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Day Trading Stocks with Discretion
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Day Trading Stocks with Discretion

  #221 (permalink)
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March 4, 2013 - Demo day 3

Todays trades don't need a chart. I was looking for a pullback after a strong push up in the first half hour. But got a continuation downard. No matter.

What got me was my anxiety to catch the trade. I had logged in late. Saw the set up. Clicked on buy, verified the ATR5 justified my buying 200 shares vs 100. Check. Pulled the trigger - gonna miss the trade.... Problem: I had not adjusted my stop to $0.20 from the default $0.40. In less than 30 seconds, the market stopped me out with a loss of $82 (equivalent of two full stop trades), which ended my day. Closed out.

Couple problems here. It did take 30 seconds, which forces the question, why didn't I immediately close out, once I knew I had too much risk? Or at least trim down to 100? I was futzing around with the interface trying to change the stop. But the time I got there, market was below my stop. So I followed the time-honored tradition of former traders and hoped it would come back.

Fortunately I had the $0.40 default stop. Market went on for another $0.50.

So to avoid the problem in the future:
1) correct stop must be in place before entering the trade. If I miss it, I miss it. Next trade.
2) I will change my default stop to $0.20 (and see how many problems that creates).

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  #222 (permalink)
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Good read. I am digging the statistical breakdown and the charts and internal analysis. One question I have is would you say that your trading experience has been better/worse since you have focused on one stock?

When I looked at the highlighted months that you traded, I instantly knew that you were gonna have a good month 4th month (admittedly I thought you have another great month on the 5th month as well though). The reason I thought that was because those were the only two months with even a semblance of a trend. Other than that, it looks like rangebound city for the most part. Personally I would assume that trading a rangebound stock would be the hardest form of trading... Since the trend isn't strongly established, the buyers/sellers don't have quite as much conviction to keep the rallies/sell offs going, and so there is lots of whipsaw action intraday. I suppose this can be advantageous depending on your setups?


Quoting 
Longs carrying the profits. Despite no bias in longs vs shorts. I did make 70% of my net profits from longs. Only 30% from shorts. This is probably from the upward bias of VFC during the time I traded it. I will leave that analysis for when I look at month-by-month statistics in another post.

Have you given any more thought to this as well? I don't know how effective it would be if VFC still trades the same way (it was literally rangebound from mid-May to mid-July, then it gapped higher, and then it was rangebound again until the 2nd week of September) but having an overall bias depending on the Daily trend might have an interesting effect.


Last edited by Bermudan Option; March 4th, 2013 at 09:58 PM.
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  #223 (permalink)
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Thanks for the questions, @Bermudan Option. Here are my thoughts (and questions).


Bermudan Option View Post
One question I have is would you say that your trading experience has been better/worse since you have focused on one stock?

I used to trade anything that moved. I really had no idea what I was trying to trade - I wasn't even looking for stocks in play. Then I narrowed it down to 6 names, which helped. But my set ups were still ill defined, and watching six stocks didn't help that. Record keeping was present (see posts 1-35), but analysis was not. It was too easy to say "I wasn't looking then" but with one name you ARE looking and have no excuses.

Finding Lance Beggs was the beginning of a turning point in terms of set ups. Focusing on 1 stock forced me to look at how those set ups played out and how they failed. Rather than "this doesn't look like this will pan out, move on to the next name" I had to watch and decide bar after bar: long or short or wait. There are stretches where little money is made. I think that can change. I am surprised by days where the range is tight, but trading went ok (like 7/16/12 in month 2, here is the original trade journal). It was one of my better days made on a $1.50 range day.

I think it makes sense to focus on one name, one screen set up at a time. @Big Mike is a long-time critic of aspiring traders running from instrument to instrument and screen set up (indicators) to screen set up. What I have not heard is how long should you spend with one thing before "cutting your losses" and moving on to something else? I do like what I saw in this journal, where @grahamg commits to spending a 6-week period with a few different types of trading.

