Taking 76K to 500K by Year End

[neke]

Quote from verbotenlaandia:

I guess the question that I have is: if you feel you can continue to duplicate your recent trading history indefinitely, then what did you start doing differently on 2/25 when you started this thread? Why weren't you already worth 126 billion dollars? You could have gotten there in a handful of years at those monthly return rates.

A few weeks ago, you would have thought the chance of hitting your goal was over 50%, until you hit a major drawdown. Since then, you've identified two new rules that you'll follow going forward. One thing to think of, that I wouldn't know the answer to is: before your bad week, how much of your gains came from trades that broke your two commandments, but just happened to work out in your favor? I'm suggesting that there could be more trades that you could have put on that showed you big gains, but if done thousands of times, would put you in the red. I'm not trying to crap in your patch, but am suggesting that it isn't reasonable to expect monthly returns of 47% or even 19% over an extended period of time. Even if you had an edge that could give you those numbers, it probably would eventually be identified by others and whittled away.

Verbotenlaandia,

Thanks for your questions. First off, I have never claimed I will be able to duplicate my recent trading history indefinitely. Moreover, I do not know how you came to 126billion starting from 76K. Over how many years? I did set a target for 2/25/2007-12/31/2007 based on my opening balance and what I felt was achievable. I fully understand that trading 100billion is not the same as trading 76K. I will not buy 9000 shares of a stock that trades 200 shares/day for a day-trade neither will I buy 10million shares of a stock that trades 1million shares/day for a day-trade, assuming I had the money. So please keep things in perspective and the comments rational.

If you read my prior posts (which I believe you have), I mentioned not keeping to rules as keeping me behind. What I committed to do differently on 2/25/2007 was a stricter commitment to keeping the rules, reinforced again after last week's blow. How much of my gains comes from disobeying my rules? Compared to the losses over a longer time-frame they are insignificant (I have analysed that before over a prior period based on real trading results).

Well, edges do come and go, but it behoves the trader to keep innovating, and make maximum advantage of the edge before it goes away. I have not set an expectation of 19% per month - or whatever it comes to - over the next 50 years, only till 12/31/2007. After that I shall see what the balance is, what my edge looks like, and decide what the next realistic target should be. Part of the reason for posting my results is to develop some form of accountability and reason to keep focused on doing what is right to achieve the target, besides providing an interesting reading and maybe challenging someone to become better at trading. I have mentioned before in 2005 I took 15K to 135K January to December. In 2006 started with $135K, made 126K and took out 170K to fund a capital project and pay taxes; my option trading in 2006 was a net loss of 188K, excluding that I should have made a much better result. I have set the current target based on what I felt is achievable: if I fail to hit it, whether because of loss of edge or bad money management, I will have nothing to regret. Companies do set revenue and earnings targets based on what they think is achievable and go about to realise it: it is not an ego display, neither are they crucified if they fail to achieve it.

I have taken this liberty to address your questions, and I hope we keep the diatribe rational and civil.

 

[jimclark]

I can't recall if you said you have a day job or if you are professional trader. if you have a day job...then where did you learn or how did you learn trading...
Wouldn't you want to do it fullt ime?

 

[SiSePuede!]

I think you should just find a bunch of companies with 5-15B in market cap that look like they might be good buyouts, buy a bunch of out of the money calls with strike price 15-20% above current valuation and throw $5-15k at each of them...if there is a buyout announcement on any of them you'll make your $500k.

 

[verbotenlaandia]

Quote from neke:

Verbotenlaandia,

Thanks for your questions. First off, I have never claimed I will be able to duplicate my recent trading history indefinitely. Moreover, I do not know how you came to 126billion starting from 76K. Over how many years? I did set a target for 2/25/2007-12/31/2007 based on my opening balance and what I felt was achievable. I fully understand that trading 100billion is not the same as trading 76K. I will not buy 9000 shares of a stock that trades 200 shares/day for a day-trade neither will I buy 10million shares of a stock that trades 1million shares/day for a day-trade, assuming I had the money. So please keep things in perspective and the comments rational.

