$200.00/day trader chronicles - Thursday 11Dec08 (Day 1)

[vleon1012]

$200.00/day day trader chronicles - Weds 31Dec08

Today I am very pleased to have pretty much broken even as I am only down -$32.00 for the day.

After yesterday's $300+ loss, I was kinda apprehensive to get back in the game but losses are part of the game. Without losses there is no game. This weekend I'll be working on re-entry opportunities and I need need need to trust the setups I've back-tested a million times. Backtesting is easy after the fact, but in real-time the blips can be disconcerting.

Tightening of stop-losses did work well in some cases, but for some setups I am going to either time my entry better or keep a higher stop loss trusting that the prophecy will fulfill. It's a fine line. Re-entry has proven to be a weakness for me.

LESSONS / WEEKEND RESEARCH
:
1) Fix your charts! They were starting @ 9:31 instead of 9:30 which explains why you didn't see the first bar!
2) Learn how and when to re-enter.
3) Again, trust the self-fulfilling prophecy plays and don't get scared by the price action if it's going against you. The targets are eventually a magnet.
4) Start getting on the other side of the prophecy trade once it's near fulfillment and you've cashed out. I.e., short @ new target after longing to get to it. The targets are STRONG shorts.
5) Overall. I am pleased to have bounced back from yesterday. Continue reviewing, refining, stepping through the charts one bar at a time, backtesting the news, pivots,EMAs, and learn how to re-enter.
6) Determine whether you are over-trading.

** LATE ENTRY ** I finally had a successful re-entry play which brought my loss down from -50s to the -32.20 posted. The CWT short from above took a little longer to materialize, but that news was too powerful to ignore. So I shorted CWT for around 20 bucks during noon. Yay.

 

[timsk]

Hi vleon,
Looking at your notes, I have a few observations which may well be inappropriate or wrong as you may be doing things that I'm not aware of and / or choose not to articulate in your posts. So, these comments are very much at face value . . .
1. Looking at your notes in the 'Reasons for Position' column, it appears that you generally aim to go long on 'good' news and short on 'bad' news. If other factors confirm that the market is responding in this logical fashion, then it is a reasonable starting point. However, there are scores of ex-traders whose careers were very short lived because they assumed the market would respond in a logically. Big mistake. To avoid this, you need to follow the very good advice often given by Mr. Charts (and others) and trade the reaction to the news rather than the news itself. All a news story does is to flag up a stock that is likely to be a good moving stock on the day, thereby providing the opportunity for profit if you get on the right side of it. Needless to say, if you're on the wrong side of it . . .
2. You don't appear to make any reference to what the market is doing as a whole. You will always struggle if you look at the stock in isolation. Suppose you have a stock that's weak and is in a weak sector and you pick it up on your scanner because of a broker downgrade or poor results etc. However, on the day, the main market is strong and trending up. Even if your stock isn't moving up in tandem with the main market, don't go short. You need to wait at least until the main market pauses, retraces or shows signs of reversing. Then - and only then - your stock is liable to plummet and offer a good opportunity for a short. Even with a very weak stock such as the one in my example, your career will be short lived if you try and fight the sentiment of the main market.
3. Consider closing out in one - or a max' of two tranches - rather than three (or in the case of BA - four tranches). You ended the day down -$32.20, yet I calculate your gross P/L was (just) the right side of b/e. You paid something like $45.00 in commissions and, although IB are one of the cheapest, you're still looking at $900.00 per month if you do that every day! I completely understand that this is the downside of trading very small size, but the costs of trading 25 shares don't make it worthwhile. You gotta keep those costs down! Also, if a trade goes against you, ALWAYS close the whole position in one go, rather than in two (or more) tranches.
4. I repeat my earlier comment: your stops are too wide. Had you closed out your BA, CWT and NAV trades with much tighter stops, you'd have ended the day with a decent profit.
To summarize, on the basis of the info' provided, it's your exits that you need to work on the most. Try and minimise the number of them as far as possible - thereby keeping commissions down - and make your stops tighter - thereby keeping the losses on the losing trades to a minimum. I know it's very easy for me to preach and darn difficult to put into practice! I look forward to seeing how you get on.
Happy New Year!
Tim.

 

[vleon1012]

Hi Tim,

Your comments were very very helpful. Actually, I am going to print it out and read it many times. Definitely good for thought for this weekend's preperation as you are definitely correct regarding the potential of news to go against you. Generally, I simply do short on bad news and long on good news -- but many times I go the against the "perceived good or bad" opposite based on previous back-testing, current price action, and pivot points. For example, many times when Merril Lynch says a stock is a "Buy" and the previous/current day chart has a huge gain AND it's near R1 or R2, then it's priced in and it's the best time to short it. If the news is released and there's no appearance of it being priced in, go long -- especially if it's slightly above or below a pivot.

