Spydertrader's Jack Hershey Equities Journal II
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Without trying to sound peremptory, you can sum up my take in two words: Shit Happens. I experience the same sort of frustration from time to time (check the TIE chart since my stop triggered - its up about $10.00 USD per share since my exit). Several solutions exist allowing you to slightly alter your own personal methodology to avoid repeating such circumstances. You can increase your initial 'first day' stop percentage, while at the same time, reducing the number of shares traded to arrive at the same overall level of risk. If you feel the market has caused a higher than normal number of "stop outs followed price reversals which would have resulted in profits" for you, then by all means, back test various alternative scenarios and implement those which you find produce an improved level of profit. I believe several of the posters to this forum have already altered their first day stop in this manner. One might also simply throw out the first day 2% rule entirely and stick with 5% as a trailing stop. Whether you stick with the methodology as is, or choose to alter the methodology somewhat based on your experience and psychological profile, the decision to do so remains one of personal responsibility.
One other note with respect to Ross' Rule. The theory behind this rule protects the trader from remaining in a stock which has no possibility of transitioning from (in the words of Jack Hershey), "a score of one or a zero to a score of seven or six." Once the stock turns negative, it cannot (by definition) have a seven score by EOD as long as price remains negative. However, should the stock turn positive, it would then have the possibility of becoming a seven by the end of the day. When a stock does not show price improvement, it receives a binary score of zero for price when scoring via Hershey's PVAD algorithm. As a result, it can only then have a maximum overall score of three (See PVAD discussion in Original Journal). Should a price (after causing an implementation of Ross' Rule) return to positive territory, then Ross's Rule no longer applies. In other words, the reasons for causing you to exit in the first place, no longer exist.
As always, your mileage may vary.
- Spydertrader
Spydie, Take that TIE off your screen... The very reason I like your methodology is because it allows me to do that... It's refreshing. This NGPS is not exactly a comfort ride... I ended up peeking at the chart because I was babysitting my son instead of reading. If I make any pennies out of this piece of crap, I think I earn it. Good trading. 
It's ironic because I'm actually having a smooth ride on TIE, currently on its way to a 10% profit target.
Thank you for the detailed explanation on the Ross rule. I will add an ATR adjustement to my stop loss price, as per Doug posts, and better risk management sizing.
As I write NGPS has reached 77% of FRV and it's no longer negative for the day. As a result, I re-entered the trade.
An observation:
- The DU LB usually occurs halfway through the morning or at least the condition has to be met before 11:30 in order to apply for an entry before EOD. Now, 12:00 is usually an inflection point for the market and I noticed that a few JH long positions showed some weakness around this time. This is something I regularly experience with the other long positions that I carry for other strategies. Given JH stocks low liquidity, I would be cautious to enter trades right after the 11:30 signal.
Or maybe this is something that only happened with TIE and NGPS recently?
In addition to a small profit on NGPS (I hung in there early but then sold when it didn't hit FRV) I thought I'd mention a few other trades that I tried that are slight variations to the strategy (15% run ups in 6 months not 20% and at least 3 run ups, not 5 times).
I am testing on the fly so there is no assurance that these will work as well as the traditional trades (probably won't) but I was curious...
I entered FTO (5 15%+ run ups) at 34.86 and sold at EOD at 35.18 when it didn't make FRV.
I also entered GFIG (4 20%+ run ups - not 5) at 44.45 and am still holding at 44.64 as it surpassed FRV.
I also tried to enter TTI (4 15%+ run ups) at 28.73 but it started to run as soon as I put my limit order in a few cents below ask and it never looked back, ending at 29.65. It didn't make FRV so I would have exited.
I'll let you guys know either good or bad how the variations work.
Mike
I am testing on the fly so there is no assurance that these will work as well as the traditional trades (probably won't) but I was curious...
I entered FTO (5 15%+ run ups) at 34.86 and sold at EOD at 35.18 when it didn't make FRV.
I also entered GFIG (4 20%+ run ups - not 5) at 44.45 and am still holding at 44.64 as it surpassed FRV.
I also tried to enter TTI (4 15%+ run ups) at 28.73 but it started to run as soon as I put my limit order in a few cents below ask and it never looked back, ending at 29.65. It didn't make FRV so I would have exited.
I'll let you guys know either good or bad how the variations work.
Mike
Actually the TIE pullback starts around at 10 am reversal time zone.
I am new to this but the only question in my mind is "Will the buyers follow thru?", I feel the reason I can go against the Ross rule and the FRV is because I think this is a bull market. I don't know how things work in a bear cycle but I would imagine these rules can save my ass.
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