RealityTrader.com Positon room results

Wow, a busy thread here... Guess I need to keep closer tabs on the msg world :)

JWN has been a sweetie for us... I had it on that swing back in the $21 area, Russ pegged it today. You try to tag it long at EOD Tony?

I have been trading a lot of NYSE stock in recent months, they seem to be trending better for me. Seem to rinse less violently then the nazwhack issues.

Want the rinse attempt of the week? Check FDC, stops were set .10 or so above $83. Evil lil squeeze attempt there, just missed... Really goes to prove how important it is to stick to stops and not give up on the position before it is ready to be abandoned.

I think the line of least resistance for the overall market is down, yet it bugs me that the naz 100 has yet to tag the 20ma. Perhaps we get a morning thrust and then turnaround day tomorrow. I see so many rallies to resistance just begging to be shorted. Been transitioning out of longs recently, 1/2 lot BA my last bull open.

For those interested in longer term positions, keep your eyes on F... looks ready to build a new uptrend

Yikes on AMAT David, you fading the range? That weekly looks explosive.. living da vida loca. :)

Guess I'll scan around and see if I missed anything else on the ET boards..

See you all in NY next weekend!

-Bo
 
Finally got off my duff and did the trackrecord calculations for Jan...

Here they are.

From website...
<snip>

TRACK RECORD
Performance since January 1, 2002: During this time we have followed and discussed 86 trades. Of these 36 produced a gain, 50 a loss. This gives us an accuracy rating of 41%. During this month, these trades produced 20 units of profit. A "unit" is a measure of risk, and is used to properly manage position size. If a trader risks a consistent 1% of their account on each trade, then this is their "unit size". Therefore a trader risking 1% on every room trade would shown a gross 20% profit for the month of January. (1% multiplied by 20) A trader risking a consistent 2% on every room trade would be up 40% (2% multiplied by 20) Etc....

Updated Feb, 2002
<end>

So far in Feb, Don't have any of Russ's data, but my stuff looks like this....

13 trades
8 winners
5 losers
61% accurate
+5.7 units

On track for a decent month..

It's interesting to see how our trading has adapted to the market conditions. Our accuracy has dropped, but our r/r has grown. We tend to only have a few positions open while things chop, then get big and aggressive as the trend begins again.

I'm doing this video newsletter now, "A Dose of Reality". One trade a day, all trade management done after hours based on daily data. After I get a few months data from that, it will be fascinating to see if that can outperform the intraday entries and management of the room. I suspect it may, as many of these setups will just sit and never trigger when the market does not move in the right direction. So far, when they set up, they seem to be ready to trend. So perhaps fewer trades a month, but better r/r and more accuracy.

That's it for now...

Good luck and Good trading!

-Bo
 
Are you guys going to be at the expo?

Feel free to call my room. I'd like to get together with you. Jodi and Jordan are joining me, so I can't stay up as late as we used to, but we should still have fun.

Tony
 
Yes, I'll be there! Look forward to seeing you... You staying at the Marriot?

I'll shoot you a call when I get there.

-Bo
 
Just curious,,,,how does 41% equate to a successful month. Am I missing something here? Perhaps you are being stopped out early and letting your profits run? The reason I ask, is that we try to keep around a 70+% winning average to make a living in this business, and I am always looking to learn something new.

As far as your "pre opening" trades, even only 1 per day....I would be glad to volunteer to have those trades entered and publish results (my risk of course).

Let me know!!
 
T/A Bo,

Would you explain this unit concept a bit? I don't see how you can compute a proper ROR from it, but perhaps I don't understand the concept.

-=-=-=-=-=--=-=-=-=-=-=-

Sure.

The best way to explain it is to first understand the style that Russ and I trade. We are taking trades with multi day expectations, yet managing and entering them intraday. This style delivers trades with many different stop sizes. For instance I have DISH short off a 55 cent risk, and had BA long with a $1.65 stop.

If you have these differences in stop size, and trade a fixed number of shares, you are doomed to follow lady luck. On the days the small stops are hit, and the big stops cruise you clean up. But when things flip and you are taking the gains from the small stopped trades, and taking losses from the big stops, you get crunched.

Many daytraders don't have this problem, as their style delivers them a consistent .20-.30 risk per trade. What you need to most efficiently exploit your edge is CONSISTENT dollar risk. However you achieve that result is fine.

