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Brave New World
- Thread starter Neoxx
- Start date
Quote from Bitstream:
looks like u read too much Baudleaire and Dante.
If u fail, u could still aspire at becoming a poet: your prose is very good.
Best of the best in your career
Take care
bit
I wish I had time to read.
When I succeed, I'll have the time to write. Forgetting how...
My career brooks no distractions.
Thanks for the message.
Likewise, wishing you success.
Ok, since I like your general philosophy of trading & life, I'll point out which parts of your strategy are good, and which ones you'll be forced to change (since they are severely flawed). I'm not here to argue with you, so you can take my advice or ignore it.
I'm just some guy who at age 21 saw a pack of gum one day in a vending machine, and didn't buy the gum because I <b>couldn't afford it</b>. However by age 24, my trading had made me a millionaire.
__________
My mean hold period has been 9 days. <b>--â OK</b>
I¡¦ve been keeping it simple, speculating on direction with puts and calls.<b>--â OK</b>
I¡¦m trading with the trend. <b>--â That part is good</b>
I experimented a little, but now my basic strategy is to look for stocks in a firmly established uptrend, preferably having hit a recent 52 week high. <b>--â That part is good</b>
I then look for bullish signals after pullbacks to a significant support level. <b>--â That part is good</b>
Essentially, I¡¦m looking to ride momentum, and I¡¦m happy to miss the very start of a move. <b>--â OK</b>
I use TC2000, which in my estimation is an outstanding product. <b>--â OK </b>
I¡¦m using price <b>--â OK</b>
, 50 day and 200 day simple moving averages,<b>-â Not so great</b>
volume bars,
<b>--â That part is good</b>
and candlesticks. <b>-â Not very good</b>
I¡¦ve set up stock scans on telechart for stock that have posted a 52 week high over the past week, <b>--â OK</b>
and another scan for bullish engulfing patterns in uptrending stock. <b>--â OK</b>
I¡¦m narrowing the search by looking at stock with a price of $5-$45, <b>-â Not so great (Why exclude higher priced stocks?) </b>
and (very recently) institutional ownership > 75%. <b>-â Not so great</b>
I want to be following the smart money. <b>--â We all do, but realistically speaking, you're not getting the info fast enough to do it properly.</b>
I initially set the screen to daily charts over a two year period, rapidly skim through the charts (usually a hundred or so), flag the ones that show promise and copy these to a watchlist. <b>--â OK</b>
I then go through them more slowly, looking at weekly charts, daily charts and then zoom right in to the last few weeks. <b>--â OK</b>
I¡¦ve also begun plotting industry comparisons, and will most probably stick to bullish stock in bullish industries. <b>--â That part is good</b>
I end up with a watchlist consisting of approximately ten stock. <b>--â OK</b>
For every trade, there is an estimated position risk of ≤ 1.5% total equity, which equates to an estimated risk of ~$1 (including slippage). I would have preferred to stay with 1% but found it too restrictive at this account size.
<b>--â Dead wrong. Keep going up. Waaaaaay up. You have no choice.</b>
I am aiming for a risk:reward ≥ 1:2.
<b>-â Not so great. You can't pinpoint entry points as perfectly as you now think you can.</b>
I place GTC conditional market sell orders for every trade, based on the underlying hitting my stop level, which I¡¦ve placed 20 cents or so below most recent support. <b>--â Dead wrong, unless you want to be a loser. http://www.elitetrader.com/vb/showthread.php?s=&threadid=54604&highlight=stop+orders</b>
The majority of my initial small losses came courtesy of vega. I was buying ATM/OTM options, and getting burnt, even though the underlying often proceeded to make a nice move in my direction (after I¡¦d taken my 1% loss and closed the position). <b>--â I think you mean theta.</b>
So I¡¦ve decided to stick to 75-80 delta ITM calls, expiring at least a month after the expected move.<b>-â Not so great. You might as well get 30-1 pro leverage and just trade the underlying. Less slippage, more leverage, no decay.</b>
These are my current open positions, with dates of inception ¡V
27th Dec
AEIS April 12.5 call
FCS May 17.5 put
5th Jan
ADPT Apr 2.5 call
CNET Feb 12.5 call
IVIL Apr 7.5 call
ZIGO Feb 12.5 call
BIOS Apr 5 call
6th Jan
HYSL Feb 33.375 call
LZ Mar 40 call
GOLD Mar 15 call <b>--â I'm not taking the time to look over these. </b>
However, because of my ≤ 1.5% max loss, if I get stopped out of every single trade, 85-90% of my equity will be preserved. <b>--â Because of your 1.5% max loss and (suicidal) use of stop orders, you'll continue to bleed until you correct these mistakes.</b>
I'm just some guy who at age 21 saw a pack of gum one day in a vending machine, and didn't buy the gum because I <b>couldn't afford it</b>. However by age 24, my trading had made me a millionaire.
