I'm done early in the markets today. I had a great day paper-trading SKF and GS. It was not my highest dollar gain since beginning the blog on Jan 31st, but it felt as though it was my best day; at least in a long time. From the start, it seemed as if I was "dialed in" to the market and the stocks I was playing. Indeed, I never had the sense that I was not in control of my positions. As I scaled in to fade strong market emotion, I had confidence in my entry points. I took profits when they presented themselves and didn't try to cash the "big lottery ticket" on any positions. All my positions were winners today, although a few of my scale-in trades were not winners. I did have one trade error when I clicked on "SELL" when I meant to click "BUY" to cover my position, adding one losing trade to my tally today. Fortunately, it lost less than one penny per share. That hasn't happened in a while, which means I was over-due for it!
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Some days are just a bust and make you feel lousy even if you finish the day with a gain (days where you are scrambling and playing from behind). Today was just the opposite. It feels good to leave April on a high note, considering I closed March with a losing session. I intend to recap April with a separate post as I did at the end of March. That will likely come tomorrow night or Saturday, as I must now prepare for my class tonight and I have a busy "Day-Job" schedule tomorrow. No trades on May 1st for that reason.
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10 for 15, a 67% win rate. Gain of 95 cents per share.

April 29th

I was able to take a couple hours to watch the markets, and found a couple opportunities to paper-trade. Four trades, three for winners. All four long on SKF. I'd really like to stay in for the closing but there is simply too much to do outside the stock market. My day-job appointment postponed until Friday leaving the day available for projects/chores here at home. Life requires balance and today, my bro-in-law and I are preparing a bigger herb and vegetable garden for Mrs. Blue Collar. Also on the list: replacing burned out flourescent lights in the garage so the old ones can go to the upcoming annual recycling day in my town, lawn tractor fluids and filters, thinning the "forest" around my house with the chain saw before the truly hot weather rolls in, lawn treatments, etc... The list is too long to go on. Here's the rub: if I could make decent money trading, I could pay people to do most of what I must do myself! To make decent money, I must practice the craft of trading. But I can't spend all my time practice-trading because I must do the projects!

Maybe I can squeeze in some time to wash and wax my Harley, Ha! That would be the only fun thing on the list.

I'm happy for my gain today, small as it is.

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3 for 4 winners, 75% success rate. Gain of 38 cents.

April 28th

I made it to the computer to paper-trade about 2:45 pm after my day-job ended. I was scalping small moves in lieu of letting something develop longer-term. I put together a few small gainers and a couple small losses before taking a short on SKF at 3:38 after a substantial amount of the EOD run-up had taken place. This appeared to be a breakdown in the making, but I was wrong, it was a small pullback. Then came a big green candle (3-min chart). Thanks to my newfound attention to S & R, I saw a resistance point at around 61.24, so I shorted again as the price moved toward it. With volume climbing to the fourth highest of any 3-min candle all day and a substantial diversion from the mean (10 sma), I sensed the reversal would come at the resistance point and shorted a third position right there. Then, I waited to see if my breakdown would come. At 15:49, I covered into the reversal move, for a gain on the whole trade; two of the three positions which made up the trade yielded winners. The resistance held very well and SKF stayed choppy in this range through the close and into after-hours (presently 5:00pm).

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7 for 10, a 70% win rate. Gain of 53 cents per share.

April 27th Re-Discovery

After a rough few days of paper-trading, I have made some adjustments. Back to the 3-minute charts after about 4 days of 5-min charting, and a re discovery of the importance of support and resistance. For nearly three months I have ignored S. and R. in favor of focus on Volume and Diversion from the Mean. Today, I started charting S. and R. and there before my eyes was the reason why I once charted it and why everyone else does it as well. A missing piece of the puzzle was found and I began to see the correlation of large volume spikes, maximum diversions from the mean, and support and resistance.

I still was caught in chop while trying to focus on so much information as compared to the bare-bones simplicity I had been trading. But, this added piece of information is going to be helpful, I believe. I now have to figure out what weight to give the three indicators in relation to one-another to achieve my best results. It is still possible to suffer the same problems with the added information. I had some early success today but for small gains, going 8 for my first 11 trades for a gain of 37 cents per share. Then, as has been the case lately, I got into a choppy phase in GS and was stopped out 3 straight times for hefty losses compared to the gains I had taken earlier. I played for a continuation of the down turn and to my dismay, it reversed. I was slow on the exit and the eventual reversal to the long play. I must learn to execute faster and avoid the bad entries that slow responses inevitably give a trader.

