Conclusions, as promised.

Conclusion from post-trade analysis:
Having gone over all my trades on daily, weekly and sometimes even monthly time-frames I have to say there was no real “ahhuh” moment. This is probably because I make it a habit to go over my trades every few months, but this is the first time I’ve done it with printed charts.


I wrote down the following observations (many of which are already ‘common wisdom’):
• All my winners had almost immediately gone in my direction – perhaps good reason to develop a system of scaling down when the position goes against you.

• Broad market (indices) corrections would lead to the stocks breaking down or consolidation. Consolidating in a tight range in the best case.

• My entries were too late on both my shorts and longs. Especially on my shorts. This is easy to change (I already have), but it means I will not be able to take as many longs due to time zone differences. Late entries make you very vulnerable to pullbacks.

• I noticed many of my failed trades were bought after a large weekly run (200 %+) with very little consolidation, i.e. weekly rather than monthly. If they did continue to run this was usually a trick breakout which would lead to the development of another “base” / consolidation pattern.

• Relating to the above point: I think that smaller consolidations are only really acceptable if you have a very strong industry which is also showing rampant speculation (e.g. oil related stocks like PDO).

• In speculative issues (low price, low volume types) sometimes my long entries were the actual tops. Perhaps a trap for momentum players?

• Big consolidation periods (often the double-bottom type), many months / a year were rarely followed by a strong uptrend – but usually just more chop.

• I found lots of new stocks after a run of say 30%+ would actually form two bases. One which would fakeout and then the price action would create a similar one again which was the actual breakout.

• Look for a history of long-term downtrend as these stocks are usually bad performers over the monthly /long-term period

• Buying on a “right-side of a base” rather than an actual breakout hardly worked. I would usually get caught out on a pullback and only succeed on the breakout.

• Those volatile charts showing shakeouts and fakeouts in every direction never performed as well as those textbook type charts with smooth price-action combined with volume – my big winners were never these crazy cowboy charts.

• You shouldn’t rush to get into IPO’s. They are tricky because they lack a history and often shake you out (me). See : (2007 long losers MELI #21) and also (2008 long losers TITN #3)

• It may be worth trying to use partial exits (scaling out) on smaller chart-pattern breakdowns early on (i.e. Near the buy point)

• Short setups need to be worked on. My entries are not defined as well as they are in longs. They also only work for me on a shorter-time frame and are therefore much harder to pull-off / make money from safely.

• Unless I can find a good R:R entry there is really no point putting in an arbitrary stop which was actually designed for a totally different type of entry. Go with the T.A based stops offering a good R:R, go 1% risk instead of 2% if you insist on buying speculative issues. CANSLIM (containing particular fundamental characteristics as defined by William O’Neil. See www.investors.com) stocks are the exception. Stops can be widened for these.

• Finally. Its the market that has changed (I already knew that), not so much my system. If anything my system should have improved. The problem is me. I need to be able to better determine market conditions (through experience) such as chop, downtrend and therefore know when to get defensive and when to get aggressive. This will only develop with experience - its not really something I can learn from textbooks, but they can help.

All the above relates to MY trades. Therefore it could be wrong as it is only based on a small data-sample relative to the market itself.

Other conclusions:
I need to buy some top-notch trade log software to track vast details (time of trade, high during trade, comments, chart, volatility, market environment, allows me to jot down some fundamentals and other risk measurements etc). Probably Stator AFM.

I’m going to pickup Ninja-trader (not related to my “swing trading”/ trend trading) but this will help my short-term futures trading with access to a nicer DOM and trade analytics /metrics and especially system testing / idea testing.

If I’m going to swing trade well I need better data. Industry groups / news / fundamental screening (only relates to CANSLIM stocks). But this also applies to my other shorter-term trading (this is for another time).

Post-trade charting complete

I've just spent the past few weeks taking screen-shots of every single trade from my MB swing trading account. They contain entry and exits, as well as weekly and monthly charts in some cases (to give a context when necessary).

2005 Longs which were losses
2005 Longs which were profitable
2005 Shorts which were profitable

2006 Longs which were losses
2006 Longs which were profitable
2006 Shorts which were profitable

2007 Longs which were losses
2007 Shorts which were losses
2007 Longs which were profitable
2007 Shorts which were profitable

2008 Longs which were losses
2008 Shorts which were losses
2008 Longs which were profitable
2008 Shorts which were profitable

(To get a bigger chart picture, press "download" when viewing the image)

Notes:
Files are named in the following fashion:
Trade #. Ticker. Time-frame. EE / blank
so 1.ARD.DAILY.EE would mean a trade in ARD on a daily time-frame and the EE means the chart contains the "Entry" and the "Exit".

