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Grinding it out in the Stock Market


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Grinding it out in the Stock Market

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  #1 (permalink)
 UnderPar 
Burlington, VT
 
Experience: Intermediate
Platform: IB
Trading: Stocks
 
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Posts: 17 since Jan 2012
Thanks: 7 given, 17 received

Hey Everyone,

It has been my intention to have a public journal for awhile now and decided March Madness would be a good time to start.

I trade US equities. Any positions are closed out by the end of the day. Each trading day I will post my P/L. I'm going to post dollar amounts opposed to percentages as real money made or lost, unequivocally, connects to the psychological component. Being a discretionary trader, without a rigid system, I intend to focus a great deal of this journal on the psychological aspect of trading. I will also post charts of entries and exits for some of my trades. I plan to focus on any particularly good or bad trades.

My hope for this journal is that it helps me develop into a better trader and that others can learn from my journey.

Starting account value: $26,731

If at any point my account value falls below $25,000 I will stop trading. If this occurs I will take a step back and reevaluate. Live to trade another day.

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  #3 (permalink)
 UnderPar 
Burlington, VT
 
Experience: Intermediate
Platform: IB
Trading: Stocks
 
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Posts: 17 since Jan 2012
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P/L: +$94

Today wasn't a great day. Gave a lot back on some very bad trades. The most frustrating part is that as I made these trades I knew I was making bad decisions, but that didn't stop me. I would much rather lose money making good trades that go against me then to lose money making trades I know from the start I shouldn't be taking.

I attached screen-shots of three stocks I traded today with commentary.

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  #4 (permalink)
 the edge 
Olympia, WA
 
Experience: Advanced
Platform: Ninja Trader
Broker: Interactive Brokers/IQFeed
Trading: YM, CL, Stocks
 
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You say you were making bad trades even though you knew it. So the question is do you have a WRITTEN TRADING PLAN? You can not expect to be profitable unless you have a trading plan that spells out:

The type of trades (i.e gaps, reversals breakouts, etc)

How much risk on each trade?

How many shares/contract will you buy?

How much loss will you take before you stop out? (you should have this answer before entering any trade!)

What time of day do you plan to trade for the instrument you trade? each type of instrument has a best time to trade ie.e Stocks 9:30 - 11:00 EST.

Are you keeping an excel spread sheet of your trades? You say you gave a lot back, were you trading in the lunch hour? You should only be taking trades from 09:30-11:00 and 2:45 -4:00 EST.

you should also take a screen shot of your good trades and bad trades and file them in a folder on your computer so you can review the trades that were profitable and the trades that weren't .

Why are you trading an expensive stock like AAPL????? this stock can move $4 in an instant. if you have less than $100K in your account stick to stocks that are $10 - $30

The liz Clayborne where did you enter?? I would have entered at bar 2 after the open with a stop just below the low of bar 2 and held until $11 why did you go short on this high monentum Long stock? The odds were to the long side. Also what time frame are you using? You should have a 1min,15min, & Daily chart for intra day trading and trade in the direction of the 15 minute chart, using the daily for S&R points!

Same goes for Microsoft, the breakout was clearly to the upside, why did you go short? Are you using just technical indicators to trade, most indicators are garbage and will give a signal after the fact in real time markets? What time frames are you using to base your decisions on?

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  #5 (permalink)
 UnderPar 
Burlington, VT
 
Experience: Intermediate
Platform: IB
Trading: Stocks
 
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Posts: 17 since Jan 2012
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Thanks for the advice the edge. I have a trading plan in place, but definitely need to focus more on it. I think I will write some of my hard set rules on sticky notes and put them up on my monitor. I'm already taking a screen-shot of every trade to save and review. It's a great way to review what works and what doesn't and see where my strengths and weaknesses are.

AAPL is one of my favorite stocks to trade. It has great liquidity. Just because its share price is in the 500s doesn't make it more risky. My position is typically 20 shares.

For LIZ, I didn't pull up the chart until towards the end of the day. I know the odds were to the long side, but I thought shorting the second failure of breaking the HOD was a decent setup. I find great setups shorting the huge post earnings run-up. I usually wait until mid-day or afternoon to fade these huge % movers and use a tight stop. Nothing moves in a straight line continuously. Plenty of opportunity to trade pull-backs. That being said, trading in the direction of the trend is probably a safer play, but I've been focusing the other side. In the future, I hope to have a system that is split 50-50 reversion trading and trend following as they complement each other nicely.