At this point of the day in GS where I made these 3 losses, lies a good example of the importance of Support in making a decision on a stock's direction. On a 3-min chart, the 1:18 pm candle is the second big red candle in a down-draft on GS. Note also the substantial relative volume of theat candle. Further, note that it is within 6 cents of the support line from the close and open prices of the 10:15 and 10:18 candles respectively. And, to go along with that, see the large diversion from the mean (10 day simple moving average) that the candle registers for a low price; approx. 84 cents, a nice push from the average for a mid-day move. The reversal did take place in the next (1:21pm) candle. While the down move did continue after that, it went only 18 more cents lower on un-impressive volume. The 1:18 candle with all it's supporting indicators, was a nice exit point. It later is identified as very near the mid-day low, which took place at 1:51 pm. In hindsight, I see all the indicators of a high-probability reversal. I did not heed the indicators and that is why I took big losses on the three GS trades I mentioned earlier.

From there, I managed to finish the day 7 winners out of the next 12 paper-trades, taking extra note of the importance of support and resistance areas in where the SKF and GS prices were reversing or breaking away with force.

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15 for 26, a 58% win rate. Gain of 28 cents per share.

A day away from the market...

I just returned from the day job and took a look at my overnight SKF long position. It was down quite a bit but off the lows of the day. I did close it out just a bit ago. It appears it was in the money for a few minutes between 10:20 and 10:23. As I blogged this morning, I would have sold it there, had I been able to be in front of the computer. So, that's how that has played out. It really doesn't matter anyway. It is paper-trading, after all. Loss of $27 per share on the trade but would have been about even or slight gain IF I been in front of the computer. Of course, as the old saying goes, "...and if I had wheels, I'd be a bicycle!"
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I have the charts up and this blog running but I am not trading. I must attend to business admin deadlines today. In fact, this is one which MUST be done within the next 2.5 hours or I won't have any phone book advertising for my business in 2009-2010! When I state that I have let everything lapse for my time in front of the markets, I assure you I wasn't kidding. Also, I filed an extension on my taxes! Didn't make the time to do them!
As I write this, SKF is making a monster move up (2:00 PM) and now retreating. Now it is nearly at my breakeven point (2:10 pm). I can't take my eyes off the charts... I am obsessed with and haunted by the idea of being a trader for a living...

Priorities & Balance

Since February 1st, I have been blogging about my progress trying to learn to trade the stock market through paper-trading. During this time, actually about two weeks prior in mid-January, I set my mind to give as much as possible to this endeavor. Nearly all my free day hours are spent in front of the computer, in the evenings I read blogs, work on this blog, and study resources related to the stock market.

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Last night, Mrs. Blue Collar and I attended a minor league hockey playoff game. During dinner out prior to the game, we discussed at length my frustrations at repeating the same mistakes, my inability to focus, and the inevitable discussion of when I might move to live trading. I feel I am not ready because I see in myself the lack of discipline and the aforementioned penchant for repeating the same mistakes over and over. I have shown some paper-trading gains since I started keeping track on March 1st. I've had 26 winning days out of the 31 that I've traded. Paper-gains (not counting my current open position) have been $23.41 per share over the same time frame. Yet, I don't feel I'm ready to risk real money. I haven't mastered my trading strategy. In fact, I haven't settled on a trading strategy as yet. I had some good results from fading high-volume, strong diversion-from-the-mean moves, and still that tactic seems to have validity. But as the volatility has shrunk, so has the force of those moves and it is not nearly as easy to quickly profit off them. As I have often blogged about this strategy, it is prone to big losses when a stock doesn't reverse as expected. My original intent has been to be a momentum trader. From my months following and participating in the outstanding old GOTS chat, I saw the importance of riding "momo"moves in garnering profit. Then in late January, I was referrred to Scott Farnham's Fear & Greed blog and it cemented the importance of joining momentum and the real power of harnessing this strategy of trading. More recently, I have decided to make my tactic of trading reversals a secondary one to learning to spot and ride intra-day trends. The past few days have been frustrating. I thought the transition would be a clean one; flick a switch in my head and voila'. AS most of you know, this is not a reasonable expectation. At times, I fell as though I am starting over... Do I think I'm back at square one? No, I don't. But, my goal of trading profitably with real money seems much farther away than it did a month ago.
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So, back to my dinner last night. Our discussion did turn to the finacial realities of life. I have devoted an inordinate amount of time to trading. So much so that my small business has suffered. It requires marketing, and administrative time. It deserves that since it is the primary vehicle by which we survive. I write this post because when I told Mrs. Blue Collar about my intent to postpone today's day-job appointment to close out my overnight position, I could tell by the look on her face that this was a mistake. The fact is, I have been giving my work-life short-shrift since February and it is starting to show in the bottom line. I have been lax in marketing and I have been filtering work projects out in favor of spending time in front of the computer. My administrative duties have been suffering some also as evenings formerly reserved for them have been taken up by stock market study. Needless to say, the soft economy has played a part as well.
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I love this stock market thing and I see it as my eventual career. I am approaching the point where I must decide on what my life priorities are and what balance I must strike between trading and my personal financial health. Clearly, if I am going to be switching trading strategies every month or two, I will slowly destroy my business. I have to focus and settle on one trading strategy, learn it, and apply it! My financial health depends on it. I also must not act as though paper-trading is supporting my household.
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How many of you have gone through this or a similar conflict? I'm curious...

