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.
Friday, July 3, 2009
Thursday, July 2, 2009
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.
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.
Wednesday, July 1, 2009
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.
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.
Tuesday, June 30, 2009
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.
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.
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.
Monday, June 29, 2009
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.
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.
Tuesday, June 23, 2009
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.
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.
Thursday, June 18, 2009
Back into the swing of swing trading?
Most of this post is from my day trading blog entry of today.
I am trying something a bit different, actually it is a medium term trade idea. I have accumulated a list of stocks that are reasonably big players that I see other traders trading intraday or these are used to gauge market sentiment. Either way they are fairly common and reasonably fluid issues.
I plan on putting all of these stocks (McDonalds, Morgan Stanley, General Electric, Dupont, Johnson and Johnson, 3M, etc.) on a page in my Esignal software. I am working on a script to monitor these for certain significant milestones and trends in order to do some swing trading and sector rotational style trading, perhaps a bit of hedging as well, perhaps capture some dividends while at it.
It would be fairly easy to even scroll through these one by one to watch for certain patterns and price positioning on a daily chart basis. I have been only trading full lots due to a restriction in Questrade that would not allow me to place a part lot stop loss. I figured that, seeing as the stop loss was a market restriction altogether, I should try a partial lot stop loss in the NYSE...surprise surprise! I am able to stop loss partials, so it had nothing to do with Questrade at all.
Now I will be trading in my TFSA using part lots of various companies with appropriate stops in place for each. I may even let them trickle into my other accounts if I can keep enough capital free for daytrading...although even there I could use smaller position sizing as the main restriction I have been considering was having to use lots of 100 shares which can, in slumps or testing periods, draw my account down. Live and learn.
Today I bought McDonalds (MCD) due to the significant 200DMA test. It was not ideal but I wanted to place with an order setup and test the stop loss order entry. I placed a limit order lower than my eventual entry which I should have just left in play. Due to impatience I replaced it with a market order, only to see the price drop 20 cents shortly afterward. Unlike day trading a drop of 20 cents in a medium term trade means next to nothing as my stop loss is a full $1 away. I sort of wanted to be in the trade today even though I likely could have gotten a better price tomorrow.
I think that I will apply trend in process trading, like swing trading, and skip the counter trend stuff altogether. At the very least I will choose position sizing to suit the risk of the trade, at least for my loss allowance.
Entry points will likely be determined by entering the trade at the previous day close price or better. This saves trying to decide when to trade during the day, set a limit order at the open for this point unless it is plainly obvious off the start that I may get a better price. These are not to be time intensive trading decisions during the day. Shorting will not be involved at this point either.
Basically, a work in progress.
Jeff.
I am trying something a bit different, actually it is a medium term trade idea. I have accumulated a list of stocks that are reasonably big players that I see other traders trading intraday or these are used to gauge market sentiment. Either way they are fairly common and reasonably fluid issues.
I plan on putting all of these stocks (McDonalds, Morgan Stanley, General Electric, Dupont, Johnson and Johnson, 3M, etc.) on a page in my Esignal software. I am working on a script to monitor these for certain significant milestones and trends in order to do some swing trading and sector rotational style trading, perhaps a bit of hedging as well, perhaps capture some dividends while at it.
It would be fairly easy to even scroll through these one by one to watch for certain patterns and price positioning on a daily chart basis. I have been only trading full lots due to a restriction in Questrade that would not allow me to place a part lot stop loss. I figured that, seeing as the stop loss was a market restriction altogether, I should try a partial lot stop loss in the NYSE...surprise surprise! I am able to stop loss partials, so it had nothing to do with Questrade at all.
Now I will be trading in my TFSA using part lots of various companies with appropriate stops in place for each. I may even let them trickle into my other accounts if I can keep enough capital free for daytrading...although even there I could use smaller position sizing as the main restriction I have been considering was having to use lots of 100 shares which can, in slumps or testing periods, draw my account down. Live and learn.
Today I bought McDonalds (MCD) due to the significant 200DMA test. It was not ideal but I wanted to place with an order setup and test the stop loss order entry. I placed a limit order lower than my eventual entry which I should have just left in play. Due to impatience I replaced it with a market order, only to see the price drop 20 cents shortly afterward. Unlike day trading a drop of 20 cents in a medium term trade means next to nothing as my stop loss is a full $1 away. I sort of wanted to be in the trade today even though I likely could have gotten a better price tomorrow.
I think that I will apply trend in process trading, like swing trading, and skip the counter trend stuff altogether. At the very least I will choose position sizing to suit the risk of the trade, at least for my loss allowance.
Entry points will likely be determined by entering the trade at the previous day close price or better. This saves trying to decide when to trade during the day, set a limit order at the open for this point unless it is plainly obvious off the start that I may get a better price. These are not to be time intensive trading decisions during the day. Shorting will not be involved at this point either.
Basically, a work in progress.
Jeff.
Monday, June 1, 2009
Quick update on my S&P500 short position
Given today's activity I would have to say that I would have been in the high volume of short coverings...or bear fund dumpers. I am not sure where my stop would have really been but I expect that, after the first 30 minutes of trading, I would have closed all SDS, SH or short positions in SPY or SSO for a loss.
I have been following another trader's short position and noted that he often closes the position based on the type of day we might have only to re-enter at a better price near the end of the day. This is almost day trading but it falls under intraday management of a longer term trade. some interesting ideas.
I'll check later this week to see if this is setting up for a good long position in a SPX related ETF.
Jeff.
I have been following another trader's short position and noted that he often closes the position based on the type of day we might have only to re-enter at a better price near the end of the day. This is almost day trading but it falls under intraday management of a longer term trade. some interesting ideas.
I'll check later this week to see if this is setting up for a good long position in a SPX related ETF.
Jeff.
Saturday, May 30, 2009
May 30th update and musings
Quick note on the daily charting for longer term trading of the ETFs.
The bull ETF moving averages seem to correspond reasonably well with the same period averages on the SPX chart. The ber funds, on the other hand, vary widely. It appears that the longer the period of the moving average the less correlation it has. This makes using them on the bear fund charts impossible to use. I realized some time ago that trading ETFs really should be based on the underlying index chart and not the ETF chart anyway but this is more important on the daily scale.
On the minute scale the averages are not bad and can be used, loosely, on any chart for comparison but the index should still be the main reference.
This brings me back to the trial trade in the last post. My stop of $56 on SDS was based on monthly pivot points calculated from that chart...I should have been using the index especially as, unlike day trading, a daily chart needs no instantaneous updates to determine trade management.
So, looking at the charts I see that I should have bee stopped out on SDS yesterday, even according to the SPY chart had I bee shorting I would have covered as my stop would have been based on the 200 DMA line and it was breached in both cases as the end of bay...and end of month rush, spiked SPY over a dollar, SDS dropped a bit more than that. That last push would have stopped me out, which would not have been in the plan.
So going back to the SPX chart it peaked at 920. Still short of the 200DMA at 928.60 and short of the recent high of 929.20.
Another consideration is that longer term trades really should be taken on non-leveraged funds as the leverage effect loses money over the long run as a price oscillates from day to day particularly in a sideways market move. Nice straight trending is fine but that is not always the case. In fact, a good long long term plan might be to short a bull fund and hold it as a hedge as, over time, it will continue to drop in peak value until it reaches the point where the fund manager decides to consolidate the units to bring the value back up to a workable level.
