Update on My Trading

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Sorry for not posting much lately. I now use Trade Ideas for my intraday trading, so I felt like there was not that much interesting to discuss, though I will explain my methods, as this may be some help to others.

I use Trade Ideas integrated into Quote Tracker, and also use the integrated Interactive Brokers interface for placing trades, limit, with bracket orders. I maintain two long and two short Trade Idea alert generators running during the U.S. market timeframes to generate signals. The Trade Ideas alerts are developed using the Odds Maker add on. The best alerts are based on following block trades. I have used variations of this method for 15 years or so.

The Trade Idea’s alerts are about 50 - 60% winners, with loss stops at .15 and profit stops at .45. Trades are held no more than 30 minutes. I try to maintain at least a .10 profit net per trade, so that if I trade 10 times a day, I can expect $1.00 net, or $1000 day using 2000 share lots. By net, I mean (amount won/amount lost) per trade, averaged.

 A note on the stops.

Loss Stops: Every system will have bad days. A day of 5 losers in a row, at a .15 loss stop, only puts me down .75, an amount that can be made up in one or two trades, potentially. Make your loss stops as small as possible. I run them at either .15 or .20.

 Profit stops: Even though my profits stops are at .45, if I get a “flyer” I will ride it and not exit. But, I do not want my system performance to depend on this. Test the initial system with a loss stop, but no profit stop, then add the profit stop. If the performance is significantly worse, the system is too dependant on a few big trades, and needs further review.

Use Trade Ideas alerts that are not inter dependant. For instance, a breakout long alert, and a counter trend long would not have the same performance under the same market conditions. Review daily performance and try to have a system that will be ahead on the same day another may not be.

I try to trade as much as possible, as more trades help maintain the average winners at 50% and net win per trade at .10. Trading as much as possible is the goal. If there are 20 trades per day, that is what is traded.

This method has become the least stressful way of trading for me for three of reasons:

1. I take almost all the the signals, with only a quick look to verify. I don’t over think it.
2. I think in terms of profit per trade, the same as if I were making widgets. At only 10 cents net per trade, that may seem small. At the end of a trading day, it adds up and it is consistent.
3. I use bracket orders (Stop Loss, Profit Target), and I am either stopped out, or I hit the profit, or exit after 30 minutes. I do exit early if the trade is not moving, or it gets weaker as I am holding a profit. I do move the stop loss up. TWS from Interactive Brokers makes this very easy. The bracket orders get placed with the initial order, so everthing is set at entry.

It is not very complicated, and could be automated.

I am working on a new swing trading system using Tradestation that is looking promising. I’ll most more on that later.

- TraderD

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com