End of Day Journal (2-26-2010)

Comments:

Not much to say about today, pretty much went perfectly. The little blog pep talk seemed to do the trick on SORL. I sold at a hefty loss and now intend to remain back on strategy. The realized p&l listed in IB's trade window is not correct given that it reflects the price at time of transfer. True realized loss is negative ~ $888 + TD's commission.

The posted commissions reflect IB's non-bundled pricing schedule - closed CENX for a sweet $0.88 commission! I could have made quite a bit more on CENX, and ROSE, but JASO worked out about as well as it could. The sell points were based on the 75% probability percentage gain point. I am going to try out some additional metrics to try and link the price and percentage gain, in terms of best performance, but until something works out I will be using the probable percentage gain for expected gains and hope for the occasional gap open outlier.   

Interim - finally ready to go with IB

No posts over the last few days as I was switching broker accounts. I was able to sell on 2/24, but I did not. I entered several new positions quasi-end of day yesterday: CENX, JASO, and ROSE.

Rude awakening: IB liquidates positions! I received a warning yesterday that the account did not meet the margin requirements after my last purchase. I have been outside of margin requirements in TD, but they never actually liquidated a position. Surprise, surprise... IB doesn't waste any time at all. They sold half of my CENX holdings. Fortunately it was at a tidy profit, but I was planning on making more today =). Already I like the reduced commissions!

I should have been using the practice/simulated platform while I was waiting for the account to be funded, but it never occurred to me. The format/layout is much different than StrategyDesk and there will be a definite learning curve. Using the quick start guide I was able to figure out how to make some trades, but it feels very cumbersome at the moment. It didn't help that I had not saved my subscription status on IB, meaning delayed data, so I was trying to monitor up to date activity on SD.

SORL has been a burden... still trying to overcome the bid/ask gap and sell the darn thing. pfft. Such a fail.

Incredibly - the loss is substantial at this point - and still - I find myself optimistic about what the next day's activity will bring... go figure. How many times have I been thru this losing 'hang on just a little longer' game? After my last post, I thought I had myself talked into a sale on SOLR, but by the time I was able to sell, I decided to wait it out a little longer. Part of me was glad that the account was moving and I didn't have sell access for a couple of days, I think I was subconsciously expecting the position to come out as a winner by the time I was able to sell. Time to admit I am way out of strategy, accept the losses, and get back on track. I have to say again - why is this so hard to do?

I am rambling - but that is part of the reason for this blog - working out the relationship between my personality and successful trading. 90% head game, 10% technical analysis. Get into and over the head game.

Re. account update: I will have to figure out how to post the day's activity using Trade Station. For now the lonely Excel chart will have to suffice.

End of Day Journal (2-22-2010)

No trades today, account is in the process of being moved to IB. Still holding SORL, for better or worse. Today it was for the good. Nothing showed up on the screener today, and still in the learning curve portion of NT.

End of Day Journal (2-19-2010)

Comments:

The day started off bad again for SORL - a > $0.40 drop, and with the mixed market action and low volumes, I couldn't bring myself to sell. Why is this so hard to do? 

ICXT was also due for a sale. I ended up waiting on this one as well, and picked up a tidy profit late morning.

So - off of the disciplined and mechanical strategy approach on these two trades, and I feel like I am just winging it. One ended up being a loss (though not realized) and the other a winner. In this type of a market not a big deal... but in conditions similar to the last two weeks of January, I am sure I would have regretted delaying the sales. I tell myelf that I am convinced of my strategy, yet my optimism is still clouding the execution.

Perhaps another factor is the overall drop in account value that has occurred over the last 4 weeks. I think I would have been quicker to sell at a $400 loss with the higher account value.

In some ways, I feel like I am working thru the same thought process that I was last January - and feeling the same feelings. But there are differences - for one, I have a definite stop loss (one day of ownership). I do not think the motivation has so much to do with 'I am sure I am right and I can't be wrong' as much as it has to do with a hopeful optimism. I held onto the stock after the steep decline with some confidence that it would go back up, but after bouncing off of the day's open, I hoped that it would continue to go up and realize a gain. What drives that? Not my analysis. Perhaps my bias?

