Hello Everyone- I am new to the EliteTrader forums. I decided to start a journal here in the hopes that I may get some help from experienced traders.. to possibly point out my mistakes and bad logic and get me on track. Last week marked a bad point in my trading "career" My daytrading account fell below the $25,000 minimum and I got "the call" to add funds or no more daytrades for me. I opened my account with $30k a few months ago- made some early mistakes and got it down close to $25k- figured a few things out and got it back up to about $27.5k, then piddled it back down. At this point, I'm taking a break, as I don't feel I know anything more than I did on Tuesday Feb 24th, when I made a fatal short that lost me $1000+ and put me under $25k (im new to shorting- have always gone long, but in this market..) So for now, my journal will consist of some examples of past trades and methods I was using- so that you all can get an idea of what I've been doing and hopefully point out to me where I've been going wrong. Thankfully, I've kept pretty good logs/notes of my recent trading, along with charts, etc So I plan to post it all here for your review. But first, let me tell you a little bit about myself and my history with trading: I've been dabbling in daytrading for about 10 years now, on and off. I first became interested in it around 1999 or so- I was trying to remember how it first caught my attention and I really can't remember. I opened a Datek account in 1999-2000 or so, and somewhere around that time started getting very interested in the concept of daytrading. Back then, there wasn't any good trading software that I could find that didn't cost a ton of money every month. There was the Datek order entry page thing, which I recall was very clunky.. and some external javascript-based entry thing called "Da-Slinger" or something like that. Thats what I used in the beginning, and for my charts I used QuoteTracker which was free, and could create realtime charts from my Datek stream. During this period I was 100% in the dark. I had no idea what I was doing, complete guesswork. I lost some money, and rightfully so. A little bit later, Quotetracker came out with integrated trading, which meant I got rid of "da-slinger" and started entering orders right from Quotetracker. This worked pretty well from a technical standpoint, and its actually what I still use today.. I feel pretty comfortable with Quotetracker. Now that Datek is TDAmeritrade, they have teamed up with QT and have a deal going where all the TD clients can get QT for free. However, at this time, even though my software had improved, I was still pretty much in the dark. I got the first Tony Oz book "The Stock Trader" and read it. I don't even remember how I found out about Tony Oz. Anyway, I tried to do the things he outlined in the book.. but it didn't really work for me. Lost more money. Might have made some here and there, but as I kept going- it always went right back to the market with a little extra thrown on top. In the summer of 2000 I drove from Phoenix, Arizona to Orange County, California to attend a Tony Oz course. Myself and about 10-15 other people sat in a room in an office building and looked at charts projected on a wall. I recall the tech bubble had just burst and there was alot of commentary about it, as we looked at the Nasdaq index. Now I didn't learn how to trade from this course.. not at all. And the course wasn't cheap either.. and I had driven a long way to attend it. But I felt it was worth it for me.. and here's why: Being in that room with those traders (some of whom had some experience and seemed to know Tony) and listening to them discuss these chart patterns made me realize that there WAS a "logic" to daytrading. And that was the single piece of information I had come to find out.. Was it simply "guessing" whether a stock would go up or down, or could you actually attain some skill and see things in the chart that would give you an advantage? That's what i had really come to learn. Tony would flash a chart on the screen and a bunch of people would point out an ascending triangle, a breakout, loss of support, things like that. There seemed to be general agreement in what we were seeing in front of us. Tony would throw up a chart, and in a few moments laser-point to a "bear flag" or say "hmmm not seeing much here" That is what gave me the confidence to continue to pursue daytrading, and sealed the deal for my obsession with one day being able to do this thing successfully. So I got back home, and tried trading some more. I sucked. Lost more money. I was trying to trade support/resistance, but I was no good. I was also trading with a small account- I can't remember how much, but not alot, and only 2x margin.. so maybe my positions were like 500 shares max of lower priced stocks, and I was hoping to see a 1.5 point move on my entries- stuff that never really happened for me. Next came Tony's second book, "Stock Trading Wizard" ..that one was better than the first, helped me a bit to see things a little clearer, but my