Solid Mom's Journal

S

Solid Mom

Hello folks,

This is my trading journal. I am a stay at home mom of two young children. The oldest will enter kindergarten in the fall and the youngest will follow in two years. I have a liberal arts degree, so no formal business background.

I started trading just as the bull market ended last year. Lost some $, took a break, came back, lost some more $, and now I’m back again. I think I have a better plan this time, but part of that plan involves learning more, and participating here will be part of the learning experience.

I am interested in your thoughts on what I’m doing right and wrong. I’ll just start with the present and save you the boredom of bad past trades that served as “tuition.”

Today began well, but I ended it by blowing through all earnings from the past two days. Still paying tuition? Here are my trades as well as the psychology that accompanied the trades.


June 24, 2008

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SPY BOT 300 Limit $130.50 Executed $130.50

SPY SLD 300 Limit $130.63 Executed $130.63

Bought at 10:33
Held 12 minutes. Note – If I had held, I would have made much more within 2 hours.

Gross Profit = 39.00
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QID BOT 1,500 Limit $42.50 Executed $42.50

QID SLD 500 Limit $42.65 Executed $42.65

QID SLD 200 Limit $42.65 Executed $42.65

QID SLD 800 Limit $42.65 Executed $42.65

Bought 10:26 ETS
Held 8 minutes

Gross Profit = 225
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QQQQ BOT 700 Limit $47.25 Executed $47.25

QQQQ BOT 2,300 Limit $47.25 Executed $47.25

QQQQ SLD 3,000 Limit $47.06 Executed $47.06

Bought 2:24 EST
Held 22 minutes

Gross Profit = (570.00)
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This last trade was the problem. The first two seemed to be in a rising or level trend. This last one I could have used better judgment on.
I was nervous because it was the end of the day, and my trading plan calls for me to trade earlier ion the day so I have more time to profit before having to hold over night. So, right away I wasn’t following my plan or my gut.

After I bought, I watched the 13 minute candle chart. The trend seemed to be going against me. I switched to a 3 minute chart, and I decided that at this point, if I were just logging on, I wouldn’t buy the EFT, so therefore, that was an indication that I should bail. Bailing turned out to be a good move, because just after I sold, the price fell and did not come back up for the rest of the day. If you would have held over night, I would be interested in hearing your thoughts.

Also, once I bought QQQQ, I put in a limit sell order for $47.34. I really think I was getting cocky from luck on my trades over the last two days, because I had no reason to think the market would pay that. Really, my plan calls for smaller increases between the buy and sell prices.

I think I need to learn charts / trading on technical better. If I can better anticipate a drop, I will be better off.

I also need to come up with a better stop plan. I do know I need to use stops, but is what I did a good example of a stop – just seeing that the trend isn’t going my way and jumping out? If it had been earlier in the day, I would have allowed a longer time for recovery.

Thanks for your ideas
--- Mom
 
There are a couple of things that I can see. First your winners are 13 and 15 cents. Your loser was 19 cents. I think your winners need to be at least 2x your losers and preferably even more.

The other thing is you arent trading constant size on all of your trades. If you traded 1000 shares in all 3 trades you would have made money. So try to trade a constant size since you arent really using size management to size in positions throughout the day.

As for stops, mental stops are fine, its just that you must be extremely disciplined to get out of bad trades in this manner to the point that very few people can do. It most cases it may actually pay off to get stopped out and simply get back in the trade if you feel you got stopped out erroneously. Often after a stop out you can think more clearly than when you have a losing position sliding agaisnt you.
 
Thank you for your feedback. For the next few trades, I’ll trade 1000 shares and see what happens.

After reading bhristov1’s feedback, I realized that my trading plan is still in development, and I recall reading a Don Bright article that said it’s a living document, so I suppose it’s okay to trade that way.

This morning I looked at SPY. I do not know much about technicals yet, but I have read about Bollinger Bands. My chart was already set to display the candles with the Bollinger bands, (although I cannot get the middle band to show, does that matter?) and I noticed the band had narrowed and a candle’s high had penetrated the top of the band. I recalled that being a buy signal. So I bought and then immediately setup my sell order for two cents higher. I watched the price movement and reset my sell order about five times, each time trying to squeeze a couple more pennies out of the deal. But of course the price dipped and I really just wanted a winner, so I reset it back to the 2 cent profit. The sale was soon executed and the price rose several cents more past my sell price. I guess that’s okay. I’ve read that I should try to get my cut from the middle of an up trend, but maybe I could have earned another two cents per share if I hadn’t kept the sell price just out of reach of the market price.


