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-- Hammering away, slow and methodical (http://www.elitetrader.com/vb/showthread.php?threadid=233760)

Hammering away, slow and methodical

A new year deserves a new journal with a catchier title. You can read my first journal here Rol's Trading Journal. Starting balance will be 35K. It should be interesting to see what one can do with close to the minimum in a pattern day trader equities account. I removed 40K to pay off loans and pay down my mortgage to the point that I can pay it off in 6 months. Even with a smaller trading account, I feel wealthier with reduced debt. I don't plan to make any contributions for at least 6 months, as I will be sending extra income to pay off my mortgage. This should help with analyzing system returns and drawdowns better without the magnified drawdowns from contributions as occurred last year. I may even withdraw any profits at the end of each month, and send them to the mortgage company, so I can benefit from some tangible rewards. There is a good chance the journal will be quite slow at times, as I wait patiently for pullbacks in the market. I don't want to get my hand smacked in the cookie jar. I would rather wait for the cookie jar to fall over, and like a dog, scarf up the cookie pieces.

There were some breakdowns last year with following my strategy, and performance suffered. I concentrated in positions at times, mostly to my detriment. I am still studying hedging methods with my long only strategy, besides simply limiting size. If I find my long only system down 5% and exposure exceeding 100% (2X buying power), the system shall begin shorting the S&P.

I am looking to achieve a minimum 30% return with a maximum 30% DD. I started with 30K in September 2010, and was actually on quite a roll up until August 2011. I did manage to bounce back some, but the swings and failure to follow my system began to take their toll on my resolve. The larger account size and trying to hit dollar goals also added pressure on performance. What I plan to do is nibble at the markets, with small positions, scaling into, as well as out of the market, like a wave coming ashore and then returning out to sea.

I am starting the year with an altered strategy. I am going to be much more selective with the symbols I track. It will follow stocks in the Nasdaq 100, and a selection of ETFs, that have performed well with my strategies. Naturally, I expect to be on the sidelines more. However, there will be times that the markets are highly correlated, and I will be sizing up. Last year, I did not like the negative news related impact on my positions, so focusing more on a wide variety of ETFs will help avoid some individual stock risk. I will track Index ETFs, Sector ETFs, Country ETFS, Emerging Market ETFs, Commodity ETFs, and a few short ETFs… just about any ETF that has a decent equity curve and daily trading volume.

I will mostly be buying and selling at the close, so I will from time to time make some trading calls before the market opens the next day. I currently am following 121 ETFs, and 67 stocks. I will probably add more stocks from the SP500 over time. My current holdings are SPDR Gold Trust, GLD and iShares Silver Trust, SLV, about 30K of each. I plan to hold these for as long as possible and see if they have legs. I know it already sounds like I am breaking my rules. I may deviate from time to time and size up, but I will make it a live call, so it should make me be quite choosey, knowing my trade is on public display.

I have been reading Dr. Elder, and like his method of trading pullbacks in channels. It is similar to what my strategy does, but I plan to use it to build up my discretionary skills. Even with auto trading, I think it is important to keep sharpening discretionary skills, to keep your trading in check. I will keep size very small, though, until I can prove to be consistent. I like Dr. Elder’s style because it is rules based, and he teaches how to grade your trades, which provides feedback.

I will continue to use the format of weekly updates, year to date, and end of quarter analysis. And so, the journey continues…

Nice post and good luck. Great you are trying to winnow down your debt. My only gripe is I could never understand the mindset of hedging with a small account. Hedging just adds another layer to the decision making process. And don't get me going on Elder. Doubtful he has ever been a successful trader and you will never ever see multi-year real money trading statements as validation. But if you think of him more as a teacher than a trader, then go for it.

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Quote from KBaines:

Nice post and good luck. Great you are trying to winnow down your debt. My only gripe is I could never understand the mindset of hedging with a small account. Hedging just adds another layer to the decision making process. And don't get me going on Elder. Doubtful he has ever been a successful trader and you will never ever see multi-year real money trading statements as validation. But if you think of him more as a teacher than a trader, then go for it.

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Rol, good luck with your new strategy.

Do you mean 3K positions of GLD and SLV?

There is a trading strategy on Collective 2 called 'Stock Swing Trader' that is worth taking a look at. Julian Van de Walle trades long and a short positions at any given time, chosing strong performing equities for long position and weak performing equities for short positions. His returns have averaged 73% per year for the last two years since he started the strategy.

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Quote from Camdo:

Rol, good luck with your new strategy.

Do you mean 3K positions of GLD and SLV?

There is a trading strategy on Collective 2 called 'Stock Swing Trader' that is worth taking a look at. Julian Van de Walle trades long and a short positions at any given time, chosing strong performing equities for long position and weak performing equities for short positions. His returns have averaged 73% per year for the last two years since he started the strategy.

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GLD and SLV are tightly correlated. The two positions are essentially the same bet on market direction. The impulsive SLV entry lacks discipline and planning.

I have gathered from your first post that a keystone of your new strategy is to keep the account at a minimum to enforce discipline that every trade must count.

Gld and SPY are generally uncorrelated, so a paired position would be hedged. The volatility of both is enormous, so the pair could be exited with both being profitable by using profit limit targets, provided the market does not move beyond the volatility range. In that case a small loss would be incurred but that is the advantage of the hedge. The strategy is for win-win net gain, but if it does not play out it is win-loss net even. The time frame is the important discipline.

I am aware of the correlation between gold and silver. I took the trades when no other signals presented themselves. I wanted exposure in both because one might perform better than the other one might in the short term. Yes, I consider them as a hedge for the broader market. I plan to leg out as more signals appear in stocks and ETFs.

I closed out my SLV and GLD yesterday, quite by accident. I had some faulty logic in my strategy exit override code. Instead of condition1 AND condition2, the code read condition1 OR condition2, with condition2 being Exit_Override = True, so the strategy exited when condition1 was true, and ignored condition2. In Market Wizards, Ed Seykota said he would override his systems at times. If I choose to override an exit, I then have a stop put in place.

