After almost 2 years of back testing and coming up with a mechanical strategy I decided to go to live market. I've been trading with an average of 50-200 shares and made a small profit of 150 dollars for the month which came to 20 dollars after fees/data. I trade on 10M time frames so I don't get a lot of trades, it probably comes out to around 1-2 a week that actually make anything. I don't really think I'm going to lose any money if i stick to the plan but my fear is not making very much. All was going well until the past 2 days. I'm a long only and lately there has been so much opportunity that I've had no part of because of my large time frame. My small stupid profits bugged me enough today to start discretionary trading which was a disaster. Slippage in real markets is by far my worst enemy. Today I ate a stop loss of 40 cents slippage on the largest amount of shares I've ever traded, which resulted in me losing 170 bucks. The money isn't what bugs me, it's the fear of not being able to make it back feeling like I'm hitting a constant wall with fees and small gains. My average gain is probably 10-60 cents after waiting for the trade patiently over a 10-30 minute period. To be stopped out and initially have a 6 cent risk that turns into a 20-40 cent risk seems ridiculous, even on stocks with average volume above 1m. Why would anybody trade if the black swan losses are so much larger than the gains. Most 2 dollar stocks don't move 30 cents in a day, let alone 50 cents in slippage. Am I eating these large losses due to herd mentality? I don't have very many options outside of trading, the average wages where I live are probably 5 bucks a day so I'm very frustrated.
Sounds like Haiti. To reduce transaction costs (slippage, commissions, bid/ask spread): 1. Use limit orders 2. Use low fees/commissions broker 3. Trade highly liquid instruments
IMHO, never use stop losses, you're better off with cheap puts. Make them delta neutral to your stock. Decent movement either way, you're in the money or make adjustments and lock in profits. Good luck!
Based on what I am able to infer from your post It seems you need to do the following: (These are SOME of my ABSOLUTE rules that I NEVER break and others are just advice I am sharing with you.) 1) trade instruments much higher than $2. Don't trade anything less than $5. My rule is $10 and occasional $7 but almost never anything less. DEFINITELY NEVER LESS THAN $5. 2) don't trade any more shares than the 22 EMA average volume for the stock divided by 780. There are 390 min in a trading day and that means 780 thirty second periods in a day. Do not trade more shares than you can get rid of in 30 sec or less. If the stock averages 780,000 shares/day then max is 1000 shares. 3) try to reduce slippage and brokerage fees by choosing a better broker. I like IB or similar brokers. 4) I am guessing by your comments that your account size is very small. Probably less than $10000 or maybe even less than $5000. You need more money to trade to reduce the effects of slippage and commissions eating away at your gains. If your fees are Much higher than your .10 profit then you are in a no win situation. Why are you trading for .10-.60 profits???? I can find more change in my couch cushions. The answer again is probably your account size is so small that you can not make much profit because you can not buy enough shares to make money. 5) I don't expect you to tell secrets of your "system" but I would not consider 10 min time frame as a really long time frame that should only yield 1-2 trades a week. Some of us trade end of day/daily, and weekly time frames. I can come up with at least 5 trade ideas per day. Sometimes HUNDREDS per day. It's up to me to then narrow down to the most likely to be profitable and lowest risk. Consider trading higher time frames. Intraday time frames often times are more difficult (in my opinion) but several people do it successfully. I just find it too difficult to do regularly. 6) limit your risk per trade to 1% of your account. That means if your account is $10000 you risk no more than $100/trade. If the stock is $10 and your stop is $0.20 lower then you can buy no more than $100/0.20 or 500 shares MAX. Again, your comment of losing $170 on "the most shares you ever traded" and having a 0.40 loss/share instead of the 0.06 loss/share you expected suggests that you traded 425 shares. This also shows you were only WANTING to risk about $25 on the trade. Again,.....MUCH TOO SMALL of an account. This makes me think your account is actually only about $1000!! If I am right you should stop trading real money immediately and paper trade with a much larger account (on paper) until you resolve these issues. Paper trade using my rules above and your system and see if it helps. Just my 0.02 Good Luck
Questions you need to ask since you said you backtested are how are the current results compared to past results. I wouldn't consider 10min time frame large. Whats your trade sample size from backtest over what period. If it's trading to infrequently compared to its average return it's going to be hard to beat the market. Kind of the nature of the beast. Maybe it's time to hit the backtest again if things don't make sense. Theirs a lot of variables to your issue based off the little info you gave. Not an experienced trader myself but should be easy for yourself to figure out why your system isn't working.
