Starting Fresh, taking a Strategy to 30k a month by years end.

I wanted to start this journal so that I could teach a few new traders, on top of keeping myself motivated, and reaffirming the core set of profitable trading principles i already know to be true.

I will start off by giving a description of my history in the stock market. I started off In 2005 trading prop as a side job while I took my commerce degree. In my first year of trading I made roughly 60k (started in May). At this time I was basically trading the same stock day in and day out and I got to know the thing like the back of my hand. I noticed a pattern in this stock which holds true for every stock I trade to this day, and you will see me talk about it in a bit. I just kept repeating the same pattern over and over not really knowing much about the market, or systems development or anything like that, but being to naieve to realise how difficult the market was, at this point I thought the market was a joke.

In 2006 I made roughly the same and decided to study up a bit. Over the first 2 years I saw people making hundreds of thousands of dollars a month. (our firm showed the numbers) I had a lot of confidence in my ability, and my own intelligence, and thus thought “if these guys are making this kind of money why can’t I,” I decided not to finish my degree and pursue trading full time. At the end of this year I read every single book I could on trading and vowed in 2007 I would beat all these guys.

In 2007 with a lot of hard work my trading exploded, at this point I was still a discretionary trader. I finished 2007, having made 330k, but I was very tired of grinding out every single print on every single stock day after day. I had met with a few other good traders off of elite, and we exchanged ideas, as it turned out most people I showed what I was doing to could not make money off what I was doing, as it was hard for me to define an “XYZ” set of variables, but with the systems stuff they taught me I was able to make money.

In 2008 The systems stuff just exploded for me, and I decided to be lazy and just do the stuff I had been taught and wait for setups and piss around on the internet all day until I got a signal. I totally gave up on my discretionary trading as I was in fact making more off these systems with very little effort. I finished 2008 up close to 600k, with very little effort.

Now here comes the problem. In 2009 I once again figured that the systems stuff which worked so well for me the year before would work well for me once again. This was where everything went south. I started off 2009 down close to 150k, and then worked my ass off (adding discretionary back to the mix) to get back to zero. Thankfully by the middle of 2009, I had made my way back to zero since there was still lots of volatility in the market. The last 6 months of 2009 I made about 60k, most of it from systems, as I had found I could not trade my discretionary stuff anymore.

My problem lies in the fact that I now for some reason have a problem controlling my risk. I will be doing good for days on end with my discretionary stuff and then decide to start swinging like it was 2008 all over again, 10k+ swings in my pnl all of a sudden come in to play, and I average stuff into oblivion. In the last 6 months I have started out each month pretty good, and then decided it was 2008, and I started swinging like Barry Bonds. Thankfully the only thing this ever cost me was blown profits, but it made me realise I Was taking on way to much risk. (even to start these months)

My goal for 2010 is to start from scratch, I am going to start doing my discretionary starting from scratch again with piker size, 300-1000 shares. I am hoping this journal will embarrass me enough not to average losers into oblivion, and blow my month out with 2 days trading.

Any and all questions are welcome and I hope I can help anyone who is new, by explaining stuff, as it helps me to reinforce my rules. Only a couple rules of the thread, I will not answer the same question twice. I will not answer anything about my systems trades. Reason being I think I can offer valuable advice for new guys with my discretionary stuff, (in terms of trading fundamentals) which most, probably cannot just copy and steal from me. I do not want to give up my systems stuff.

Starting Monday I will post trades in as close to real time as possible, I will have to wait till after the day is over to offer analysis on trades. My goal is to take my discretionary trading to 30k a month again by year’s end.

Good luck to all and good trading in 2010.

 

Ok, let me start out by detailing a trade I took today on SNDK. (Sandisk) First off, when trading the way I do, the stock ABSOLUTELY MUST have went through support/resistance on a daily chart.

Note on the daily chart to the left of this image that SNDK had went through the level between 28.50 and 28.00. Secondly it had absolutely no support in sight. Often times you will trick yourself into shorting a stock because it went through 1 set of support/resistance only to look closer and realise there is a brand new level right around your short position.

So the first rule to trading stocks which are trending is that there can be absolutely no support/resistance in the way on a daily chart, if you choose to follow the trend.

So now that we have proven SNDK to be a viable candidate in terms of a daily chart our next step is to prove it a viable candidate on a 5 min chart. (I only use 5 min 1 day and monthly charts) Basically at this point I look for a spot where it is setting a lower low or else I look for easy money. The way I would define easy money is as follows.

When I am watching something trend down often times you will see size walking down. By this I mean you will see a large offer, on something like SNDK stepping down and down and down as every bid breaks. Here is an example, you will see a stock with 2k on the bid and 30k on the offer AT 25.81, when the 2k bid breaks, at 25.80 the 30k offer now rolls to a 30k offer at 25.80, etc. etc. In this scenario, it will keep going and going and going, this is a computer chasing it down in that case, and I will smack the bid to watch the offer keep chasing down with its size. Other times I look for a level on a stock.

