I day traded using FAS/FAZ pair, this time using break outs of bases with a tight stop loss order. This method yields a profit of $700 on 6 round trips with 7 winning trades and 1 losing trade. The only losing trade today was when I tried to use FAZ in a counter-trend rally what looked like a breakout which quickly fizzled out. I would have lost even more had I not had a tight stop loss in place. This method compared vary poorly to my watching the stochastics for entry and watching the stochastics+momentum+volume+MACD for exit. The main reason for the poor performance of the breakout method is that after the breakout follows the consolidation period which often gets you back below the breakout. But this also signals failure of the breakout. So I needed to protect myself against that and that made me take really small profits. Sizes of winning trades were 0.01+0.09+0.11+(0.02*3/5 + 0.01*2/5) + (0.03*1/5+0.01*4/5) and the losing trade as -0.11. NEVER TRADE AGAINST THE MAJOR TREND!!! That is one lesson learnt this week. All through the week the counter-trend rally gave very small gains or outright losses. But, hey $700-Cost$120 = $580 is not bad at all on approx. $30,000 account plus the margin. That's like 2% net in one day. If I got 2% everyday then compound yearly return will be humongous: (1.02)^(250) for 250 trading days, basically doubling every month!! Clearly unsustainable. My first day with approx. 10% gain must have been really a fluke since so many large trades worked out. Today I found myself really being TOO CAUTIOUS and I will sell too soon only to find myself buying FAS at a much higher level since FAS was making the staircase every 1 hour or so. I would have made at least 10% had I just stayed in FAS regardless of drawdowns along the way. I was too fixated at limiting the draw down to no more than 1%. On Monday I will go back to my first method.
Meanwhile the hypothetical portfolio of SSO is doing incredible. There I am not arguing with the tape. My gosh even with lower than average volume we have explosive moves. From the bullish sentiment manufactured by the Obama administration I was expecting a 500 point day today. So I am a little disappointed. Remember jamming the tape and tape painting are old tricks of wall street. That's how they make money - just give a higher valuation to their assets and that means they have more money. Incredibly easy game - its real surprise how they can ever run out of money?
Friday, May 8, 2009
Thursday, May 7, 2009
Not a good trading day in FAS/FAZ pair
I missed the big move in FAZ in the morning and spent the rest of the day fighting the tape with 21 trades, two of which were made by mistake on the order entry ticket. (Hey with that many trades you are bound to have a mixup. I want a system that has no more than 6 trades, and has >50% of what I catch here.)
Trade # 1s (sell): Mistake from yesterday unclosed FAS gave a surprise bonus to start the day with +0.55. Without this surprise I would have 1/2 the gain that I got today trading the market.
Trade # 2b/s (buy and sell): FAZ gave a puny +0.04. (I have got to learn to take profits in this method. I let a huge run disappear watching for the signal to show up.)
#3b/s: FAS gave -0.13. (I had to cover in a hurry to prevent more loss.)
#4b/s: FAZ gave +0.05. (Same happen again!)
#5b/s: FAS gave -0.07. (Decided that I am not going to play FAS today since overall market was bearish.)
#6b/s: FAZ with a tiny loss -0.03.
#7b/s: FAZ with another tiny gain 0.05.
#8b/s: FAZ with a really good midday rally +0.19. (Could have been >0.3 but I let the tape run down till it gave me a signal.)
#9b/s: FAZ with another small gain 0.075.
#10b/s: Made a mistake in placing buy order on FAZ, it should have been 5.92, instead I placed it on 5.85. I had to manually stop the loss at 5.70. Lost -0.15 points.
#11b/s: Tried to go back to FAS - a BIG MISTAKE - violated my earlier decision not to touch FAS today. Lost -0.13.
I played with 10 shares of FAZ for ever 3 shares of FAS to have the bearish bias of the day in addition to my deciding to stop playing with FAS altogether. The ratio of 10:3 FAZ/FAS made the money difference of approximately 3:5 since FAZ was around 5 and FAS around 10, which is a good idea when you are betting, i.e placing bets on the side expected to have higher win rate (poker anyone?). Therefore, today's haul was 3*0.22 + 10*0.225 = 2.91 units. I was playing with 1000 share units, so my take was $2,910. I am fully out today. Hey, not bad for a day's work. But it was really terribly frustrating and intense. Definitely not for the faint of heart. I also made some changes to my method.