When trading, I definitely have the SPY chart open and make reference to it as my "market guide" and I generally end up taking about 1/2 my anticipated positions due to the SP500 chart AND where a stock is on pivot points. I also consider the sector action using FINVIZ.com and try to gauge the stock's / sector's relative strength. If a stock opened above around 25% it's pivot on and it's bad news, I generally stay out of it unless it's one of the "magnet" setups because opening above the pivot tends to be bullish. All of this analysis generally get's done in just about 30-60 seconds before the news gets (perhaps even more) priced in.

Regarding the stops, I'm going to tighten them for certain setups even more. After yesterday's review, I realized that a $40.00 stock can't have the same stop as a $4.00 stock and have to be scaled accordingly, which is yet another variable. It's interesting, because these fine points are points I didn't consider when paper trading AND I had a lot more "staying power" when I was paper trading. I feel like I've learned a lot more in 2 weeks of live trading than almost 60 days of paper trading!

Regarding the exits, I am starting to feel like scaling out is going to cost me in the end too. Since I only take what I consider to be "high probability" setups, then I should just be able to trust and minimize how many times I scale out. I still feel the need to lock in a target, but instead of 50,25,25 I should either scale out 50,50 or just ride the full 100. But for now, I will start with 50,50 and take it on a trade by trade basis.

Again, thanks for your response. While I am tempted to trade tomorrow, I think I'll wait because I've been reading that Jan 2nd trading tends to have minimal volume AND it's a Friday so I'm sure many market movers will take a vacation. Instead, I'll just use the day to refine my entries and exits.

One thing that continues to motivate me is that ultimately, I haven't lost much and overall my analysis tends to be correct BUT the weirdest thing is that you can be correct in your initial analysis based on backtesting etc, but your execution and psychology can still make it a bad trade. I am realizing that Timing + Confidence = SUCCESS. All the great news or chart setups are just setups but you still need to know when to pull the trigger w/out hesitation.

I have to calculate my to date P/L but I think I might be down around 400-600 which is very acceptable to me as a newbie. I've read a lot of blogs where new traders blew several thousands if not an entire 25k in that time. So for me, this loss is like taking a class and cheaper than many so-called systems -- you know the ones they sell on CNBC!!

Happy New Year!

-v

 

[danielion]

Greetings vleon,

Just wanted to take the time to thank you for your thread, it's excellent. I know what you mean about psychology and how it affects the outcome of a good call.
At the end of 2007 I made 3000 on 15000. But I'm down to 12000 in 2008. Alway's remember that anything can happen, and if you are doing any long term trading, don't confuse it with your short term trading as I have. I lost with the general market because I believed things would recover and wound up selling some things low. Most of these stocks are 40% better now than when I sold.
Now I am just taking baby steps on what I feel are good calls. I don't make as much money but then I don't lose as much either. And I am less likely to act irrationally due to psychological factors. On my last 56 trades 41 were winners and 15 losers. My winners were about 17 dollars and losers 19 after commissions.
All the best in the New Year!

Dan

 

[timsk]

Hi vleon,
I'm glad my observations are of interest and I'm delighted that for the most part you appear to have the I's dotted and T's crossed. There is one major oversight that i didn't mention in the list in my last post which is more important than all the other points combined and that's . . .
VOLATILITY
Forgive me for shouting, but its significance warrants it. Most of your trades have the same position size of 100 shares which suggests that you are not factoring volatility into the equation to determine how large or small each trade is. Unless you're an absolutely brilliant trader, you'll want wide stops for very volatile stocks and tight stops for the docile ones. If you're in any doubt about this, put a $0.10 cent stop on both GOOG and MSFT and see which one gets stopped out first. There are various ways to gauge volatility, but the most straight forward is Welles Wilder's Average True Range indicator (ATR). Depending upon your entry strategy, you can set stops as a multiple of ATR. GOOG will have a high ATR whereas MSFT will have a relative low ATR. Consequently, you would trade fewer shares of GOOG with a wide stop and a lot more shares of MSFT with a tighter stop. Wherever the stops are placed, the loss in each case would be the same and set to a fixed percentage of your trading capital - e.g. 0.5%. The value of this approach is twofold:
1) You never lose more than a pre-determined and fixed amount of your capital on any one trade, regardless of whether it's a volatile beast like GOOG or a gentle giant like MSFT.
2) If you want, you can choose a stop according to other criteria that you may have (i.e. support / resistance or a chart pattern etc.) so that if you require a $1.00 wide stop - (as you have done recently) - you may do so by trading a correspondingly small number of shares to ensure your loss is always the same fixed percentage of your account.

