SKC 2010 trade review journal

[So_Cynical]

Great thread SKC...surprised to see you buying into the tops of the up legs (DOM & SRL) since your entry level seems to be discretionary, i have to ask why aren't you just buying at the bottoms - support ?

 

[skc]

Great thread SKC...surprised to see you buying into the tops of the up legs (DOM & SRL) since your entry level seems to be discretionary, i have to ask why aren't you just buying at the bottoms - support ?

Come on... that's a bit of a hindsight comment?!

How was I supposed to know that was the bottom before it turned up? If it didn't turn up how was I supposed to know that the support would hold / held?

They are both back at the bottom now... would you buy them now?

I was trading patterns, not investing based on intrinsic value or anything like that. There is no pattern to trade unless they had turned up. If you want to see some buy support trades, go see "My conservative trading strategy" thread by Luke... and see how he went.

Plus, you need to see the chart in a longer term context. While both were nearer to the top of the up legs, they are still way low compared to their 6 month highs. As long as the reward was there compared to the risk, they were valid setups.

 

[So_Cynical]

Come on... that's a bit of a hindsight comment?!

How was I supposed to know that was the bottom before it turned up? If it didn't turn up how was I supposed to know that the support would hold / held?

They are both back at the bottom now... would you buy them now?

I was trading patterns, not investing based on intrinsic value or anything like that. There is no pattern to trade unless they had turned up. If you want to see some buy support trades, go see "My conservative trading strategy" thread by Luke... and see how he went.

Plus, you need to see the chart in a longer term context. While both were nearer to the top of the up legs, they are still way low compared to their 6 month highs. As long as the reward was there compared to the risk, they were valid setups.

You posted the hindsight charts and the first thing im looking at are those clear as a bell support lines...and yep that's where i would of been buying and holding till they came good....i actually had a good look at SRL again last week as it seemed to be channelling the way i like stocks to channel.

And i still reckon Luke's support trades will come good in time (the 2 i posted about in that thread) support buying seems to be working ok for me, i don't think i would enjoy trading with margins and time pressure....time is prob the best friend a support buyer has.

Of course you never know if support is going to hold but you do know its support, and it is support because its held in the past....support buying is a gamble that support will hold...is that any worse than the gamble/decision you took that resistance would break?

Not looking for an argument skc...just thinking out loud.

 

[skc]

Trade #7 - HSP

Entry date: 18/1/2010
Entry price: $5.05
Initial stop: $4.89
Risk: ~0.8% of capital
Quantity: 5000
Position size: ~25.3% of capital
Pattern: Channel support / breakout retest

Exit date:19/1/2010
Exit price: $4.89
Reward:-1R
Trade PnL: -$840

Entry discussion: HSP is a healthcare player with operations in hospitals and pathology - a relatively stable industry that is less susceptible to the overall economic climate.

HSP share price has been on a 10 month uptrend. The price action has been choppy, but within a well defined channel. Since Sept 09, $4.9 has held prices back except for a false breakout in early Dec. Prices finally broke through in the new year, but has since slowly drifted down to retest the breakout level against a rising overall market.

On 18 Jan, prices touched $4.9 and reversed immediately (see the hourly chart). I interpreted this as the retest of the breakout was completed. I bought on market at $5.05 and place initial stop below the day's low at $4.89.

Position management:I looked at an initial target 2 ways. The top of the channel which is ~$5.5, and the depth of the triangle (~40c) prior to the breakout which offered a target of ~$5.4.

As it turned out that's all academic and prices turned down the very next day (19 Jan, the reversal into the current correction) and triggered the initial stop late in the afternoon.

Post mortem:Another questionable entry. The volume on 18 Jan was not particularly strong and while there was a chance that prices will move up after bouncing off the support, I have no idea the probability of such chance. Given the poor reward / risk ratio (~40c reward / 16c risk), not a good trade even if it had works out.

Key lesson - make more honest assessment of reward / risk.

Rolling record
Trades: 7
Wins: 2
Win ratio: 29%
Avg win: 1.665R
Avg loss: -0.803R
Total commission paid: $185.8 (0.08% of transaction size)
Closed PnL: $98,739

Longer term chart


Hourly chart around entry.

 

[skc]

You posted the hindsight charts and the first thing im looking at are those clear as a bell support lines...and yep that's where i would of been buying and holding till they came good....i actually had a good look at SRL again last week as it seemed to be channelling the way i like stocks to channel.

And i still reckon Luke's support trades will come good in time (the 2 i posted about in that thread) support buying seems to be working ok for me, i don't think i would enjoy trading with margins and time pressure....time is prob the best friend a support buyer has.

I don't understand what you are trying to say... are you suggesting buy at support, not have a stop, and wait for the price to turnaround even when the support is broken? Luke's most recent trade DJS and WOR both would be stopped out. Are you saying you would still be holding? How do you manage your risk and position size?

