Breaking the Pattern Day Trading Barrier
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Just about everyone here at EliteTrader who wrote a comment on what I do tried to talk me out of my system, but I'm glad I listened to none of them. The first (and only) person I ever found (just a month ago) who says the same thing I say about moving averages is some guy named Patrick (who calls himself VP) from a website called No Nonsense Forex, so I'm curious...who is this JH to which you refer?
(The only trader I know of who says something similar to what I say about moving average envelopes is a contributor to this forum who calls himself Turveyd. By the way, what I refer to as a "directional bias line" is labeled as a "baseline" by Patrick.)
I agree with all that you wrote in the post above except that, in my experience, I do not find the added benefit that many others do in trading using EMAs in place of SMAs. Simple moving averages work just fine for me, though not at the same settings as EMAs.
I'm familiar with the advantages of trading futures, and have done so through derivatives or demo accounts while living in the United Arab Emirates. But for some reason, my impression is that you need about $50,000 minimum to trade futures effectively here in the U.S.A. (though I understand that recently services have begun to offer micro e-mini futures, though I think I also read that the fees if day trading can be disproportionately high).
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Wednesday / November 20, 2019 / 8:30 a.m. PST
It turns out that this was a good decision in that PDD took a dive today. If I were trading for real and following my rule to never trade Chinese companies, I wouldn't have been in this trade in the first place in that it also turns out that PDD is an e-commerce platform founded in Shanghai.
I'm satisfied that this approach to trading stocks is superior to all those I came up with in the past, so I will not be adding anymore equities for now. The last major question I have at this point is whether LPG should be sold now at $13.64 for a 9% gain, even though it looks like it has the potential to push higher. I'm thinking that maybe checking the volume at the end of the day might offer a clue as to which way to go.
Image from TC2000 Chart
If JH is Jack Hershey, my research suggests that "the only minor drawback is that his writing style frequently borders on the incomprehensible." Consequently, if I ever return to trading futures with a live account and find I am dissatisfied with my results, I might at that time give Hershey's method a serious look. But for now however, I'll merely make a mental note that his ideas are out there.
Based on volume, it would seem to me that a trader ought to hold on to LPG a bit longer, seeing as how today's volume at the close was higher than it's been in the past two weeks.
Thursday / November 21, 2019 / 90 minutes after the NY session opening bell
The above would seem to have been the right call in that LPG is now up 11% at $13.86.
Today I would have cashed out of FCN for a 2% gain and FLXN for a 1% gain. I would have also exited ATKR for a slight loss that would have amounted to less than -1%.
Given the performance of COLD, SUM, INXN, LPG, and MDCO, establishing a flat or hard rule for exiting positions once a 5% return is available does not make a lot of sense. If Chinese companies are avoided, this filter seems to select stocks that usually begin dropping very gradually, so exiting at the first sign of weakness (or when a stock has suffered a full -1% loss) would appear to be the better way to go.
Note to self: MDCO is back on the rise, just for your information, but not that it matters.
Of the four stocks chosen yesterday, only OMF is up at all, and UFPI had to be abandoned due to a -2% drop, but seeing as how the S&P 500 and DOW have been falling the past three days, this is no big surprise, and the screen that highlighted them is still superior to all those I designed in the past, especially in its apparent ability to avoid drops of greater than -2% (except for PDD).
Thursday, November 21, 2019
I am out of all the stocks I purchased (virtually) a week ago except for LPG. At $13.96 this asset is still rising (up 12% now) which makes me nervous. I therefore did an inadequately minute amount of research to see if I might be able to get some idea as to why it is doing so well, and apparently it is already outperforming expectations from three weeks ago. I am therefore going to pocket my gains here (virtually) to ensure I don’t get blindsided by an unexpected crash, and I will simply watch its progress going forward to see how much profit I may have left on the table due to what might very well turn out to be an overabundance of caution.
I am also out of all the stocks purchased last Friday, and the only one I’m still holding from Monday is CZZ. Most of those from Tuesday through today however are still in my “portfolio,” but have been unable to climb even as high as 1% thus far.
If I had purchased $1000 worth of shares from each of all these equities, those from last Thursday would have netted me approximately $488.43 before fees and commissions, Friday’s would have lost me -$41.50, and Monday’s would have returned roughly $266.41 (though this would have only been $40.36 without MDCO) for a total of $713.34.
I am out of all the stocks I purchased (virtually) a week ago except for LPG. At $13.96 this asset is still rising (up 12% now) which makes me nervous. I therefore did an inadequately minute amount of research to see if I might be able to get some idea as to why it is doing so well, and apparently it is already outperforming expectations from three weeks ago. I am therefore going to pocket my gains here (virtually) to ensure I don’t get blindsided by an unexpected crash, and I will simply watch its progress going forward to see how much profit I may have left on the table due to what might very well turn out to be an overabundance of caution.
I am also out of all the stocks purchased last Friday, and the only one I’m still holding from Monday is CZZ. Most of those from Tuesday through today however are still in my “portfolio,” but have been unable to climb even as high as 1% thus far.
If I had purchased $1000 worth of shares from each of all these equities, those from last Thursday would have netted me approximately $488.43 before fees and commissions, Friday’s would have lost me -$41.50, and Monday’s would have returned roughly $266.41 (though this would have only been $40.36 without MDCO) for a total of $713.34.
Trust the volume dude. At $14.43 LPG is now up 16%.
My previous screens would often find stocks that would climb 5% or more the very next day, but would also choose assets that fell -5% or more the next day. I like this filter much better because virtually none of its selections lose big all at once. The only one that did was from China, and even that one gave warning signs in advance so that I was able to get out before the crash. Moreover, from time to time this filter selects equities that are ready to take off on kind of a slow (or not so slow) burn, such as CAR, SUM, LPSN, MDCO, and LPG, so that it might take a week or so, but I still end up with those big 7%+ winners anyway, but without the big -7%+ losers.
Something else I like about this stock screen is that it picks some of the few equities that are able to rise in the face of falling indices, such as CSK, CCK, OMF and AER. And finally, the "let your winners ride until you see weakness, but bail on any instrument that loses a full -1%" means I will never be deluded into holding in a down market.
So today I exited OMF with a 2% gain, FSS with a -2% loss, and MAS with a -1% loss. (I should have exited FSS yesterday, when it was only at -1%. Also, if CZZ does not do better than $17.35, where it is right now, I will have to exit this stock today as well in that this would mean it is beginning to show signs of weakness.)
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