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Addendum: I am holding my 9:00 am day-job appointment and not sticking around to trade my open position. For the record, I would trade it at the first opportunity after it goes positive gain. Right now, it appears to be holding at a loss because of the Ford earnings report. If the postition stays negative, I'm inclined to hold it until it does go positive.

April 23rd

Wow, a day of huge highs and lows for me personally when paper-trading the SKF and GS. To begin, my trade held overnight did pretty much what I expected and yielded a gain of $1.14 per share. In fact, at the open I added another position on to it which added another $1.04 per share gain... for a total of $2.18 on the trade in total. I learned a great deal about trading the open however! I clicked the transaction shortly after the opening bell because I had a very nice gain going. However, the trade was not executed until 7 minutes later. I lost most of the gain showing on the screen and was lucky to salvage a winner at all on the whole lot. This was incredibly frustrating. Well, it was to get worse from there. I was again trying to stick to the trend/momentum plays. I got chopped out/ stopped out consistently all morning to the point where I had lost all my gains from the overnight trade and was in the hole for about $2 - $3.00 per share! Talk about ugly reversals! Much like yesterday, the chop took me away from trying to play momentum and took me back to trying to play for reversals... it was what would be working in that type of action. With this change in strategy, I started to get a few winners, 7 out of 8, in fact. They were small gains and I was still down a bunch, but things were looking better. Then, the momentum came into the market and I was caught playing for reversals. At 2:10 pm, there started a drop in SKF that would have been a terrific short for a momentum play. Not for me though, I got caught on the wrong side of it and the market proceeded to "drop me on my head." I took a $3.55 per share loss! Ouch! At that point, albeit a bit late, I switched strategies and went back to trend/momentum trading again. I went 11 for 22 with a $ 4.73 gain and made back my losses of the day, finishing the day with a 98.4 cents per share gain. However, like yesterday, I am in a big position overnight. I didn't want to be, but I was unwilling to take the loss when I went against the trend in SKF during it'sbig drop into the close. So, with my success last night in fading a powerful uni-directional move, I decided to hold again. I'm currently down about $6.40 per share but I am counting on the trade to revert to the mean at open tomorrow. We'll see. This is a fairly reliable strategy. I just hope no news hits overnight to "drop me on my head again." For today, I am glad to escape with a gain, considering what went on. I really am undisciplined... all over the place. partly because I am playing two strategies so I can stay in the market all day, trying to profit from what the market throws at me. After all, this is training, not reall money trading. I need the practice in all facets of the game. For instance, today was the first time I tried to trade the opening bell. I learned something. Tomorrow, I'll try the same thing. This might get ugly though. I have a day job appointment which won't allow me to be here at the open... I'm going to try to change the appointment to 10:30 so I can trade that open position. If not, I'll just let it ride....
For the day:
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34 for 63, a 54% win rate. Gain of 98.4 cents per share.

Tips For New Traders -

I just found a reference on Don Miller's site to the following interview with Mark Douglas, author of "Trading In The Zone," and "The Disciplined Trader."

http://www.4shared.com/file/96740657/227e2748/Mark_Douglas_-_Mind_Over_Market.html

I HIGHLY recommend this 53 minute interview for beginning and slightly experienced traders. It is eye-opening to those (like myself) who haven't thought deeply enough about the psychology of trading. I am planning to watch it again tomorrow and I'll likely go to Amazon to buy Mark's book, "Trading In The Zone." So much of what's in the interview is akin to what experienced traders on the blogosphere espouse in their writings. For example, his principle of looking at the market in terms of probabilities, etc. Take a look at it, I think you'll like it...

