Moving Stops

Okay, I've had a number of different days where I've taken profits and incurred costs. Where I've taken costs, what could've been done better. Not sure if I wrote about this before or not, but out of every costing trade I've had in the past 2-3 weeks (funded), they were all positive at least at one time. Hey, positive is positive.

As one of my super trader friends said, begin adjusting your stops. Instead of holding them all the way back, move them to close to where your profits are. If it continues in your favor, keep moving your stops in your favor, so you can at least capture that. This may mean a hard stop or it may mean a trailing stop.

This is for daytrading. Most of my trades which are just 1 contract OTM for BIDU usually moves at least $100 in my favor. Often it's quite a bit more. And, what I've found with the costs which have been in the $20 to $800 range, this was totally unnecessary to incur these costs.

Where is the problem? As a pattern trader, a chartist, I trade patterns. The stock moves in my favor, then a pullback, which can sometimes be a reversal. I don't now until it breaks the pattern. This is where I err. By the time it breaks the pattern, I'm now in the negative. As the stock moves in my favor, I'm in the positive.

Because I trade BIDU, usually 1-3 strikes OTM (delta of 0.25 to 0.5), a $1 move in my option is usually $2-4. That is not unheard of for BIDU. The past 5 days' True Average Range is over $23. So, even if you only get half of the move for the day, that's still $3 on your option pricing if you had the 3 strikes OTM (delta = 0.25). Even if you only got $2 on your option pricing, you spent most likely around $8 for your option to get $2 profit. That's a 25% ROI in what probably occured in either minutes or usually within an 1-2 hrs.

If you do this a couple times a day, that's around $350-400 in a day. If you did that for 200 days a year average, that's $70K a year, which is a nice salary for most people in the U.S. This isn't even trading every single day. That's with 12 weeks of vacation. Sort of almost like a school teacher that gets paid probably close to 1.5 to 2x the salary.

What if you had more money and could do grab $100-300 every time you traded. Let's say you did 5 trades in a day with 2 trades going against you. You get out quick when it goes against you. I use a 4:1 ratio. Let's say you make $200 each time profitable and $50 for your costs.

3 x $200 = $600
2 x -$50 = -$100
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Profit = $500

My commissions portion for these 5 trades would be $10.95 x 10 = $109.50

Net Profit = $390.50

$390.50 x 200 = $78,100/annual plus 12 weeks vacation (1 week vacation a month)

Could you do this with a lower priced stock. Yes, but you would typically have to buy more contracts and above 10 contracts, you would have to add more to your commission costs. Plus, you would most likely need bigger moves. As you buy options, remember, time usually works against you.

That's why often times GOOG, CME, RIMM, FSLR, to name a few are stocks that move fast enough for you to make some decent money from them with even just one contract.

I like the moves well past $200 and often while waiting for those moves, it reverses and I'm in a cost. So, the key here for me is to grab those $200 when they come and start over. Cash is still cash. And, while it's on the table, might as well take it.

It's still a learning process for me to hone my entries and exits in the different trading scenarios I'm in.

Remember, I'm just sharing what I'm learning. In no way am I giving advice and you can take what you want from what I'm learning. I am not licensed to give advice or recommendations.

$200 Accounts (20-Mar-2008): BIDU, FSLR, ISRG, RIMM, WYNN

These are 5 practice accounts. A few posts back I set what the criteria of my charts are.

BIDU: When BIDU moves, some really good money can be made. If it's going sideways, you need to have your entries time well.

Starting Amount = $19,069.90
Ending Amount = $37,989.75 (18,895% net ROI)


FSLR: This week had some beautiful run ups and downs. If you are a swing trader trading FSLR, it's not too exciting, but daytrading was sure nice.

Starting Amount = $2,886.70
Ending Amount = $7,979.30 (3,888% net ROI)

ISRG: Looking at the overall intraday trading chart, this seemed like a very easy stock to trade this week. I was able to more than double what I started with this week. Very awesome. Trading this swing wouldn't have been too bad.

