Interested in a day trading method ?

Traderich,

some statistics are very important (at least for me) to assess whether a strategy is sound and tradeable:

1.) Average profit per trade:

My criteria is >1% per trade AFTER commission (for stocks). This gives you some room to cover slippage

2.) Return in relation to drawdown:

This measures the consistency of your strategy. I want to have at least a relation of 10:1 (e.g. 100% annual profit, 10% max drawdown) with a reasonable number of trades

When your strategy is only profitable when trading >500 lots then your average profit per trade is simply not good enough.

One way to improve things is to look at the MFE (Maximum Favorable Excursion) and MAE (Maximum Adverse Excursion) figures in combination with the profit distribution of your strategy. These numbers can give you a hint to find better stops, entries and/or exits.

The portfolio simulator in Wealth Lab is a great tool to support a research like this.
 
Quote from bighog:

Display your methods and surely we can give you advice...GOOD and BAD...:D

I will be sending via email a copy of the spreadsheet which has the details of all the trades for the past few months for further in depth conversations. If you are interested send a message directly to me with your email. Thanks.

off the top of my head i will say this, high math and quantum physics is not the answer. I know, i use simple stuff, stuff that has been in tons of books.

I agree, quantum physics is not needed here, and yes the KISS is very much at work here. In fact, my strategy will seem extremely simple when I tell you what I do. I can tell you that it was not without a good deal of time looking at and refining it and its still not a home run, that is why I am venturing here to see if anyone has any good ideas of how to further improve the method.

What is not in the books is quite simply the psychological gut wrenching learning curve drawn from actual battles. Winning and losing is your real study to dwell on, mistakes are made for one reason, that is to learn from them.

Print the methods, surely you have no "SECRET WEAPON"....:)
More...
I have no secret weapon, far from it. I will give you more detail on a 1 on 1 basis rather than blindly posting my strategy on here.
 
Quote from mujoh:

Traderich,

some statistics are very important (at least for me) to assess whether a strategy is sound and tradeable:

1.) Average profit per trade:

My criteria is >1% per trade AFTER commission (for stocks). This gives you some room to cover slippage

2.) Return in relation to drawdown:

This measures the consistency of your strategy. I want to have at least a relation of 10:1 (e.g. 100% annual profit, 10% max drawdown) with a reasonable number of trades

When your strategy is only profitable when trading >500 lots then your average profit per trade is simply not good enough.
How much is good enough? I don't know how much you make for a living, but I am pretty happy making about $50,000/year trading stocks when I do not have to watch the market all day long. I have my day job as well.

One way to improve things is to look at the MFE (Maximum Favorable Excursion) and MAE (Maximum Adverse Excursion) figures in combination with the profit distribution of your strategy. These numbers can give you a hint to find better stops, entries and/or exits.

The portfolio simulator in Wealth Lab is a great tool to support a research like this.
More...
 
Quote from spike500:

If the commission makes the difference between profit and loss the system is worthless.

Commission can never turn a profitable system in a losing one if the system is sound.

It's not the math that defines if a system is profitable or not. A system is a combination of factors (charts, emotions, psychology....). It's finding the perfect balance between all these factors that is important. Thta makes a system profitable.
Analytical thinking and finding relations between the different factors is essential.
More...

Many of you will consider what I am doing as scalping because the average gain is about 4 cents per trade. Be careful though, I am saying the 'average' is 6 cents for several thousand trades. 6 cents per stock equates to $60 for 1000 shares minus $14 commission is $46/trade average. Assume average of 6 stocks traded each day equates to just under $300/day and about $1500/week. It is extremely important that you realize that this the average of hundreds of trades. Some trades were worth several thousand dollars profit where others were a couple thousand loss and everywhere in between. I have a full log of each trade and the profits and losses for your review.
 