If you read my prior posts (which I believe you have), I mentioned not keeping to rules as keeping me behind. What I committed to do differently on 2/25/2007 was a stricter commitment to keeping the rules, reinforced again after last week's blow. How much of my gains comes from disobeying my rules? Compared to the losses over a longer time-frame they are insignificant (I have analysed that before over a prior period based on real trading results).

Well, edges do come and go, but it behoves the trader to keep innovating, and make maximum advantage of the edge before it goes away. I have not set an expectation of 19% per month - or whatever it comes to - over the next 50 years, only till 12/31/2007. After that I shall see what the balance is, what my edge looks like, and decide what the next realistic target should be. Part of the reason for posting my results is to develop some form of accountability and reason to keep focused on doing what is right to achieve the target, besides providing an interesting reading and maybe challenging someone to become better at trading. I have mentioned before in 2005 I took 15K to 135K January to December. In 2006 started with $135K, made 126K and took out 170K to fund a capital project and pay taxes; my option trading in 2006 was a net loss of 188K, excluding that I should have made a much better result. I have set the current target based on what I felt is achievable: if I fail to hit it, whether because of loss of edge or bad money management, I will have nothing to regret. Companies do set revenue and earnings targets based on what they think is achievable and go about to realise it: it is not an ego display, neither are they crucified if they fail to achieve it.

I have taken this liberty to address your questions, and I hope we keep the diatribe rational and civil.

Neke,

I was just joking around about the 126 billion...just trying to make a point and suggest that drawdowns and bad trades tend to not be factored into profit projections, simply because by nature they are not predictable. It's a common fallacy, myself included of course, to take a recent sample of trades and extrapolate those results into the future (the exaggeration being to take 3 or 4 trades that earned a quick, high return...plug into a spreadsheet, drag the formula across your screen and see how big your money gets if "x" continues to happen).

But regardless, if you turned 15k into 135k in 2005, that's outstanding. Can you do it again? Depends...I am curious as to why you'd change strategies in '06 (in search of higher returns??). If you traded the exact same way as you did in 2005, do you feel you could garner the same returns? It's hard to pinpoint obviously, but how much was due to an edge, or trading skill, and how much was random? After reading your thread, I would agree that you seem to have something going on. If you didn't have any trading skill, you wouldn't have made it this far.

You mention that you have a certain percentage of your trades automated, with the remainder being discretionary. And it sounds like generally, you like to fade breakouts, at least on the discretionary trades. Without disclosing what you feel is your edge, how do you set up your automated trades? Are you just using features available through Ameritrade (ie, "trade triggers"), or some other more complex back-end software package that runs along with your brokerage software? And how do you returns stack up when comparing automated to discretionary? Thanks.

 

[neke]

Quote from jimclark:

I can't recall if you said you have a day job or if you are professional trader. if you have a day job...then where did you learn or how did you learn trading...
Wouldn't you want to do it fullt ime?

I work full time as an IT professional. I learnt to trade by of course trying and failing over the four years from end 1999 to November 2004 when I bottomed. It was after I started keeping detailed records and analysing things I began to develop strategies I thought could work.

I will not think of doing this full time before I have 500K in my account. Even then I will still need to answer the question my wife posed: "If your daughter (whom we are expecting in two weeks) asks what you do for a living, what would you say?" I am still thinking about that.

Quote from verbotenlaandia:

Neke,

But regardless, if you turned 15k into 135k in 2005, that's outstanding. Can you do it again? Depends...I am curious as to why you'd change strategies in '06 (in search of higher returns??). If you traded the exact same way as you did in 2005, do you feel you could garner the same returns? It's hard to pinpoint obviously, but how much was due to an edge, or trading skill, and how much was random? After reading your thread, I would agree that you seem to have something going on. If you didn't have any trading skill, you wouldn't have made it this far.