trading still sucked. Nonetheless, I really had a thing for all these charts and the whole atmosphere of daytrading- I was hooked and still am and for some reason, after all these years and losses- I still have this affection for it, and want to keep coming back and get it right for once and for all. Fast forward a few years. I have moved from Phoenix, AZ to Melbourne Beach, Florida. I met a daytrader at the beach one day while learning how to surf. We become friends, and I gained a little bit more clarity as to how it all works.. The SEC $25,000 rule goes into effect and I tell my friend I'm out. I can't put together an account that big just to daytrade.. plus I'm concerned I'd lose it. A few years go by- no trading, but I'm still curious and read forums, look at TA on charts, etc. By now my 401k account, which is at TDAmeritrade, has gotten pretty big and I decide to do the occasional daytrade with it. Before I take the plunge, I signed up for a live market daytrading chat-room based course offered by Ken Calhoun called "TradingTheOpen" This really did help me. Things were being typed at lightning speed, but what was good about this chatroom for me was that I could watch live charts on my QuoteTracker setup, while reading what Ken had to say about them. Things like "here's our entry" and then maybe 3-5 minutes later, "looks like it stalling out.. time to exit" That showed me that before I was waiting way too long. I wasn't taking quick profits of $50, $100, $150 if the stock was losing steam. I printed out all the chat sessions and archived logs and poured over what was said each night- highlighting little things that had valueable information. I still have those printouts and there's still some good info in there. -That's all I have time for today. I will contiue this story in part2, which I will post soon. Hopefully you enjoy my tale
PART 2 (I meant to post the original entry last week, but had to do it today due to a forum-related problem not allowing me to post.) So here's the continuation: After some time doing daytrades in my 401k, I got tired of only being able to do a couple roundtrips per 5-day period, and decided that soon I would open a real daytrading account, where I'd be able to go in and out as much as I needed, and would have the 4x margin. Sometime around November 08 I opened a new account and funded it with $30k The idea was I'd give myself that $5k on top of the $25k minimum as a buffer to see where I end up. I figured there was a good chance I'd lose it. I traded for awhile in November, had a bunch of good trades- but it always seemed that after a good run, I'd hit some trade that went bad and it would get huge on me and wipe everything out. This seems to be how it goes for me- I make a series of small winners- some of them are what I'd consider "good" trades where I had an expectation of what was going to happen, and it would.. and I would exit a little bit early to ensure I came out in the green. Others were trades that didn't do what I expected right off the bat- but I held on, and then turned out profitable in the end. Often these trades I'd end up in the position where I just wanted to get back to break-even and get out, but they'd pass b/e a little and I'd make a small profit. I consider these trades to be pure luck, really. And then, of course, there are the ones that went bad. The worst of these were ones where I had an entry all setup and thought out- I'd enter the trade, and it would go against me. Often I'd pretty quickly be down $200, then $250 and not long- $300. I'd be gritting my teeth then, and having a personal battle. "I don't want to sell when its this low, I'll just let it correct back to breakeven, or at least reduce my loss somewhat" Sometimes that would work. Other times it didn't, and I'd wipe out a whole week of trading profits. So you get the picture. It's not like I havent made some good trades. It's that I kill myself with the bad ones. Perhaps, as well is that up until about my last two trades, everything was long. I've been going long in a market with downward pressure, and that's gotta be hurting me as well. I'd see losses get to -$200 a heck of alot faster than I'd see winners get to +$200 My System: After all the different experimenting and trial and error I've done over the years, I eventually settled on a method of picking entries- simple overbought/oversold based on RSI. After reading some other journals on here, it seems like others do this as well. In particular, NoDoji's journal makes some sense to me- but I see that she uses a stochastics indicator rather than the RSI indicator. I'm curious to know what the advantage/difference is there. I have been trading SPY almost exclusively. The reason for that is because I wanted to focus on just one stock/etf and try to get to know it, rather than bounce around to various stocks and get suprised. Also, it was easy for me to "keep tabs" on SPY while I was out anywhere, or not actively trading- since you can always find a S&P500 ticker on TV,etc and SPY generally mirrors it. I don't use the L2- tried it