Mr Subliminal's Remote Trading Journal

Instruments to be traded
Nasdaq stocks with an average daily volume greater than 4 million, price 13 to 25, ATR(14) > 1.0. A prerequisite for trading any stock is observing Level II and T&S action for at least 5 full trading days, plus acquiring a rudimentary fundamental and technical feel for the stock.

Hardware
Dual monitor (17"+19") PIII 866MHz, 256 MB RAM, DSL connection, TV (CNBC, CNN etc.)

Software
Mach II, NexTrend with 4 1m charts (ES, NQ and 2 Nasdaq stocks) on the active page, with 4 corresponding 5m charts on another open, but not visible, page.

Trading Style
Discretionary, intraday, mainly trend following, top down approach. ES and NQ (as opposed to the "big" contracts) used as lead indicators together with Level II, time and sales, intraday (1m, 5m) support and resistance levels. Intraday (5m) trend of market used to determine bias of direction to be traded. Relative strength (weakness) of the 2 stocks used to determine which one is traded. Special focus on selectivity of trades.

Trading Rules
  1. Intraday only - definitely no overnights, even for profitable positions.
  2. No positions to be opened in premarket trading. Extreme selectivity to be exercised during the midday doldrums, especially for opening positions.
  3. Only 1 open position at a time.
  4. Maximum position size (MPS) = Equity * 6%, rounded to lower two hundred. Maximum value is 6,000 shares.
    eg. for $42,000 account, MPS = 2,400 shares.
  5. The only factor to be taken into account during trading should be the short term (5m) trend and not any preconceived ideas no matter how well-founded, nor other people's opinions.
  6. Entry, in the direction of the short term (5m) trend, for the stock which has been displaying greater relative strength (or weakness) based on price, Level II (see a) and T&S (see b), should be taken when the futures (ES & NQ) indicate a continuation of the trend (see c). The position size should be for MPS and not scaled in.

    a. The Level II "rotation" of movement should be in the direction of the short term trend, generally meaning that there are more buyers (ie. no. of shares bid) than sellers (ie. no. of shares offered) around the inside quotes for an upward trend, and vice versa for a downward trend. The axe, or any other large and persistent MM/ECN should not be active on the opposite side.

    b. Most T&S prints should be at or through the offer for an upward trend, and on or through the bid for a downward trend.

    c. Continuation of green candlesticks on ES and NQ 1m charts for an upward trend and red candlesticks for a downward trend.
  7. l, the stop loss, is 20 cents and p, the stop profit is 35 cents regardless of MPS. In any event, MPS*l should not be greater than Equity*1.2%.
  8. Full exit to be taken when stop loss is reached without exception (ie. at price e-l, where e is average entry price).

    In the event of choppy or rangebound conditions in either the stock, Nasdaq Comp or S&P 500, full exit to be taken upon reaching the profit target (e+p) .

    If the stock, Nasdaq Comp and S&P 500 are all trending, 50% of position (50%*MPS, rounded to upper 100) to be exited at price e+p, with the exit stop price moved up to e, where it becomes a trailing stop taking on the value e+h-p, where h is the highest price reached above e+p since exiting the first 50%. When the trailing stop is hit, the remaining position is exited.
  9. A position should not be immediately reversed (after stopping out) only in extenuating circumstances.
  10. Cease trading for the day should the daily loss exceed Equity*3%.
    Cease trading for the week should the weekly loss exceed Equity*7.5%.
    Cease trading for the month should the monthly loss exceed Equity*15%.

    Cease trading for the day for any deliberate breach of 1 to 9 above.
  11. In the event of an execution error, such as buying instead of selling, or opening a position in the wrong stock, the error should be reversed immediately, and if the original trade criteria are still valid, the correct trade should be entered into without too much mulling or regretting.
    [/list=1]

    Miscellaneous
    1. A trading log will be maintained daily.
    2. This Trading Plan is a work in progress to be modified continually.
    3. The account is to be swept monthly.
    4. Only after 6 months of consistent, profitable and disciplined trading of this style should any substantial changes be considered (eg. adding on another position, changing the timeframe etc.) to enable the utilization of (a) higher intraday margin and/or (b) infusion of capital. This, however, does not preclude the use of another separate account to trade a different style (eg. longer timeframe) as long as it doesn't interfere with this present style and is based on a sound and actual trading plan.[/List=1]
 
WOW,

that last post was great. I was just talking (as usual"talk" not action!!) to a trading friend about actually putting my plan/rules onto paper, even showing them to my wife for accountability .