Reentered 200sh GILD short today, after stopping out earlier for a $35 loss on 100sh. I knew my first entry was not working out quickly. For me, fading the open on shorts doesn't work most the time. I do better in the afternoon, I think, when it appears a long bull run has lost power, and preferably price and volume spiking at the highs for the day.

I feel a bit better about this one. The volatility has increased the past 2 days, as opposed to the slow grind up it has been doing. Also looks as if a double top was put in today, where I shorted. Seeing some divergence in bull power past 2 days on the 60min, with a new recent high today, I began shorting. In addition, there is a MACD crossover to the downside. The indicators and some of the interpretation are from my reading of Elder's, Come Into My Trading Room.

Nice trading on that GLD & SLV even with program errr!

I was wondering if the GUILD trade is based on a strict mechanical interpretation of the chart and indicators shown? Are you introducing fundamentals from the news, or general overall market (i.e. SPX) chart analysis to influence taking the short position? As I understand it, you are searching for an alternative strategy to compliment your RTM strategy.

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Quote from Camdo:

I was wondering if the GUILD trade is based on a strict mechanical interpretation of the chart and indicators shown? Are you introducing fundamentals from the news, or general overall market (i.e. SPX) chart analysis to influence taking the short position? As I understand it, you are searching for an alternative strategy to compliment your RTM strategy.

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Re: Hammering away, slow and methodical

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Quote from Rol:

"... I am starting the year with an altered strategy. I am going to be much more selective with the symbols I track. It will follow stocks in the Nasdaq 100, and a selection of ETFs, that have performed well with my strategies. Naturally, I expect to be on the sidelines more.

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After a couple scratch trades, I am long 300 sh FXP UltraShort China, average price $24.62. I see some divergence, and a possible MACD crossover, although I didn't base my entries totally on this. We just need some bad news on China from the media now. I am currently down $23.

Re: Re: Hammering away, slow and methodical

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Quote from Scataphagos:

Long time trading veteran here... I see 2 major strategies to mining the market...

1. "Trade every wiggle"... hoping your runners offset your whips.

2. "Cherry pick"... playing for the perceived "big opportunities" with lots of time spent on the sidelines. One of the biggest risks with this strategy is underperforming due to missing too many good plays. (Note: In a mutual fund timing service I ran years ago, in one of my 100+% return years I was "in the market" only 23% of the market days... that was back before there were inverse funds and ETFs.) Cherry picking is doable overall, but you unlikely to be right more than 50% of the time.

One strategy is as valid as the other.

Good luck...

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Rol, any chance you gonna get back to your old strategy?
It seemed very interesting and I loved the fact that you meticulously kept records and provided weekly stats - would be great to see that again.

As for dip buying, I would recommend to include canadian stocks as well - it works extremely nice and can diversify your risk substantially. Also consider hedging any long position you take on.

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Quote from NikEy:

Rol, any chance you gonna get back to your old strategy?
It seemed very interesting and I loved the fact that you meticulously kept records and provided weekly stats - would be great to see that again.

As for dip buying, I would recommend to include canadian stocks as well - it works extremely nice and can diversify your risk substantially. Also consider hedging any long position you take on.

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I am providing a YTD update and talking about some changes I made. Today I stopped buying stocks and changed to a system that only trades the Spooz, the Q’s, and the Diamonds, as well as their inverse ETFs primarily when the inverse ETFs are below their 200 DMA. I don’t think returning to my old system would be making progress as a trader. While I like stocks, I find myself getting too emotional with earnings news, lawsuit filings, infatuation with a company, etc, that causes me to lose discipline with following my plan.

By focusing on the three major ETFs, I can define my variables much better, such as maximum DD. I am using last August as my “Worst case scenario.” With my new system parameters, an account using maximum 1.8X buying power would have experienced a 24% DD then, and about the same in ’08, without hedging. When I say DD, I mean from the net worth just prior to a major market correction like last August, and not a stationary starting account balance or high water mark.

The individual equity curves of my new strategy look good on each ETF, and by following the three major indices, I hope to smooth it out even more. I know they tend to move together, but on occasion, they diverge. It will help me psychologically to have exposure in each one when watching the markets, so I won’t feel like I am missing out when one outperforms. My maximum position size on each will be around five times what I would be comfortable with on an individual stock. Looking over the past decade, I see even with a 25K account, 1 or 2K swings would be the norm, but I am ok with that. If I am down 5% or more, I have my system begin to hedge by a small amount each day until there is a reaction. This should help me to get more use to hedging. I will continue to trade the long ETFs, even when they are below their 200 DMA, but at reduced size, with the remaining BP reserved for the short ETFs. The equity curves don’t look too bad even when taking positions under the 200 DMA on the Spooz, the Q’s, and the Diamonds. Small Cap ETFs, however, consistently display uncomfortably large drawdowns and non linear equity curves with my new system, or my old system for that matter, so I have chosen not to include them.

On a side note, just about every time I read about trend following systems, the authors talk about waiting for a pullback in the longer-term trend to enter. I don’t see how that is trend following when you are buying against the short term trend. I always thought of trend following as simply following the herd, and buying higher highs.

I have incorporated my net worth into the position sizing calculations. When equity increases my position size will increase, and when it decreases, so will the position size. I think I will like trading the major ETFs, because I don’t see any liquidity issues like with individual stocks. I anticipate saving on commissions too, because I won’t be trading hyperactively, and slippage should be reduced. There will still be plenty of trading signals each month, and I plan to hold positions for a longer period of time, around 6-7 days on average. The system actually will be using BP more aggressively that my previous system, but the 1X ETFs won’t be as volatile as stocks, so I will hold through difficult times and follow the plan. For me, consistency over time and peace of mind is more important than risking a blowup by shooting for some astronomical returns. I plan to contribute and reinvest winnings, so I need a system that is somewhat conservative with known draw down expectations.

I decided to kick off my system today with a couple of short trades to test the code out. Normally in a strong uptrend I would not want to be short, but we are at longer term resistance right now, so I anticipate some sideways trading for the near future. I am also curious how the system might perform both long and short concurrently, even if the shorts don’t happen to work out well. The vast majority of the time when I hear of traders blowing up, it is when they were short in a runaway uptrend. I just read in The New Market Wizards how Bill Lipschutz took $12,000 to $250,000 in 4 year and then "blew the entire account because of one drastic mistake of wildly overleveraging his position" (He was "very bearish and heavily long puts.") I want to learn from other's mistakes by never taking huge risks. Markets, after breaking out for a time, tend to find a new trading range, until the next breakout.