SPY BOT 1,000 Limit $132.47 Executed $132.4699 ·
SPY SLD 200 Limit $132.49 Executed $132.49

Bought 12:22 EST
Held 8 minutes

Gross Profit = 20.10
A small win for morale.
 
I thought I was done for the day, and then I noticed a small rally in SPY. I thought I would ride it for a few cents. I bought, then began to enter my sell order, and then my internet connection (Cable) went out before I could hit the place order button. The cable came back after minute, but by then the price had changed. So at first it seemed as if a win was turned into a loss. Frustrating, but really, I know this can happen from time to time. I am interested in what others do to take control of Internet service outages. I’ll check to see if I can enter the sell order at the same time as the buy order.

So I decided to play “what if.” I don’t want the loss. I thought, what if I just let it ride and see if the price rises. The current price is not so far away that recovery is a pipe dream. Maybe I’ll have to hold over night.

I thought, I’m going to have to take a loss. Can I limit the number of times I have to take a loss by waiting some time for recovery? What % of my trades will recover that way?

I waited and the fund rallied again. I got out with my 2 cent profit, but I could have made up to 40 cents more if I had asked for it. I’m still experimenting with how much profit to go for without becoming a slaughtered pig. Here is the trade…

SPY BOT 1,000 Limit $132.95 Executed $132.8999

SPY SLD 1000 Limit $132.92 Executed $132.92
Bought 2:17 EST
Held 43 minutes

Gross Profit = 20.10, again
………….
Gross profit for the day = 40.20
 
My best piece of advice....

Save your dollars and trade on a simulator until you can at least demonstrate that you have a solid trading plan that will produce positive results.

Developing a solid trading plan could...unfortunately....take years without the proper guidance. However, it will keep you from blowing the money that you have.
 
Mom, if you are going to be a frequent trader, the tax paperwork at the end of the year will be a killer trading ETF's (I am assuming you are trading in a taxable account). You are better off trading the equivalent futures, ES and QQQ, which have trivial tax paperwork and more favorable tax treatment. All the best, Dad.
 
Have to agree with monti1a. Either use a simulator or trade 100 shares at a time -- and make sure you have a broker (e.g. IB) that doesn't charge more than a buck or so for each trade. I think you'll find it easier mentally to let your winners run, instead of bailing after a 2-cent move, if you're dealing with small orders. Once you've built up your confidence you can start adding size.
 
As for your trading I am getting some red flags. I want to go through it point by point.

1) You are misusing the Bollinger Bands. bollinger bands basically show you when the price has moved excessively fast away from the mean (that middle line you couldnt see). When the price is past the envelopes traders look for opportunities to take the retracement trade back to that midline. So in your case you should have shorted not bought.

2) 2 Cents of profit is just way too low a profit target to make ANY strategy worthwhile. If you want to make $20, try getting 20 cents on 100 shares rather than 2 on 1000.

3) You mentioned in your first post that you didnt really use hard stops and now in your second you say that you couldnt decide where to take profit. You NEED to KNOW exactly how much you are looking to make and how much you are going to risk BEFORE even getting into a trade.

4) I can also tell from your posts something about your psychology that will hinder your trading and the most likely reason for your small winners. You like to take profits early because you are scared that they may turn into losers if you hold too long and "get greedy". It is a symptom that you dont have a faith in your strategy (I am not sure if you really have one) and you want to make sure you get positive PnL whenever you can. If you have a real strategy and know what to expect from it, you must always let your winners ride, even if they sometimes turn into losers in order to make sure you capture the 20% or so of trades that will account for 90% of your PnL.

Ideally i would recommend that you develop a solid written strategy with a clear plan and backtest it rigorously. After that papertrade this strategy until you can get at least one month of positive PnL. Then go live, with minimal shares (100).

If you choose to keep trading bring it down to a max of 200 shares and work really hard to get at least 20 cents out of trades, even if that means letting a 5 cent winner stop you out for a loss. It may be tough to fight the urge to take quick profits but that is actually the right thing to do and its what makes trading challenging.
 
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