Help... I feel I'm out of 'options'

[CanOz]

That's a tough call on the stop issue. The way i look at it, my job is to manage the risk now, as I've a proven handful of plays that work. But i risk roughly 1% on each trade, 2% per day.

I view my stops as more qualitative too, i have hard stops away from the market to allow for unexpected events, but if i don't like the way the trade is going, I'll pull the pin...at the same time though, I've held through some pretty bad heat as the market i was trading went against...but i sensed it was just the big guys loading up on that market and i could see that the other market were still in my favor, so i held through it.

Your risk has to work with your play, or you can't take the trade.

The options guys like Minwa should be able to give you a better view though.

 

[wayneL]

Felipe

Maybe you could give is an insight to your general approach, What strategies you're using, when and you're rational?

 

[Felipe]

Luck adjusted, would you expect traders to have the skill in the first 3 years to make a significant profit?

Suppose, significance is relative.
But, i can only go off what I have read, and my limited time in the game.
I am of the belief, that in 3 years, i shouldn't be down almost 70%.
But in contrast to that, I do believe that everyone blows an account. ..or 2..maybe 3.

This is my obvious reason for starting this thread, I need more information. I actually don't know how long anyone needs to kick ****, a guy who done same course as me went on to make 40k next month! Not I though. Not sure if he's playing a 4 string out of tune guitar on Hay Street now or not.

But let me be picture clear to you shouldaindex, I am not here saying "Ive been studying for 3 years, i paid so much on learning & software, ive vomited countless hours back trading to find a good stratergy, so I should be flicking dollar bills from my left palm and making it rain"

Also, ive only been trading all up for not even a year all up, prior to that was 2 years of learning and doing very little trades here and there.

Im merely giving people a little background check, ...in the first 3 years of trading "options" was your account as bad as mine?

You don't really need to answer that, it was more rhetorical. My instinct tells me, I need to chat with more people who are actually "proven" making money, not keep chewing on the sizzle.

Just making my move that's all

 

[Felipe]

Felipe

Maybe you could give is an insight to your general approach, What strategies you're using, when and you're rational?

Ok....here I go. ..

I use Option Vue scannner to scan me stocks. The parameters are stocks with a minimum of 140 DVO and a high statistical volatility.

I get back 120 stocks.

I then use Market Analyst to find the strongest sectors in the market as the s&p 500 as my bench mark.

I then go back to my list, and start flicking through the daily price chart (if im feeling over all bullish on the market im eliminating extremely bearish stocks, unless it looks it may be evolving into a break of trend and visa versa) I'll use "yahoo finance" to type in the stock look up the "portfolio", this will tell me the sector and sub sector this stock is in.

I then go over to another free site, (im away at work so i can't remember this other aite ATM) this site goes into the sub sectors and gives me a yearly and a quarterly percentage on the stock.

So far I'm going through and im finding stocks in those strong sectors, and the leading subsectors in that. I base a strong subsector as being equal to above the S&P 500.

This takes a good part of 3 hours.
I then have a list. From that list im skimming through, looking at upcoming earnings (i don't want to enter to close to earnings, but i do have another way of trading earnings, save that for later)
Im looking for trends, patterns, resistance history.

Ok, ive narrowed my list at the most to 10....i then watch carefully for entries.
IV will dictate my statergy....high IV im writing low IV im buying. That may come in either a plane bought call or put or spreads....i have done calendars also but I've only used that with earnings.

So a trigger got me has been, a double bottom, a close above a 20 day SMA, pull back into a flattening to rising SMA.

I then work out with option vue my stratergy with the "matrix" tab. This helps me work out position size (i have been guilty here, loading up and placing a stop at were 1 % would be of my over all capital)

I use IB to place the trade, and I'm off losing from there haha. There are a few other things i trial with, fibonacci and RSI, choppines index....but I've never had a stock reach any kind of level on fibonacci anyway.

So......im sure I've left a few things out, typing on my phone at work.

So, what are some disturbing findings in this?

 

[AlterEgo]

So, what are some disturbing findings in this?