So, here is the unit size example..... Trade twice today, one stop has .25 risk, the other has $1.25. Want to risk $1,000 on these trades? Take 4,000 shares for the small stop trade, and 800 for the larger one. If you stop out of either of these you lose $1,000.

The trade with $1.25 stop does poorly, and stops you for -$1,000 loss.
The trade with .25 risk does well, and you take .56 cents in gains.
(4000 X .56 = $2,240)

Your profit on this day before commissions and data fees is $1,240 or 1.24 "units" (since your initial risk was 1k) Yet notice you actually posted a pont loss.. (-1.25 + .25 = -1.00) Points are meaningless, it's important instead how much you gained for the amount you risked at the outset...
If you choose to risk a fixed percentage of your account on each trade as we teach in the position trading chatroom, then it's easy to calculate % return.

Produce a 5 unit gain in a week? A trader with a $50,000 account who risks 1% ($500) on every trade would be up a gross $2500 or 5%.

By scaling my size to achieve a consistent dollar risk for each trade, no one loss will "hurt" more or less then any other. and for each 2 to 1 gain I produce, I wipe out two full stops.

I know this concept is a simple one, but it can get folks tied up in knots. Hope this explanation helps!

-Bo
 
T/A...
Just curious,,,,how does 41% equate to a successful month. Am I missing something here? Perhaps you are being stopped out early and letting your profits run? The reason I ask, is that we try to keep around a 70+% winning average to make a living in this business, and I am always looking to learn something new.

As far as your "pre opening" trades, even only 1 per day....I would be glad to volunteer to have those trades entered and publish results (my risk of course).


-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=

If you trade with a 70% hit rate, what is your risk to reward ratio?

Normally there is a balancing act in the markets, the higher the hit rate, the leaner the edge per trade.

>Perhaps you are being stopped out early and letting your profits run?

Exactly... small stops, then large gains to offset these small nicks.

My accuracy has been in the 55-65% range for ages. In recent months however, I am seeing much more cyclicality in the payout/payback cycle. Trades don't set up, the ones that do flop around, then stop. Then things get hot and every trade I take runs to the moon. This "Hero to Zero" cycle has become more pronounced in recent months. I find that I make more money by constantly positioning myself in the line of least resistance, then waiting for the trend move then I would trying to grind it out every day as I used to. This slower style can be mentally taxing as you see losses in a cluster followed by a series of large gains. It's all a matter of personal preference. Some folks are scalpers, happy to take small consistent gains. I am more interested in forming an opinion, backing my opinion with money, then giving the trend time and room to work in my favor. I can sit back and snicker at the intraday antics of the stock as my daily or weekly trend slowly pushes the stock in the right direction.

Here is the way the newsletter works. It's called "A Dose of Reality" http://www.realitytrader.com/positionletter.htm

3-5 times a week as worthy patterns surface, Russ or I do a 3-4 minute video in the evening. This is a screen shot type thing, and shows the chart as we explain why the setup interests us, how we would enter and manage it, and where our partial profit and target areas are. These trades can be managed by stop and limit orders set the evening before. You would have to pick a risk level dollar wise, and then scale each position to find out how many shares to take. (see above explaination) Then check the open positions section of the web page each night for trail stops or for any adjustments to the offers for partials or target levels.

Here is what the format looks like, http://www.realitytrader.com/dor/jan9.htm if you don't wan't the education and commentary set out in the video, you can just go straight to the setup numbers on the web page.

If this interests you, I can provide you with a login..

-Bo
 
Bo,

I understand your position sizing methodology, but have a question. What if a trader has multiple positions to choose from? It is relatively easy to position size futures, but with stocks a trader runs out of available equity. For example, I am looking to buy a $25 stock, have a $10,000 account (any size actually), will risk 3% of equity, and have determined the risk in the trade to be $1. The preceding dictates I buy 300 shares, using $7500 of my available equity. Even with 2 to 1 margin, only two such trades are possible. What if a trader is faced with more than two opportunities? How do you go about determining the positions to take? Would it be best to take just the first two and let the remaining go, trusting that, over time, the trades taken will correspond to historical results?

This situation is what I struggle with when position sizing stocks.

Thanks
 
Good question, there are really only two choices in my opinion.

1: take smaller risk in order to tie up less equity in each position.
2: develop some way to spread trades out, reduce trading frequency...maybe take only one a day? This way you will keep taking trades consistently as the market cycles from favorable to unfavorable for your strategy.

Trading with a small account is awkward... But without a small account, you can't ever have the chance to build it into a bigger account :)

-Bo
 
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