P2 US Equity Portfolio

[peter2]

There's thousands of stocks in the Russell 3000. I let you guess how many. I need to reduce the number that appear in my scans.

1. My first step is to filter using the weekly trend.
Wkly trend is UP: 13 ema > 21 ema and the ema (vol, 10) > 1 Mill.
This reduces the number to approx 1341.

2. Stocks that are moving up faster than the QQQ index.
RSC(QQQ, 26) > ma(rsc(QQQ), 26)
This filter reduces the number to approx 411.

This is a significant reduction and it's very likely that I'll miss lots of good opportunities. Will there still be enough for me to trade?

Tonight, it's Presidents' day holiday in the US so I'm spending some time going through last weeks scan results. Last week there were 64 1stBB results (from 411). That's only 13/day. A number 20 - 30 / day would be easily manageable.

 

[peter2]

Let's look at this chart example.



I've circled the last 3 x 1st BBs.
#1 formed before the weekly trend turned UP so it's missed.
#2 formed when the wkly trend is UP, RSC is above it's average, but it may have been too close to earnings (gap up 5 days later)
#3 formed just right. (edit: and was a 3R winner)

The scan parameters can pick them but I need to see if it picks enough of them.

 

[peter2]

Before you get carried away by the possibilities. Look at this chart.



LOSER, LOSER, WINNER.
Would you have taken that winner after those two losses? If you manage your trades like @tech/a then YES of course you did. The two small losses wouldn't have stopped you cashing in on the +3R winner.

I've got to get that into my head and trade these opportunities with the utmost discipline.

 

[peter2]

All that pre-market work seems worth it so far. I was going to say it's already started to pay but until the money in is the bag, open profit means nothing.

I placed six orders in the market and four of them triggered. I post the charts for you with some explanations. The scan I was working with showed all the 1st BBars that formed in the past week.
The green/red line on the chart is the QQQ index. I want to trade trade stocks with the potential to go up faster than this index. The ST parameter on the daily chart has been changed to 1.8.

CDMO: Regulation buy the open after the 1stBB (or 2nd in this case). iSL two bars back.
MRNS: Regulation BO-HR (This one appeared when I was fiddling with the ST parameter (1.5 - 2.0)).

I'm also applying an alternate entry setup using the 1stBB. This applies when I think the initial risk is too big. I'll wait for one or two PB bars with a LH and LL. The entry will be a few ticks above the bars high. If this PB closes red the chart is deleted.

FRTA: Shows this alternate entry condition
INFN: Shows the alternate entry condition (2nd PB bar but taken 5 days later).

 

[peter2]

I'm prepared to risk 5R in the market. This means I can start 5 trades. I've started 4 meaning I've risked 4R. The price action since entry allows me to raise a few exit stops reducing the open risk to 2R. This means I can start another 3 trades if there's cash available.

I'll be selecting trade opportunities that require small amounts of capital (margin). This will allow me to start more of them with my limited capital. I'll be making use of the broker's overnight margin allowances (100%).

A peek of the open trade spreadsheet showing the T1, T2 targets.



I'm really tempted to grab the +2R already and hear the "ka-ching".
I'm pleased to grab +1R in <3d and 2R in < 6d.

 

[peter2]

This is what @Newt and I have been talking about. Look for this pdf.

"New Ideas in Technical Analysis, The Pocket Pivot Buy Point"
by Gil Morales & Dr. Chris Kacher

Thanks for the reminder,Newt The 1st BBs that I'm scanning for can also be pocket pivot buy alerts. I might modify my scan to find them.

 

[peter2]

Whoops, two of the trades opened yesterday are within 6,7 days of their earnings reporting date (INFN, FRTA) according to the Tradingview indicator. I have no intention of holding these short term trades through earnings reports because the prices can jump or fall quite a lot. I'm also not going to try and guess what's going to happen.

Re these two trades, the 1st BBs got me in before the BO-HR and they may need to be held through earnings to get the larger payoff. I would be tempted to do this if the portfolio had proven itself and had already earned plenty of profit. This is not the case as I've only just started and it's an unproven strategy.

I could give them another few days to go higher but this is holding and hoping. I'm lucky that these two trades can give me >1R now. I'm going to take the money while it's there.