Starting Amount = $825.50
Ending Amount = $2,921.50 (1,361% net ROI)

RIMM: This stock was fairly easy to trade the past 3 days. Not a lot of entries and exits. Just staying a little out of the way so the stock can work and when you allow that, it sometimes DOES pay off. However, RIMM can also be a very whipsawy stock if you're a swing trader. Daytrading, the moves seem very clean cut the past 3 days. Monday was iffy.

Starting Amount = $660.30
Ending Amount = $2,744.20 (1,272% net ROI)


WYNN: This stock was not as easy to trade for me as ISRG and RIMM. Last week when my first trade cost me over half my account, it has been a challenge to increase the amount. However, I was able to increase my starting amount to almost 600% of what I started with this week, which was excellent and better than I did with the rest of the stocks. However, the dollar amount may not be impressive, but the % return from the starting amount is. Though I gained almost $19K this week from BIDU, that was actually only 100% gain. 600% would've had me well into a 6-digit dollar amount and that, would've meant taking some unnecessary risks. No thank you.

Starting Amount = $140.40
Ending Amount = $906.10 (353% net ROI)

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It's always easier to see what you should've done in trading AFTER the fact. I'm still working on refining my entries & exits. There are times I give some leeway and other times, I don't. How do you know when?

One of the things of concern for me is my option buying power. That is limited. I am looking forward to getting into futures trading as this will not be a factor, which greatly reduces my overall risk in a position. As a good chart reader, I often would not like to stay in a position, rather I would just jump out than to let it retrace. When it decides whether it wants to retrace or reverse, THEN I can jump in again. This would also be in smaller moves.

There is still much to learn. Keep it simple.

Expiration Week

I've learned some valuable lessons this week with regards to trading. These markets are good for daytraders, IMO. This week pretty much all my trades were in the right direction of the market, as I'm a buyer first and then a seller. But, very few of my trades was I able to take profits off because volatility was so great, spreads were often big on the 2 stocks I traded this week: FLSR and my main one, BIDU.

When I waited for confirmation of the move going against me, what had been a profitable position turns negative. However, I still ended the week positively, though, the past 2 days, I gave back all the profits I made and then some. Not a good thing.

As I get into a positive position, I will need to do a better job of locking in my profits. Since I'm an options player for now, this may mean in greater volatility to put a trailing stop on the option. There were times in just a matter of minutes, my small position could be $100-400 and a few minutes later be down that same amount. If I begin locking in the profits from an options' standpoint, this allows me to take profits rather than take costs home. When you're doing a number of trades where each trade is $100-400 costs, that gets to be pretty expensive.

I'm doing a better job of scaling in to a trade, which means I may be getting in earlier than confirmation and I will get in for a small position. Usually it's just one contract. As the move is confirmed in my favor, I will add another contract. With BIDU, really, with some of the moves it makes, you really don't need to trade a bunch of contracts to make enough family to support a family of 3-4. This keeps your commission costs down.

On a side note, I did ask my broker recently to reduce my commission fees and they did by $2 per trip. This adds up greatly. Today I probably made about 20-25 different trips. That's almost a tank of gas I got to save today to put back into my brokerage account.

One of the good things about trading expiration week is the majority of fluff is out of the options, however, if there is any padding, can you hear the sucking sound that is made when they suck the time value out of your OTM option? It's always best to get as quickly ITM as possible during expiration week.

What I really liked about BIDU options are the ATM options were in the $3-5 range and it's been moving this week, so that's been great to get cheap options that move, which means money in your pocket if you can get in and out at the right times.

When one has a small account, one needs to learn to take the smaller amounts and build up. Yes, you do have to take into account option buying power and you may use that up all early. So, choose wisely.

CME

This is the $SPX (S&P 500) overlaid onto CME. Sometimes it seems to follow the S&P and sometimes it doesn't. The past few days it has. Boy, CME is in a buying mode, isn't it? First the BOT, now NMX for about $9.3B. Guess this would broaden CME's original market from just financials to agriculture with the BOT acquisition, and if this acquisition takes place with NMX, this would give it energy and metals. Which, inspite of the market we are in, these tend to be fairing very well.
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BSC, $SPX





Wow, I can't help but see dollar signs in my eyes at BSC, if you've been shorting this, had puts, a or a Bull Put Spread on this. I know for those who just had regular stock in BSC, calls, they are in some deep doo doo.

