Sounds like a disaster waiting to happen. I don't think I've ever met anyone that was successful trading based on volume and news.
Well all trading plan needs an entry signal. I chose volume above its own MA on the basis that this means an increase in the crowd following this particular price movement and therefore provide strength to the movement.
Rabbitone here are my follow up comments to your questions, in the same order - I have a goal of making 1% per day (obviously not making it) - Yes, my account size is around 50,000$ none of it is "sacred money" - I have paper traded this strategy during most of last year, and the year before I did blow up a 30,000$ account but it was adding to losing positions, not using stop losses, calling tops and bottoms, letting losing trades run, etc, making all the mistakes in the book, none of which I am making now. - I don't have a maximum loss limit for any given day, but I do have a 20% maximum loss overall limit, that if reach would make me stop all trading - My trading log helped me learn a lot during last year's paper trading experiment, specially with respect to not using stocks below 5$, not using stocks with low volume, and never put more that 10% of account value in a single trade. This is how I came up with the rules in my trading plan. The problem I have here, and it is why I am asking for help, is that my trading log has stopped teaching me. I log in my trades on a weekly basis, half of them are winners, half of them are losers, but I don't "see" anything. There is nothing that differentiates the losing trades from the winning trades. I have looked at time of trade, number of shares, day of the week, but there is nothing that sticks out like a sore thumb that would help me perhaps add another rule to reduce the number of loses. - I review all market news/results announcements/analyst recommendations/volume spikes etc prior to market open and based on that select the stocks I will monitor throughout the day. Al though I also have separate to all this a small market timing system I am working on which tells me if I should be long or short, I don´t let it bias me. I never have a market bias. - I monitor my trades weekly and use number of winners, number of losers, $ won, $ lost and use those 4 figures to come up with winning %, ratios, averages, etc. Since January and after commissions, I have had 298 wins 447 losses for a win ratio of 40% Average win 289$ Average loss -209$ Not quite the 2x1 mentioned in the plan, but not all trades reach the profit goal and are exited manually if there is a change in direction. But its the 40% win rate that really worries me. Its not even 50% as I mentioned at the beginning. J
Hey jr, You are actually on a very good track. This is somewhat related to what I do, but I've automated it and backtested the hell out of it. My win rate is only 44% and my P/L ratio is 1.61. It's not the best in the world, but it's been making consistent money for the past two years. However, I average around 13 trades per day, so this trade frequency helps out quite a bit. A few suggestions for you: - You may want to reconsider how you are sizing your positions. Instead of risking 10%, consider risking a percentage of your portfolio as follows: Say, you are at $50,000 and you decide that you want to risk .5% of your portfolio per trade. This means that you are willing to loose $250 for each trade. Therefore, divide 250 by your stop size, to yield your "estimated" position size. I say estimated, because you should also include commissions and estimated slippage. So, in the case of a .20 cent stop, your position size would be $250 / .20 = 1250. But, due to commissions and slippage, you may want to only trade 1000 or 1100 shares. For myself, I use .25% per position and sometimes (if the days are very crazy), my system starts to down-size positions as the day wears on..... - I know this can conjure up religious wars, but consider using a trailing stop after you've let your position wiggle around for a short while (from 1/2 hour to 1 hour). I have tested just about every stop under the sun and a simple trail has given me the highest expectancy (bar none) over all other types of stops and profit target techniques. When trading these types of stocks, you are really looking to capture large fat-tails where certain stocks are trading on insanely abnormal volume. These fat tails are the bread-and-butter of this type of strategy. Jason
Works out to an average of 17 trades per day. Do you feel that you are over trading? How many different strategies are you using? Is your system always in?
You can obtaing historical dates of important announcements. Ask Datastream for a trial. It's much more difficult to obtain initial data releases versus revisions.
thanks for the additional details. attached is a followup that may be an iterative refinement of your original post.
- How do you define over trading? How much is too many trades? I don't know, I make the trades that my system dictates and the ones that are triggered based on my rules. - Only one strategy, the one described in the first post - During the day, yes, 99% of the time (no positions overnight)