SKC 2010 trade review journal

[skc]

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?

I entered the new year with an expectation that the overall market is heading towards 5000-5200. So I traded long in line with those expectations.

Yes many of the stocks are trending down from Sept highs, but my over-arching read was that the Sept-Dec correction was part of the larger uptrend since March... so 6 months up, 4 months down, and time to move up again.

Many of the trades were entered when they looked like reversing the downtrend. e.g. SRL, LNG and ARU all made higher highs within that down trend. Clearly many of them have not played out... partly due to the individual stock, and partly due to the overall market.

I am not entering any longs at the moment, but that's as much to do with my imminent travel plans as the shakiness in the overall market.

 

[Wysiwyg]

Okay thanks. Like the honesty.

 

[skc]

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

brty

Sidetracking my own thread... did you know something was up? Which way will the news go?

http://www.asx.com.au/asxpdf/20100129/pdf/31nd8jb3gl83xc.pdf

 

[brty]

I have absolutely no idea, I trade on technicals only. What do AJL do??

All I know is that it met my criteria for a buy. Look at the volume increase recently without an acceleration of price. The selling was running into buyers.

If the news is bad, sei la vie, I may have to repair the position.

brty

 

[lukeaye]

Hey dont take a shot at me SKC!

yes i will admit i got those 2 trades wrong, i got stopped out, but thats ok i was wrong. But if you also saw my statement for the other support trades i took, the profits i made from the previous weeks made up for more then 10x that. I posted that in another thread, i beleive it was adapting strategies to suit the market.

And in SKC defense, his strategy is different to mine? There isn't just one technique that works. There are several. If he can apply it consitently to profit, then can it be a bad strategy? I don't think it can be.

PS today i took a support buy, on RIO and FMG.

 

[skc]

Hey dont take a shot at me SKC!

yes i will admit i got those 2 trades wrong, i got stopped out, but thats ok i was wrong. But if you also saw my statement for the other support trades i took, the profits i made from the previous weeks made up for more then 10x that. I posted that in another thread, i beleive it was adapting strategies to suit the market.

And in SKC defense, his strategy is different to mine? There isn't just one technique that works. There are several. If he can apply it consitently to profit, then can it be a bad strategy? I don't think it can be.

PS today i took a support buy, on RIO and FMG.

Haha thanks for dropping by. I was just using your thread as an example of buy support trades... not taking a shot at you mate.

FMG actually makes sense, but please watch your position size relative to your account size...you know how FMG can gap!

 

[skc]

Trade #10 - MCR

Entry date: 6/1/2010
Entry price: $1.87
Initial stop: $1.75
Risk: ~1.2% of capital
Quantity: 10,000
Position size: ~18.7% of capital
Pattern: Reversal / gap close

Exit date:20/1/2010
Exit price: $1.795
Reward:-0.63R
Trade PnL: -$779

Entry discussion: MCR is a smallish nickel miner explorer which seems to have managed through the GFC "relatively" well - obviously their share got hammered due to fall in the nickel price, but in terms of debt position and operations they actually did OK.

The chart pattern is again very similar to several trades already reviewed in this thread. A hard run between Mar low and Aug high (up ~6x) and steady, choppy decline from Aug to Jan, down to the 50% retracement level. In Dec the stock made a few false starts to reverse, failed but managed to hold the ~$1.7 level. Come 2010 it started to move sharply and gapped up on 5 Jan.
With the expectation of an up swing in the whole market, and MCR having a fair bit of catching up to do, I entered on the close of that gap at $1.87.

Position management: Steady rise after entry was met by a reversal day on 12 Jan at resistance just below $2. I decided to play it patiently and adjusted my stop trailing ~10%. Stock continued to drift lower there after. With the market looking sad on 19 and 20 Jan, I exited at market at $1.795.

Post mortem:Looking back I asked myself why I didn't move the stop up more aggressively... e.g. a 6 day low stop would have the stop at ~$1.85. I remember me thinking that I want to be patient with this trade, as MCR has been a great runner in the past. I traded it last year and it treated me well, so that gave me some false confidence about the share price's prospects.

Aside from the "past performance" influence, I don't think there is a great deal of "process mistakes" in taking the trade... the loss is a direct result of reading the market incorrectly.

The share price has tanked considerably since exit and now at ~62% retracement level. But I am hesitate to trade this again unless the resource sector as a whole can show some strength.

Rolling record
Trades: 10
Wins: 3
Win ratio: 30%
Avg win: 1.556R
Avg loss: -0.701R
Total commission paid: $265.8 (0.08% of transaction size)
Closed PnL: $99,276

Longer term chart


Detail around entry

 

[skc]

Trade #11 - PLA

Entry date: 8/1/2010
Entry price: $1.09
Initial stop: $1.035
Risk: ~0.83% of capital
Quantity: 15,000
Position size: ~16.4% of capital
Pattern: Potential breakout

Exit date:21/1/2010
Exit price: $1.21
Reward:2.18R
Trade PnL: $1772

Entry discussion: PLA, as the name implies, is a platinum producer. I know little of the company apart from that it has done a capital raising last year (so unlikely to do one again soon), and it attracted the investment of George Soros in Oct last year which caused a nice spike.