JP Morgan buying for $2 a share? Some people are going to be cashing in big on this and others may want to commit suicide.

BSC was never a stock that I really loved to trade of all the financials. Mine were more GS and LEH. When I was trading BSC, it was in the last 2006, early 2007.


This is just a candlestick overview (also with my trend lines on it) of the S&P 500 of the last couple years. It truly amazes me with all the millions of traders and trillions of dollars going through the market that there could be such cohesiveness in the traders. It's unbelievable, yet it works.


I just wanted to put this in a line graph to show the M of the past few days. It broke through the midpoint and is a confirmation to the downside. HOWEVER, in the next chart, it shows that 1275 is a major point, as it's come down near this several times in the past week to test this area.

Next points down are 1245, 1220ish, 1185, 1170, 1145, 1104, 1086ish, 1060, 945, 850, 770. Well, even though I'm very bearish on the market, if it honestly dropped to 770 this week, we're probably in pretty big trouble as that would send a huge panic to drop 500 points on the S&P in a week. Anything is possible, though.

Of course, if it dropped huge, which could be like 200-500 points, I would expect the market to attempt to rally some, causing for huge, huge volatility and great fear in the market. Well, what do I know. Just speculating.

Play what is happening and keep one's opinions out. It's always interesting to see what will happen after I put these numbers out there BEFORE anything happens.

I was reading something online about perhaps tomorrow being Black Monday? What an opportunity to trade.


Another Fed rate cut to 3.25%? You know, when all this is said and done, maybe the Feds will be eventually giving us money in that it will be in the negative? j/k


It was interesting to see what the S&P Futures were doing. They rallied a little before on Sunday and came tumbling down afterwards. Right now, as I write this, they are settling to where they ended near on Friday.
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200 Accounts: BIDU, FSLR, ISRG, RIMM, WYNN


BIDU: Basically in the 6th week of this $200 account, I doubled what it ended with the week before, which was about $9.5K. It's now at $19K. This was a net 100% ROI.


FLSR: This stock had some REALLY nice trades to start off the first week. I ended with just under $2.9K. That is over 1350% ROI in the first week. Awesome. It would've been even better had I closed out the trade on the first day as it began to tank, but gapped up on Tuesday.


ISRG: There were 5 trades for ISRG, each not making a lot, but in relation to the $200 amount, it still was good. However, when one's account is that small, it sure impacts greatly. Thankfully I got my commissions reduced by $2 per transaction, so round trip, that saves me $4. That is huge for a $200 account. One of the trades was over $400, which is double the starting amount. I ended the first week at $825, which is over 300% net ROI.


RIMM: It would've helped me greatly to have gotten out of RIMM the first day, as it was nicely going down, but gapped up on Tues, which was against my position. The profits I would've had on Monday were given back. My first trade was costing, which it wasn't. In a volatile market, sometimes holding overnight just doesn't pay, and other times, you totally cash out. This time, my guess was wrong and it cost me. After 1st week, this is over 200% ROI, which is still excellent.


WYNN: It's good out of these five $200 accounts that I do have one account that would be a greater challenge to increase. My first trade really bit the dust. It cost me more than half my account. Thank goodness I did not utilize the whole account's $200, otherwise it would be worse and I would have to probably scrap this particular account. After 1st Wk, -30% ROI.

In each of these $200, you do need the stocks to move a great deal in a short period of time to build up the account. Once the account is probably above $10K, it's much better in building the account dollarwise, so as long as you continually manage your risk. As the account size gets bigger, I do go closer to ATM in my options. Though the ROI will be less, that's fine because the stock doesn't have to move as much for me to make money.

When you start with $200, you have to go pretty far out of the money with your options, which requires the stock to really have to move a lot. It can even more a lot in your favor and your option may not move due to time value being sucked out of the option. So, quick, large moves in your favor help you when buying way OTM options.

