End of Quarter Wrap up

As this quarter wraps up, I thought it would be good to re-cap the events and any lessons learned. First some stats.

Not a very pretty quarter account value wise: 1 month up in value, 2 months down.  6 weeks positive, 4 weeks negative and one half week at no gain or loss (this last week).  Largest single day gain of $1495.07. Largest loss: $2431.29, with an average of -$85.33/day. Overall the account is down 20%; at one point the account was 20% up.

Lessons?

Hope has no place in successful day trading. Probability wise, at least for the stocks that met the screener criteria I was using, there was a 75% chance that the stocks would see a 1% increase after the day of purchase. But when they didn't, I think pass successes - especially the great first two weeks in January - lead to some hopeful optimism about what would happen. After several bad days in January and a couple in February, the account had lost all of the profit and then some.

Greed has no place in successful day trading. I did fairly well for the next month and a half, but holding out for higher returns, based only on some misplaced sense of hope, led to one heavy loss.

Commit to a position only after I have quantified the acceptable amount of potential loss. I entered into ABIO early - and in too large of a quantity, without properly setting a stop. After I realized it was early - or perhaps wrong, there was a significant decrease in the value of the account.

Set definite criteria - how to know when/if I am right and know when I am wrong. There was a definite improvement in overall account performance when I knew when to get out of a bad position. For the implemented strategy, this was the 'one day of ownership' rule.

Where to from here?

Over the last few weeks, I delayed entering a position until I found what I thought would be a good return on the first day of ownership. This met with some decent first day sells and returns (and a couple of potential returns). The IRA account saw a 10% increase over the last month. I have decided that I feel more comfortable with the shorter time frames. Primarily in terms of decision time and judgment criteria.

I have spent the first part of this week organizing the logistics for some practical momentum trading implementation. I think I have everything set up after today, but we will see tomorrow. I will be paper trading until I am convinced that I have everything worked out.

Rawr.

End of Day Journal (3-29-2010)

The day was a disaster as it concerns paper trading results. A lot of technical/logistical hurdles. I am trying to juggle three platforms: SD for screens, NT for entry/exit, and IB for trading. Go figure. By the end of the day things were coming together quite nicely, so tomorrow (3-30-2010) will be the real test.

Another part of this: paper trading is hard for me to take seriously, and I tend to adopt this 'Go for it' mentality. This weird mixture of 'I don't really know if this is the right thing to do' coupled with 'Do it anyways and see what happens'. I need to reign this in - i.e., be aware of it and consciously make the decision not to do it.

(This was posted late on 3-30-2010. Got carried away with the day I did).

End of Day Journal (3-26-2010)

Comments:

Well...

From the perspective of the account balance, it was a rotten day. But from the perspective of my trading abilities, it was a good day.

I have two accounts, and IRA and the 'I am supposed to generate enough income to live off of' account. I can only trade the IRA account with limited frequency due to the cash cycle and lack of margin. ABIO popped up on my new screener and I debated which account to buy in with. I choose the income account. This was meant to be a day trade. I got in too early and bailed 11 minutes later (an eternity) after a small bump and then reverse. after the stall I knew it was going up, and given the day trading restrictions on the income account, I bought in with the IRA account - scaled up after the first full bar and rode it out perfectly. Heh. If only it had been the income account, I would have made back all of the money I have made and loss since January 1st. Oh well.

So - my strategy/plan is changing. Overnight, lengthy stays are tough to do, mentally and emotionally. Also, my faithful screener has been turning up nada for the last several weeks.

Momentum.

Blue Collar Trader has turned me onto  FnG's blog and the stuff just makes sense. (Interestingly enough, ABIO was one of his picks on Friday.) The market approach just makes sense - and he appears to be very successful in his trades.

Out of curiosity, I pulled up all of his picks for Friday and backtested them with my intra-day trend strategy. Here are the results:

And again for March 4th:

I thought I would test a bear day (1-22-2010):

Heh. Two winners and one very bad day. Needs a little work, but one thing to keep in mind is that FnG screens and does not trade the entire day on a particular stock, but just as they appear. And I need to play with my stop loss value.

Acouple of additional insights, percent profitable does not mean that much. And I ran the same stock pick list on days other than the 'trade' day (i.e., trading the 3-26 list on 3-1). It seems it is more important to trade on the right day with the right stocks rather than applying the same strategy to a group of stocks every day. I think I knew this intuitively, but did not state the idea in my head. This changes my whole approach to backtesting.

So here is the plan -  I am going to wait until I can trade 4 times in a day. Until then I am going to paper trade on my own screener and - FnG's picks.

