Welcome to the Gutter

A Setback, Bounceback, and Milestone in the Gutter

2011-07-21T20:36:00.000-07:00

It's been a while since I've posted on trading so I thought I would make a post on my recent trading progress.

Back in May, I had my biggest trading setback ever. In fact, I started the first week of the month down over $13,000 for the month (although still up on the year). It was due to a combination of things. First, I had taken an aggressive long-term short position in CHBT, which was not a part of my core trading strategies. Yes, I knew the company was a fraud, and I like to short frauds, but shorting a fraud for the long-term was not something I typically did. It's fine if you have A LOT of trading capital, but I didn't have it. So I was tying up my trading capital, while missing other good trades. And I didn't even have that great of an entry into the position. So over April I was underwater on my short, and CHBT kept moving higher. Not only that, but I hadn't bothered to check to see the interest rate I was paying to hold CHBT short. Lo and behold, the interest rate was nearly 100%!!!! For April I had paid over $1000 in interest just for holding it short. I was trying to be too much like Citron or John Bird by holding long-term shorts in these China frauds. However, I don't have the capital of Citron or John Bird, so I shouldn't have tried to be like them. Eventually, I decided to just eat the loss the first week of May and free up my capital. Of course, not long after that, CHBT came tumbling down and was halted. It has now re-opened on the pink sheets.

The CHBT was problematic because it was a gamble. It was an obvious fraud, so it wasn't a gamble in that sense. But it was a gamble in the fact that you didn't know when the SEC or other regulators would come in and halt it, and that is what I was betting on. And unfortunately for me, it took much longer for CHBT to get halted compared to all the other Chinese RTO frauds. Of course, even if it had been halted, I would've been paying interest on my short, and I would've had my capital tied up.

On top of that, I took an overly aggressive position in the pump AVVC, averaging down as it went down. I figured it would do what LEXG did. But we all know what happened to AVVC...it was a pump that never went anywhere. It kept going down, and I ended up eating a huge loss on that one too, much like InvestorsLive did. Combine that with some other mental errors, and suddenly I was down $13,000 to start off the month of May.

It nearly got worse. I had a 3000 share short position in JAMN in the high 2's. Since I knew it was a pump and dump, the plan was to hold for the dump. Well, we all know that JAMN squeezed to $6. I was wayyy down in my position, and scared that I was going to get a forced buy-in at IB. Fortunately, I didn't, and JAMN eventually fell back below $2 where I covered for a profit. But if I had gotten bought in (like many people did on LEXG), it could've wiped out most of my profits for the year. And I didn't even consider boxing my position (which I should have).

It was at that point I made a decision. As I've stated before, I keep meticulous stats of my trades. I looked back at my various strategies, and decided to throw away the ones that obviously weren't very profitable based on the stats. I reduced it to a core set. Looking at the stats for the core set, I KNEW I would make a significant amount of money if I just stuck with those strategies, followed my rules, and stopped experimenting with new strategies like long-term holds of China frauds a la CHBT.

It was time to stop screwing around, and stick with a certain set of core setups. Sure, I could refine and tweak those setups, but I needed to stick with those setups. And it worked. Not only did I end up making all of the $13K back, but I ended up with a 2K profit for May. This was a huge confidence booster. It proved to me that I could dig myself out of a horrible hole if I just stuck with my core strategies. It also gave me new confidence in those strategies.

I followed that up with my best month ever in June, exceeding my January profits (which had previously been my best month ever). Other than January, it was my 2nd 5-figure month in my trading career. And that was even with another terrible mistake where I got overnconfident, took too big of a short position in ORS, trying to hold a longer term short, and got a forced buy-in by IB and by Speedtrader.

July has been even better. I have already made 5 figures this month and have exceeded my June profits, so July so far is my best month ever. Not only that, but I have reached the next major milestone in my trading career since surpassing the PDT: I surpassed $100K in trading capital. The extra capital is nice, because now I can spread it among more brokers (to optimize my chance of getting borrows) yet still not be bound by the PDT.

In fact, my goal is to trade full-time for a living, and I have met 2 of the 3 requirements for that goal:

I need to be exceeding my work salary (I've met this goal)
I need to be have more than $100K in trading capital, so that I can withdraw profits and still have money to trade with (I've met this goal)
My wife and I need to sell our condo and get a house. Unless you've got a solid 2 years of trading full time, you can't use that income to qualify for a loan. So I will need my current salaried job for us to get a loan. Once we have the house, then I will consider moving to full time trading.