As a side note, in the past, I'd always done well with practice trading WYNN, but never with real money. I vowed that now matter how well casino stocks do, I would not actually put real money on any of them. Thank goodness this is a practice account. Honestly, I do not think God really wants me to make money with any casino stocks, or maybe this is my own psychological talking myself into this? Anyhow, there are many stocks that one can do well on and make money.

Futures

I'm looking into futures trading for more leverage, so we'll see how this goes. It seems the more successful traders I know that are really profitable are all into Futures trading, so I might as well jump on the bandwagon and see what this is all about.

My charting skills are excellent and I'm thinking that my understanding of Futures trading, provided you manage your risk well, are disciplined, have the psychological part down, this can be way more lucrative than my option trading, where I have to be concerned about time decay if I'm buying as well as volatility.

Also in option trading, you have to be concerned with option buying power, so once you use that up for the day, no more trading. That's not so with Futures trading. So, let's see if I can make a go with this.

Quick Post

I only have a few minutes. Today I did make trades on all five $200 accounts, but I was not organized to enter the trades for my credit spreads, so that will wait until tomorrow.

On Wed, I'm going on an all day field trip with my daughter to a dairy farm and on Thurs, I have legal work. Fridays I usually do not usually trade much, as that's the day I spend with my 4 yr old son, volunteering for my daughter's school. It's basically kids' day. The only Friday I won't abide by that is Expiration Friday. That is just too good to pass up.

Today, ISRG, FSLR, RIMM, and WYNN all were bearish. I got into bearish trades for all the stocks and am still in my positions. FSLR is a very nice trade as I got in at $1.50 and my option is over $5.

Now, the logic on these 4 stocks, I sort of used intraday, but I was overall looking at the daily chart. Things look pretty bearish. WYNN really didn't go anywhere with my option. RIMM and ISRG moved some, but not huge. Though percentage wise, RIMM was about 50% and ISRG was about 30% ROI at the close of market.

What important regarding the $200 is the quicker you can get the account to a higher amount into over $1K, the better it is. Not like you can predict which stocks are really going to take off or not.

As with BIDU, my favorite stock for now. It was both bullish AND bearish today. Better for daytrading.

Sunday Work

Today didn't work out such that I could spend the time I wanted to with regards to trading work.

Yesterday I looked at BIDU, MOS, FLSR and CME for credit spreads. I have contingencies, so I will see if they get filled before I post.

Pointing Out

I would like to point out though I did well on BIDU's $200 Account, it doesn't mean I will do well on the other 4 I am starting tomorrow. Four may be too many, so we'll have to see. This is a learning process for me.

Just in case you didn't read my comments from some other comments, I've found the best conditions for me to trade are when I'm relaxed and focused, not dwelling on the money (size of account, how much I need to make, etc). Rather, I am focusing on making good trades.

I never know when the stock will just momentumously take off, or if it will putter around where I may only be able to grab small bits and pieces here and there. Money is still money and if I'm given a profit, it's still a profit.

This is a game and sometimes I do get faked out, other times, I'm right in sync with what's happening. Another key is to remain as neutral as possible. It "LOOKS" like it's doing this, and so you trade that. Keep your opinions out of the trade. It may look like it's bearish and then all of a sudden be bullish. Keep neutral and go with the flow.

You also need to realize when it's a pullback or reversal, which are very different and you'll need to have a plan of attack for each of these. If you're wrong, okay, you're wrong. Do something about it. Do not HOPE. Hope = Dope in trading.

These very things I'm writing about are very things I have learned multiple times. Will I avoid doing this again, probably not, but the times of me doing these are fewer and fewer. The market and market makers are NOT against you. In most cases, unless you're some super trader that is impacting the market (which most of us aren't), we're the easy ones to deal with. My number of shares and contracts does not impact the market. We're just bystanders.

Credit Spreads For March

Okay, I did not do any credit spreads for February. Too many things going on.

It was a lot of work to maintain so many spreads in January, though I did extraordinarily well at them. Let's see what I can do with 2 weeks left to expiration. I'll put on a few BUPS and BCS, but nothing like I did in January.

