Taking 410K to 4million by Year End 2010

traderhf · Oct 24, 2010

Neke,

I have been following your journal with 'great' interest- never posted before. I also read your previous year's journal end to end.

Good comeback this week. Just a word of caution for the coming week though (strictly from my personal experience) - Many times, I have had big losses (40-50k) after hitting big gains (40-60k) - simply because I became complacent OR I risked more than I should have (with short term pump in confidence). After, I put in stricter MM in place, I was able to control this urge, and I started having positive days/week following a big day/week.

You have enough experience trading - so I am pretty sure you would have experienced this phenomena first hand in past. But still I am writing it hoping I can offer my cautionary wisdom so that you don't lose a lot this coming week - rather a more 'level-headed' trading will let your bull run continue!

Other than that, nothing much to add. Keep up the good work!

neke · Oct 24, 2010

Quote from traderhf:

Neke,

I have been following your journal with 'great' interest- never posted before. I also read your previous year's journal end to end.

Good comeback this week. Just a word of caution for the coming week though (strictly from my personal experience) - Many times, I have had big losses (40-50k) after hitting big gains (40-60k) - simply because I became complacent OR I risked more than I should have (with short term pump in confidence). After, I put in stricter MM in place, I was able to control this urge, and I started having positive days/week following a big day/week.

You have enough experience trading - so I am pretty sure you would have experienced this phenomena first hand in past. But still I am writing it hoping I can offer my cautionary wisdom so that you don't lose a lot this coming week - rather a more 'level-headed' trading will let your bull run continue!

Other than that, nothing much to add. Keep up the good work!

Thanks for the hint. I've seen that happen too. Caution is the keyword for next week.

neke · Oct 24, 2010

Quote from Picaso:

(One question, though, did you really short half a million in RVBD? Was that within your size parameters?)

The rational for RVBD as explained was that I was trying to "hedge" my position in CMG. I thought it was Friday, both are up huge on euphoria surrounding earnings beat, and anything could happen (market might change its mood) before close. Of the two I thought RVBD was more succeptible to a sell-off than CMG (based on several considerations). The nominal value of the CMG position was about $1mill, while that of RVBD was about $500K. On a delta basis (change to acct value), assuming equal IV, the risks were the same and opposite at the point of initiation. If I had held both positions to the close, my CMG position would have maintained its value (in fact added a little more gain), while RVBD could have been closed for break-even. So even my exit was bad. And yes, the size was above what would have been allowed (RVBD) by my position monitor. Unfortunately (or fortunately) my system did not start that day.

lurefo · Oct 24, 2010

Quote from Nexen:

Now take what you can now and reduce size before you lose more, including what you made this week.

Greg disagrees with you... "Bet MORE!"

starts at 7:57
<embed allowfullscreen="false" allowscriptaccess="never" wmode="transparent" src="http://www.babelgum.com/embed/5003510" type="application/x-shockwave-flash" height="415" width="480" flashvars=""></embed> <div style="font-size:0.9em;">
<a href="http://vodpod.com/watch/3754742-floored-the-movie-episode-4">FLOORED: The Movie. Episode 4 </a>
- Watch more <a href="http://vodpod.com">Videos</a> at Vodpod.</div>

neke · Oct 24, 2010

Quote from lurefo:

Greg disagrees with you... "Bet MORE!"

starts at 7:57
<embed allowfullscreen="false" allowscriptaccess="never" wmode="transparent" src="http://www.babelgum.com/embed/5003510" type="application/x-shockwave-flash" height="415" width="480" flashvars=""></embed> <div style="font-size:0.9em;">
<a href="http://vodpod.com/watch/3754742-floored-the-movie-episode-4">FLOORED: The Movie. Episode 4 </a>
- Watch more <a href="http://vodpod.com">Videos</a> at Vodpod.</div>

That is brutal!

Nine_Ender · Oct 24, 2010

Quote from neke:

Really? Did you see the date/timestamps on the trades? So if in the course of a year you've traded shares worth $100million on your $100K account, that means you've been levered 1000:1? Awful analysis.

Buddy, do we need to go over your BIDU options again to explain to you the fallacy in your trading strategies ? You don't seem to have any awareness of risk.

I don't see much of an edge in your trades but you made 60k on highly volatile call options on stocks that have run up a fair bit this year. So at the very least losing 60k was a likely scenario.
Were you prepared to draw down another 25% in one week ?

Ok, daytrading options for large chunks of your account might seem normal to you. It's not. Your gambling not investing. You are chasing your losses. You are taking far more size on your option positions then you need to.

That's the good analysis buddy.

NoDoji · Oct 24, 2010

Quote from neke:

The rational for RVBD as explained was that I was trying to "hedge" my position in CMG. I thought it was Friday, both are up huge on euphoria surrounding earnings beat, and anything could happen (market might change its mood) before close. Of the two I thought RVBD was more succeptible to a sell-off than CMG (based on several considerations).

RVBD had a short interest almost 40% lower than CMG, and a P/E that made no sense whatsoever, so I'd expect CMG to run up all the way into the close on short squeeze alone, and I'd expect RVBD to dip after the opening shock played out.

But we can't predict what will happen next so we look for the highest probability trades. When a stock gaps up, you're much better off buying the first dip than fading the gap, IMHO. Think about who's in real trouble when a stock gaps up. Shareholders are very happy; shorts are in pain and they have to buy back (drive price higher) or hold and hope. You have two scenarios on the open: Price sells off on profit-taking, or price continues to run on new buyers and short-covering. Either way, your best trade is to go long, buying the first dip, because any shorts who are still holding in the hopes price will come down more and ease some of their pain, will throw in the towel when the first dip attracts buyers and price moves in to make a new high.

ifue · Oct 25, 2010

Hi Neke,

Do you continue to focus on strategy? Meaning do you analyze which trades resulted in gains/losses because you read the conditions correctly/incorrectly and which trades' gains/losses resulted from conditions that were unpredictable? I would think you would want to focus on why things happen the way they do so that you can make more accurate predictions (trades).

