Trials

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

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

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

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

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

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

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

My shorts did well enough at least.

Jeff.

Flexible stops

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

My thinking:

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

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

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

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

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

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

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

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

Jeff.

One more trade

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

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

These are mostly accidental except for the healthcare short.

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

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

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

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

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

Jeff.

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...