Post-Mortem

All trades occurred in an up market for the day.7

PHM Short at 9.57 on a Gap & Trap, out at 9.43
I traded this one on the first five minute bar. It had gapped up on no news and was trading down. I took a flyer on it and - based on my results the rest of the day - assume I simply got lucky. I don't like depending on luck.

ESRX Short at 64.03 on a Continuation Flag, stopped out at 64.25 for a 1R loss
This trade occurred on the 6th bar. It looked like a continuation flag that had formed nicely: 2 long bars down, 3 consolidating in a down-up-down pattern, and then the 4th bar of the flag began trading down. This went against me within 10 minutes and my trailing stop got hit after 15. What did I do wrong? Maybe trying to trade a continuation was wrong, because the stock had gapped up on the open so we weren't technically in a downtrend at that point. However, if I look at the previous day, we were DEFINITELY in a downtrend coming into the start of day. The only reason it was NOT a downtrend was the gap at the open, and the first 5 minute bar was a down candle. Another possible weakness was that I should have counted the first bar of the flag as the last bar of the pennant. If that were the case, then I should have waited one more bar for the pattern to complete, and I would have seen that the pattern did not complete properly. That could have kept me out of this trade.

VRSN Short at 38.67 on 3 Black Crows, stopped out at 38.99 for a 1R loss
The trend was definitely up, and I got what looked to be 3 black crows. Howevber, in retrospect I can see that the 1st black crow actually opened below the close of the previous bar. In fact, none of the 3 bars of the crows opened higher than the close of the previous bar, which means it is NOT a reversal. 2 bars after the crows, the trade went against me and move up to my stop. Had I watched and waited, I would have seen a longer term trend that was violated around 10:45. I could have played short when the up trendline was violated around 38.98 and picked up a nice profit by riding it all the way to 38.28. I should habe been able to get at least 50 cents out of this by paying attention to the trendline.

UBS Short at 46.09 on a cont flag, stopped out at 46.59 for a 1R loss
The pole was 5 consecutive down bars. I came in on the 5th bar of the flag, right at the bottom of the fabric. I failed to set a stop at half the pole length and got hit when it went against me. The pennant of the flag was poorly formed. My stop loss should have been at 46.36. Poor formation, poor use of the stop loss.

TEVA Short at 43.74 on a prayer, stopped out at 44.01 for a 1R loss
TEVA Long at 44.00 on 3 white soldiers, stopped out at 43.67 for a 1R loss
This one was pretty good - I lost both directions.
The prayer was exactly that. I had two long down bars so I shorted against those, even though the trend was up. I need a much stronger signal to short against the trend. Had I not gotten into the trade short, I probably wouldn't have traded it long either, because the so-called 3 white soldiers weren't a true reversal pattern because the basic trend was up anyway.

Today's trading shows what happens when I want to trade more than I want to trade well.

Find the GOOD setups. Trade the good setups. It is better not to trade than to try to make something be there which is not there.

S&P Negative YTD

Just saw that the S&P is negative year-to-date:
http://bigpicture.typepad.com/comments/2007/11/weakness-contin.html

So if you are net positive in trading you are out performing a buy-and-hold benchmark. Neat.

-f

A week of review

Best two days ever were last Thursday & Friday. Monday I felt lousy and traded only part of a day, Tuesday I was sick and didn't trade at all. Felt much better today, but the trading doesn't prove it.

THURSDAY
ESLR
Cont Flag SHORT at 15.80, stopped out at 16.50 for -1R loss
I entered on the 3rd bar of a Pole & Pennant formation, hoping to get in early. I basically did this all wrong. First of all, the Pole had not carried me past the previous price action at all. Secondly, the "pennant" was not drifting up, as it should have been for a valid pennant. Finally, I placed my stop way to high. A valid stop should have been in the 15.90 - 16.00 neighborhood.

Lesson: Be patient and let the pattern form. If the pattern is wrong, then don't bother. Something else will come along.

AA 3 Black Crows short at 38.47, hit trailing stop at 37.76 for .71R gain
I think I may have gotten lucky on this one. I had three black crows coming off of two previous consecutive highs, but the general trend was actually down. My stop was a shade too tight as well. I could have picked up another 75c with a little looser stop. I moved my trailing stop tighter when I saw the price reversing against me, but it was reversing on lower volume. I could have been a little more patient and let the weaker volume peter out.

The UP bars prior to my entry were on lower volume, and the DOWN bars prior to my entry were on higher volume.

Lesson: On these candlestick patterns, try to confirm the predicted direction with the volume - particularly when the pattern isn't perfect. Also, be patient with your stop losses; if it appears price is moving against you, check to see if volume confirms, or if you might be able to ride it out.

CY
3 Black Crows Short at 41.89, hit trailing stop at 37.60 for a 5R gain.
I did this one right, but I also got lucky. I caught it just before it fell off a cliff, and rode it almost all the way to the bottom. This is how to do it. The formation was very strong, not contradicted by the volume, and I got stopped out not just on a rising price but on rising volume as well. My best performance so far.

AA
I thought I got stopped out too soon, (and I did), so I jumped right back in with a too-tight stop for a .07R loss. The lesson is that my stops were too tight.

FRIDAY
ODB
Continuation Flag Long at 17.82, hit trailing stop at 18.50 for a 6,8R gain.
The flag pattern on this was just right. I got in several bars late, but the "pennant" formation had not yet been broken - it was just an extended consolidation that I picked at the right time. My trailing stop maybe could have been looser, but I got almost all the rise on this one.

Lesson: Perfect formations are worth the wait.

WB
3 Black Crows Short at 39.52, hit trailing stop at 39.10 for a .8R gain
This was a good formation and I caught most of the move. My one regret is that I missed the reversal. It also gave a good strong signal, (3 White Soldiers), but I was already out and looking elsewhere.