1. Slow stochastics to get the signal to enter the market. But that was not very helpful today, so I used resistance on FAZ to place an order on the breakout to re-enter the market on FAZ. But there was no other resistance nearby to place an exit order. So I lost at least 0.2 points on FAZ exiting too late. There was a support on FAZ which I used once to limit my loss once I found my error in entering FAZ at 5.85 instead of 5.92, which would have been safely above a resistance at 5.84. I better relearn the Fibbonaci stuff, which will at least give some expectation from each move. Right now I don't have any expectations and I have to watch the market and charts and at the same time fight myself (like try to be fearful of losing the gains and greedy for getting a better price of entry - just the opposite of what you are supposed to feel.)
2. Exit was decided on the overall picture gained from looking at momentum, MACD and volume. Did not work out, since my return is definitely worse than yesterday's. Then I went to look at really more or less non-trending market after the initial push on FAZ. I found good support and resistances and used them to enter on breakout on FAZ and to limit loss.
I am going to do some more studies tonight. I definitely need a less strenuous system. I had to look at the screen practically all day again. I want to have a system where I can place some entry and exit orders and then forget the market for hours. Also I need another measure of how many points is enough for taking profits. I was watching the market and I noticed that after a rally of 1/2 hour or so the market takes a breather. Probably the average range of the sizes of these rallies will be the best indicator of the amount of profit to expect with each intra-day rally. Got to figure this out before tomorrow.
Trade # 1s (sell): Mistake from yesterday unclosed FAS gave a surprise bonus to start the day with +0.55. Without this surprise I would have 1/2 the gain that I got today trading the market.
Trade # 2b/s (buy and sell): FAZ gave a puny +0.04. (I have got to learn to take profits in this method. I let a huge run disappear watching for the signal to show up.)
#3b/s: FAS gave -0.13. (I had to cover in a hurry to prevent more loss.)
#4b/s: FAZ gave +0.05. (Same happen again!)
#5b/s: FAS gave -0.07. (Decided that I am not going to play FAS today since overall market was bearish.)
#6b/s: FAZ with a tiny loss -0.03.
#7b/s: FAZ with another tiny gain 0.05.
#8b/s: FAZ with a really good midday rally +0.19. (Could have been >0.3 but I let the tape run down till it gave me a signal.)
#9b/s: FAZ with another small gain 0.075.
#10b/s: Made a mistake in placing buy order on FAZ, it should have been 5.92, instead I placed it on 5.85. I had to manually stop the loss at 5.70. Lost -0.15 points.
#11b/s: Tried to go back to FAS - a BIG MISTAKE - violated my earlier decision not to touch FAS today. Lost -0.13.
I played with 10 shares of FAZ for ever 3 shares of FAS to have the bearish bias of the day in addition to my deciding to stop playing with FAS altogether. The ratio of 10:3 FAZ/FAS made the money difference of approximately 3:5 since FAZ was around 5 and FAS around 10, which is a good idea when you are betting, i.e placing bets on the side expected to have higher win rate (poker anyone?). Therefore, today's haul was 3*0.22 + 10*0.225 = 2.91 units. I was playing with 1000 share units, so my take was $2,910. I am fully out today. Hey, not bad for a day's work. But it was really terribly frustrating and intense. Definitely not for the faint of heart. I also made some changes to my method.
1. Slow stochastics to get the signal to enter the market. But that was not very helpful today, so I used resistance on FAZ to place an order on the breakout to re-enter the market on FAZ. But there was no other resistance nearby to place an exit order. So I lost at least 0.2 points on FAZ exiting too late. There was a support on FAZ which I used once to limit my loss once I found my error in entering FAZ at 5.85 instead of 5.92, which would have been safely above a resistance at 5.84. I better relearn the Fibbonaci stuff, which will at least give some expectation from each move. Right now I don't have any expectations and I have to watch the market and charts and at the same time fight myself (like try to be fearful of losing the gains and greedy for getting a better price of entry - just the opposite of what you are supposed to feel.)
2. Exit was decided on the overall picture gained from looking at momentum, MACD and volume. Did not work out, since my return is definitely worse than yesterday's. Then I went to look at really more or less non-trending market after the initial push on FAZ. I found good support and resistances and used them to enter on breakout on FAZ and to limit loss.
I am going to do some more studies tonight. I definitely need a less strenuous system. I had to look at the screen practically all day again. I want to have a system where I can place some entry and exit orders and then forget the market for hours. Also I need another measure of how many points is enough for taking profits. I was watching the market and I noticed that after a rally of 1/2 hour or so the market takes a breather. Probably the average range of the sizes of these rallies will be the best indicator of the amount of profit to expect with each intra-day rally. Got to figure this out before tomorrow.
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