Attached is an MS Excel worksheet to give an idea of how this works in practice. It is offered purely as an example and you will need to play around with the figures to suit your own risk : reward parameters. I'll walk you through it: the table is based on an account with $30k capital and and a maximum loss of 0.5% per trade, i.e. no more than $150.00. I'd recommend that you work out a pro rata table with smaller losses (i.e. 0.1%, 0.2%, 0.3% and 0.4% respectively) and work up to this. Okay, so what do the headings mean?
ATR
This is the reading from your chart (irrespective of time frame) and is based upon the default setting of 14 periods. The key point here is that if - for example - the stock has an ATR of 0.18, you can trade a maximum of 400 shares. You can trade 350 shares (or less) with a wider stop if you want, but you can't trade 500 share and above.
QUANTITY
This is your position size based upon the ATR reading and / or the position of your stop loss. Never start with the idea of trading X number of shares (e.g. 100). The quantity should be determined by a combination of ATR and the Max Stop.
MAX STOP
This is - as the name implies - the maximum you'll lose on any one trade. It doesn't matter whether you're trading 50 shares or 1,000 shares - your loss will be the same. In this example, the Max Stop is 2 x ATR. However, it could just as easily be 0.5 x ATR, 1 x ATR, 1.5 x ATR or 3 x ATR etc. You will have to decide what fits best with your style of trading. The Max Stop can be determined by T.A. (chart patterns and S/R etc.) but it should not conflict with ATR. For example, your reading of the chart suggests that you can safely place your stop $0.36 cents away from your entry, giving a position size of 400 shares. However, the ATR reading is 0.35, indicating a position size of only 200 shares. Always be conservative and play safe: trade the smaller size. With experience, you may decide that you're being too conservative and missing out on profits. At which point, you have two choices. You can either risk more per trade (i.e. 0.6% instead of 0.5%) or you can reduce the ATR multiple from 2 x ATR to 1.5 x ATR or 1.00 x ATR etc.
TARGET
Again, this is up to you and, indeed, you may choose to dispense with this altogether as lots of traders don't like targets. In this example, the target is 1% of the account size, i.e. $300 which is 2 x the risk.
VALUE
This is arrived at by dividing the account size ($30k) by the quantity, assuming a black swan event that wipes you out completely. You can alter these values according to your risk tolerances and how much leverage you wish to take on board, as well as how many trades you have open simultaneously.

There are so many variables that I doubt any two traders would have the exact same table, even if they trade the same market in the same time frame with the same size account. That's why I stress this is an example only and NOT an 'off the peg' table that you (or anyone else) should use as it stands. Needless to say, it's the relationship between 'Quantity' and 'Max Stop' that is most critical, governed by the volatility of the stock - as indicated by the ATR. If you're a techie, you can get bolt on software that automatically works all this stuff out for you and you don't have to anything more than click the buy and sell button.
Enjoy!
Tim.

 

[vleon1012]

Backtesting the news - my personal method (w/ attach)

Wow, I spent the past 6 or so hours backtesting the news from 16:01 31Dec08 to 16:00 02Jan08. I should have traded yesterday!!! The potential for an awesome day was there IF my execution was good. That's where I will continue to research this weekend because I would like to at least break even for next week.

Attached is my full news spreadsheet complete with calls for 02Jan08 and actual results. The way I backtest the news is I have the news on one screen, then on another screen I load the 1 minute chart giving it 2 weeks of data. I don't look at the current day so that I don't know of the price action of the day. I didn't even know that yesterday was actually a good day overall.

For news that could affect the opening of a day, I pretty much place orders @ opening or 9:45-10:00 based on price action, pivots, and the first 9:30 bar (gap up/down?) OR the 9:45 - 10:00 AM time frame. This is something I need to refine to actually make a profit based on my calls.

For news that occurs during the day, trades depend on the current trend and where the price action is relative to pivots and my assessment of whether the news is priced in based on time of day, current trend, and slope of trend.

As you can see, I don't trade every news item. But there are certain high probability setups IMO. Just gotta refine the timing, execution, and psychology and hopefully I will be making money very soon.

Perhaps this will be helpful to someone out there so I am attaching the whole thing. The last column, Y = Yes (I usually trade that news item), M = Maybe (requires more back testing to become a Yes), N = No (I'll probably never trade it)

Actually, I am considering paper trading all of next week to refine the timing and then go live again the following week. But I dunno, to me paper trading isn't anywhere near as real. I wish I could find a way to make it feel more real. Also, imagine if I make big gains on paper I will be irritated hehe.

