Who says I have been consistently losing with this strategy? I've been cautiously doing it for a week now and have not lost more than $20 in one day. I'll admit I have been a terrible trader in the past. I have resigned myself to that fact that I have no idea where a stock will be next year, next week or even in 5 minutes. I have listened to Larry Pesavento too many times say, "losers ask how much many can I make, winners ask how much I can loose." As Kevin Spacey said in 21, "we're not gambling, we're counting cards, we're playing a system." That's what I'm trying to do. I have tried it for a week and I think it can work if I automate it. Just today I placed my usual system orders and then thought hey I think I'll just short 100 shares here and scalp a few cents out of it. I got filled and put in a buy order. I thought I'll get filled right away so I won't bother to put a stop in. Well it wuickly went 10 cents away from me, and then 20 and 30. It got 50 cents away from me and I put in a buy order 10 cents lower and soon got filled on it for a $40 loss. That $40 wiped out my gains from my usually strategy trading with a hard stop. I deviated from the system and lost. I have often thought about doing the opposite of my trades. But then you would start second guessing yourself about which side you would actually trade. I'm not sure it would work anyway. If you are a loser and I'm a winner, I would make $10 and you would loose $10. Except we have to pay commissions. So lets say it's $1 per side. So you actually lost $12 and I only made $8. The broker got $4. Then the next trade I lose $10 and you make it. So in the end we are actually both down and have only made the broker rich. By the way I read your previous post on another thread. It was very good. Like everybody else, I have kept my losers way to long and have cut my gains too short. I am at the point where I am literrally afraid to trade even 100 shares of XLF without a stop. If I trade without one, I keep thinking to myself that it could go against me forever and I don't know when to get out if there's no stop in.
Thank you. You are most gracious. This is the first thread I've started and boy am I taking a beating.
If you add liquidity (don't hit the bid or ask) the ecn's give you a rebate of between 20-30 cents per 100 shares. So you are in effect buying it at a discount and getting paid to trade. Some people do this all day and break even on the trades and keep the rebates as their profit. I'm not sure what you mean by my numbers are 100% wrong. Please explain. I'm certainly open to critisizm and feedback. I have never had a scratch. From what I have read those usually occur in pre and post market trading and occassionally when a bad bid or ask freezes and keeps getting hit. I'm trading the XLF and QQQQ right now - they move. There is no slippage in these. I'm trading directly with the ecn and only use limit orders. This is not Scottrade or some other broker that likes to screw with your order. Of course we've all made mistakes and bought when we meant to sell. That's when you get out and then pound your head against the wall. Just today I got stopped out on a trade but then realized the stop was for 200 shares not 100. So I was now short. So I got out (at a 2 cent profit!).
I don't buy it at a discount, I get the liquidity rebates from the ecn. So in affect I'm buying it at a net discount. I think what you're referring to is pegging an order. That is where a buy order stays at the best bid until it is filled. If XLF is at 15.00 X 15.01 and you place a peg buy, it immediately tries to buy at 15. If sell orders come in and hit you, you get filled at 15. However if you don't get filled and the bid moves to 15.01, then your order automatically moves to 15.01. It keeps doing this until you get filled on the bid. I have tried to place both a buy and sell peg at the same time and see how I get filled. I consistently lose 1-3 cents when I do this. The best I have ever done is break even. I don't think this will work because you are always chasing the market. Also your order is always in the back of the que because it is constantly changing. Whatever you do you have to take risk. You will never be able to consistently buy a stock on the bid, wait till it trades through and then sell it on the ask at the same price. If you want to know what firm I trade at, send me a pm. I don't work for them, or represent them. I certainly don't want them held responsible for all the heat I'm taking today.
I explained my logic in a different post. You are assuming that there is a 50% chance that the 10 cent the stop will hit and a 50% chance the 3 cent profit target will be hit when there is not. Using your logic we could all place 1 cent stops and 50 cent profit targets and print more money than the Federal Reserve. In reality you would get stopped out 49 times and win once.
I explained in my first post that the strategy is to generally buy and sell along the Bollinger Bands. This way I'm hoping to get a slight advantage on the trades. Like I said, I have backtested a lot of stuff and intraday counter trend strategies work much better than trend following ones. Yes people hit the bid for a reason. They think it's going lower and I'm willing to buy it from them. One of us is going to loose. Except that I get a rebate and they pay for it. So I don't see how I don't have the advantage.
You have to look at the "Right Options". I trade daytrade everyday using the QQQQ options. Right now the volitility is perfect to trade this. The spreads are only a couple cents most of the time and the volume is extremely large.
------------------ Just wanted to say i've had the same idea and its been working for me consistently until i blew my account sep. 08 of last year. Check up on some of these links http://www.elitetrader.com/vb/showthread.php?s=&postid=1555895#post1555895 http://www.elitetrader.com/vb/showthread.php?s=&postid=1815136#post1815136 http://tradermike.net/2004/05/trading_101_expectancy/
What's your payout %? (You are anonymous and you haven't named the firm, so confidentiality shouldn't be an issue.) You take all the losses, but only get a portion of the profit. So far, I haven't seen your calculations reflect that.