My trading journey

M

my7tvette

I can't quite believe it, but I've been trading for 3 years now with a prop firm. I've been primarily a scalper, with some intraday stock pairs trading and hedged overnight trades. I haven't blown out my account, but then again, if I had been one of the guys who showed up with >=25K and a dream, would have been back working for "the man" a long time ago. I am generally pretty good at grinding out a few hundred a day, really all I need to pay the bills, but then occasionally I will have an "occurrence" where I lose a week or more of earnings in one day.

My primary weakness is one that plagues a lot of traders: I am quick to take my profits, and slow to take my losses. Another weakness has been my lack of a set of rules and disciplines to give my trading a theme. I am a discretionary trader that may be scalping a single stock for pennies today, trading stock pairs tomorrow, whatever catches my eye and looks promising.

I am hoping that the maintenance of this journal will help me reevaluate my trading, and rid myself of some of my collected baggage; I will try to post my results daily and some general reflections on my trading day. As for my trading methodology, I will be following several sets of stocks in various industries. My entries will be chart-based, on an "index" comprised of the particular stocks in the industry group I am following.

For me, the more things I try to watch, the less effective I become. I have three monitors devoted to charts and spreadsheets. I plan initially to watch 3 industry groups, one per monitor. I have set up 3 "index" charts. On each monitor there are 3 other charts, that will display the individual charts making up the "index". I plan to use a fairly simple moving average crossover system for my entries and exits. The entry signal will come from the index chart. I will then quickly scan each of the stock charts to determine which looks the most promising, seeking to rule out the choppier and/or misbehaving stocks. Once in a trade, my exit will be based on the price action of the individual stock. I will be stopping out on moving avg. crosses against me, and I will likely have some fixed amounts, based on volatility of the individual issues, that will constitute stops as well.

My goal here is to hone in on the relative strength of several different sectors, and by using an amalgam of three correlated stocks in the same industry group, reduce the noise and act on an individual stock only when the price action of the group is similar. In terms of other indicators besides MA's, I don't really use much; the more stuff thats on the screen, the less I see.

I realize there is nothing game-changing here. This isn't holy grail stuff. I merely seek a more rules-based approach to my trading; its funny, but after 3 years of full-time trading, there are days that, when I haven't made any $$ in the first hour or so of the day, I get this perplexed feeling, and think "now what do I do?" There are times when that answer can and should be "nothing".

I've seen a lot of guys come and go, some with a bang and others with a whimper. The guys that left with a bang never stopped throwing roundhouses long enough to realize the impending disaster that awaited them. The guys that left with a whimper had taken too many shots and just got to the point where all they could do was cover up. They just stopped throwing punches altogether. Then they just disappeared. For better or for worse, I've always tried to keep my hands moving, keep learning, keep moving forward and keep a healthy respect for my adversary. I've just had a few too many of those days where I got smacked right in the face and then threw my whole plan out the window...just long enough to catch up, I'll follow the game plan once I get even. I really can't afford to do that anymore. Anyway, I'm kinda getting off topic here, sorry to come off so boring and preachy.

As for this journal, I'll try to keep up with it on a daily basis. I have a trading log I keep in excel and also just started a handwritten log that I try to do as the trading day unfolds. My unfortunate tendency has been to quit posting in those logs after I take a big hit, I guess trying to forget what happened and move on. I will definitely try to keep it real here, and post the good and the bad. I need to get my ego out of my trading, and realize that its ok to be wrong, but that its not ok to be stubborn, just admit it and move on.
 
Today, my first day of trading this MA crossover scheme. I say "scheme" because it is really a work in progress; I am still ironing out many of the details in terms of how I will handle stops and profit-taking. Today I was watching the following 3 sectors, gold miners, brokers and homebuilders. I took 5 trades with the following stats:

Winners: 60% /Avg win: .13 / Avg loss: .20 / overall avg per share .015

I took a .58 loss on an MS long trade, in hindsight probably a bad idea anyway because of weakness in the group. Also, in my other four trades, I took profit on half my positions at a fixed amount, and tried to let the other half run, the fixed profit portion varied from .05 to .10. Looking back, here is what my stats might have looked like if I had not taken early profit on half of the positions:

Winners: 40% /Avg win: .31 / avg loss: .20 / overall avg per share .028

It is hard to draw conclusions from one day, but thus far, it appears that while taking the early profits bumped up my win %, it also reduced my winners and hurt my overall profitability.
Although the MS trade was my "worst" in terms of outcome, I had another trade, a short on GG, that I let go against me a bit more that I should have, but then it sold off and ended up as my most profitable trade. I traded from 5 minute charts, using a 5 and 45 pd MA for my crossover signals. I don't want too many signals per day, it just starts feeling like herding cats. I think you generally get 1 to 3 really good turning points most days in a stock and I am trying to fashion this strategy to approximate that idea. As it happens, I had 3 possible entry signals in the homebuilders (I took 1), 3 possible entry signals in the brokers (again, took 1...not the best one in that case) and 6 in the choppier golds (I took 3 there). I would have been chopped up pretty badly had I taken all the signals in the gold stocks.

