Hello everyone, I am starting this journal to keep myself disciplined with my strategy and to get some insight/comments from other traders. A little background: Currently, I am a full-time Tax Accountant working for a fortune 500 company. I also have a side bookkeeping/tax practice that keeps me busy nights & weekends. Don't worry about trading while at work, many of the accountants in my office do it and we actually discuss our trades. For the past 3 years I have been focused on what most corporate employees focus on; long term cost averaging investing for retirement (401k, IRA, Mutual Funds). I've also studied the markets for the past 8 years and realized the opportunity there is in short term investing but I have never tried until this year. After papertrading for about 3 months (since Jan. 05) I decided to finally open a margin account with an online brokerage. I papertraded my online brokerage for another month to familiarize myself with their platform. Then I started trading this month (May 05). How I trade (I only trade stocks): Since I am a beginner to Short-term trading, I am starting out very small. I am only trading Down Jones Components, since there are only 30 to study, and they are the core of how most people judge the stock market. I am trading 100 shares at a time. My goal is to make a 1% gain each trade and risk no more than .66%. That means if my entry is $30/share, I expect it to go to $30.30 that day for my gain then exit, and I will stop when it goes down to $29.80. My strategy is simple, as it should be since I am starting out. I calculate pivot points every night for my entry points the next day. I am only trading long as well. Once I get more familiar with this I will try shorting. I also use moving averages and MACD to spot exits/holds. Once my 1% target is hit I put a trailing stop on it if I feel it can go higher, this gives me the chance to ride winners if possible and to preserve any profits. I hope I didn't miss anything, but if I did I will fill it in later. I will post my trades that I made everynight for the days I trade, while I do my analysis at night. Side notes: Don't worry about my capitalization, I have plenty, and a consistent amount incoming as well to keep me funded. Also, don't worry about money management - as the name suggests I'm an accountant, that is priority. Any other ideas/thoughts are welcome as I embark on this business. Thanks, Accountant
ok, I will follow. I like you. When looking at your 30 stocks how many do you play at once? or what is the most you will play? Do you go both long and short on the same day in different instruments?..and do you factor in general market direction as any basis...? Do you look at sectors? Michael B. P.S. Folks you never want to get on the bad side of your accountant...
Are these day trades only? What have been the results of your backtesting/papertrading? I think it is a good plan to limit the universe of stocks you follow, although I might not have chosen the Dow. Actually, I think this plan would work very well with only four or five stocks, although you would have to modify them from time to time. Also, you might not get trades every day. Personally, if I were daytrading only, I would want to stick to stocks that typically produce a fairly large daily range. Probably half or more of the Dow stocks will not pass that test. Anyway, good luck.
hahah I LOVE THIS LINE "Also, don't worry about money management - as the name suggests I'm an accountant, that is priority" Good luck on your journey
THe problem with this approac is that the dow stocks are notorious for being choppy and trading all over the place. they are not directional stocks and usually have little momentum unless new driven. -MIKE
OK then: One of the problems with trading retail (while you try to maintain your profession) is that you are always operating with incomplete information. Also you are competing with folks like me. I am sure I would not try to build an accountants practice while trading. Why? Because I could not devote enough time to keeping up with tax code requirements and other requirements of my profession while trading. Something has to give. Just my bias. So I have will post a couple of charts. One is the weekly chart of the S&P. You can see how it chops around all last year. Typically retail traders get knocked out repeatedly and their accounts bleed to death. Just a word of warning. Lefty
OK, here is the OEX on a weekly basis. This is the S&P 100. You can see the same thing. If we went down to the Dow30, again you would see the same thing. Chop So what I am saying is you will need to have a system that keeps you in long enough for your edge to kick in, but somehow protects you from a significant adverse move. Professionals have the luxury of monitoring the markets all day long to protect themselves. Do you have the assets in place to do the same for your account?
Answers to some of the questions: Only play one. Only go Long. General market direction is factored into my plan. Papertrading success rate is 45/62 trades successful. That is with the 1% to .66% reward:risk ratio. All in all, >70% success with a decent reward ratio made me happy. I don't have the software to backtest my strategy but I feel backtesting doesn't matter that much anyway since today's markets are not yesterday's markets. Just because in the past 4 months I have been successful 70% of the time doesn't mean I will be in the future either. Not every trade I make is a day trade, and I don't trade every day. If the market opens and I don't like what I see, I won't be trading that day or I will try to pick up a swing trade. Keep in mind I'm not doing this to change careers, just to make extra money/learn the markets. If I make money - good, if I don't - oh well. Last Friday was a perfect example of that. Markets opened up terribly for the dow due to a rally week and profit taking on Friday, I waited the morning out to pick up a swing trade and I got alcoa (AA) at 27.45 late in the day. So there is my first journal entry: Carrying over Alcoa (AA) buy long @ 27.45 from 5/20/2005.
Sold AA at 27.66 in the afternoon because it was doing nothing all day and 27.66 seemed to be the resistance. Sure enough right after I sold, the stock shot up to 27.89 and hovered around there until it finally closed at 27.76. Oh well, I made around .40% which is well shy of my 1% goal. Tomorrow is another day!
Good luck, it sounds like you got a plan and are going to stick to it. Questions: 1. How do you decide which of the 1 of the 30 to trade? 2.Is there a time restriction (if 3 days pass with out taking profits or getting stopped out you will get out)? 3. Will you only enter one trade a day or just one trade at a time, say the dow goes up 2000 pts in one day will you take 1% out of many stocks/trades or just 1? 4. If you do trade more than once and decide to stay in the same stock, will you take your 1% profit and then re-enter? why? Thanks 5yr I will let you know if you passed within 2 days of collecting your quiz. j/k