Man you are way undercapitalized number one. You ought to just buy and hold some big cap stocks. Secondly, I notice your trades have been mostly shorts. That's the quickest way to blow up, short a market that is in a strong bull run. Of course the market will pull back and you will make small amounts on shorts, but the best risk reward is to be patient, wait for a good pull back in the futures, then buy some stocks or etf's. Third, summer is possibly the worst time to practice what you've learned. You will see there is no volume, trades can only last 1-3 days, 3 days is a lifetime in the summer. All the pro's are off to the beach. You will see. I suggest holding some defensive stocks this summer, then wait for the selloff, and buy retailers from october to december.
Thanks. I do agree with the first part of your statement. As money comes in, I will play some very basic trades and shoot for longer term (1-3 months). I think you have the wrong impression of me, however, if you think I should buy and hold some large caps. Not what I am looking to do. You're correct about the shorts part. I realized my fault with the VMSI trade and someone else pointed it out with MA. I shouldn't be shorting stocks near all time highs... bad risk/reward... especially in my time frame. As far as buying retailers... we will see how they are performing when we get to the end of summer, I don't plan on purchasing anything before i see price action. I do have a system... though I havn't been following it. I try to use the O'Niel's CANSLIM system and the stocks from the previous list mostly meet his paramaters. Anyways, the general summary of now is that I am realizing I have had some tunnel vission in the last few months having hopes of making money with the frequency of trades i've been taking. I have learned lots of things, however and don't regret it. Here on out, it's a longer ballgame. What do you guys think of VMSI? I am thinking of placing a stop around 50.73 simply because of how far it is extended that for a long-term trade it is completely the opposite of what I want given my new realizations.
After further deliberation about why I have been failing this year as a trader despite how much effort I've put in, all the books i've read, all the knowledge i've gained, etc. I have come to another realization, which took me a while... but I'm glad it happened. I have created my trading plan over the last year from my many failures and from my many realizations. AND DESPITE THIS, I continue to try to play new setups, new methods, prancing back and forth between the latest trick or gizmo I've learned and not taking the time to learn anything thoroughly. I am mediocre at everything, because I never set out to master anything. And. I realize this. I am a mediocre trader, and I have admited this before, but I havn't taken the steps to fix it. A thread by cashmoney actually prompted me to evaluate my own methods. Therefore, before I begin annotating charts as I said I would, I will list my trading strategy in its entirety tomorrow (or as much as I care to give away because although it's nothing special... i do feel like I have an edge). Enough for everyone to know exactly what I'm doing and exactly enough for me to know when I break my own rules. This one realization if nothing else... is worth me joining this forum. I'm glad I did... I am 100% sure that I have a strategy and method which can make me money on average as long as I follow my own rules. My mentor has told me this before... my style of trading is boring, but effective if I do it right. He is right... it is boring, which is why I look for more difficult setups, etc. But trading isn't always about excitement, if I want that I may as well go to a casino. Time to put the emotions on hold and trade only according to my rules. That is all for tonight. I am tightening my stop on VMSI like I said... if it hits it, I am out and I will spend the next few days evaluating what I have been doing and my strategies from here on out. I need some ease of mind to concentrate on my plan and future profits. If I exercise my plan, I am sure it will come.
Here it is guys. Please let me know what you think. I have provided examples of charts showing what each of my entries would look like. Hope this is detailed enough. As far as position sizing goes, I am only working with 3 k right now so I did not discuss that as I didn't think it was necessary... the only way i can book profits with the commissions on the trades is to trade 3-5 grand. I feel much more confident this year than the start of last year, and even 3-4 months ago. So... we will see, if I stick to my rules I may add some money to my account.
You refer to stops without saying where you place them initially. Are they based on volatility, technical levels, etc? You might want to start sizing your positions based on the fixed percent risk model a la Van Tharp. Risk being the distance between your entry and initial stop.
Sorry... I completely forgot to put that. Stops will be based on technicals... for the pullback it will be underneath the bottom of the setup so that it creates at least a 2:1 reward to risk scenario. Otherwise, I will simply use the low of the last bar if the bottom of the setup is greater than 5% for instance from the buy price. For the breakout buys, stops go underneath the last bar or at a place where it makes technical sense and isn't more than 2-5% from the buy level. Thanks for the suggestion. Only problem is, until i switch brokerages to IB, what do you think should be my maximum percentage of my portfolio risked on a trade, given as the difference between the entry and initial stop? I think 2-5 % would be about reasonable for my timeline...
1% is a rule of thumb you see thrown around alot. That's what I use. I'm sure it's overly conservative, but I'm making money and haven't wiped out yet. Good enough for me. I'm currently capitalized around $50K so I can have about 10 positions open at the same time, yet not be eaten alive with commish. IB is a good choice for stock trading. No problem with fills, dirt cheap. When I calculate a position size, it might be some weird number like 243 shares. That's what I enter. I don't round to the nearest 100 lot or anything. Sometimes I fill in 2 chunks but usually it's all immediately. I use a volatility based stop of 3 ATRs on the daily chart. I started making money when I stopped being totally technical. I also look for "good" stocks with high EPS and high RS so we're not that far apart in stock selection.
ATR? Average total range? My method has been shaped over the course of this entire year... my biggest problem has been not sticking to my guns. Which is why right now I am creating a checklist for entries so that I can literarily paste it on my wall and punch myself in the face if i break a rule. I also performed some calculations and it makes 0 sense for me to use a 1-2% risk model with my capital. I do have more money, but I want to make sure that I am 100% confident in my methods and have consistent returns before putting up more dough. Problem is even on the expensive stocks that I trade (which i limited my positions to so that i wouldnt have as much slippage), a 60 cent stop loss on a 30 dollar stock (using 2 %) for instance, is unrealistic if the reward on the stock is at 3 dollars lets say, and technical support lies at 1 dollar away. I do agree as I get more capital I have to re-evaluate my position sizing, though. Also, when I get IB I will decrease my risk because I will be able to take advantage of cheaper commissions... and being wrong more often to be right when it counts.
I feel like I am cluttering my own thread, but here goes. Revised my document for more detail on my methods.