One of the things that's really helped me is keeping very detailed stats of my trades...and I mean VERY detailed. I use TradePerformance to track my trades, which allows you to categorize trades by custom strategies. I've gotten more detailed in how I categorize my trades as time has gone one, and that's really helped me eliminate unprofitable strategies, and refine my existing ones. For example, if I shorted a big runup in the morning, I used to simply categorize it as "Short Big Runup Morning." However, I saw my trade winning % slowly dwindling, so I re-examined how I could make it more profitable. I got more detailed in how I categorized the trades. For example, I might say, "Short Big Runup Morning, Crack Morning Low Green to Red." By doing this and being more specific, I was able to eliminate setups that I was taking that weren't working, and keep the setups that were working. And I'm continuing to do this. In fact, I had 2 losing trades today from the long side. I bought a couple stocks that were starting to ramp in mid-afternoon off earnings reports. But they dropped off rapidly in late afternoon. I was suspicious whether the "mid-afternoon ramp" as I called it was working, so I went back and looked at the stats. I had a 62% winning percentage, which is good, but my profit/loss ratio was only 1.5. That's not good enough; I want at least a P/L ratio of 2 to keep a strategy. So I'm going to toss that strategy out.

Being a part of the InvestorsUnderground chat room is also helpful. In fact, it's the only trading chat room I use, and I have been with them since they began. They have good seminars. While all the alerts might be a bit overwhelming if you're a beginner, just pay attention to the moderators like InvestorsLive if you're starting out. Now, I am an IU affiliate and I do receive a commission for people that sign up through my link, but as I said, it's the only chat room I use and you can learn a lot. Keep in mind, though, that trading is hard work. Too many people get into trading thinking it will be easy money. However, most drop out after less than a year. I can't count how many traders I've seen come and go. It's very hard, and the odds are against you. The stats show that 80-90% of traders lose money. My first full year of trading, I was not profitable...I had a small loss on the year. My 2nd year I was profitable but nothing big...I made about $12K. This is my 3rd full year of trading and this has been my breakthrough year. But it has required persistence, constant studying, and hard work. Many traders I've talked to, such as John Welsh and Michael Goode, have said that it took them at least a couple years to become consistently profitable. In fact, I highly recommend Michael Goode's series of articles entitled So You Want To Be A Stock Trader? He details the challenges that you will face in your endeavor to become a successful trader.

One important key is to stay in the game. Don't have a loss so big that it completely wipes you out. Trading favors the people who are able to stick with it over the long run. One of the reasons is that trading is about seeing patterns, and not just seeing them once, but seeing them over...and over...and over...and over...and over, until you learn to recognize them and act on them quickly. And there are many nuances and subtleties that you will only learn over months and years of constantly watching and trading the markets. In fact, it's those nuances and subtleties that got me to become much more detailed in how I categorized my trades.

Anyway, I've been very open about my ups and downs in the world of trading on this blog. Hopefully many of you have found my sharing of my experiences helpful. Thank you for reading.

James

Thank You For Helping Me Support Kiteboard 4 Cancer

2011-07-12T22:00:00.000-07:00

I want to thank any of my readers who made a donation to Kiteboard 4 Cancer. I ended up having a bad kite accident (we call them "kitemares") so I only made it 1.5 hours through the endurance race. Fortunately I wasn't hurt but I did have to spend my afternoon untangling a mess of lines. But it was still a great weekend and we were very successful in raising over $41,000 for a good cause.

Before my kitemare, somebody did grab a cool picture of me with a helicopter flying overhead.

I apologize to anyone who has emailed me or left comments on Weightology Weekly for which I haven't yet responded. I am currently in a big back log from being gone the entire weekend and will be catching up this week.

Kiteboard 4 Cancer is Almost a Week Away! Please Help Me Support This Good Cause

2011-06-30T09:26:00.001-07:00

As mentioned in this post, I will be participating in the 5th annual Kiteboard 4 Cancer event at Hood River, Oregon on July 9th. I will be doing as many laps as possible in a 6-hour endurance race. Money goes to advocacy, prevention, research, and survivorship programs. If you are willing to make a donation, please visit my donation page:

https://www.athletes4cancer.org/athlete_detail.cfm?a=259

Here's a cool video talking more about the event:

A big thank you to those of you who have already made a donation!