So here's to my new strategy…

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Quote from Rol:

I am providing a YTD update and talking about some changes I made...

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Quote from sprstpd:

How often do your strategies change? How much confidence do you have in a system before starting it live? What kind of backtesting do you do?

Personally, I think moving into the index trading space (SPY, QQQ, DIA) is a questionable decision. Those indices are highly efficient - the odds of finding a viable trading strategy there is lower than in individual stocks.

However, good luck! Interesting journal.

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Quote from sprstpd:

How often do your strategies change? How much confidence do you have in a system before starting it live? What kind of backtesting do you do?

Personally, I think moving into the index trading space (SPY, QQQ, DIA) is a questionable decision. Those indices are highly efficient - the odds of finding a viable trading strategy there is lower than in individual stocks.

However, good luck! Interesting journal.

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I launched my new improved strategy the later part of last week. Rather than trading only SPY, DIA, and QQQ, and their inverses, my basket will consist of the stocks in the S&P 500, and a variety of about 80 ETFs. I noticed when scanning all stocks, I would often end up over concentrated in sectors. Whereas limiting trading to the S&P only, I get fills on a wider variety of sectors. I closed out my shorts midweek last week for a $300 loss. One rule of my strategy is to only enter a trade when the last tick is above its 200 DMA. So for practical purposes, my basket currently includes about 350 stocks and around 70 ETFs. I altered my rules somewhat to allow for more fills than before, so I won’t need to do nightly scans to get signals. All stocks will be monitored in real time. By concentrating on stocks in the index above their 200 DMA, I hope to avoid “Enron” type companies and Chinese pump and dumps, for example. I will be shorting, but only when the market is in a downtrend, and going long when in an uptrend. I am kicking my new strategy off with 30K, and will make bimonthly contributions to accelerate compounding. Current maximum position size is $3300, but I plan to inch it up to $3600 soon and keep it there. I may load up on an ETF on occasion, but only after much deliberation and patience. My new strategy has me holding for longer periods of around 5 days, which is something I will have grow accustomed to. I will let my winners run a bit longer than before.

Real-time Unrealized P/L $120.24
Real-time Realized P/L (Today) $39.69

Rol,

thank you for keeping the journal. It is very inspiring and motivating!

I have couple of questions:

1) you mentioned way back that it took you 4 years to develop the system - was part of that figuring how to setup tradestation on a server, internet connection etc...

2) i am thinking of renting a decidicated server with goddady to run tradestation. would you say i am better off buying a server and run it from home with comcast as ISP or am i better off running tradestation off of goddady?

Thanks,
tihfa

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Quote from tihfa:

Rol,

thank you for keeping the journal. It is very inspiring and motivating!

I have couple of questions:

1) you mentioned way back that it took you 4 years to develop the system - was part of that figuring how to setup tradestation on a server, internet connection etc...

2) i am thinking of renting a decidicated server with goddady to run tradestation. would you say i am better off buying a server and run it from home with comcast as ISP or am i better off running tradestation off of goddady?

Thanks,
tihfa

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Long 300 XLU at 34.66

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Quote from Rol:

Long 300 XLU at 34.66

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Here is a quick chart of my profit distribution of trades from strategy implementation on 2/10/2012. I am a bit concerned about the few negative outliers (from JCP) not matched with positive outliers, but I like the overall skew of the chart. I will keep updating this as time progresses.

I made some modifications to my entries because I felt I was getting too many signals for my current BP. I also added exit criteria that would have resulted in an exit on JCP with a $200 loss. If an exit signal triggered on the prior daily bar close, which was passed up, and the next bar close is lower, then go ahead an exit. IOW, take the loss. I consider these changes as "fine tuning" my strategy.

I think the old strategy was better.. beating SPY is very hard in my opinion. All the best anyway. Edit: I justed noticed you went back to stocks?

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Quote from macrotrader:
I think the old strategy was better.. beating SPY is very hard in my opinion. All the best anyway. Edit: I just noticed you went back to stocks?

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Hi Rol,

Just wanted to give you a brief note on risk management because I notice you're 100% exposed and 100% long with what looks to be heavy energy & utility.

You've done your homework, but, I remember you did have some solid DD's last year. DD's are part of the biz, we all have them, but I'm seeing an allocation here that can get you into some trouble eventually. It may not happen tomorrow, tomorrow may be a good day (or not) for this portfolio, but, the next time you load up too much in one sector with 100% long it may not be so nice.

Have you thought about adding a short component and limiting long exposure to 60%? Say, never being more than 2 to 1 long to short? You could probably do some beta hedging with SPY fairly easily...

What about limiting sector exposure? No more than 10% or so to any one sector/fundamentally group?

Just some suggestions to possibly avoid major DD's.

Mike

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Quote from Mike805:

Hi Rol,

Just wanted to give you a brief note on risk management because I notice you're 100% exposed and 100% long with what looks to be heavy energy & utility.

You've done your homework, but, I remember you did have some solid DD's last year. DD's are part of the biz, we all have them, but I'm seeing an allocation here that can get you into some trouble eventually. It may not happen tomorrow, tomorrow may be a good day (or not) for this portfolio, but, the next time you load up too much in one sector with 100% long it may not be so nice.

Have you thought about adding a short component and limiting long exposure to 60%? Say, never being more than 2 to 1 long to short? You could probably do some beta hedging with SPY fairly easily...

What about limiting sector exposure? No more than 10% or so to any one sector/fundamentally group?

Just some suggestions to possibly avoid major DD's.

Mike

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Hi and thanks for the input Victor and Mike. I know I mustn't concentrate in one sector like I have. I feel like Dr, Jekyll and Mr. Hyde sometimes. I suppose I rationalize with my small account I can get away with it, but I am trying to build skills for an eventual larger account, so I need to keep practicing patience and diversification.