Lesson: Perfect formations are worth the wait, and when you get stopped out, see if the trend is actually reversing with a strong signal to go the other way.

XMSR
No Good Signal Long at 14.67, hit trailing stop at 14.74 for a .3R gain
I should calls these NGS trades. I don't know why I pulled the trigger on this one, other than that it was rocketing up, and I was pretty sure I could protect myself on the downside. As it was, I got lucky. There was no strong signal here. I'm not saying a moonshot bar is not a valid signal, but it is not a strong signal.

Lesson: Sometimes its better to be lucky than good, but luck runs both ways. NO UNDISCIPLINED TRADES!

MER
3 White Soldiers Long at 53.17, hit trailing stop at 53.69 for a 1.5R gain
Again, I had a nice strong formation. I got into it a little late, but I still caught a nice ride up. The stop again may have been a little loose, but I am very satisfied with this trade. However, I missed another 3 White Soldier and hour or so later.

Lesson: Good patterns are worth the wait. When you get stopped out, watch for reveral confirmations.

MONDAY
AEL
3 Inside Up Long at 8.85, hit trailing stop at 9.10 for a 1.25R gain
I actually got into this trade thinking it might be a multi-day trade. I chose it because it had created a Three Inside Up pattern on the daily chart. I was right about the direction but wrong about the timing: as it turned out, AEL went my direction right away and I got stopped out with a nice gain.

Lesson: The perfect pattern is your friend.

HL
Cont Flag Short at 10.87, closed it at 10.80 for a 1R gain
Cont Flag Long at 10.71, hit stop at 10.68 for a -1R loss
Cont Flag Short at 10.69, hit stop loss at 10.82 for a -1R loss
I just screwed this one up royally. My first trade I intended to go short. When I realized that I had done the "wrong thing", I immediately closed the trade for a small profit. If I'da been paying attention, I would have realized that my initial idea was wrong and that the Trading Gods had been merciful on my stupidity by letting me get out with my hide intact. But no, I was so keen to trade trade trade that I jumped right back in, this time long, and got hammered. So now I've done two trades wrong and managed to still be at Nothing Lo$t. But I wanted the trifecta, so I jumped in AGAIN, for no good reason that I can see, and The Gods took my head off this time. I deserved it.

Lesson: Undisciplined trades and trading is the sure road to ruin.

DOW
Three White Soldiers Long at 41.54, hit trailing stop at 41.58 for a .08R gain
This is supposed to be a reveral pattern, and I think I actually hit it right. The problem is that it was a really short and small reveral. I managed to get out without losing any money - just covered expenses.

Lesson: Perfect patterns are not infallible. That's why we have stops.

DELL
Continuation Flag long at 27.39, stop loss at 27.34 for a .17R loss.
This pattern was good, but not perfect. I set my stop loss just below the fabric of the flag, where I got taken out - thank God - and only suffered a small loss for being wrong. In retrospect, although the pole of the flag was plenty long enough, it had failed to take me to a new high past the previous swing high - which is one of the rules. I violated that rule and was fortunate to have a tight stop in place.

Lesson: Those rules are there for a reason, son. Don't be a dope.

WEDNESDAY
This was my "I got up early for this?" day. I hate to even write this stuff down, but it is instructive to do so. And since I'm not gonna get anything monetarily positive out of the day, maybe I can at least learn something.

OVTI
Gap & Trap Short at 20.98, hit trailing stop at 20.53 for a 2.25R gain.
This should have been my one and only trade for the day, but I took this trade because I was practicing my execution. I wanted to try to place a trade that was a combination of One Cancels Others and One Sends Others. I wanted to place a trade that would trigger Long if the price went up and Short if the price went down. Whichever one got triggered, the other would cancel. Then, whichever one got triggered, I wanted to send an automatic stop loss order. I picked OVTI mainly because it was cheap and I thought it would be "safe" to practice on. I only did 100 shares on this guy - because I was practicing - and watched my trade execute perfectly. The only problem? This guy decided to RUN and coulda made me a boatload of dough if I had been playing a normal position size and using normal Trailing Stops. But I was just trying to figure out how to execute the trade, so I got out pretty quick. Stupid, stupid, stupid.

Lesson: Don't leave money on the table for stupid reasons.

PCS
3 Black Crows short at 17.84, hit stop loss at 18.20 for a -1.2R loss.
I mistook a continuation flag for 3 black crows and got rightfully taken out.

Lesson: 3 Black Crows should follow a smooth uptrend, not a flag pole.

NTAP
Cont Flag short at 26.56, stopped out at 26.96 for a -1R loss.
I don't think I misread this one. I was just wrong.

AES
3 Black Crows short at 21.95, stopped out at 22.05 for a -1R loss.
I think read the pattern correctly, but I was just wrong. When that happens, I just accept it as the price of playing the game. The one possible signal I missed is that the downward movement occurred on lower volume.

Lesson: Check the volume to confirm the price direction.

Three Sucky Days

I've had three sucky days in a row. If I can't make money in amarket with this kind of volatility, then I am doing something wrong. Time for some post-mortem analysis:

All trades for November 7, when the market was showing DOWN most of the day.

CY
Gap & Trap Short at 39.03, stopped out at 38.97 for a +.3R gain
No news of interest. This had gapped up, then closed the gap and was continuing south. I entered when the second bar showed it was continuing down. It continued in my direction for the duration of the 2nd bar, so I changed my stop loss to a trailing stop. I got stopped out on the third bar. The action continued up to the level of the previous day's close, and then bounced its way down on the first bar when it was about 40c below yesterday's close.

