Yesterday evening I thought I had identified three excellent Swing Trade Revert-to-the-Mean trade candidates. This morning, they all looked ridiculous, so I made no trades. Similarly, I had identified a number of gappers that I wanted to fade, but by the time I had dug under the covers, I didn’t like the flavor of any of them, so I made no trades.

I’m gonna contact Mark directly about how he scans for the DRRBMP, (DR Rubber Band Morning Pop). Today was the first day I seriously attempted to find some of those, and was not impressed with the results.

As for the promised “basket” of stocks, I located a list that Trader Jamie posted online. It’s a place to start.

I find I have a short bias. Somehow, I find it more satisfying psychologically to take a short position than to take a long position. Anyone else have this experience? (I know Mark confessed to the same “issue” as well. What do you supposed that says about us?)

I made some money on my Gold spread today. I confess I was concerned about that one. Gold has made a habit of hitting $720-ish and bouncing down the last year. I’ve had the December 700-750 spread since February. I took half off the table last week and the rest today. I have a couple more futures options positions to wind up, then I am out of the futures options business for a while till I master these day trading strategies and techniques.

Oh, one other thing. I got a copy of Edwards and McGee’s Technical Analysis of Stock Trends for 8 bucks at Trader’s Library. A new copy goes for $125. I call that a good ROI. It’s not the latest edition, but everything I read says that nothing truly essential has been added since the 5th edition. I’ll probably add Trader’s Library to the sidebar.

Review of my last two weeks (lengthy post!)

It seems hard to believe but we have been out of the seminar for almost two weeks! Since this is a forum to help us get better at trading, I want to take the opportunity to further share my experiences over the last couple of weeks. Hopefully, people will be able to take something from this post and help them get more profitable. And it helps me organize my thoughts too 😉

On the flight home, I thought for sure I would sleep since we had absorbed so much information, I thought I was exhausted. However, I couldn’t slow down my mind enough to sleep so I decided to write out a 3.5 month plan to get me to where I want to be to feel comfortable that I can support my family in 2008 forward by trading. I wrote almost non-stop for 2 hours.

My goals for September were pretty straightforward – 1) Document the course and my learnings so as to “make it mine” and review it again; 2) Review all gap strategies and investigate sources for gap info before the open; 3) Work on identifying the Flag pattern; 4) Develop basket of high volume, high volatility stocks for the Basket Gap and Trap; 5) Document EVERY trade. Every one; 6) Do a daily debrief EVERY day; 7) Strive to not lose money in Sept.

Results of my goals – 1) done. Found some notes that I had written down that I had forgotten about; 2) Reviewed and wrote up the gap stuff for myself again. Briefing.com has some gap info but haven’t found anything great at this point; 3) I can see the flag patterns well in the middle of the chart! 🙂 It is on the right edge that I have problems . . . In fact, this has been a consistent losing trade for me as I seem to get in on the wrong edge of the flag (increasing my Risk) and then it often gets breaks against me, stopping me out; 4) Haven’t done, waiting on DR for the start; 5) Done this and I have to say it has been a fantastic learning experience. I put down my thoughts on the specifics of the trade, the entry and exit and anything else that I think can help me. I have learned a TON about myself and my techniques doing this. I would HIGHLY recommend doing this yourself; 6) the individual trade info helps me with my daily summary and I am proud to say I haven’t missed doing one of these yet. I expect to review these each week, summarize and then do the same at the end of each month. I am really learning a lot from this exercise; 7) Between 9/19 and 9/28, my totals are -2.8 R and loss of about $3,000. A further break down of that below.

Over all, I am pretty happy with September. In the last week, I have reduced execution and psychological errors and am getting better at this thing. Definitely something I can feel good about going into October.