I do have a component of my strategy that goes short via SDS a little each day as long as my unrealized loss is greater than 2% of NW, but I am upping it to 1%. My rational is that as long as my longs are increasingly underwater, then the overall market must be bearish. I like the 60% long exposure as a nice "working exposure". I won't feel that I am too much on the sidelines or overexposed in the markets at that level.

Jack Schwager mentions in "The New Market Wizards" how even if your shorts net zero gains, they still provide the benefit of reducing overall drawdowns of your account. That was a "light bulb" moment for me.
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Exposure 138%
Real-time Account Net Worth $36,615.93 (After 1K deposit)
Real-time Unrealized P/L $0.76

It was a fairly light day, buying and selling a few. I talked to a friend today who has been getting into options. He says you can make a lot of money. I told him I think more about how much I can lose. I know for me personally, I could get into trouble with the leverage of options, currencies, and futures, so I have not opened an account for them. He also thinks the automation space has been so exploited by large firms, that it is too difficult for individuals to make work. He was told that the markets are gambling, but he responded that like Vegas the “house” can still make money. I believe to realize any edge you have to be cold, calculating, and, consistent over a long period of time; not exactly common human traits. It was a good thing I lightened up during what turned out to be yesterday’s dead cat bounce, as I viewed charts this afternoon of some of the stocks I sold yesterday. I should be increasing exposure some more tomorrow, though.

Basically I need to trade everyday as if tomorrow is just the beginning of the worst thing that could happen to my account. I think by initiating even a nominal size short as soon as a draw down begins to develop, will help get me into the trend following short mindset. Especially, as I will be viewing it as a hedge, and not overly concerned about it making big money. I have heard mention of “forced shorts”. Does anyone know exactly what “forced short” means?


Real-time Account Net Worth $37,115.66
Real-time Unrealized P/L ($104.97)
Real-time Realized P/L (Today) $114.40
Exposure 39%

''Real-time Account Net Worth $36,615.93 (After 1K deposit)''

How long did it take?

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Quote from ocean5:
''Real-time Account Net Worth $36,615.93 (After 1K deposit)''
How long did it take?

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Quote from Rol:

I’m not sure what you are referring to by, “How long did it take?” Some of the current balance is due to past contributions and some are profits. This journal is not about all the money I made or lost before starting this journal, it is about what I am currently doing now and the evolution that is occurring. Once I get my balance to 100K, I plan to cease the contributions and just compound the profits for a more realistic equity curve and stats.

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Market seems a bit unstable after the Fed announcement yesterday that more QE was not needed right now. I think in the future, I will look into trading in the direction of the market’s reaction to Fed announcements. Unrealized loss is not over 1%, so have not opened any short positions yet; that will likely change tomorrow.

Real-time Account Net Worth $36,943.87
Real-time Unrealized P/L ($268.52)
Exposure 65%

Here are current holdings. I forgot to mention that I snapped up some country ETFs as well, but within strategy position size limits.

I realized a nice gain from an AH bounce on an earnings beat from OI. I am underwater by $600 on XLE with 550 shares. Don’t plan to add more unless there is some serious blood letting. After this, I really need to concentrate on eliminating the urge to take large individual positions, even if it is an ETF. It will eventually be my undoing. I need to reserve enough BP to withstand a 15 day relentless selloff. There are at least two or three times a year when market corrections occur and I need to be prepared for the worst at all times. So, rather than getting margin calls, I will calmly be providing liquidity to eager sellers and buying the eventual bottom. I am going to consider putting on a short position equal to my long exposure when I get very few long signals. I only had one signal during this most recent top so it could prove to be a good contrarian signal. Had it not been for the XLE discretionary trade, my exposure would be around 87%. I realized a $130 gain in SDS the past couple of days, and currently hold 200 shares.

Real-time Account Net Worth $69,147.48
Real-time Unrealized P/L ($1,690.03)
Real-time Realized P/L (Today) $203.37
Exposure 143%

When I crawled out of bed at 10am, I was pleased to see my NW up $1600 from yesterday’s close. I am going to let my XLE position ride to shoot for bigger gains on the energy sector. I will trail a stop below key support levels. I am still leery of the markets as May approaches. This could be a double top forming. If my signals drop to ~0, I will add to my SDS position.

Symbol Open P/L Open P/L % Average Price Quantity Total Cost Description
TSO ($254.67) -7.09% 26.42 136 $3,593 Tesoro Corporation
SDS ($108.00) -3.37% 16.01 200 $3,202 UltraShort S&P 500 ProShares
KIM ($101.68) -2.82% 18.86 191 $3,603 Kimco Realty
LXK ($47.61) -1.33% 33.43 107 $3,578 Lexmark Intl'A'
LM ($37.40) -1.60% 26.56 88 $2,337 Legg Mason Inc
PCAR ($31.57) -1.31% 43.77 55 $2,408 Paccar Inc
PGN ($14.52) -1.21% 52.10 23 $1,198 Progress Energy
DPS ($1.50) -0.13% 39.17 30 $1,175 Dr Pepper Snapple Grp Inc
CCE $9.24 0.77% 27.34 44 $1,203 Coca-Cola Enterprises Inc
PLD $25.56 2.14% 33.17 36 $1,194 ProLogis Inc
GD $27.54 2.25% 68.13 18 $1,226 General Dynamics Corp
CTXS $29.52 2.53% 72.89 16 $1,166 Citrix Systems
XLE $222.50 0.58% 69.35 550 $38,140 S&P Sel Energy Spdr Fund

Symbol Type Filled/Canceled
EWG Sell 04/12/12 02:59:03 PM
PDCO Sell 04/12/12 02:59:03 PM
XHB Sell 04/12/12 02:59:02 PM
MOLX Sell 04/12/12 02:59:01 PM
HON Sell 04/12/12 02:59:01 PM
AVY Sell 04/12/12 02:59:01 PM
TXN Sell 04/12/12 02:59:01 PM
EWZ Sell 04/12/12 02:59:01 PM
ETN Sell 04/12/12 02:59:01 PM
CMI Sell 04/12/12 02:59:01 PM
SWY Sell 04/12/12 02:59:01 PM
GS Sell 04/12/12 02:59:01 PM
AFL Sell 04/12/12 02:59:01 PM
GCI Sell 04/12/12 02:59:01 PM
DTE Sell 04/12/12 02:59:01 PM
MS Sell 04/12/12 02:59:01 PM
EFA Sell 04/12/12 02:59:01 PM
FFIV Sell 04/12/12 02:43:58 PM
DTE Buy 04/12/12 08:33:35 AM
DPS Buy 04/12/12 08:31:31 AM
PLD Buy 04/12/12 08:31:14 AM
CCE Buy 04/12/12 08:30:44 AM

