2 Week Catch Up

I'm committed to keep this blog up to date, if not for anyone else, simply for my own purposes to look back on. These last couple weeks have been good trading weeks, let me summarize.

Two weeks ago on Monday was the first (and only) loosing day that I've had. It was not fun!! I placed a trade, and immediately didn't feel good about it. Although my trading indicators pointed toward an oversold market, my pressure gauges were all pointing upward. Despite the conflict of indicators, I put in a trade. The market went against me the entire day...slowly but surely. Because I've set my stop loss at such a high amount, I ended up loosing $300 on that trade. Not fun!! But I learned a lot from that day.

First I learned of the importance of market news. News about the economy is what threw the market in a buying frenzy...I obviously didn't get that news. So I've started checking for 15 minutes before I start live trading Yahoo Finance and the Bloomberg economic calendar which tells me what news is scheduled for the day that could effect the market. I have decided not to trade 15 minutes before or after a large market announcement is scheduled, which has proven very fruitful.

Second, I implemented a sim before live trade strategy which simply means that I'm going to make a couple of paper trades everyday before going live. I found that almost every time I've gotten into a trade that I didn't like, it was the very first trade of the day. So I figured, let's make the very first trade of the day a practice one...makes sense right?

These two things seem to be paying off. After the day of loss, I got a little gun shy and changed my goal of $50 a day, to $37.50 a day. This I did successfully for a week. Then I upped my goal to $75 a day, which I did successfully for a week. Today I made $225, which the largest 1 day gain I've had. I'm trading 3 contracts at 2 ticks, which seems to be a good strategy from the time being. I'm going to try to make this amount for a week. My goal is to get to a point where I can make $300/day. I hope to get to that point by January 1st.

I also have had several days where I just didn't feel like the market was a good one to trade in. So I shut down the system and simply didn't trade. Although many of those days ended up being good days had I traded, I still felt a level of comfort that I was able to shut it down and trade another day.

This is the first week that I haven't felt a high level of anxiety. Although, emotions still play a big part in it, I'm finding that I'm able to take emotions more and more out of the equation. So it's taken a good month to get comfortable with live trading. And I'm just as thankful for the day of loss as I am for all the days of gain.

Total Fees - $750
Initial Deposit - $5000

Gross Gains - appx $800

Net Gains(losses) - ($275) - this is because of broker fees

3rd day of Live Trading..nerves calmed a little

So, as I said in my last post, I was incredibly surprised at the emotional impact of live trading. Yesterday, one trade started moving against me, and I got so nervous I thought I was going to throw up...seriously. Luckily the trade turned and I got out of it ahead.

Today was a much better day. Trades moved in my favor, I made 5 trades, all were successful, and I was done in 40 minutes. Right now my goal is at least $50 a day. If I can do that for one month, than I'll up the goal to $100 a day.

I'm trading one contract at 1 tick. This is the lowest possible risk for what I'm doing. I'm setting my stop loss at 25 ticks (which is around $300 loss if it goes against me).

Initial payment - $525
Acc Monthly Expense - $500

Total Acc Revenue (gross) - $325

FIRST DAY OF LIVE TRADING!

Today was officially my first day of live trading. I decided, after much deliboration, to stick with the Infinity Platform and trade the S&P Minis. Im the 2 months that I've been practicing on that platform, I have had good success, so I stuck with it.

Today was actually a horrible day for trading. They announced 3rd quarter GDP so the market went nuts. Luckily I stayed out of it as I recognized the volatility in the market and didn't like what I was seeing. I traded one time, one contract, at one tick. I was out of the trade quickly and made my first $12.50! Not too exciting, but I tell you what, I was super nervous to make that trade. I was very surprised at how nervous I became as soon as I was trading with real money.

So today I'll go away happy and with an increased level of confidence.

Initial Investment Fee- $525

Acc Monthly Investment - $500

Acc Profit / Loss - $12.50 (gross)

Initial Investment - $5000

So why would this work for me, and not everybody?