If you are curious, October goals include: 1) Trade DR’s Rubber Band Morning Pop at 1/2 position size (was trading it at a quarter in Sept); 2) Trade gap strategies consistently at 1/4 position size; 3) Develop a simple band system (based on the swing class) and trade at 1/4 position side; 4) Begin home Peak Performance for the second time; 4) Finish first revision of trading business plan; 5) Finish the month with at least 1 R in net winnings; 6) Document every trade; 7) Do a daily debrief.

Since we are mostly numbers guys, and if you have made it this far, here are some numbers from my trades in Sept.

DR RB Morning Pop: I have taken every trade since 9/19 that meets the system ruleset and the results are: 0.25 R, 1.76R, -0.25R, -1.2R, -0.4R, 0.33R, 1.22R, 0.98R, -1.27R, 1.44R, -0.28R, 2.16R, and 2.28R. Total of: 7.02R . . . . not so bad for 8 days of trading!

A couple of comments/learnings from this one – trailing stop losses can cause high percentage slippage, especially on those trades with a low stop – below 20 cents. Trailing stop limit orders can cause your stop to be only partially hit causing you to have to chase it down if you are watching it. This slippage is the reason for my losses larger than 1R. Other than that, I really like trading this system.

Continuation flags: Taken these as I have seen them, but it is pretty haphazard – -0.9R, -1.67, -2.7, -0.72, -0.53. As you can see, I am not very good at these. Will likely put this one on the shelf and work on some other systems.

Gap and Trap – I definely seem to have a short bias on this one. I am getting better at setting profit targets and am working on the entries. DRs comments about filling the gap to half and then bouncing seem to be right on.
Results with some of my trade comments – 0.04R (comment – “not great entry, wasn’t patient”); 0.70R (“good entry at top of resistance”), -0.65 (“not great entry”); 2.73 (“good setup, I just got to it late. It filled half the gap while I was putting in the order. I then waited for it to break through by 5 cents the half gap and went long. Not a great risk trade but did it with small postion. After I got it, it took off. I put profit target at 10 cents below the gap. Since the price moved so strongly up to 24, I then revised my stop and took it off at 23.90 per Brad’s comment of if it moves strongly in your direction, get ready to take it off. Except for the lower R:R, this was a good trade and good exit. Got out at right time”); 0.84 R, 0.32R.
Total of: 3.9R. Again, not bad for 2 weeks of trading.

So, if you do the math of the above numbers, it doesn’t add up to -2.8 R, does it? Where do you think I may have caused myself some problems? Buehler . . . . Buehler . . . . Buehler . . . .

Answer – the need for action and trading without a plan!

Most, if not all, of the system trades I have been taking are all morning set ups that usually are closed by lunch. So I take a break for lunch and come back to the screen looking for such things as flags and other patterns. Guess what? I then start looking for excuses to trade. Here are the trade results with comments. At least I am getting to be honest with myself 🙂

-0.49R (“No strategy – stock was up 5 pts, fell off the top dramatically. Sold short on the pause and it reversed so got out.”)

-0.67R (“No strategy – stock was up 5 pts, fell off the top dramatically. Tried once, got in again as momentum continued. Watching it in conjunction with XLF”)

-1.04R (“Hi tick reading (600, highest of the day), not able to move up at all. MACD is trending down in divergence to the price. Looks like a good short opportunity. Exit was terrible. I chased pennies and it moved up to my stop loss. When short at the very beginning of a 2.5 hour almost uninterrupted uptrend. I did NOT have the rythym of this stock today.”)

** BTW, the last three losses were all on the same stock in one day . . .

-3.56R (“No strategy – Had 1 R win, should have put stop there. Instead, it ran back all the way through my original stop. And then some. Then had the classic, “nothing goes straight up, I will wait for it to come back down and then get out. Then, I added another position when the tick reading went to extreme yet it wouldn’t move up. 3 major mistakes there. 3.5R execution errors. 4.5 if you count lost opportunity.”)

-1.2R – “No strategy – Added on to a loser here – shouldn’t have done. Entered when price didn’t move but tick was at extreme. Initially went in my direction but got my ass handed to me.”