Anyone wanting to see this just run a chart with an index and the leveraged bull fund side by side or overlayed. Each successive peak of the fund is slightly lower than the peak of the index, relative to all previous peaks as the fund gets rebalanced each day whereas the index does not. I think that shorting a leveraged bear fund would result in the same effect but I haven't looked closely at it. Had I access to shorting ETFs (no shorting in my registered accounts) I might just short a handful of shares and hold them to see how effective this might be in reality.
I digress.
The point is that my SDS trade would likely be an SH (proshares S&P500 short...non-leveraged) at $66.92. Current closing price is $65.82.
That compares to $55.50 in SDS down from $57.71. Thanks to leverage.
So, we shall see where this goes. I will consider entering the next trade setup for longer term in my TFSA account. I probably will not trade in even lots so I cannot use a true stop loss, but that hardly matters as I intend to be day trading so I can easily monitor the position and close the trade at any time during the day...which also lets me aim for better prices than just the previous day's close. Perhaps even try out a VTSO to enter the trade...I wonder if that will work...
The bull ETF moving averages seem to correspond reasonably well with the same period averages on the SPX chart. The ber funds, on the other hand, vary widely. It appears that the longer the period of the moving average the less correlation it has. This makes using them on the bear fund charts impossible to use. I realized some time ago that trading ETFs really should be based on the underlying index chart and not the ETF chart anyway but this is more important on the daily scale.
On the minute scale the averages are not bad and can be used, loosely, on any chart for comparison but the index should still be the main reference.
This brings me back to the trial trade in the last post. My stop of $56 on SDS was based on monthly pivot points calculated from that chart...I should have been using the index especially as, unlike day trading, a daily chart needs no instantaneous updates to determine trade management.
So, looking at the charts I see that I should have bee stopped out on SDS yesterday, even according to the SPY chart had I bee shorting I would have covered as my stop would have been based on the 200 DMA line and it was breached in both cases as the end of bay...and end of month rush, spiked SPY over a dollar, SDS dropped a bit more than that. That last push would have stopped me out, which would not have been in the plan.
So going back to the SPX chart it peaked at 920. Still short of the 200DMA at 928.60 and short of the recent high of 929.20.
Another consideration is that longer term trades really should be taken on non-leveraged funds as the leverage effect loses money over the long run as a price oscillates from day to day particularly in a sideways market move. Nice straight trending is fine but that is not always the case. In fact, a good long long term plan might be to short a bull fund and hold it as a hedge as, over time, it will continue to drop in peak value until it reaches the point where the fund manager decides to consolidate the units to bring the value back up to a workable level.
Anyone wanting to see this just run a chart with an index and the leveraged bull fund side by side or overlayed. Each successive peak of the fund is slightly lower than the peak of the index, relative to all previous peaks as the fund gets rebalanced each day whereas the index does not. I think that shorting a leveraged bear fund would result in the same effect but I haven't looked closely at it. Had I access to shorting ETFs (no shorting in my registered accounts) I might just short a handful of shares and hold them to see how effective this might be in reality.
I digress.
The point is that my SDS trade would likely be an SH (proshares S&P500 short...non-leveraged) at $66.92. Current closing price is $65.82.
That compares to $55.50 in SDS down from $57.71. Thanks to leverage.
So, we shall see where this goes. I will consider entering the next trade setup for longer term in my TFSA account. I probably will not trade in even lots so I cannot use a true stop loss, but that hardly matters as I intend to be day trading so I can easily monitor the position and close the trade at any time during the day...which also lets me aim for better prices than just the previous day's close. Perhaps even try out a VTSO to enter the trade...I wonder if that will work...
Saturday, May 23, 2009
Transferring the TICK to the dailies...EXPERIMENTAL
Well, my longer term outlook was pretty close so far as the S&P500 has slipped a bit. I don't think there is a huge concern for a sudden drop off quite yet but it may be coming. There is not much more good news that can be disseminated that will push the market hard enough to stop the almost inevitable drop.
Here is the last six months on a daily chart for the SPX.
As the value approached the 200dma it lost steam and started a small drop. I have not been watching the S&P500 for long enough to know how it moves so I would not be able to call the short entry based on the chart and the price proximity tot he moving average, so let's take a look at an unorthodox method that I have started using for day trading and apply it to this timeframe and see what happens. It is worth noting that I have not managed to use this successfully in my daytrading as it is still pretty fresh and I am doing some fake trading yet. I tried it on Friday but a tight ranging day requires some different angle than what I am using here. I haven't nailed tight range trading yet.
Here is the chart of the S&P500 with the latest long term trading noted.
The stop line is based solely on the price passing the next monthly pivot point, support or resistance then moving the stop price up to just below that point. One case I used the 50SMA as the pivot point for April dropped and I don't think I would drop my stop setting to suite, just use the next reasonable resistance line.
Now this is the kicker, here is the daily TICK chart that was used to set these trades up...in hindsight right now but I will start tracking as if I did place the trades in "real time"...or as close to that as I can get with daily chart bars.
SMAs are red = 5, blue = 10, green = 15 and yellow = 20...the dotted are somewhere in between and are not really necessary.
The 30 / 50 crossover needs to be confirmed by some upward (or downward for shorting) trending no matter what the price chart looks like. I have run these in backtests by marking the minute TICK chart and only afterwards referring to the price chart. Using the TICK data for exiting the trade is not as good as using the stops, so far as I can tell now. Interesting to note, and something I didn't expect, as the TICK indicated it was time to get short I may still be in the long position...depending on how tight my stop was set to the 1/2 R1 line. According to my chart I would still be in. Using ETFs is an advantage here as I can enter a regular one, SPY, SSO, to play the long trade and use a short ETF like SDS for the downside. Simultaneous long and short positions which are not possible in a single issue...although I have multiple accounts so I could manage this if I REALLY wanted to.
I think that the TICK trending is a very strong indicator for the S&P index and comes very close to being a leading indicator. I am working on a method of using this in conjunction with some sort of sector rotation to be in the ETFs that are moving the most consistently. That may take some time to get going though. One project at a time for now.
In order to track these trades I would, for now, use the previous day close price as the next day entry price. So for the trade entry on the 19th I will use the 18th closing price of $57.71. My stop will be just above the monthly R1 point...taking this over to SDS, well, this would be not as easy to manage as the price and averages for bear funds are not the same as they are for bull funds, leveraged or otherwise. Shorts are easier. I'd say the stop might be about $56.00 for now.
Enter = $57.71 ( I might have set a lower limit order to get in expecting a down day though)
Stop = $56.00
Last close = $60.54
For curiosity I checked the gain from SPY for the long trade.
March 11th entry at $72.17
Current stop at about $88.10
Nice tidy little paper gain. I may run some of these in one of my accounts to see how it goes...only I have to wait for the next good setup before placing a trade...the whole reason, or most of it, for me going back to day trading, I didn't have the patience to wait for a setup to setup on a daily chart. Maybe use part lots and not worry about the lack of stop loss orders for the smaller risk profile as a result. Just enough to prove a live system.
Jeff.