Exciting times.

End of Day Journal (3-25-2010)

Comments:

Today is an important day.

It was a good day trading wise, at least until this afternoon. I stepped away from the desk for an afternoon meeting without selling, and proceeded to lose all the gains in CLDX.

The funny thing, I knew this - I mean I knew that I should have sold, it was just obvious. But I hung on, hoping for the big gain. You don't hope in the stock market. You go with the flow.

Part of the hanging on was the anticipation of a big gain. Yesterday, I knew I would make out well in CLDX. It bumped up in the morning, and proceeded to fizzle all day. That is when I should have sold. And I should not have walked away from the desk with open positions.

With the absence of screener results from the tested strategy, I have been using the new screener 10% gain screener.

Strangely enough, I feel like I am maturing as a trader, despite what happened today. I am content to wait for a good entry, and nearly all my picks have been good. Good entries are probably 90% of a successful trade. I have been able to time exits, but hope/greed has kept me in too late. Today (after the fact) I recognized it for what it was and at the same time, it wasn't associated with a feeling of out of control recklessness. It is what it is? Famous last words?

Going to slow down and work the intra-day for awhile, which limits me to 4 trades/5 days until/if I get the account built back up.

End of Day Journal (3-24-2010)

Comments:

Bought into CLDX and ISIS as day trades, but did not sell out as either given the account limitations. The strategy screener that I had been using has been empty for quite awhile, perhaps due to the strong bull trend?

So I started a new screener on what is generally the same basic approach, but handled a little differently.

This is out of strategy and out of my commitment, but I feel good about it. Last words of a fool?

End of Day Journal (3-22-2010) (More like end of last week)

Comments:

Tough weekend - and even tougher day. I bought into SOMX Early Friday, missed the $1000 gain, bought back in lowering average and subsequently missed the $700 gain this Monday morning. I was at a professional workshop all day and came home to find a $1400 loss on the stock. Needless to say I was in a rotten mood and beating myself up.

Fear and greed.

How to strike a balance between fear versus caution/bad entries and greed and confidence/good entries?

End of Day Journal (3-17-2010)

Comments:

On vacation in Disney Land this week, but managing to trade - remotely... The internet connection at the hotel is incredibly slow slow. It is actually faster to log into the desktop at home (via Log Me In) and monitor/trade thru it. Go figure.

Anyhoo - made out great today, wasn't able to enter a new position due to the day at the park, but at least something to help pay for the trip =).

Too difficult to modify the spreadsheet, so only posting the day's trades.

End of Day Journal (3-12-2010)

Comments:

Sold SUSQ early in the day based on a recent introduction to a new indicator: the Heiken-Ashi candlesticks. 30-day average volumes were too low on the screener to buy back in.

Anyhoo - a good week. One loss and one outlier, and stuck with the strategy. More of what I expected - actually better than I expected when I set the targets back in January.

The 'what-if' of course is VECO: up all week with something like a + $0.80 high for today. I think more experience may give more of a gut instinct for sure winners . But as Don Miller says - this is a game of inches.

End of Day Journal (3-11-2010)

Comments:

PRGO worked out nicely, it is unfortunate that I had to sell part of the position yesterday. 

SUSQ popped up along with a few others. I was watching it early, and was ready for the bounce, but I had to leave for part of the day and missed coming off of the low.

Stilll working on a new intraday strategy on Ninja Trader.

End of Day Journal (3-10-2010)

Comments:

Sold AIPC a little earlier then intended, but came away positive. Bought into PRGO, but there is still some confusion regarding IB's margin calculations, so I ended up making two sales to avoid the automatic liquidation. I think I have it figured out now.

Too bad I wasn't able to buy back into VECO yesterday. Beautiful return today.

I have been continuing to backtest intra-day strategies using Ninjatrader. Hard to get past that ~55% success ratio.

End of Day Journal (3-9-2010)

Comments:

Finally - some action. 4 potentials popped up on the screener this morning. VECO was looking good so I bought in quite a bit earlier than I normally do. I set the sell high with the intention of selling tomorrow within strategy and managed to pretty much hit the high for the day! $1000 gross gain, and only a $2.87 commission from IB!!. Now to keep from getting carried away with this - this was an outlier.

I bought in on AIPC end of day, trying to get 1000 shares. Rather than chase the price, I canceled the outstanding. I also tried to get back in on VECO but hesitated when the margin calculations did not make sense, and missed it.

The past week has been an exercise in discipline, and I am encouraged. The fact that I avoided trading when out of my strategy - when the conditions were not favorable - shows me that I may be maturing as a trader. Head games.

