I've been working pretty much non-stop (just ask my Julie) trying to develop a profitable trading system. I believe I've made some great strides with one that meets both of my main concerns: easy to use and understand; and takes the emotion out of trading.
Most books I have read on trading systems say, for the individual, to K.I.S.S. A system with less than 5 indicators can be developed that is very profitable. In the evolution of my current system I use 5 filters to find potential stocks to trade, and then only 3 indicators to determine whether or not to enter/exit a trade.
In past trading, my weakest area has been getting in/out of a trade when I knew I should or should not. Often times, I would hang too long to a bad trade or just get overly involved in the market instead of waiting until better opportunities came along. This system has defined rules that place trades with defined entry and exits points.
The concept is very simple, and I've found a way to make it profitable I think. In addition because I believe it will work in the long run, I feel no need to adjust what the system tells me to do on a daily basis. Therefore, no emotional decisions to change things in the heat of the moment should happen.
While I am happy with what I have found so far, I am still trying to fine tune it. This requires numerous studies to see how the stocks may perform under different scenarios/rules, but because I am a stats geek, I actually enjoy it.
I have been using this system (with some minor tweaks) since mid-to-late November with fantastic results. I have been running very well due to some very large gains in a few stocks that I know don't come along very often. I am fully aware that this could system may not work in practice and that this hot streak is just an anomaly. My hope is that my study on this system is accurate, and that while this hot streak is just that - a hot streak, I can still make decent returns over the long-run.
Wednesday, December 12, 2012
Monday, November 26, 2012
Awesome Week!
Hell has frozen over!
My little brother got married over the weekend. For a long time, I wondered if the day would ever come. It was an amazing celebration, with two great families. I was thrilled to get to take part in it, and I couldn't be happier for him and Krissy.
Possibly my favorite non-wedding couple related moments had to involve my two kids. It was an adult only wedding reception, but because they were both in the wedding party, they were invited to the reception. My daughter was even asked to do the prayer before dinner. In front of well more than 200 people, she calmly delivered an adorable prayer for the meal. Everyone, was amazed at her poise.
My son made a name for himself on the dance floor. Showing off some moves and rhythm I never knew he had, the crowd encircled him for well more than 4 songs straight. He continued to dance after this for over an hour as smaller crowds continued to watch him. Here are some pictures from later in the evening of him:
And lastly a picture of Matt and the best man:
Congrats Matt and Krissy!
My little brother got married over the weekend. For a long time, I wondered if the day would ever come. It was an amazing celebration, with two great families. I was thrilled to get to take part in it, and I couldn't be happier for him and Krissy.
Possibly my favorite non-wedding couple related moments had to involve my two kids. It was an adult only wedding reception, but because they were both in the wedding party, they were invited to the reception. My daughter was even asked to do the prayer before dinner. In front of well more than 200 people, she calmly delivered an adorable prayer for the meal. Everyone, was amazed at her poise.
My son made a name for himself on the dance floor. Showing off some moves and rhythm I never knew he had, the crowd encircled him for well more than 4 songs straight. He continued to dance after this for over an hour as smaller crowds continued to watch him. Here are some pictures from later in the evening of him:
And lastly a picture of Matt and the best man:
Thursday, November 15, 2012
Be Careful
Anyone that has been following this market should realize how weak it has been. Each day starts with a small to mid size rally before inevitably falling most of the day. In addition, the volume has been relatively high on the exchanges. Days that have a higher volume than the previous day and are down are known as distribution days. When you get a handful of these in a 2-4 week period, it usually means the market is going to be selling off in the near future. Sure enough a few weeks ago Investors Business Daily (IBD) gave a market in correction signal based on this indicator. Since then, the markets have dropped almost 10%.