-1.02R – “No strategy – Chasing my tail. Impulse :-/”

** History repeats itself – these last three losses were on one stock as well

-1.67 R

-1 R – “Continuing my trading without a plan stupidity. Thought I saw a trend opportunity. Issues – trading in last 30 minutes, trading without a plan.”

-0.98R – “Spike on takeover rumor news, got in too early”

2.28R – “No strategy – RIMM and SPY down agressively over last 20 mins. Looking for a rebound, SPY seems to have flattened out and RIMM seems to be trading similarly. Playing revert to mean. SPY support designated by Briefing at – 1525/1524 (session low 1524.77). Took it off after 2 R by hand. Looked like momentum had died out for the time being. Was right about the momentum dying”

-0.85R – “No strategy, trying to ride visual momentum.”

Total: -9.22R, and only 1 win out of 11 trades.

If I had not taken these non-system trades, my 8 day total would be 6.22R instead of -2.8R! That is almost 1 R a day. Or, said another way, I lost over 1R a day in psychological errors (need for action, impulsivity, etc.)

So, what to do about that? For the short term, I have instituted 2 new rules – No trading without a predefined rule set, and no initiating a trade after noon. That should help keep my losses lower for now. Longer term, I need to go through the Peak Performance course and start doing the 10 tasks of trading to help me meet those needs in other ways outside of trading.

Sorry for the really long post, but I wanted to share my experiences with you guys with the hope that you can take something away from this post that will save/make you money. Overall, I am really happy with the course we took and am I looking forward to putting it into action with “conscious competence” over the next couple of months. Best of luck to everyone, enjoy the weekend!

– Mark

A Learning Day

No trades for me today. I got TradeStation installed yesterday and spent a good bit of today learning to use it. Geez, I so shoulda started with this – soooooo much better than IB’s TWS.

I’m looking at playing a “Reversion Toward the Mean” on EMC tomorrow. I have a pretty good setup, although I am not crazy about the Risk/Reward. OTOH, this will make a good learning trade, since my actual Dollars Risked is so low right now, it won’t much matter whether or not this is a trade with the possibility of big money. It is more an opportunity to play this particular strategy & see how it looks.

I am using TradeStation and have not found the symbol’s needed to track the S&P, Nasdaq futures realtime during the day. Does anyone know what the symbols are? Is there a datafeed that is required to access?

dwight

First Official Profit

I made my first official profit on a day-trade today. (I’ve been doing longer-term stuff till now.) RIMM opened on a gap with no significant news. The gap was about .70ATR – not a huge gap, but big enough to be interesting. There was no obvious resistance level above the open, so I was hesitant to jump in right at the open. Instead, I chose to “pay for confirmation” and shorted it at 99.70 about 10 minutes after open. I set my stop at .25ATR, or about 100.50. The trade basically went my way the whole time. My target was to close the gap, about 2.70, but once I had hit a 1R profit, I trailed a stop and got stopped at 98.70 for a 1.4R profit in about an hour.

I didn’t do this trade perfectly. For example, I just now realized that I had not checked the direction of the general market before I placed the trade. I should have checked to see if the S&P futures were against me. It would have been more risky to short into a rising market, but I got lucky. I won’t depend on luck next time.

I also realized this morning that I won’t be day-trading $100 stocks with such a small risk per share. Once I get kicked into gear, I expect to risk between $500-$1500 a trade., but to have done that on this trade this morning would have required purchasing something north of $60,000 worth of shares. That’ll chew up the trading power in a hurry. I guess I am going to have to add some parameters for myself, something like:

  • If the risk-per-share is less than $1.00, then the cost-per-share should be less than [some number I haven’t determined yet].
  • If the cost-per-share is more than [another number I haven’t determined] , then the expected profit-per-share must be greater than [yet another number I haven’t determined].


I don’t anticipate tacking positions greater than $10k at a time, so that all by itself should help me with my selection process.