April 22nd

The importance of focus is clear to me now that the market has closed. I came into the markets late after a day-job appointment and found myself trying to paper-trade the choppiness in SKF between 2:15 pm and 3:30. Frankly, I felt like I was being chopped to bits between 2:24 pm and 2:50 pm; stopped out on 6 out of 8 trades. I was still looking for a momentum move though, and it came at 3:35 pm... and what a nice move it was. I was long a double position at an average of $60.95 per share and foolishly sold it into this first green candle. I had been fooled by the prior choppiness and didn't expect the move to continue... I thought it would do a quick reverse as it had been. In hindsight, this was a very costly maneuver. While I took a nice 84 cents per share gain on the trade, the gain would have been up to an $8.48 per share had I held into the market close! And here lies the importance of focus. The choppiness lulled me into my old risky pattern of playing for a reversal into this final big move up in SKF. Sure, it payed off on the next trade; a short on the 3:40 pm red candle, yielding 49 cents per share. This was positive reinforcement and I continued looking for more reversals instead of going long on the "momo train." On my final trade, I went short at 3:51 and, liking the position, I doubled up on it. The reversal never came and I lost all my gains (about$1.30 per share). As good as I felt yesterday, I feel equally lousy right now. I ignored the proper, higher percentage trade of riding with strong momentum and took the riskier approach to fade it. Old patterns die hard. This is why I have not moved to my real-money account. I don't have the mental discipline yet to make the appropriate plays.

I am carrying a large short-position into tomorrow. I am reasonably confident about fading the strong, upward end-of-day move. In other words, I'm sticking to my guns that it will reverse into tomorrow's open, based on the huge volume traded in one direction during the last 15 minutes of the day. My average cost basis is $63.35 per share; the ETF is now trading at $63.81 and has been as low as $63.56 thus far in the after-hours session. I will count this trade in tomorrow's tally. Rest assured, if this trade ends positive as I expect it will, it is still not how I want to conduct business. I am training to be a day-trader not a swing-trader. I don't want to get in the habit of holding an ultra-short ETF overnight.

Without considering my open position in SKF, I ended today up 20 cents ... pretty disappointing considering the action that took place in the final 20-30 minutes of the day.

Focus, focus, focus is critical. I will eventually get it, I have faith.

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ADDENDUM: SKF is now trading as low as $63.07 at 6:35 pm. After further review of my trades today, I noticed that on my six double positions for the day, I was 5 for 6 with a gain of $2.55 per share. I was surprised and pleased at this result; I didn't notice it initially. I have been trying to get in the habit of adding to winning positions when conditions warrant. (as mentioned above, I am counting my present open position tomorrow when I expect to close it, not on todays tally)

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16 for 26, a 61.5% win rate. Gain of 20 cents per share.

April 21st

Trading distractions... they come in many forms. For some, it is CNBC, or the radio, or children, or pets. Today, it was the phone call from a day-job customer. After making my first paper-trade entry, I received a call from a customer who kept me on the line interminably, it seemed. In a flash, while distracted, I was down 80 cents per share! So, I covered the position for a large loss of $1.10 per share. Just what I had been desperately trying to avoid! Damn it... but the day-job pays the bills and trading pays nothing, for now. So allowances must be made. After that, I was looking for a recovery. I am trying hard to follow the momentum model set by Scott Farnham so rather than playing for a reversal and blindly holding it trusting that I was right, (as I have been doing mostly over the past two months) I played along with the momentum for two wins of 56 and 20 cents. I was looking for opportunities to reverese direction with the market and ride the momo as long as I dared. I took a couple mental-stop losses of 22 cents and 38 cents per share but was looking for the longer term play to make up for the damage. That opportunity presented itself and I shorted it, riding the SKF down to a point where I felt comfortable doubling up on my winning position as it was moving. It felt really good to play a position the "right" way, the way I envision it should be. And the gains really pile on when you double up... I sold the position with a nice gain of $1.87 cents per share, missing another $7.90 per share (3.95 x 2) of the primary move down. But, I had to get out and prep for a day-job appt at noon, so I took a gain on my final trade of the day at 10:59 am and ran with it. What a great feeling to be in on a good trade... I want that feeling again and again...