I do not want to kill my optimism, I think it serves life (and opportunity if you subscribe to Dr. Brett's approach) well. But I want to be a successful trader, and I am fairly certain that optimism flying in the face of the analysis is not a good thing. Now to get over it.

This is one of the benefits of this blog. Tracking these kinds of thought processes and working them out. I wonder how useful this tool will end up being.

End of Day Journal (2-18-2010)

Comments:

Urgh... a lot of frustration today.

I am off of the strategy already. I blame it on the low volumes on both of these positions - I am not use to seeing such a wide spread in the bid/ask and the < 1000 shares/10 minute bar trade action.  I just couldn't bring myself to sell on SORL. The same for ICXT - but I have until tomorrow.

A lot of things go into a decision to sell. The big obstacle for me today was that SORL was going down, there was a 4 to 5 tick spread, 100 shares sitting on the bid side - and a 7 or 8 tick gap on the first ask differential. I need to sell 902 shares. My stomach can handle a situation like this if the stock is going up - but I don't like sitting on the ask on a downward move - rea-djustments on a pending at $10 commissions doesn't help.

Who is buying/selling 100 share lots? On such low volume stocks it seems that there is a lot of room for market manipulation... conspiracy!! Heh. Crazy mental games.

I appreciated Dr. Steenberger's thoughts on stop-losses the other day. Everyone has a stop loss - explicit and based on market action, or undefined and based on emotional response. Explicit is good. My current strategy includes a stop-loss based on time (per the statistical analysis). Yay! But how could I have expected the situation I was in yesterday - and what to do in those situations?  My analysis did not look at liquidity (well, I tried to, in terms of daily and 30-day MA volumes, but everything washed out).

Part of me, the part that is scribbling all of this down - is trying to understand my own thought patterns The fact is, I have no idea what will happen with these stocks. All of the statistical analysis says that for the stocks that pass the screener I have set up, I should sell after Day 1. If I don't then I am moving into the 'unknown'. So I should sell. Why didn't I?

Because I was looking at a certain loss on the account, and there was a good chance that liquidating the position in this kind of a market would lead to an increased loss, especially in today's opening minutes - where SORL saw a >$0.30 drop in price. So I held on, and the position closed $0.01 higher for day.

It is one thing to decide to sell, and another to actually conduct the transaction with that kind of volatility.

Such good intentions with respect to sticking to the strategy, and I didn't today. If January and the first part of February are any indication, chances are that I will regret not having sold.

End of day journal (2-17-2010)

 

 

 

Comments:

Another slow day. I missed the high on SORL - not that I was trying to hit it, but My sell was $0.03 over and it is kind of disappointing to see it then close lower for the day. I think I may check percentage rather than absolute value to see how it fits against a distribution.

ICXT appeared on the screener early in the day, but as per the plan, I did not buy until end of day. I had a couple of additional options, but 2 were on extremely low volumes (2-3k), and one was on a daily spike in volume at ~180k, with the days prior at ~15k. I just didn't feel like taking the chance.

Interstingly enough, both of the purchases I passed on yesterday finished higher, one comfortably hitting the $0.20 sell point. This had me second guessing, and almost determined to buy all screener stocks from now on, but I talked myself out of it. Nothing worse then sitting on and trying to get out of a low liquidity position.

End of day journal (2-16-2010)

 

  

Comments:

Slow day for my strategy today. WSII was due for an immediate sale, but with the strong market open, I thought I would hang on for a bit. Not much came thru the screener today - everything was relatively low volumes, but I thought SORL looked promising.

Spent a large portion of the day setting up an account with IB, it looks like this is going to save me a lot on commissions. For now I plan on keeping the IRA account with TD, which will allow me to access all of the tools that I have been using. I have not been able to convert the strategy over to the NT platform yet, but I am learning a lot.

Sticking with the strategy. I didn't even look at what the rest of the market was doing. If I can pull this off for 3 consecutive months, and show a profit, then I may start some simulated intra-day trading. I think the three months will give me some indication of what I can expect income wise using this strategy. I don't think it will allow for much scaling.