Real-time Account Net Worth $71,295.84
Real-time Unrealized P/L ($280.58)
Real-time Realized P/L (Today) $739.11
Exposure 90%

I just heard that AAPL beat earnings estimates after hours. My 4 shares are up over 7% AH. What clear thinking speculator would be selling into the recent retreat before earnings of AAPL shares? Apple is notorious for beating estimates.

XLE showed some strength today, albeit on lighter volume. Let’s see if a trend can get going into the end of the month.

Symbol Open P/L Open P/L % Average Price Quantity Total Cost Description
TSO ($451.87) -12.57% 26.42 136 $3,593 Tesoro Corporation
LM ($89.32) -3.82% 26.56 88 $2,337 Legg Mason Inc
WHR ($65.15) -1.82% 67.70 53 $3,588 Whirlpool Corp
NTAP ($55.20) -4.54% 40.52 30 $1,216 NetApp Inc
CME ($40.32) -1.22% 275.93 12 $3,311 CME Group Inc
MMI ($34.90) -1.03% 38.54 88 $3,391 Motorola Mobility Holdings Inc
SMH ($11.55) -0.52% 33.35 66 $2,201 Mkt Vectors Semiconductor ETF
CSCO ($5.60) -0.51% 19.54 56 $1,094 Cisco Systems
AAPL ($5.54) -0.25% 562.19 4 $2,249 Apple Inc
SDS ($5.00) -0.32% 15.79 100 $1,579 UltraShort S&P 500 ProShares
SPLS $7.20 0.66% 15.23 72 $1,097 Staples Inc
MDT $3.90 0.35% 36.99 30 $1,110 Medtronic, Inc
M $4.20 0.39% 38.67 28 $1,083 Macy's Inc
EWY $12.16 1.12% 57.24 19 $1,088 iShares MSCI South Korea Index
DGX $12.84 1.18% 57.42 19 $1,091 Quest Diagnostics
MYL $20.91 1.90% 21.60 51 $1,102 Mylan Inc
AMP $14.91 1.37% 51.74 21 $1,087 Ameriprise Financial Inc
XHB $16.74 1.53% 20.20 54 $1,091 SPDR S&P Homebuilders
XLE $323.00 0.62% 68.97 750 $51,727 S&P Sel Energy Spdr Fund

Symbol Type Filled/Canceled
ICE Sell 04/24/12 02:59:02 PM
GOOG Sell 04/24/12 02:59:01 PM
SDS Buy 04/24/12 02:59:01 PM
JPM Sell 04/24/12 02:59:00 PM
AAPL Buy 04/24/12 12:57:25 PM
SMH Buy 04/24/12 11:42:11 AM
MDT Buy 04/24/12 10:00:00 AM
CSCO Buy 04/24/12 08:58:51 AM
MMI Buy 04/24/12 08:48:35 AM
SPLS Buy 04/24/12 08:46:07 AM
DNR Sell 04/24/12 08:39:05 AM
DGX Buy 04/24/12 08:32:44 AM
AMP Buy 04/24/12 08:32:06 AM

Real-time Account Net Worth $71,656.61
Real-time Unrealized P/L ($348.59)
Real-time Realized P/L (Today) $108.34
Net Long Exposure 116%

I swung back to net profitability on unrealized gains today. The SDS position I opened at yesterday’s close was exited at today’s open. My rule is that when unrealized gains return to > 0, then any SDS hedge is closed if I haven’t already taken profits, as I figure the market is rebounding and I am coming out of a DD. My XLE is still open and I have an $800 gain. I got down to a $100 gain today, but refused get stopped out as my goal was to hold thru the end of the month. Maybe trend followers will push it higher as it breaks out.

Real-time Account Net Worth $72,752.02
Real-time Unrealized P/L $357.82
Real-time Realized P/L (Today) $389.22
Net Long Exposure 108%

How is the rally around the facebook IPO working out for you?

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Quote from NikEy:

How is the rally around the facebook IPO working out for you?

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__________________
the world is so certain yet i walk on thin ice.

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Quote from Rol:

I am leveraging up my positions in anticipation of the market rallying around the Facebook IPO tour in the near future. In addition, while the Eurozone crisis has weighed on the markets, the market seems to be rallying back from any selloffs. This to me is bullish where the market buys after bad news. Besides, I can’t help but believe Europe has already been priced into the market to some degree.

I bought back into XLE today, in anticipation of another energy bear bounce. I think in a roundabout way, I am trying to recoup unrealized losses on National Oilwell by buying an ETF in the same sector. Probably a little risky, but if it makes money, I won’t complain. I couldn’t resist buying up a few more index and country ETFs today, so exposure is more than what is should be right now.


Real-time Account Net Worth $92,316.55
Real-time Unrealized P/L ($980.99)
Real-time Realized P/L (Today) $97.24
Net Long Exposure 144%

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Quote from Mike805:

Hi Rol,

How did this month treat you? I'm hoping you cut some exposure last week or hedged at some point. This portfolio looks like its in about -13% drawdown at this point, is this within reason for this strategy?

Mike

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Quote from Rol:

Hi Mike and everyone else curious of my performance. From the equity high of $92,316, I am down 7.3% at $85,600. Yes, the strategy jettisoned most all of my positions last week and earlier this week for substantial losses. Current unrealized losses are $586. I took an 800 share discretionary position in SPY late this afternoon for an average cost of 128.33, so long exposure is 115%. I must improve my skills at identifying broad market topping conditions and taking action. Trader Vic has some actionable material on that in his book "Methods of a Wall Street Master". I have been busy doing some home remodeling, so haven't followed intraday action too closely. I'll try and post an equity curve with stats sometime this weekend.