5 for 8 winners giving me a 62.5% win rate. Gain of $1.05 cents per share.

April 20th

After a morning of community volunteer work, I hit the markets around 1:30pm. My first trade was at 1:48 and it was a rocky start. I had losers in 7 of the first 9 trades. The good part is that the losses were mostly small as I was trying to carry forward from last Thursdays effort to "get out quickly" if I felt uneasy about the trade; only three of the nine losses were greater thatn 10 cents per share and only one exceeded 20 cents. After getting a feel for the markets, I hit a stride and went 21 for 27, a 78% win rate on the remaining trades of the day. I had a quick trigger finger on the exit button and perhaps too quick to pull that trigger. But, I was determined to keep ALL losses under 40 cents per share. All but three were under 20 cents per share. I hope to improve on that but I feel that to do so would send my trade count soaring.

I took double positions in two of the trades and both were good set-ups and the add-on to the original position was better or very close to the original buy price. No averaging way down for this guy anymore. If Scott at Fear & Greed calls it foolish for day-traders to average a loser, I'll take his word for it! I was scared out unnecessarily from some great moves. Still, I like the new idea of setting these mental stops and making quick exits. Commissions will go up, but losses will be mitigated. I simply (ha) have to manage my winners better by having faith in their continuation. Average loss = 12.5 cents per share, average win = 15 cents per share.

21 for 36 winning trades, a 58% win rate. Gain of $1.26 per share.

April 17th - No Trades

What a strange day this was. I was watching the market early but didn't see anything which I wanted to jump into. I had a service person show up at my house and spent time with him. Afterward, a billing dispute with a day-job customer took two hours of my day; research and phone time. Have I mentioned lately how much I hate my day-job? Anyway, I came back to the computer, placed a trade, and nothing happened... I got the blue box on the IB order line which states the trade is held and awaiting confirmation. This continued and after four tries, I called customer service. It appears that the Simulated Trading platform is "down" and will likely not be up until tomorrow. So, no trades today. I'm watching the mkts and drawing lines on the charts for my trades but it just isn't as satisfying.

April 16th

Well, I covered my paper-trade position from yesterday's close with a gain of $1.14 per share. Missed up to an additional $7.00 per share by not sticking with the trade. (the trade was a 4x position, four buy-ins)

Glad to take the winner though, after two days of losses.

A day- job appointment at noon forces me to quit on the markets early today. If I can get back to my desk before closing, I will. But for now, the trading day is over.

Addendum: I was able to trade the last hour and twenty mintues of the day. I added 58.5 cents per share to my earler gains after a 9 for 13 success rate in the afternoon session. I really tried to focus on the momentum and on selling at the least sign of a trade moving against me... trying to use mental stops. This really worked...mostly, it gave me confidence to stay in slightly longer (I felt like I had "insurance.") I kept repeating to myself, "it only costs $5 to click sell" all the time I was in a trade.

12 for 17 winners, 71% success rate. Gain of $1.72 per share.

April 15th - tax day

Another tough day. Same deal as yesterday. One tough trade hurt my results; $2.16 trade loss on SKF at 1:00 pm brought what would have been a slight 37 cents gain on the day down to a $1.79 loss for the day.
In addition to other problems, my analysis after the close indicates I am trading far too much. Discipline is really what I need and is the hardest for me to attain. I still feel pretty good about my method. I am certain that at this point, self-control and patience are my stumbling blocks. This is not an overnight fix... I will not get discouraged. I will just keep plugging away until I can trade impassionately like a machine and not as a human being; one who races between joy and disgust, depending on how the day is progressing!
These are my first back to back losing days since February 24th - 25th. I don't like the trend!
For the record, one trade was a scratch and isn't counted in any way. I also am long SKF overnight as I could not exit the position in time for the close. That trade is not counted here.
Average win is $1.23 per share. Average loss is $3.94 per share. Ouch, that is a telling stat! And, even without that one really nasty loss, the average is still -$2.15 per share; double my average gain per trade.

24 for 36, a 67% win rate. -$1.79 per share loss.

