May Trading

I have a bad taste in my mouth this month, fairly disgusted. Few gains were had, only one closed trade had a profit higher than the amount I was risking. The details are tough to write about.

The big gain was a daytrade in SDS. The big losses were in what turned out to be short term trades in XLF, VMW, and BIDU puts. I was correct but early on the puts, bought them near the top, maybe two days early. Well that two days early stuff handed me near total loss of position and I ended up selling them as they came back a few days before expiry for a 3R loss in 2 accts, so this was a 6R loss! In a cruel kick to the nads, they closed in the money for what would have been a similar gain. I got more nad kicking with the VMW and XLF spots. They closed one day just shy of an R loss each, then went pretty fast to 3R loss the next day. Based upon my rules, I took the loss, they did go lower. Again VMW was 6R due to holding in 2 accts. When I'd bought the VMW, I saw it as a leader that I was really willing to give 2% loss to, not .5%.

I am going to chew on this for a while b4 commenting further.

$SPX.C

Digging for Gold?

Actually just trying to get room for a berry patch.

RJI

Pain!

It has been a while since I did many scans, went through some charts this am and things really look crappy. The only things close to bullish are the yen and dollar (FXE UUP). PTM and VXX might be okay also. Gold is debateable here, but I've been influenced on that one by an email I got. Retirement accounts continue to suffer as does my position I got into yesterday in XLF.

I am reading Jim Rogers book Hot Commodities, they are suffering also, seemingly contrary to what he is saying. There are some ETNs that track his index, I am going to start watching them more.

I should follow my own advice more.

Plan

I expect that volatility will calm down. If there is an easy way to trade VIX on the short side without being short I will look into it. Otherwise this remains a market I am not interested in being involved in. Research time will be devoted to evaluating possible long stocks in the event we get back into an upswing. I will also continue reading about futures, set up what I think is ACAT or ACH funding of futures account.

I reviewed 401k and annuity data last night. It pains me to look at the money that evaporated away, yet it only takes us down to par for the year. 50 day still > 200 day so I remain all in. Trading acct is similar story.

I want to be pickier with what I buy if market gets healthy.

Clawing as best I can

Average price was <2.95

Nerve wracking

It got to feel a lot more like luck. I expected this to happen sooner, when it did not I should have gotten out. Time to go swing a hammer!

Futures decisions

Well I went ahead and made some decisions. I remember when I started with my current broker that there was a steep learning curve for the various platforms. Different features, bells, and whistles. Setting up quote lists, parameters, charts, alerts, all of it. It occurred to me that maybe I would enjoy having a backup broker to turn to, or that I might like the futures so much that I would only want to trade them. So if the learning curve is steep, and some brokers might only do futures, some might only do equities, having another broker that could do all from one platform/account might make things easier. I've heard that IB does this, but I find them a mess to navigate, have picked up that customer service is not that great-it is designed for folks that know what they are doing and I clearly do not at this point. So this left me with Tradestation and MBT. I'd looked at TS a while back, generally have heard some bad things and I did not like something with a Beta chart package they were putting out. So late yesterday I started opening a MBT account, VERY FRUSTRATING. Good thing I am starting this way earlier than I need to.

I need to be careful of greed. I've followed some futures prices this week, made some analysis of what the market could give one if it had been traded, and the chances are there to exponentially grow ones account. This am I look at the emini and see it has traded in a range of 1104-1118 overnight. I've followed this kind of thing for about a year now and it is amazing the moves this thing makes overnight and premarket. If anyone actually reads this, perhaps you have seen how the market opens one direction when the latest Yahoo finance front page says futures are down. Take a look at the picture, as I snipped it futures were really only down 3.5. I'd seen this market at 1106 early this am, don't know if I'd have traded it, but it is now at 1115! Maybe my math is wrong, but that is $450 move for each contract emini.

Maybe some daytrades would be okay, just would need to make sure I do not fall down an emotional slippery slope.

