Welcome to my trading journal. This year will mark a milestone in my life as I will be turning 50 years old. Therefore I thought that I would document my trading experiences, reflections, psychology and tools. View and comment as you please. All the best to everyone in the upcoming trading year. TBA99 Next: Why did I Select Trading as a Career?
Why did I select Trading as a Career? My first introduction to trading was in the late 1990's. I was working as an IT consultant. A friend called and said he had opened up a trading account and had loaded up on some tech stocks. He was looking for some IT support to setup and configure his trading platform. During the years that I provided support, I built a number of workstations, including dual monitor systems. I was introduced to IBâs trade workstation (TWS), charting with Quotetracker (Medved at that time), Briefing.com, and many other web based stock tools. When the .COM boom went bust my friend retreated from trading but by that time I was set on making a career out of trading. I learned early on that I wasnât cut out for institutional and corporate environments that can often stifle creativity. Less appealing were the company politics, patronage appointments, hidden class structures, etc. that one must endure on a daily basis. After a number of years in the work force in varied capacities, I determined that my criteria for the perfect work environment are: I work on my own, compensation is based on knowledge and work ethic, the work must be interesting and challenging, I control the hours of work and the workspace is mobile. Trading, I felt would meet all of the criteria. Other pluses to trading include an unlimited income potential, a business that is easy to administer (broker generated reports), and the ability to utilize my IT skills in a different context to generate revenue. Trading also can be very exciting. It is like a realtime video game (complex) that has a casino like payout for those who are successful. The last aspect of my decision was probably more ego driven at the time - the challenge. Only a very small percentage of traders are successful and just like a professional sport one would be playing against the most highly skilled players and teams in the world. TBA99 Next Topic: Education & Background
Education & Background I graduated from highschool in 1980 and then went on to receive an Electronic Engineering Technology Diploma in 1984 at a community college. For the past twenty-four years I have worked as an IT consultant specializing in support of small business (computers, servers, networks, etc.). Accredited education has never been one of my strengths and I have yet to write a single computer accreditation test. All of my computer skills have been self taught and I have extensive knowledge in both the hardware and software aspects. This was largely achieved by struggling through large technical manuals cover to cover, investing in hardware purchases to get access to hands on experience, and utilizing the information available on the internet. In the trading field I consider myself to be an underdog to a certain degree due to not having a formal economics or financial background. That being said I donât know of any educational programs being offered today that guarantee success to the individual trader. Being a self styled learner, having a strong work ethic, research techniques, and problem solving skills are the attributes that one really needs to succeed in trading. TBA99 Next topic: Transitioning from the IT field (Christmas is Over) to Trading
Transitioning from the IT field (Christmas is Over) to Trading I have been working at this for a long time - for the past 11 years trying to make the transition from the IT field to a full time trader. Iâm sure most people would have called it quits by now. If I wasnât still improving as a trader I too probably would have called it a day. Fortunately or unfortunately Iâm still in the game and as optimistic as ever (howâs that for stubbornness or is that foolishness). With Christmas over and the New Year begun, 2012 looks to be a promising year. My final rounds of paper trading were completed at the end of October 2011 with positive results. My plan is to trade stocks (discretionary method) with a fully funded account. All trade related information (ex. stock scanning criteria, chart setups, screen shots, etc.) will be published in this journal. TBA99 Next Up: Trading in Review 2001-2011