I do this process every day and on weekends. It takes a lot of time but I feel it's a method that will pan out for me in the end. Just gotta be patient. As you can see from my comments in the "Anticipated" column -- I keep the analysis simple because news trading if fast. Check the first bar, check the nearest pivot, and go. I might have a couple of typo auto-fills in the Anticpiated but you'll get the idea for the most part.

-vic

 

[vleon1012]

Hi vleon,
I'm glad my observations are of interest and I'm delighted that for the most part you appear to have the I's dotted and T's crossed. There is one major oversight that i didn't mention in the list in my last post which is more important than all the other points combined and that's . . .
VOLATILITY
Forgive me for shouting, but its significance warrants it. Most of your trades have the same position size of 100 shares which suggests that you are not factoring volatility into the equation to determine how large or small each trade is. Unless you're an absolutely brilliant trader, you'll want wide stops for very volatile stocks and tight stops for the docile ones. If you're in any doubt about this, put a $0.10 cent stop on both GOOG and MSFT and see which one gets stopped out first. There are various ways to gauge volatility, but the most straight forward is Welles Wilder's Average True Range indicator (ATR). Depending upon your entry strategy, you can set stops as a multiple of ATR. GOOG will have a high ATR whereas MSFT will have a relative low ATR. Consequently, you would trade fewer shares of GOOG with a wide stop and a lot more shares of MSFT with a tighter stop. Wherever the stops are placed, the loss in each case would be the same and set to a fixed percentage of your trading capital - e.g. 0.5%. The value of this approach is twofold:
1) You never lose more than a pre-determined and fixed amount of your capital on any one trade, regardless of whether it's a volatile beast like GOOG or a gentle giant like MSFT.
2) If you want, you can choose a stop according to other criteria that you may have (i.e. support / resistance or a chart pattern etc.) so that if you require a $1.00 wide stop - (as you have done recently) - you may do so by trading a correspondingly small number of shares to ensure your loss is always the same fixed percentage of your account.

Attached is an MS Excel worksheet to give an idea of how this works in practice. It is offered purely as an example and you will need to play around with the figures to suit your own risk : reward parameters. I'll walk you through it: the table is based on an account with $30k capital and and a maximum loss of 0.5% per trade, i.e. no more than $150.00. I'd recommend that you work out a pro rata table with smaller losses (i.e. 0.1%, 0.2%, 0.3% and 0.4% respectively) and work up to this. Okay, so what do the headings mean?
ATR
This is the reading from your chart (irrespective of time frame) and is based upon the default setting of 14 periods. The key point here is that if - for example - the stock has an ATR of 0.18, you can trade a maximum of 400 shares. You can trade 350 shares (or less) with a wider stop if you want, but you can't trade 500 share and above.
QUANTITY
This is your position size based upon the ATR reading and / or the position of your stop loss. Never start with the idea of trading X number of shares (e.g. 100). The quantity should be determined by a combination of ATR and the Max Stop.
MAX STOP
This is - as the name implies - the maximum you'll lose on any one trade. It doesn't matter whether you're trading 50 shares or 1,000 shares - your loss will be the same. In this example, the Max Stop is 2 x ATR. However, it could just as easily be 0.5 x ATR, 1 x ATR, 1.5 x ATR or 3 x ATR etc. You will have to decide what fits best with your style of trading. The Max Stop can be determined by T.A. (chart patterns and S/R etc.) but it should not conflict with ATR. For example, your reading of the chart suggests that you can safely place your stop $0.36 cents away from your entry, giving a position size of 400 shares. However, the ATR reading is 0.35, indicating a position size of only 200 shares. Always be conservative and play safe: trade the smaller size. With experience, you may decide that you're being too conservative and missing out on profits. At which point, you have two choices. You can either risk more per trade (i.e. 0.6% instead of 0.5%) or you can reduce the ATR multiple from 2 x ATR to 1.5 x ATR or 1.00 x ATR etc.
TARGET
Again, this is up to you and, indeed, you may choose to dispense with this altogether as lots of traders don't like targets. In this example, the target is 1% of the account size, i.e. $300 which is 2 x the risk.
VALUE
This is arrived at by dividing the account size ($30k) by the quantity, assuming a black swan event that wipes you out completely. You can alter these values according to your risk tolerances and how much leverage you wish to take on board, as well as how many trades you have open simultaneously.

There are so many variables that I doubt any two traders would have the exact same table, even if they trade the same market in the same time frame with the same size account. That's why I stress this is an example only and NOT an 'off the peg' table that you (or anyone else) should use as it stands. Needless to say, it's the relationship between 'Quantity' and 'Max Stop' that is most critical, governed by the volatility of the stock - as indicated by the ATR. If you're a techie, you can get bolt on software that automatically works all this stuff out for you and you don't have to anything more than click the buy and sell button.
Enjoy!
Tim.

