This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Thanks, Richard, for the invitation to post my trades! I was hesitant to put my work under scrutiny since I am still learning every day. It turns out that feedback from the GREAT community of traders who visit your site has already improved my trading and mindset.
I have been daytrading for fifteen months, but I’ve only had an unlimited daytrade account for four months. Prior to having a $25,000 minimum balance, I set up three Tradestation accounts so that I could make nine daytrades per week. That was THE best limitation that could ever have happened. Over the first eleven months, I saw only small drawdown- approximately 6%. Since I had been studying the markets and technical analysis for a couple of years, I was hoping to break even. Still, I proved to myself that I was on the right track. When I did get $25,000, I started to lose money from, you guessed it, overtrading. I turned that around by writing out my rules and adhering to them… most of the time ;). I concentrated on cutting losses and letting winners run.
After looking at last week’s trades, I was determined to be more selective. Here is this week’s summary as I don’t trade on expiration Fridays:
Biggest lesson learned this week….5 EMA, and how to use it, thanks to Trader-X.
| Total P/L: | 3.7 R |
|---|---|
| Trades Taken: | 7 |
| Winners: | 2 (28.60%) |
| Break Even Trades: | 3 |
| Losses: | 2 |
| Expectancy: | 0.53 R |
| Biggest Winner: | 3 R |
| Biggest Loser: | -0.56 R |
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
October 19th, 2006 at 7:37 pm
I owe Trader X my trading a lot. 5MA = GOLD. Never noticed it before… but it does make a lot of sense! The little `ah-ha` moments, gotta love um.
October 19th, 2006 at 8:00 pm
Keep up the good work Zoomie! I am glad you are posting here, and appreciate your numerous contributions on my blog in the past.
October 19th, 2006 at 8:03 pm
You guys are too kind. Take what I put on my blog and make it your own. There is a wealth of knowledge out there with blogs like “Move the Markets” and all the others that most of you guys know about.
Have a great weekend.
October 19th, 2006 at 8:40 pm
One idea I’m taking from Zoomie is that his largest loss over the last two weeks has been less than 1R. So, unlike me, he’s not waiting to be stopped out when trades look funny. hmm… certainly sounds appealing right now.
October 19th, 2006 at 8:50 pm
yup, the 5-MA(or 8-MA) idea is good to keep you away from rushing to trade when the stock is due for pull back.
Good job Zoomie.
October 19th, 2006 at 9:38 pm
zoomie.. i don’t understand something - maybe this is pretty basic to you, but i’d appreciate if you can elaborate a little.
how come your biggest loser is only 0.56R?
shouldn’t R be the loss you make when a stop loss is hit, and if a trade is a loss, shouldn’t that be -1R normally? or is this because of a trailing stop?
October 19th, 2006 at 11:15 pm
Trader X: Thank you for the kind words! To quote Wayne’s World, “I am not worthy!” ;).
Ryuu: I will try to answer your question as best I can.
“how come your biggest loser is only 0.56R?”
Because the trade was not acting as I felt it should, so I closed the trade.
“Shouldn’t R be the loss you make when a stop loss is hit, and if a trade is a loss, shouldn’t that be -1R normally?”
No. I do not feel a loss should be -1 R normally. I will share with you a conversation I had with my wife, that reminded me of a quote in a trading book I read. Bear with me..ha. She is in sales. She hadn’t gotten a sale in a long while. I said, don’t worry, you will get a sale soon. It is only a matter of probabilities of when you will get a sale, just like my trading. She said, yeah, but unlike your trading, I don’t lose money when I don’t make money. I thought, you know what? She is right. Every time I trade, when I don’t make money, I lose money. That is a tough way to do business. Why should that be? Should I just sit around and wait for my stop to get hit and lose more money? Or, should I manage my trade so that the trade has to prove itself in order for me to keep it. If the trade does not prove itself, then it is not acting correctly, and I should close the position. Waiting for the market to close out your trade will cost you more everytime. Now, what is my initial stop for? Notice it is called an INITAL stop. That is for when the sh@t hits the fan. And yes, I am lucky not to have a 1 R loss in the last couple of weeks. But it is not all luck, as I close my positions when I feel the trade is not acting correctly.
“or is this because of a trailing stop?”
I do trail my trades at times. I very rarely raise my stop above break even. I am not saying this is how everyone should do it. But, with the way I trade, I find it works best.
The conversation that my wife and I had jogged my memory to what the author of “Phantom of the Pits” was trying to share. It finally sunk in.
October 20th, 2006 at 4:27 am
“I close my positions when I feel the trade is not acting correctly.” YES!!!
It has been a money saver for me. “FEEL”
is very important - spending hours infront of a screen and hours holding a position - begins to develope “FEEL” It becomes part of your rules
“It doesn’t feel right” get out!
October 20th, 2006 at 8:47 am
Cool Paul! How long have you been trading like that? Do you daytrade?
October 21st, 2006 at 10:33 pm
hmm. interesting. which means that you only go for stocks that “behave” themselves.. :)
October 22nd, 2006 at 4:44 am
Ryuu,
Ha, very true! They need to prove to be correct. I am going to elaborate on this on a further post for movethemarkets.com
October 23rd, 2006 at 9:37 am
Zoomie:
Have you looked at your less than -1R trades to see if you would have made a profit had you stayed with the initial stop? Are you helping or hurting yourself?
Thanks for the trades and analysis!
October 23rd, 2006 at 10:23 am
Ex Engineer,
Good question. I think on paper I may have done better to wait. But, that is on paper. How many would I have sold if they dropped then returned to even? Would I have raised my stop, to be taken out, only to see the stock rise again? I like my method as it is now. Very small losses I can handle. I have had a couple R1 losses in a row before, more than a couple, and it does a lot of damage to my account and psychology. I find my profit curve is going up steadily and comfortably. My heart and nerves like it better too ;).