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Nice turnaround today, but still about 2K from my high water mark. I am hanging on to 950 shares SPY, but closed out most of my longs at the close. It seems whenever the FED hints at or takes new action, the market makes big moves like today on hints of QE3. I need to be less aggressive on positions allowed by automation. The markets have not been too friendly to my strategy for about the last year. I am giving back to much of my gains. The market, when it hits longer term S/R and fails to break through seems to be doing an about face and trending quickly in the opposite direction, taking my gains with it. This was not the case with backtesting from 1993 to mid 2011. Frankly, I am surprised I have been net profitable since starting my strategy automation in fall 2010. I am sure a lot has to do with all the uncertainty with debt ridden countries affecting the markets. This is why I want to be more on the lookout for topping and bottoming action off longer term S/R.

Last Friday I was 14% long going into the 260 point DOW sell off. My strategy shut down to opening new longs, though because Thursday night the Russell 2000 broke below its 200 DMA, so I was grateful for that added feature. It took me awhile to figure out why it failed to open any new trades that day.

Real-time Account Net Worth $90,229.43
Real-time Unrealized P/L $3,622.61
Real-time Realized P/L (Today) $377.61

Net Long Exposure 140%

I closed out my SPY trade yesterday around the open. I moved my stop up because the market appeared to have trouble moving higher. I thought of reversing my position, but thought that would be reckless emotional trading. I am flat going into the weekend. Account balance is 96K after a 5K contribution. When I get to 100K, I will stop contributions and begin a new equity curve. YTD profits are 6.8K, but are largely due to my discretionary gold trade to start the year, and this SPY trade, which is troubling to me for automation. I plan to scale back automation, and maybe even override it after I have a nice run of a few months and be on the lookout for topping action.

I have doubled my hedge size, when in DD. Also, this last time around, I took profits on my hedge when the market dropped more, and this hurt overall performance of the hedge. I have to avoid this temptation and let the hedge work as designed.

Just for kicks...long 700 HAL 27.96. Current price 27.84. Testing Oct suport levels.

Well, that was a real head fake with futures opening up over 1% last night, but closing down over 1% today. Now glad I went flat Friday. I am down $300 on HAL, but still feel good on my overall entry. I added stocks in the S&P midcap index, so now I track about 900 stocks and ETFs.

Symbol Open P/L Open P/L % Average Price Quantity Total Cost Description
HAL ($298.00) -1.33% 27.92 800 $22,338 Halliburton Co
SLE ($31.20) -2.60% 19.99 60 $1,199 Sara Lee Corp
VRTX $3.52 0.29% 55.34 22 $1,217 Vertex Pharmaceuticals

Real-time Account Net Worth $95,752.95
Real-time Unrealized P/L ($325.68)
Net Long Exposure 26%

rol,

what program are you using to run all of your stats like that?

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Quote from hoop121:

rol,

what program are you using to run all of your stats like that?

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My gold trade turned out to be a nice hedge for today. I will trail a stop. Net losses on my other positions are $166. Biggest unrealized loss is ADM at $140 on 158 shares. I got the urge to place a 1000 share position in SPY this morning, but it didn’t feel right. The usual script is to tank Monday then revert later in the week. It would be better to wait another day or two for the selling to subside.

Real-time Account Net Worth $97,852.68
Real-time Unrealized P/L $256.65
Real-time Realized P/L (Today) ($19.00)
Net Long Exposure 65%

I am happy about the minimal DD during the recent market activity. I gave back about half my gains on my gold trade, but am still long. Exposure is good.

Real-time Account Net Worth $97,939.97
Real-time Unrealized P/L $21.83
Real-time Realized P/L (Today) $322.12
Net Long Exposure 57%

Not wanting to be too aggressive here. It could turn out to be a buy the rumor, sell the news on the meeting of Euro leaders Thursday. I am down 13%, ($160) on ORLY, after a company earnings warning. These up and down days are the zone I like to work in, as I am getting plenty of signals.

Real-time Account Net Worth $98,057.70
Real-time Unrealized P/L ($153.38)
Real-time Realized P/L (Today) $293.39
Net Long Exposure 51%

Unrealized losses increased enough today to trigger a 200 share SDS position. I added 100 shares to my UGL, ProShares Ultra Gold. Now down $53, -0.23%. I am still kicking myself for not selling when I had a $400 profit.

Real-time Account Net Worth $98,002.12
Real-time Unrealized P/L ($492.87)
Real-time Realized P/L (Today) $284.33
Net Long Exposure 55%

Sold the news by invoking close all positions macro. Done for the quarter. Will top up account to 100K to start the next quarter.

Real-time Account Net Worth $99,484.29
Real-time Unrealized P/L $0.00
Real-time Realized P/L (Today) $989.70

Hi Rol,
On Monday 6/25/2012, you were contemplaiting an SPY position.

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I got the urge to place a 1000 share position in SPY this morning, but it didn’t feel right. The usual script is to tank Monday then revert later in the week. It would be better to wait another day or two for the selling to subside.

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Quote from Camdo:

Hi Rol,
On Monday 6/25/2012, you were contemplating an SPY position.

I was wondering if you made the entry?

Also, I have lost track of the basis of your gains. As I recall you started this thread with about $38K, your last statement shows $10K profit. Does this mean you added $52K to your account since January 2012?

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Short 200 shares SPY, average price 136.41. Hoping it goes against me so I can add more. . I predict the overnight futures will drop on low volume around 4th of July holiday.

Add 100 at 137.38. Average cost, 136.73. Will add 100 at 137.77.

Closed SPY short for $62 loss.

Just a quick midweek update here. Current exposure is 35%. I will start expressing draw down using $100,000 as my HWM. I plan to withdraw money when the account gets above $100,000 at least thru the end of this year. Current DD is 0.39%. Now wishing I had stuck to my guns on my short SPY position. I think I was uncomfortable with the relatively large dollar value of the position, even though the actual volatility on it was not bad. I will stick with something like SDS or SH in the future, as the dollar value would be smaller on 100 share pops. Also, I can still play it as if I am long the ETF, which is more in my comfort zone. I am now holding 20 positions, with current BP to add 35 more.