I don't trade on margin so time is not a pressure as far as I am concern. However, prices continue to fall, is my concern.

Of course you never know if support is going to hold but you do know its support, and it is support because its held in the past....support buying is a gamble that support will hold...is that any worse than the gamble/decision you took that resistance would break?

This seems inconsistent with what you just said above. So when the support fails, do you hold or do you get out?

My gamble was not for resistance to break... my gamble was simply on that the stock will trend until it hits the next resistance. Is that any better? Dunno. But at least my risk are really well defined.

Not looking for an argument skc...just thinking out loud.

Hey all thoughts welcome and understand you are not arguing.

 

[Ato]

I really like your threads of trades you do, skc.

Couple of questions if that's okay.

1. For the 4th trade of DOM, I notice that your initial stop was $3.55 but it sold at $3.57. Why was that? Sometimes I notice slight discrepancies like that (not necessarily in the trades you've posted here, just in general), and wonder why this is?

2. For trade 7, HSP, you mention "the depth of the triangle (~40c)". How do you calculate that?

Cheers

 

[skc]

Trade #8 - SGN

Entry date: 4/1/2010
Entry price: $0.76
Initial stop: $0.715
Risk: ~1.2% of capital
Quantity: 26,667
Position size: ~20.3% of capital
Pattern: Reversal swing trade / sector play

Exit date:20/1/2010
Exit price: $0.82
Reward:1.33R
Trade PnL: $1566.3

Entry discussion: SGN is a media company - a sector severely battered during the GFC and many companies have yet to recover.

The most obvious feature on SGN chart is the resistance/support at ~66c. This held prices back until Aug, and supported prices in early Dec. I was alerted to this chart from my other trading strategies. Essentially, every media stock have reached or touching new 6 month highs, yet SGN was still a fair way off. See the 3rd chart below and look at how SGN prices compared with Fairfax, APN and News Corp. Given good strength in the overall market at the start of new year, I elected to long SGN anticipating some catching up to its peers.

Entry was made on 4 Jan with a market order at $0.76. Stop was $0.715, roughly 2xATR(14) away.

Position management:The target was a new high at ~$1. This $1 also coincide with the depth of the triangle before the August breakout. The share price moved up nicely from entry, and I trailed the stop up. The falls in the market last week had the stop triggered at $0.82.

Post mortem:I was very tempted to take profit at 84c, and again at 86c (~2R). But I held back and moved the stop up very tight instead. Again, it was the sector wide movements that had me looking for more upside. FXJ was breaking out into new highs and several other well correlated stocks were poising for a breakout. I thought the tight stop was a reasonable middle ground solution to keep exposed to the upside without giving back too much open profit.

This remains on my watchlist, although the media sector as a whole has come off a fair bit.

Rolling record
Trades: 8
Wins: 3
Win ratio: 38%
Avg win: 1.556R
Avg loss: -0.803R
Total commission paid: $219.5 (0.08% of transaction size)
Closed PnL: $100.305.5

Longer term chart


Close up chart showing entry and stop level moving up


SGN vs FXJ, APN and NWS. Note discrepancy at time of entry.

 

[skc]

I really like your threads of trades you do, skc.

Couple of questions if that's okay.

1. For the 4th trade of DOM, I notice that your initial stop was $3.55 but it sold at $3.57. Why was that? Sometimes I notice slight discrepancies like that (not necessarily in the trades you've posted here, just in general), and wonder why this is?

2. For trade 7, HSP, you mention "the depth of the triangle (~40c)". How do you calculate that?

Cheers

Glad that I can entertain a few people while trying to improve my own trading. To your questions

1. With DOM I actually executed the exit at market. The market depth looked terrible, the overall market was falling bad, the chart pattern was already broken so I decided to save myself a couple of cents.

2. See below.

 

[Ato]

Goodo, thanks.

Do you ever find your stocks selling at below your stop loss? If so, what's the general cause? (Eg you set stop loss at $6.50 and they sell at $6.00)

I think I basically understand the triangle. I'll have to read some more on TA though.

 

[nomore4s]

Goodo, thanks.

Do you ever find your stocks selling at below your stop loss? If so, what's the general cause? (Eg you set stop loss at $6.50 and they sell at $6.00)

It's called slippage Ato.

Your stop loss gets triggered and executes at market but by the time the order goes into the market price has fallen further and you are forced out at a lower price.

 

[skc]

It's called slippage Ato.

Your stop loss gets triggered and executes at market but by the time the order goes into the market price has fallen further and you are forced out at a lower price.

There are 3 main forms of slippage.

1. As described above, when the trigger price and market price is different. This happens a lot esp in low liquidity stock with wide spreads. But rarely as bad as 50c for a $6 stock.