Right now, as I will be more actively managing 5 different $200 accounts, that will take up the bulk of my time. In the meantime, I will be integrating some of my own funded trades where I see fit.

My plans are to have a half dozen to a dozen total of credit spreads ready for Monday.

More $200 Accounts

I'd like to try my hand and add 2-3 more $200 practice accounts and see where I get with them. I'd like to see stocks that are momentum stocks above $100 that move quite a bit in a day with at least an Average True Range for the past 20 days that is greater than $10.

It came back for 7 stocks:

1. FLSR - nice intraday moves, high volumes
2. CME - very nice intraday moves, good volumes
3. RTP - not very clean intraday
4. ISRG - some days are very nice, clean intradays, but some days indecisive, good volumes
5. FFH - intraday volumes too low
6. BIDU - choppy intraday moves, high volumes
7. GOOG - okay intraday moves, high volumes

What to choose? I do like trading FLSR, CME, GOOG. I've never traded FFH. ISRG is a hit & miss with me. I've done a little RTP.

I'm inclined to do GOOG, since this is a wonderful stock and it's right now trading in the low 400's. BIDU is in the mid 200's and I'll continue that account.

Any preference towards one more in that group?

Okay, I'm going to choose FSLR & ISRG in this group. My original thought was to do CME, but there are many traders who have a difficult time stomaching the moves of CME, so ISRG is less gut wrenching.

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I also wanted to look at some lower priced stocks in the $75 - $99.99 range that have great momentum and an ATR (20) > $4.

The following stocks were returned to me:

1. FCX - metal mining sector, okay daily and intraday
2. WYNN - Casino/gambling, nice daily and intraday (as much as I hate this stock, the traders are very disciplined with this stock)
3. SNP - oil, doing really care for daily or intraday charts
4. HDB - financials sector, intraday charts are a yawner
5. SHLD - retail sector, boring price charts
6. ATW - oil sector, nice price chart
7. ITRI - same sector as RIMM, but RIMM has a greater ATR value
8. RIMM - This is my favorite out of this group to trade

I'd probably choose WYNN and RIMM to trade of these 8 stocks. Let's put my hand at this and see over the next month what I can return from each of these stocks starting at $200 each on Monday.

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This will give me 5 stocks to daytrade (starting off, that won't be the case). They all have reasonable daily and intraday patterns.

1. BIDU
2. FSLR
3. ISRG
4. RIMM
5. WYNN

These stocks are all in different market sectors, so let's see how these fair.
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$200 Account (Fri, 7-Mar-2008)

BIDU's daily chart is trading into a compression pattern, a pennant type wedge. The closer it trades into the point of the wedge, the less dynamic the breakout should be. It would be nice to see a breakout next Monday or Tuesday.

Predictions for BIDU in the near future is $350, which would be really nice to see as it's tumbled from the $400 range down by almost half. A $100 move to the upside would be nice. There could be some further drop.

Upside Targets: 277, 292, 303, 325, 350 ($108 range)
Downside Targets: 222, 218, 198, 172, 160 ($82 range)

Either directions is fine with me.


Keeping the daily picture in mind and perspective, this can also give us a range to trade in in the pennant wedge. Depending on what is happening with BIDU, sometimes it comes up to tag the 200 EMA and then begin its descent again. In this case, it did it. Lately, though, it's been overshooting the 200 EMA, almost like a headfake, to me.

I'd already gotten in and out 3 times earlier in the day and already had one position on. It looked like the stock COULD go lower, so I decided to take on another position and leave the 4th position I had on. This is like adding to the position with confirmation of the move in my favor. My account had used up $6600 of the $8K, so I only had $1.4K left of buying power. I wanted to buy 2 contracts, and there was not enough to buy 2 of the Mar240P, so I got the Mar230P.

Options for BIDU are very fairly priced right now.

As the stock hit the 200 EMA and began going back down, I saw that as a perfect entry after the 10 and 20 EMA crossed. For me, that was confirmation to the downside and volumes were fine.