I have had similar thoughts on screen set ups, that eventually you should try to optimize, but how do you balance "investing time to get it right" with the expediency to find what works best. I heard that @VinceVirgil used to trade 5min charts, then eventually settled on 800-tick charts. I would be interested to hear how is screens evolved and why he decided to move on and choose the next set up.

No doubt focusing on one name has helped refine my PASR abilities from undecipherable to crude...

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  #224 (permalink)
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Bermudan Option View Post
When I looked at the highlighted months that you traded, I instantly knew that you were gonna have a good month 4th month (admittedly I thought you have another great month on the 5th month as well though). The reason I thought that was because those were the only two months with even a semblance of a trend. Other than that, it looks like rangebound city for the most part. Personally I would assume that trading a rangebound stock would be the hardest form of trading... Since the trend isn't strongly established, the buyers/sellers don't have quite as much conviction to keep the rallies/sell offs going, and so there is lots of whipsaw action intraday. I suppose this can be advantageous depending on your setups?


Have you given any more thought to this as well? I don't know how effective it would be if VFC still trades the same way (it was literally rangebound from mid-May to mid-July, then it gapped higher, and then it was rangebound again until the 2nd week of September) but having an overall bias depending on the Daily trend might have an interesting effect.

@Bermudan Option, part of what is lost looking at a month of daily bars is that trends do exist on my time frame within the day. In a previous post, I look at how much VFC moves in a day to get a sense for how much of a range I can expect to see. This information could suggest where price will peter out in the extreme. What a trading range on the daily chart range does is make you more reliant on reversal patterns rather than continuation of trend or break outs.

I primarily look for tests of prior S/R, failed breakout, pullbacks (complex ones too), and pullbacks after breakouts - and admittedly break outs. In range months those tests and failed breakouts should provide more opportunity than the pullbacks and pullbacks after breakouts. But I did not keep set up data in my journal - something I will either backfill, but will definitely keep going forward.

But I also see it in the propotion of net profits from shorts. In the monthly data pdf, I can see it in month 3 and 5.75, where shorts were 57% and 88% of profits, respectively. And I don't see shorts contributing much in trend months 4 or 5 (only -9% and 35%).

So one thing I need to adapt to is expecting more range days, which mostly involves on setting a profit target based on prior S/R rather than what I do now, where I only have a stop and often let price take me out on a retracement of price. Not there yet. Another thing I need to add is "pressing my winners" where I add to the trend trades that are going my way. Not there yet either.

But this is one of the challenges of trading. If I knew ex-ante that the day was going to be trading range, I could look for specific set ups (tests and failed breakouts especially), but the hard right edge doesn't telegraph that all the time.

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  #225 (permalink)
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bijeremiad View Post
I do like what I saw in this journal, where @grahamg commits to spending a 6-week period with a few different types of trading.

I got the 6 weeks trial idea from Enhancing Trader Performance - by Dr Steenbarger.

As it turns out I am trying everything in my mental power now to stick with this one method longer than 6 weeks as I don't think it is a long enough time period to pickup the skills to know if the technique is viable for me. This is in complete conflict with my goal of trying different methodologies to see what I enjoy on SIM. Someone needs to set me straight haha. To correct my original goal also - For me trading on the SIM was a very unrealistic game compared to trading one lots and did not represent the style of trading I intended to experiment with.

In addition to your discussion - I can say that sticking with the one instrument alone is beneficial. I am slowly getting to know very well the behaviour of the Bund after watching for 2 months for a few hours a day. I am noticing the inkling of an intuitive feel for where its going next - but the conscious part of my mind wants no part in trading that 'feel' unfortunately at these key moments just yet. Perhaps stocks are not as active though and you can follow a few at once.