Please Help Me Support Kiteboard 4 Cancer

2011-06-01T21:58:00.000-07:00

All my readers,

On July 9th I will be participating in the 5th annual Kiteboard 4 Cancer event at the Hood River event site in Oregon. It will involve a 6-hour endurance race where I will try to complete as many laps as possible in that time period. The goal of Kiteboard 4 Cancer is to raise money for advocacy, prevention, and survivorship programs. Kiteboard 4 Cancer is under an umbrella of multiple events known this year as the Tenacity Games, which will include a stand-up paddleboarding event and kiteboarding relay race.

If any of you are willing to make a donation, please visit my donation page:

https://www.athletes4cancer.org/athlete_detail.cfm?a=259

I participated in this event in 2008 and it was a joy to gather with other kiteboarders to raise money for the battle against this difficult disease. Here are some pics from 2008:

This is in memory of my Uncle Bob Raper and grandfather Glenn Van Wieringen, who both passed away from cancer.

Thank you for helping me to support this cause.

Sincerely,

James

Bye, bye, PDT!!!! (Again)

2011-01-27T19:32:00.000-08:00

Back in November, I wrote about how I finally overcame the limitations of the pattern day trader rule in my Interactive Brokers account. However, I was still limited by the PDT in my Speedtrader account (which partly influenced my horrible trading decision and loss in December...I didn't want to use up a day trade).

Well, that limitation is no more.

I made enough money on this month's MCP short and MCP puts to put me at about $59K in my two trading accounts combined. So I moved $24K into Speed (already had about $4K there), so now I have about $29K in each account.

This was the next big milestone in my trading journey and it feels great to get over that PDT hump again! Now I'm no longer worried about missing trades or being afraid to take a loss because of the PDT in either account. And now if Speed has borrows for something, I can freely trade it if I wish.

This will also dramatically speed up my progress. My Interactive Brokers account has been growing much faster since no longer being limited by the PDT. Now that I'm over that hurdle in Speed, both accounts should now grow quickly (as long as I stick with my rules, that is).

Now the next major milestone...to reach the $100K mark.

Bitten by the Black Swan...Don't Let It Happen To You

2010-12-24T09:12:00.000-08:00

Back in 2009, I wrote a blog post about avoiding black swans when it comes to trading.

Nassim Taleb talks about black swan events in his book Fooled by Randomness. A Black Swan event is a rare but high impact event (similar to how sightings of black swans are very rare). Black Swan events have caused many a trader to blow up his/her account. In his book, Nassim talks about a trader who was a dip buyer and would average down on losers. It worked for him for a long time...until he got involved in one trade where he continued to average down on a loser and the trade continued to go against him. He eventually lost all of his money.

Well, I was bitten by a black swan yesterday. Fortunately I was not severely hurt. However, I learned some valuable lessons and I will share my experience with you.

Prelude to a Black Swan

Yesterday I got off to a bad trading start before the market even opened. In my Interactive Brokers account, I played VRGY premarket off the bounce off 13.80; they had a $15 buyout offer. I got in at 14.07. However, I went in too big...normally I only do half position sizes when trading premarket. My stop was below 13.80 and I got stopped out. But then I made the mistake of trying to re-enter despite the fact that my "trading hypothesis" had failed. This time I went in smaller, but it continued to fade, and I was stopped out again.

I then shorted HDY too aggressively near the market open, and got squeezed. I reshorted and made the money back, fortunately. However, I also shorted BOOM and miscalculated my position size and was in twice as large as I should have been, and was squeezed.

Suddenly I was down nearly $2K early in the day, so already I'm not in the right frame of mind for trading when starting in a big hole. However, I have yet to be bitten by the black swan at this point.

On a Path to a Black Swan Rendezvous

I had shorted 1000 shares of XOMA overnight at 4.50 in my Speedtrader account. I wanted to grab some shares while they were available, and I was out of day trades as I'm still limited by the PDT in that account. XOMA spiked a bit in the morning and started to fade. However, it then spiked again. Right there I should've taken the $300 loss and gotten out. But already down nearly $2K on the day, I didn't want to take another loss.

