December 12, 2011

First week back ...

The immediate MF Global impact is winding down. Got my custom trading platform working with a new broker the week prior, and finally got my '60%' with that broker. I'm restarting at 'half' strength wrt number of contracts traded, with a program for working back to my plan, say by the end of January at the latest.

Looking back I see I made 12 trades which is probably fewer than I should have. I played very cautiously, more to avoid losing and just get back into the swing of things. I feel like I really underperformed. Looking back versus the 'optimal' trade execution, i.e. once a trade is entered, what is the optimal way to finish it, I see I under performed by about 50%. My analogy is a hitter in baseball coming back to spring training trying to get their swing back. But then I look back at my goals in March, and I see I am actually on track in the sense that I made a 2%+ return on my diminished margin. It's actually pretty exciting how much my own expectations have changed the last few months. If I was at full strength, like I fully intend, that would have been 4% of the diminished margin, or 2% of the new 'virtual margin' I will be working off of going forward. Which is to say, I will not be keeping myself so over margined with cash at the broker in the future.

The most disappointing thing last week was the 'perfect' closing trade on the eighth. I was on the phone and entered the trade in simulator mode without realizing it. That would have been good for another 4%. Just have to get back into the groove.

 November 10, 2011

Trading resumes ...

Finally got my account reopened. I can't believe it took this long. My IB switched to one of the clearing firms involved in the first wave MF Global transfers. The clearing firm got swamped and it took them almost a week to get my new account application processed. Than there was a paperwork problem that needed straightening out (my IB had very old records that needed updating.) Anyways, I'm back online, but no trades yet.

I think I missed some big easy trades. Now you have to deal with the big gap up following the big gap down. Coupled with the underlying good economic numbers and bad eurozone, very tough to trade until the market makes a statement, possibly not until the close.

I feel a need to be a bit cautious in any case as I don't want to get over anxious to finally start trading again. Plus my account is not at the level I would like it to be pending the return of my MF Global funds.

 October 22, 2011

100% Profit Target Reached.

When I started this blog in March, my target was 100% annual return. This week I achieved that return in less than 7.75 months. Of course that feels good, but it also offers a chance to reflect.

First I should note that over 95% of the gains came after June 3. Why is that important? That is when I finally gave up on my attempt to develop a completely computerized trading system. Those first three months I had results not much different from the last few years when I was more a hobbyist than a professional trader. When you make that kind of commitment it is really hard to say "I was wrong for the last five year. My grand project was a failure." So I really had to go back 20 years to when I was really good at that, and recapture my inner trader.

The first and biggest obstacle was psychological. One of the main reasons for the 'grand project' was to remove or at least reduce the emotion from trading. Back in the day I had great financial swings coupled with great emotional swings, which is certainly one of the reasons I stopped. The 'grand project' certainly reduced the grand draw downs, but it never really had the grand gains either. Looking back on it I feel I was in an grand emotional grey area for all those years.

While I eventually scrapped the system trading techniques, I did salvage the trading execution platform. One of the biggest problems back in the day was the need to call every time you made a trade or closed a trade. The whole act of analyses and mustering the emotional wherewithal to pick up the phone was actually quite emotionally strenuous for me. Having a good automated execution platform really takes a lot of that out of the equation thus keeping the emotional energy more on the trading where it should be.

 June 1, 2011

Three Month Wrap

My initial three month trial has come and gone. I see the markets much better than I have been playing them. While there is always a certain amount of randomness, there have been plenty of opportunities to execute strong positive plays that I have either missed or underperformed on. I find I have gotten into the pattern of playing the best after losses. Don Miller talks about that too. He has a results spread sheet that he always marks the previous day as red.

I must add that at least this month I have been pretty tied up in my consulting. That's good in the sense I have been able to save some cash and not be forced to make a decision on continuing trading at this time. The downside of course is the trades I missed, and not knowing if I would have taken them had I not been busy.

I like where my trading plan is now compared to where it was three months ago. (See my May 7th entry). I look at fewer charts and have a better sense of the effect of intraday momentum. I need to look at more trades just to keep my head in the market, even if they end up being break even. I will try to get on track for another three months.