All in all, it was a good excercise to help me work out some of the kinks. Pretty much a breakeven in terms of these trades, but made a bit scalping some old favorites to pay for my time. Might need to try filtering my trades a bit more, sort my industry groups by relative strength and lean toward the long signals only on stronger groups, shorts only on weaker groups. Would have saved me some $$ on MS
 
Will be watching your posts with interest. I feel like my experiences and weaknesses are somewhat like yours, so it will be interesting to see what revelations you have.

Best of trading to you, and thanks for posting.
 
Thanks for the encouragement J, I notice you have started a journal as well, I am going to check it out. Hopefully we can all learn a little bit about ourselves and trading along the way.
 
Day 2 was rather uneventful in terms of trades generated by my indicators. Again, I was watching gold miners, homebuilders, and brokerage firms. I took two trades, both short, in the homebuilders. I stopped out of Len at 15.25 when it started trading new intraday highs, for a .09 loser. Later in the day, when the homebuilders started trading down, took a short position on Kbh, which I closed out with about a minute left in the trading day for a .03 loser. There were three possible signals in brokerages, in hindsight it looks like one would have been nicely profitable, one probably a loser and the last probably a push. In the homebuilders, the first signal I took ended up being a headfake, I tried to anticipate the MA cross before the 5 minute bar was completed; looking back, by the time the bar closed, it didn't happen. There were two legitimate signals in the homebuilders, had I gotten long earlier on the first signal, it would have been a nicely profitable trade. The gold miners were very weak and sold off most of the day. This is a problem for an intraday MA crossover system. If the crossover happens right off the open, or near the close, and you choose to wait until things settle down, you miss the trade. not sure what to do about that.

Anyway, lost small $$ on these trades, I made some $$ off the open and later in the day scalping some other things. I'm not really documenting my scalps, crutch pair trades, etc. in this journal, as they will just confuse things even more than already.
 
Oops, I think I was mistaken J, it wasn't your journal. I've never been interested in doing this journal thing on a public forum before, but at this point, I'm hoping it will help keep me honest in my trading and more focused on eliminating my "wild hair" trades where I just throw out my rulebook and start trading like a cowboy. (Actually, its more like a mental list of "general recommendations to consider" than a strict rulebook. That is part of my problem, I'm sure!)
 
I didn't get much trading in today, and didn't take any trades based on this evolving methodology. I've had guys here retiling a shower in my house, so it has been a distraction. I was playing with my charts (again) trying to tackle the problem of wanting to be flat at the end of the day. Yesterday the homebuilders signalled a short during the last couple of hours. I took the trade, but scratched it at the close. Today they got crushed. So what to do, jump back in, or wait for the next signal there? Hoping to nail down a few of these issues with something that makes sense over the next day or so.
 
Quote from my7tvette:

Yesterday the homebuilders signalled a short during the last couple of hours. I took the trade, but scratched it at the close. Today they got crushed. So what to do, jump back in, or wait for the next signal there? Hoping to nail down a few of these issues with something that makes sense over the next day or so.
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I have worked with (not successfully I might add) time constraints when getting signals late in the day. If I get a signal after 2:00, I only enter if I am willing to hold overnight and I get much smaller/sell half at the close. Otherwise the risk/reward gets blown because I get flat at the close, killing any chance full profits. I am sure you have mulled this over, but it is a fairly simple rule to nail down if you are struggling with hard rules to follow.
 
I was following homebuilders, gold miners and oil refiners today. I switched out of brokers, LEH just hasn't been correlating with the others in the group and it is very news driven right now. I was doing quite a bit of scalping outside of this strategy, thus only took one signal, late in the day, had an MA cross on the gold miners. I needed a short anyway to hedge a stupid and stubborn scalp-gone-bad (remind me to start a "GE sucks" thread), so rather than picking one likely target out of my three candidates, I went ahead and hit them all. The trade was working, and one thing I did like about being in all three, it seemed to smooth out the noise because I really couldn't watch every tick go by. GG was coming down the slowest, so I covered for .05 and let the others work a bit. Covered ABX and NEM for about .33 each. I need to cut back on my "extracurricular" trading and concentrate on looking for entries within this system, to really give myself a chance at turning this into a workable strategy. I missed a couple of signals in the homebuilders and as for the refiners, the action midday was pretty choppy, so I'm just as glad I missed it. In the future I will present my trade statistics on a weekly basis rather than daily, and use the daily entries for general commentary on the trading day.
 
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