__________
My mean hold period has been 9 days. <b>--â OK</b>
I¡¦ve been keeping it simple, speculating on direction with puts and calls.<b>--â OK</b>
I¡¦m trading with the trend. <b>--â That part is good</b>
I experimented a little, but now my basic strategy is to look for stocks in a firmly established uptrend, preferably having hit a recent 52 week high. <b>--â That part is good</b>
I then look for bullish signals after pullbacks to a significant support level. <b>--â That part is good</b>
Essentially, I¡¦m looking to ride momentum, and I¡¦m happy to miss the very start of a move. <b>--â OK</b>
I use TC2000, which in my estimation is an outstanding product. <b>--â OK </b>
I¡¦m using price <b>--â OK</b>
, 50 day and 200 day simple moving averages,<b>-â Not so great</b>
volume bars,
<b>--â That part is good</b>
and candlesticks. <b>-â Not very good</b>
I¡¦ve set up stock scans on telechart for stock that have posted a 52 week high over the past week, <b>--â OK</b>
and another scan for bullish engulfing patterns in uptrending stock. <b>--â OK</b>
I¡¦m narrowing the search by looking at stock with a price of $5-$45, <b>-â Not so great (Why exclude higher priced stocks?) </b>
and (very recently) institutional ownership > 75%. <b>-â Not so great</b>
I want to be following the smart money. <b>--â We all do, but realistically speaking, you're not getting the info fast enough to do it properly.</b>
I initially set the screen to daily charts over a two year period, rapidly skim through the charts (usually a hundred or so), flag the ones that show promise and copy these to a watchlist. <b>--â OK</b>
I then go through them more slowly, looking at weekly charts, daily charts and then zoom right in to the last few weeks. <b>--â OK</b>
I¡¦ve also begun plotting industry comparisons, and will most probably stick to bullish stock in bullish industries. <b>--â That part is good</b>
I end up with a watchlist consisting of approximately ten stock. <b>--â OK</b>
For every trade, there is an estimated position risk of ≤ 1.5% total equity, which equates to an estimated risk of ~$1 (including slippage). I would have preferred to stay with 1% but found it too restrictive at this account size.
<b>--â Dead wrong. Keep going up. Waaaaaay up. You have no choice.</b>
I am aiming for a risk:reward ≥ 1:2.
<b>-â Not so great. You can't pinpoint entry points as perfectly as you now think you can.</b>
I place GTC conditional market sell orders for every trade, based on the underlying hitting my stop level, which I¡¦ve placed 20 cents or so below most recent support. <b>--â Dead wrong, unless you want to be a loser. http://www.elitetrader.com/vb/showthread.php?s=&threadid=54604&highlight=stop+orders</b>
The majority of my initial small losses came courtesy of vega. I was buying ATM/OTM options, and getting burnt, even though the underlying often proceeded to make a nice move in my direction (after I¡¦d taken my 1% loss and closed the position). <b>--â I think you mean theta.</b>
So I¡¦ve decided to stick to 75-80 delta ITM calls, expiring at least a month after the expected move.<b>-â Not so great. You might as well get 30-1 pro leverage and just trade the underlying. Less slippage, more leverage, no decay.</b>
These are my current open positions, with dates of inception ¡V
27th Dec
AEIS April 12.5 call
FCS May 17.5 put
5th Jan
ADPT Apr 2.5 call
CNET Feb 12.5 call
IVIL Apr 7.5 call
ZIGO Feb 12.5 call
BIOS Apr 5 call
6th Jan
HYSL Feb 33.375 call
LZ Mar 40 call
GOLD Mar 15 call <b>--â I'm not taking the time to look over these. </b>
However, because of my ≤ 1.5% max loss, if I get stopped out of every single trade, 85-90% of my equity will be preserved. <b>--â Because of your 1.5% max loss and (suicidal) use of stop orders, you'll continue to bleed until you correct these mistakes.</b>
Hi Rearden,
I really appreciate that you've taken the time to assess my strategy and provide some feedback. I always welcome suggestions and advice.
I don't place much importance on background. Far more important is who we've become, how far we've come, what we've achieved, and what sort of legacy we're leaving.