This stock since July has been range bound btw 80c and $1.1, testing the resistances twice and the support 4-5 times. Early 2010 the stock tested $1.1 for the 3rd time, and consolidated a few cents below that for 3 days. With the overall market looking quite positive, I entered the trade at market on 8 Jan, anticipating a breakout. Stop was placed at $1.035, which was just below the 5 day low and gave me a reasonable position size in terms of % of capital.

Position management:Initial target was 30c, the same distance as the 6 month consolidation range btw 80c to $1.1. Fortunately, prices spiked up 4 days in a row after entry to a high of $1.28. Stop was moved to $1.17 on 15 Jan to lock in some profit. I have traded this stock last year (on the George Soros spike), so I was familiar with how it can move up and down in large range. The stock retested above $1.25 several days despite weakness in the overall market from 19 Jan. On 21 Jan, the market looked set to open with a sharp fall and I was no longer interested in giving it room to move, so I placed an order to exit on the open at $1.21.

Post mortem:A good outcome to get 2.1R, but I did also let go ~1.2R of open profit. During the holding period, I felt more "in control" than usual. It was probably due to the fact that I traded this before, and have started with a mind set of taking profit where I can, rather than just hoping it would run. To me this highlighted the importance of being aware of the individual characteristics of each stock / market that one trades.

A week on, it's fallen sharply back into the range. I am keeping it on my watch list to see if it bounces off the lower range again.

Rolling record
Trades: 11
Wins: 4
Win ratio: 36%
Avg win: 1.712R
Avg loss: -0.701R
Total commission paid: $293.4 (0.08% of transaction size)
Closed PnL: $101,048

Longer term chart


Detail around entry

 

[skc]

Trade #12 - LNC

Entry date: 8/1/2010
Entry price: $1.715
Initial stop: $1.635
Risk: ~0.92% of capital
Quantity: 11,500
Position size: ~19.7% of capital
Pattern: Reversal

Exit date:21/1/2010
Exit price: $1.635
Reward:-1R
Trade PnL: -$950.8

Entry discussion: LNC is a stock in the energy industry. Something about a technology that makes use of coal deep underground that are otherwise uneconomical. Anyway, like many new technologies, they are probably a fair way from realising any cash flow from their work. This means the share price movement will predominately be driven by sentiment.

Similar chart pattern to many trades before. Sharp move from Mar low to May high and retreated back to test support at $1.3 just as quickly. Since then, it threatened to burst up several times, each one were high in intensity but low in duration.

In late Dec the price lingered at $1.5 before a sharp spike to $1.7 in the new year. It retraced for 3 days and I placed a stop entry order above the recent high. Entry was triggered on 8 Jan on relatively high volume. Initial stop is $1.635 which is the low of the 3 day retracement.

Position management: Initial target was ~$3, measured on the length of the upleg back in Mar. Prices chopped around either side of my entry and tested my stop on 13 Jan. With that retest it looked poised to move up but did so for only 2 days. It declined steadily since then, gapped down on 21 Jan and triggered the initial stop.

Post mortem:As mentioned LNC spikes a lot. Since the May high, it's done so 3 or 4 times, and each time it runs for 40-60c over a week. I see now that my entry level was ~25c over the recent low... so immediately one would conclude that this spike has already run a good part of its way. I didn't do this check as part of my entry. It's all about being aware of the price characteristics of a stock which I must do more work on.

I should probably tighten the stop after 19 Jan when the market was rolling over. That would have saved me ~0.5R.

The share price now looks headed towards $1.3 zone of support. I am keeping half an eye on it and see if I can capture the next run earlier.

Rolling record
Trades: 12
Wins: 4
Win ratio: 33%
Avg win: 1.712R
Avg loss: -0.738R
Total commission paid: $324 (0.08% of transaction size)
Closed PnL: $100,098

Longer term chart


Detail around entry

 

[skc]

Trade #13 - AGS

Entry date: 11/1/2010
Entry price: $0.63
Initial stop: $0.58
Risk: ~0.80% of capital
Quantity: 16,000
Position size: ~10.1% of capital
Pattern: Reversal

B]Exit date:[/B]21/1/2010
Exit price: $0.60
Reward:-0.6R
Trade PnL: -$496

Entry discussion: AGS, junior uranium explorer (that's all I know really). Another chart with run up from Mar low to Aug high, followed by retracement to ~62% from Aug high to Dec low.

From Dec low, share price moved from 51.5c to a high of 67.5c (sort of a 5-wave impulse up for those who want to speak Elliot wave) over 13 days, then retraced to find a low of 58.5c which is ~55% retracement to this most recent up swing.

I placed a stop entry at 62c waiting for the swing up again, and initial stop was below the recent pivot low at 58c. Entry was triggered on 11 Jan when price gap opened.

Position management:Initial target was 85c, based on ~1.5x the length of the last upswing. Price moved up as intended and reached a high of 69.5c on 15 Jan. At that point I moved the stop up to 60c based on 3-day low. It then failed to hold its gains against the weaker overall market from 19 Jan, eventually triggering the stop.