Here is the last six months on a daily chart for the SPX.
As the value approached the 200dma it lost steam and started a small drop. I have not been watching the S&P500 for long enough to know how it moves so I would not be able to call the short entry based on the chart and the price proximity tot he moving average, so let's take a look at an unorthodox method that I have started using for day trading and apply it to this timeframe and see what happens. It is worth noting that I have not managed to use this successfully in my daytrading as it is still pretty fresh and I am doing some fake trading yet. I tried it on Friday but a tight ranging day requires some different angle than what I am using here. I haven't nailed tight range trading yet.
Here is the chart of the S&P500 with the latest long term trading noted.
The stop line is based solely on the price passing the next monthly pivot point, support or resistance then moving the stop price up to just below that point. One case I used the 50SMA as the pivot point for April dropped and I don't think I would drop my stop setting to suite, just use the next reasonable resistance line.
Now this is the kicker, here is the daily TICK chart that was used to set these trades up...in hindsight right now but I will start tracking as if I did place the trades in "real time"...or as close to that as I can get with daily chart bars.
SMAs are red = 5, blue = 10, green = 15 and yellow = 20...the dotted are somewhere in between and are not really necessary.
The 30 / 50 crossover needs to be confirmed by some upward (or downward for shorting) trending no matter what the price chart looks like. I have run these in backtests by marking the minute TICK chart and only afterwards referring to the price chart. Using the TICK data for exiting the trade is not as good as using the stops, so far as I can tell now. Interesting to note, and something I didn't expect, as the TICK indicated it was time to get short I may still be in the long position...depending on how tight my stop was set to the 1/2 R1 line. According to my chart I would still be in. Using ETFs is an advantage here as I can enter a regular one, SPY, SSO, to play the long trade and use a short ETF like SDS for the downside. Simultaneous long and short positions which are not possible in a single issue...although I have multiple accounts so I could manage this if I REALLY wanted to.
I think that the TICK trending is a very strong indicator for the S&P index and comes very close to being a leading indicator. I am working on a method of using this in conjunction with some sort of sector rotation to be in the ETFs that are moving the most consistently. That may take some time to get going though. One project at a time for now.
In order to track these trades I would, for now, use the previous day close price as the next day entry price. So for the trade entry on the 19th I will use the 18th closing price of $57.71. My stop will be just above the monthly R1 point...taking this over to SDS, well, this would be not as easy to manage as the price and averages for bear funds are not the same as they are for bull funds, leveraged or otherwise. Shorts are easier. I'd say the stop might be about $56.00 for now.
Enter = $57.71 ( I might have set a lower limit order to get in expecting a down day though)
Stop = $56.00
Last close = $60.54
For curiosity I checked the gain from SPY for the long trade.
March 11th entry at $72.17
Current stop at about $88.10
Nice tidy little paper gain. I may run some of these in one of my accounts to see how it goes...only I have to wait for the next good setup before placing a trade...the whole reason, or most of it, for me going back to day trading, I didn't have the patience to wait for a setup to setup on a daily chart. Maybe use part lots and not worry about the lack of stop loss orders for the smaller risk profile as a result. Just enough to prove a live system.
Jeff.
Sunday, May 3, 2009
Shorter term look at the S&P 500
I decided to take a shorter term look at the S&P 500 index. I am not convinced, by a long shot, that this bear is dead yet. I know that a chart can be spun in almost any manner to demonstrate a clear outcome in any direction... I am not trying to spin, I am just looking at the facts. My opinion can be as wrong as the next person's.
Here is the chart from my last post:
If this were a minute chart for intraday trading I would be getting ready for a short as the price approached the 200sma... or perhaps long if the price should break that line.
Note here the MACD in this example is STRONGER than the current one.
Here is how that period played out:
Trading is all about pattern recognition...this one is pretty clear as everything is very close to repeating itself.
Let's see what happens as it happens.
Jeff.
Here is the chart from my last post:
The positive convergence looks convincing given that the price trend SEEMS to be broken.
and here is the more current shorter term outlook:
On the zoom there is a whole new set of lines to study. I think the most important is the reduction in volume and the increase in price. The MACD really does not fall into my studies anymore but it was on the default so I used it. I think that the slow creeping up of the price on lower and lower daily volume leads one to consider the market sentiment at work here. If everyone were in the groove of a full on bull move here, even though it has been a good rally, I would expect the volume to be increasing or at least quite high The price is still in the high volume price zone but with volume lessening there may not be enough buying pressure in the underlying stocks to drive this move higher in the long run.
I must admit that the volume is still higher than it was a year ago, but a year ago the market was still in decline, here is the chart for that particular move:
If this were a minute chart for intraday trading I would be getting ready for a short as the price approached the 200sma... or perhaps long if the price should break that line.Note here the MACD in this example is STRONGER than the current one.
Here is how that period played out:
Trading is all about pattern recognition...this one is pretty clear as everything is very close to repeating itself.Let's see what happens as it happens.
Jeff.
Saturday, May 2, 2009
Few and far between
My posts have been exactly that here in the medium term realm...primarily due to the fact that I am entrenched in the daytrading timeframes. Recently I started trading the NYSE instead of the TSX due to the lack of real stop loss orders in the Canadian exchanges.
I have found a great wealth of additional indices and data streams that are not available for the Canadian markets as well. I will be using some of these here and there.
I keep swaying from and to ETFs and lately I have been concentrating on the S&P500 index and related ETFs, SSO, SDS, SPY, SH... various shades of leveraged and non-leveraged ETFs. All work fine in an intra day basis as there is a direct correlation between the leverage factor (1, 2 or 3X) and the ETF price movement. The larger priced SPY moves well enough and it is tradeable as is the leveraged lower priced SSO.
For the purpose of longer term trading SPY and SH (1X ETFs) would be the only issue that makes any sense to use. The problem lies in the price as buying either would tie up enough capital that I would not be able to continue daytrading... so I give up on the one to do the other.
Having said that I will likely be setting up a direct automatic deposit into my margin trading account as they have lowered the margin requirements. It will take a while to build up enough capital for the planned trading but it's got to start somewhere.
No cool charting or forecasts here, although the SPX is at an important price level and anyone trading it should be paying close attention to the next move, I suspect that it may be fast and furious when it breaks.
Well, I couldn't resist. Here is the SPX index for the last year. Note the nice convergence of price with the MACD and the jump the the MACD levels as the price crossed that high volume level around 850. I would be watching closely as the index approaches teh 200dma around 925. Some are saying teh May is a typical selloff month, something about seasonal trading...it may work out that way but he volume is averaging higher as the level rises slowly which lends itself to the thought that there may be some support for a continued rally.
Yes, I still use the stockcharts.com as they have a few things that esignals do not have.
Jeff.
I have found a great wealth of additional indices and data streams that are not available for the Canadian markets as well. I will be using some of these here and there.
I keep swaying from and to ETFs and lately I have been concentrating on the S&P500 index and related ETFs, SSO, SDS, SPY, SH... various shades of leveraged and non-leveraged ETFs. All work fine in an intra day basis as there is a direct correlation between the leverage factor (1, 2 or 3X) and the ETF price movement. The larger priced SPY moves well enough and it is tradeable as is the leveraged lower priced SSO.
For the purpose of longer term trading SPY and SH (1X ETFs) would be the only issue that makes any sense to use. The problem lies in the price as buying either would tie up enough capital that I would not be able to continue daytrading... so I give up on the one to do the other.
Having said that I will likely be setting up a direct automatic deposit into my margin trading account as they have lowered the margin requirements. It will take a while to build up enough capital for the planned trading but it's got to start somewhere.
No cool charting or forecasts here, although the SPX is at an important price level and anyone trading it should be paying close attention to the next move, I suspect that it may be fast and furious when it breaks.
Well, I couldn't resist. Here is the SPX index for the last year. Note the nice convergence of price with the MACD and the jump the the MACD levels as the price crossed that high volume level around 850. I would be watching closely as the index approaches teh 200dma around 925. Some are saying teh May is a typical selloff month, something about seasonal trading...it may work out that way but he volume is averaging higher as the level rises slowly which lends itself to the thought that there may be some support for a continued rally.
Yes, I still use the stockcharts.com as they have a few things that esignals do not have.Jeff.
Wednesday, April 15, 2009
Choosing a timeframe
I've been playing with 1 minute charts for some time now and having fun with the the immediacy of the activity. With the Esignals charting software and 150 day historical intraday archives it makes doing backtesting great...the other big factor is the automatic plotting of pivot points and other formulae and studies. Almost as much fun as trading.
One issue that I keep running up against is what timeframe to use for medium term trading?
I plot the monthly pivot points and use them on my minute charts.
I like the play between the 30, 50 and 200 Simple Moving Averages in conjunction with the pivot points so I figured I would leave them on for longer trades.
I tried daily charts, 60 minute charts, 30 minute charts... today just as a play around I tried the 5 and 10 minute charts...they seem to have the correlation with those averages that looks nice and clean.
Now the idea will not be to use the 5 minute candles to day trade as the plan would be to hold these for the duration of a longer term trend or move so the 5 or 10 (5 seems best) gives enough graduation to allow playing with limit orders during the day for entry and exits and still be able to see days at a time for the overall larger picture.
Interestingly the 5 minute chart for 10 trading days looks so similar to a 1 minute chart over 1 day, except for the EOD gaps, as the monthly pivot points are there and seem to act as support and resistance in a similar manner. I can squeeze one month per page and that looks even more like a day.
I have read a lot about trading different timeframes and being aware of the longer frames as they relate to short term trading but it never really hits home until it is seen in a chart of my own making. Now I can easily see the tendency toward range trading as since the 6th of this month the price of HGD has stayed strictly between the monthly pivot point and 1/2 R1 until breaking it a bit on the upside this afternoon...basically from $7.95 to $8.70ish. That is a 75 cent spread for the last week and a half, most days were not nearly that wide. That helps explain my smaller profits, and more frequent small losses as my trading size is not large enough to take advantage of such small moves yet.
Not that I need an excuse. If I were trading for a living that is exactly what that would be, an excuse, as I would have to be able to handle all markets. To be honest, I should be just changing sectors and trading something else...
To be REALLY honest, I should not be playing with ETFs, I should be playing real stocks. In that case I could just play long and short positions of whatever stock I wished to give me the volatility that I needed for the larger moves. The restriction is, of course, the registered accounts not allowing short selling. That is the whole reason I ended up trading ETFs to get the advantage of buying bull and bear funds.
So I will stick to the ETFs for the time being and considering adding some longer term trades in my TFSA, perhaps some banks when I feel that the time is right.
Jeff.
One issue that I keep running up against is what timeframe to use for medium term trading?
I plot the monthly pivot points and use them on my minute charts.
I like the play between the 30, 50 and 200 Simple Moving Averages in conjunction with the pivot points so I figured I would leave them on for longer trades.
I tried daily charts, 60 minute charts, 30 minute charts... today just as a play around I tried the 5 and 10 minute charts...they seem to have the correlation with those averages that looks nice and clean.
Now the idea will not be to use the 5 minute candles to day trade as the plan would be to hold these for the duration of a longer term trend or move so the 5 or 10 (5 seems best) gives enough graduation to allow playing with limit orders during the day for entry and exits and still be able to see days at a time for the overall larger picture.
Interestingly the 5 minute chart for 10 trading days looks so similar to a 1 minute chart over 1 day, except for the EOD gaps, as the monthly pivot points are there and seem to act as support and resistance in a similar manner. I can squeeze one month per page and that looks even more like a day.
I have read a lot about trading different timeframes and being aware of the longer frames as they relate to short term trading but it never really hits home until it is seen in a chart of my own making. Now I can easily see the tendency toward range trading as since the 6th of this month the price of HGD has stayed strictly between the monthly pivot point and 1/2 R1 until breaking it a bit on the upside this afternoon...basically from $7.95 to $8.70ish. That is a 75 cent spread for the last week and a half, most days were not nearly that wide. That helps explain my smaller profits, and more frequent small losses as my trading size is not large enough to take advantage of such small moves yet.
Not that I need an excuse. If I were trading for a living that is exactly what that would be, an excuse, as I would have to be able to handle all markets. To be honest, I should be just changing sectors and trading something else...
To be REALLY honest, I should not be playing with ETFs, I should be playing real stocks. In that case I could just play long and short positions of whatever stock I wished to give me the volatility that I needed for the larger moves. The restriction is, of course, the registered accounts not allowing short selling. That is the whole reason I ended up trading ETFs to get the advantage of buying bull and bear funds.
So I will stick to the ETFs for the time being and considering adding some longer term trades in my TFSA, perhaps some banks when I feel that the time is right.
Jeff.
Friday, March 27, 2009
March Madness, in the medium term...
Well, in my short day trading blog I've mentioned about using a new (to me) software and online service for charting.
Esignals.
They provide a fairly robust charting package which gives me almost everything that I would look for in a trading software package...for now. The reason I mention it over here is that it has some nice features that will translate well for medium term trading.
Specifically the ability to plot pivot points for varying timeframes automatically. While this is a great benefit for day trading it has it's advantages in longer term trading as well. Particularly when I can go back in historical studies and see the old pivot points plotted in the past without having to do any number crunching and manual plotting.
Now I had to do a bit of basic style programming to get what I wanted but it certainly will pay off in the long run.
About paying...this is not a cheap package deal. The cost is $125 per month plus about $40 in data access fees. Now the data access is expensive only because I want level 2 market depth quotes, otherwise I could get away with under $10 in fees...$2 extra if I wanted NYSE data. I think I could get delayed or end of day data for no extra charge too.
Anyway. I have a 30 day trial after which time I will have to pay for the past 30 days, so it is not free, just a money back guarantee. So I am one week down now and I have all my setups in and pages configured how I need them for now. I am sure that I may tweak them later but I need to get trading to get a feel for how this will work...and make some money to pay for the extra expense.
I worked out the cost benefit and decided that over my normal 60 trades per month it is the same as taking my commission/ECN fee from about $5.40 to $8.80.
All this because I decided that I need better data flow for my trading...I don't really need it for medium term trading but I will definitely take advantage of the conveniences available.
That's all for now.
Jeff.
Esignals.
They provide a fairly robust charting package which gives me almost everything that I would look for in a trading software package...for now. The reason I mention it over here is that it has some nice features that will translate well for medium term trading.
