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Day Trading Stocks with Discretion


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Day Trading Stocks with Discretion

  #291 (permalink)
 
bijeremiad's Avatar
 bijeremiad 
San Francisco, CA
 
Experience: Beginner
Platform: IB
Trading: Stocks
Posts: 412 since Jul 2011
Thanks Given: 286
Thanks Received: 346

Losing streaks. Another thing I struggled with was controlling my losing streaks. S-I-X-T-E-E-N consecutive losses. Highest on the win side was 4. This compelled me to see what the odds of seeing a 16-loss streak in 45 trades was (assuming 50/50). It lead me to something I never knew about: hexadeccanacci series. Sparing you the details, the odds are 1 in 4,900. So probably safe to assume I was titling the odds against me.



One thing I was curious about the losing streak was if it was a result of breaking any rules, such as no more than 5 trades per day or no more than $80 of loss per day (two full stops). On 6 or 15% of my trading days I did exceed my max number of trades (highlighted in yellow), but only 1 of those was a losing day (1 kind of breakeven day). I did exceed my max daily loss limit, but this was driven by slippage rather than me not honoring stops.


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  #292 (permalink)
 
bijeremiad's Avatar
 bijeremiad 
San Francisco, CA
 
Experience: Beginner
Platform: IB
Trading: Stocks
Posts: 412 since Jul 2011
Thanks Given: 286
Thanks Received: 346

Trade set ups. I collected more data this time around. Among that data was set up information. Here are the long/shorts for trades that were pullbacks, complex pullbacks, failed breakouts, tests, breakouts, first pullback after breakout, pressers, flips (closing and opening a position at the same time) , and “gut” trades. Pressers were trades that I tried to add to a trade that appeared to be working out. Gut trades are just as they sound – no real set up, just “looks” like it will work.
  • Pullbacks worked, both long and short. The win rates are better, the W/L ratio is better.
  • Complex pullbacks I struggled with, and oddly didn’t see on the short side. Not a lot of numbers here, so tough to draw too many conclusions.
  • Failed breakouts were tough too, but also sparse.
  • Tests I got killed on the long side, probably trying to fish the bottom. On the short side I fared a little better, but probably flat given sparse data.
  • Breakouts were pretty flat, nothing exciting.
  • First pullback after breakout were terrible on the long side and pretty good on the short. Sparse data here too.
  • Pressers were disappointing. I would have hoped for better results when a trade appeared to be going my way.
  • FLIPS were not surprising. They seem like the only logical thing to do at the time, but rarely feel right in retrospect.
  • GUT trades always “feel” right. Not much edge in the numbers.


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  #293 (permalink)
 
bijeremiad's Avatar
 bijeremiad 
San Francisco, CA
 
Experience: Beginner
Platform: IB
Trading: Stocks
Posts: 412 since Jul 2011
Thanks Given: 286
Thanks Received: 346


Crossed 10,000 views today on the journal. Thanks for looking. 91% of the journals don't make it this far - over half of those are inactive (as was I for a while). How do you tell the difference between determined and stubborn?

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  #294 (permalink)
 
bijeremiad's Avatar
 bijeremiad 
San Francisco, CA
 
Experience: Beginner
Platform: IB
Trading: Stocks
Posts: 412 since Jul 2011
Thanks Given: 286
Thanks Received: 346

Type of mistake. Another piece of data that I kept track of was mistakes made during trades. I classified those mistakes into 5 buckets
1. Directional (35%), thought the market was going up/down but instead it went down/up.
2. Entry error (11%), something was off on the entry: I got in too late which pulled my stop higher, or I chased the entry too much, or I hesitated too much, but if my entry had been better, the trade would have eventually gone my way or presented a better opportunity.
3. Stop Error (8%), stop too tight, or not wide enough to incorporate the latest swing low (can be tough to distinguish #2 from #3), or moved the stop too soon.
4. Execution error (28%), didn’t let a winner run, or didn’t break even when the market gave me a chance. Somewhat of a catch-all category where something could have gone better.
5. Trade error (9%) bought when I meant to sell and vice versa. Or bought too many shares. Or bought the wrong instrument. Or put in a limit order when I needed a stop loss.

That leaves 9% of my trades that I was totally happy with given the circumstances.

Here are the P&L impact of each of those groups. Over time I hope to see the directional errors decline.



Always frustrating to see the impact of those trading errors - $26 an error. They seem so avoidable.

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  #295 (permalink)
 
bijeremiad's Avatar
 bijeremiad 
San Francisco, CA
 
Experience: Beginner
Platform: IB
Trading: Stocks
Posts: 412 since Jul 2011
Thanks Given: 286
Thanks Received: 346

I also kept track of my assessment of the market when I placed my trade, whether it was trending or in a trading range (and whether my trade was in the direction of the trend or counter). Not too many surprises: with trend was my “best“ collection of trades, really got chopped up in the trading range, and counter trend has “room for improvement”.


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  #296 (permalink)
 
bijeremiad's Avatar
 bijeremiad 
San Francisco, CA
 
Experience: Beginner
Platform: IB
Trading: Stocks
Posts: 412 since Jul 2011
Thanks Given: 286
Thanks Received: 346

Should I set profit targets? One question I was interested in was to see how I would have fared with a price target – rather than holding onto my winners for an undetermined amount of time and profit. The Chart below shows what my P&L would have been had I exited all my winners at a predetermined profit target – including the ones where price went my way, but I let retrace a bit too much.

Fitting a curve line to those scenarios, I get an equation. The first derivative (solved for zero or just eyeball it) shows the local maximum of the curve to be about $120. But practically a $105 and $145 yield better “results”.



In both cases, my winning percentage increases a percentage point or four and my average win declines $3 to $9, contributing to a higher overall result. If I were to split my targets into 1 at $100 and the other discretionary, that might be interesting.

When I lower my hypothetical price target to 1R or $40, I get a win rate of 49%, but I lose my big winners.

One other thing that this analysis does is group all trade entries together. It might make more sense to have larger targets for with-trend trades and smaller targets for counter-trend and trading-range trades.

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  #297 (permalink)
 
bijeremiad's Avatar
 bijeremiad 
San Francisco, CA
 
Experience: Beginner
Platform: IB
Trading: Stocks
Posts: 412 since Jul 2011
Thanks Given: 286
Thanks Received: 346

I am going to put up this last chart without much commentary. I put it together, so it might as well be here.


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  #298 (permalink)
 
bijeremiad's Avatar
 bijeremiad 
San Francisco, CA
 
Experience: Beginner
Platform: IB
Trading: Stocks
Posts: 412 since Jul 2011
Thanks Given: 286
Thanks Received: 346

I haven't been idle from a trading perspective over the last month. I have been "post-it" trading - keeping a screen in the corner of my eye and jotting down entries, targets, fills, and exits on a post-it. I will put together an analysis of those 83 trades over 19 trading days. Maybe tonight. Hopefully this week.

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