Post mortem:Looking at the chart now I still quite liked the entry. It had a good chance of an extended wave 3 or C run that should go to minimum of 74c. So the risk (4c) to reward (12c) was there.

I think the trailing stop was not aggressive enough given the price action. After the spike high to 69.5c and a clear rejection on the charts, I had plenty of opportunity to move to at least breakeven if not more. Keep trailing the 3-day low would get me to 63c. This is a similar mistake to the ARU trade earlier.

Rolling record
Trades: 13
Wins: 4
Win ratio: 31%
Avg win: 1.712R
Avg loss: -0.723R
Total commission paid: $339.9 (0.08% of transaction size)
Closed PnL: $99,602

 

[skc]

AGS charts here...

Longer term


Detail around entry

 

[Albi]

You guys work so hard, I feel that I need to study more to lock the profit. I always hesitate to take risk. Thanks SKC for starting this thread. It is motivating. I should reflect upon my trades.

 

[brty]

SKC,

I notice the earlier trades seemed to have a bit of FA in the decision making, but now it seems more technical, as in.....

junior uranium explorer (that's all I know really).

compared to....

I liked the fundamentals of this sector

Any reason for the change?? Does this affect stock selection and performance of your system in response to the change??

Also you have bought both breakouts and pullbacks. From your research is there a difference in win %, R/r ???

Finally, is your system performing as you expected given the current market over the same period??? Did you test how it would work in the negative period we have had/are in??

brty

 

[skc]

SKC,

I notice the earlier trades seemed to have a bit of FA in the decision making, but now it seems more technical, as in.....

Any reason for the change?? Does this affect stock selection and performance of your system in response to the change??

As you may notice the dates of trade entries they were not necessary all later trades... they were just being reviewed later.

I guess stock fundamentals for me is a filter to not to take a trade, rather than a filter to take the trade. I usually look at a stock's Webiress profile and the headline for recent announcements. With junior explorers there is really no point in doing anything in the finanicals, and I am not knowledgable enough to understand their exploration prospects. But I do tend to check that they have enough cash to last more than just a few quarters. I have not detailed these in the review.

I have not reviewed whether performance is better with stocks that I am more familiar with. But given my short holding times in the average trade, I doubt one can easily attribute any observation to fundamental knowledge or there lack of.

Also you have bought both breakouts and pullbacks. From your research is there a difference in win %, R/r ???

Unforunately documenting the type of trade is only a recent addition to my trade record, so I don't have enough data to make a good analysis. It is a good suggestion. Probably something I can do down the track by looking back at all my trades last year.

But I will say that, from what I recall, breakout trades will probably have a smaller average loss - as it's easier to set move stop up fast and tight once the breakout fails. Whereas pullback trades will have better R/R since they have more scope to run (if they do in fact run that is).

Finally, is your system performing as you expected given the current market over the same period??? Did you test how it would work in the negative period we have had/are in??

brty

The trades here are really discretionary and are based on strategies and patterns I picked up from various books, and stuff from my Nick Radge subscription (not individual trades, but the trading methodology). As such they are not readily back tested as a system.

How do I know it's profitable? I cannot be sure. But I know it is a tested methodology from someone who's been around for a long time. And I know it will make money in a rising market. I don't expect it to be profitable in a negative period. And in times like now, I simply switch this strategy off - I have no position open at the moment.

My overarching game plan is actually quite simple... I put on many smallish trades when the market looks to be rising (which it did to me in early Jan), using patterns that probably have good chance of playing out in a rising market, and manage my risk relatively aggressively so I'd be out if things don't work out.

In Jan I've done ~25 trades and I ended with a loss of 3% (hopefully I will find the time to detail all these trades), while running head in to a 10% market correction. I know it's no point just beating the market, but as a strategy, I think the risk / reward is there. If the market was to move up 10% instead, I'd expect my return will be far greater than that.

I am reasonably certain that this strategy will not work all the time, but it should work quite well in a more volatile environment like we are having now. The most important factor is probably how early I start putting on trades on the market's upswing, as opposed to how well I read charts and pick individual trades well. It suits a new, low skill trader like me, and gives me the opportunity to learn about other aspects of trading (like things I've identified in this journal) within an environment of fairly controlled risk.

 

[skc]

You guys work so hard, I feel that I need to study more to lock the profit. I always hesitate to take risk. Thanks SKC for starting this thread. It is motivating. I should reflect upon my trades.

Thanks Albi. Since starting this journal I have gained a lot just through self reflection and input from others. You do get out more when you put in more...It's time consuming but well worth it.

 

[travwj]

Hi SKC

Are you still running this thread. I have enjoyed reading it an it has been about a month from your last post. I have learnt a bit from this thread, so please continue to update us on your trades and reasons behind the trade.

Thanks

Trav

 

[So_Cynical]

Hi SKC

Are you still running this thread. I have enjoyed reading it an it has been about a month from your last post. I have learnt a bit from this thread, so please continue to update us on your trades and reasons behind the trade.

Thanks

Trav

I think hes on Holidays. :alcohol: :bandit: imp: