I can't believe last time I posted was way back in September.
Anyway, it is a new year and time for a new beginning. I have spent the last few months testing and coding the TD indicators in Ninjascript and I think I have finally optimized it to something I can trade consistently. There are some more issues I need to work out but those will be resolved in due time.
A Change in Instrument
I am adopting a new trading style and strategy starting this year. For one, I will move away from options. Reasons:
1. The bid/ask spread is too much on everything but SPY and QQQQ. Even then, a 3-tick bid/ask spread means that any trade I make, I am in the hole $6 right awy including comissions. So I have to wait 6 ticks before I can show any profit. My trading style generally means I trade for only 10-20 ticks. aka up to 60% of my trade goes into just moving into profit. Terrible news for me.
2. Options often take on their own properties and deviate from the models and behaviors of the underlying. Since I chart the underlying, it does not make sense for me to trade the option while looking at the underlying security.
3. Too much hassle and calculations.
Also, I need to be able to trade off hours because of my job, etc.
So what do I trade? FUTURES!!! Woo hoo, join the bandwagon!!! But I can see why the futures market is so immensly popular:
1: bid/ask spread on ES, for example, is usually only 1 tick. Inlduing commissions and all, 2 ticks later I am in profit zone. Much more suitable to my trading style.
2: Futures, although do take on properties themselves, are generally easier to manage.
Defined Strategy
Strategy is simple: When I hit a 9 on a TD setup or a 13 on TD, and my composite index is also showing momentum in that direction (MA is above/below the actual value) I trade that direction, with clear targets and stop losses.
max loss per trade:$400 (so any trade with a stop loss exceeding that, I cannot trade).
Long term goals
Well besides the obvious: make a ton of money, I want to ultimately automate my strategy. In order to do so, I am tracking some key statistics that will help me refine my strategy. You will see these stats pop up in my future posts.
I also need to stick to the rules much more strictly this time around. For every trade, I am recording whether I followed the rule or not. Saying "Did not follow rules" almost reminds me of my elementry school teachers and imposes a sense of discipline that I cannot put on myself (growing up in India is tough!).
So, let us enjoy the ride:
First 3 trades:
3/7/2011
Trade details:
Long 2 ES contracts at $1307.25
Stop loss $4.50 (18 tickst) below entry price at 1302.75
Strategy:
If price reaches 1308.25 (4 ticks), move the stop loss to BE + 1 tick.
Target 1: $1311.50 (17 ticks) - Sell 1 contract and set trailing stop of 10 ticks
Target 2: $1322.75 (62 ticks) - set trailing stop of 5 ticks
Outcome:
Rules were followed.
MAE: 2.75.
Exit price for both contracts: 1307.25
Commission: $14
Profit: $(14)
Reflections:
All rules were followed. Looking at this trade the Risk/Reward ratio sucks. I calculate profit targets and stop loss based on fib ratios of the previous move. I should calculate the ticks of the ratios and apply them to the entry price (as I did with stop loss). Otherwise, I move the stop loss to BE after moving a mere 4 ticks.
Had I done the above, I would have waited 14 ticks (as opposed to 4) to move my stop loss to BE and all profit targets would have been 10 ticks higher.
3/8/2011
#1:
Saw a sequential set up along with the oscillator crossing over on both the 15 and 5 minute charts. I was a little late in getting into the trade because... well because I was not paying attention.
anyway here are the details:
Long 2 ES contracts at $1310
Stop loss $2.00 (8 ticks) below entry price at 1308
Strategy:
If price reaches 1312 (4 ticks), move the stop loss to BE + 1 tick.
Target 1: $1314 (12 ticks) - Sell 1 contract and set stop loss to 1312.
Target 2: $1319 (36 ticks) - set trailing stop of 5 ticks
Outcome:
Exit 1 rules were followed. Price moved to target and 1 contract was sold.
Exit1-MFE efficiency: 40%
Exit 1- Risk efficiency: 88%
MAE: 1.
Exit 1 price: 1313.50
Exit 1 Profit: $161
Exit 2 rules were broken slightly. I noticed that the contract reached a resistance level and was having a tough time breaking it. So I decided to set the trailing stop earlier and got stopped out.
Exit2-MFE efficiency: 80%
Exit 2- Risk efficiency: 175%
MAE: 1
Exit 2 price: 1317
Exit 2 Profit: $347
Reflections:
Had I not prematurely activated the trailing stop, I would have probably doubled my profit so should have stuck to plan...
on another note, I should start tracking Bench statistics to see exactly how much I missed out on.
3/8/2011 Trade 2:
A sell setup completed with falling osciallator lines. Additionally setup complete on 15 minute chart as well. I was expecting a big drop. Did not happen but I did make a small profit
Trade Details:
Short 2 ES contracts at $1324.25
Stop loss $2.00 (8 ticks) above entry price at 1326.25
Strategy:
If price reaches 1323.25 (4 ticks), move the stop loss to BE + 1 tick.
Target 1: $1321.25 (12 ticks) - Sell 1 contract and set stop loss to 1323.25.
Target 2: $1316.25 (36 ticks) - set trailing stop of 5 ticks
Outcome:
Exit 1 rules were followed. Price around 10 ticks then started retracing. A setup was completed in opposite direction so an immediate buy order was placed.
Exit1-MFE efficiency: 50%
Exit 1- Risk efficiency: 63%
MAE: 1.
Exit 1 price: 1323
Exit 1 Profit: $49
Reflections:
All rules were followed. Although the trade did not work out as planned, I feel pretty good about it since I followed the rules.