Here is a definition of a level, or something else I deem risk free money, Lets look at something like HRS today, I was short at 44.31, and when it broke the even dollar at 44, Someone offered 15k shares at 44 dollars even. So my plan was to step in front and add to my trade at 43.99 and if 44 broke I know it is time for me to get out. 44 never broke and it went down a dollar.

THIS IS ESSENTIALLY A RISK FREE WAY TO ENTER A TRENDING STOCK AS ALL YOU HAVE TO DO IS SHORT IN FRONT OF THIS PERSON AND IF HIS SIZE BREAKS YOU ARE OUT. IF YOU RIDE IT LONG ENOUGH SET STOP TO BREAK EVEN. AND LET IT RUN.
The situations I have listed above rarely happen but when it does it is free money.

The thing I NORMALLY Look for is the stock setting new lows on a 5 min chart (after the daily confirms its trending of course). I will set an s-stop order for 500-1000 shares for the new low should the previous low be breached, depending on the size of the levels.

If it is something which is pretty thin instead of setting an s-stop I will set a price alert through my trading system and try to work an order when it hits that point. Often times at this point it becomes a matter of tape reading. If you think it is going down you smack a bid, if you don’t like it you go to your next trading idea.

At this point I keep incredibly tight stops, I never really let anything go against me for much more than 20-40 ticks, I am usually fairly good at creating positions in spots of momentum, so im usually on side to begin with then I decide whether or not to add, or to move a stop to breakeven, or allow the full room of the stop.

 

this looks like a good one. following.

so the trade is entered countertrend on the daily with a gap down at a good support line with no near support in the future? you are looking for controlled smooth selling on the 5min and then a breakout level supported by tape selling for entry? do you let the 5min bar close or just look at the tape? where would your stop be in that chart?

 

Damn you!!! You just explained my 3mill word cluster f%$* in one damn sentence.... j/k

Yeah you got it nailed.... I am trying to be as open and willing to explain stuff to people as possible, this may seem basic to some but this is my gift to the newbies of ET.

It is actually the opposite, i am following trends, not going counter trend yet, i will show counter trend some time next week. Basically counter trend entails hitting size when you see it start to break as opposed to stepping in front of size, I will go into further detail when I get a chance.....

Let me know if i am being too basic, though i dont think i am..... It is hard describing trading from day 1.... I dont know where to begin.

 

what happend with really tight stops to cause such a draw down? death by a thousand cuts type thing?

no you are not being to basic at all. i was able to pick up a fair understanding because of the description.

i might be reading your chart wrong, but it looks like you were against the daily trend by going short at that line? i know it was breaking a support, it looked like a strong uptrend so a pullback is ruled out? not trying to be difficult, just curious to know how you are seeing it

 

When I have been disciplined, the result is always positive, without fail.

What has happened to me time and time again(while i am up) is a total failure to recognise stops, at first I would look at them and scoff, so for example when something hit 20-30 ticks offside Instead of punching out, I would double up, then my next move was to sit there like a fricking jackass and try to hold my line on an arca reserve, I could show you many days which i lost 50,000 or more, telling myself the whole way, that i was right...... My best POSITIVE day was 19k, my worst NEGATIVE day was
-78k..... that should tell the story.....

I also hope new traders learn off this, you all would be somewhat surprised, the good traders most people know are not gods, they make mistakes, just as we all do.

 

so no hard stops? what are you looking for to punch out (when you know you're wrong)? it seems like you know you should punch but you want to be right. it's like when someone asks you a question they already know the answer to. hopefully that doesnt sound rude, but just an analogy.

 

I recently had one of these days

I find when I hold onto my opinion too tightly it bites me in the ass – more times than not


When I allow my opinion to go easily by the wayside – the mkt is more than willing to tell me its intentions – and all I need do is simply follow along

The human condition – it is a real bitch

Successful journey to you Sir

RN

 

That is just it, I am "RIGHT" at an alarmingly high level....

My problem isnt "not knowing what im doing" it is not accepting defeat, and ti is a common problem with most traders.... I still have a problem allowing a stopout to kick me out of a trade.....

My problem is that at one point I was "RIGHT" or "WRONG" on a much higher level.....

Up until this point, i was unable to accept the "wrong," this is more common amongst rookies, but it is DISASTEROUS, amongst wealthy pros, I created my own demise..... I made enough money my own prop shop could not tell me i was a fucking idiot...

Do not hold back, i know damn well i screwed up, i have explained it, but that is the reason i plan to start anew and teach people while i go through the experience.

Do you get it now?

This is why I am starting from fresh

 

Thank you for your contribution.