April 14th

A tough day which did not have to happen. I'm going to work hard in this summary to find the good in a big losing day of paper-trading. I'll start with this. Except for one trade, I was actually up $1.60 per share. As happens from time to time, I found myself playing for a reversal on a big directional move... this time on GS. Volume level and price distance from the mean were signaling an entry... but, it was a "false positive" and the trade sped right away from me. I did the worst of all things... instead of selling (or reversing), I averaged onto the losing position. This is something which can REALLY sting you, and this was one of those times. It's bad enough to hold a loser like this for so long but the pain is compounded exponentially when one adds on to the loser as it moves away. I just continuously shake my head at my inability to correct this habit. All I can hope is that I will eventually learn to manage it. Truly, I don't think it is a fear or greed thing... I think it is a false sense of confidence in my method. It is correct often enough that I expect it to work all the time! Averaging in on a trade which is down can and often does, reward you with a gain, provided the reversal eventually comes, and comes in time! But, depending on the entry, you may not recover. I didn't... Enough said about that.
As I mentioned before, that one lousy trade made all the difference. I was up $1.60 without it, I had a 63% winning trade percentage without it. And, after the big loss, I was 7 for 12 with gains of $1.21 vs losses of only 35 cents per share.
So, there it is. The good and bad. It wasn't enough to leave me negative for the month.
I'll just continue to practice until I can get my head right... I have a reasonably good feeling about my trading method, I just need to work on the mental discipline.

22 for 36, a 61% win rate. Loss of -$4.37 per share.

April 13th

Well, I was able to finish day-job early enough to log in to the IB and watch for about 40 minutes or so. I saw two trades in HIG and took a tiny gain out of both. Lots of good action at the close but coming in late, I just didn't have a feel for it enough to really dive in. I'll take my tiny paper-trading gain.

Day job has a seasonal component to it and is starting to heat up. Unfortunately, my time in front of the markets may get shorter as warmer weather approaches. I'll try to trade as much as possible but full days watching stocks may be few as time goes on.

2 for 2 trades, 100% win rate. 5 cents per share gain.

April 10th - Markets Closed, Good Friday

April 9th

Well, it was a mixed day. At one point I was up about 80 cents per share. Then I decided to try to play reversals on HIG and GS. Well, that was a very bad move on a day when the financials were on a tear! Stupid, really. I constantly castigate myself privately and on this blog about playing reversals against the primary trend of the day. Yet, I continue doing it because it's familiar. I think that my relative success paper-trading these past weeks has allowed me to continue on the same path and accept these bad days as the cost of doing business. At some point, I will have to make a change to this mindset. I have some things in mind and I will be trying to implement them in the near future. It really was a day of lost opportunity... that's how I see days where the movement is primarily in one direction and I don't capitalize on it. How easy it would be to just go short the inverse ETF's or long the financials like GS. Just as Tiger Woods had early success yet changed his swing to improve it, I must follow the same principle to improve my paper-trading. If a leader in his field such as Tiger believes in changing what is good in pursuit of better, it seemingly could work for me also. We'll see. I'm not Tiger Woods, of course, but I am sufficiently motivated. I just have to be prepared for losses while "re-working my swing."
ADDENDUM: After re-reading this post, it gives the impression I am "elevating myself" to a level of competence of which I am certainly not worthy. It is meant only to imply the potential for me and all of us to learn from successful people that we can make change for the better even if we enjoy some success already.


11 for 21 wins for a 52% win rate; 86 cents per share loss.

April 8th

This was a more comfortable day in front of the markets for me. Although I started off on the wrong foot with two losses on one cumulative position, I was pleased that I recognized it as a loser and bailed instead of riding it down as has often been the case for me. I then promptly reversed my direction and went short into the trend and made most of the loss back right away. Because I am paper-trading, the dollar amounts are moot. What is important is the training... and this trade was good training in what to do when the trade goes against you. The whole point is to keep yourself in the game; which requires protecting your principle. The rest of the day went quite well with just one other loss. With regard to winners, it was another day with escaping too soon after good entries at the head of nice moves. Notably, the final trade of the day where I took only 6.5 cents out of a 56 cent reversal in SKF at 2:12 pm; a mere 12% available to me! But, the fact is that I took a profit on the trade and I will not complain too loudly, lest I anger the market gods and be rewarded a massive loss the next time out for my insolence.
Two other bright spots in the day:
1. My conversation with Yngvai of http://welcometothegutter.blogspot.com/ regarding all things stocks. Thanks, James, for a great back and forth about this little world we choose to play in! It was a pleasure to talk shop with an afficianado.
2. Scott Farnham, the human trading machine, has opened up his blog Fear & Greed Day Trader to the public again, after a two-month hiatus. Copy everything you can as Scott's comment indicated that it may be available only temporarily. Hopefully he will keep it out there for us for a long time! Thanks Scott.