I spent a lot of time over the weekend on NinjaTrader. The more I use it, the more I like it. At this point I have not been able to get the multi-time series strategy to work out, but I think NT 7 has expanded on this quite a bit. For now I am using it to test out various intra-day strategies. The backtesting, backtesting reports and - the optimization - beat Strategy Desk's package hands down. But... I can perform the multi-time series strategy on SD that I can't on NT.  

Reminiscences of a Stock Operator

Slow week for me and my strategy, only traded Monday. End of today I had two pop up on the screener, but I decided against both - one was extremely low volumes and the second was on high volumes but a renewed offering. Not sure about the new offering and how that affects the future price, so I decided to pass.

I have a back porch remodel project going on so I have not had a lot of time to work on NT or TWS. I have however received LeFevre's Reminiscences of a Stock Operator (annotated edition) from Amazon which has made for some excellent end of day reading.

The story is fascinating. Written in the first person, the book chronicles the trading exploits of one Larry Livingston (primarily centered on the career of real-life Jesse Livermore) just after the turn of the 20th Century. The writing is full of period references and slang (which the annotated version helps to interpret), but the story is one that I am already personally familiar with, albeit on a much smaller scale. What strikes me is that Livingston thru the course of his trading career comes to some of the same conclusions that I have - and quite remarkably, in the same order. I am only a third of the way thru the book, but thus far some of the things that coincide:

'Of course there is always a reasons for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn't go into explanations. I didn't ask the tape why when I was fourteen, and I don't ask it today, at forty. The reason for what a certain stock does today may not be known for two or three days, or weeks, or months.'

My notes: The mechanism behind changes in price are always the same - more people wanting to buy, or more people wanting to sell. The reasons behind price fluctuations don't necessarily need to be understood, the fluctuations themselves just need to be noticed (or fluctuation pattern).

'The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.'


'No diagnosis, no prognosis. No prognosis, no profit.'

My notes: Don't trade for the sake of trading or just to be in the market. know what you are trading, and trade what you know.

'I have heard of people who amuse themselves conducting imaginary operations in the stock market to prove with imaginary dollars how right they are. Sometimes these ghost gamblers make millions. It is very easy to be a plunger that way.'


My notes: Paper trading definitely has its merits, but no substitute for the real deal.

'A man must believe in himself and his judgment if he expects to make a living at this game. That is why I don't believe in tips. If I buy stocks on Smith's tip I must sell those same stocks on Smith's tip. I am depending on him. Suppose Smith is away on a holiday when the selling time comes around? No, sir, nobody can make big money on what someone else tells him to do. I know from experience that nobody can give me a tip or a series of tips that will make more money for me than my own judgement.'


My notes: Trust your own judgment and strategy rather than rely on or pay for someone else's.

Pretty cool stuff - and what a confirmation of my journey. On that note, I have run across several things that I have not made my own yet - 'own' - as in lost money and decided that I needed to change something. Maybe acknowledging the ideas is the beginning of ownership:

'There was as much to learn from partial victory as from defeat.'
'They say you never grow poor taking profits. No, you don't. But neither do you grow rich taking a four-point profit in a bull market... Where I should have made twenty thousand dollars I made two thousand. That was what my conservatism did for me'.
'I think it was a long step forward in my trading education when I realized at last that wen old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements - that is not in reading the tape, but in sizing up the entire market and its trend.'


'It never was my thinking that made the big money for me. It was always my sitting.'

'It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.'


Livingston writes here of missing the big moves. He considered small capture of the big run a partial victory and evidently kept track of the trade after the exit. He reckons his switch to the general market trends as a primary  lesson. I am not there yet (waiting to see if this strat works), but I want to keep this in mind.

I expect the last 2/3 of the book to be just as informative. Let's see.

Interim day - no trades

No trades today. Only one stock on the screener, one with 3 times the 30-day average volume, but the SORL action has me gun shy.

At this point in my trading career, I consider this to be a big success with respect to the psychological aspects of the trading game: not buying unless the odds for success are high. Slow and steady. Thanks to Don Miller for expounding on the bell curve of the trading business.

End of Day Journal (3-1-2010)

Comments:

Tidy profit on VECO. Missed most of the action, but still above my target, so an excellent day. One stock on the screen today, but with the low volume I decided to stay away. Interestingly enough - all of yesterday's screen reached sell points today - even the ones with low volume. Maybe as I become more proficient with the strategy (that is, overcoming the mental struggle), then I will start considering the low volume picks again.

A new month. And a great start.