain types of managed funds in the past with good success.

Jeff.