The leap into freedom is the exchanging of risk for reward. This can be done only by shifting from tension to ease, and that can be done only when one perceives the reward and not the risk. That you won't win all the time has nothing to do with it - that's life, that's the [stock] market. The trying itself is freeing. And being free has its own reward - Justin Mamis, The Nature of Risk
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  #226 (permalink)
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March 5, 2013, Day 4 of $im

Today I didn't even pull up my screen until 10am. Missed a good part of the day.

Gross profit $71, net profit $65. 2 winners, 1 loser.

Trade 1 - long 200 shares, $33
entry: test of $164.45 intraday support.
What went well (WWW): was relatively patient, entry was such that my $0.20 stop was outside the support line I was fading.
What could improve (WCI): Execution problems. The way I have my stops set up on IB, I can't just change the price; I have to change an offset, and that offset cannot be >=0, so I can't move it to break even. I have to delete the first stop and replace it with another. As I was in that process, I put in a limit order rather than stop and was taken prematurely from the trade.

If I had stayed in, I may have gotten out at break even. I may have held to my target of $165.10; I was not going to hold this one since the day had moved already and ES and XLY had were moving more slowly.


Trade 2 - short 200 shares, -$46
set up: failed break out off of the high of the day
WWW: not too much
WCI: Could have been more patient on the entry - chased a little, and so my stop was not wide of the recent High of Day.


Trade 3 - short 200 shares, $78
set up: pullback to the EMA21
WWW: Did manage entry such that stop encompassed a) local high, b) upper end of channel, c) pretty close to EMA21. Also held to pretty close to the close. Felt like coming up out of the water after swimming submerged, just wanted to take profit (breathe), but wanted to see sell off into the close - held to plan, which had to be trimmed due to market close.
WCI: My target of $164.05 was hit. I closed out early because I had a meeting starting at 1pm. Didn't want to go into the close short.

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  #227 (permalink)
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grahamg View Post
I got the 6 weeks trial idea from Enhancing Trader Performance - by Dr Steenbarger

Interesting, @grahamg, looks like he based that 6 week number on medical rotations:


Steenbarger
Medical students, as I mentioned earlier, take at least six weeks to complete their specialty clinical rotations. This is because they need to have sufficient exposure to a range of treatment settings and patients to truly appreciate what the specialty is like. Similarly, experiencing different kinds of markets—fast ones, slow ones, trending ones—helps you appreciate the nuances of each trading niche. Six weeks’ experience at intraday trading provides you with about 30 days of exposure—probably enough to capture varied market action.

6 weeks also gives you n=30 at five trading days a week, for data to start becoming more representative.

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  #228 (permalink)
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bijeremiad View Post
Thanks for the questions, @Bermudan Option. Here are my thoughts (and questions).



I used to trade anything that moved. I really had no idea what I was trying to trade - I wasn't even looking for stocks in play. Then I narrowed it down to 6 names, which helped. But my set ups were still ill defined, and watching six stocks didn't help that. Record keeping was present (see posts 1-35), but analysis was not. It was too easy to say "I wasn't looking then" but with one name you ARE looking and have no excuses.

Finding Lance Beggs was the beginning of a turning point in terms of set ups. Focusing on 1 stock forced me to look at how those set ups played out and how they failed. Rather than "this doesn't look like this will pan out, move on to the next name" I had to watch and decide bar after bar: long or short or wait. There are stretches where little money is made. I think that can change. I am surprised by days where the range is tight, but trading went ok (like 7/16/12 in month 2, here is the original trade journal). It was one of my better days made on a $1.50 range day.

I think it makes sense to focus on one name, one screen set up at a time. @Big Mike is a long-time critic of aspiring traders running from instrument to instrument and screen set up (indicators) to screen set up. What I have not heard is how long should you spend with one thing before "cutting your losses" and moving on to something else? I do like what I saw in this journal, where @grahamg commits to spending a 6-week period with a few different types of trading.