Ok, where do we start? Do you really know that this method of yours actually works? Have you back-tested, and forward tested it? If so, were the results of these tests good? Because you really shouldn't be committing any real money to the market until you know with fairly high probability that the method really works.

So, first step is finding a profitable method, and proving to yourself with a reasonable degree of confidence that it does really work, before committing any money to the market. It seems to me by your results that you haven't even got this far.

For your results to be that bad, something is obviously very wrong. You should stop trading immediately, and go back to the drawing board. Find out why the system isn't working. Make changes until it does work, or develop a different method that does produce good test results. Then you should paper trade (or else trade with small dollar amounts) at first to verify that the method that worked in testing, does work in the real world. Only then would I go back to trading with the full account size.

 

[Felipe]

Ok, where do we start? Do you really know that this method of yours actually works? Have you back-tested, and forward tested it? If so, were the results of these tests good? Because you really shouldn't be committing any real money to the market until you know with fairly high probability that the method really works.

So, first step is finding a profitable method, and proving to yourself with a reasonable degree of confidence that it does really work, before committing any money to the market. It seems to me by your results that you haven't even got this far.

For your results to be that bad, something is obviously very wrong. You should stop trading immediately, and go back to the drawing board. Find out why the system isn't working. Make changes until it does work, or develop a different method that does produce good test results. Then you should paper trade (or else trade with small dollar amounts) at first to verify that the method that worked in testing, does work in the real world. Only then would I go back to trading with the full account size.

Agreed Alter Ego.
This is all part of my "get my s**t" together plan.
CanOz recommended I go through all my trades and work out what went right and to focus on those.

I have stopped trading. Might do a few earnings in the interim as I've done well with those.

But certainly cleaning out the closet. It's crushing to be in this position.

Thanks for your feed back

 

[wayneL]

Felipe

Can you tell me the typical way you lose versus the typical way you win. Are they large losers our many small losers just whittling away your account.

.... And, if you were trying straight stocks, do you think you'd be winning or losing?

I see two potential problem areas but need this info to help.

 

[Felipe]

Felipe

Can you tell me the typical way you lose versus the typical way you win. Are they large losers our many small losers just whittling away your account.

.... And, if you were trying straight stocks, do you think you'd be winning or losing?

I see two potential problem areas but need this info to help.

Wayne,

There large losses predominantly. It comes down in my view to bad management of the trade once it is placed or/and position sizing.

If they were stocks, i feel i wouldwould be fine. I like the idea of investing in straight stocks and not trading them.

See, ive been shown how to fish, but I'm unfamiliar still with my tackle, bad analogy maybe. Im still kind of learning as i go on making my mistakes.

CanOz made i feel a really good suggestion. Go through and review all my trades, I'll be doing this once I'm back home. Also another thing that springs to mind. When i go through back trader and work out what went wrong with reach trade, was it a fundamental thing, incorrect stratergy , did the trade come good, or just plain wrong. I cannot loom at any reference notes as to why i took the trade as I have not logged any.

I feel really stupid now even saying it out loud. I have already an administrative plan in place to log a really professional log going forward.

When i go back over my trades, there is going to be plenty of lessons learnt.
Although I obviously sound very undisciplined, and in this case i certainly have been. In every other aspect in my life im actually very disciplined, so its strange how I've blindy set up these bigger positions with greater losses.

Shaking my head. Idiot.

What's your thoughts Wayne L

 

[Felipe]

Sorry Wayne,

Typical way i win has been when the stock almost instantly is in the money, I'll own it for no more than a week. Straight put or call buying.

Recently have been very successful with setting spreads up for earnings announcements.

Just haven't had that stock that continues a good strong rally, or i get stopped out at the start, Stock goes and makes a profitable move. So maybe its also my entry management, and the non re-entry even though the TA states nothing has been negated.

Felipe

 

[minwa]

Sorry only saw this thread now

One of the biggest problems I have in my view, is the lack of network of like minded people. Every loss i make, I am left there scratching my head and no one else really to give me there opinion, atleast not someone who is actually making money.