'5/2 $4,180
'5/3 ($554)
'5/4 $1,006
'5/5 ($1,034)
'5/6 $556
'5/9 $3,306
'5/10 ($1,554)
'5/11 ($164)
'5/12 ($734)
'5/13 ($1,294)
'5/16 $866
'5/17 $1,286
'5/18 $786
'5/19 $826
'5/20 $726
'5/23 $786
'5/24 ($1,174)
'5/25 ($3,614)
'5/26 ($44)
'5/27 ($174)
'5/31 ($124)
'6/1 $356
'6/2 $3,196
'6/3 $4,196
'6/6 ($574)
'6/7 ($214)
'6/8 ($174)
'6/9 $2,466
'6/10 $1,412
'6/13 ($904)
'6/14 $3,776
'6/15 ($244)
'6/16 ($3,024)
'6/17 ($6,134)
'6/21 $1,776
'6/22 $1,646
'6/23 ($1,684)
'6/24 ($1,354)
'6/27 $166
'6/28 $1,286
'6/29 $3,266
'6/30 ($154)
'7/1 $816
'7/5 ($1,784)
'7/6 ($518)
'7/7 $1,816
'7/8 $892
'7/11 ($504)
'7/13 ($3,414)
'7/14 $396
'7/15 $0
'7/18 $1,456
'7/20 $4,306
'7/21 $206
'7/25 $1,726
'7/26 ($428)
'7/27 $1,496
'7/28 $1,172
'7/29 ($564)
'8/1 ($164)
'8/2 ($354)
'8/3 $476
'8/4 ($114)
'8/5 ($1,454)
'8/8 ($1,864)
'8/9 ($294)
'8/10 ($1,104)
'8/11 ($334)
'8/12 ($264)
'8/15 $786
'8/16 ($804)
'8/17 $256
'8/18 $7,126
'8/19 ($2,484)
'8/22 $56
'8/23 ($568)
'8/24 $2,086
'8/25 ($304)
'8/26 ($1,144)
'8/29mon $616
'8/30 ($834)
'8/31 $4,161
'9/1 ($1,494)
'9/2
'9/5
'9/6 $816
'9/7 ($1,024)
'9/8 $496
'9/9 ($34)
'9/12 $1,726
'9/13 $886
'9/14 $736
'9/15 ($2,254)
'9/16 $1,300
'9/19 ($2,134)
'9/20 ($2,244)
'9/21 $786
'9/22 ($2,294)
'9/23 $2,036




$20,795
 
Quote from mschey:

If execution costs make the difference in his strategy, the difference between making money and not making money, then I am not sure he has found an exploitable edge. Given the capital constraints he has listed.
More...

I am paying $7/trade market or limit order.

If you were using a full service brokerage house which could charge $500 for a trade, guess what? You'd better be in for the long haul to try and overcome that vig!

My average profit for several hundred trades is less than 10 cents per trade. Doesn't sound very good, but 9 cents average profit per trade for 1000 shares is $90. Subtract commission of $14 leaves you with $76/trade. Times that by about 6 trades a day on average is say $400/day or about $2000/week. If this is chump change to you, please let me be the one asking you what the heck you are doing!
 
I really didn't want to have to explain this in detail but here is the reason why the same 1000 share trades would not be profitable if I only traded 100 share blocks:

9 cent profit per trade average x 1000 shares is $90.
9 cent profit per trade average x 100 shares is $9.

subtract $14 commission and you see why.

so, I am sure the smart ones are saying, oh, I see, so my breakeven is 1.4 cents on 1000 shares buy 14 cents on 100 shares.

Big difference. In fact, it turns a profitable method into a losing proposition.

Now that we have that detail cleared up, let's move. thanks.
 
I know I have stressed the point that the AVERAGE for several hundred trades is about 6 cents, here are a couple specific examples of the swings. Notice in my post of the actual day results from 5/2- 9/23 there are huge swings.

I bought ALO @ 26.60 the other day, sold off @ 29.25 for a nice gain on 1000 shares.

I bought POT @ 104.55 a while back. sold the 1000 shares off @ 100.35 for a massive loss.


As you can see there are huge swings on individual trades and also on a single day.

I am not concerned with one trade, or one day of trading. I want to show a profit doing the same thing over and over again over the course of a year or longer.

One other point: I do not use tight stops on the orders. I have thought about this and have to further review it to see what is a good stop loss. I like the idea of minimizing the losses, but several times the stocks go down and then go back up later in the day.

If you review the data you will see that the big gains are bigger than the big losses and there are more bigger winners than big losers.

I agree with the guy who said that in layman terms its better to let the winners ride and cut the losers fast.
 
7/29/05:
ticker buy price sell price 1000 500 300 100
RGR 11.21 11.77 ($504) ($259) ($161) ($63)
MNT 48.78 48.27 ($524) ($269) ($167) ($65)
WEN 50.32 51.74 $1,406 $696 $412 $128
IM 18.43 18.64 $196 $91 $49 $7
SVR 14.01 13.98 ($44) ($29) ($23) ($17)
BHS 50.99 49.91 ($1,094) ($554) ($338) ($122)
Total 193.75 194.23 ($564) ($324) ($228) ($132)
DTBP needed $193k $96k $58k 19k


Notice that this day was a loss of $564 based on 1000 shares of each stock traded. Also notice that $193,000 was needed for buying power to buy all the stocks that day.

Here is a winning day:

10/17/05: # shares traded
ticker buy sell 1000 500 300 100
BLI 12.5 12.7 $186 $86 $46 $6
COG 29.87 30.46 $576 $281 $163 $45
PKG 22.3 22.39 $76 $31 $13 ($5)
HD 39.19 38.8 ($404) ($209) ($131) ($53)
DKS 35.21 35.9 $676 $331 $193 $55
HYC 5.61 5.8 $176 $81 $43 $5
144.68 146.05 $1,286 $601 $327 $53
DTBP needed $146k $73k $43k $14k
 
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