Specifically the ability to plot pivot points for varying timeframes automatically. While this is a great benefit for day trading it has it's advantages in longer term trading as well. Particularly when I can go back in historical studies and see the old pivot points plotted in the past without having to do any number crunching and manual plotting.
Now I had to do a bit of basic style programming to get what I wanted but it certainly will pay off in the long run.
About paying...this is not a cheap package deal. The cost is $125 per month plus about $40 in data access fees. Now the data access is expensive only because I want level 2 market depth quotes, otherwise I could get away with under $10 in fees...$2 extra if I wanted NYSE data. I think I could get delayed or end of day data for no extra charge too.
Anyway. I have a 30 day trial after which time I will have to pay for the past 30 days, so it is not free, just a money back guarantee. So I am one week down now and I have all my setups in and pages configured how I need them for now. I am sure that I may tweak them later but I need to get trading to get a feel for how this will work...and make some money to pay for the extra expense.
I worked out the cost benefit and decided that over my normal 60 trades per month it is the same as taking my commission/ECN fee from about $5.40 to $8.80.
All this because I decided that I need better data flow for my trading...I don't really need it for medium term trading but I will definitely take advantage of the conveniences available.
That's all for now.
Jeff.
Wednesday, March 18, 2009
RRSP account ready to fly now.
I now have my RRSP transferred. Those mutual funds really crapped. I know I cashed out half back when they peaked and I had the paperwork ready to liquidate the rest but just never sent it in, procrastination cost a lost that time.
Now I want to get some decent dividend stocks on the wish list mixed up in financials, energy, perhaps some gold and a trust or two. I have a bunch that I am familiar with so I will start going over those this weekend.
Generally speaking the financial and energy sectors have had a decent rally so I will wait for the pullback to enter these.
Meanwhile, I may buy some of the Horizons BetaPro bear ETFs for these sectors as they weaken in preparation for the decline. Seeing as I cannot just short sell the stocks themselves. I am considering just using the bear ETFs as a hedge in order to remain in the dividend positions. In theory I should be able to gain on the ETF twice the loss of the stock, roughly, due to their leverged effect. If that works out OK then it lets me remain long in the stock and still collect any dividends and perhaps use the synthetic DRIP method as well as still growing my portfolio.
Hedging with bear ETFs can eliminate the need for setting stops on good dividend stocks. I will eventually need to compare that plan with using the protective put strategy but I feel that the puts are a good hedge plan for large positions, not me yet.
In order to take advantage of synthetic DRIPping I need to have a position large enough that the dividend payment equals at least one share value or it just gets deposited as cash.
The upside is that each position will grow, slowly at first, the down side is once I have an odd lot I can no longer use stops, not really a concern though. Alternately is the idea of just letting the cash grow and adding to positions manually, preferably in even lots. This lets me add my cash contributions to the dividend cash and pick and choose exactly where to best spend the money at the time, perhaps not even on of the existing positions.
Lots to think about anyway.
Now I want to get some decent dividend stocks on the wish list mixed up in financials, energy, perhaps some gold and a trust or two. I have a bunch that I am familiar with so I will start going over those this weekend.
Generally speaking the financial and energy sectors have had a decent rally so I will wait for the pullback to enter these.
Meanwhile, I may buy some of the Horizons BetaPro bear ETFs for these sectors as they weaken in preparation for the decline. Seeing as I cannot just short sell the stocks themselves. I am considering just using the bear ETFs as a hedge in order to remain in the dividend positions. In theory I should be able to gain on the ETF twice the loss of the stock, roughly, due to their leverged effect. If that works out OK then it lets me remain long in the stock and still collect any dividends and perhaps use the synthetic DRIP method as well as still growing my portfolio.
Hedging with bear ETFs can eliminate the need for setting stops on good dividend stocks. I will eventually need to compare that plan with using the protective put strategy but I feel that the puts are a good hedge plan for large positions, not me yet.
In order to take advantage of synthetic DRIPping I need to have a position large enough that the dividend payment equals at least one share value or it just gets deposited as cash.
The upside is that each position will grow, slowly at first, the down side is once I have an odd lot I can no longer use stops, not really a concern though. Alternately is the idea of just letting the cash grow and adding to positions manually, preferably in even lots. This lets me add my cash contributions to the dividend cash and pick and choose exactly where to best spend the money at the time, perhaps not even on of the existing positions.
Lots to think about anyway.
Monday, March 16, 2009
Bear or bull? The market is never wrong.
The market is never wrong, or the price is the price.
I have not been doing too much other than a little additional research into my longer term trading ideas lately. My RRSP account that I am going to use for these longer term trades is just online now, I need to wait while it gets linked to my main trading platform so I can use any of my accounts just by selecting a tab. Very handy.
Last night I was reviewing the state of the market in general and I noticed how the TSX was weakening. While everyone was going on about the rally and how it may indicate the end of the recessions (HUH?) the charts are pretty obviously not agreeing, the charts represent everyone who has a stake in actually putting their money on the line based on the market. declining volume on increasing price looks like it's time to get short to me...so a limit order on HSD (Horizons Beta Pro S&P 500 Bear ETF) for $37 was my target. I cannot short in my registered accounts so this is the next best thing.
I was spending some time updating my trading software at lunch and spending some time online with the broker to clear up a few issues so I checked into the HSD chart... the low today was $36.70...so I would be in at $37 give or take a cent. If I had been watching it during the day I may have gotten in a bit lower. Either way I would stop this at $36 as if it breaks $36 I was wrong on the trade.
Ideally I might wait until today was done and gauge the entry for tomorrow seeing as the range is pretty narrow. For curiosity I will go with $37 and see what happens.
Jeff.
I have not been doing too much other than a little additional research into my longer term trading ideas lately. My RRSP account that I am going to use for these longer term trades is just online now, I need to wait while it gets linked to my main trading platform so I can use any of my accounts just by selecting a tab. Very handy.
Last night I was reviewing the state of the market in general and I noticed how the TSX was weakening. While everyone was going on about the rally and how it may indicate the end of the recessions (HUH?) the charts are pretty obviously not agreeing, the charts represent everyone who has a stake in actually putting their money on the line based on the market. declining volume on increasing price looks like it's time to get short to me...so a limit order on HSD (Horizons Beta Pro S&P 500 Bear ETF) for $37 was my target. I cannot short in my registered accounts so this is the next best thing.
I was spending some time updating my trading software at lunch and spending some time online with the broker to clear up a few issues so I checked into the HSD chart... the low today was $36.70...so I would be in at $37 give or take a cent. If I had been watching it during the day I may have gotten in a bit lower. Either way I would stop this at $36 as if it breaks $36 I was wrong on the trade.
Ideally I might wait until today was done and gauge the entry for tomorrow seeing as the range is pretty narrow. For curiosity I will go with $37 and see what happens.
Jeff.
Tuesday, February 24, 2009
Timeframe shift.
I was a little unimpressed with the daily trading setup I was using when I started looking at longer term trades earlier and I could not put my finger on the reason, until today. I am not trading today even though I am at home for the afternoon. Technical difficulties and everything is so outside of my charts now that I would be doing as much guessing as anything else...best to leave it alone.