I'm sensing a bit of a "GIMME"/blaming mentality. Retail trading is a very personal thing, even different people trading the same method will end up with vastly different trades. I don't see how anyone but yourself can turn YOUR trading around in the end.

When it comes to T/a, in my opinion studying TA rather than fundamental analysis, is like studying astrology instead of astronomy, or alchemy instead of chemistry, you can dedicate your life to astrology and never learn anything of real use, sure some predictions will be right through chance.

My core intraday strategy on going long/short (not spreading or options) S&P has a 80% strike rate using pure TA. Felipe has obviously taken up TA as it suits his personality, I really don't see how this part of your post helps whatsoever - it only misdirects, the TAvsFA really belongs to another thread.

Position sizing....does that mean. ...and I have not traded like this but just for an egsample....

If i had 100k in my account, and i had a 10k position, would placing my stop at the 1% loss ($1000) be what other traders are doing?

Or.....no matter what even if its a spread you absolute maximum loss. ....even if stops are gaps etc.....it would be 1%?

I'll admit, i was putting up to 7k trades on, and then setting my stop/limit at roughly what the 1% loss would be.....most times though, i get gapped, then I'm losing 10%....
Silly, silly..

From your losses it obviously sounds like too many trades ended up costing more than you originally planned, I'm guessing a tight stop so resulting in high leverage which really chews up your account when it goes pass your stop due to gaps/frozen in fear/not closing. You need wider stops which will result in lower leverage and lower P&L volatility. Cant really give anymore advice without knowing more details on your methods which I am not going to go over the details of.

I am not a guy with bad paying job looking for a get rich quick scheme, I actually have what would be concidered a relatively well paying job of 320k + P/A and i only work half the year, I could see the rest of my work life on that wage.

You are relatively killing it on the pay scale. I had to save my 2nd trading fund (first fund was from my mum, which I blew out) from a below minimum wage cash in hand job. You're at a huge head start capital wise, and time wise it sounds like, than most people.

From what I gather, OptionVue & Market Analyst RRG, I'm assuming you're studying under Paul W. ? Havn't uncovered anything bad about this guy yet but selling 2 programs + ongoing data subscriptions sounds a bit overkill and is questionable, without results to prove. Besides back trader, I do not believe a retail trader trading simple spreads require Optionvue. Market Analyst probably also.

The description of your method sounds interesting, finding strong sectors and stocks sounds solid but then your entry criteria of double bottom and MA/BB/RSI sounds like the usual traps .

 

[Felipe]

Sorry only saw this thread now



I'm sensing a bit of a "GIMME"/blaming mentality. Retail trading is a very personal thing, even different people trading the same method will end up with vastly different trades. I don't see how anyone but yourself can turn YOUR trading around in the end.



My core intraday strategy on going long/short (not spreading or options) S&P has a 80% strike rate using pure TA. Felipe has obviously taken up TA as it suits his personality, I really don't see how this part of your post helps whatsoever - it only misdirects, the TAvsFA really belongs to another thread.



From your losses it obviously sounds like too many trades ended up costing more than you originally planned, I'm guessing a tight stop so resulting in high leverage which really chews up your account when it goes pass your stop due to gaps/frozen in fear/not closing. You need wider stops which will result in lower leverage and lower P&L volatility. Cant really give anymore advice without knowing more details on your methods which I am not going to go over the details of.


You are relatively killing it on the pay scale. I had to save my 2nd trading fund (first fund was from my mum, which I blew out) from a below minimum wage cash in hand job. You're at a huge head start capital wise, and time wise it sounds like, than most people.

From what I gather, OptionVue & Market Analyst RRG, I'm assuming you're studying under Paul W. ? Havn't uncovered anything bad about this guy yet but selling 2 programs + ongoing data subscriptions sounds a bit overkill and is questionable, without results to prove. Besides back trader, I do not believe a retail trader trading simple spreads require Optionvue. Market Analyst probably also.

The description of your method sounds interesting, finding strong sectors and stocks sounds solid but then your entry criteria of double bottom and MA/BB/RSI sounds like the usual traps .