I just noticed this post -- thanks!!! -- will add it to my collection. Always learning. I am a dixie cup and the market is an ocean!

 

[vleon1012]

Greetings vleon,

Just wanted to take the time to thank you for your thread, it's excellent. I know what you mean about psychology and how it affects the outcome of a good call.
At the end of 2007 I made 3000 on 15000. But I'm down to 12000 in 2008. Alway's remember that anything can happen, and if you are doing any long term trading, don't confuse it with your short term trading as I have. I lost with the general market because I believed things would recover and wound up selling some things low. Most of these stocks are 40% better now than when I sold.
Now I am just taking baby steps on what I feel are good calls. I don't make as much money but then I don't lose as much either. And I am less likely to act irrationally due to psychological factors. On my last 56 trades 41 were winners and 15 losers. My winners were about 17 dollars and losers 19 after commissions.
All the best in the New Year!

Dan

Thanks -- if anyone can learn from my mistakes or successes than that's pretty cool also.

 

[simba00000]

Earlier today I read through this thread, your “$200.00/day trader chronicles”. I myself am very new to day trading also. Just completed two full months of day trading US stocks myself. My account is slightly larger than yours. I think it is very cool that you are dedicated enough that you would create an online journal. Equally cool you have more experienced traders assist you. You probably took a similar road to me, read several books, online trading videos, read info (articles and posts) online, etc.

No matter what my P/L is or W/L ratio is for the two months, I am not qualified to give trading advice to you. After I read your posts there were a few things I noticed that I may be able to give you food for thought on. This might assist you in your quest. Below are a few things that have assisted me. I will also try to impart why I take these actions. I think I am a bit fortunate that I did make a good living for 7 years playing medium limit Texas Hold’em poker in public card rooms. The three Ms are almost identical in Poker as with Trading, so my understandings of these concepts are very good.

For beginners like us, simple is better. Simple and easy to take action on will allow for quicker and easier execution of decisions. Clarity of action (which is easier to analyze for improvement) is another by-product of simplicity and easy. This step is absolutely required for me to facilitate a quicker learning curve. This means for me simple rules, simple ways to detect trade candidates, simple ways/options for risk management, etc. If I believe what I have to do as the trade progresses are simple and easy, then I can confidently and quickly take action. Once I can see the action prove fruitful consistently I can analyze and refine.

The masses think of the financial markets as speculation. Since I am not qualified to speculate, I don’t. I let the market “tell” me what is happening. I trade with the current stocks trend, not against it. Of course previous short term and market trend may be a factor. Obviously trading long in a strong bear market is illogical, and the same with shorting a stock when the sector is rocketing.

I focus on one market only. This way I can learn the ebb and flow much quicker.

Building confidence in our ability to be profitable trading. I truly believe this is vital. Let me explain what I mean. How can any beginner or novice expect to trade (and be profitable) in the largest financial arena in the world? A place where the richest, smartest, most aggressive money sucking hunters call their playground? Ever see Wall Street (good movie by the way)? I read once that the financial markets are “dog eat dog and will eat your cat too” lol. On top of all this, every book I own and even this site is full of posts saying 95% will fail and blow their account. FYI, the statistics are the same for poker. From my experience with poker and using logic, if a trader is a break even to consistent loser they will develop bad (or wrong) habits, and go to battle scared. The financial markets is not a place I want to donate my hard earned money and then feel (insert whatever negative feeling you want)! There is the cool thing about trading, I do not need to be a chess master, graduate from MIT, or be a brain surgeon to make money. I used to sit at poker tables with brain surgeons, rocket scientists, district attorneys, chess masters, etc. and most were not profitable.

So what I did was design a methodology that was as accurate as possible so I can feel confident to engage/pull the trigger on a trade. So far I am profitable with 90% of my trades. I actually have two different methodologies I use. One is kind of like your momentum play. What I like about this strategy is that it works whether the market is bullish or bearish. I started with only one trade at a time, so I can study the nuances of the steps from the beginning to the end of the trade. You know, after several books and countless hours of studying and analyzing, the information needs to be slowly fitted to my personality, trade style, market, etc. What I did once I was confident with the trades being consistently profitable I would be willing to take on a second trade at the same time. Possibly now I will try managing three at a time. We will see. Only yesterday did I realize only a small portion of my capitol is utilized any given time. What I am doing is getting my mind used to handling more comfortably, and in a relaxed state. This way I have the control. Kind of like building my trading multitasking muscles.

You are probably wondering what my results have been so far. First month my gain was 13.89%. Last month’s gain was 8.61%. I do not place a trade every day. I had 20 round trip day trades last month. With what I gathered from your strategy something seems off. Briefly, this is what I do with regards to the methodology like yours:

1) I get up at 6am (I am in California, which is 3 hours behind NY time). By 6:15am I am scanning the news as it gets released including international market action.