INFN: T1 is at 8.30 and the BO level Is 8.28, price got close to it before falling a little. I sold at 8.23 and grabbed the +0.8R.
FRTA: T1 is at 14.70 and the BO level is 14.80, price was only at 14.30, placed a sell at 14.78. I was pleased to see that price did hit this level much later in the day. Result +1.1R. I'm also pleased to grab almost +2R in one day.

I'm not going to go through the details of every trade but I thought it worth explaining my intentions with the trade management in this portfolio. There are so many opportunities in the US markets that when I make a mistake, just exit and start another. If a trade isn't profitable in a couple of days take the small loss and start another.

Quick profits increase the W% and allows the aggressive compounding do it's thing. The $513 profit lifts the account to $26K and a normal FF of 1% would make the next trade risk $260. However I'm adding 5% of the profit to the next trades making them risk $286. A high W% will make the trade risk increase quite quickly. A strategy like this needs a limit and a brake. The limit will be between 2-3% and the brake is a DD of -4R.

I plan to update this thread every few weeks. I'll post a few trade examples when there's something of interest to discuss. The markets always provide something new. I'm also considering including some shorts in this portfolio when the time is right. I may start with the inverse ETFs and I'm considering using the sp500 for my universe for shorts. I use the 1st BB to go long perhaps I could use the 1st red bar to short.

 

[peter2]

Welcome to the US markets P2. Today we're going to sell everything you own. We're not going sell them gently, they're going straight down.

 

[fergee]

Welcome to the US markets P2. Today we're going to sell everything you own. We're not going sell them gently, they're going straight down.

Yeeeha! When will you start to add shorts to your portfolio @peter2 or will you just let inverse ETFs appear on your watch list naturally as they come up?
Also I was wondering how you view/use the implied volatility index's, S&P500 and ASX200, in your trading?

 

[peter2]

The market toyed with me yesterday. It opened slightly down then tanked before rallying late in the day. The daily chart looks like nothing happened but when you're looking at intraday charts it was dramatic. I was looking to start a few more swing trades and instead of placing the orders and getting into my day trading routine all I was looking at were the mounting losses from the open swing trades. The market yanked my chain and I was flushed.

I'm smiling now thinking about last night. This is the first time I've tried to do two things at the same time. I wasn't prepared for it. The swing trades are managed using the daily charts and I shouldn't look at them during the day. I've got to create a swing trade workspace and once the orders are placed ignore it and focus on the day trading workspaces.

DNLI: price went straight down to the exit (-1R)
NXST: price went straight down but stopped just above its exit. Likely to lose 0.8R
CDMO, MRNS opened slightly lower but prices didn't fall further.

Checking the EOD prices and I almost fell off the chair. MRNS rallied strongly after I logged out. It gained 1R and is now >2R.



Summary: Get organised (seperate workspaces), be prepared (pre-market prep) before the trading day starts. I missed the rally in the gold stocks, stupid.

Current: Took the loss on DNLI (-1R) and started swing trade on NERV.
Four open swing trades with open heat of -1R, so it seems that I can start another 4 trades tonight (if my head is on straight).

 

[peter2]

I didn't feel like yelling "yeehah" last night @fergee, but something else. I acted like a newbie last night.

Volatility index's: I keep an eye on the ASX:VIX as part of the week-end review but ignore it at other times. I don't trade it. I do trade the US volatility ETF UVXY. I mostly day trade it when the SPY goes down. Shorting the SPY requires a lot of margin as its ~330 while the UVXY is ~ 11.

I'm still bullish the US markets and I'll mainly be looking for longs. UVXY is down near all time lows (naturally as the market are at all time highs) and I've considered buying some UVXY as a hedge, but where do I place my iSL? If I buy at 11, should I place it at 10, 9 ... ?

I've no experience with pairs trading or spread trading (FX excluded) and prefer to stick with pure directional trades.

 

[fergee]

I didn't feel like yelling "yeehah" last night @fergee, but something else. I acted like a newbie last night.

Volatility index's: I keep an eye on the ASX:VIX as part of the week-end review but ignore it at other times. I don't trade it. I do trade the US volatility ETF UVXY. I mostly day trade it when the SPY goes down. Shorting the SPY requires a lot of margin as its ~330 while the UVXY is ~ 11.