End of day journal (2-12-2010)

 

 

 Comments:

Above target on one position today and a light loss on another. The sell point on KVHI had been higher because I liked the momentum behind the increase, especially against the general market, but I had afternoon meetings and decided to sell just above the strategy target. Of course the stock saw a big jump right after I sold. I am beginning to come to terms with the mental 'what-ifs' which I think is healthy. I repeat the 'steady with the an occasional outlier' mantra to myself several times a day. Fewer spikes and more consistency on the target chart.

Perhaps part of January was finding out what 'steady' is for the amount that I am investing. If I would have been smart about it, I would of collected the historical data and performed all of this analysis prior to beginning this trading experiment. I would probably recommend a couple of months worth of data along with a good backtesting record for someone new to trading. 

I am definitely more of a hands on learning type of guy. For me personally, the level of emotional involvement and over-riding necessity is just not the same while sitting idly on the sidelines or even virtual trading. While I don't like the losses incurred over the last 3 weeks, I am comfortable with them. Discouraging? Yes. But at this point I still consider this part of the educational cost. I am far from making a living at this.  

In other news - still working on the NT implementation. Also checking out Options House in terms of the tools available and commissions. And I am finding more blogs to explore.

End of day journal (2-11-2010)

 

  

Comments:

A good day. Sold NVDA as planned and XTEX slightly lower than planned (1000 shares would have been great on XTEX, but I was too picky on the buy).

But it is crazy what goes on in my head. I made ~$300 on NVDA. That is an incredible return. But I missed the continued rise and as I watched it continue to go up, I started playing these mental games. Thinking about how much I could have made: even missing the high, I could of easily doubled the return.

This is one of my weaknesses. Seeing the missed opportunities and big dollars, and then breaking out of the rules. Sometimes breaking out is the thing to do, no doubt about it. But these opportunities should be seen for what they are - exceptions and rare by definition. I plan on giving this strategy a shot for 3 months and seeing what happens. I imagine that 3 months will not signal the end of the battle against myself, but it will give me a track record and may offer additional perspective. Reading other trader blogs, I am fairly certain that even if I am successful with this venture, the head games will be a constant challenge. I consider recognizing this a huge step forward.

Selling Strategy (2-10-2010)

Last month's losses served to stress the importance of establishing a better basis for profit/loss points. Stretching my profits points worked out very well the first part of the month, but the lack of a good stop loss ended up costing the account a lot of money.

And now, a week and a half into February, and a couple of mistakes later, the account value is down another ~5k.

Two factors - the stop loss and, perhaps an even bigger factor - the psychological: buying outside of the tested strategy, getting carried away with big profits, and the lack of a proper perspective for the trade profit/loss calculation interval - combined for some very poor decisions.

I have been analyzing the data that I have been collecting on the stocks that have passed screener criteria. Unfortunately, almost all of the metrics that I have saved, - or thought of calculating - have pretty much washed out in terms of predictive value. I haven't been able to establish any type of relationship between collected/calculated on the day of purchase to future price - everything resulted in uniform scatter plots with an occasional outlier.

I decided to take the stochastic approach and examine performance of the stocks that passed screener criteria by way of the difference between a day's high and the close of the stock on day of purchase. Day 1 of ownership was the most consistent. The figure below plots the difference between the high of the first day of ownership and the close on day of purchase, with the day of purchase (Day 0) on the x-axis:

Pretty cool huh? Some crazy variance on the DOW's down days, but it is pretty easy to see that the majority of stocks have a high that is higher than the close on the day of purchase.  Here is a histogram of the day 1 data:

Using some statistical analysis, I fit the total Day 1 data to a distribution and calculated values at 50% probability and 75% probability and came up with gain values of approximately $0.20 and $0.04 respectively. Filtering the Day 1 gain for positive only yielded approximately $0.20 and $0.09 respectively. For those who may be interested, the unfiltered data was fit to a Burr (4p) and the filtered data was fit to a Pareto distribution, with respectable goodness of fit tests:

 

I next filtered the Day 1 gain data for negative values only, and checked the corresponding difference between the high gain on Day 2 versus the close on Day 1. The value for a 75% probability was approximately $0.01, indicating that for the most part - it is best to sell the losers on the first day as well.