2) Before the market opens (and will do the same during market hours if I am still trading after lunch NY time) if I see any news items that seem significant like last week DOW loses $17.5 Billion contract, Seagate (STX) gets upgraded by Standards & Poors from Hold to Buy, FDA approvals, etc. I will make note of these stocks.

3) The first few minutes or so after the market opens I will take a quick glimpse at these noted stocks. If any of these stocks react “sharply” (and not from that company selling or buying imbalanced shares) I will take a quick glimpse of the last six months trend, then go to shorter time frames and look for the nearer term trends. Check to make sure the stock is liquid enough and take a quick look at daily volatility. If the stock is a shooter (heavy pressure in either direction, but in the direction of the news).

4) If all is a go at this point, which would have taken me 2-3 mins so far, I will quickly plot the support and resistance points. Wait to pull trigger on trade if getting close to a major resistance or support area. If the price shoots through a major resistance or support area, I pull the trigger. I trade using one minute intraday candle charts only.

5) This stock still must have strong buying or selling pressure. For example DOW was already down 7% at this point and my T&S was showing massive sell pressure. I pulled the trigger and shorted DOW. By the time the trade started I was already 3% in the black. I immediately placed a hidden stop on the trade. Then I just managed the trade until I got out 10% ahead.

The above is most of the strategy, not all of it. Should be enough to give you a good idea what I do. When I use the strategy above 8 out of 10 times I am in the black before I can place the stop (which I do immediately). On a daily bases I find anywhere from 2 - many stocks like this. I love cheap Nasdaq stocks, I will get 1% - 10%+ per trade. I think I average 3% per trade, but this is my fault, not the method. These trades last a few minutes to 2 hrs. So, I am a little lost as to why you are picking up so little or losing. How does your methodology differ? What happens is I am picking fast moving trades, then jumping onboard. I know I can improve profits in several ways, which is soon going to be my focus.

I need an EDGE. There are four that I can see with the above strategy.
1) Simple to execute. Minimizes mistakes, and is fairly quick to execute.
2) Low risk and extremely high probability
3) Trading with the trend, aids in momentum
4) Trade can be highly profitable (especially when I improve)

Damn that took me forever to type! By the way as mentioned above, these are US stocks. I know next to nothing about the other financial markets. Best of luck to you Vic and hopefully you can get something useful out of my rambling. Peace….

Chris

 

[TomTom]

Make some good money guys.
Stay out of the markets untill you are an expert in the business you are in.
This may take years depending on expierance and then you will only have a small chance of succeeding.
Remember you dont have to trade every day.
Even one trade a year if done correctly will make more than enough money to support a good life style.
This business is all about timming and direction, get one wrong and your a looser.
To start I recomend buying spiders and rydex funds.
Good luck for 2009 guys Tom

 

[rathcoole_exile]

5) I sort of "discovered" something (maybe just coincedence) I will call "sub-Pivots". You know the regular pivot points, well I noticed a lot of times consolidation or reversals would occur MIDWAY between pivot points. Now I draw horizontal lines in the middle BETWEEN all pivot points and I take those into consideration as potential resistance / support / etc.

without doubt the single most important "discovery" in trading that you will ever make !

but shhh, let's just keep it a secret between you and me ........

 

[timsk]

Hi r_e or Vic,
Would either (or both) of you care to bung up a chart to illustrate the sub-pivot point idea. I promise I'll keep it to myself and not show anyone else!
Tim.

 

[rathcoole_exile]

there were 4 five point moves between M+ (mid point between PP & R1) and PP
then a big move up to close for the day around M++ (mid point between R1 & R2)

 

[rathcoole_exile]

PPs for "day following 02 Jan"

and this is the current set-up, with a Reversal Short from M+ @ 929.11 triggered by a resting Sell Stop implemented as soon as price went above the level

(I have to admit I don't trade the Sunday session or early pre-market Mondays, so I haven't taken this trade - but it serves as a good illustration)

 

[vleon1012]

Hi r_e or Vic,
Would either (or both) of you care to bung up a chart to illustrate the sub-pivot point idea. I promise I'll keep it to myself and not show anyone else!
Tim.

Basically, you have your Pivots S2,S1,P,R1,R2 -- well, between those you manually draw in additional horizontal lines right in the middle between each pivot point which actually turns out to be additional supp/res in many cases. This chart doesn't illustrate the effect, but you will see it on many others.