Until we get what is known as a "follow through day" to the upside, (which I won't describe) the market remains in correction. This does not mean that we won't have a few days that could rip to the upside. In fact, usually the weakest markets go down for days on end then have one monster upside day before resuming the down trend. It is the lack of any "follow through" that defines the down market. With this in mind, we are due for a big upside day. Nonetheless, until we find some footing in the markets, the safest place to be, if you cannot go short stocks, is in cash.
Until we get what is known as a "follow through day" to the upside, (which I won't describe) the market remains in correction. This does not mean that we won't have a few days that could rip to the upside. In fact, usually the weakest markets go down for days on end then have one monster upside day before resuming the down trend. It is the lack of any "follow through" that defines the down market. With this in mind, we are due for a big upside day. Nonetheless, until we find some footing in the markets, the safest place to be, if you cannot go short stocks, is in cash.
Thursday, November 8, 2012
CMG - A Day Later
Hits $260 on the nose before a small rally.
Once I figure out exactly how to determine the ideal stops I should be using to minimize getting stopped out on random noise, my results should turn around substantially. This stock is not an isolated instance. This exact scenario has played out repeatedly. What this tells me is I am reading the charts fairly well enough to determine the most likely next decent move, but I am not seeing points where a possible small counter trend could stop me out.
Ideally, you want to pick a price, that if hit, probably means the trend you thought was going to happen has a far less likelihood of occurring. If that price is too far away then the risk/reward profile for the trade becomes poor, and you just don't take on the trade. Determining proper stops/exits on a trade are far more critical than entries for me at this point simply because, as of yet, I am not as good at it.
Once I figure out exactly how to determine the ideal stops I should be using to minimize getting stopped out on random noise, my results should turn around substantially. This stock is not an isolated instance. This exact scenario has played out repeatedly. What this tells me is I am reading the charts fairly well enough to determine the most likely next decent move, but I am not seeing points where a possible small counter trend could stop me out.
Ideally, you want to pick a price, that if hit, probably means the trend you thought was going to happen has a far less likelihood of occurring. If that price is too far away then the risk/reward profile for the trade becomes poor, and you just don't take on the trade. Determining proper stops/exits on a trade are far more critical than entries for me at this point simply because, as of yet, I am not as good at it.
Wednesday, November 7, 2012
I'm Back!
So I haven't blogged in forever. Originally I quit because I was told not to write anymore about my financial opinions. This was because it could have been construed as an advertisement (I was registered with a broker-dealer and had some clients even though poker was my main business). However, as of the beginning of 2012 I no longer am with them.
With online poker still difficult due to the UIGEA and our wonderful justice department, and my lack of desire to play live poker in the St. Louis area or travel the circuit, I have begun trading stocks fairly actively (hoping to make a living out of it). With this in mind, I plan on using this blog as a way to describe what is going on with my trading - both emotionally and in practice.
I have been "officially" trading since mid June or so. My results have been horrible to say the least. I figured this had a good chance of happening based on various bloggers/books I have read, but it doesn't make it any easier on my mind. The learning curve is pretty steep, and even though I have invested successfully for years, trading is a whole new ballgame. I came in with what I perceived to be a good system. However, I quickly began overtrading both in volume and size. Plus, I would trade things not even related to the system. These seem to be a common errors for many beginners that can and often do bankrupt traders. For me, it was a very painful lesson to learn. While I still battle trading too large occasionally, for the most part I have got that under control. Furthermore, after much reading I have learned proper risk management that is very important to long-term success. This is akin to what successful sports bettors do to determine proper bet sizing to ensure they are not exposing themselves to too much risk such that a cold streak can bust them.
My main focus now is on developing a couple trading systems that not only work and are fairly easy to incorporate, but fit my personality. I am currently working on one that seems to have good potential, but until I see it in real world trading, I will not know for certain how well or poor it really does.