Futures vs market activity

So overnight the spy/eminis traded in a 1120-1140 range. I figured that trading off either of those extremes would be good for a daytrade-fading whatever extreme was approached. I did this with very little pain this am. I took a look at what I think the math could be for this one trade if it was eminis. For one contract I could have pulled in $300, for my goal of 10 contracts it could have been 3K in gain in less than 30 minutes. Intraday margin requirement, if I am correct, would have been just over 14K to make that trade. In my opinion, it was low risk, decent reward scenario. I got a 1R gain out of this.

Futures Plan

This is a long term plan with live implementation being considered for 2012.

1. Learn the brokers. Currently just a few being considered due to cost and service levels. Infinity AT looks ok, very responsive, likely no fees once account opened just to follow and learn the markets. MBTrading and Tradestation slower to respond but likely in line price wise. Those I respect use MBT. I am looking at the demo of Infinity and will demo the others. Next I will open a real funded account with the better of these and do some simulated trading as I follow the markets.

2. I will learn the markets. I will remain open to a fundamental news source so that I can better understand the factors that influence the price action. Hopefully this is the kind of thing that will not permeate too many trading ideas but educate so I can make the decisions. I also will learn the basics of the various contracts through sim trading and reading books such as the new one I got yesterday from the CBOT-Handbook of Futures and Options. There appear to be some okay online resources to learn also.

3. I will develop a trading plan with defined rules for application that incorporates risk management and position sizing, when and what to trade. Currently I am thinking to NOT be a daytrading monkey but to try and catch longer term trends similar to what I have read in trend following books. Then through paper trading with sim account or on paper, track the signals and learn how the pain vs gain stuff works out.

4. Build funds with money that will not change my lifestyle.

5. Decide viability through post trade analysis. Decide funding level desired.

Futures

I spent a good part of the day yesterday reviewing different futures brokers websites and sending them email questions. I am disappointed in no responses from Tradestation and MBTrading so far but they did clearly have phone numbers if I needed a real person. I had a tough time signing in to my demo Infinity AT platform, they emailed and called me back the next am. I was using the wrong password as I could not read my own handwriting. The broker/sales guy called me in the am also, talked me thru what I was doing. That is a big plus.

Here is what I found out. Tradestation not as well rated at elite trader forums, seems to offer a lot, including charts. Might be $100 a month without and trading, I am willing to pay in order to learn. MBT might have some data fees. It is not clear if they have a demo mode in either of these. Infinity has live simulated mode, does not include charts but they are available for $30 a month thru another provider. I am not sure of the data included with them. Infinity does not seem to want to give access to all data, they would want to add different contracts piecemeal due to the cost.

It is interesting to look at all the flashing lights and be able to put on large contracts. But this is not what I want to do. While I will pay attention and have a single screen set up for intraday moves in something like the SP 500, I really want to trend trade moves in the futures and commodities. In order to best follow and understand these, I want to watch and keep records of paper trades. I am able to look at charts on Finviz, these seem kind of basic without ATR indicators that could help me determine position sizing. But I can identify potential trades setting up and see how trading some breakouts month ago could potentially lead to profits. Here is what I saw last night to follow:
Feeder cattle a buy at NH 115
lean hogs near NH
nat gas in range, can trade the b/o either way
pork bellies a buy, rice a ss, oats a ss, soy oil a ss,
OJ long or ss b/o, same for cotton.

But the tough part without a broker or better data is determining ideal position sizes, stop losses, seeing how the potential trades shape up, and what the pain and gain ends up being. Looking at all the flashing lights for eminis is fine, I want the big gains with holding in trends.

PREDICTION

The end of the world is not upon us. I suspect that questions remain in native lands as to the viability of proposals. I also think that our markets have likely seen the worst of the selling action but that we have a ways to go for new minibull to rise. We are digesting and chewing on our cud in the second stomach and have created a lot of gas. Teachers I have listened to seemed to know very well to step aside and allow the market to do its thing, avoiding the intraday noise and playing hot and heavy in big demand leading stocks when the time is right. I do not think that time is now. I have lost a lot of money playing stocks in times like now and expect I will be very uninvolved in trading until proven different. Volume seems low for this huge move up today, might yet be a dead cat bounce.

I need to be aware of my surroundings and be ready to pounce. In the interim I am looking more seriously at futures trading.

Theme Song interview

Q: I notice there is no quote machine on your desk.