Good luck Rol, you probably don't need it though.
Your journal definitely wins the award for the best title.

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Quote from d08:

Good luck Rol, you probably don't need it though.
Your journal definitely wins the award for the best title.

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Going on record with my market exposure in case I am able to turn some of my positions into gains the next couple of days. I have struggled so far this month to break out for sizable gains. I regressed and took a 6500 share position in Dean Foods a few days ago, which went down 2.3K and back up for about a $200 loss. I was becoming impatient with waiting for trading gains, and tried to hit a home run. On the bright side, I had turned off my system while I focused on DF, and may have missed some of the downtrend of the broader market by not opening new longs during that time. Other than that, things have remained flat line as I hover above 100K, in spite of the S&P being negative for the month.

Real-time Account Net Worth $100,265.06
Real-time Unrealized P/L ($332.29)
Real-time Realized P/L (Today) $111.65
Net Long Exp, 58%
Drawdown, 0.00%
Number of Positions 33

Intraday exposure rose to 69%, and then closed at 45% long exposure. I was becoming concerned today as the DOW was up 200 points midday, but my NW was barely budging as several stocks were tanking, probably due to earnings related misses. But into the close, many of my positions rallied, likely due to short covering.

Account Net Worth $101,005.51
Unrealized P/L ($31.06)
Realized P/L (Today) $440.87

Markets down about 1% today, but I managed to claw a bit higher. It still feels like I am trading embarrassingly small, but I must keep my powder dry. I had to pass on a few new entries due to daily limits. I decided to include symbols with margin restrictions in my daily scans to get a few more signals. I don’t think the stocks are overly risky as long as they have liquidity.

Real-time Account Net Worth $100,525.85
Real-time Cost of Positions $21,462.35
Real-time Unrealized P/L ($12.18)
Real-time Realized P/L (Today) $48.15
Net Long Exp, 21%
Number of Positions 12

Symbol Open P/L Open P/L % Average Price Quantity Total Cost Description
VIXY ($196.25) -2.46% 21.70 367 $7,966 ProShares VIX Short-Term Fut
THRX ($57.82) -3.89% 25.17 59 $1,485 Theravance Inc
TWM ($13.70) -0.33% 27.19 155 $4,214 ProShares Ultra Short Russel2k
SRTY $55.86 0.34% 37.56 439 $16,490 ProShs UltraPro Sh Russell2000
NOTE: The list is automatically sorted every minute. Last sort on 9/6/2012 at 3:04:47 PM

Real-time Account Net Worth $99,879.51
Real-time Cost of Positions $30,154.92
Real-time Unrealized P/L ($211.91)
Real-time Realized P/L (Today) $638.72

I withdrew another $800 today. Closed out most of my longs a couple hours after the open, and proceeded to start shorting, when the DOW was up over 200. Probably should sit tight and not try shorting more until some of the market giddiness wears off over the ECB move to buy bonds. VIXY was a bit more volatile than I anticipated today, and I haven’t traded it before, so I better be more careful.

I was lucky this morning because many short ETFs failed to execute at the open due to a software glitch. If anyone uses TS order entry macros and wonders why they won’t trigger, try saving the code to notepad, and then delete and recreate the indicator file. Sometimes, I think the file gets corrupted even if all of your code seems to be in order. This weekend I am going to narrow down the short ETFs, because they haven’t back tested well anyway, and I mostly view them as a hedge.

Up .78%, $343 on IYT thanks to an up day in transports. This also includes some of my railroad stock holdings. I’m taking a hit though on some semis, including PANL. Exposure is about 94%, but half of that is from the IYT holding which the downside volatility has paused on, for now anyway.

Net Worth $100,660.54
Unrealized Loss 671.11
Realized Gain Today $16.10

Total cost of long positions is $92,347 and my short position $23,940. So about 69% net long right now. Net worth is currently $99025, so about $1500 off of HWM. Opened a 500 share SH position yesterday when the market seemed to be rolling over in the afternoon, and I added 200 today when the market showed a little bounce. It is easier for me to short when the market is looking weak, and knowing it is just a hedge that I’m not trying to score big on.

I closed my short premarket as overnight futures were showing strength reportedly from news of China government intervention of some sort. I prefer not to fight it when central banks and governments intervene. Had 37 positions going shortly after the open, but after the close it dropped to 19.

Net Worth $100,968
Long Exposure 56%
Unrealized Loss -$867
Realized Gain Today $1,144

I’ve gone full tilt on PANL. Today was the first up close in 14 days. I suspect pre-earnings price manipulation, so I am going to hold this one until earnings early November.

Symbol Open P/L Open P/L % Average Price Quantity Total Cost Description
PANL ($996.57) -1.20% 34.31 2,413 $82,797 Univl Display

Real-time Account Net Worth $100,583.97
Real-time Realized P/L (Today) $199.48
Real-time Unrealized P/L ($1,127.69)
Net Long Exp, 104%
Number of Positions 9

Symbol Open P/L Open P/L % Average Price Quantity Total Cost Description
PANL ($7.24) -0.01% 34.31 2,413 $82,797 Univl Display
QLD $62.21 0.11% 58.40 1,000 $58,398 ProShares Ultra QQQ Trust

Real-time Account Net Worth $101,586.62
Real-time Realized P/L (Today) ($24.95)
Real-time Unrealized P/L ($179.56)
Net Long Exp, 160%
Number of Positions 11

Holding 2 large positions here and a few others. PANL came back from below 34 to close green, which was encouraging on a down market day. I still want to hold it until earnings. The company has no debt, and has started becoming net profitable, and believe it or not, is still in an uptrend starting in June. Of course, I could just be trying to justify my risky positions! I will start working nights in a few weeks, so I can be up and alert for the market open at 0830 here in Texas. I missed an opportunity to lock in a 2K profit recently on PANL because I was asleep. I just don’t see the market rolling over here, but I am a bit uncomfortable with the risk I am taking…

Closed QLD at the open for a $100 gain. I didn’t like the overall mood of the market. Still holding PANL, but may have to start selling shares if automation eats into BP. 34 is still acting like a magnet for now. Hopefully a new round of buyers will emerge (like me) and after the bulls who bought higher give up, I can reap my reward around earnings. I have a $40 price target in mind.