Lesson: In retrospect, I had no good reason to enter this trade. It had already closed the gap, and it was too early to call a continuation flag.

ONXX
Gap & Trap Short at 52.29, stopped out at 52.58 for a -1R loss
Continuation Flag Short at 54.58, stopped out at 54.99 for a -1R loss
This had gapped up on a good earnings announcement, that I misread. The announcement said that projected earnings were (.21) and actual earnings were .01, which shows that they beat by .22, but I somehow read it as projected of .22 and actual of .01, which I interpreted to mean they missed by .20.

Lesson: Obviously I was on the wrong side of this both times. Had I read the news correctly, I could have ridden this guy up for about 12R. Ouch!!!

TSO
Continuation Flag Short at 59.70, stopped out at 60.15 for a .9R loss
This was a case where I was right about everything but the stop. Had I set my stop at or above the day's open, I would have been able to ride this puppy down to less than 57.00. Again, I missed a ton of dough on this one.

Lesson: I need to do some more analysis about the size of my stops. I was too conservative for my own good here.

BTU
Continuation Flag Long at 54.83, stopped out at 54.32 for a -1R loss
I had a nice big pole to play off here, and tried to get in on the second bar after the formation of the pole. In retrospect, the previous bar was a spinning top, which should have warned me that the stock was ripe for a turn. Had I gone short instead of long off the spinning top, I had more than a dollar of movement.

Lesson: On a CF, let the pennant form two bars before deciding to play. In addition, do NOT play off a spinning top until the direction is established.

JASO
Cont Flag Long at 62.51, stopped out at 62.04 for a -1R loss
This one appeared to be a well-formed flag. I had a nice long pole - more than 50c - followed by a 3 bar pennant moving opposite the direction of the pole. I looked perfect to me, but I was completely wrong. The "fabric" portion of the pennant was admittedly not very good - perhaps that was my mistake. As I look at it, the first bar of the fabric was nicely formed and closed down, the second bar was a spinning top with very long stems and the third bar was an inverted hammer. IOW, I guess the fabric was not a strong pattern after all.

Lesson: Pay attention to the fabric of the flag. This was a weak pattern to trade on.

Mediocre Monday

Some days are better spent in bed, or on the golf course, than trading. Today was one of those days for me.

In spite of the fact that the S&P futures showed strongly down in the premarket, I found NOTHING that interested me to short on a gap. So, like an idiot, I found a couple of stocks I could go long on a gap with. The best news first:

DELL had gapped down and looked to be a pretty safe bet to close that gap, given that tech stocks are leading the charge right now. I got in at 29.60 and set a 1/4ATR stop, which was 19 cents. I felt pretty comfortable with that. If I was right, I had a long ways to go to close the gap. If I was wrong, I would know pretty soon. As it turns out, the stock just fiddled around after I got in - up a little, down a little, up a little, down a little. It approached but never breached my stop loss. In the meantime...

...CROX had gapped down too, and I decided it was "due". (I think there is a "trader's fallacy" lurking in that thought.) So, like an idiot, I jumped in long at 45.57 and set my stop at 44.40. I watched CROX wander aimlessly for a while before it decided to head south and take out my stop for a lovely 1R loss to start the day. This led me to...

...the decision to try to capture at least a little profit in DELL once it turned positive. Once I was up a bit, I set a trailing stop at 10c. I ultimately got stopped out for a .8R gain. But, after looking at the rest of the chart, I got fidgety too early. Had I left my initial stop loss, or even trailed at 19 cents, I would have picked up at least an additional dime, if not an additional 16 cents.

The lesson is patience and compartmentalizing. I allowed the CROX loss to get involved in my DELL trade, which resulted in me leaving at least half my profits on the table. If I had let my profits run, I'd be a happier guy right now.

I also shorted WFC late in the day on what appeared to be a nicely formed continuation flag, but I was wrong for a 1R loss.

I also tried a couple of swing trades today with little downside and what appear to be strong upside: NOK and AMAT. I'm short NOK at 39.49 with a 40.01 stop and long AMAT at 18.73 with a stop at 18.43. I'll report on those when the positions close.

Terrific Tuesday

In the spirit of Karl Denninger, here's how today went:

I shorted SOHU twice today, the first time at the open on a Gap & Trap and the second time on a nicely formed continuation flag for a total of 2.5R. The first trade lasted a grand total of 57 seconds before my trailing stop was hit for a 1.5R gain. I took that one because the stock was up waaaaay too high for two-day-old news, particularly in a market that was showing down to start the day. I was right. The second time I saw a good continuation pattern and caught it in time to make 1R in a little less than 4 minutes.

Let's see - that's 2.5 R in a little under 5 minutes. If I could do that 8 hours a day, 200 days a year.... Uhm, not likely.

Anyway, that's the good news.

I gave the ole' RBMP a try again - three times - with ANPI, PIEX and QI, for a net loss of 1R. I broke even on one, lost .1R on a second and .9R on the third. Did I do anything wrong? You betcha:

ANPI had a humongous gap less than two weeks ago. I just plain ignored it. Stupid, stupid, stupid. (That's the one I broke even on.)

PEIX actually had a decent setup. It printed solidly up during the first five minutes, but then fell out from under me. My stop loss got hit on the way down for a .9R loss.

QI was a little different. The pre-market setup was good, but it printed a spinning top on the the first five minute bar, then followed that up with a down bar, which is where I chose to get in. I didn't violate any of the entry rules, but in retrospect, that spinning top shoulda been a warning flag to me that the market wasn't sure which way to go. Had I waited on some confirmation of the actual directional momentum, I would not have taken this trade. Although the stock actually traded higher in the first five minutes, a little more patience on my part would have rewarded me by keeping me OUT of the trade.