Here is my day's closing on 5 daytrades on BIDU. It gave me about a 19% ROI of the $8K that I started with, which was a profit of $1.5K.

The $200 Account is now at $9575.25 (4688% ROI) in 5 weeks.

One of the things about trading this account is that I am not stressed, rather relaxed, which gives me ideal situations with which to trade in. By no means am I perfect and I am learning as I trade what works and what doesn't.

71% Profitable Trades, 29% Costing Trades

For the most part here, I've let my profits run and cut costs very quickly. This is the way we are supposed to trade. Mind you, 71% profitable trades is VERY good.

Can you imagine making over 4000% every 5 weeks on your money? That's not 4% or 40%, that's 4000%. It's just unbelievable, but I have recorded my entries and exits for every trade. I did not share the reasonings for all but one of the trades, but I did provide my chart settings and with that, you should be able to see what I did if you have some reasonable understanding about trading.

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$200 Account In About 5 Weeks

As promised and I figure the easiest way to share what I've done with this practice account is to share my results with you, give you my chart settings and do the best I can to explain how I traded this account.

Attached is the Excel spreadsheet that I have kept all the trades for this account, which includes entries and exits of the stock price and what the option pricing was, the specific option.


If you cannot read it after clicking on the image, and you would like me to send you a copy, please make a comment with your email address.

The $200 account is currently at $8,044.75 (3922% ROI).


The blue line delineates where I went from way OTM options to basically 1 strike OTM options because the account has more money.


Intraday Chart Settings (Real Time):

  • 10, 20, 50, 200 EMA

  • 20 day, 2 std dev Bollinger Band

  • 15 day, 1.5 std dev Bollinger Band

  • Volume

  • Trend Lines

  • Support & Resistance

Daily Chart Settings:

  • None - I draw trend lines, Support/Resistances

Timeframes:

  • 1 min. (main chart)

  • Daily

  • Shifting between 3, 5, 10, 15, 30, 60 min. charts

I look for trends, compression patterns with breakouts, pullbacks (dips) as entries or exits. The best entries are where the exits are close and clear. After big moves, often pullbacks are reversals occur with BIDU and sometimes very quickly, so you need to be on top of this.

Anyway, is this as clear as mud? Be flexible, but not too flexible. If you're wrong, You're wrong. Close your trade. Better is a small cost than to hope and have a huge cost. Remember, Hope rhymes with dope in trading.

Keep in mind the big picture, which is what I use the daily for.


I will often use the moving averages as areas for entries or stops, but there is no set rule. I do watch to see what is happening and adjust as needed. I'm learning to be fixed with some things and to give flexibility where needed. It's a learning process.




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Crick In Neck

My spirits, despite the stuff going on in my divorce, as I put my focus on Christ and not myself and my circumstances, has been progressively getting better. However, this morning, as I awoke, there was this crick in my neck that gave me shooting pains down the left side near my scapula. Granted, I don't think Satan just caused this and perhaps the exercise I've done the past few days, not enough stretching, sleep deprivation and stress that this is the culmination.

Anyway, I attempted to papertrade and after 3 costs and 1 profit (smaller), which is the total opposite of my normal trading, I decided this wasn't good for me to keep papertrading and dropping that particular account down.

This crick hurts like the dickens and making me feel very nauseated. Sigh, another day of non-funded trading. There was a part of me that did awake feeling anxious about my trading.

So, these are non-ideal situations to trade in. If my papertrading isn't going so well, there is no way I should be trading with real funds. That's a sure sign for disaster. Doesn't matter how good the opportunities are, not a wise decision. There are daily opportunities to make money with the stocks I trade, and right now, it's only BIDU.

It's best to wait.

Break

I'm sorry I have not updated my blog. I have not traded in about 1.5 weeks due to my mind not being on trading, rather on my divorce. I'd care not share the details here, but it's impacted me emotionally a great deal and I do not have a grip on those emotions just yet, so I haven't been doing real trading, just on/off trading.

My $200 paper account is at over $5K. I will eventually share the details, but not sure when as there is a lot on my plate.

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