So, in the interest of figuring out what is the best approach to get going on I decided to play with the timeframes.
In my daytrading the pivot points are based on the previous day's high low and close, this is the pivot point period. Seeing as there are 390 minutes in a day that makes the base pivot point period (1 day) almost 400 times larger than my trading period (1 minute). I used an intraday chart and plotted 5 minute bars instead of 1 minute bars, it becomes almost untradeable based on the daily pivot points and the ratio is 1:78.
I figured that I should use some similarly large ratio to use for the longer term trades. One month pivot point period used to trade an 30 minute chart is 1:260. Now my stockcharts does not allow 30 minute charts past a certain timeframe so I cannot create a 30 minute for December and still have the averages correct, so I cheated and used the hour chart (longer hourly history available) and just divided the averages by 2. So a 200sma in the 30 minute timeframe is the same as a 100sma in an hourly timeframe.
Here is the same chart for BVF that I started out with before, only in the 1 hour period with the equivalent of moving averages for the 30 minute timeframe.
So, in the interest of figuring out what is the best approach to get going on I decided to play with the timeframes.
In my daytrading the pivot points are based on the previous day's high low and close, this is the pivot point period. Seeing as there are 390 minutes in a day that makes the base pivot point period (1 day) almost 400 times larger than my trading period (1 minute). I used an intraday chart and plotted 5 minute bars instead of 1 minute bars, it becomes almost untradeable based on the daily pivot points and the ratio is 1:78.
I figured that I should use some similarly large ratio to use for the longer term trades. One month pivot point period used to trade an 30 minute chart is 1:260. Now my stockcharts does not allow 30 minute charts past a certain timeframe so I cannot create a 30 minute for December and still have the averages correct, so I cheated and used the hour chart (longer hourly history available) and just divided the averages by 2. So a 200sma in the 30 minute timeframe is the same as a 100sma in an hourly timeframe.
Here is the same chart for BVF that I started out with before, only in the 1 hour period with the equivalent of moving averages for the 30 minute timeframe.
Red arrows are short sales, green arrows are long. I circled the trades that use the sma for entry or exit. The assumption is that every trade is taken either as the price moves away from the respective line or is crossing and past, the trade is taken in the direction of the move. It's a little more complicated than that as some of this is based upon just doing the trades and knowing how it moves and when to jump in and out. No trades are held for a loss, breakeven before commissions are deducted but the trade is exited before it can go in to the red.
16 trades, $4.05 per share profit. In my case I would be trading 400 shares so the net would be $1428. Now this is not in a tax sheltered account due to the shorts so I would lose marginal income tax off of that, say net after taxes might be around $800. Apply my fudge factor here and the total comes down to $560.
The 400 shares is base upon a $5K working capital. I would plan to have two other trades of a similar value at the same time as I have no qualms about using margin. That should be able to triple my potential returns. Yes, it could triple possible losses if I let a trade go for a loss. Assume that all trades in December were about as profitable the total take could be in the $1500 range.
This obviously needs to be checked out more thoroughly before actually being put to the test, but it is a start.
Next I will play with another timeframe and averages, get this going more long term.
Jeff.
Saturday, February 14, 2009
The ETF angle for medium term trading
I see a ton of interest in ETFs lately and specifically oil related ETFs, Horizons BetaPro NYMEX Crude Oil Bull and Bear Plus ETFs, HOU and HOD respectively. The particular ETF or index has not really interested me unless they are in a certain price range, have ample intraday volatility, enough liquidity and have an index that I can track in real time...this all for day trading purposes. So in this regard I really don't care too much which one I am using.
Having said that this particular interest caught my attention and leads me to check into ETFs a little closer.
Link to my post about ETFs from my daytrading blog.
Another link with more particulars and other links to Horizons BetaPro ETFs.
I took a table from the Horizons site, exported it into a spreadsheet and ran a few numbers to get a feel for how the ETFs seem to behave. I figured out some ratios to see a few relationships. Now these may not mean much as a single day snapshot so I may have to track them for a bit but they are interesting none the less.
RELATIVE VOLUME (Relative to the outstanding shares)
To get an idea of the interest in a particular fund I divide the volume for the day by the outstanding shares. I figure that the closer to 1 this number is the higher the trading interest, this is relevant more to compare the bear vs the bull of the same ETF than comparing anything between the various ETFs, although higher interest ratios can lead to at least better liquidity. Interestingly the bear crude oil ETF, HOD, was ahead as it traded more than the number of shares in circulation by a ratio of 1.57:1.
Top five in relative volume:
1.57 - Crude Oil Bear (HOD)
0.48 - Natural Gas Bear (HND)
0.43 - Crude Oil Bull (HOU)
0.31 - Global Gold Bear (HGD)
0.18 - S&P 500 series Bear (HSD)
I'm not sure if this really means anything but the rankings were interesting to note.
PERCENTAGE CHANGE CORRELATION
This shows that the inverse funds track well together...when one goes up the other goes down a corresponding percentage. I think that this is a very important factor in trading these funds as a bear that wildly varies in the inverse relationship from the bull creates an unpredictable result when trying to trade them based on the index that they are supposed to be following...they cannot be tracking well and with less correlation, the worse they are at that.
I used the percentage price change of the last day between the bear and bull of the same fund. I divide the increase of one by the decrease of the other then also calculate the decrease by the increase. If they are tracking well I would expect both numbers to be close to 1. They were not all, so to make the results easier to see quickly I just use the difference between the two calculations. The closer to zero this number is the closer the overall correlation.
The top five in percentage change correlation:
0.02 - TSX 60 series (HXU/HXD)
0.07 - Global Gold (HGU/HGD)
0.08 - S&P 500 series (HSU/HSD)
0.13 - Financial series (HFU/HFD)
0.29 - Crude Oil (HOU/HOD)
MEAN VARIANCE
The last number that I noted was the Mean Variance or how far away from the mean of the two funds, bear and bull, the current prices were as a percentage of the mean. This sort of falls into the category of Reversion to the Mean as a method of determining the probability of a trade.
I think, but have not thought long on this, that the mean might represent the underlying index if it were represented as a number relating to the two derivative funds and charted over time. In theory I would expect that the funds would track equally on either side of this number...but they won't in practise I am sure. So it may serve as a snapshot indication of the current state of the price only. I would like to see a large variance to consider a larger likely price change to return to the mean...which should happen at some point.
The top five in wide mean variance:
88% - Natural Gas (HNU/HND)
80% - Financials (HFU/HFD)
76% - Crude Oil (HOU/HOD)
70% - S&P 500 (HSU/HSD)
69% - NASDAQ 100 (HQU/HQD)
So, after playing with these numbers it is interesting to see who has the best showing in the top five lists, I suppose that I could have easily guessed this answer without doing any of these calculations. Having said that, it suggests that perhaps my spreadsheet may be useful in the future when it is not quite so "cut and dried".
Crude Oil. Both the bear and bull funds made the high relative volume list and placed in the change correlation and wide mean variance lists as well.
I was surprised to see the S&P 500 show on all three lists as well. I think I may have a closer look at these fund offerings to see if they match my other normal criteria.
Do note that these are not recommendations for trading any of these funds even though I will probably check them out closer and perhaps even do some trading on them myself...afterall, that is the only real way to prove an idea one way or the other.
