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Please comment on my day trading plan
- Thread starter jr07
- Start date
Quote from AAAintheBeltway:
What makes you think a break of the "100 period " MA of volume is a good entry signal?
Playing news or earnings stocks is tricky. I doubt this kind of approach will have an edge. Ken Wolfe has done a lot of work on these types of stocks. You might want to review some of his suggestions.
Well all trading plan needs an entry signal. I chose volume above its own MA on the basis that this means an increase in the crowd following this particular price movement and therefore provide strength to the movement.
Quote from Rabbitone:
Hello Jr07,
You said to comment so I am. I have a number of questions because there are a number of items we are not privy to from your plans list that are not shown that may affect how your day trading will actually work and how your plan is set up. Some of these items are:
Have you specified what your goals and objectives are for the trades you make? For example what kind of average profit per day can you expect to get from your trading.
Account sizing. Are you starting with $50,000 and up so you can pay for any learning curve in trading? Are all you funds for trading only and not âscared money?â
No Prior experience in trading: If you have never traded before than position size will have to be much more limited. Unless you do this you may go through your account quickly while you are learning to trade. As others noted you will have to back test your edge and consider paper trading it to confirm how the edge works.
Prior experience in trading: If you have day traded before and blown accounts like the rest of us then you need to define controls over losses. I donât see any mention of drawdown controls or account management? What is the maximum loss you will allow for a day and cumulative before you stop trading?
Trading Log? What roles will this play in your plan? How often will you review your trading and lessons learned feedback?
Do you have a daily work schedule for each day? For example do you do daily market reviews? Is defining market trend part of this? Are you going to review not at just the sector level but pick the best performing industries and then the stocks in them?
How often will you do performance reviews of your trades? What key stats will tell you that you are meeting your goals and objectives? Are you meeting your expectancy?
Rabbitone here are my follow up comments to your questions, in the same order
- I have a goal of making 1% per day (obviously not making it)
- Yes, my account size is around 50,000$ none of it is "sacred money"
- I have paper traded this strategy during most of last year, and the year before I did blow up a 30,000$ account but it was adding to losing positions, not using stop losses, calling tops and bottoms, letting losing trades run, etc, making all the mistakes in the book, none of which I am making now.
- I don't have a maximum loss limit for any given day, but I do have a 20% maximum loss overall limit, that if reach would make me stop all trading
- My trading log helped me learn a lot during last year's paper trading experiment, specially with respect to not using stocks below 5$, not using stocks with low volume, and never put more that 10% of account value in a single trade. This is how I came up with the rules in my trading plan. The problem I have here, and it is why I am asking for help, is that my trading log has stopped teaching me. I log in my trades on a weekly basis, half of them are winners, half of them are losers, but I don't "see" anything. There is nothing that differentiates the losing trades from the winning trades. I have looked at time of trade, number of shares, day of the week, but there is nothing that sticks out like a sore thumb that would help me perhaps add another rule to reduce the number of loses.
- I review all market news/results announcements/analyst recommendations/volume spikes etc prior to market open and based on that select the stocks I will monitor throughout the day. Al though I also have separate to all this a small market timing system I am working on which tells me if I should be long or short, I don´t let it bias me. I never have a market bias.
- I monitor my trades weekly and use number of winners, number of losers, $ won, $ lost and use those 4 figures to come up with winning %, ratios, averages, etc.
Since January and after commissions, I have had
298 wins
447 losses
for a win ratio of 40%
Average win 289$
Average loss -209$
Not quite the 2x1 mentioned in the plan, but not all trades reach the profit goal and are exited manually if there is a change in direction.
But its the 40% win rate that really worries me. Its not even 50% as I mentioned at the beginning.
J
Hey jr,
You are actually on a very good track. This is somewhat related to what I do, but I've automated it and backtested the hell out of it. My win rate is only 44% and my P/L ratio is 1.61. It's not the best in the world, but it's been making consistent money for the past two years. However, I average around 13 trades per day, so this trade frequency helps out quite a bit.
A few suggestions for you:
- You may want to reconsider how you are sizing your positions. Instead of risking 10%, consider risking a percentage of your portfolio as follows: Say, you are at $50,000 and you decide that you want to risk .5% of your portfolio per trade. This means that you are willing to loose $250 for each trade. Therefore, divide 250 by your stop size, to yield your "estimated" position size. I say estimated, because you should also include commissions and estimated slippage. So, in the case of a .20 cent stop, your position size would be $250 / .20 = 1250. But, due to commissions and slippage, you may want to only trade 1000 or 1100 shares. For myself, I use .25% per position and sometimes (if the days are very crazy), my system starts to down-size positions as the day wears on.....
- I know this can conjure up religious wars, but consider using a trailing stop after you've let your position wiggle around for a short while (from 1/2 hour to 1 hour). I have tested just about every stop under the sun and a simple trail has given me the highest expectancy (bar none) over all other types of stops and profit target techniques. When trading these types of stocks, you are really looking to capture large fat-tails where certain stocks are trading on insanely abnormal volume. These fat tails are the bread-and-butter of this type of strategy.
Jason
You are actually on a very good track. This is somewhat related to what I do, but I've automated it and backtested the hell out of it. My win rate is only 44% and my P/L ratio is 1.61. It's not the best in the world, but it's been making consistent money for the past two years. However, I average around 13 trades per day, so this trade frequency helps out quite a bit.