You mention that you have a certain percentage of your trades automated, with the remainder being discretionary. And it sounds like generally, you like to fade breakouts, at least on the discretionary trades. Without disclosing what you feel is your edge, how do you set up your automated trades? Are you just using features available through Ameritrade (ie, "trade triggers"), or some other more complex back-end software package that runs along with your brokerage software? And how do you returns stack up when comparing automated to discretionary? Thanks.

The primary reason I failed to repeat my 2005 performance in 2006 were bad option trades, plus heavy withdrawals (took out 100K in first half, and 70K in the second half of the year). I was trying to day-trade those options like stocks and it costs a lot (commissions, bid/ask spread). In 2005 I did very few and my options trades were basically break-even. I still analyse my 2005 transactions, and it is still surprising I achieved that much given that 55% of my trades were profitable, while in 2006, 57% were profitable. I think I made some quite big hits in 2005.

My automated trades since 2/25/2007 have netted 33K while the discretionary has made 20K. Of course before the disaster, discretionary gain was as high as 98K. If I devote all my buying power to automated I could probably make 10% per month on average, but of course that will not take me to my destination: hence the discretionary. But after the disaster, I am putting emphasis on automating as many strategies as I can: it will still take some time to do though.

I do not use AMTD trade triggers: they are too simplistic. My software is a combination of VB and Java-application written by me with Quotetracker API to interface with AMTD, and TWS API to interface with Interactive Brokers. I maintain my wife's account on IB using only my automated strategy with overnight long-only positions. So far this year that account has grown from 10.5K to 17.5K, trading with normal overnight margin (2 X Account value) - which has made me envious whether I should not devote all the buying power in my own account to that strategy. I do my own research and develop my own strategies. Hope that answers your questions: disclosing strategy is of course out of the question, right?

 

[MidKnight]

Hi neke,

When comparing your discretionary results to the automated results, remember you had a huge win from that mistake on google which will skew your discretionary results. I can't remember the exact figures, but it was a massive win compared to your others.

I think you can meet your goal. You know how to make money, its just a matter of keeping your expenses low (losing trades).

Best regards,
MK

 

[verbotenlaandia]

Quote from neke:

I work full time as an IT professional. I learnt to trade by of course trying and failing over the four years from end 1999 to November 2004 when I bottomed. It was after I started keeping detailed records and analysing things I began to develop strategies I thought could work.

I will not think of doing this full time before I have 500K in my account. Even then I will still need to answer the question my wife posed: "If your daughter (whom we are expecting in two weeks) asks what you do for a living, what would you say?" I am still thinking about that.



The primary reason I failed to repeat my 2005 performance in 2006 were bad option trades, plus heavy withdrawals (took out 100K in first half, and 70K in the second half of the year). I was trying to day-trade those options like stocks and it costs a lot (commissions, bid/ask spread). In 2005 I did very few and my options trades were basically break-even. I still analyse my 2005 transactions, and it is still surprising I achieved that much given that 55% of my trades were profitable, while in 2006, 57% were profitable. I think I made some quite big hits in 2005.

My automated trades since 2/25/2007 have netted 33K while the discretionary has made 20K. Of course before the disaster, discretionary gain was as high as 98K. If I devote all my buying power to automated I could probably make 10% per month on average, but of course that will not take me to my destination: hence the discretionary. But after the disaster, I am putting emphasis on automating as many strategies as I can: it will still take some time to do though.

I do not use AMTD trade triggers: they are too simplistic. My software is a combination of VB and Java-application written by me with Quotetracker API to interface with AMTD, and TWS API to interface with Interactive Brokers. I maintain my wife's account on IB using only my automated strategy with overnight long-only positions. So far this year that account has grown from 10.5K to 17.5K, trading with normal overnight margin (2 X Account value) - which has made me envious whether I should not devote all the buying power in my own account to that strategy. I do my own research and develop my own strategies. Hope that answers your questions: disclosing strategy is of course out of the question, right?