I realise there are many successful traders, with wildly varying strategies, and that everyone has their own particular style and preferences.
Now, these might not be valid justifications, but I'll try and explain my reasoning for doing things the way I am.
The way I understand it, these two averages are very highly regarded by many of the institutional traders. Thus, to some extent, they're self-fulfilling.
The entirety of my technical analysis is based upon the dynamic between supply and demand. I think that candlestick charts provide a great visual representation of the shorter term balance. And I'm a very visual person.
I'm looking for 80 delta ITM calls, and I'm limiting each position to 10% of my equity. I've found that these calls cost > $700 in the higher priced stock. As my equity increases, the universe of stocks will increase.
I realise I'm not entering a move until it's already begun. But I'm fine with that. I'm content to profit from part of a move. This way, hopefully, the swings will have more weight behind them.
I want to make sure that I'm still in the game after a string of losses.
Two reasons for this.
Firstly, I've heard some real horror stories about massive, unrecoverable losses.
Secondly, because of my work, my access to my account and the markets can be limited. For example, a couple of times now I've arrived home from work after markets have closed, noticed that a stock has dropped beneath my mental support, and then gapped down the next day, incurring a bigger loss than I'd allowed for.
If I had full-time access to the markets, I'd stick to mental stops. But unfortunately, I don't have that luxury. I need to have a safety net in place, in case I'm not there myself to catch the stock as it falls.
No, I mean literally three or four days after I'd buy my long OTM/ATM calls, they'd drop to 50% of their original value, with no change in the underlying.
You're right. The slippage on ITM calls is outrageous.
I'm not familiar with 30-1 pro leverage.
What exactly is that?
I haven't actually completed any trades since forming these rules and this basic strategy.
I don't have any results to base a judgement on yet.
I'll definitely re-evaluate things after a couple of weeks, once I close some of the positions.
Thanks again for the feedback.
I really appreciate that you've taken the time to assess my strategy and provide some feedback. I always welcome suggestions and advice.
I'm just some guy who at age 21 saw a pack of gum one day in a vending machine, and didn't buy the gum because I couldn't afford it.
I don't place much importance on background. Far more important is who we've become, how far we've come, what we've achieved, and what sort of legacy we're leaving.
I realise there are many successful traders, with wildly varying strategies, and that everyone has their own particular style and preferences.
Now, these might not be valid justifications, but I'll try and explain my reasoning for doing things the way I am.
50 day and 200 day simple moving averages,-â Not so great
The way I understand it, these two averages are very highly regarded by many of the institutional traders. Thus, to some extent, they're self-fulfilling.
and candlesticks. -â Not very good
The entirety of my technical analysis is based upon the dynamic between supply and demand. I think that candlestick charts provide a great visual representation of the shorter term balance. And I'm a very visual person.
I¡¦m narrowing the search by looking at stock with a price of $5-$45, -â Not so great (Why exclude higher priced stocks?)
I'm looking for 80 delta ITM calls, and I'm limiting each position to 10% of my equity. I've found that these calls cost > $700 in the higher priced stock. As my equity increases, the universe of stocks will increase.
and (very recently) institutional ownership > 75%. -â Not so great
I want to be following the smart money. --â We all do, but realistically speaking, you're not getting the info fast enough to do it properly.
I realise I'm not entering a move until it's already begun. But I'm fine with that. I'm content to profit from part of a move. This way, hopefully, the swings will have more weight behind them.
For every trade, there is an estimated position risk of ≤ 1.5% total equity, which equates to an estimated risk of ~$1 (including slippage). I would have preferred to stay with 1% but found it too restrictive at this account size.
--â Dead wrong. Keep going up. Waaaaaay up. You have no choice.
I want to make sure that I'm still in the game after a string of losses.
I place GTC conditional market sell orders for every trade, based on the underlying hitting my stop level, which I¡¦ve placed 20 cents or so below most recent support. --â Dead wrong, unless you want to be a loser. http://www.elitetrader.com/vb/showt...ght=stop+orders
Two reasons for this.
Firstly, I've heard some real horror stories about massive, unrecoverable losses.
Secondly, because of my work, my access to my account and the markets can be limited. For example, a couple of times now I've arrived home from work after markets have closed, noticed that a stock has dropped beneath my mental support, and then gapped down the next day, incurring a bigger loss than I'd allowed for.
If I had full-time access to the markets, I'd stick to mental stops. But unfortunately, I don't have that luxury. I need to have a safety net in place, in case I'm not there myself to catch the stock as it falls.