Sounds like you paying huge for commissions, try finding a pay by the share or free. http://techcrunch.com/2014/02/27/trade-stocks-free-robinhood/ https://www.nerdwallet.com/blog/investing/free-stock-trading/ It is better to trade less shares of stocks trading over $5 to $15 that have better volume than cheap stocks that nobody are trading, you have to be concerned that either the owners or brokers themselves have standing orders to get out of shares and you be getting much more slippage by keep trading low volume shares, this is one of the problems of back testing low volume traded stocks, as the back testing will have less creditability. I would never use stops if I had to trade these types of stocks cause I would create my own slippage. I NEVER recommend to day trade stocks when you have less than $30,000, you have no staying power dealing with PDT rule. To me it better to get into stocks that have showed sideways price action or bouncing off a trendline. You can get into low price stocks and see if they will double in price where you can take profit on half and let the rest keep going, so if price comes back to where you go in originally, you made 50% return on much less commissions. When I tell many that you have to make 100% return to breakeven for many day traders each year cause of the commissions and fees, hardly anyone notices. Here are some stocks I have gotten into since beginning of year and after, AES, DHT, FTR, SBS, TDW, TLN, am willing to risk below the lowest lows when I enter and if they have options, I will hedge. I am always scanning for low priced stocks that was much higher priced in past few years and find bottoms in Utilities and Transportation stocks and if they pay a dividend all the better. You can often make so much more doing longer term trading than day trading cause of the fees and data, and plus you get a job while the stocks are working when you are working. Unless you have sizeable funds for day trading, it is far better to do longer term trading and find a job or go to school. Good luck
1. Backtesting is worthless if you don't forward test your methodology in simulator mode and confirm your system. Only after that is done, you can go live. 2. Trade something liquid and slippage won't be (much of) an issue. 3. Don't be discretionary.
Change your broker. It feels like you're paying too much in fees. Then try to adjust your r:r ratio, looks like you're too risk tolerant. And try to develop a bit more trading discipline, in never harms
I shouldn't have been so vague, I'm with IB, my account is 27000$. I trade 50-200 share lots to not have a massive loss and to make sure my strategy works live. My fees are around 1 dollar round trip and then I have a monthly fee of 20 dollars from data. I checked back with my most profitable trades and it's been from stocks usually gapping down below their low on the buy side. But one of those comes around probably 1 time a week. The rest of the time i'm trading stocks up above 10%. I can't stand trading stocks nobody sees because most of the time they end up doing nothing. I've attached 2 of my trades and the stop loss i ate once they failed and preceded to go in my direction. Both of these had average volume above 1m a day, the first was yelp and the second was lxu. risking around 10 cents each, both of them turned into a 20 cent loss after the stop. The 10 minute chart to me isn't ideal either, I missed 2 big trades on mgt because the chart didn't set up on the 10 minute chart but did on the 5 minute chart which to me was less trustworthy. The large stop also makes me wonder if it's something to do with herd mentality. I should also mention, it's always a lot easier to make money with more shares because you can sell partial. selling 25 shares wouldn't even cover the fee most of the time
During the day I can't make too many comments because of work. But I will suggest you set stops below a recent low or using some multiple of ATR. I will elaborate more later but your stops look way too tight to me. It would be helpful if you could post the exact date and time of your trades so we can give constructive criticism. Since I exclusively use TA I am willing to point out some things that may seem to me to be favorable or unfavorable for the trade from my TA standpoint.....IF you are ok with that??