I have had similar thoughts on screen set ups, that eventually you should try to optimize, but how do you balance "investing time to get it right" with the expediency to find what works best. I heard that @VinceVirgil used to trade 5min charts, then eventually settled on 800-tick charts. I would be interested to hear how is screens evolved and why he decided to move on and choose the next set up.

No doubt focusing on one name has helped refine my PASR abilities from undecipherable to crude...

Hello bijeremiad,

I started with 5 minute charts because of Al Brooks. 1 chart 1 instrunment. And the 800 tick because of Mack using the 2000 tick on the ES.

But, I used a single 5 mnute chart for entry and trade management for over 1 year on the CL with the 20 EMA as my only indicator.

I added Market Proflile charts from Rancho Dinero, but, I went to the 800 tick after watching Macks at PATs on the ES for over a year as well.

This entire process took over 2 years, of daily effort.

Keep at it, and you can do it. It is doable. By virtually anyone that is dedicated to it.

VV

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  #229 (permalink)
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March 6, 2013 - Day 5 of $im

Trading today was good and it was bad. I did manage to put a long green box on the chart (a 6R runner on one leg). I also made 3 trade errors. It was like watching the keystone kops .

Grouping the trades will be a little more challenging today. For simplicity I will say there were 2 winners, 1 loser for a gross gain of $177, and a net gain of $164.

Trade 1 - short 300 shares, $191
set up: pullback. I got in a little early to call it a pullback, but that is what it ended up being.
What went well (WWW): My target worked out. I was waiting for a complex pullback, but got surprised how complex it would be...
What could improve (WCI): Got in early. Was very concerned about being stopped out at 7:44 I wrote on my scribble sheet "Miserable trade, late entry, can't even remember why I got in. And I began trying to fiddle with my trade management to move stops down. But I couldn't change them! Then a few minutes later, I scribble "Now would be an OK time to to get in... on the ACTUAL pullback. By then I had managed to get out of 1 lot and decided to add another lot to get back to $40 of risk, having already lost $12.



Trade 2
- long 200 shares, -$22
set up: break out
WWW: got luck and took myself out before a full stop
WCI: I let myself get fished in. I had been looking for a long since 10AM. The stop I put in turned out to be a limit (which became a market order when that happens) and I lost the $0.10 bid/ask spread instantly. Nice thing was that I would have lost the full $40 had that not happned. Ugh.



Trade 3 - long 600 shares (400 erroneously), -$5
set up: Test of low of local low
WWW: got in much earlier on this attempt
WCI: I had an error on entry and exit. My platform has a "feature" that when I click Ask, for a limit order, it takes the Ask price minus $1. So this limit will be immediately filled when executed (at NBO). It disappeared so quickly I thought I had clicked the wrong button, so I put in another limit order (which filled immediately as before). Now I reazlied that I had double the risk I wanted. It took 60 seconds to sort out and exit the extra shares. That needs to get faster. Then on exit (after fixing the limit orders that were really market orders), I bought, when I intended to sell. Now I am long twice risk again. This one only took 30 seconds to unwind. But it cost me $25 in real cost and $25 in opportunity cost.

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  #230 (permalink)
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1st week of $im


Finished my first week on sim yesterday. Not going to post an equity curve with 5 points. But here is a quick recap: things look ok.

$263 for the week, which is -0.26 standard deviations off the average of my prior sample's weeks. I had 4 positive days, and 1 negative.

15 trades, which skewed short: 4 longs, 11 shorts. 47% were profitable, 13% scratch, 40% losers.

When I look at the last 5 days, I have the following observations:
1) The short skew concerns me a little. The trend for the week was up. But I was not watching the market for the bulk of that up trend (shaded light orange). If I had been, the week could have been very good vs average. I did manage to squeeze some profits from rather tight range days. Good.
2) Errors cost me $70 in performance. Enough to make the week better than average. Need to get my execution skills polished.
3) Win percentage was higher, but avg win/avg loss was only 1.7x. I only really had one trade to let my winners run, so that is not concerning yet, but need to catch those runners.

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