Taking 103K to 1.2million by Year End 2008

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Quote from NoDoji:

retire45 puts it well. I just placed stops on my two short term options trades from late Friday. One ended the day slightly profitable and the other at a still-reasonable loss. Both stocks moved in my favor during after-hours trading. However, if they don't continue to move in my favor, I'm out and placing the stops right now will keep me from analyzing the situation until my losses double. Every day I have to look at some losing trades that I thought (being far back month options) had plenty of time to work in my favor. Now I have nothing to count on but upcoming earnings reports to boost them (and that is not my favorite position to be in).

Josh Lukeman spends the entire first chapter of his must-read book, Market Maker's Edge, on risk control and position management. He just gets right to the point: never risk more than 2% of your capital on any single trade. Period. So when trading a $130K account, losing $2000 per trade is the limit. Neke, how many of your winning trades lost $2000 or more before reversing and making you money? Only two of mine did, and the only reason they reversed was because the market was still hopeful and having periodic rallies.
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There are certainly too many of my losing trades that went down 2K and still came back up. I meet that a lot in my contrarian plays. To me it still boils down to reward/risk over the expected time-frame. I have a hard 10% (of account) limit on my stock trades. I know that is way more than most people could handle. If my exposure is right in the first place (and consistent) I do not usually fear the size of the loss. It is when I add on to losing positions most of the terrible things happen. I understand that if you are trading with leverage (say 10:1, 20:1) as in futures, it is inevitable you must have a hard stop loss, so as to be able to play another day.

It is hard to set stop rules on options, given the rate they decline. Moreover I do not like placing market orders on options, because of the slippage. In my opinion, my exposure (percentage of account used) effectively constitutes my maximum stop loss. If I use 10% of account on an option I intend to hold for multiple days, I should be prepared to lose that much. In effect, if I intend to hold overnight, I make sure my exposure is small.
 
Quote from Mvic:

Sorry you had a tough week Neke.

When you enter a trade do you do the basics?

Have a target? Have a hard stop? Have a risk reward ratio comensurate with your edge? If yes you are either not following your own rules or your edge is not what you think it is. Good luck.
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My trades are normally based on the premise that over a given time-frame (normally till end of day) the reward/risk justifies the trade. I only put a hard stop for stock when my account is threatened (10% rule). Otherwise I judge the situation and take action when I think my initial expectation was wrong.

Having said this, some of my strategies do not have the "edge" I thought they did - the results show it. Add to that negative impact due to slippage, excess leverage, adding to losers, commissions, taking profits too soon while allowing losers full time, and some rule violations, and the impact on my account is obvious.
 
Quote from monti1a:

Neke-

Consider the following suggestions:

1. Never assume that the markets will behave as they did in the past. Markets are constantly changing. Therefore, all this massaging past results and tinkering with "system" changes.....if I did this, then I would have, could have made this...is futile.

2. The only way to get around the ever-changing nature of the markets is to keep your losses as tiny as possible, while letting your winners run as long as possible. Scaling in to trades is a possiblility so that you are not trying to be all right when you put the trade on..and if you are wrong, you are losing on a portion of your intended position.

3. Consider holding for days to weeks.

4. Drop your Goal of 1.2 million, and focus instead on trying to achieve a more doable goal, and prep for next year to go for 1.2 mil.
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When I said earlier had I stuck to my two top strategies (out of more than a dozen) my account would have been up more than 100%, I said so using actual trade results. As of the end of last week, my top strategy made $54,795 (53.4%) while the next made $26,737 (26%). My computation of greater than 100% is based on the effect of compounding the individual gains (in the absence of the other strategies).

It hasn't been a good year so far, but I am determined to get a decent return (1.2million is probably out of the question) for the remainder of the year.
 
Quote from neke:

My trades are normally based on the premise that over a given time-frame (normally till end of day) the reward/risk justifies the trade. I only put a hard stop for stock when my account is threatened (10% rule). Otherwise I judge the situation and take action when I think my initial expectation was wrong.

Having said this, some of my strategies do not have the "edge" I thought they did - the results show it. Add to that negative impact due to slippage, excess leverage, adding to losers, commissions, taking profits too soon while allowing losers full time, and some rule violations, and the impact on my account is obvious.
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Regarding taking profits too soon, do you simply pick a point in time that you're pleased with the existing profit and exit the trade at the going rate? Or do you choose a target in advance? In the past I've often changed my protective hard stop to a tight trailing stop once my trade is reasonably profitable, because I want to exit at least close to the current profit level, but also want to ride it as far as possible. This has worked well for me on high volume options. I don't get out at the top, but I often get more than I initially bargained for. I'm currently trading AAPL and it's very liquid, tight spreads, and moves in solid trajectories up and down, so I feel good about setting a pretty tight trailing stop. But I've certainly lost spare profits to serious slippage on less liquid options.
 
Quote from neke:

When I said earlier had I stuck to my two top strategies (out of more than a dozen) my account would have been up more than 100%, I said so using actual trade results. As of the end of last week, my top strategy made $54,795 (53.4%) while the next made $26,737 (26%). My computation of greater than 100% is based on the effect of compounding the individual gains (in the absence of the other strategies).

It hasn't been a good year so far, but I am determined to get a decent return (1.2million is probably out of the question) for the remainder of the year.
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Can I please have your top two strategies :p
 
Weekly Update for week 27 ended 07/19/2008

The bleeding continues, down 9.6K (8%).

The biggest one was from BIDU (BIDU CALL) on Monday that sent me down 7K. That was pre-mature. Other than that, it was program bugs on Tuesday that sent me down another 3K (Kept buying and selling a certain option at market, incurring commission and slippage, until I stopped it).

I hope the worst is over, and I can plan towards a recovery.

Code: 
Opening Balance:               	    	119,020
Net loss for the week 		         -9,606
------------------------------------------------
Net Balance:                   		109,414
Number of Trades	            	 39
Number of Profitable Trades    	    	 19

Since Inception of Thread   01/13/2008 - 07/19/2008

Opening Balance:                   	102,615
Net gain (Less Margin Interest)		 11,799
------------------------------------------------
Balance Before Withdrawal:            	114,414  (Up 11.5%)
Cash Withdrawal				 -5,000
------------------------------------------------
Net Balance				109,414

Number of Trades	           	632
Number of Profitable Trades        	352

Expected Balance at this time to be on track for Year-End Target : 
				       387,264


Status:			       Behind Target		(Based on adjusted balance before withdrawals)
 

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Quote from neke:


I HOPE the worst is over, and I can plan towards a recovery.


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Hope is one of the deadliest sins in trading. analyze your trade and know your risk.:D
 
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