2. Share prices can gap overnight and fall right through your stop price

3. Company makes announcements or trading halt during the day and prices gap through that.

These things do and will happen. You are unlucky if you hit them, but they should be taken into account in your overall risk management approach.

 

[Ato]

Alright, cheers guys. Sorry for the derail. Back to the interesting trade reviews!

 

[Largesse]

Glad that I can entertain a few people while trying to improve my own trading. To your questions

1. With DOM I actually executed the exit at market. The market depth looked terrible, the overall market was falling bad, the chart pattern was already broken so I decided to save myself a couple of cents.

2. See below.

i dont profess to be an expert but what the heck is that triangle based on?

 

[skc]

i dont profess to be an expert but what the heck is that triangle based on?

Fair comment. Not really a textbook triangle. The resistance at $4.9 was prominent, but not for the red triangle as marked.

What is important to me however, was just to show that HSP was capable of 40c swings as demonstrated in that last move.

 

[skc]

Trade #9 - ARU

Entry date: 14/1/2010
Entry price: $0.915
Initial stop: $0.840
Risk: ~0.88% of capital
Quantity: 11,667
Position size: ~10.7% of capital
Pattern: Reversal / flag

Exit date:20/1/2010
Exit price: $0.895
Reward:-0.267R
Trade PnL: -$250.23

Entry discussion: ARU is a small cap rare earth player. Rare earth was a very hot sector back in August / Sept 09 and all the larger players milked the market for equity at pretty good prices. Many of their prices have come down a fair bit since then. I liked the fundamentals of this sector, and I thought the implications of the capital raisings should be all flushed out by now.

ARU retraced from peak of $1.3 in mid Sept to a low of 70c by end of Dec last year. The fall was choppy and relatively low volume. In the new year, it popped up with a strong 14% move on 4 Jan, and formed a little triangle / flag below $0.91, which also happened to be a resistance zone in Nov. I placed a stop buy order at $0.915 and placed the stop loss at the base of the micro consolidation pattern. Entry was triggered on 14 Jan.

Position management: The initial target is $1.5. A figure calculated from the length of the last upleg of 85c (45c to ~$1.3) to the recent low of 70c.

The share price gained throughout the day on entry, and closed at the high near $1. Straight away I moved my stop to $0.895 to reduce most of my risk. Unfortunately, the move up could not be sustained and it the next 4 days it fell back and triggered my stop on 20 Jan.

Post mortem: It was very exciting to see a stock jump 10% the day you entered, and it was very disappointing to get stopped out shortly thereafter at a small loss. The hindsight question was: Should I have taken profit the day after the entry? Or should I have moved the stop to at least above breakeven, given that blowoff candle on 15 Jan which finished well off the day's high?

To me the chart on 19 Jan still looked quite good, representing a small flag sitting on the recent spurt. The blowoff high was noted at the time, but I looked at the intraday volume which suggested that the decline was pretty low volume. So taking profit was definitely off. I think moving stop up would be a 50/50 call, and moving it to above breakeven was probably the way to go.

One other thing of interest - ARU responded to a speeding ticket on morning of 15 Jan which basically said nothing. The price still spiked up on the open but ran out of buyers soon after. Perhaps a stock's behaviour after a speeding ticket offers a hint as to whether the move has substance or not...

Rolling record
Trades: 9
Wins: 3
Win ratio: 33%
Avg win: 1.556R
Avg loss: -0.714R
Total commission paid: $236.4 (0.08% of transaction size)
Closed PnL: $100,055

Longer term chart


Chart ~3 days after entry... still looked like a flag on a pole.


1 week after exit

 

[brty]

SKC,

The first thing I noticed about this trade and your others is that the stock has already moved substantially in both price and time when you buy them.

ARU has moved nearly 30% in price in 19 trading days with not more than a 3 day correction along the way. It was itching for a larger correction over a time period consistent with its cycles. To trade a breakout like this I would have to have a much larger stoploss, back down at the 60c level, in other words not my way to trade.

Over the longer term people people note that the indexes rise by about 10% pa, and hope to beat that performance. Lets say you hope to make a 100% return for the year. A stock moves 10% in one day, after moving up ~30% in a few weeks, stops dead at resistance, and you ask what you should do???

What are your contingency plans for different types of moves??

Your trading style is different to mine, for instance I bought AJL today, but I think your idea of this thread is excellent.

brty

brty

 

[skc]

The first thing I noticed about this trade and your others is that the stock has already moved substantially in both price and time when you buy them.

ARU has moved nearly 30% in price in 19 trading days with not more than a 3 day correction along the way. It was itching for a larger correction over a time period consistent with its cycles. To trade a breakout like this I would have to have a much larger stoploss, back down at the 60c level, in other words not my way to trade.

Very valid point and I don't really have much research into cycles apart from some fib retracement and time lapses...