I'm still bullish the US markets and I'll mainly be looking for longs. UVXY is down near all time lows (naturally as the market are at all time highs) and I've considered buying some UVXY as a hedge, but where do I place my iSL? If I buy at 11, should I place it at 10, 9 ... ?

I've no experience with pairs trading or spread trading (FX excluded) and prefer to stick with pure directional trades.

I bet it was a few choice words of the four letter variety getting thrown around

I enjoy the vol hence the yehaaa. Volatility is like driving in the rain when there's no rain for ages and then it finally does rain everyone forgets how to drive properly.

Thanks for your opinion on it, its always interesting to hear other thoughts. I tend to use it as more of an indicator but have traded it via cfd as well.

Im not sure if your question regarding UVXY was rhetorical or not but I personally would not touch it going long with a ten foot pole the decay is horrendous, its a short only play imo, but I guess if you are day trading it your exposure is limited. You cant buy SP500 put options or go short e-minis through your account?

 

[peter2]

The US markets have done it again, falling quickly after the open. I'm looking at the effects on the open swing trades instead of focusing in the current short opportunity (UVXY long). The few open swing trades were hammered again. Lessons handed to me in a gilt edged envelope (that I paid for btw, including the courier).

MRNS: Closed 3.04, opened 2.75.
Lesson: What the market gives, it can take away. Beware the opening gaps.
If you intend to use price targets then place them in the market asap.
If you're going to use trailing stops then be very careful where you put them.

DNLI: (~25.00) Be careful with the spread. The spread on this one was about 0.50 for the first 15 min and when price was falling the spread widened to 0.90 at times. I see the spread has decreased to 0.10 one hour after the open. Another trap for the newbies.

NXST: Another falling price with a wide spread of 0.40. Still 0.30 - 0.40 after one hour. (124.00 price tag so not bad really)

If you want to sell when the prices are falling you have to pay to cross the spread. I closed all the swing trades and got some ordinary exits as I paid to cross the spread on a few of them. Seven trades closed in the past three days for +2.7R.

The biggest lesson for me is: Don't watch the intraday price action on the swing trades. If I want to tighten the trailing stops then do it at least 60min after the open.

A reason for my discombobulation could be that I normally deal near the close of the day in the ASX. I base some judgement on what happened during the day. Now I'm active in the US market near the open. OR it could be that the US market act differently (I know this) and I'm getting sucked in to reacting rather than being proactive. I've got a few days to think about it.

 

[qldfrog]

Could it be that the psychology to trade US has to be different?
in that case your wealth of knowledge here may be counterproductive?
And the real question then is: is it worth it?
are you not better off leveraging your knowhow here?
A dollar profit is a dollar, where ever it is made be it ASX, NYSE or the Bagdad bourse
Unless you plan to move, playing on the US market means reduced social family life with awkward hours and most probably a toll on your physical wellbeing
Playing the Devil's advocate..i hope you do not mind
I got a lot out of reading your posts, seems fair to give back a maybe naive but genuine opinion
In the best of spirit

 

[debtfree]

I've got no doubts at all Peter that you'll bounce back from these little newbie setbacks.

I just looked at QQQ and noticed it has risen roughly 16% since the middle of Dec 2019 to the middle of Feb 2020 (2 months). 16% in a short time ... then I had a flashback

I remember the XAO had risen 800 points (roughly 16%) since the middle of Dec 2014 to the middle of of March 2015 (3 months).
Then you took over PAV's thread with Capital at Risk 8.4%, Portfolio Heat at 15%, then the market basically headed downhill for the rest of the year.
At the end of the year (2015) Capital at Risk was 1%, Portfolio Heat was 3%, Portfolio was up 25% and Drawdown was about 7%.

A few stocks that caught my eye over there (maybe not perfect but anyway) CLVS, EVH, PCG. All the best.

 

[ducati916]

Could it be that the psychology to trade US has to be different?
in that case your wealth of knowledge here may be counterproductive?
And the real question then is: is it worth it?
are you not better off leveraging your knowhow here?
A dollar profit is a dollar, where ever it is made be it ASX, NYSE or the Bagdad bourse
Unless you plan to move, playing on the US market means reduced social family life with awkward hours and most probably a toll on your physical wellbeing
Playing the Devil's advocate..i hope you do not mind
I got a lot out of reading your posts, seems fair to give back a maybe naive but genuine opinion
In the best of spirit

There are a significant number of differences in the US. I was not sure that they (could/would) make a difference (hence my question to Skate) to automated trading strategies (weekly) etc.

