Stopping When You Hit A Weekly Goal?

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Nonsense. “Stopping when you hit a weekly goal” is a psychological game that is actually detrimental to your success.

How do you know that the remaining days in the week will be losers if the previous days in the week were winners?

Winning and losing days are randomly distributed. You could have a string of winners or losers in a row and there’s no way to know ahead of time. Therefore you don’t know ahead of time if it’s going to be a winner or a loser, and therefore there’s no reason to stop trading when you hit a “weekly goal” unless you just don’t feel like trading anymore.

What if you make $1,000 by Wednesday. How do you know you would lose it all on Thursday? How do you know you wouldn’t make $2,000 on Thursday? You don’t. If you do, I would like to invest a significant amount of money with you.

Unless you have some way to know if your future trades are going to be winners or losers, then how do you know if you’re going to “lose everything you gained”?

Look, there are 5 days in a week. You have no idea which days are going to be winners and which days are going to be losers. there’s nothing magical about starting on Monday and stopping on Friday. Trade the days you want. You have the same chance of making money on any day that you trade as you do on any other day you trade. There’s no “stopping when you hit a weekly profit level.” Trade whenever you feel like trading.

July 1 2010 Trades

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Trades today:

short:
1025.25 x 1
Out:
1022.50

$132.90 net

short:
1016.75 x 1
out:
1014.00

$132.90 net

short:
1011.25 x 1
1012.50 x 3
out:
1007.50

$919.10 net

short:
1007.5 x 1
1008 x 3
1008.50 x 5
out:
1010

-$841.40 net

$343.50 so far for the day.

Dunno where my buy/sell arrows are.

7-1-2010 trades

Here’s the loser:

7-1-2010 trades2

market has been going straight up since that loser maketrket has been going straight up since that loser. That’s why when averaging down you ALWAYS have a hard cutoflsoss and don’t try to do martingale. Just take the loss and move on to the next trade.

June 30 2010 Trades

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First trade today (not sure why the arrows aren’t showing up, so I drew them in with circles in MSPaint). OEC is a great brokerage but sometimes the options on the charting platform (such as showing order entries/exits) seem to randomly disable themselves, especially after upgrades.

1039 * 1
1037.75 * 3
1036.75 * 5

Out 1042.50

$2310.60 after commission.

From looking at the chart, someone might see where the top of the fib lines are (1042.50) and ask “why did you draw the line there rather than at the first high of 1042.25?” The answer is because when price hit 1042.25 and started retracing, it didn’t retrace far enough to get to the first retracement (38%), so it didn’t really count as a “top.” If you draw the fib lines there, you’ll see that price doesn’t make the first retracement (the green line, I don’t know what that gray one that OEC draws is all about) and just continues higher.

You might also notice that, from the time price started retracing, there were multiple opportunities to go short (although I didn’t take them because I was already long, but that could have been an interesting hedging opportunity).

6-30-2010 trades

This afternoon was full of short winners, but I stopped after the trade this morning because I figured after being away from the game for months, I was content with a single winner for my first day back. Here’s a pic of the afternoon, but you’ll have to excuse the confusion on this pic because OEC draws fib lines to the right forever (as opposed to having them stop at the point on the Y axis where you drew the original line to). So I tried to annotate this pic with diagonal lines where they were drawn because right now it’s just a giant mess of lines. I probably wouldn’t have taken that last trade because 15 minutes before the market closes is way too close for comfort. I don’t want to get stuck with a position afterhours or overnight.

6/30 PnL: $2,310.60

All the trades I missed this afternoon.

6-30-2010 trades2

May Update

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For those of you following along at home, I have been buying a lot of index ETFs during this little down trend that we’re having now. This is on a longer-term basis; not day trades.

As I’ve mentioned before, the majority of my wealth is from averaging heavily into weighted ETFs during the 2008-2009 “recession”. I took a portion of that capital and used it to fund my futures account that I day trade with.

I’m finally getting my personal affairs back on track and am about ready to jump back into day trading and posting screenshots and PnLs again.

Thanks for the encouraging messages!

Thoughts on Averaging Down

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It’s taboo cuz most people can’t do it. As long as you have clearly defined stop limits before you ever enter the trade and you know how much you can lose, it’s not bad. People get into trouble when they KEEP averaging down and blow their account. As long as you fully understand the nature of what you’re doing, and the risks that come with it, then it’s ok.

Trading With A Small Account

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You run into other problems besides PDT rule if you’re trying to do this with a small account. Trading the S&P for example, you can buy 1 contract with $500 margin. Yet say you’re trading SPY, and say for simplicity’s sake it’s at $100 per share. If you wanted to buy 100 shares you already need $10k right there, and that 100 shares would only get you $30 on a 30 cent price retracement. Minus commissions. And if you’re scaling into that 100 shares, you’re going to may multiple commissions which will almost assuredly be more than the $30 profit you make. (Day) Trading stocks requires a much, much larger account size and you still don’t get the margin that you do with futures.

I swing trade stocks with a similar strategy to this. The one thing I like much better about stocks is that you can use selective position sizes (eg. you’re not locked into a minimum size of one contract with its tick sizes) which makes hedging a lot more comfortable. I don’t usually hedge with equal sized positions in either direction because I have a bullish bias over time when it comes to the stock market. Using 2x ETFs makes this even more accessible if you’re not worried about decay over time. I think I mentioned before, the majority of my wealth, including my entire futures trading account, comes from heavily averaging down into the weighted ETFs during the huge drop at the end of 2008. I modified the rules a little during that time, however.

Thoughts on Trading

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as with any trading, the wider the range that you are trading the less important slippage is.

If you’re scalping for a few ticks, slippage will ruin you.

If you’re swing trading for 10-50 points, who cares about a tick or two of slippage.

That being said…

The percentage between winners and losers is always the same regardless of the spread of the fib lines.

Remember that if it gets to 62% it has less room to go to get to the 100% than to get to the starting point.

I cannot predict price, I don’t know where it will go. That’s why I average down. If it gets to 62% it probably will go to 100%, but if it doesn’t, I make a lot more money.

Combine with hedging the other way and you can make money regardless of which way price goes. Well, sometimes your wins are reduced a bit, sometimes your big loses are reduced by a lot, and sometimes both sides win, which is awesome. Imagine as price is drawing down to the first 3 fib lines and you’re averaging down, you’re closing out trades for profit on the other side (in another account). I do this more on swing trades with index ETFs in my Scottrade account because I can get more control of position sizes than with futures, but like I said, more on this later when I have more time.