Anyway, it is a new year and time for a new beginning. I have spent the last few months testing and coding the TD indicators in Ninjascript and I think I have finally optimized it to something I can trade consistently. There are some more issues I need to work out but those will be resolved in due time.
A Change in Instrument
I am adopting a new trading style and strategy starting this year. For one, I will move away from options. Reasons:
1. The bid/ask spread is too much on everything but SPY and QQQQ. Even then, a 3-tick bid/ask spread means that any trade I make, I am in the hole $6 right awy including comissions. So I have to wait 6 ticks before I can show any profit. My trading style generally means I trade for only 10-20 ticks. aka up to 60% of my trade goes into just moving into profit. Terrible news for me.
2. Options often take on their own properties and deviate from the models and behaviors of the underlying. Since I chart the underlying, it does not make sense for me to trade the option while looking at the underlying security.
3. Too much hassle and calculations.
Also, I need to be able to trade off hours because of my job, etc.
So what do I trade? FUTURES!!! Woo hoo, join the bandwagon!!! But I can see why the futures market is so immensly popular:
1: bid/ask spread on ES, for example, is usually only 1 tick. Inlduing commissions and all, 2 ticks later I am in profit zone. Much more suitable to my trading style.
2: Futures, although do take on properties themselves, are generally easier to manage.
Defined Strategy
Strategy is simple: When I hit a 9 on a TD setup or a 13 on TD, and my composite index is also showing momentum in that direction (MA is above/below the actual value) I trade that direction, with clear targets and stop losses.
max loss per trade:$400 (so any trade with a stop loss exceeding that, I cannot trade).
Long term goals
Well besides the obvious: make a ton of money, I want to ultimately automate my strategy. In order to do so, I am tracking some key statistics that will help me refine my strategy. You will see these stats pop up in my future posts.
I also need to stick to the rules much more strictly this time around. For every trade, I am recording whether I followed the rule or not. Saying "Did not follow rules" almost reminds me of my elementry school teachers and imposes a sense of discipline that I cannot put on myself (growing up in India is tough!).
So, let us enjoy the ride:
First 3 trades:
3/7/2011
Trade details:
Long 2 ES contracts at $1307.25
Stop loss $4.50 (18 tickst) below entry price at 1302.75
Strategy:
If price reaches 1308.25 (4 ticks), move the stop loss to BE + 1 tick.
Target 1: $1311.50 (17 ticks) - Sell 1 contract and set trailing stop of 10 ticks
Target 2: $1322.75 (62 ticks) - set trailing stop of 5 ticks
Outcome:
Rules were followed.
MAE: 2.75.
Exit price for both contracts: 1307.25
Commission: $14
Profit: $(14)
Reflections:
All rules were followed. Looking at this trade the Risk/Reward ratio sucks. I calculate profit targets and stop loss based on fib ratios of the previous move. I should calculate the ticks of the ratios and apply them to the entry price (as I did with stop loss). Otherwise, I move the stop loss to BE after moving a mere 4 ticks.
Had I done the above, I would have waited 14 ticks (as opposed to 4) to move my stop loss to BE and all profit targets would have been 10 ticks higher.
3/8/2011
#1:
Saw a sequential set up along with the oscillator crossing over on both the 15 and 5 minute charts. I was a little late in getting into the trade because... well because I was not paying attention.
anyway here are the details:
Long 2 ES contracts at $1310
Stop loss $2.00 (8 ticks) below entry price at 1308
Strategy:
If price reaches 1312 (4 ticks), move the stop loss to BE + 1 tick.
Target 1: $1314 (12 ticks) - Sell 1 contract and set stop loss to 1312.
Target 2: $1319 (36 ticks) - set trailing stop of 5 ticks
Outcome:
Exit 1 rules were followed. Price moved to target and 1 contract was sold.
Exit1-MFE efficiency: 40%
Exit 1- Risk efficiency: 88%
MAE: 1.
Exit 1 price: 1313.50
Exit 1 Profit: $161
Exit 2 rules were broken slightly. I noticed that the contract reached a resistance level and was having a tough time breaking it. So I decided to set the trailing stop earlier and got stopped out.
Exit2-MFE efficiency: 80%
Exit 2- Risk efficiency: 175%
MAE: 1
Exit 2 price: 1317
Exit 2 Profit: $347
Reflections:
Had I not prematurely activated the trailing stop, I would have probably doubled my profit so should have stuck to plan...
on another note, I should start tracking Bench statistics to see exactly how much I missed out on.
3/8/2011 Trade 2:
A sell setup completed with falling osciallator lines. Additionally setup complete on 15 minute chart as well. I was expecting a big drop. Did not happen but I did make a small profit
Trade Details:
Short 2 ES contracts at $1324.25
Stop loss $2.00 (8 ticks) above entry price at 1326.25
Strategy:
If price reaches 1323.25 (4 ticks), move the stop loss to BE + 1 tick.
Target 1: $1321.25 (12 ticks) - Sell 1 contract and set stop loss to 1323.25.
Target 2: $1316.25 (36 ticks) - set trailing stop of 5 ticks
Outcome:
Exit 1 rules were followed. Price around 10 ticks then started retracing. A setup was completed in opposite direction so an immediate buy order was placed.
Exit1-MFE efficiency: 50%
Exit 1- Risk efficiency: 63%
MAE: 1.
Exit 1 price: 1323
Exit 1 Profit: $49
Reflections:
All rules were followed. Although the trade did not work out as planned, I feel pretty good about it since I followed the rules.
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