Jeff.
Having said that this particular interest caught my attention and leads me to check into ETFs a little closer.
Link to my post about ETFs from my daytrading blog.
Another link with more particulars and other links to Horizons BetaPro ETFs.
I took a table from the Horizons site, exported it into a spreadsheet and ran a few numbers to get a feel for how the ETFs seem to behave. I figured out some ratios to see a few relationships. Now these may not mean much as a single day snapshot so I may have to track them for a bit but they are interesting none the less.
RELATIVE VOLUME (Relative to the outstanding shares)
To get an idea of the interest in a particular fund I divide the volume for the day by the outstanding shares. I figure that the closer to 1 this number is the higher the trading interest, this is relevant more to compare the bear vs the bull of the same ETF than comparing anything between the various ETFs, although higher interest ratios can lead to at least better liquidity. Interestingly the bear crude oil ETF, HOD, was ahead as it traded more than the number of shares in circulation by a ratio of 1.57:1.
Top five in relative volume:
1.57 - Crude Oil Bear (HOD)
0.48 - Natural Gas Bear (HND)
0.43 - Crude Oil Bull (HOU)
0.31 - Global Gold Bear (HGD)
0.18 - S&P 500 series Bear (HSD)
I'm not sure if this really means anything but the rankings were interesting to note.
PERCENTAGE CHANGE CORRELATION
This shows that the inverse funds track well together...when one goes up the other goes down a corresponding percentage. I think that this is a very important factor in trading these funds as a bear that wildly varies in the inverse relationship from the bull creates an unpredictable result when trying to trade them based on the index that they are supposed to be following...they cannot be tracking well and with less correlation, the worse they are at that.
I used the percentage price change of the last day between the bear and bull of the same fund. I divide the increase of one by the decrease of the other then also calculate the decrease by the increase. If they are tracking well I would expect both numbers to be close to 1. They were not all, so to make the results easier to see quickly I just use the difference between the two calculations. The closer to zero this number is the closer the overall correlation.
The top five in percentage change correlation:
0.02 - TSX 60 series (HXU/HXD)
0.07 - Global Gold (HGU/HGD)
0.08 - S&P 500 series (HSU/HSD)
0.13 - Financial series (HFU/HFD)
0.29 - Crude Oil (HOU/HOD)
MEAN VARIANCE
The last number that I noted was the Mean Variance or how far away from the mean of the two funds, bear and bull, the current prices were as a percentage of the mean. This sort of falls into the category of Reversion to the Mean as a method of determining the probability of a trade.
I think, but have not thought long on this, that the mean might represent the underlying index if it were represented as a number relating to the two derivative funds and charted over time. In theory I would expect that the funds would track equally on either side of this number...but they won't in practise I am sure. So it may serve as a snapshot indication of the current state of the price only. I would like to see a large variance to consider a larger likely price change to return to the mean...which should happen at some point.
The top five in wide mean variance:
88% - Natural Gas (HNU/HND)
80% - Financials (HFU/HFD)
76% - Crude Oil (HOU/HOD)
70% - S&P 500 (HSU/HSD)
69% - NASDAQ 100 (HQU/HQD)
So, after playing with these numbers it is interesting to see who has the best showing in the top five lists, I suppose that I could have easily guessed this answer without doing any of these calculations. Having said that, it suggests that perhaps my spreadsheet may be useful in the future when it is not quite so "cut and dried".
Crude Oil. Both the bear and bull funds made the high relative volume list and placed in the change correlation and wide mean variance lists as well.
I was surprised to see the S&P 500 show on all three lists as well. I think I may have a closer look at these fund offerings to see if they match my other normal criteria.
Do note that these are not recommendations for trading any of these funds even though I will probably check them out closer and perhaps even do some trading on them myself...afterall, that is the only real way to prove an idea one way or the other.
Jeff.
Tuesday, February 10, 2009
BVF, Biovail December week two
Yesterday I plotted week one in December for the trade, as it turned out, for the week.
On the Friday the price hit the S1 point and "bounced". Given the proximity to the 50sma as resistance and the potential for a target of the 200sma and/or the Primary Pivot Point it would be worth the entry long, at least for the day. Since I have been day trading I no longer like keeping a trade overnight let alone over the weekend but I used to do this fairly regularly before, so let's go with it. This is not a commodity related stock so it is not as prone to weekend gaps like gold and oil might be.
Chart for BVF week two in December.
On the Friday the price hit the S1 point and "bounced". Given the proximity to the 50sma as resistance and the potential for a target of the 200sma and/or the Primary Pivot Point it would be worth the entry long, at least for the day. Since I have been day trading I no longer like keeping a trade overnight let alone over the weekend but I used to do this fairly regularly before, so let's go with it. This is not a commodity related stock so it is not as prone to weekend gaps like gold and oil might be.
Chart for BVF week two in December.
So, I was in on the previous Friday, held over the weekend and watched the activity after Monday.
While I have not figured a stop plan into this yet, I would likely go with something like:
"Should the price change from one PP to the next, the stop should be set to half of the distance between the PPs. This guarantees 1/2 of the first target profits as the first target is always the next PP. This is set regardless what the volatility, technical setup or other indicators might intimate, the target is the next PP and profit."
I might amend this to setting the stop to 1/2 of the move...I will consider that after seeing how the testing turns out.
Back to the chart. The red exit arrows are on Wednesday and Thursday. Seeing as the initial target was the blue PP, the price breached R1, so I would already be past the second target, exit here anywhere as profit is already achieved. Letting the winners run is not part of the plan at this point but there is no sense in just cutting them short. So, let's apply the rules for stops as they appear so far:
Monday breaches R1. Set the stop at R1 for Tuesday.
It does not get hit so move the stop to 1/2 of the move.
The R1 is $11.32, the high for Tuesday is $11.65...so stop for $11.49.
I could either set a VTSO or just go with the stops or spend some time in the morning watching the activity to determine where I might want to exit. I'll just go with the hard stops for the purpose of this testing though.
Buy $10.40 Sell $11.49 Gain $1.09 ps Return 10.5%
Jeff.
Monday, February 9, 2009
BVF.TO - Biovail Corp.
True to form I did some research...the company is called Biovail...something to do with medical stuff. Ok, enough of that, now on to the fun stuff.
Here is a chart for November through January. The horizontal lines are the pivot points plotted on the weekend of November 29th and 30th for the following first week of December.
Blue is the primary pivot point (PP)
Red are the ascending Resistance points R1, R2 and R3
Green are the descending Support points S1, S2 and S3...S1 only appears
The blue box is the trading week in question.
Click on the chart to get the clearer picture if needed.
Total profit for a 100 share position is only $45 after taxes and commissions which is still a 4% return on the trade for the week. This is one of the reasons that I am choosing to use the TFSA for my trading. I may still dabble with these in my margin account and just suck it up and take a tax hit...I only should pay any taxes while in a profit situation so it is not all bad, and the taxes are collected after the year is up so at least the money gets to remain in place to grow for the year.
Here is a chart for November through January. The horizontal lines are the pivot points plotted on the weekend of November 29th and 30th for the following first week of December.
Blue is the primary pivot point (PP)
Red are the ascending Resistance points R1, R2 and R3
Green are the descending Support points S1, S2 and S3...S1 only appears
The blue box is the trading week in question.