A: Having a quote machine is like having a slot machine on your desk- you end up feeding it all day long. I get my price data after the close each day.

Market madness

There is plenty of emotion in the market, I myself am fearful of losing a lot of my retirement funds. But I have a stable job and will just continue to work, saving as much as I can. If my trading were better I would argue that 401K owners need more control over their funds. The market was looking healthy as it advanced, the simple things I currently look at for market breadth suggested that this was a strong bull market we were in, warning signs were not flashing that big bull was over. The way I see things, if I was not smart enough to pull money out of the market as things went up, I need to sit through this time now. Of course, if the 50 day moving average moves below the 200 day average, all bets are off. At present it looks like that could be coming. If the market behaves poorly on Monday, I will consider a 1/3 move to cash in 401k, pulling out of the Europac fund.

Some interesting black monday 1987 links: What Caused the Stock Market Crash of 1987? and Black Monday (1987)

I want to get in touch with my inner voice more, learn to listen to it. As I was noting the danger signs of crumbling leaders I was thinking it was time to get out of the market and bury my head for a while. If I'd done that I'd have a few more percent of my equity still listed in my account. This market is too volatile for the average participant. I will wait for more reasonable times but continue my processes for monitoring potential leaders. I know of nothing else to do.

Danger will Robinson

So yesterday SIRO makes the IBD list of good movers up on volume. How did it do today? It is tough to trust the market and stocks. It is even tougher to trade individual issues instead of broad indices due to such action. Buyer beware!

Work chart review

This is the one that is closest exposure to Greece. It is the worst performer of what I have. The simple system of following long term moving averages is still bullish.

Month and trading in review

It is getting hot around here. While I appreciate getting inside to cool off, it is a bit stressful to review my trades, rethink the moves, wish I could grasp for those that got away, and kick myself in the pants. But it also creates an attitude of gratitude as I think of how the exact opposite of the above could have happened. I know lots of people lost their arses this month.

Overall I am very happy with my trading. I feel like I have got initial position sizing and risk management via predetermined prices at which to take losses. I'd like to determine better if my points of taking losses are correct. When price is trending down, there is no way of knowing when it will stop doing so, making it difficult to hold onto losers. But just taking a look back at this post tells me there could be some work to do. If I'd stayed in each of those 4 stocks I'd have a lot more money right now!

I traded a lot, 33 trades give or take. For me a trade is a buy and hold or a buy and sell, so number is more likely double. For ease of detailing it, I am calling R as 0.5% of my trading capital as the amount I would risk on a trade. This month gains in excess of R were: 1.4R, 1.46R, 2R, 4.8R, 5.1R. Losses in excess were 1.39R and 1.85 R. I do not feel real bad about the 2 big losses. One was a gap down after earnings (maybe should of been out of it) and the other I did not have good alerts programmed into my platform. I hated not having a good alert in as it got near my loss point, but the difference in time was minutes...it just crapped and got flushed that fast! My two biggest gains were a big trade in C on the first day of Greek fears (held 4/16 4.56 until 4/21 4.97) and on PWER bought in two installments (5.4 on 4/22 and 5.57 on 4/26 and sold premarket gap 4/30 at 6.9). PWER could have been held longer but I doubt I would have kept it into the weekend. It was a marvelous gift!

Overall I was up 1.45% for the month and now 4.5% YTD. That is 3 months positive in a row! For the time involved, I could have just worked OT at day job and beat this with the money at risk.

Emotionally it was a roller coaster. My protection from losses during the ride was predetermined loss points based upon an issues volatility. I did not screw up taking losses. I sold some things prematurely not wanting to sit through whatever was happening but once I recognized my WEAKNESS in doing so, I capitalized on others doing the same and had my 2nd best gain of the month.

I want to do better with a daily trade log. It is tough to look back to fully know the reasons for trade entry and exit. I want to be a better predator on entries.

Some of the action of "market leaders" concerns me. I remember such concern when I took a small profit in APPL years ago. I'd bought it at 98, sold at 113 after it came in from 120, it got near 200 by the end of the year.

The option god demon still willing to take my money. One small gain, two small losses, two open positions.