for awhile back in the day, and it just gave me information overload, so I stopped using it. I was trying to keep things stripped down and simple. I traded with limit orders for awhile, but got frustrated with partial fills and missed fills. The idea behind what I've been doing is to wait until SPY was real oversold- both on a 1min chart and a 3min chart, and then wait for some indication that the bounce was happening- hit a market entry, have it fill quickly.. and then watch the action visually and market order myself out of there while there was still some buying interest, or I saw things slowing down. Again, I tried to keep it pure and simple: pick the most likely time for a short rally, get in fast, and get out fast before it reversed. I've probably made a bunch of mistakes right there in my technique. (SPY, long, market orders, no L2) I'm interested to hear from people on that. Another area where I think I make mistakes is in picking my entry time.. it's one thing to see the stock is oversold- its another thing to know its not going to keep dropping and get VERY oversold. I've made plenty of entries trying to catch a bounce, only to have it drop on me a little, I get out with a loss- and then here's the rally and up it goes. I think its been experiences like that that have gotten me into the bad habit of trying to grit my teeth and hold on when my position goes bad- I think perhaps if I ride it out a bit my original notion that its oversold will play out and a rally will come.. sometimes it doesnt come until muuuch lower. Sometime last week, I got frustrated trying to trade long when most of the day's movements were down, and I figured I'd try shorting.. ha lord knows I had a decent notion of when a stock was gonna fall apart and plummet. So I waited for a moment that seemed to be a perfect setup for a short- an overbought condition on both the 3min and 1 min charts, the top of the trending range, etc. I found this setup, shorted and proceeded to watch the most baffling rally I had seen in some time- SPY just kept running up with superpower right in the face of its daily range and RSI.. I couldnt accept that it wasn't going to correct and just held on like a tool. Before I knew it, it was obvious that it was just going to be hanging out at 70+ RSI for awhile and I wasn't going to be getting out that day w/o a loss. Where was this rally-power on all my previous longs? I wanted to punch the wall. And so my account finally broke $25k and here I am. I will post a chart of this particular trade in a few hours so you can see what I did. Perhaps my mistake was just as simple as I should have been more disciplined and exited when I reached a certain loss level regardless of my "logic" or perhaps I'm doing alot of things wrong at the same time. I'm here to find out Thanks for your time
Hi QT, I'm glad you're enjoying my journal. I think it's helping me avoid repeating the same mistakes TOO many times. I tried to subscribe to yours, but it came up with a registration error. You said "Others were trades that didn't do what I expected right off the bat- but I held on, and then turned out profitable in the end. Often these trades I'd end up in the position where I just wanted to get back to break-even and get out, but they'd pass b/e a little and I'd make a small profit. I consider these trades to be pure luck, really." That happens to me often and it's dangerous to use that as a benchmark for any other trade. You're very right to say those trades are pure luck. It's important to have your exit plan in advance and never change your stop, except in your favor. Today I shorted ORLY @ 32.72 and it moved into the .90's where I missed a second entry to add to the short. I've been trading this one for some time and I "know" it. However, if it were to have gone above 33.00 and I added to my position, and it then re-tested recent highs and broke through, I would be looking to scale back out at the next oversold pull back. This is my plan for shorting stocks at 52-week highs in a bear market. My plan for stocks that are not at major highs/lows is to set a tight stop based on the high or low of the day, or even the high or low of the previous bar. I am very pleased to say I have not moved a stop (except in my favor) for quite some time now. You also said, "The worst of these were ones where I had an entry all setup and thought out- I'd enter the trade, and it would go against me. Often I'd pretty quickly be down $200, then $250 and not long- $300. I'd be gritting my teeth then, and having a personal battle." Do you see what's missing? You had an entry all set up, but no exit. You must know your exit before putting on the trade. If you tend to have personal battles when trades move against you, put in a hard stop as soon as your order is filled. Move it to break even as soon as you're profitable. Then you're free to let your profits run. And remember, if your original stop takes you out of a trade, you can trade it again if you still think it's a valid setup. I've done that a few times with success. Best of trading to you!