A few suggestions for you:
- You may want to reconsider how you are sizing your positions. Instead of risking 10%, consider risking a percentage of your portfolio as follows: Say, you are at $50,000 and you decide that you want to risk .5% of your portfolio per trade. This means that you are willing to loose $250 for each trade. Therefore, divide 250 by your stop size, to yield your "estimated" position size. I say estimated, because you should also include commissions and estimated slippage. So, in the case of a .20 cent stop, your position size would be $250 / .20 = 1250. But, due to commissions and slippage, you may want to only trade 1000 or 1100 shares. For myself, I use .25% per position and sometimes (if the days are very crazy), my system starts to down-size positions as the day wears on.....
- I know this can conjure up religious wars, but consider using a trailing stop after you've let your position wiggle around for a short while (from 1/2 hour to 1 hour). I have tested just about every stop under the sun and a simple trail has given me the highest expectancy (bar none) over all other types of stops and profit target techniques. When trading these types of stocks, you are really looking to capture large fat-tails where certain stocks are trading on insanely abnormal volume. These fat tails are the bread-and-butter of this type of strategy.
Jason
Quote from jr07:
I monitor my trades weekly and use number of winners, number of losers, $ won, $ lost and use those 4 figures to come up with winning %, ratios, averages, etc.
Since January and after commissions, I have had
298 wins
447 losses
for a win ratio of 40%
Average win 289$
Average loss -209$
Not quite the 2x1 mentioned in the plan, but not all trades reach the profit goal and are exited manually if there is a change in direction.
But its the 40% win rate that really worries me. Its not even 50% as I mentioned at the beginning.
J
Works out to an average of 17 trades per day.
Do you feel that you are over trading?
How many different strategies are you using?
Is your system always in?
You can obtaing historical dates of important announcements. Ask Datastream for a trial. It's much more difficult to obtain initial data releases versus revisions.Quote from jr07:
No, not really. Since stocks in the news change so much I don't think this is possible. How can I know which stocks I would've traded on feb 15th 2007, for instance?
J
Quote from jr07:
Rabbitone here are my follow up comments to your questions, in the same order
- I have a goal of making 1% per day (obviously not making it)
- Yes, my account size is around 50,000$ none of it is "sacred money"
- I have paper traded this strategy during most of last year, and the year before I did blow up a 30,000$ account but it was adding to losing positions, not using stop losses, calling tops and bottoms, letting losing trades run, etc, making all the mistakes in the book, none of which I am making now.
- I don't have a maximum loss limit for any given day, but I do have a 20% maximum loss overall limit, that if reach would make me stop all trading
- My trading log helped me learn a lot during last year's paper trading experiment, specially with respect to not using stocks below 5$, not using stocks with low volume, and never put more that 10% of account value in a single trade. This is how I came up with the rules in my trading plan. The problem I have here, and it is why I am asking for help, is that my trading log has stopped teaching me. I log in my trades on a weekly basis, half of them are winners, half of them are losers, but I don't "see" anything. There is nothing that differentiates the losing trades from the winning trades. I have looked at time of trade, number of shares, day of the week, but there is nothing that sticks out like a sore thumb that would help me perhaps add another rule to reduce the number of loses.
- I review all market news/results announcements/analyst recommendations/volume spikes etc prior to market open and based on that select the stocks I will monitor throughout the day. Al though I also have separate to all this a small market timing system I am working on which tells me if I should be long or short, I don´t let it bias me. I never have a market bias.
- I monitor my trades weekly and use number of winners, number of losers, $ won, $ lost and use those 4 figures to come up with winning %, ratios, averages, etc.
Since January and after commissions, I have had
298 wins
447 losses
for a win ratio of 40%
Average win 289$
Average loss -209$
Not quite the 2x1 mentioned in the plan, but not all trades reach the profit goal and are exited manually if there is a change in direction.
But its the 40% win rate that really worries me. Its not even 50% as I mentioned at the beginning.
J
thanks for the additional details. attached is a followup that may be an iterative refinement of your original post.
Attachments
Quote from sappjason:
Hey jr,
You are actually on a very good track. This is somewhat related to what I do, but I've automated it and backtested the hell out of it. My win rate is only 44% and my P/L ratio is 1.61. It's not the best in the world, but it's been making consistent money for the past two years. However, I average around 13 trades per day, so this trade frequency helps out quite a bit.
A few suggestions for you:
- You may want to reconsider how you are sizing your positions. Instead of risking 10%, consider risking a percentage of your portfolio as follows: Say, you are at $50,000 and you decide that you want to risk .5% of your portfolio per trade. This means that you are willing to loose $250 for each trade. Therefore, divide 250 by your stop size, to yield your "estimated" position size. I say estimated, because you should also include commissions and estimated slippage. So, in the case of a .20 cent stop, your position size would be $250 / .20 = 1250. But, due to commissions and slippage, you may want to only trade 1000 or 1100 shares. For myself, I use .25% per position and sometimes (if the days are very crazy), my system starts to down-size positions as the day wears on.....
- I know this can conjure up religious wars, but consider using a trailing stop after you've let your position wiggle around for a short while (from 1/2 hour to 1 hour). I have tested just about every stop under the sun and a simple trail has given me the highest expectancy (bar none) over all other types of stops and profit target techniques. When trading these types of stocks, you are really looking to capture large fat-tails where certain stocks are trading on insanely abnormal volume. These fat tails are the bread-and-butter of this type of strategy.
Jason
Thanks a lot. I will consider your suggestions
Quote from duhmentor:
Works out to an average of 17 trades per day.
Do you feel that you are over trading?
How many different strategies are you using?
Is your system always in?
- How do you define over trading? How much is too many trades? I don't know, I make the trades that my system dictates and the ones that are triggered based on my rules.
- Only one strategy, the one described in the first post
- During the day, yes, 99% of the time (no positions overnight)