10 for 13 winners, a 77% win rate. 83 cents per-share gain.

Trader tax issues

As mentioned in an earlier post, above is Page 72 from IRS Publication 550. Here is the link to see the whole publication.

http://www.irs.gov/pub/irs-pdf/p550.pdf

btw, that's a picture of our 14 year old Lab Retriever, Elsie.

April 7th

Today was a lesson in patience and squandered opportunity while paper-trading the SKF. The greatest example of this was my multi-part position long in SKF; buy-ins were at 10:12, 10:22, 10:32, 10:32. This was a dollar-cost average to a price of $87.66 per share during the strong 21 minute, unbroken (3-min chart) drop in preparation for the reversal off this down move. This was the lesson in patience as my position was down significantly during this timeframe. But, I felt quite good about this play as the futures had been weak, the shorts have let up on SKF, and the big move down had to correct. Finally, with green showing in this position, I covered at 1:22 pm. At the time I clicked the mouse, I had about a 12 cent per share profit. When the transaction finished, I had actually lost 15 cents. I cut it too close, I guess... Now, the squandered opportunity: The run continued up short term to $88.26, what would have been a gain of roughly $2.40 cents per share. Had I held my position end of day, as I was prepared to do if the position hadn't come back to me, I would have cashed out a $ 9.36 per share gain. Oh well, that is all predicated on a perfect world scenario. At one point in the trade, I was down $8.00 per share but I can't figure out why I was unwilling to let it run with a gain more than 10 or 15 cents per share?! It's not something I was thinking about while the trade was on or at the point of sale. Looks like I have some mind-training to do on that! Add one more to the list.
There were a number of other exits too soon which cost me gains, but all in all, I'll take my "green" for the day in SKF plus a nice 55 cent profit on my one trade short in GS at 12:14 pm. That was as perfect a set-up as I could ask for! Again, I didn't follow through for all the $ available but I don't mind on that one.
Staying on the topic of positives, I can say I managed my losers well today. I had some bad entries but stayed patient and averaged out of them or cut just them off quickly, (except one, my 10:00 am short).
I am also working on figuring out if I can use my entry signals as exit signs. I am a long way from my goals, but I'll continue the journey because I have just enough success to keep coming back. Am I a sucker or what? :-)

10 for 17, a 59% win rate. $1.07 per share gain on SKF & GS

April 6th

It felt good to get back to the paper-trading after Friday off, especially with my new 24"monitor to match my other one. I retired the 19" I had.
Despite a reasonably good day, I just never felt comfortable today...never sure of what was going on. And, boy did I miss some nice gains by getting out early after very nice entries. On the other hand, I got out of some trades with a profit just by "the skin of my teeth," as my mother used to say! I believe that big loss at the end of March is sticking with me. I was thinking about going live with real money this month but that will have to wait. Again, this is practice trading and any success at this is tempered by the fact that my emotions, my head, are not under control. Until I can do this without a second thought about losses or gains, I am going to stick with the fake $. Any anxieties I have paper-trading will only be magnified when I go to live trading.
I still feel that there is something in my analysis which I am missing. A pefect example is the big drop in SRS from 3:27 pm to 3:51 pm. This $3.35 cent per share move had ALL red candles (3-minute), not one reversal in it. Because I play a lot of reversals, these are the moves which terrify me. Clearly, I would rather ride momentum with moves like this; to stay on the trend and not go counter to it. So often, like on March 31st, I go against these uni-directional "downdrafts" and just get smoked. While I have managed to make overall gains, these moves are punishing because I cannot seem to consistently play them correctly. April will be an important month for me in this regard. I am going to try to spot these moves so I can go with them and keep an eye out for the reversals which have been my primary strategy of late. I want to become a well-rounded trader; playing comfortably long and short trends and catching the changes in direction. Only then will I be able to approach the success of Scott Farnham, the trader whom I wish to pattern myself after.
Another interesting thing I noticed today is that SKF now has shares to short on IB for the first time in quite some time. That is a clue as to what's going on with the financials in this market.
I played four stocks today and managed gains in all four, although the gains in RIMM and GS were negligable on a 2 for 3 win ratio.
20 for 30 success rate, 67% winners. $1.10 per share gain.

April 3rd - No Trades Today

No trades today. Sure do miss it when I have to attend to other things. For now, trading does not pay the bills and so must take a back seat to my "real life." I haven't checked the charts yet but by the looks of the closing numbers on CNBC, it may have been a quiet day.