Trading in Review 2001-2011 (Part I) My market experience and the information being discussed in this journal are in the context of an individual stock trader making manual (discretionary ) trades. During the twenty plus years that I have been involved in the IT industry I have had many tough technical problems come across my desk but solving the trading game has been by far the toughest. The reason that trading is so difficult to master is that the game requires the application of multi-disciplinary skills from such areas as economics, finance, money management, IT, risk control, etc. It also has a psychological component that is tough to master, an emotional roller coaster ride of ups and downs. When I compare my trading skills back in 2001 with my skills of today, the difference is night and day. It is my experience that a trader evolves over time, and becomes able to adapt to the market conditions of any given day. A little luck also helps along the way. This is why I want to document chronologically my trading experiences and evolution in the trading business starting in 2001 to the present. Hopefully some of this information will be useful to other traders in their quest for success, particularly in shortening skill acquisition times and reducing trading costs. Prior to 2001 my past exposure to the markets was limited to the IT support work I was providing for a friend who was actively trading. It was during this time that I began conducting research on the viability of starting a trading business. In March 2001, I decided to pursue trading as a career, initially part-time. After analysing a large number of stock charts, I recognized that certain stocks had large daily volumes, and daily price ranging exceeding $1.00. Therefore I developed a plan to trade these stocks and capture a portion of that price movement per day with enough volume to make a profit. Since the stock being traded had a high volume (liquidity) the purchase and selling price would be optimized (minimal price spread between the BID and ASK). The use of a discount broker would keep commissions low. To limit risk, all trades would be cleared before the end of the day (no holding stock overnight). Having profits credited to your account right away for use and having the broker handle the paperwork were added bonuses. To put this plan into action I would need to learn the business of trading from the ground up. Since all of my IT education was self taught, I would use the same educational techniques to teach myself how to trade. I wanted to be an independent trader, so any ideas of using a stock picking service, stock recommendations from business channels, etc., were quickly discarded. During my research of the trading business I noticed family, friends, etc. were not very receptive to the idea, however this did not deter me. My mind was made up and with or without support I was going to pursue this endeavour. TBA99 Trading in Review 2001-2011 (Part II)
Trading in Review 2001-2011 (Part II) Here is my Trading Business Expense Sheet 2001. My initial investment in the business was $9190.94. Trade Workstations Specs (Component Pricing) Case/Power Supply: ATX Full Tower / 300 W $ 163.89 Chassis Fan: Internal Fan $ 22.94 Motherboard: Asus P2L97DS $ 244.37 CPU / Fan: (1) Intel Pentium II 300 MHz $ 200.00 Memory: 512 MB RAM (4 x 128MB) $ 211.60 Video Card: Matrox G450 AGP 32MB Dual $ 294.73 Network Card: 3 COM Etherlink $ 88.00 Sound Card: N/A Hard Drive: Fujitsu 10.2 GB IDE $ 147.20 CD-ROM Drive: LG 52X CDROM IDE $ 62.10 Floppy Drive: NEC 3 1/2in. $ 17.83 Keyboard : Standard US Fujitsu $ 20.12 Mouse: Logitech Trackman Marble $ 74.69 Monitors: (2) KDS VS Series 19in. $ 925.75 OS: Windows NT4 $ 200.00 Antivirus: Norton 2001 $ 132.20 Sub-Total $2805.42 Total (2 Workstation) $5610.84 ------------------------------------------------------------------------------------- Hardware Network Router: Linksys 4 Port Router $ 258.75 Cable Modem: Provided By Service Provider 0.00 Printer: HP 2100M LaserJet $1107.24 Total $1365.99 ------------------------------------------------------------------------------------ Trade Services Charting Software: Medved Quotetracker (Registered) $ 94.67 Market Data Feed: (2) Marketfeed.com $ 360.87 Market News: Briefing.com $ 156.02 Total $611.56 ------------------------------------------------------------------------------------ Trade Documents & Reference How to Get Started in Electronic Day Trading $ 44.20 Reminiscences of a Stock Operator $ 37.35 Total $ 81.55 ------------------------------------------------------------------------------------ Office Office Furniture: Shelving Unit $488.00 Office Supplies: Paper $ 50.00 Electricity: Hydro Company $500.00 Internet: Highspeed Cable $ 483.00 Total $1521.00 ------------------------------------------------------------------------------------ TOTAL COST $9190.94 TBA99 Next: Trading in Review 2001-2011 (Part III)