Minwa,

Thanks allot for taking the time to give me your honest opinion. This is exactly what I need and feel that much better for it. This kind of network i was hoping for.

I do learn from Paul.W, not sure if you have read my other comments, but I have never once bagged out the course or his ongoing help afterwards, quite the contrary I rate it. I know if you tell people you done an option course, first thing they ask is "how much have you made? ", if you answer none yet, they instantly assume your mentor to be of substandard. Like doing an option course is like buying a car, put your key in the ignition and off you go.

I hope that debunks your view of me as looking for a "handout" or "Gimme" mentality, haha trust my my misses would disagree to that with absolute conviction, Im very hard on myself and don't go blaming Paul or anyone, but I am after a network Minwa, and as you rightly said, only I can make those changes and that's how I've stumbled upon this site. It's not Serendipity, nor coincidence, It's all by design.

Regarding the 'leverage' you speak of, how do you mean? My stops are just 'market or limit orders'. I know I need leverage when I do spreads.
Also, I agree im off with the entry signals also, just unsure on where to go from here?

Any links or ideas mate, im all ears. I appreciate you giving me an honest opinion and it resonates very much with my own.

 

[minwa]

No worries Fellipe,

Unfortunately in the trading education business, to me it's guilty until proven innocent. But this not a topic of discussing this mentor so let's leave it there.

I certainly don't hold that view (you - handout attitude) after reading more. Only your first post gave off that vibe a bit.

Regarding stops I think this is what you are doing: You find your stock, say a stock and you enter when it's at $30, with a stop at $29. You buy a call option and put into the P/L graph to find out how much each option will lose from a $30 move to $29 to determine how many contracts to buy for a 1% risk. Compare this with a wider a stop at say $28, the loss each contract will bigger, resulting in less contracts bought/lower leverage.

Assuming a perfect world where all your trades are stopped at your predetermined point, they will both lose 1%. But as you've found out the world is not perfect, especially stops, in the case that the stop goes over your point (which sounds like the case in your scenario), your first position will lose much than the second position. So having a wider stop resulting in less contracts but still same proposed 1% risk will allow you to control downside better, less unexpected extra drawdowns. Obviously the downside is if the trade goes in your favor you will make less, but seems like your downside is out of control, with trades losing 10%+. Remember a trade that loses you 50%, you will need a 100% return to make it back to break even. So always control downside first.

Wayne mentioned a good question, if you go back through your options trades, and simply theoretically backtested if you bought stocks instead of the option at the same entry and exit points, what is the result ?

You mentioned you think entry is a bit off, then your main problem does not lie with the options (yet), but entry/exit direction picking and that's where you should focus on. No amount of options theory will turn it around if you're trading directional.

As for entry/exit, kinda hard to help ya, there's no link or method that I can just say do that and you will suddenly get it, haha. But at least now you may know what the problem is and where to focus on.

 

[Felipe]

Cheers Minwa,

That made prefect sense regarding the Stops. So instead of going in so tight with the stop loss, give it more breathing room for it to find itself. This way it may be likely to keep you in more profitable trades which I otherwise would of been stopped out of from such a tight stop.

The position sizing makes sense also, go wide a little more, but obviously, position less as to keep your risk at 1% no matter of the market gaps your stop or not.

Thought only just popped into my head as I'm writing this, but would you even need the 'stop', if all your happy to risk is 1%? This way your giving the contract all the time it needs to go your way (if it ever did)

Suppose its relative to your account size. Not going to have a 10k account, risk $100 for a profit of $40 and have brokee fees etc.

But on the other hand if you had 100,000
It would be a little more feasible.

I have alot to do when I'm home. I will have the strenuous task of going over my options trades .
After this, go back over the underlying and work out if they would had been successful during the same time of the options contracts (thanks Wayno)

Apologies for anyone who reads this and cannot understand, I wrote this while I'm almost falling asleep. Damn you night-shift

Thank you

 

[pixel]

Felipe,

Picking one of the many questions you raise here: My take on stop loss and position sizing based on risk.
Many traders use a fixed % value - either of their trade or the size of their bank account. But why should the Market care about either? The Market neither knows nor cares how many shares you bought at what price! Therefore, it doesn't surprise me to hear so many complaints "it ain't working" and "I got whipsawed out."