I'm only using the 5-min chart. I found looking at multiple time frames causes me too much confusion, but I know how successful people can be using multiple time frames for confirmations. My plan is to get really comfortable trading off the 5-min chart before adding more time frames.

I'm not using any indicators.

I forgot to add entries and exits are on the charts I posted (a small horizontal line). Its what IB does by default.

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  #6 (permalink)
 UnderPar 
Burlington, VT
 
Experience: Intermediate
Platform: IB
Trading: Stocks
 
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Posts: 17 since Jan 2012
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P/L: +$583

Today was a good day overall. I'm posted two trades with commentary: Zanga (ZNGA) and Shutterfly (SFLY). These trades show two things I need to work on.

1) Trade Management: I need to give my winners room to run. This example is illustrated with ZNGA.

2) Wait for a price reversal to develop. I made two trades in SFLY. In the first trade I bought into a sharp-reversal before the actual reversal started (this always ends badly). The second trade shows how to trade the reversal correctly.

Please see the charts for additional commentary. Trades are the small blue and red horizontal lines (what IB does by default). Speaking of which, does anyone know of something better than MS Paint for annotating charts? I'd like to highlight trades better and all I can really do is a text box.

Have a great weekend everyone!

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  #7 (permalink)
 bijeremiad 
San Francisco, CA
 
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UnderPar View Post
Speaking of which, does anyone know of something better than MS Paint for annotating charts?

I use Snagit at work for image capture and annotation. Done by the same people who do Camtasia for video capture. $50 for Snagit, but you can try it out for a 30-day free trial.

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  #8 (permalink)
 Pajot 
Toronto, ON
 
Experience: Intermediate
Platform: NT
Broker: IB
Trading: ES, CL
 
Posts: 148 since May 2010
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I like how you use stocks to work on your skill, instead of a more leveraged and risky instrument. You are cautious and patient, and learn from each trade. You are not only looking for reversals and counter trend trades, but it would be probably a lot better to try "with trend" trades only, at least until the other side proves some strength. Are you taking a trade with a clear stop and target in mind (or on the chart)? Good luck!

Pajot

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  #9 (permalink)
 UnderPar 
Burlington, VT
 
Experience: Intermediate
Platform: IB
Trading: Stocks
 
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Posts: 17 since Jan 2012
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P/L +$113

I traded 3 stocks today: SQNM, AAPL and VZ (please see charts and comments in that order).

I only made ONE good trade today. The first trade in SQNM. The trades in AAPL and VZ were ridiculous. In both I averaged down as the trades went against me and used no stop.

When entering a trade I should always use a stop or at least have a mental stop in mind. Whenever a trade is placed NOBODY knows what will happen next. It's that simple. I really need to embrace this and have a plan in place in the event the trade goes against me (as it did in both cases). Averaging down arbitrarily is a sure way to lose money in the long run. From now on every trade I take I will have an exit strategy in place BEFORE entering.

The second thing I want to address is how almost all my trades so far are going against the trend looking for reversals and counter-trends as @Pajot pointed out. Swimming upstream is sure harder than swimming downstream. I shouldn't be fighting the trend. Going forward I will try to make 50% trend trades and 50% counter-trend trades. Each trade I will label as as either an "against the trend trade" or a "trend trade". Once enough trades are made I will go back and see what is working better for me.

I'm a firm believer in adapting a trading style that fits ones personality. For some reason I have been attracted to reversal / counter-trend trades. But for all I know, trend trading could suit me better. I'm going to do both and see which works best.

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  #10 (permalink)
 UnderPar 
Burlington, VT
 
Experience: Intermediate
Platform: IB
Trading: Stocks
 
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Posts: 17 since Jan 2012
Thanks: 7 given, 17 received


P/L: +$268

Solid day. I traded both with the trend and counter-trend. I also did not average down on anything and used stops (two things I have had problems). Please see the attached charts for trades and further discussion.

Two things I noticed today. I will arbitrarily pick a few symbols I know and follow them and force trades. For instance, most days I will trade AAPL. Some days I will trade SQNM. The only reason is because I know the stocks from previous trades.

Trading the same random symbols leads me to forcing trades.

I need to screen and only trade from a watch-list that I consistently update.

Anyone have ideas on good stock screeners? And what should I look for?

I've also signed up for both Ninja and Sierra Charts to test live. I paid for one month of Sierra and 3 months of Ninja. Hopefully I will adapt to one of these two. Honestly, I feel most comfortable with IB TWS. But I will start giving the other two a try and at least rule out one out.

Anyone think one platform is better for stocks? I don't use any indicators at the moment so trade management is most important.

