Registered: Jul 2009
12-31-11 12:28 AM
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…