Thanks for the reply ND- Quote from NoDoji: Hi QT, I tried to subscribe to yours, but it came up with a registration error. I will look into that Do you see what's missing? You had an entry all set up, but no exit. You must know your exit before putting on the trade. If you tend to have personal battles when trades move against you, put in a hard stop as soon as your order is filled. Move it to break even as soon as you're profitable. Then you're free to let your profits run. And remember, if your original stop takes you out of a trade, you can trade it again if you still think it's a valid setup. I've done that a few times with success. Best of trading to you! Thanks for that advice. I am going to look further into using actual entered stops. I avoided using them for a number of reasons: 1) As far as I can tell, at TDAmeritrade, I can only have one order in at a time. IE: If I'm long SPY, and I set a stop at say 71.50 after an entry at 71.60 that is THE sell order for spy. If I fire off a market order later, it won't go through unless I cancel that stop order first. This was "too much stuff to do" for me in the past, so I ended up not entering those stops, but rather would just hover my hand on the SELL button and watch the P/L and chart. If I saw too much loss, or a break through my support- I would just hit sell and do a market order. But perhaps this leaves me way too much opportunity to be undisciplined. As far as exits for a winner- well, that is an odd one for me- I usually would just get out at the first sign of a stall in upward movement, if I was in the green, and if I happened to hit +$200 I just automatically would sell for fear of losing it. I am more concerned about locking in a winner than leaving money on the table at the moment.. but perhaps thats another mistake. I'm curious- when you enter a stop loss order at Etrade, and then you become profitable and decide to exit- do you have to cancel your stop-loss order first? or can you just enter another order on top of it that gets executed?
Thanks for your reply ND I have a bunch of questions at the moment- so forgive me for all of them- but I do feel that I'm closer to "getting" this than ever before.. Do you see what's missing? You had an entry all set up, but no exit. You must know your exit before putting on the trade. If you tend to have personal battles when trades move against you, put in a hard stop as soon as your order is filled. Move it to break even as soon as you're profitable. Then you're free to let your profits run. Of course, I will be trying this as per your suggestion. But here is my concern: wiggle room. I can understand the emergency stop order at support. But how profitable should I be before I move the stop to break-even? Say I'm in at 70.10 and I'm thinking 70.20-70.25 is a reasonable range to exit.. on a 1000 share lot, thats $100-$150 gain should I set my stop to breakeven once I see $50 in the green? I'm curious as to when you would move your stop up. I've been in trades like this, where I will get in, see a quick 50/60 dollar gain, then back down to a 10 dollar gain, then maybe a little loss and then wham.. it takes off and I get my $165 or whatever. If I had set a stop at breakeven though, I would have seen a little green, and then got stopped out. Wondering how you deal with that kind of thing.
Here's another: It's important to have your exit plan in advance and never change your stop, except in your favor. Today I shorted ORLY @ 32.72 and it moved into the .90's where I missed a second entry to add to the short. If you were shorting at 32.72, where did you set your stop? If it moved up to 32.9+, should you have gotten stopped out there, since the trade was going against you, or were you still in your wiggle zone?