The first (major) difference is that the US operates with Market Makers. Daytraders (certainly) start by learning to follow the Level II screens. Market Makers make their money on the spread and filling orders. Someone wants a million shares at X but price is currently at Y, what happens? This is why VWAP is so popular in the US.

The second major difference: algorithms. The US market is full of machine trading, which can create counter-intuitive price movement.

There are (many) others, but these two are enough on their own to distort the market significantly in short time frames.

jog on
duc

 

[peter2]

There are a significant number of differences in the US. I was not sure that they (could/would) make a difference (hence my question to Skate) to automated trading strategies (weekly) etc.

Totally agree with you on the significance that the market makers and the algos have on the daily price gyrations. The challenge for me is to go with the flow intraday.

I was also unsatisfied with skate's reply to your inquiry into the performance of his systems trading the US markets. I have no doubts that the weekly CAM, MAP or Hybrid auto systems would perform very well on the US markets (*). I would even say that a 40 - 60 position portfolio targeting stocks outside the large caps (SP500) would do much better than a 20 position portfolio. It would require more work, say, an extra 20min /wk to place the extra orders.

* - These systems do a great job of getting into a trend early and the rest is trade management.

 

[Warr87]

Totally agree with you on the significance that the market makers and the algos have on the daily price gyrations. The challenge for me is to go with the flow intraday.

I was also unsatisfied with skate's reply to your inquiry into the performance of his systems trading the US markets. I have no doubts that the weekly CAM, MAP or Hybrid auto systems would perform very well on the US markets (*). I would even say that a 40 - 60 position portfolio targeting stocks outside the large caps (SP500) would do much better than a 20 position portfolio. It would require more work, say, an extra 20min /wk to place the extra orders.

* - These systems do a great job of getting into a trend early and the rest is trade management.

This is something that I am working towards. Plan is to port my current systems into python to automate the process more (will probably still have to manually enter trades as I don't have the money to pay developers to build an API like what Nick Radge did). But I am also under the same impression as you that a 40-60 position system in either the CAM, MAP, etc., would work quiet well. The extra liquidity and low commissions makes it an interesting prospect.

 

[ducati916]

1. Totally agree with you on the significance that the market makers and the algos have on the daily price gyrations. The challenge for me is to go with the flow intraday.

2. I was also unsatisfied with skate's reply to your inquiry into the performance of his systems trading the US markets. I have no doubts that the weekly CAM, MAP or Hybrid auto systems would perform very well on the US markets (*). I would even say that a 40 - 60 position portfolio targeting stocks outside the large caps (SP500) would do much better than a 20 position portfolio. It would require more work, say, an extra 20min /wk to place the extra orders.

* - These systems do a great job of getting into a trend early and the rest is trade management.

1. There are two other (longer term impacts) on US markets: (a) a very deep and active Options market that will create a significant amount of hedging in common stock/index/ETF and (b) ETF rebalancing itself.

2. Yes, I would have welcomed a slightly more expansive answer, but given the IP in these systems, I guess that is the way it is.

jog on
duc

 

[peter2]

I'm too hyped to sleep, so you get another post about the US markets.
After such a savage selloff last Friday I didn't expect many results in the 1st BB scan. Only 11 came up in the scan and only four made it through to be monitored tonight. Two of them SQ and TTD didn't produce any setups while I was watching, scratch them.

The other two (CBB, KPTI) were both looking likely to open gap up. I don't chase the gap open but wait for a low risk setup to go long. The CBB chart had lots of recent gaps, more frequent than the quarterly earnings schedule. A quick check shows me that CBB is merging with another company and the bids have been revised upwards. I don't trade news involving mergers or takeovers as the prices are well known and there's usually not much movement. Scratch that one. That left me with my regulars and KPTI.

KPTI was different. The news was exciting, Ph3 trial meeting primary endpoint. This should attract other traders. It didn't take off early (phew, because I was looking at UVXY) but there was a rewarding result about 1hr after the open. I took the break-out day trade (*). 100 shares got me ~$300 in ~20min. * Note the small bars with low volume before the BO. I'm learning slowly that when this happens get in quickly.