I'm glad you've decided to tone down your discretionary trades. If you really feel like you can average 10% per month on automation, by all means, just do that! You might argue that adding your discretionary trades can boost returns...but the confidence level of those returns (the bell curve around the expected avg return) would be really wide, given the drawdowns that are apparently possible. Unless you think your automated trades will stop earning 10% a month at the end of this year, just run with it...so it'll just take you a little longer to 500k but with more certainty (I assuming).

As for answering your daughter's question about what you do, you could just say that you kick it out by the pool all day while your trader-bot pulls money out of the market. I think that would be an adequate response!

 

[neke]

Weekly Update for week 14 ended 06/01/2007

Pathetic. My resolve to hold to rules lasted less than two weeks. Really bad trading lately. Shorted 2000 JOYG on Tuesday at 49.20 on cursory look at earnings release, added 2000 more at 50.80 and covered at 53.80. Total loss nearly 16K. Need to do a better job of analysis before acting. Same day chased NOVC on the short side on the way down, and suffered a painful covering at a bounce towards market close. My discretionary trades have lately turned into impulse trading.

Automated trades were at break-even this week. So since inception of thread, discretionary is now barely positive, while automatic has made about 33K. Spending a lot of time now trying to automate more strategies, and reducing discretionary trading to bare minimum. Ideally I should only do discretionary trade swing-style on stocks or options, having more time to look before I leap. Trying to make instant decision on stocks at work is not a good idea: there is just not the time to do a better job. Hopefully by mid to end June should have added two more strategies to my automatic arsenal: right now I have only one.

Balance B/F:                   		110,951
Loss for the week             		-19,385
------------------------------------------------
Balance C/F:                   		 91,566
Number of Trades	            	 16
Number of Profitable Trades    	    	  6

Since Inception of Thread   2/25/2007 - 06/01/2007

Balance B/F:                   		 76,636
Net Gain (Less Margin Interest)		 33,930
Cash Withdrawal		       		-19,000
------------------------------------------------
Balance C/F:                   		 91,566
Number of Trades	           	 368
Number of Profitable Trades        	 228

Expected Balance at this time to be on track for Year-End Target : 
			       139,190
Status:			       Behind Target

Top/Bottom Discretionary Trades for the week


TICKER	ENTRY DATE/TIME		EXIT DATE/TIME		QTY	PURCHASE AMT	SOLD AMT	GAINS		TYPE

UKORB	2007-05-31-12-14-21	2007-05-31-13-51-57	10000	15500.00	18500.00	2819.73		OPTIONS
CIEN	2007-05-31-11-56-28	2007-05-31-15-41-55	2000	66540.00	68500.00	1938.97		LONG
NOVC	2007-05-30-14-24-33	2007-05-30-15-58-24	3000	44986.00	39322.00       -5684.65		SHORT
JOYG	2007-05-30-09-32-07	2007-05-30-11-18-36	4000	215556.00	200000.00     -15589.08		SHORT

 

[stocktest]

Try to slow down. It's not necessary to invest everyday or everyweek in order to make money. Invest only at the right time. Its better to combine the automatica strategies with you.

BTW: May 30 is also a day my market suffered with a 10% decrease.

 

[mschey]

Neke,


My best advice to you, stop this journal, get back to basics, focus on your core strategies, and get yourself back to profitability.

A journal, IME, acts as a powerful magnifier. When you are trading well, it can boost your profits, when you are trading poorly, it will help you lose money faster. When you are being watched and monitored, you are under pressure to perform. When your system is doing well, you do much better, because, in general, you are being more aggressive, you are trading bigger size, etc. However, when you are doing poorly, the pressure to perform is even greater. As a result, you often take mediocre trades, revenge trade, etc.

I have been through many ups and downs as a trader, I'm still here and still profitable! I attribute this to the fact that when trading is tough, and I'm not making money, or not making the money I want to make, I work harder, I go back to basics, focus on my only the best of my strategies, and only size up when I regain profitability. Once I am trading well, I step things up, and take my trading to new levels.

Step down, regain your confidence and profitability, then step back up when you know you are on track. And don't be afraid to dump this journal, trading is your business, put your business first.

Good luck!