XOMA spiked over $5. It hovered up there and looked like it was having trouble. And this is where my risk management got worse and worse. I started to average in higher, knowing full well I was out of day trades and would not be able to exit without my account being frozen. Now, I had done this before with PIP and VHC and had made some huge gains off of these. But, like Nassim Taleb's dip buyer who averaged down on losers, I was about to get bit by the black swan.

Now, normally you're allowed one PDT violation every 90 days. However, I had already violated it a while back and signed a form that unlocked my account. So I knew I would be locked if I exited.

I was eventually short 2800 shares at a $4.80 average.

And we all know what happened to XOMA yesterday. It kept going higher, and higher, and higher.

Bitten by the Black Swan

I should've simply taken the loss earlier, but I didn't and it kept spiking. Eventually I was underwater in my Speedtrader account, with negative equity. I had to wire $2K to the account to keep it from being underwater. But they called me and I couldn't hold the position overnight. I covered 1900 shares at 7.20 for a nearly $5000 loss. And I'm still short 900 shares (down over $2K on that) which I will cover on Monday if XOMA continues higher.

And on top of that, my Speedtrader account is now frozen, and I can't unfreeze it until early January (as I signed the form on October 7th).

Despite yesterday's massive loss, I'm fortunate that my month has been so good that I'm still up $3K for the month (I was up over $10K on the month). And I'm still up overall in regards to trading. Here I just wrote about rule adherence and my best week of trading ever, and I followed that up with my worst week ever! But obviously I'm continuing to have the problem of getting sloppy when I'm winning. And my rule adherence for yesterday? 30%.

Black Swans and Short Squeezes

I had gotten overconfident with shorting big runups, and had gotten away with averaging up on stocks like PIP and VHC. The vast majority of these stocks, while squeezing, don't squeeze like XOMA did. However, it's easy to forget that XOMA-like squeezes can happen, although not very often (hence why they are like black swans).

Here's XOMA's chart, going from under $2.50 to over $7 in 3 days:

Now look at NLST from November of 2009, where it went from $1 to $7 within 4 days:

And here is RPC in early 2010, where it went from around 20 cents to over $2 within 5 days:

Can you imagine what would happen to you if you shorted these and averaged up like I did on XOMA? You would have likely blown up your account. Again, these types of short squeezes are rare...ones like PIP and VHC are more common and you can get away with averaging up. But all it takes is one black swan for you to lose all of the money in your account, and then some.

The PDT and my Risk Management

What is clear to me is that I have issues with the PDT and hard-to-borrow stocks like XOMA. In this case, XOMA was hard to borrow and IB didn't have shares, but Speedtrader did. I'm not under the PDT in IB, but I am in Speedtrader. I was out of day trades, but I didn't want to miss a tank if it happened in XOMA. So I got into a position that I should have never been in....a position where I didn't want to take a loss. In my IB account, I have no problems taking losses because I'm not worried about the pattern day trader rule. If I had shorted XOMA in IB, I would've simply been stopped out. But, as I've written before, I find that the PDT messes with my head and influences me to take on more risk than I should, and makes me hesitant to take a loss. And thus you get me averaging up on a hard-to-borrow stock, something I would never do in IB.

In fact, when I look at the equity curves of my various trading accounts I've had, I lacked consistency when I was under the PDT. Here's my equity curve for Thinkorswim (which is now closed):

You can see that there's no consistency.

Here's the equity curve for Sogotrade (which is now closed):

Again I was inconsistent early on, although I eventually had some big gains towards the end (due to getting lucky by averaging up on PIP and VHC mainly).

Here's the equity curve for Speedtrader:

Again you can see some inconsistency.

Finally, here's the equity curve for IB:

There's much more consistency with IB, and you can see the dramatic surge in my account late since I'm no longer under the PDT there.

Now, for a long time, I was under the PDT in IB as well, but there's a key difference between IB and the other brokers. IB won't let you enter a trade at all if you're out of day trades. Thus, my XOMA scenario would've never happened because IB would've never let me enter a position at all. I remember how frustrated I was sometimes about IB not letting me enter a trade that I was planning on holding overnight, but in retrospect, this was a good thing.

The bottom line is that I should not be trading when under the PDT. It adversely affects me psychologically and it impairs my ability to manage risk and stay disciplined. Thus, I will no longer be trading with Speedtrader until I have enough funds to day trade in it. I have about $37K in IB right now; once I grow that to over $50K, I can move some to Speedtrader and be free to day trade in both accounts. My Speedtrader account is frozen until early January anyway.