Also, which one has the better scanner? It would be great to be able to scan for intra-day movers like I can with TWS.

Thanks everyone.

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  #11 (permalink)
 UnderPar 
Burlington, VT
 
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At the beginning of this journal I said: If at any point my account value falls below $25,000 I will stop trading. If this occurs I will take a step back and reevaluate. Live to trade another day.

As of the close on Thursday (3/8/2012) my account value was $24,877.

While I'm not terribly excited about this fact... I am proud that I'm not continuing to trade my account to $0 and that I am reevaluating my trading strategy. It also feels good to be honest and continue this journal opposed to quitting.

The major culprit was a horrendous trade in Deckers Outdoor (DECK). The stock was down 5% on the day and had pretty much flat-lined during the afternoon. I bought into this level, taking a counter-trend bet the share price would recover. When I entered this trade I did not have any stop in place or profit target in mind. My thought process was simple: The price had gone down 5% already so it shouldn't go down further.

After 2PM the stock started to drop. Once it had fallen even further, I thought two things:

1. I don't want to lose money on this trade. So I will average down.
2. The stock was already down around 5% and it is now down 6%... the stock really shouldn't drop further. So I will average down.

Long story short the stock continued to drop and I continued to average down. I ended up holding over-night hoping (key word here) for a bounce Thursday morning. Deckers opened down and continued to drop and I sold everything right before it rebounded to where I would have broken even on the trade. Instead I lost over 2k.

Although this might sound crazy, I'm glad the trade didn't come back and that I took a huge loss. Had I exited break-even it would only be to my future detriment. I would have been reinforcing bad behavior. While losing over 2k on one trade is hard to swallow I think its only for the best in the long run. It made me realize that I didn't have any plan or system in place.

I'm taking the weekend to write down a trading plan with hard-set rules.

While I added another 1K to my account to be above the 25K PDT rule, I am not going to trade live money until A) I have a plan with B) hard and fast rules.

Here are some overall things I am looking at:

1. REDUCE & FOCUS I think first and foremost I need to focus on a few instruments. Before I was looking at stocks that were up big or down big and jumping in and out without knowing anything about how the stock acts. Constantly jumping around creates many problems.

Here are three symbols I am looking at: SPY, USO, AAPL

Trading SPY has many benefits. The spread is .01, Round Trip commissions are $2 or less. I can adjust share size up or down easily. Although I have enough capital to trade the ES I think trading SPY is better in the beginning for these reasons. Also, if I do well with SPY I can always move to ES.

I think focusing on a few stocks will be so much easier. I won't constantly worry about scanning and looking at all these different stocks. I will reduce the number of charts and numbers flying at me. I will have to process far less and as a result be able to focus on my strategy and following my rules.

2. SETUP I have to find the setups I want to take and only trade those setups. I cannot arbitrarily make trades as I had been doing. I need a defined system in place and track it overtime. Only then, should I make changes etc.

3. TRADE MANAGEMENT I absolutely have to create a set of rules and follow them. Always using stops. Only risking a set amount per trade. Never averaging down (gee I think that might serve me well). etc.

4. PSYCHOLOGICAL What are my strengths and weaknesses? One thing I discovered is that I hate to lose. I need to accept that losing is part of trading. If I can accept losses and treat them as part of the business I will do much better.

I will be back soon to post my trading plan in detail and I hope people can comment on the strengths and weaknesses of the plan. Hope everyone is having a good weekend!

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  #12 (permalink)
 Big Mike 
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Congratulations for sticking with the plan.

Mike

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  #13 (permalink)
 mkoning 
Saipan, Northern Marianas Isla
 
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Hi UnderPar,
I wish my golf was as good as yours.

Trading stocks is particularly difficult because they all have some personality, they tend to gap irrationally sometimes and are prone to big moves by major players before announcements. It is sometimes hard to figure why they move until the rest of us get information. I gave up on the stock picking concept a long time ago.

I kind of like futures. by focusing on a couple of instruments I learn what to expect from them and I can read their behaivior a bit. I found that 80% of stock movements are related to underlying index movements - so why not just focus on the index/future? It reduces the unpredictability of strange instruments. Of course, I'm no pro either.

A trading plan, to my mind, has to be specifically tailored to the instrument you are trading. In my case, I am only interested in specific situations and times because I have studied the probabilities of a specific response. I know some people can read a chart like a book, but before I risk money, I want to see something that falls into one of my setups. That helps to reduce the randomness from overtrading. I think of myself as a card counter at the blackjack table - the edge is thin, so the strategy has to be applied accurately and in small bets.

Good luck,
mkoning

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