Trading in Review 2001-2011 (Part III) I break the trading business into five separate components. These components are: (1) Trading - all skills related to trading including market knowledge, market tools, trading, and automation. (2) Psychology - emotional control and mental discipline. (3) Technology - IT equipment, internet services, live market data streams, etc. (4) Business Operation - business planning, day to day operation, cost control, etc. (5) Tax (Planning & Reduction) - strategies to shield trading income from taxes, optimizing tax deductible eligible expenses, etc. The evolution of my trading business will be discussed as it relates to these 5 components. Journal entries for 2001 will serve as the baseline for this evolution. (1) Trading - In 2001 I really didnât know much about the markets. Therefore my first task at hand was to learn how the markets worked and the associated market terminology. Like most traders starting out I was eager and excited to learn as much about the markets as possible. To get educated, I used a combination of TV, real-time market information, website sources, and books. My TV was tuned to MSNBC giving me the daily market play. I set up 2 trading workstations with (4) 19in. monitors, two data streams from marketfeed.com, a stock charting subscription from Medvek Quotetracker, and a market news & event calendar website subscription from briefing.com. I purchased the book How to Get Started in Electronic Day Trading and read this book cover to cover a number of times. I thought this book was a good introduction to how the markets and electronic daytrading worked. I also purchased the book Reminiscences of a Stock Trader which I attempted to read a number of times but never completed due to its limited practical knowledge of the markets. The website sources used for research included briefing.com, bigcharts.com, nasdaq.com, bloomberg.com, and nyse.com. A lot of focus was spent on learning the application features of the charting software Medved Quotetracker. The main features that were explored were, portfolio setup, column configuration, chart timeframes, indicators, type of charts, chart colour schemes, streaming data sources, backfill data sources, indexes, Level 2, historical charts, and raw data. Being in the computer business I chose Intel (INTC) as my first stock to follow. My early chart setups were simple line charts. They were white lines with black backgrounds. I tested charts in different time frames including 1, 2 .5, and 10 minute. The indicators I was using were SMA (Standard Moving Average) and EMA (Exponential Moving Average) with period adjustments between 9 and 15. I also displayed the raw data transactions and level 2 data for the stock. The index data for the NASDAQ, DOW, and S&P500 was configured to display in the index area of Quotetracker. Paper trading was conducted manually in 2001. (2) Psychology - Like most traders starting out I was hyped to play the markets. Emotional control and discipline were nil. I can remember being overly optimistic, egotistical, and arrogant at times thinking my trading skill levels were high when in actual fact they were nonexistent. (3) Technology - Refer to Trading in Review 2001-2011 (Part II). (4) Business Operation - My initial investment in the business was $9140.94. Therefore keeping the trading business operation overhead low was of prime concern for 2001. The trading business was established as a home based business therefore no office expenses. No broker was selected therefore no brokerage fees were incurred. Late in 2001 real-time subscription data feeds (marketfeed.com) were replaced with free 15 minute delayed data feeds. Also, late in 2001 the news feed subscription (briefing.com) was cancelled for various free internet information sources. (5) Taxes (Planning & Reduction) - Technology purchases in 2001 were put through my IT business. My home based IT lab/office also served as a trading office. The IT equipment served in both capacities for IT testing and trading. The potential to develop an IT support market niche was also a consideration in the tax process. No income was generated from the trading business in 2001. TBA99 Trading in Review 2001-2011 (Part IV)
Trading in Review 2001-2011 (Part IV) is delayed. I am ready to begin the next round of testing. I will be using a thirty (30) monitor system. I have attached picture 1 of 4 of the setup. It will probably take 30 days to be fully operational. The testing will be based on setting up as a hedge fund. Ten (10) monitors (1 computer & 1 trading account) will be designated to the long side of the trade. Ten (10) monitors (1 computer & 1 trading account) will be designated to the short side of the trade. Six (6) monitors (1 computer & 1 data feed) will be designated for stock indices, commodity, and currency tracking. Two (2) monitors (1 computer) designated for stock scanning, web surfing & trading news. Four (4) monitors (3 computers & 1 data feed) designated for stock qualification using historical charts and 30 days of active data. TBA99 Picture 1 of 4