One trade from yesterday illustrates very much what I have been going through. I sold CMG short at $279.1 based on what I think was good logic and charting. I had an initial target of ~$260 for the stock. My current risk (or R) my system allows me is a loss of 1% of my account on any given trade. However, because I got greedy on how much I wanted to invest, I put the stop loss at a tighter point (284.1) than I should have given where the support was. Essentially, I set the stop ~$5 above where I sold short. This would give me a roughly 4:1 reward:risk which is pretty strong. I should have set it a few dollars higher meaning I just couldn't sell as many shares (thus reducing my profit potential=greed) and/or been more patient and waited for a better entry point. Today the stop got hit as the daily high got to $284.57 before falling fast to close the day at $272.88. As a result instead of a $6+ paper profit, I took a $5/share loss. Even as I was setting my stop, I was internally questioning it. These types of amateurish mistakes add up quickly, and to be honest, I am really pissed at myself because I feel I should have been better, and I definitely need to get better. I am definitely struggling at this point.
Anyways, I plan on updating this blog fairly regularly. This is partially a therapeutic way of writing down my thoughts, but also I think it will help my growth in trading. Hopefully, other people will also learn from what I write about and not make the same mistakes as me.
With online poker still difficult due to the UIGEA and our wonderful justice department, and my lack of desire to play live poker in the St. Louis area or travel the circuit, I have begun trading stocks fairly actively (hoping to make a living out of it). With this in mind, I plan on using this blog as a way to describe what is going on with my trading - both emotionally and in practice.
I have been "officially" trading since mid June or so. My results have been horrible to say the least. I figured this had a good chance of happening based on various bloggers/books I have read, but it doesn't make it any easier on my mind. The learning curve is pretty steep, and even though I have invested successfully for years, trading is a whole new ballgame. I came in with what I perceived to be a good system. However, I quickly began overtrading both in volume and size. Plus, I would trade things not even related to the system. These seem to be a common errors for many beginners that can and often do bankrupt traders. For me, it was a very painful lesson to learn. While I still battle trading too large occasionally, for the most part I have got that under control. Furthermore, after much reading I have learned proper risk management that is very important to long-term success. This is akin to what successful sports bettors do to determine proper bet sizing to ensure they are not exposing themselves to too much risk such that a cold streak can bust them.
My main focus now is on developing a couple trading systems that not only work and are fairly easy to incorporate, but fit my personality. I am currently working on one that seems to have good potential, but until I see it in real world trading, I will not know for certain how well or poor it really does.
One trade from yesterday illustrates very much what I have been going through. I sold CMG short at $279.1 based on what I think was good logic and charting. I had an initial target of ~$260 for the stock. My current risk (or R) my system allows me is a loss of 1% of my account on any given trade. However, because I got greedy on how much I wanted to invest, I put the stop loss at a tighter point (284.1) than I should have given where the support was. Essentially, I set the stop ~$5 above where I sold short. This would give me a roughly 4:1 reward:risk which is pretty strong. I should have set it a few dollars higher meaning I just couldn't sell as many shares (thus reducing my profit potential=greed) and/or been more patient and waited for a better entry point. Today the stop got hit as the daily high got to $284.57 before falling fast to close the day at $272.88. As a result instead of a $6+ paper profit, I took a $5/share loss. Even as I was setting my stop, I was internally questioning it. These types of amateurish mistakes add up quickly, and to be honest, I am really pissed at myself because I feel I should have been better, and I definitely need to get better. I am definitely struggling at this point.
Anyways, I plan on updating this blog fairly regularly. This is partially a therapeutic way of writing down my thoughts, but also I think it will help my growth in trading. Hopefully, other people will also learn from what I write about and not make the same mistakes as me.
Saturday, June 25, 2011
Monday, July 19, 2010
Full Tilt
The market/government is tilting me
poker is tilting me
and unfortunately I'm even getting tilted by friends
Things better turn around soon....
Good thing I'm on vacation, even though I'm not enjoying as much as I should
poker is tilting me
and unfortunately I'm even getting tilted by friends
Things better turn around soon....
Good thing I'm on vacation, even though I'm not enjoying as much as I should
Subscribe to:
Posts (Atom)