 March 24, 2011

It's the trades you miss that can kill you

I feel like a rube. When you play poker, you often have runs of poor cards. The trick is to use that run to set yourself up for the big score when the cards hit, while making sure you don't go broke on the blinds. If the cards hit and you get outdrawn, that's life. You know you played well and you move on. But when the big score is in front of you and you leave it on the table, that's what will drive you insane. You can't get that money back. There's only so many lessons to be learned, you know the right play and you know you blew it.

I started this journal with a bit of a bad run on the Eminis. But I knew it was a bad run, not bad playing. The next couple of weeks were not the best market for me, but I played them well and got out of the early hole. On Tuesday I wrote about catching the big play,thinking it was coming. Sure enough, on Wednesday the setup came up, a bit imperfectly but there. I even got myself situated in a long position off the early lows. But I had a bit of a loss getting there, so got out to get even. Than, as noted yesterday, I let the rest of the day slip away.

So today just a few minutes before the low I write "This is where you have to have some bullish confidence if we test near yesterdays close". So I have the choice of going a bit outside the system and being aggressive off the oversold ticks, or the pure system play and wait for the momentum reversal. I choose the second and can't get a system fill. The market is not unexpectedly moving too fast. This is where I know if I stayed the course yesterday, I would have the confidence to be more aggressive today.

Than finally there is another system entry off 1300.25. I take that but the secondary retrace causes a system exit strategy to BE. Again, I needed to think outside the system, but was not able to. Essentially I left 20+ points on the table because of what? Fear of losing?

For my part, most of the time is spent getting set up for the occasional big scores. I wonder if the electronic platform is getting me too much into a scalper mentality. Back in the day, you'd find a setup, call the floor, place an order and a contingent order, in my case usually a deep stop OCO MOC. If there was an extremely good response, you might raise your stop or take something off. Now maybe it is too easy to take it off. But what that really means is that it is too easy to take the pressure off yourself once you're even after a poor start. I need to get my mojo back.

 March 17, 2011

System testing, waiting for opportunities; S&P futures key levels 1261.5 1249 ▼

With the trading opportunities being sparse, I did some system testing Wednesday. First trade was a short at 7:48. Of course the SPes dropped 20 pts in the next 20 minutes. That is the perfect conflation of trend continuation with unexpected external events. That second part makes the trade an outlier in that very few trades are driven so immediately and forcefully by the news.

The system I was testing is based on reversing support / resistance levels. In the above case, I was looking at the preopen swing high at 1276.5. Hitting 1276.25 set up the potential trade. Than when it did not breakout after 5 minutes, the trade is to retest down.

Otherwise, when the primary systems rely on decent retracements which just have not set up the last few days, there won't be a lot of trading. There is always a trade off between more trades and higher winning percentages. One of thing that needs to be weighed is in the 'boredom' factor. That is something I struggle with - usually being bored for too long than finally taking the wrong trade. :oops:   That's why knowing your plan and sticking to it is so important.

 March 14, 2011

Busy Weekend; key levels 1308 1295 ▼

Spent the weekend preparing to take this live and updating / improving the trading software. As a hobbyists, the trading software was fine, but once the change of attitude comes from being the customer to being the seller, you need the little things to be right. It's the small edges that eventually lead to the big gain.

 March 8, 2011

Triangle unbroken to my chagrin

First I looked for the preopen trade to go long and nothing materialized. Than the open did not set up quite right. System trading kept me out of some bad trades yesterday, today they kept me out of the big opening buy. Than to add insult to injury, my closing buy which looked to set up for a possible break out, ended up a dud on the close. These are times that try a traders patience. It does no good to lament, just move on to the next trade. But sometimes it does good to blow off a little steam, especially with how the start of this blog experiment is going.

Add to that the order server seems to have changed it's order response sequence so my live trading twitter feed was down. That also screwed up the position tracker, which is just annoying. Now I need to dig into the software and fix it.