Well that's is got to go, got some writing to do :-)

Thanks for a great post.

Andy
 
Commisso : "I have been only working the opens,..."

I had a good week and most of it was attributable to 1 or 2 good trades in the first hour of the day, followed by rock trading. A rock in poker jargon is a player who plays an extremely tight, patient game. Rocks don't create a lot of action, and when they enter a pot, more often than not they're in as a favorite. This is a decent strategy at some tables but good players with more varied strategies will eventually get the best of a real rock. Last week, on the other hand, I invariably started each day off on the wrong foot leading to more frenetic trading for the rest of the session. I am dissatisfied with both styles, missing excellent opportunities in one and taking too many in the other. I refuse to include a daily profit target in my trading plan as this would be the easy way out. In my quest to drive, I must now learn to shift gears. Ah, now where is the humor in all this, you ask? Where, indeed. (Starting to sound like a regular journal :()
 
The revelation of super_ego's PM to rs7 raises the moral dilemma of public disclosure of material originally obtained in confidence. Without consulting an ethicist, I am of the opinion that given the right circumstances, the public's right to know overrides the privacy issue. In this light I intend sharing with you some of the PM's I have sent and received recently, and hope that the ET members concerned do not view this as a betrayal of their trust. If this causes a controversy, then so be it - my conscience is clear.

Mr Subliminal wrote on 06-22-02 10:17 AM:

Dear Don,
I know Bright Trading has a regular weekly radio show on KFNN. I have an acquaintance well-connected in the entertainment industry who wishes to promote daytrading in general, and who would be willing to allocate you broadcast time on community radio throughout the entire US, targeting, of course, the more affluent areas. The ideal starting date would be August. You may mention Bright Trading as many times as you wish, but the content has to be attractive enough to lure the potential fencesitters and wannabes and therefore each program should start off with Bo Yoder's excellent $100 bill exercise - see link.

http://www.elitetrader.com/vb/showthread.php?s=&postid=73770#post73770

Let me know if you're interested.

Sincerely,
Mr Subliminal
More...

Mr Subliminal wrote on 06-22-02 10:39 AM:

Hello Magna,

http://www.elitetrader.com/vb/showthread.php?s=&postid=45272#post45272

Behind my idiotic banter, which as Moderator of the Journals Forum you no doubt are familiar with, lies a wealth of business acumen. My cyber-rummaging has revealed your interest in bikes which leads me to the following business proposition. Instead of trading during the low volatility days of August, I offer you, and any other bike owner you wish to bring, an opportunity to see America and make great money at the same time. At this stage, I cannot get into too much detail - suffice it to say that it will involve concentrated and frenzied bikeriding for about 15 minutes, followed by "mopping up" operations for about an hour depending on prevailing meteorological conditions. Sorry, can't say anymore but don't worry, it's all legitimate. Please reply soon.

Cheers,
Mr Subliminal
More...

Magna wrote on 06-22-02 11:14 AM:

Mr Subliminal,

Thank you for the offer, but I have made alternative plans for August. I have taken the liberty of forwarding your PM to murray t turtle, who is also a bike enthusiast and who may be interested.

http://www.elitetrader.com/vb/showthread.php?s=&postid=46405#post46405


Magna
More...

Don Bright wrote on 06-22-02 12:33 PM:

We currently have our hands full with the "Beyond the Snake Oil" tour. Throw in our "5 Day Professional Trading Course", my opening orders and posting to EliteTrader, and you can see that I haven't even got time to scratch my beard :) So, thanks for the offer but maybe some other time in the future.

Don Bright (not an alias)
More...

murray t turtle wrote on 06-22-02 01:08 PM:

Multiple,moving avg{4,EMA}??????.......:)[Linda Raschke p24-28]..."[1]Bar[chart],longer than 5min...........[2]more noise........[3]Shorting Argentinian Christmas/Hannukah RALLY"---------ActiveTraderMag:cool:

murray t turtle,nickname,not an alias
More...

Mr Subliminal wrote on 06-22-02 01:55 PM:

Hey Murray! I take it that you're not interested - that's cool.