The majority of my initial small losses came courtesy of vega. I was buying ATM/OTM options, and getting burnt, even though the underlying often proceeded to make a nice move in my direction (after I¡¦d taken my 1% loss and closed the position). --â I think you mean theta.
No, I mean literally three or four days after I'd buy my long OTM/ATM calls, they'd drop to 50% of their original value, with no change in the underlying.
So I¡¦ve decided to stick to 75-80 delta ITM calls, expiring at least a month after the expected move.-â Not so great. You might as well get 30-1 pro leverage and just trade the underlying. Less slippage, more leverage, no decay.
You're right. The slippage on ITM calls is outrageous.
I'm not familiar with 30-1 pro leverage.
What exactly is that?
However, because of my ≤ 1.5% max loss, if I get stopped out of every single trade, 85-90% of my equity will be preserved. --â Because of your 1.5% max loss and (suicidal) use of stop orders, you'll continue to bleed until you correct these mistakes.
I haven't actually completed any trades since forming these rules and this basic strategy.
I don't have any results to base a judgement on yet.
I'll definitely re-evaluate things after a couple of weeks, once I close some of the positions.
Thanks again for the feedback.
Opened two more positions:
AMTD May 22.5 calls
AOC Apr 32.5 calls
65% of equity working.
Raised the stops on CNET, LZ, CIGO, all of which have established an intermediate support.
The rest of the watchlist didn't move.
I was tempted to buy HIBB regardless.
Why?
On the weekly chart, steady long-term uptrend since 2001 and recent role-reversal.
Gap down to strong support after a breakout on high volume.
Industry rising out of a two-month consolidation phase.
Earlier today, was moving up nicely and I imagined it was poised to form a bullish engulfing pattern. I was very close to buying.
Decided to wait for the pattern to complete.
The price duly dropped from the high, and ended as a hammer. I'm going to maintain discipline, and wait for a convincing move up to begin before I put my money on the table.
I've learnt a couple of important lessons-
Don't second-guess the stock's movement. Trade later in the day, so the price is a more accurate reflection of the closing price.
So tomorrow's watchlist -
POOL
HIBB
RBAK
TLAB
AMTD May 22.5 calls
AOC Apr 32.5 calls
65% of equity working.
Raised the stops on CNET, LZ, CIGO, all of which have established an intermediate support.
The rest of the watchlist didn't move.
I was tempted to buy HIBB regardless.
Why?
On the weekly chart, steady long-term uptrend since 2001 and recent role-reversal.
Gap down to strong support after a breakout on high volume.
Industry rising out of a two-month consolidation phase.
Earlier today, was moving up nicely and I imagined it was poised to form a bullish engulfing pattern. I was very close to buying.
Decided to wait for the pattern to complete.
The price duly dropped from the high, and ended as a hammer. I'm going to maintain discipline, and wait for a convincing move up to begin before I put my money on the table.
I've learnt a couple of important lessons-
Don't second-guess the stock's movement. Trade later in the day, so the price is a more accurate reflection of the closing price.
So tomorrow's watchlist -
POOL
HIBB
RBAK
TLAB
I have the pleasure of commuting ninety minutes to work every morning.
Which gives me a lot of time to think.
I made a couple more distinctions.
Last night, from 6-9 pm I was virtually glued to the screen, hypnotised to my real time data feeds. I was constantly reviewing the stock on my watchlist, the ones on my portfolio, jumping back and forth between market data, intraday charts, option chains, daily charts on TC2000, my results spreadsheet, stock moved up, stock moved down, forcing me to constantly reassess my open positions.
I didn't realise the absurd futility of this until after markets had closed.
I based my decisions to enter a position on end of day data. Therefore, I should be deciding when to get out on comparable information.
So my first distinction is not to monitor open positions until markets have closed.
Coupled with trading during the last hour of the trading day, that should free up the rest of my time to attend to other commitments.
Anything that assists the seamless integration of trading with my life.
Which gives me a lot of time to think.
I made a couple more distinctions.
Last night, from 6-9 pm I was virtually glued to the screen, hypnotised to my real time data feeds. I was constantly reviewing the stock on my watchlist, the ones on my portfolio, jumping back and forth between market data, intraday charts, option chains, daily charts on TC2000, my results spreadsheet, stock moved up, stock moved down, forcing me to constantly reassess my open positions.
I didn't realise the absurd futility of this until after markets had closed.
I based my decisions to enter a position on end of day data. Therefore, I should be deciding when to get out on comparable information.