Looking at the ARU action in August / Sept, it seems that a strong spike is always followed by ~20% correction. Project that to the current spike and 80c is about the right place for it to come back to, even if it was still able to get on with it. Which meant that my stop was too tight, or I should have waited for the correction before making the entry.

Over the longer term people people note that the indexes rise by about 10% pa, and hope to beat that performance. Lets say you hope to make a 100% return for the year. A stock moves 10% in one day, after moving up ~30% in a few weeks, stops dead at resistance, and you ask what you should do???

What are your contingency plans for different types of moves??

Not sure what you are getting at. Personally wouldn't care too much about the market's return in the context of this stock...

I have to say my trading skill is lacking when trying to handle a volatile uptrend.

Your trading style is different to mine, for instance I bought AJL today, but I think your idea of this thread is excellent.

Definitely. AJL is still falling and I have no skill in catching a falling knife from a technical perspective.

In terms of overall trading style... I have a pretty limited repertoire. I've only learned how to buy high and sell higher. This worked well in middle parts of 2009 but may or may not work in 2010.

Thanks for dropping by.

 

[brty]

Not sure what you are getting at. Personally wouldn't care too much about the market's return in the context of this stock...

The context is more with what to expect. If something rises 10% in one day after already being up what are the odds of further galloping gains before significant correction. In my world I'd say slim. ARU actually went from opening at 88 up to 104 at the high next day, 18% move over ~day, much greater than most expect the market to do in 365 days (250 trading). To expect a repeat the following day,two days or week, is relying on hope, not on probability.

I have a rule that says "take outsized gains". Most of my rules of trading are sublime to say the least, but they serve me well. This would qualify to me as "outsized gain".

I have to say my trading skill is lacking when trying to handle a volatile uptrend.

No, that is what being prepared is all about, you know what you will do if the market/stock does a,b,c or d. This should be in your position management section (you don't have to post it, just know it your self).

To me the cardinal mistake you made on this trade was letting something that was 14% in your favour turn into a loss, despite having an original 8.8% 'risk' on opening the trade. As the trade unfolded you let the 'risk' grow to ~14.5% by raising your stop to 89.5 when the price was up to 104.5.

I hope this makes sense.

I've only learned how to buy high and sell higher. This worked well in middle parts of 2009 but may or may not work in 2010.

Not too many years are like '09 with a ~60% move for the whole market from the bottom. Then again not too many years are a copy of what's happened the year before, very few actually. Have a look at different years and how your strategy would go in different market conditions, in other words more research.

AJL is still falling and I have no skill in catching a falling knife from a technical perspective.

Most traders think it is really dumb, how do most traders go?? There are falling knives and then there are falling knives, we'll see how this one goes.

brty

 

[Wysiwyg]

I have a constructive question SKC. Many stocks started to come off their yearly highs from Sept./Oct. That is they aren't making new highs and are trending down.

Are your long entries enabled for any stage of a stock's trend or market conditions?

 

[skc]

The context is more with what to expect. If something rises 10% in one day after already being up what are the odds of further galloping gains before significant correction. In my world I'd say slim. ARU actually went from opening at 88 up to 104 at the high next day, 18% move over ~day, much greater than most expect the market to do in 365 days (250 trading). To expect a repeat the following day,two days or week, is relying on hope, not on probability.

I have a rule that says "take outsized gains". Most of my rules of trading are sublime to say the least, but they serve me well. This would qualify to me as "outsized gain".

Excellent point. I think the comparison is not just to the overall market, but also to how the same stock has moved in the past. And in this case both measures pointed to outsized gains without doubt.

No, that is what being prepared is all about, you know what you will do if the market/stock does a,b,c or d. This should be in your position management section (you don't have to post it, just know it your self).

To me the cardinal mistake you made on this trade was letting something that was 14% in your favour turn into a loss, despite having an original 8.8% 'risk' on opening the trade. As the trade unfolded you let the 'risk' grow to ~14.5% by raising your stop to 89.5 when the price was up to 104.5.

I hope this makes sense.

Makes sense. When I move my stops I don't really consider the open profits in relation to the original risk size... I move my stops based on the chart. It does make sense to keep that in perspective to the original risk size however. I need to make some changes to my spreadsheet so I can track this easily.

Not too many years are like '09 with a ~60% move for the whole market from the bottom. Then again not too many years are a copy of what's happened the year before, very few actually. Have a look at different years and how your strategy would go in different market conditions, in other words more research.

09 was my first year of trading and that's all I've seen. No doubt conditions like that cannot repeat on a regular basis.

Most traders think it is really dumb, how do most traders go?? There are falling knives and then there are falling knives, we'll see how this one goes.

I don't think it is really dumb. I was just making the point that I don't have the skill to trade those myself.

Thanks for all the input brty... makes all the journal entries worthwhile already.