 

[vleon1012]

Earlier today I read through this thread, your “$200.00/day trader chronicles”. I myself am very new to day trading also. Just completed two full months of day trading US stocks myself. My account is slightly larger than yours. I think it is very cool that you are dedicated enough that you would create an online journal. Equally cool you have more experienced traders assist you. You probably took a similar road to me, read several books, online trading videos, read info (articles and posts) online, etc.

No matter what my P/L is or W/L ratio is for the two months, I am not qualified to give trading advice to you. After I read your posts there were a few things I noticed that I may be able to give you food for thought on. This might assist you in your quest. Below are a few things that have assisted me. I will also try to impart why I take these actions. I think I am a bit fortunate that I did make a good living for 7 years playing medium limit Texas Hold’em poker in public card rooms. The three Ms are almost identical in Poker as with Trading, so my understandings of these concepts are very good.

For beginners like us, simple is better. Simple and easy to take action on will allow for quicker and easier execution of decisions. Clarity of action (which is easier to analyze for improvement) is another by-product of simplicity and easy. This step is absolutely required for me to facilitate a quicker learning curve. This means for me simple rules, simple ways to detect trade candidates, simple ways/options for risk management, etc. If I believe what I have to do as the trade progresses are simple and easy, then I can confidently and quickly take action. Once I can see the action prove fruitful consistently I can analyze and refine.

The masses think of the financial markets as speculation. Since I am not qualified to speculate, I don’t. I let the market “tell” me what is happening. I trade with the current stocks trend, not against it. Of course previous short term and market trend may be a factor. Obviously trading long in a strong bear market is illogical, and the same with shorting a stock when the sector is rocketing.

I focus on one market only. This way I can learn the ebb and flow much quicker.

Building confidence in our ability to be profitable trading. I truly believe this is vital. Let me explain what I mean. How can any beginner or novice expect to trade (and be profitable) in the largest financial arena in the world? A place where the richest, smartest, most aggressive money sucking hunters call their playground? Ever see Wall Street (good movie by the way)? I read once that the financial markets are “dog eat dog and will eat your cat too” lol. On top of all this, every book I own and even this site is full of posts saying 95% will fail and blow their account. FYI, the statistics are the same for poker. From my experience with poker and using logic, if a trader is a break even to consistent loser they will develop bad (or wrong) habits, and go to battle scared. The financial markets is not a place I want to donate my hard earned money and then feel (insert whatever negative feeling you want)! There is the cool thing about trading, I do not need to be a chess master, graduate from MIT, or be a brain surgeon to make money. I used to sit at poker tables with brain surgeons, rocket scientists, district attorneys, chess masters, etc. and most were not profitable.

So what I did was design a methodology that was as accurate as possible so I can feel confident to engage/pull the trigger on a trade. So far I am profitable with 90% of my trades. I actually have two different methodologies I use. One is kind of like your momentum play. What I like about this strategy is that it works whether the market is bullish or bearish. I started with only one trade at a time, so I can study the nuances of the steps from the beginning to the end of the trade. You know, after several books and countless hours of studying and analyzing, the information needs to be slowly fitted to my personality, trade style, market, etc. What I did once I was confident with the trades being consistently profitable I would be willing to take on a second trade at the same time. Possibly now I will try managing three at a time. We will see. Only yesterday did I realize only a small portion of my capitol is utilized any given time. What I am doing is getting my mind used to handling more comfortably, and in a relaxed state. This way I have the control. Kind of like building my trading multitasking muscles.

You are probably wondering what my results have been so far. First month my gain was 13.89%. Last month’s gain was 8.61%. I do not place a trade every day. I had 20 round trip day trades last month. With what I gathered from your strategy something seems off. Briefly, this is what I do with regards to the methodology like yours:

1) I get up at 6am (I am in California, which is 3 hours behind NY time). By 6:15am I am scanning the news as it gets released including international market action.

2) Before the market opens (and will do the same during market hours if I am still trading after lunch NY time) if I see any news items that seem significant like last week DOW loses $17.5 Billion contract, Seagate (STX) gets upgraded by Standards & Poors from Hold to Buy, FDA approvals, etc. I will make note of these stocks.

3) The first few minutes or so after the market opens I will take a quick glimpse at these noted stocks. If any of these stocks react “sharply” (and not from that company selling or buying imbalanced shares) I will take a quick glimpse of the last six months trend, then go to shorter time frames and look for the nearer term trends. Check to make sure the stock is liquid enough and take a quick look at daily volatility. If the stock is a shooter (heavy pressure in either direction, but in the direction of the news).

4) If all is a go at this point, which would have taken me 2-3 mins so far, I will quickly plot the support and resistance points. Wait to pull trigger on trade if getting close to a major resistance or support area. If the price shoots through a major resistance or support area, I pull the trigger. I trade using one minute intraday candle charts only.