It seems like you might be a little too focused on results. Just because you made a lot of money in a week doesn't mean it was a good week. If you got lucky but your reasoning turned out to be incorrect, you should be upset and try to focus on the errors in your logic. If you lost money but you believe your rationale for your decisions was correct you should be happy because you know that by repeating that performance you will make money in the long run. If you are focused on developing your skills as a trader I would expect to read more posts mentioning trades because of the quality or lack there of, of your decision making, not because it was a big gain or loss. Basically a way of telling that you are focusing on the right things is are you enjoying the challenges of trading and feeling rewareded from that alone or are you focused on the results?

There is a lot of talk from other posters about your risk level. I think for a while you clearly laid out how risky you were going to be and followed that plan. But when you started losing money you reduced your risk level because of outside factors, factors other than trading logic. If your not comfortable with your risk level anymore, then that is a smart thing to do. But I do think your original plan of risk was rational, very ballsy, but rational. If you follow through on your risk tolerance and focus on rational decision making and continue to learn then I believe you will see excellent results.

One other note, I can't remember what you said your largest expected drawdown would be given your risk tolerance but it was a very large percent. If you keep trading over many years you can expect to see that drawdown many times. I'm not sure after your reaction this time around if you chose the correct risk level for yourself (or if your risk tolerance shrinks as your account grows). The good news is if you continue to improve your skills as a trader then that drawdown amount will drop (as long as you don't increase your risk).

neke · Oct 29, 2010

Weekly Update for week 42/50 ended 10/30/2010

Moderately positive week, up 7K (2.5%).

Earnings season brought a lot of activity. Unfortunately the pattern was for me to start each day with a good winner only to enter a dumb trade later that practically wipes out the earlier gains for the day. Need to remind myself to be cautious and do my due diligence before leaping on a trade.

Looking forward to next week.

Code:

Opening Balance:                	286,079
Net gain for the week 		          7,030
------------------------------------------------
Net Balance:                   		293,109

Number of Trades	            	37
Number of Profitable Trades    	    	23


Since Inception of Thread   01/10/2010 - 10/30/2010

Opening Balance:                   	410,000
Net loss(Less Margin Interest)		116,891 (Down 28%)
------------------------------------------------
Net Balance				293,109

Number of Trades	           	1177
Number of Profitable Trades        	 633


BREAK-DOWN BY AUTOMATED/DISCRETIONARY

		Number       P/L      Best Gainer	Worst Loser

AUTO             8      -5,029.40      1,260.40     	 -4,035.10     
DISCR           29      12,058.80     10,703.70    	-15,451.40

neke · Oct 29, 2010

Quote from ifue:

Hi Neke,

Do you continue to focus on strategy? Meaning do you analyze which trades resulted in gains/losses because you read the conditions correctly/incorrectly and which trades' gains/losses resulted from conditions that were unpredictable? I would think you would want to focus on why things happen the way they do so that you can make more accurate predictions (trades).

It seems like you might be a little too focused on results. Just because you made a lot of money in a week doesn't mean it was a good week. If you got lucky but your reasoning turned out to be incorrect, you should be upset and try to focus on the errors in your logic. If you lost money but you believe your rationale for your decisions was correct you should be happy because you know that by repeating that performance you will make money in the long run. If you are focused on developing your skills as a trader I would expect to read more posts mentioning trades because of the quality or lack there of, of your decision making, not because it was a big gain or loss. Basically a way of telling that you are focusing on the right things is are you enjoying the challenges of trading and feeling rewareded from that alone or are you focused on the results?

There is a lot of talk from other posters about your risk level. I think for a while you clearly laid out how risky you were going to be and followed that plan. But when you started losing money you reduced your risk level because of outside factors, factors other than trading logic. If your not comfortable with your risk level anymore, then that is a smart thing to do. But I do think your original plan of risk was rational, very ballsy, but rational. If you follow through on your risk tolerance and focus on rational decision making and continue to learn then I believe you will see excellent results.

One other note, I can't remember what you said your largest expected drawdown would be given your risk tolerance but it was a very large percent. If you keep trading over many years you can expect to see that drawdown many times. I'm not sure after your reaction this time around if you chose the correct risk level for yourself (or if your risk tolerance shrinks as your account grows). The good news is if you continue to improve your skills as a trader then that drawdown amount will drop (as long as you don't increase your risk).

Thanks for your comment (Was curious when I saw you've posted just twice since registering in May 2009, checked your other post, and voila it was in last year's thread). This journal basically gives the result of my trading, with rough sketches of the trades I do. The intention is not to bring a crowd reading my mind and doing exactly what I would do. Beside this journal, I keep meticulous record of my trades, and classified by strategies (at last count there are more than 30 such classifications traded this year). Yes I do drill down and know the ones that are making it and he ones that are losing, and above all the losses I have incurred as a result of not sticking to plan - those I can't really blame on strategy. I know (have always known) the big obstacle to greater gains is myself (which is why at various times I have considered doing only autoamted, which up till now is still not there - too many variables within my discretion I could never put into a program).

For the prior year, I laid out my expectation that maximum drawdown should not exceed 40%. I think that is still a realistic drawdown given my risk tolerance, but the truth is that much of my drawdown is not due to strategy faithfully implemented, but rather personal issues (averaging down, revenge trading etc). My intention still remains to bring the personal issues under check, and execute faithfully the strategies, and the results will follow.