April 2nd

With a busy Day-Job schedule and errands that have been neglected, I wasn't able to get into the market and paper-trade until late this afternoon. At 3:23, I made my first trade and then made 11 more before the close; 12 in total.
I dollar cost averaged in on three separate positions on SRS. This required four entries on the first position, two entries on the second, and 6 entries on the third. To this point, I've been considering each buy-in as a separate trade even when it is a "double-down" (dollar cost average)on a single position. For this reason, when the final close of the position is a winner, I have been comparing that exit price to every entry to decide whether each was a winner or loser. This allows me to evaluate all trades on their own merit, in addition to the final close. I will continue to do this, I see no reason to lie to myself. So, although each of the three positions were closed for gains, not each entry was a winner based on entry & exit price. Basically, I average in to cover my butt when the position continues against me, not as a "strategy!" Although, it does seem to work...
9 for 12 winners, a 75% success rate. $2.78 per share gain.

April 1st

When I used to play golf, I would struggle to break 90. I loved the game but I was never able to conquer it. The old joke was that most times out, "I got my moneys worth" from the round because I would get to walk a lot...back and forth across the course chasing my ball! Well, that's the best analogy I could come up with for todays paper-trading. I felt like I struggled back and forth all day. The thing is, as I look at the trade recap, it looks pretty good. Why then do I feel like I just walked ten miles on the golf course? It's because I felt as though I was playing catch-up all day. First, I started with a loss. Next, my third trade was another bruiser although not as bad as yesterday's. Boom, after that trade, I was down $1.16 per share. And from there, while the tape looks pretty good, it was a mish-mash of scrambling to get my gains from each trade; often lacking confidence that I had a good entry. And, on the trades where I later learned I did have decent entries, I had bailed on some nice moves! I really think that except for the one bad trade early, my anguish was mostly because I was not riding my winners in a way that would have allowed a quick recovery of the big loss. For example, my 12:56 pm short on SRS at $54.58. This was as near to picking the top of a major daily turn of a stock as possible. Yet, I sold at 12:57 pm with a 6 cent gain. The shortest-term bottom following my exit was at $53.88 about 3 minutes later for what would have been up to a seventy cent gain. The bottom of the longer-term major move was at $52.05, a full $2.53 per share move from original short. Truly, I would not have held that whole move. But, this illustrates the reason why I had a "blue collar" hard work day at my desk! And this is just one of many examples of early entries on decent moves of that I jumped out of. The last trade of the day was a first for me. I quadrupled down on a reversal off that monster move in the market around 3:30 to 3:45. I was so sure that this was a winner; a power move which had to reverse! Again though, I took only a fraction (20 cents) of the $4.40 per share gains available to me on it (because it was 4x of a $1.10 per share move). I predicted the move but got only 5% of it! Sometimes, I really make things more complicated than they have to be. Phew, what a day. I'm going to the fridge for a Bass Ale.
19 for 24, for a 79% win rate; 99 cents gain.

New Trader Important Info ...

The following does not represent advice and must be verified through independent means:

To all who are considering trading as a "business" in 2009: If you have not yet requested "Mark To Market" status from the Internal Revenue Service, your deadline to do so is fast approaching! April 15th is the deadline and the election for the Mark to Market status can be filed with your 2008 tax return. If you file for an extension, send the "M to M" election notice with your extension. While I have not investigated the details of the process yet, it is my understanding that the notification is simply a written statement which must contain a few specific things. It was pointed out to me that acceptance by the IRS of this status is reliant on certain behaviors of the trader, not on the simple act of making the statement.
Among other things, Mark to Market relieves you of the burden of the "Wash Sale Rule" as well as allowing greater recognition of stock losses in the year they accrue; no requirement to carry-over losses to later years. It is also my understanding that the "M to M" election allows relief from self-employment tax in some way. I realized that I must investigate further the details of Mark to Market after getting an overview from the IRS agent with whom I spoke over the phone yesterday. He recommended reading IRS publication 550, page 72 in particular.
While I am still sketchy on the details, of one thing I am certain. The deadline is April 15th.
I will update this post when I get new information. Green Trader Tax is also a resource if you are willing to spend some money. See their website at www.greencompany.com/index.shtml.
The IRS may be contacted at 800-829-4933, call them to verify the statements I made above. Do not rely on me as an authority on the subject.