I've decided to start this journal in the hopes that it makes me a bit more disciplined about following my trades. THE BASICS: ---------------- STRATEGY = Find oversold/overbought stocks with the intention of getting in to a larger trend early. VEHICLE = Long Near/ATM PUTS/CALLS with 90+ days to expiration. REQUIRMENTS = 1) 10 < Stock Price < 75 2) Avg Daily Vol >= 2,000,000 3) Option Bid/Ask spread <= $0.10 RISK = 0.5% per trade. STOPLOSS = 2*ATR(14) although a reversal may take me out earlier. INITIAL POSITION SIZE (C): Determined by option change price change if the stoploss is hit (using ThinkorSwim theoretical price). TRADE MANAGEMENT: Add contracts as price moves in our favor, starting at 1.0ATR and every 0.5ATR afterwards. MAX TOTAL POSITION SIZE: No more than 5% of account
LONG: NOK (> 13.37, ATR=0.48) SHORT: MRO (<34, ATR=0.95) WMB (At Open, ATR=0.58) Triggered 10/20/09 and it's still valid. KFT (<26.98, ATR=0.39) OPEN: None COMMENTS: Using Jan10 ATM/NTM calls/puts. All Stops are 2*ATR(14)
SETUPS: 10/26/2009 OCO order used so that first order to hit is activated. System changes: Risk=0.25% per trade Limit of 3 setups per direction. Only 1 fill allowed in each direction. HOLDING LONG: NOK RED: KFT, WMB
Just noticed that TCB spreads are wider than I allow (Bid/Ask > $0.10), so we'll scratch that setup. No longs on the books for Monday.
I've noticed that I tend to have problems sticking in my trades, so I decided to try a volatility-based stop. Since I read Tharp's book and also some stuff on the Turtle system, and without any compelling data to choose some odd multiple, 2*ATR seemed like a good starting point. I use 2*ATR as my disaster stop and as trailing stop (chandelier-style), although normally it will not get hit, as I recieve an exit/reversal signal before then.