As I analyze my trades this month, I am significantly more profitable when I play short than when I play long. I've succeeded playing short in a rising market as well as in a falling market. But I am no better than 50/50 playing long in ANY market.

Lots to think about.

I am determined to crack the nut on this RBMP.

More Lessons

I made 1.4R on two continuation pattern trades today: lost .35R on NTAP and made 1.75R on PAY. Although I'm pleased with the result, I would like to figure out how to set my stops so that I capture profits and keep them, rather than have them and lose them like I did with NTAP. At one point, it was actually almost .30R positive for me, but then it went the other way. Perhaps I am just being too greedy and have to recognize that these small losses are the price of success. If that's the case, I can handle it.

So lemme see, the ATR on this guy was 1.12. It had already made a move of .58 cents when I got into it, so that was more than 1/2 ATR before I got in. That flag pattern was strong: I had a strong move down followed by a 3-bar consolidation. I got in on the fourth bar after the pole and got my stops taken out in a very short upswing. The price then marched steadily downward the rest of the day, so I was on the right side at the wrong time.

If anyone has any insight, I'd like to hear it. I think I did everything right and was just wrong, but if I did something wrong, I want to know so I can correct it.

Seven R Day

Yesterday I traded one Gap & Go and two Gap & Traps.

The Gap & Go was ECA. When I decided to buy, (yes, I go long occasionally), it had already made most of a 1 ATR move, but since their earnings announcement was coming up, I decided to "buy the rumor and sell the news". My stop-loss got hit for a 1R loss.

Lesson: "buy the rumor, sell the news" is a rule-of-thumb. It might have made sense if the stock hadn't already made almost a full ATR move for the day, but in retrospect, I need to not try to trade when a full ATR has already been made for the day.

I shorted DD on a Gap & Trap. The setup was good but not great. I got jumpy and moved my stops tighter yet again, and got stopped out for a .37R gain. In retrospect, the jumpiness kept me from incurring a 1R loss, but I have got to be more disciplined about how and when I move my stops.

I shorted AXP as well and made 2.2R. This was my most disciplined trade. I waited until I had a 1R profit in the move, then cancelled my stop-loss and put in a 1/2R trailing stop. I was pleased with my execution on this trade. I picked the setup well, set my stop-loss correctly, and took profits in a disciplined manner.

All told, it was 1.5R day. Since my initial short-term goal is 6R per month, I feel pretty good about that.

Today I decided to try a Parabolic SAR trade. I was looking for one that had the stop-loss set really close to the entry, just so that I could watch how the trade works. I shorted KG at 10.26 with a Stop-Loss indicated at 11.10. This is a trend-following trade, so I'll see how it goes and report.

I shorted PTV on a Gap & Trap and hit my trailing stop for a 1R gain. I shorted GENZ and got jumpy, (again) and got my trailing stop hit for a .67 gain. I got upset with myself and said, "don't do that anymore!" So GENZ still had a decent setup and I jumped in again. I was wrong this time and hit my Stop-Loss for a 1R loss, but I felt better about it because it was a DISCIPLINED trade this time.

The big winner of the day was AAPL. I watched it form a nice continuation flag pattern, was patient as the second bar of the flag confirmed, and entered a short trade just like the book says. It took a while to move in my direction, but I set my stop well, and though the price approached my stop, it never it hit. Once it started in my direction, though, it went like a rocket. I canceled my stop-loss and put in a trailing stop once I had a 1R profit, but the thing just kept going. I didn't get stopped out until I had a 6.4R gain.

I know those don't happen often, but it sure is fun when they do. It's a 7R day!

Learning to Not Lose Money

Hey, I think I'm starting to get it. Yesterday I traded more than at any time up till now, and - for the most part - traded right. Not that I hit all winners, but I executed correctly and limited my risk correctly.

One exception: when I left town on Thursday, I had one open position on a swing trade I had put on Thursday. When I got back yesterday, I checked my position and discovered that my stop had expired. Yep, I had put in my stop as a "Day" rather than a "GTC". That cost me almost one full R. Lesson learned!

Anyway, here's yesterday's results:

HAL on a Gap & Go: I made .4R but realized in my debrief that I had set my stops too tight for such a volatile stock. With wider stops, I'd have made more. The lesson is to make certain that the width of my stop matches the volatility of the stock; not too big for smaller volatility, not too small for bigger.

COP on a continuation flag: This was my big winner, 4.5R. Strangely, I also realized my stop on this one was too small for the volatility. I left some money on the table, but at 4.5R, I'm not unhappy.

ERTS on a continuation flag: I lost 1R, but I played it right and limited my risk correctly.

Overall, it was a 3.5R day. I can make a terrific living with days like that!

Thursday was "too many choices" day. I had a pile of things to choose from, and didn't choose too well. Shorted both VOD and INFY on gaps up. Both were positive for a while, but ultimately went against me. I had a 1R loss on BOD and a net zero on INFY after my trailing stop got hit.

Lessons: It's certainly possible to short into a rising market - many of the stocks I watch were moving down after gapping up this morning - but you gotta be decisive and you gotta be ready. I didn't get into VOD until 15 minutes after open and INFY until 23 minutes after open. Most of the big action had already occurred. Plus, there were stronger candidates than the ones I chose. In the future, I should choose higher volume over lower for my day trades. Neither of these were slow movers, but it woulda taken less time to find out I was wrong on bigger volume movers.

VOD I think I handled okay, because it was legitimate trade and I was simply wrong. I had a set a 1R stop and my stop was hit. INFY it looks like I got jumpy. It ended up making a significant move down later in the day - just as I had anticipated - but not before a brief spike up that took out my too-close stop. If I'da left my original stop where it was at 1R, I would have had a 1/2R excursion go against me before it finally went my way. This could have easily been a 2R trade - and certainly 1R - if I had followed the rules.