Whipsawing is a function of a stock's volatility, and as you (I believe) include T/A in your strategy, you know probably how it is measured. I use ATR, expressed as a percentage of the median price average. Drawing a channel either side of the share price will then allow me to tailor assumptions about "in trend" and "against trend" to suit my time period. It will also give me a realistic stop-out range specific to the individual trade. Knowing the risk (i.e. distance of the next trend break from my buy price), I can then calculate the individual position size, depending on the sum that I'm comfortable with risking in a particular trade.

 

[Felipe]

Pixel,

Thankyou for your post and insight into your own algorithm regarding stops. That was a really good read.

I do use TA, although I am unfamiliar with ATR. Your right with the "whipsaw", i get stopped out to much at a loss. I have been given really good leads by others on this forum for me to go back over my trades and investigate with.

I am away at work atm, but will be going over all suggestions thoroughly and applying it.

Thanks to everyone who has posted on this thread, it may seem like "rookie" errors to you and even wasteful of your time, but to me it's the push I needed as I felt I was in a rut. I now feel confident I can review my own methods, change, test and implement in the coming weeks, months.

Hope this thread helps others who may feel shy or have there ego/pride deflated by the market, so much so that they cannot bring themselves to ask some questions.


Cheers

 

[mazzatelli]

When reviewing your trades, one thing that can help is profiling the volatility behaviour of the underlying you're trading.

For example, two stocks may have the same implied volatility (lets say 30%) but say Stock A has historically had more moves beyond 2 standard deviations than Stock B . Your rules might class 30% as "low IV" and buy Stock B, even though it is not optimal.

 

[Felipe]

When reviewing your trades, one thing that can help is profiling the volatility behaviour of the underlying you're trading.

For example, two stocks may have the same implied volatility (lets say 30%) but say Stock A has historically had more moves beyond 2 standard deviations than Stock B . Your rules might class 30% as "low IV" and buy Stock B, even though it is not optimal.

Mazzatelli,

Thank you for posting.

Im afraid I'm not sure what you mean when your reffering to standard deviations.

Could you post a link maybe which may have illustrations. I'll consider anything that falls into a percentile ranking of 30 or below to be low IV, and percentile ranking above 70 to be high IV.

But yes, I will be making notes of IV when I've created the contract and it's behaviour through out the trade.

Cheers

 

[hamli]

>Don't feel that you always need X% invested. Wait for opportunities.

>Investing is good when there is fear in the market, but be careful when investing in crazy.

>When there is a lot of fear in the environment, why bother with individual companies where you also have to factor in business risk? Why not pick index/etf when they are premium rich.

>look as relationship between implied volatility vs statistical volatility as Mazzatelli said. What he means is that if A had statistical volatility of a 70% up/down in price for FY, and B had statistical volatility of a 30% up/down in price for FY, but now both their implied volatility is is 70% up/down in price for FY, then only B would be considered 'premium rich' in relative terms, and generally you should be picking B over A to sell premium in.

>Focus on a smaller selection of etfs/stock. Will save you time with the fancy filtering/understanding the stock/etf etc.

>What is your game plan? Does it make sense based on the expiry date you select, the feel of your overall portfolio. What happens if the market goes down 5%, 10% or up 5% or 10%. How do you plan on making money? etc

 

[History Repeats]

seem to me you lack the knowledge to trade options. Read option market making by baird inside out and till you understand everything and that should build your foundation to understand options.

 

[Felipe]

seem to me you lack the knowledge to trade options. Read option market making by baird inside out and till you understand everything and that should build your foundation to understand options.

Hi HR,

Thank you for committing your time to giving me a suggestion. I've got a few books, but I'll add that one to the list also.

Enjoy Australia Day

HR, would you consider yourself a successful options trader? Learning? Or more mentor?

Regards

Felipe