May 19th

Hmmm, that was an interesting day. There's lots of stuff I could throw in here, especially about the early part of the day. But, I'll try to keep it brief because I have to cut the lawn before a 6:30 pm meeting. I am still inclined to use my old method but I am trying to refine it in a way that works for the momo trading I am trying to learn. I find that a combination of the entry triggers from the old method are still valid and can be used still, as long as I am careful about adding to losers if I am not close to a reversal on my entry. I found today that for the most part, I was able to stick to my stops. My losers did rise in number however, but 9 of the 13 were under 12 cents per share; my mental stop amount for today. A couple really got away from me. This is day two of the focus on trend and it will take practice to manage: one early loss was nearly 47 cents, two others were 17 and 17.5 cents. If I had managed to keep the four losses which exceeded today's mental stop at the max of 12 cents, I would have added 48 cents onto my gain on the day. Discipline, discipline!

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Another item of note today was how quickly I was exiting my winners. With my "insurance policy" in place in the form of my stop, I was free to let the winners run. However, I was much too quick on the trigger. Too bad, because today was a super day for trending in SKF and GS; the two I paper-traded. Without precise numbers, I see eight good or very good entries (early in a trend) which I bailed on. I plan on calculating later just how early I was in relation to the whole move as well as how much I took as a percentage of the moves. On one of my final trades, for example, I was long on SKF for $41.70 at 3:05pm. This was within 5 cents of the low of the entire afternoon. I sold with a gain of 6.5 cents in less than a minute. I pretty much turned the best trend of the day into a tiny scalp. This trade never touched my stop. In other words, had I just let it run and kept my stop in place, the 6.5 cent gain could have been as much as $1.92 per share and that's if I didn't add a position onto it. That's the most egregious of them all but there are others. Day two: much to learn but I am encouraged by what I saw. Of course, I was aided by some nice action in the markets. Flatter days like yesterday are less forgiving.

-Gotta cut all losses with stops, gotta let my winners run, gotta focus on entry and exit triggers.

For the record, I will now be counting my winning and losing trades based on the entire position, not on the individual trades which may make up that position. If two trades yield a gain when I close the entire position, it is -counted as 1 for 1, a 100% win rate percentage. Same for losses.

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17 for 30 winners; a 57% success rate. Gain of 77 cents per share in 6.5 hours of trading.

May18th - turn the page

After continuing to read Trading In The Zone over the week-end and reading Scott Farnham's blog at Fear & Greed Day Trader, I decided to turn the page on my old style of paper-trading and move on to trying to trade with the trend. As regular readers know, I typically fade the momentum in anticipation of reversals of direction. Instead of selling if I don't get a good entry, I often add to my losers (scale in to average a better price). This is, in virtually every experienced trader's opinion, a faulty approach. I can't agree more and have known it for a long time. But, I was able to manage it into consistent gains. The problem isn't that it can't produce winners, it is the fact that in certain instances, the reversal doesn't come! Further, when gains are picked up, they tend to be relatively small, muted by the fact that the initial poorer entries on the position hold back the gains. And, without stops, the pain is potentially huge when the reversal doesn't come. This is not the way I'd like to trade my real account when the time comes.

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So, today I got to the markets late; around 2:30pm. I had studied F & G Day Traders blog most of yesterday, doing research on his charts dating back to last June. I was trying to identify, as best as I could from a static chart, where his entries were taking place. So, today I decided I would only ride the momo! Well, like a couple weeks ago when I tried, I got chopped to bits as my mental stops were continuosly hit after I would buy or short at a point I thought resistance/support was crossed. I'm not accustomed to taking losses one after another like this! I was stopped out for losses on 4 of my first 5 trades and a 6th broke even when I stopped out. The one winner of the first six was a long trade which at one point had been a gain of up to 24 cents per share but then reversed instead of trending; I preserved the small gain by exiting just before it hit my stop. Very Frustrating!! So, I decide to persevere and do it again, going long on SKF... just as the big market eruption took place EOD. Caught on the wrong side and not wanting to get stopped out again, I decided to play my old way of fading a big move. This was a BIG mistake. First, I had a very bad entry for using my old style of trading, which really put me at a huge disadvantage from the start on this position. Then, the retracement a bit later was not enough to bring me up to a gain on the whole position, although it did bring me to even... (had I been using my old method from the outset on this trade, this retracement would have given me a reasonable gain and I would have sold as I have been accustomed to doing) But, it was not to be and SKF continued to pile drive down as the markets zoomed up. Finally, I decided to just quit on the "hybrid" trade ( hybrid as a result of trying to mix my old trading style with my new one). I then went to trying to get some gains out of the volatility by scalping. This gave me 4 out of 5 winners to close the session.

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If I had been on my toes, I would have waited and shorted at the LOD on SKF and ridden the momo as it plummeted on the big EOD move down. I find the the difficult part of this new method is trying to determine which break of support or resistance is real. Clearly, if I were to play every one as I was a few weeks ago and again today, I would mangle my account with small losses from continuously getting stopped out. "Death from a thousand paper-cuts."

I fully expect this trend of losers to continue as I adapt to this new style of trading; the correct style, if I want to be successful long-term. I will expect to use my old style when it feels appropriate to do so because with it, I can often get some great entries on nice long trends, which is really my new goal. But, I won't be adding to my losers to average in for a better price. I'll exit(stop out) on the trade and either reverse direction or just wait for a better entry.

Not included in the stats below is one trade which closed even.

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5 for 19 winners, a 26% success rate. Loss of $5.93 per share in 1.50 hours of trading.

May 15

Surprises never cease... I actually had a chnce to step in to the markets for about 30-45 minutes before my next day-job and I fired off 4 trades, three for winners; on one position. Sold too soon again, though.

Anyway, off to next appointment...

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3 for 4 winners; 75% win rate. Gain of 41 cents per share in 40 minutes of trading.