Today I shorted IVN on a Rubber Band Morning Pop and made 1.75R. The trade moved almost 1/2R against me before turning around. I was a little frustrated because what I thought of as my trailing stop was not moving with the price of the stock. I had to keep manually moving my stop, which is not optimal. OTOH, 1.75R is a good trade.

I also missed a couple of trades due to waiting a little too long for confirmation. I was going to go long on HANS on a Flag Continuation Pattern, but waited a shade too long to pull the trigger. I watched it rise 80 cents past the entry I had picked, which would have been almost 4R if I'da just pulled the trigger. I guess missed profits and missed losses on trades never taken cancel each other out. At least I hope they do.

Looks like a lot of interesting RBMP trades investigate tonight.

Question: Which strategy are you guys using most? Why?

Next months seminars

Hey guys just wanted to find out how many of you are going to be at next months Van Tharp/DR Barton Seminar. It is just for the emini which is what I primarily trade so I'm excited. Hope to see some of you there.

Thomas Quick

More Lessons

Monday and Tuesday were about learning to (a) learn to control losses and (b) learn to execute trades with Tradestation.

I went hog-wild on Monday morning and traded AAPL (twice), CAT, RIMM (twice) and WNR on opening gaps. Because I am dispositionally disposed to going against the crowd, I shorted them all on something less than stellar signals. The net results were:

AAPL: -.12R
AAPL: -.06R
CAT: -.84R
RIMM: +1.17R
RIMM: -.28R
WNR: -.57R

As you can see, I didn't make any money. I had 5 losers and 1 winner, which is proof that I still don't know what I am doing as far as picking trades is concerned. OTOH, none of my losses exceeded 1R and only two were as much as 1/2R. I am getting a better handle on how to limit my losses. I was tempted to be down about my results for the day, but frankly, I was pretty dang happy that I had figured out how to cut my losses short.

Tuesday was "learn to execute trades with Tradestation" day, and I had an execution error that was the result of not understanding my tool. I traded GES and LDK twice. Results are:

GES: +.65R
LDK: -.63R
LDK: +1R

The loss on LDK was four times higher than it needed to be, because I thought I had set a stop loss, but in fact had not. Today was a 1R day, and woulda been closer to 1.5R if I had understood the tool. After the markets closed, I spent some time with Tradestation's video tutorials and learned what I should have learned before trading. Ah well. If it was easy, everyone would be doing it, right?

I have an observation that I would like my fellow bloggers to respond to: It appears to me that Tradestation exceeds Interactive Brokers Traders Workstation in every regard but one: execution time. When I trade with IB, my trades are usually filled in less than 2 seconds. In Tradestation, it takes a good deal longer. Otherwise Tradestation beats IB in every area.

Remember that basket...?

Hi all,

You're doing a great job with this blog. I'm sorry I haven't contributed so far, but I'm still on the side lines, stopped trading the week before the seminar and haven't come back yet... I will start posting as soon as I have anything interesting on (first I have to get back to trading).

Have any of you heard from that basket of stocks that DR said it would be emaild to us?

Intestinal bug whacked me in the middle of the night. No trading today.

Another Day, Another Lesson

I played two Rubber Band Morning Pops this morning: HOXL and DHI. DHI went against me immediately, HOXL went my way for quite a bit, then reversed. Stupid me, I sat and watched my loss on DHI mount and my profits on HOXL evaporate, wondering what was happening with my stops. I finally realized I had set my stops wrong - roughly twice as large as I had intended.

Yet another execution error. I have a spreadsheet setup that lists the various entry, stop loss and trailing stop points I intend to take. When I setup these two trades, I simply looked in the wrong column for the Stop Loss. This is primarily because I am still not familiar with this trade. Another day, another lesson.

I'm still in the Learner stage. Thank God that DR suggested we not adhere to Van Tharp's position-sizing rules until we had become competent traders. I took that advice and - as a result - am down a total of only $170, rather than several thousand I would have been were I using the position sizes I intend to once I become competent. That advice alone saved me more than the cost of the class.

Mark asked me where I got HOXL & DHI. I thought it was on the Stockcharts site listed on the blogroll to the right, but I may have gotten it off of the WSJ's Markets page. Yeah, I buckled to the pressure and got a subscription to the Journal. Actually, the Markets page is pretty cool. I recommend it. 99 bucks gets you a 1 year subscription to the paper and the online version. Not bad, especially considering the amount I have spent on books I have only partially finished reading.

For TradeStation users

I have created of few custom symbol lists that are useful. I have one list I call Liquid_Nasdaq, it has 28 of the most Liquid stocks on the Nasdaq. I created 4 workspace's and have added by sector breakdown all of the Russell 1000 and Russell 2000 stocks. When I created the sectors using both Russell's I added the sectors together from both of the Russell's. In other words, the Russell 1000 may have had 10 stocks in the Internet sector and the Russell 2000 may have had 20, I created on sector called Internet and it contained 30 stocks. To me it didn't matter if it was in the Russell 1000 or Russell 2000.

I then made an Indicator called morning pop. I apply this Indicator to each of the workspaces I created that have the Russell stock's mentioned above. Each work space has around 800 stocks each. The last one has less than 800. I open each workspace ever evening and look for ScanDay results based on D.R.'s requirements. The ones that have a hit, I then open each chart and look to see if they qualify.

The only caveat is you need RadarScreen to apply an Indicator to all the stocks. The reason why each workspace has 800+ stocks except for the last workspace is that RadarScreen seems to have a limit of about 888 stocks that can have historical data applied.