All of this lends itself to the formation of a new strategy - set a profit point at about $0.20 above Day 0's close, and close all positions at end of Day 1.

Easier said then done. Take Monday and Tuesday of this week for example. Monday was a losing day. I did not sell at end of day, deciding to wait until the morning of Day 2 (Tuesday) (I did however enter two new positions). On Tuesday the market saw a lot of bullish action and I postponed the sale,and ended up reaping a decent return for my trouble - on all but one stock (which I sold today at an even greater loss). The psychological factor - at one point during the day I was up just under $300 on that stock, but still down overall. Why is it so difficult to keep the day's gains in perspective??

I want to be mechanical about my trading - I think that is best probably. But - it seems there has to be room for interpretation - everything was down on Day 1, so itI thought that it was probably was best to wait until Day 2's morning to sell. Futures indicated a strong opening and I held on, which happened to be the correct thing to do. But - what if they wouldn't have - e.g., week three last January?

After the steep loss on January 22, a lot of people were trying to guess at what the market was going to do the next day. I don't think it was at all possible to have any confidence in anyone's opinion on what was going to happen. What if I find myself in that position again? I think if there is any doubt I need to sell. Chances are that I will be wrong sometimes. Cost of doing business.

So that is my stop loss - hold on to the position for a day. If everything is down, wait till the next morning, then try to gauge market sentiment; if the futures market is mixed, sell right at open.

And the last thought - I have been tuning into Don Miller's blog which I have found offers a lot of practical advice. He talks about the idea of outliers and how those will be the big reward days. My implementation of this will be the lowering of the sell point during normal trading hours, but prepped for the possible gap open by bumping up the sell during extended hours. Slow and steady with the occasional home run. That's me.

Lets see what happens.

End of day journal (2-10-2010)

 

 

Comments:

Sold out today a little late on NARA. Chalked it up to the cost of doing business and forgot about it. Other than that a slow day. Bought in on two new positions at end of day, with one only being partially filled, I was being a little too picky.

One confirmation on yesterday's judgment - all of the screens except for 2 lost today. One showed a small gain late in the day, but only one would have sold. 

End of day journal (2-9-2010)

 

 

Comments:

I goofed up yesterday - kept putting the blog entry off and completely forgot about it. So - I can't post the account value screen, but I can post trades. The account saw an increase of about $1200. Finally. And all in all a great day - but the number is definitely put in perspective after the last couple of weeks.

Trying to collect my thoughts from yesterday - I basically stuck with the rules... well almost. I did not sell out of one position that I should have (NARA), I thought the bullish sense of the market justified it. And it came just short of the sell I would/should have set. Everything else worked out nicely - with some lowering of the sell points. I think I will keep things a bit lower until the general market makes up its mind.

I did not buy today, all of the screeners were on low volume, and I did not want to get stuck in that boat again.

End of day journal (2-8-2010)

 

  

Comments:

Wow. 

I have no idea what is going on with the markets, but I can't take much more of this.

The rules say I need to sell tomorrow a.m. I am already wondering if I should. Yes, I need to.

I bought in at end of day on CRNT and EROC which both popped up on the screener. Having two days with decent screens seems like a good sign, but I don't really know. I fully expected the market to bounce late afternoon, but it did the complete opposite. What a cruel world. I can only take about what... 20 more days of this before the account is wiped out??

In other news - still working on a migration to NT. As it turns out, the strategy I was using in SD takes a fairly complex program in NT; at least NT 6.5. It sounds like NT 7 is going to have better multi-timeframe controls. Overall a good exercise I think.

End of day journal (2-5-2010)

 

 

Comments:

Got my butt kicked today... big time this week... I can't take many more days like today =/

Today the pyschological element really kicked in and revealed a weakness with my strategy/personality. Yesterday was down significantly. I thought things were going to come back around today, but after the DOW went down came back up, and then went down again I bailed. Only to see everything rebound again.

