Trading in Review 2001-2011 (Part III)
I break the trading business into five separate components. These components are:
(1) Trading - all skills related to trading including market knowledge, market tools, trading, and automation.
(2) Psychology - emotional control and mental discipline.
(3) Technology - IT equipment, internet services, live market data streams, etc.
(4) Business Operation - business planning, day to day operation, cost control, etc.
(5) Tax (Planning & Reduction) - strategies to shield trading income from taxes, optimizing tax deductible eligible expenses, etc.
The evolution of my trading business will be discussed as it relates to these 5 components. Journal entries for 2001 will serve as the baseline for this evolution.
(1) Trading - In 2001 I really didnât know much about the markets. Therefore my first task at hand was to learn how the markets worked and the associated market terminology.
Like most traders starting out I was eager and excited to learn as much about the markets as possible. To get educated, I used a combination of TV, real-time market information, website sources, and books.
My TV was tuned to MSNBC giving me the daily market play. I set up 2 trading workstations with (4) 19in. monitors, two data streams from marketfeed.com, a stock charting subscription from Medvek Quotetracker, and a market news & event calendar website subscription from briefing.com.
I purchased the book How to Get Started in Electronic Day Trading and read this book cover to cover a number of times. I thought this book was a good introduction to how the markets and electronic daytrading worked. I also purchased the book Reminiscences of a Stock Trader which I attempted to read a number of times but never completed due to its limited practical knowledge of the markets.
The website sources used for research included briefing.com, bigcharts.com, nasdaq.com, bloomberg.com, and nyse.com.
A lot of focus was spent on learning the application features of the charting software Medved Quotetracker. The main features that were explored were, portfolio setup, column configuration, chart timeframes, indicators, type of charts, chart colour schemes, streaming data sources, backfill data sources, indexes, Level 2, historical charts, and raw data.
Being in the computer business I chose Intel (INTC) as my first stock to follow. My early chart setups were simple line charts. They were white lines with black backgrounds. I tested charts in different time frames including 1, 2 .5, and 10 minute. The indicators I was using were SMA (Standard Moving Average) and EMA (Exponential Moving Average) with period adjustments between 9 and 15. I also displayed the raw data transactions and level 2 data for the stock. The index data for the NASDAQ, DOW, and S&P500 was configured to display in the index area of Quotetracker.
Paper trading was conducted manually in 2001.
(2) Psychology - Like most traders starting out I was hyped to play the markets. Emotional control and discipline were nil. I can remember being overly optimistic, egotistical, and arrogant at times thinking my trading skill levels were high when in actual fact they were nonexistent.
(3) Technology - Refer to Trading in Review 2001-2011 (Part II).
(4) Business Operation - My initial investment in the business was $9140.94. Therefore keeping the trading business operation overhead low was of prime concern for 2001. The trading business was established as a home based business therefore no office expenses. No broker was selected therefore no brokerage fees were incurred. Late in 2001 real-time subscription data feeds (marketfeed.com) were replaced with free 15 minute delayed data feeds. Also, late in 2001 the news feed subscription (briefing.com) was cancelled for various free internet information sources.
(5) Taxes (Planning & Reduction) - Technology purchases in 2001 were put through my IT business. My home based IT lab/office also served as a trading office. The IT equipment served in both capacities for IT testing and trading. The potential to develop an IT support market niche was also a consideration in the tax process. No income was generated from the trading business in 2001.
TBA99
Trading in Review 2001-2011 (Part IV)