I do not remember how many sectors the Russell was divided into, some where around 30, I am at work and do not have the exact amount.

If anyone is interested in the custom symbol lists, the workspaces and the easylanguage pop me a note letting me know what you want and I will send it. For those who have TS and RadarScreen and are not familar with setting up worksaces let me know and I will give some instructions.

Contact me at: dlintz8@msn.com

dwight

Yesterday evening I thought I had identified three excellent Swing Trade Revert-to-the-Mean trade candidates. This morning, they all looked ridiculous, so I made no trades. Similarly, I had identified a number of gappers that I wanted to fade, but by the time I had dug under the covers, I didn't like the flavor of any of them, so I made no trades.

I'm gonna contact Mark directly about how he scans for the DRRBMP, (DR Rubber Band Morning Pop). Today was the first day I seriously attempted to find some of those, and was not impressed with the results.

As for the promised "basket" of stocks, I located a list that Trader Jamie posted online. It's a place to start.

I find I have a short bias. Somehow, I find it more satisfying psychologically to take a short position than to take a long position. Anyone else have this experience? (I know Mark confessed to the same "issue" as well. What do you supposed that says about us?)

I made some money on my Gold spread today. I confess I was concerned about that one. Gold has made a habit of hitting $720-ish and bouncing down the last year. I've had the December 700-750 spread since February. I took half off the table last week and the rest today. I have a couple more futures options positions to wind up, then I am out of the futures options business for a while till I master these day trading strategies and techniques.

Oh, one other thing. I got a copy of Edwards and McGee's Technical Analysis of Stock Trends for 8 bucks at Trader's Library. A new copy goes for $125. I call that a good ROI. It's not the latest edition, but everything I read says that nothing truly essential has been added since the 5th edition. I'll probably add Trader's Library to the sidebar.

Review of my last two weeks (lengthy post!)

It seems hard to believe but we have been out of the seminar for almost two weeks! Since this is a forum to help us get better at trading, I want to take the opportunity to further share my experiences over the last couple of weeks. Hopefully, people will be able to take something from this post and help them get more profitable. And it helps me organize my thoughts too ;-)

On the flight home, I thought for sure I would sleep since we had absorbed so much information, I thought I was exhausted. However, I couldn't slow down my mind enough to sleep so I decided to write out a 3.5 month plan to get me to where I want to be to feel comfortable that I can support my family in 2008 forward by trading. I wrote almost non-stop for 2 hours.

My goals for September were pretty straightforward - 1) Document the course and my learnings so as to "make it mine" and review it again; 2) Review all gap strategies and investigate sources for gap info before the open; 3) Work on identifying the Flag pattern; 4) Develop basket of high volume, high volatility stocks for the Basket Gap and Trap; 5) Document EVERY trade. Every one; 6) Do a daily debrief EVERY day; 7) Strive to not lose money in Sept.

Results of my goals - 1) done. Found some notes that I had written down that I had forgotten about; 2) Reviewed and wrote up the gap stuff for myself again. Briefing.com has some gap info but haven't found anything great at this point; 3) I can see the flag patterns well in the middle of the chart! :-) It is on the right edge that I have problems . . . In fact, this has been a consistent losing trade for me as I seem to get in on the wrong edge of the flag (increasing my Risk) and then it often gets breaks against me, stopping me out; 4) Haven't done, waiting on DR for the start; 5) Done this and I have to say it has been a fantastic learning experience. I put down my thoughts on the specifics of the trade, the entry and exit and anything else that I think can help me. I have learned a TON about myself and my techniques doing this. I would HIGHLY recommend doing this yourself; 6) the individual trade info helps me with my daily summary and I am proud to say I haven't missed doing one of these yet. I expect to review these each week, summarize and then do the same at the end of each month. I am really learning a lot from this exercise; 7) Between 9/19 and 9/28, my totals are -2.8 R and loss of about $3,000. A further break down of that below.

Over all, I am pretty happy with September. In the last week, I have reduced execution and psychological errors and am getting better at this thing. Definitely something I can feel good about going into October.

If you are curious, October goals include: 1) Trade DR's Rubber Band Morning Pop at 1/2 position size (was trading it at a quarter in Sept); 2) Trade gap strategies consistently at 1/4 position size; 3) Develop a simple band system (based on the swing class) and trade at 1/4 position side; 4) Begin home Peak Performance for the second time; 4) Finish first revision of trading business plan; 5) Finish the month with at least 1 R in net winnings; 6) Document every trade; 7) Do a daily debrief.

Since we are mostly numbers guys, and if you have made it this far, here are some numbers from my trades in Sept.

DR RB Morning Pop: I have taken every trade since 9/19 that meets the system ruleset and the results are: 0.25 R, 1.76R, -0.25R, -1.2R, -0.4R, 0.33R, 1.22R, 0.98R, -1.27R, 1.44R, -0.28R, 2.16R, and 2.28R. Total of: 7.02R . . . . not so bad for 8 days of trading!

A couple of comments/learnings from this one - trailing stop losses can cause high percentage slippage, especially on those trades with a low stop - below 20 cents. Trailing stop limit orders can cause your stop to be only partially hit causing you to have to chase it down if you are watching it. This slippage is the reason for my losses larger than 1R. Other than that, I really like trading this system.

Continuation flags: Taken these as I have seen them, but it is pretty haphazard - -0.9R, -1.67, -2.7, -0.72, -0.53. As you can see, I am not very good at these. Will likely put this one on the shelf and work on some other systems.