Well - I think I need a stop loss. And I need to change the way I see rebounds - they are going to happen, and I am going to miss them, that is simply all there is to it - call it the cost of doing business.

Anyhoo - bought back in late in the day. Going to stick with the program from here on out.

The only things that have not washed out in the analysis that I have performed have been the first day winners. So the plan is to keep the stocks at profit point for a day, and sell the remaining the following morning (2nd day of ownership). I will go into more detail as I have time.

I am finding that to be a common theme among novice traders and their blogs: 'I am going to keep all the rules from here on out.' Why do we all have to learn this the hard way? The things that go on in a guys head. I think it would be well worth my while to identify the patterns. Maybe later today.

In other news, I worked on Ninjatrader all this weekend. The software looks promising: much more comprehensive backtesting approaches and reports, an optimization routine, and a lot of customization; but I have not been able to translate my strategies yet.

Time for a winning week...

End of day journal (2-4-2010)

 

  

Comments:

I pretty much got my rear end handed to me today - enough said. Watch - I will stick to my newest rule - sell on tomorrow's account value, and everything will shoot up. Such a tough call. But I think it is best that I do this. After these are all sold, going with - and will post - the latest buy/sell.

Today will only be a good lesson if I can take the knowledge into tomorrow. Let's see how I do.

End of day journal (2-3-2010)

 

Comments:

Started the day off well, but ended it rather poorly. I waited too long to sell NANO - too greedy, seems to be a constant theme. Didn't wait long enough on NGLS - just a bad feeling on the start of the day, but I should have stuck with the original sell. APWR was almost perfect.
GSIT popped on and off of the screener, and I ended up buying on the high side. I had been holding BIOF earlier, and after yesterday's action had it back on my watch list. Bought at the wrong time, and re-entered twice - after the close of the day I am thinking it was a mistake. IVAN may have seen too much of an increase yesterday to go up tomorrow, but I thought everything would finish the day strong. So far, wrong on all accounts.

Got quite a bit of analysis in today and I think I will modify my strategy as soon as I can run some backtests. Also looking at Ninja Trader software as a replacement for Strategy Desk. Long day, with poor performance. I can't take too many more of these.

End of day journal (2-2-2010)

 

  

Comments:

Interesting day. I was concerned about NANO and sold it early. I thought NGLS was going to keep rising which ended up being the drag on the day. I bought in on BEXP and pretty much hit it perfectly. I sold early on it as well, and bought back in later, only to lose everything I had made on the first trade. APWR didn't work out well, so I doubled up later in the day. I also bought back in on NANO before the day's close.

The screener didn't list many options, so most of the buys were from earlier this week.

End of daty journal (2-1-2010)

 

Comments:
Another month. I didn't have as much time over the weekend to do all the analysis that I wanted to; family, friends, and life all beckoned. And I had to prep for some substitute teaching this week.

But the new month - I am meeting February with a lot of trepidation and intimidation. The account value is very close to the 25k margin requirement. After being up over 20% I completely blew it the last two weeks of the month. Was the success just a fluke?

Hopefully today is a precursor for the rest of the month. As it turns out I sold BEXP a little early, but hit LYV perfectly for the day. I was tempted to enter several other positions during the course of the day, but quite frankly, I am a little gun shy and just not at all sure what to expect from this market. I stayed away until the end of the day. APWR still managed to meet the sell criteria before the end of day making it an intraday roundtrip.

The analysis that I was able to conduct was pretty much inconclusive - in fact, the profit and loss sell stops both fell out as well. The market is a wild beast. But I did come away with another idea that I think warrants additional analysis. The fact is, no one can predict the market and it would seem that a definite stop loss would be in order. I am not sure how that is going to turn out yet. Another thing to consider is the idea of measuring the profit not in terms of the purchase price of the stock, but in terms of the daily change in account value; e.g. say I mis-read the market again and hold my positions rather than selling. My hunch is that it would be better to set a profitable sell point from the start of day value.

Hopefully I can post  my thoughts on January and additional analysis soon.