Real-time Account Net Worth $101,477.96
Real-time Realized P/L (Today) $205.28
Real-time Unrealized P/L ($489.14)
Net Long Exp, 121%
Number of Positions 25

PANL breaking out. Now 35 is support. Got to love mean reversion, or depending on when you get in, trendfollowing. Don't see much resistance until 37.39, 200 dma.

did i hear right?

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I am looking to achieve a minimum 30% return with a maximum 30% DD.

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Quote from chipmunk:

did i hear right?

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I am looking to achieve a minimum 30% return with a maximum 30% DD.

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LOL. That PANL screenshot was at the high of the day. Hopefully 35 will become new support. I only think these round numbers have meaning because I can see reactions occurring around them sometimes. It is a self fulfilling prophesy when enough market participants look at these areas so they naturally become S/R. If 35 doesn’t hold tomorrow, I may go ahead and get out for a small gain, and to free up capital. I normally would have gotten out this morning on the bounce, but I am trying to incorporate earnings related moves in some stocks. Fridays tend to be up days for the markets, so hopefully tomorrow I can take some profits and reduce exposure here. I want to get better about putting on a short position when long signals are few in anticipation of looming short term market weakness. So when long signals ramp up, I will already have a hedge in place, rather than waiting for a drawdown to occur first. I think markets are weak recently so they can turn around and rally some around upcoming earnings season. The market correction will materialize when it gets down to voting regarding the fiscal cliff.

Real-time Account Net Worth $103,294.78
Real-time Realized P/L (Today) $63.73
Real-time Unrealized P/L $1,265.46
Net Long Exp 140%
Number of Positions 36

Relieved to come back from a NW of $99,400 just a few days ago. It could have turned out poorly had the market continued to decline given my 180% exposure level. Still holding PANL until earnings, but I don’t want to mention it too much given my market moving position, or get an SEC investigation on the hopeful pop ;). What is the uncomfortable thing to do? Buy when the market is going against you and possibly go lower, or to buy when it is going in your favor and to fear buying the top? I think commissions and slippage is what grinds away at many, and then the occasional large adverse excursion delivers the KO. While I don’t need to swing at every pitch, I still need to step up to the plate every time. I realized a $350 loss on a strategy position today, but still managed a net realized gain on the day. Experiencing the losers is necessary to realize the winners.

Real-time Account Net Worth $102,864.24
Real-time Realized P/L (Today) $442.74
Real-time Unrealized P/L ($15.27)
Net Long Exp, 109%
Number of Positions 16

How are you weathering the post-election storm? Hope it's going alright...

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Quote from Kohanz:

How are you weathering the post-election storm? Hope it's going alright...

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Here is the equity curve for last year up until today. I want to post it as a reminder to never violate my rules again. I will start a new curve on March 1 with a starting balance of 100K. For the % returns to have any meaning to me going forward, I won't make anymore additions or withdrawals. I want this journal to be more about performance data collection, as the numbers are what interests me.

I will be including updated profit distribution of trades. So far, in line with expectations. I want to see twice the gains in the 0 to 2% range as apposed to 0 to -2%, which is where the majority of trades occur. In addition, an overall slight right shift in the bell curve should be observed.

Long TMF, Direxion Daily 20+ Yr Trsy Bull 3X, 800 @ 61.66. Stop 50, target 70. There is a lot of headline press about markets near all time highs. I expect short term profit taking, and flight to treasuries.

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Quote from Rol:

Long TMF, Direxion Daily 20+ Yr Trsy Bull 3X, 800 @ 61.66. Stop 50, target 70. There is a lot of headline press about markets near all time highs. I expect short term profit taking, and flight to treasuries.

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Rol, you mentioned about you maybe too concentrate on some of the sector doing autotrading in one of your post. Did you find that your p/l for individual stock are too moving in the same direction given that most stocks move in the general direction in trading your previous system in your Rol trading journal previously? Also you are long only previously if the market is down most stocks are down and this defeat your intention of diversify into many stocks

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Quote from clarodina:

Rol, you mentioned about you maybe too concentrate on some of the sector doing autotrading in one of your post. Did you find that your p/l for individual stock are too moving in the same direction given that most stocks move in the general direction in trading your previous system in your Rol trading journal previously? Also you are long only previously if the market is down most stocks are down and this defeat your intention of diversify into many stocks

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It's time to get long GXG, Glbl X FTSE Colombia 20

Rol, would you offer some advice on how to achieve a R:R 1:1 or > 1 for strategies? Even with trend filter the R:R is hovering around 0.8:1 or 0.9:1

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Quote from clarodina:

Rol, would you offer some advice on how to achieve a R:R 1:1 or > 1 for strategies? Even with trend filter the R:R is hovering around 0.8:1 or 0.9:1

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Actually EWZ is a 1200 share position. I forgot I lightened up at yesterday's close. Trend reversal is underway!

Profit Distribution

Bought 1000 AGQ ProShares Ultra Silver @ 35.03

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Quote from Rol:

Bought 1000 AGQ ProShares Ultra Silver @ 35.03

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Long 2000 shares SKF at 25.41, UltraShort Financials ProShare. This is my only position.

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Quote from Rol:

Long 2000 shares SKF at 25.41, UltraShort Financials ProShare. This is my only position.

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Quote from Placebo:

What's your rationale for this trade if you don't mind me asking.

Its in a downtrend and I can't see any signs of strength in the weekly daily or hourly. The hourly looks like a pullback with more down side to come.

Regards and all the best whatever the outcome.

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Quote from Rol:

I agree about the downtrend in the long term. But today at around 10:30, it bottomed and began an uptrend the remainder of the day. It hadn't done this in the previous several days. Also, SKF backtests well with this strategy. Plus, I am anticipating some profit taking tomorrow with earnings releases in financials.

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Quote from Placebo:

Thanks, I'll watch with interest.

Best of luck.

Regards.

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Long 810 UGL @ 55.23

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