Gap and Trap - I definely seem to have a short bias on this one. I am getting better at setting profit targets and am working on the entries. DRs comments about filling the gap to half and then bouncing seem to be right on.
Results with some of my trade comments - 0.04R (comment - "not great entry, wasn't patient"); 0.70R ("good entry at top of resistance"), -0.65 ("not great entry"); 2.73 ("good setup, I just got to it late. It filled half the gap while I was putting in the order. I then waited for it to break through by 5 cents the half gap and went long. Not a great risk trade but did it with small postion. After I got it, it took off. I put profit target at 10 cents below the gap. Since the price moved so strongly up to 24, I then revised my stop and took it off at 23.90 per Brad's comment of if it moves strongly in your direction, get ready to take it off. Except for the lower R:R, this was a good trade and good exit. Got out at right time"); 0.84 R, 0.32R.
Total of: 3.9R. Again, not bad for 2 weeks of trading.

So, if you do the math of the above numbers, it doesn't add up to -2.8 R, does it? Where do you think I may have caused myself some problems? Buehler . . . . Buehler . . . . Buehler . . . .

Answer - the need for action and trading without a plan!

Most, if not all, of the system trades I have been taking are all morning set ups that usually are closed by lunch. So I take a break for lunch and come back to the screen looking for such things as flags and other patterns. Guess what? I then start looking for excuses to trade. Here are the trade results with comments. At least I am getting to be honest with myself :-)

-0.49R ("No strategy - stock was up 5 pts, fell off the top dramatically. Sold short on the pause and it reversed so got out.")

-0.67R ("No strategy - stock was up 5 pts, fell off the top dramatically. Tried once, got in again as momentum continued. Watching it in conjunction with XLF")

-1.04R ("Hi tick reading (600, highest of the day), not able to move up at all. MACD is trending down in divergence to the price. Looks like a good short opportunity. Exit was terrible. I chased pennies and it moved up to my stop loss. When short at the very beginning of a 2.5 hour almost uninterrupted uptrend. I did NOT have the rythym of this stock today.")

** BTW, the last three losses were all on the same stock in one day . . .

-3.56R ("No strategy - Had 1 R win, should have put stop there. Instead, it ran back all the way through my original stop. And then some. Then had the classic, "nothing goes straight up, I will wait for it to come back down and then get out. Then, I added another position when the tick reading went to extreme yet it wouldn't move up. 3 major mistakes there. 3.5R execution errors. 4.5 if you count lost opportunity.")

-1.2R - "No strategy - Added on to a loser here - shouldn't have done. Entered when price didn't move but tick was at extreme. Initially went in my direction but got my ass handed to me."

-1.02R - "No strategy - Chasing my tail. Impulse :-/"

** History repeats itself - these last three losses were on one stock as well

-1.67 R

-1 R - "Continuing my trading without a plan stupidity. Thought I saw a trend opportunity. Issues - trading in last 30 minutes, trading without a plan."

-0.98R - "Spike on takeover rumor news, got in too early"

2.28R - "No strategy - RIMM and SPY down agressively over last 20 mins. Looking for a rebound, SPY seems to have flattened out and RIMM seems to be trading similarly. Playing revert to mean. SPY support designated by Briefing at - 1525/1524 (session low 1524.77). Took it off after 2 R by hand. Looked like momentum had died out for the time being. Was right about the momentum dying"

-0.85R - "No strategy, trying to ride visual momentum."

Total: -9.22R, and only 1 win out of 11 trades.

If I had not taken these non-system trades, my 8 day total would be 6.22R instead of -2.8R! That is almost 1 R a day. Or, said another way, I lost over 1R a day in psychological errors (need for action, impulsivity, etc.)

So, what to do about that? For the short term, I have instituted 2 new rules - No trading without a predefined rule set, and no initiating a trade after noon. That should help keep my losses lower for now. Longer term, I need to go through the Peak Performance course and start doing the 10 tasks of trading to help me meet those needs in other ways outside of trading.

Sorry for the really long post, but I wanted to share my experiences with you guys with the hope that you can take something away from this post that will save/make you money. Overall, I am really happy with the course we took and am I looking forward to putting it into action with "conscious competence" over the next couple of months. Best of luck to everyone, enjoy the weekend!

- Mark

A Learning Day

No trades for me today. I got TradeStation installed yesterday and spent a good bit of today learning to use it. Geez, I so shoulda started with this - soooooo much better than IB's TWS.

I'm looking at playing a "Reversion Toward the Mean" on EMC tomorrow. I have a pretty good setup, although I am not crazy about the Risk/Reward. OTOH, this will make a good learning trade, since my actual Dollars Risked is so low right now, it won't much matter whether or not this is a trade with the possibility of big money. It is more an opportunity to play this particular strategy & see how it looks.

I am using TradeStation and have not found the symbol's needed to track the S&P, Nasdaq futures realtime during the day. Does anyone know what the symbols are? Is there a datafeed that is required to access?

dwight

First Official Profit

I made my first official profit on a day-trade today. (I've been doing longer-term stuff till now.) RIMM opened on a gap with no significant news. The gap was about .70ATR - not a huge gap, but big enough to be interesting. There was no obvious resistance level above the open, so I was hesitant to jump in right at the open. Instead, I chose to "pay for confirmation" and shorted it at 99.70 about 10 minutes after open. I set my stop at .25ATR, or about 100.50. The trade basically went my way the whole time. My target was to close the gap, about 2.70, but once I had hit a 1R profit, I trailed a stop and got stopped at 98.70 for a 1.4R profit in about an hour.

I didn't do this trade perfectly. For example, I just now realized that I had not checked the direction of the general market before I placed the trade. I should have checked to see if the S&P futures were against me. It would have been more risky to short into a rising market, but I got lucky. I won't depend on luck next time.