Click on the chart to get the clearer picture if needed.
The red arrow denotes a short position taken at the beginning of the day sometime. As the opening price was just below the R1 but crossed above it briefly then closed the day at about $11 the position would have been taken short into the morning activity as the price failed to remain above the R1. This trade would last until a target was reached or the R1 was recrossed or even approached. A small profit is better than any loss and commissions are low enough with Questrade as to be next to inconsequential...$5 per trade in my position size range so far. (they do cap them at $9.95 though).
The cover is on the Friday as the price opens below the PP and heads up. As soon as the price opens lower than the PP I think I would place a stop order just above the line to be sure to get out near the target. Now I would likely choose a VTSO at this point just in case the price actually headed down. The active price once the VTSO was set would end up just above the line as well.
Short $11.25 Cover $10.40 Gain 85 cents ps Return 7.6% (fudged against me somewhat)Total profit for a 100 share position is only $45 after taxes and commissions which is still a 4% return on the trade for the week. This is one of the reasons that I am choosing to use the TFSA for my trading. I may still dabble with these in my margin account and just suck it up and take a tax hit...I only should pay any taxes while in a profit situation so it is not all bad, and the taxes are collected after the year is up so at least the money gets to remain in place to grow for the year.
I know this is a hindsight trade but it is basically the same method I am using live with my day trading tests and it seems to work out rather well. Of course I am always entering these trades with a particular target in mind but I have no qualms about letting the position ride for a bit if it looks like it has a very high probability of continuing in my favour.
The whole point of this little test is to demonstrate to me the validity of the pivot points over longer time frames, so even though this is a historical trade the lines were accurate.
I'll just post new charts as I get to them here.
I notice that BVF is actually very near a trade entry today as it closed within 3 cents of the current weekly R2 and seven cents of the monthly R1 as well as an upper trend boundary line a bit above that. I would be watching for a short entry tomorrow if the stock shows weakness on a 10 minute chart...but more on that another time.
Jeff.
New stock picks
I decided to go ahead and run these medium term trades with a previous plan that I used before. The primary consideration was to keep the time spent studying, researching and charting to an absolute minimum. I would like it to be reasonably simple to be able to check up on and make trades in the various stocks.
So in keeping with this idea I am going to cut this right down to the bare minimum.
This afternoon I spent about 40 minutes running a scan and paring the charts then plotting various lines to help visualize the trades. I will run pivot points on these as well but for the time being I am just going with some trend lines and a handful of moving averages...oh, and the mean over some time frames that looked to be the current trend.
Stocks to pick from were:
-between $10 and $30
-greater than 500,000 shares traded per day on average
-TSX listed
This gave me 39 to start. I dropped everything over $25, ETFs, trusts and the like which left me with 16. Rather than getting complicated I just picked 5 out of the bunch without regard to anything in particular, they could have been random. If nothing else this keeps these from being some sort of stock advisories as they have no intrinsic value to me. Ideally I would like between 20 and 30 to choose from but in the interest of keeping this manageable I will stick tot he five.
I have traded BVF a few times in the past though, even made a few dollars on it as well, but that had no bearing here or I would have picked other stocks that have performed in the past.
Final list:
Biovail (BVF)
TransAlta (TA)
Kincross Gold (K)
Manulife Financial (MFC)
Nexen (NXY)
I will post some charts for these later as well.
Jeff.
So in keeping with this idea I am going to cut this right down to the bare minimum.
This afternoon I spent about 40 minutes running a scan and paring the charts then plotting various lines to help visualize the trades. I will run pivot points on these as well but for the time being I am just going with some trend lines and a handful of moving averages...oh, and the mean over some time frames that looked to be the current trend.
Stocks to pick from were:
-between $10 and $30
-greater than 500,000 shares traded per day on average
-TSX listed
This gave me 39 to start. I dropped everything over $25, ETFs, trusts and the like which left me with 16. Rather than getting complicated I just picked 5 out of the bunch without regard to anything in particular, they could have been random. If nothing else this keeps these from being some sort of stock advisories as they have no intrinsic value to me. Ideally I would like between 20 and 30 to choose from but in the interest of keeping this manageable I will stick tot he five.
I have traded BVF a few times in the past though, even made a few dollars on it as well, but that had no bearing here or I would have picked other stocks that have performed in the past.
Final list:
Biovail (BVF)
TransAlta (TA)
Kincross Gold (K)
Manulife Financial (MFC)
Nexen (NXY)
I will post some charts for these later as well.
Jeff.
Sunday, February 8, 2009
Intent
In my first blog I started with a trading strategy that used a timeframe of one day or longer. I since changed my scope to day trading and therefore my blogging reflected that change. Here I intend to re-visit that strategy and perhaps modify it to include other bits and pieces that I have stumbled upon along the way.
Off the start I will not actually be trading any of these setups as I am still concentrating on the daytrading in my Tax Free Savings Account as I think that, short term, is my best option. Shortly I will be transferring my mutual funds from their existing home to my Questrade RRSP account. Rather than trasnferring them "in kind" they will be liquidated and transferred as cash. This will form the capital base for my medium term trades as the balance will be higher which will allow me the room that I need for my loss allowances in these trades.
A side note, Questrade currently has a promotion that they will pay up to $150 of any transfer fees incurred with a transfer of $25000 or more until March 2nd. While $150 is a pretty small part of the transfer it is a nice little perk, especially seeing as I was going to transfer this stuff anyway.
So, I may not have any trade setups ready to go right now so I will run a few backtests on some of the stocks that I was following in the past. This is a little cheat as I am hoping that my previous picks are still valid picks today. I did keep all of my old lists of charts so it should be a simple matter to check these for volume and price action.
Given the large downturn in most of the stocks on the market in the last months I am hoping to grab a few near their price troughs. Seeing as an RRSP account does not allow for short selling I may use some ETF's to play any downturns or perhaps just rotate sectors or some strategy that allows me to keep my cash in play at all times, or as close as I can get.
Jeff.
Off the start I will not actually be trading any of these setups as I am still concentrating on the daytrading in my Tax Free Savings Account as I think that, short term, is my best option. Shortly I will be transferring my mutual funds from their existing home to my Questrade RRSP account. Rather than trasnferring them "in kind" they will be liquidated and transferred as cash. This will form the capital base for my medium term trades as the balance will be higher which will allow me the room that I need for my loss allowances in these trades.
A side note, Questrade currently has a promotion that they will pay up to $150 of any transfer fees incurred with a transfer of $25000 or more until March 2nd. While $150 is a pretty small part of the transfer it is a nice little perk, especially seeing as I was going to transfer this stuff anyway.
So, I may not have any trade setups ready to go right now so I will run a few backtests on some of the stocks that I was following in the past. This is a little cheat as I am hoping that my previous picks are still valid picks today. I did keep all of my old lists of charts so it should be a simple matter to check these for volume and price action.
Given the large downturn in most of the stocks on the market in the last months I am hoping to grab a few near their price troughs. Seeing as an RRSP account does not allow for short selling I may use some ETF's to play any downturns or perhaps just rotate sectors or some strategy that allows me to keep my cash in play at all times, or as close as I can get.
Jeff.
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