5) This stock still must have strong buying or selling pressure. For example DOW was already down 7% at this point and my T&S was showing massive sell pressure. I pulled the trigger and shorted DOW. By the time the trade started I was already 3% in the black. I immediately placed a hidden stop on the trade. Then I just managed the trade until I got out 10% ahead.

The above is most of the strategy, not all of it. Should be enough to give you a good idea what I do. When I use the strategy above 8 out of 10 times I am in the black before I can place the stop (which I do immediately). On a daily bases I find anywhere from 2 - many stocks like this. I love cheap Nasdaq stocks, I will get 1% - 10%+ per trade. I think I average 3% per trade, but this is my fault, not the method. These trades last a few minutes to 2 hrs. So, I am a little lost as to why you are picking up so little or losing. How does your methodology differ? What happens is I am picking fast moving trades, then jumping onboard. I know I can improve profits in several ways, which is soon going to be my focus.

I need an EDGE. There are four that I can see with the above strategy.
1) Simple to execute. Minimizes mistakes, and is fairly quick to execute.
2) Low risk and extremely high probability
3) Trading with the trend, aids in momentum
4) Trade can be highly profitable (especially when I improve)

Damn that took me forever to type! By the way as mentioned above, these are US stocks. I know next to nothing about the other financial markets. Best of luck to you Vic and hopefully you can get something useful out of my rambling. Peace….

Chris

Awesome post and another I have to print and read. Thanks.... I feel like I'm doing similar, just need to refine the entries and exit timings to turn my calls into $$$.

 

[vleon1012]

** Due to a massive work load in terms of my real job (end of month / beginning of month processing, support tickets, and new code testing), I definitely won't be trading today and I'm not sure about tomorrow or Wednesday or even the rest of this first week of January. I'll still be doing my homework after hours and am strongly considering switching to paper for a couple of weeks as I refine my entries and exits, but this week is just too busy to keep my eye on the ball. **

Hopefully I can resume on Wednesday. Thanks for all your comments and I continue to read them and absorb.

 

[vleon1012]

Basically, you have your Pivots S2,S1,P,R1,R2 -- well, between those you manually draw in additional horizontal lines right in the middle between each pivot point which actually turns out to be additional supp/res in many cases. This chart doesn't illustrate the effect, but you will see it on many others.

UPDATE ** NOTE consolidation on Sub-pivot ** Coincidence?

 

[rathcoole_exile]

Coincidence?

doubt it, 'cos when price finally broke M+, guess where it's final destination was ?
M- (the mid between PP & S1) !!
:cheesy:

 

[Freeman.ayres]

Wow, I spent the past 6 or so hours backtesting the news from 16:01 31Dec08 to 16:00 02Jan08. I should have traded yesterday!!! The potential for an awesome day was there IF my execution was good. That's where I will continue to research this weekend because I would like to at least break even for next week.

Attached is my full news spreadsheet complete with calls for 02Jan08 and actual results. The way I backtest the news is I have the news on one screen, then on another screen I load the 1 minute chart giving it 2 weeks of data. I don't look at the current day so that I don't know of the price action of the day. I didn't even know that yesterday was actually a good day overall.

For news that could affect the opening of a day, I pretty much place orders @ opening or 9:45-10:00 based on price action, pivots, and the first 9:30 bar (gap up/down?) OR the 9:45 - 10:00 AM time frame. This is something I need to refine to actually make a profit based on my calls.

For news that occurs during the day, trades depend on the current trend and where the price action is relative to pivots and my assessment of whether the news is priced in based on time of day, current trend, and slope of trend.

As you can see, I don't trade every news item. But there are certain high probability setups IMO. Just gotta refine the timing, execution, and psychology and hopefully I will be making money very soon.

Perhaps this will be helpful to someone out there so I am attaching the whole thing. The last column, Y = Yes (I usually trade that news item), M = Maybe (requires more back testing to become a Yes), N = No (I'll probably never trade it)

Actually, I am considering paper trading all of next week to refine the timing and then go live again the following week. But I dunno, to me paper trading isn't anywhere near as real. I wish I could find a way to make it feel more real. Also, imagine if I make big gains on paper I will be irritated hehe.

I do this process every day and on weekends. It takes a lot of time but I feel it's a method that will pan out for me in the end. Just gotta be patient. As you can see from my comments in the "Anticipated" column -- I keep the analysis simple because news trading if fast. Check the first bar, check the nearest pivot, and go. I might have a couple of typo auto-fills in the Anticpiated but you'll get the idea for the most part.

-vic

Very nice thread.

I was looking at your excel file and it seems to me that there is a lot of homework to do every day with this method. You got me impressed with all this work you do. Congratulations.