I also realized this morning that I won't be day-trading $100 stocks with such a small risk per share. Once I get kicked into gear, I expect to risk between $500-$1500 a trade., but to have done that on this trade this morning would have required purchasing something north of $60,000 worth of shares. That'll chew up the trading power in a hurry. I guess I am going to have to add some parameters for myself, something like:

• If the risk-per-share is less than $1.00, then the cost-per-share should be less than [some number I haven't determined yet].
• If the cost-per-share is more than [another number I haven't determined] , then the expected profit-per-share must be greater than [yet another number I haven't determined].

I don't anticipate tacking positions greater than $10k at a time, so that all by itself should help me with my selection process.

PTR surprised me. It had gapped up two days in a row, and still did not close the gap. I got stopped out and learned a valuable (and fortunately not too expensive) lesson. Here's the setup:


I shorted PTR and set my stop-loss at about 1/4 of an ATR above my entry, (about 25 cents). The trade went a little ways in my favor, then turned around and went against me. I watched it HIT my stop-loss point, but no trade was triggered. "WTF?", I think. Then I check my stop-loss. It was a DOLLAR higher than I had intended. The market was moving fast, and I was doing my best deer-in-the-headlights imitation. The end of the story is that I got stopped at the higher point and had a 5R loss rather than my planned 1R. That's the bad news. The good news is that I took DR Barton's suggestion and have been playing very small positions till I get the hang of it, so I only lost about $70, but...

...if I had been position sizing as I intended to, that would have been a $5000 loss. Yikes!

Moral of the story is to make sure I understand my platform defaults. Traders Workspace, which I use, defaults an offsetting trade to a dollar difference. I simply failed to check the actual price I entered. Hopefully I won't make that mistake again.

I had hoped to trade CROX this morning as it had gapped overnight. I was planning to short it at the open, but it took off in the opposite direction. In fact, it was so fast it awed me. I know I'm new to this game, and perhaps what I saw this morning was just SOP, but I could not believe how fast this price swung. It opened on a gap of about a dollar, immediately rocketed up another buck, came back down about a buck and a half, and went back up above the open, all in the first five minutes. I assume some day I will be confident enough in my decision making and execution skills that I can make money on something like that, but this morning it looked like a rampaging flood that I was not interested in trying to wade through.

Shorted ACH on a gap this morning and got stopped out at 1R. It wasn't a great trade, but it was the best I saw this morning.

Question: Did any of you guys ever get DR's "basket of stocks" he promised us?

How did the PTR trade go? I didn't look like an easy trade, but hope you made money.

As for charting I am still using QuoteTracker. It is free with some ads and a limitation or two, but you can give it a try. It's like 40/year, so it is a low price while you are starting. I don't think its the greatest thing ever, but it had a good chunk of features. It will work with IB data (which I think stinks).

Here is a shot showing some of its features on a gap and trap I saw today. I did not trade this stock. I am really trying to look for them, but it is not like shooting fish in barrel like I hoped it would be.

As for scanning, I think trade-ideas.com might work for what you want, but I am not sure as I haven't used it. IB has a build in scanner, but it does not allow custom scans as far as I know. Some of the heavy weight platforms (eSignal, Tradestation, RealTick) may have quality charting and scanning combined, but I am not too familiar with them. Let me know if you program some of the scans from class. I will probably get to that at some point, but I am still just trying to get gap and trap/gap and go's down.

-frank m

I'm shorting PTR this morning. It gapped up Friday and then gapped up again today. It didn't close Friday's gap, but by my calculation, it is overextended. I got in at 182.30 and - so far - have watched the price action pivot around that point. I may have been a little too patient getting in, but I'm still learning how to do this.

ATR is $4.00, which is nice. I should be able to pick up a couple of bucks on this one today.

Platform Struggles

I use IB for my broker and platform. The software is powerful, but in ways I don't need and - worse - lacking in the things I really want.

All I'm asking for is:

Charting: I want to see intraday AND daily charts on the same instrument at the same time. I want to be able to zoom in and out on both with NO DELAY. I want to apply studies, specifically price channels, as well as stuff like ATRs. IOW, I want the kind of tools I saw at the class last week.

Scanning: I want to be able to design my own scans without having to reinvent the wheel. IOW, I don't want to have to manually perform an ATR or an StdDev calculation, I want my platform to provide those nuggets. I also want to be able to scan intraday, not just EOD. Is that asking too much?

Execution: I won't complain about IB in this arena. It seems plenty good in this arena, but it is lacking in charting & execution.

So what do you guys use for Charting, Scanning & Execution?

Jack

Oh yeah... one more thing before I go

I have been blogging for the last 3 years since I've been trying this thing called daytrading. If you want to share my pain you may read all you want. You may find some things you can learn from. My sign-off is Trader X but I'm not the Trader X blog. He is much better than me. Blogspot name is Optionpro67. The link is below if you want to learn from me.

Thomas Quick
Trader X!


http://optionpro67.blogspot.com/

No significant news!

That's funny because I had the same thoughts about the absence of news. I was watching the open as long as I could before I had to catch my flight home. It was sure fun to watch. I will spend the next couple of weeks trying to incorporate things I learned from the seminar. It will take a while to unlearn all the stuff that doesn't work and learn the stuff that does. We sure have our work cut out for us but I know that we all can do.

Thomas Quick

This is the first post on the blog. If you got an invitation to this blog, you are the only one allowed to read it. I limited blog viewing to the folks who actually got invited, and I invited only those 28 traders who were in our class this week. I hope this will be a good way to stay in touch with one another, to rub brain cells with one another, to create good ideas and perhaps help solve problems.
--------------------
Yesterday the Fed did their 50/50 cut. I was hoping for a good Gap & Trap today, but the criterion that there be "an absence of significant news" pretty well shot that one out of the water, right?

Anyone play any interesting shorts today?