On the chart the annotation "Entry @o" means entry at opening prices. "Entry @i" means entry at intraday prices (this does not mean my decision was made during market hours - rather, I was filled at an intraday price). The same holds true for exits.

The little blue entry arrows and red exit arrows point to the bar on which the entry/exit took place, not the specific price. On later charts however I began manually pointing to my exact entry on the bar (You will see the difference).

If entry/exit prices are not matching with the chart it is due to a split in the traded issue

11 of the stocks I have traded are no longer actively traded on the exchanges - they are therefore not included.

I will post a thorough analysis with all my conclusions soon. Your input is appreciated too.

Why I'm selling XIDE

I'm selling XIDE for the following reasons:

• Nasty two day high-volume reversal
• No previous uptrend in this issue has shown reversals similar to this (a price-action anomaly)
• This reversal is occurring on a multi-year high
Daily:













Weekly:













My stock swing trading strategy is now being locked down after suffering a drawdown, and possible "system death" (see last post). In the mean time I am completing a much more thorough analysis of related trades and the market (still in the process).

Gold futures trading continues.

Post-trade analysis of primary trading account

I’ve been working on organizing the trading log from my main account. The main account used to be with TDAmeritrade but as of this year is with MB Trading.

The primary strategy was swing-trading, hoping to hold the position long-term (a few months). Anything less than a few months usually meant a cut-loss, or was a short position and so profits were taken a lot quicker. Records go back 3 years.

Conclusions reached:
MSWT = My Swing Trading System

• MSWT loses money in downtrends, even when short.

• MSWT began losing equity since September 07 and not the absolute top (October 07)

See:


















• MSWT has not been able to return money even taking longs since April 08, as measured only by closed positions (I’m currently holding on to three positions, one is profitable so far).

• I had previously experimented with tightening stops but returned back to the arbitrary 7% stops thinking it (tightened stops) was ineffective, in actuality it was doing okay until the “system death” – See:
















(Blue column represents beginning of experiment with tight stops. When symbols begin to be red this symbolizes the beginning of system death. Trade # as green is simply representing a market uptrend)

• There are things beyond my control at this stage which affects profitability greatly: Not being a professional trader yet means I’m simply not available intraday (especially US markets *1). This affects entries, exits and money management (pyramid technique and scaling out when positions goes against you). This also applies to my other systems whose time zones are friendlier.

• Commissions totaled 35.34%(TH if you read this, what I sent you was a miscalculation) of my profits, but this was beyond my control until recently (as I was under 18 when I began trading, the account was opened under someone else’s name – family situated overseas). Moved to MB trading earlier this year and I’m paying $4 average for a round-trip instead of $20. I plan on moving to IB once I turn 21 (they do not permit use of margin for anyone under this age).

• I’m limited in my research capabilities as a result of lack of resources (should not be a problem later). I will eventually get a job at a trading firm. Either soon at a prop, or after university at an investment bank.

• Most cheap trading software is ****. MSA does not allow me to plot the highest point within my trade, thereby reducing the apparent drawdown. E.g. I buy ABC @ 10. Sell @ 15. Looks all fine and dandy on a graph, but it does not capture the fact that ABC had been @ 30 at one point (I thought this would be considered important)

• My swing trading system has potential, but it is very limited. I should restrict it only to very strong markets (look for local ones rather than US) and begin pushing the trades aggressively. It has to be tightened and go to cash most of the time. When I have the resources I will research it further and try implement my ideas from other areas into it: e.g. economics.



Here are images of the equity curve constructed in MSA:
Please note: $11,200 was set as beginning equity as that is roughly how much of my own money I wired in over the years.
The murderous $20 commissions are also factored into this equity curve.
Also volume is kind of pointless as it is only measuring shares traded and not the amount of money/capital at work.

Equity curve:












*1 – If you’re wondering why I traded/trade US markets: Cheaper charting data, more competitive commissions and all the books I read were easier for me to apply to US markets.

My recent foray into futures has been extremely profitable, especially as of this week when I moved my gold trading operations to MB trading (trading mini-gold contracts) from the small experimental CFD account (estimated $40 fleecing vs $3.1 for a round-trip with $30k contract value).
But I'm not an idiot: once the gold bugs and the easy crowd leaves I won't be good enough to take on the pro's.
I am going to concentrate on this while the opportunity is still there.