Take care,
Mr Subliminal
More...
 
murray t turtle wrote on 06-22-02 01:08 PM:

Multiple,moving avg{4,EMA}??????.......[Linda Raschke p24-28]..."[1]Bar[chart],longer than 5min...........[2]more noise........[3]Shorting Argentinian Christmas/Hannukah RALLY"---------ActiveTraderMag

murray t turtle,nickname,not an alias
More...
That is genius. I AM REALLY LITERALLY ROFLMAO.
:p
 
1 April, 2002 : SEBL closes at 34.20

1 May, 2002 : SEBL closes at 23.16

rs7 (16 July, 2002) : "I will usually trade 10 times more shares of an $8 stock than I will of an $80 stock."

19 July, 2002 : SEBL closes at 9.30

I've always enjoyed trading SEBL but the romance is about to end, unless one of two things happen - it goes back up to 40, or I radically alter my style of trading. Sadly, neither of these is likely to occur in the near future.

While reviewing my results, I noticed a recent "bad" (net) week was in fact a "good" gross week. Looking further back, I found that virtually all clusters of "bad" days were actually gross positive - I say clusters because naturally there were many single losing gross days. The reason for this is so simple, I'm shocked I didn't realize it much earlier. As SEBL's price decreased by 75% in the last few months, my position size increased by a factor of 4, which as a bonus qualified me for a 25% reduction in commissions. Even the mathematically-challenged can readily see that this translates into a threefold increase in commission expenses. One could go back further in time, and get a slew of Nasdaq favorites cut by 90%. The creeping bear has made certain successful trading styles of the past financially untenable today. Those that wish to continue enjoying their weekend should skip the following paragraph and table, and resume reading from "To cut a long story...", where some obfuscation may still be expected.

In January of this year, tom_p simulated different trading styles in
http://www.elitetrader.com/vb/showthread.php?s=&postid=36309#post36309 the results of which are in the attachment tables.txt of that post. I took his work one step further and present a modified and extended version of his table. The methodology, assumptions and symbols are explained in his post and I have no intention of repeating them here. What is important is not the actual absolute values, but the relative differences.

Code: 
                     [u]SEBL trader April 2002[/u]
                     
No of          R as                Average      Total         No of          
trades         a fraction          Net Profit   Commissions   30% drawdowns
per day   p    of equity     C     for year     for year      per 10,000 years
==============================================================================
  12     0.58   0.005      0.010     86,500       86,500             0
  12     0.58   0.010      0.010    360,000      358,000             8
  12     0.54   0.005      0.010          0       46,000           918
  12     0.60   0.005      0.010    355,000      178,000             0


                     [u]SEBL trader July 2002[/u]
                     
No of          R as                Average      Total         No of          
trades         a fraction          Net Profit   Commissions   30% drawdowns
per day   p    of equity     C     for year     for year      per 10,000 years
==============================================================================
  12     0.58   0.005      0.0075   -27,400       82,000         9,981
  12     0.58   0.010      0.0075   -36,000      107,800        10,000
  12     0.54   0.005      0.0075   -36,000       54,000        10,000
  12     0.60   0.005      0.0075   -17,600      105,000         7,824
  12     0.62   0.005      0.0075         0      138,000           822
------
  12     0.66   0.005      0.0075    85,800      258,400             0
  12     0.68   0.005      0.0075   183,200      367,300             0
  
------
  12     0.58   0.005      0.0050         0       92,000           870
  12     0.60   0.005      0.0050    30,800      124,200             4
To cut a long story short, our "0.58" profitable and "0.60" high-flying April traders are losing money in July, with breakeven jumping from 0.54 to 0.62. Even if commissions are halved, the "0.58" trader will just break even. Put another way, in the space of three months, a lot of traders have been castrated for no fault of their own, and it gets worse the further back in time you go. Another interesting fact - it is in the broker's interest to significantly lower commissions - hopefully some are reading this.

There are only 4 Nasdaq stocks above 50, and the handful of tradable ones above 30 I will leave to others. I am opening an account to trade the e-minis while I rethink my stock trading style.
 
Good luck with e-minis, Mr Subliminal – you'll probably get hooked like the most of us.

You will love the fast moves, you will hate being on the wrong side of them.

I wouldn’t have it any other way.
:)
 
>>>""""In the event of an execution error, such as buying instead of selling, or opening a position in the wrong stock, the error should be reversed immediately, and if the original trade criteria are still valid, the correct trade should be entered into without too much mulling or regretting.""""


C'mon, real traders embrace the error and run with it as if it was a deliberate trade. Many make most of their profits on trades like this, as the trades intentionally entered usually suck.
 
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