So my first distinction is not to monitor open positions until markets have closed.
Coupled with trading during the last hour of the trading day, that should free up the rest of my time to attend to other commitments.
Anything that assists the seamless integration of trading with my life.
I was stopped out of three positions yesterday.
Results will be posted as approximate % of equity-
AOC -1%
GOLD -1%
CNET 0.5%
Overall, account is currently -3.5%.
Instead of disappointment, Iâve found validation that my conditional stop orders are robust, and that Iâm calculating my estimated risk correctly, and gratitude, that Iâm learning my lessons so cheaply.
My three teachers and the lessons they taught:
AOC â this taught me to be accurate in the determination of a support level. Misplacement of a stop order can increase susceptibility to getting whipped. Looking back at the chart, I note that AOC had a support zone rather than a discrete support level, and had I placed my stop below the zone, I would still be in the trade.
I actually intend to re-enter this trade today.
I learnt from my early whippings that if Iâm still bullish on the stock, I should observe closely for an opportunity to re-enter. In this case, if we close above 37 itâs a bullish engulfing pattern.
GOLD â I bought on the intraday high, and the expectation of a bullish engulfing pattern forming. The price proceeded to drop and my BE became an inverted hammer. Do not anticipate a pattern completing, wait for hard evidence.
Another reason I should have been a little hesitant; it had broken out of a long-term upward channel and stalled. I should have waited for it to test support and bounce before I entered.
CNET â I protected 1/3 of my potential profits by raising my stop after the initial move up. I will do this again. It paused at previous resistance, forming an inverted hammer on high volume. Perhaps I should have taken this as a sign to exit and lock-in my 1.5% equity gain on a 3-day trade.
A common conundrum in many recent analyses:
Anticipate a stockâs movement and enter early, or wait for confirmation at the risk of missing the move (in my case, the entry rising too far above support).
Results will be posted as approximate % of equity-
AOC -1%
GOLD -1%
CNET 0.5%
Overall, account is currently -3.5%.
Instead of disappointment, Iâve found validation that my conditional stop orders are robust, and that Iâm calculating my estimated risk correctly, and gratitude, that Iâm learning my lessons so cheaply.
My three teachers and the lessons they taught:
AOC â this taught me to be accurate in the determination of a support level. Misplacement of a stop order can increase susceptibility to getting whipped. Looking back at the chart, I note that AOC had a support zone rather than a discrete support level, and had I placed my stop below the zone, I would still be in the trade.
I actually intend to re-enter this trade today.
I learnt from my early whippings that if Iâm still bullish on the stock, I should observe closely for an opportunity to re-enter. In this case, if we close above 37 itâs a bullish engulfing pattern.
GOLD â I bought on the intraday high, and the expectation of a bullish engulfing pattern forming. The price proceeded to drop and my BE became an inverted hammer. Do not anticipate a pattern completing, wait for hard evidence.
Another reason I should have been a little hesitant; it had broken out of a long-term upward channel and stalled. I should have waited for it to test support and bounce before I entered.
CNET â I protected 1/3 of my potential profits by raising my stop after the initial move up. I will do this again. It paused at previous resistance, forming an inverted hammer on high volume. Perhaps I should have taken this as a sign to exit and lock-in my 1.5% equity gain on a 3-day trade.
A common conundrum in many recent analyses:
Anticipate a stockâs movement and enter early, or wait for confirmation at the risk of missing the move (in my case, the entry rising too far above support).
Re-entered AOC 30 minutes from close, bullish engulfing pattern confirmed. This time, I made sure to place my stop below the support zone
Admittedly, immediate volume has dropped, but based on recent volume, long-term trend, and industry trend, momentum is clearly with the buyers.
I ran a stock-scan for engulfing patterns an hour before close, and my favourite from the list was PDS. However, while it wasn't overextended from the most recent support level, I again felt that I could identify a support zone (~33-33.6), which would make a conservative stop redundant.
I'm frankly a little surprised that lessons learnt are having immediate application - this is a trade I would have entered yesterday. Will be interesting to follow on paper.
Admittedly, immediate volume has dropped, but based on recent volume, long-term trend, and industry trend, momentum is clearly with the buyers.
I ran a stock-scan for engulfing patterns an hour before close, and my favourite from the list was PDS. However, while it wasn't overextended from the most recent support level, I again felt that I could identify a support zone (~33-33.6), which would make a conservative stop redundant.
I'm frankly a little surprised that lessons learnt are having immediate application - this is a trade I would have entered yesterday. Will be interesting to follow on paper.