the first thing u need to learn is price action. that is THE most important thing. think of price action as the dough of a pizza and all indicators and or trendlines etc as toppings for that pizza. u can put all the delicious toppings u want but if the dough is weak it wont be able to support the weight of the toppings when u pick up a slice to eat as the slice will bend and drop the toppings. dont know if this makes sense but just an analogy. second thing is to know the average true range of the stock u will trade third pivots and support/resistance fourth remember indicators are based in the past so they are good for reference. fifth is psycology. u must believe that when u lift weights muscles that are being worked on will get big and strong. applying it here u continue to work out/learn about trading so u have a strong awareness how things are working in the market. your first muscle to work on is price action. this will give u a sense of groundedness cause this will be the base for everything else. it will remove fears of wrong entries and losing cause u will put trades within price action where probalities are most in your favor. so get it on here are couple of links to start; remember price action principle is the same for every trading security applies to all time frames for 1min charts to yearly chart. http://www.trading-strategies.info/node/17 http://www.elitetrader.com/vb/showthread.php?s=&threadid=113456&perpage=6&pagenumber=1
Thanks for those links and your input- I will definitely look into price action and read the threads you posted
I didn't read everything you wrote. The fact that you wrote so much, points to that you have it all wrong. I saw the some RSI "and stuff" in one of your paragraphs. I will throw a few things out here. many may not make any sense to you. I am not trying to be aggressive, just showing you a glimpse of a different view. Let me tell you something about me. I have been intimately involved with financial markets for a quite a while now. I know what the acronym, RSI stands for. But that is all I know of it. It sure sounds cool. Relative Strength Index! So, I am not disparaging it (them). I am sure there are many people who have been dominating the financial markets with the RSI. I can only assume they maintain very secretive lives... Now, I see that you into reading some trading books. Tony OZ (Tony was a participating member @ EliteTrader, in the good old days). I will list every book that I have read about trading (I might have forgotten one or two as this spans well over a decade): Complete Reads: Market Wizards Market Wizards 2 Liar's Poker How To Trade In Stocks (J. Livermore) Just so you know, it is thought that JL's favorite book was: http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds Half reads: Mind Over markets Way of the Turtle Quarter Reads: The Education of a Speculator (read this if you like stories about squash and Brooklyn). Next up, I figure I'll have it read by the end of the year: Phantom of the Pits I have read some papers that pertain to this topic: They encompass game and market theory. AND MONEY MANAGEMENT. <hint! Some of your quotes (they are BOLD): that there WAS a "logic" There is logic. My logic for the short term trader is that the market has to FUK enough people to pay for itself. Then that logic continues on to how is the market going to FUK me? Think of the first FUK as entries, and the second FUK as exits. ...showed me that before I was waiting way too long. I wasn't taking quick profits Taking quick profits is not part of the plan, unless you are scalping for the change dropped on the floor. I make a series of small winners- Where are the series of BIG winners? (Big means substantially bigger than any loser) I'd hit some trade that went bad and it would get huge on me and wipe everything out. AHHH.. Here is your big trade, good job! Oh Wait, you were on the wrong side of this trade... I have never heard: 'let you losers run, and cut your winners short'. But then again I am not that well read. Guess what? You are on the road to getting your face ripped off. Often these trades I'd end up in the position where I just wanted to get back to break-even and get out So you were Hoping? Hope does not belong here. The rare time I feel "hope" I look to close the positions (UP or Down). "I don't want to sell when its this low, I'll just let it correct back to breakeven, or at least reduce my loss somewhat" Face Ripping Statement /\. Imagine a big starving Polar bear (Damn global warming) ripping your face off of, well your face. ...now times that by ten. It's not like I havent made some good trades. Well, not to be insensitive. You have not described a single "good" trade. All of your descriptions and logic have pointed to you eventually getting your face ripped off. I found this setup, shorted and proceeded to watch the most baffling rally I had seen in some time- SPY just kept running up with superpower right in the face of its daily range and RSI.. I couldnt accept that it wasn't going to correct and just held on like a tool. A real trader, one better than me, would have closed that loser out quickly and hammered the long side. Even if it was in the face of the great RSI. I am trying to be constructive with you. By what you have described, you have to change many things ABOUT YOU before this can work for you. I wish you the best. Watch out for those Polars!