One of the things I've struggled with during this entire trading experience is why would it work for me, and not every other investor in the market? After all, if every investor has the same information, and there is a process in which consistently brings in profits, why wouldn't everyone utilize the same process?

So I've come up with a couple of possible reasons:

1) Looking for small profits. One of the aspects of my trading when compared with institutional traders is that I'm looking to make a small profit off of very small movements in the market (the smallest the market allows) So this may seem insignificant, but actually, the math proves this to be important.

Let me explain...If I'm looking to buy long or sell short at the smallest possible movement, there is a 100% chance that it will move, either up or down, by that smallest possible movement (called a tick or pip). So with that, we can also calculate that regardless if we buy long, or sell short, we have a 50% chance of picking the right movement, assuming (which we can safely do) that the market won't shut down forever and will move.

So with that logic, any software or knowledge that I possess which helps me predict future movements of the market increases my chances from a 50% base. So in essence, as long as the software or knowledge that I'm using give me ANY indication of future movements, I ALWAYS have a better than 50% chance of making the right trade.

So why doesn't this work for other investors? Most other investors trade at higher market movements. They are looking for higher profits, and don't trade little trades all day. Rather, they make big investments and invest in big movements. So taking that knowledge, if an investor is betting on a 15 tick movement, the probability of the market moving up or down 15 ticks is not 100% (the market may not every get to that point...especially in a short time frame)...maybe it's only 70%. That would mean that your probability, if you flipped a coin and chose a market movement of 15 ticks, would be 35%. So that would mean that, even with great predictive software, you may never get above 50% probability of making the right trade.

Ending thought...small movements, small profits pay big in the end.

Patience, Patience, Patience

So I have created a checklist of processes that I go through before I make a trade, and I added an important one yesterday.

Before I make any trade I tell myself "Patience, Patience, Patience". Until I say that, I will not make a trade.

This small process definitely impact my decisions. It is really easy to place a trade based on what you've seen the market do in the past, rather than what it is doing right now. In other words, the market today is more important than the market yesterday, so waiting until I see all of the indicators on the current market should determine my trade.

Patience is one of those emotional skills that really needs to be learned to be effective at this I believe.

Morning Trading/End of Day Trading

So in the reading, it suggests to trade when trading is at its highest. I've found the very opposite to be true. When trading at high volumes, it increases the volatility, and although volatility increases potential return, it doesn't justify the risk in my opinion.

The largest volumes of trading seem to happen right when the market opens and right before it closes. So I'm going to avoid those times. I'll start my trading around 8:00am and end trading no later than 2:00pm. During these times I generally see a much more stable market..which still moves..but is much more stable.

I am attempting to fund my account this week...I am probably still not comfortable enough to trade live, but want to get everything worked out so that when I am ready to trade live, I can do it without any hiccups.

More risky stop loss?

So in our study material, it talks about the importance of taking your losses early, which is what I've stuck to thus far. but I've noticed that in my loosing trades, almost everytime if I would have stayed in the trade a little longer, I would have ended up winning within 10 minutes or so. So this week I'm going to set up stop loss to 10 ticks (up from 4 ticks), which means when i have a loosing trade, I will loose $250 instead of $100...but the idea is that I will loose much less frequently (not that I am having a ton of loosing trades in a day...1-2 generally).

I don't think that I've mentioned before that I learned that in order to trade the S&P, Infinity Brokerage requires a $5000 deposit. Although there is only a $1200 minimum (if I remember right), I am going to have to fork out $5000 up front. But, if I just wanted to trade in the FOREX for a while, there is no minumum, I could trade $100 if I wanted. So I'm not sure what I'll do to start. I've had good luck trading the S&P minis so far, I'm somewhat inclined to stick with that.

Initial Investment - $525
Monthly Acc Cost - $250

Acc Revenue - $175