Having a Max Loss Per Day and Some Other Steps

Another thing that I will now implement is a maximum loss per day. John Welsh does this as well. Basically, once your daily loss exceeds a certain amount, you stop trading for that day. I decided to make it 5% of my total trading capital. I have about $40K total in trading capital right now, so a 5% loss would be $2000. Thus, my maximum loss per day will be $2000. Since I follow Van Tharp's rule of position sizing where I risk no more than 1% of my capital on a trade, a 5% loss would mean either I had 5 losing trades in a row, and/or that I broke my trading rules too much. Since I started with a $2K loss yesterday, I would've stopped trading, and the XOMA issue would've been prevented.

Another thing I'm going to do is keep charts of XOMA, NLST, and RPC on my desktop as a constant reminder of how much a stock can really squeeze. Sometimes it's easy to forget.

Down But Not Out

Yesterday's event definitely knocked me down but not out. I'm fortunate that it wasn't worse, and that I'm still in the trading game and still profitable for the month and overall. Like with my past setbacks, it will help me improve as a trader. I've had big setbacks before in trading only to persevere and come back. And that's what will happen again.

Rule Adherence and My Best Week Ever

2010-12-16T21:57:00.000-08:00

This week has been my best trading week ever so far, mainly due to some nice gains with HHWW, GASS, but also my two biggest winning positions to date...CWST ($1878) and BSFT ($4323 in IB and another $372 in Speedtrader). I was short 3500 shares on CWST at 6.75 and it gapped down the next day. I took a large short position in BSFT (2000 shares at an average of nearly $25.50), knowing that a big selloff would be coming given that they have a lockup expiration approaching on December 22nd. I need to thank both InvestorsLive and MarvelMeister of Investor's Underground for the trade idea.

My total profit this week so far has been $7700.

I've been working a lot this week on remaining disciplined while winning; I've had problems in the past of getting sloppy while winning. To help with that, I've started keeping a log of how much I stick with my trading rules. Every day, I write down the percentage of trades where I stuck with my rules. For example, if I make 5 trades and follow my rules on 4 of them, then my percentage is 80%. The goal is to hit 100% every day. So far this has been my tally:

11/30: 100%
12/1: 75%
12/6: 100%
12/7: 100%
12/8: 100%
12/9: 71%
12/10: 86%
12/13: 89%
12/14: 100%
12/15: 100%
12/16: 100%

I know some traders like to set profit targets, but personally I don't like to do that, because I think it can make you undisciplined. You can start to take trades that maybe you shouldn't take, especially if you are down for the day or month and you haven't met your target. The fact is, if you consistently follow your rules, and your strategies are profitable strategies, then the profits will take care of themselves over time, just as I showed in my last blog post.

Until next time...

Disclosure: I am an affiliate of Investor's Underground and I receive a commission when people sign up for the service through my affiliate link. However, I would never recommend anything I haven't used or don't use myself. I have found IU to be very helpful in my progress as a trader. You can also see independent reviews of the IU chatroom here.

Rules Make Money

2010-11-25T09:49:00.000-08:00

Last week I told you how I have a tendency to get sloppy when I'm on a winning streak, which hurts my consistency as a trader. I start to break my rules and lose discipline, which I need to work on if I want to be successful over the long term.

To illustrate the importance of following trading rules at all times, here are a couple charts of what my trade performance would've been had I remained disciplined over time, versus the addition of the myriad of times where I've broken my trading rules.

I use TradePerformance Lite to track my trading performance over time. The great thing about it is that you can classify every single trade according to a particular trading strategy (hey, Tim Sykes, you need to add this capability to profit.ly!). I have been using this to track the performance of various trading strategies over time. I keep the strategies that are winners, and dump the strategies that are inconsistent. For me to consider a strategy as a winner, it needs to have at least a 60% winning trade rate, and a profit-to-loss ratio of at least 2.

If I screw up and break my trading rules, a trade goes into the "Bad Trading Choice" or "Misplay" categories. Thus, I can gain awareness of how much breaking the rules has cost me over time.

And it's cost me a lot.

Here's a chart of what my trade performance would have been had I consistently followed my rules, using the winning strategies I described above (this chart does not include strategies that I experimented with and found not to meet my criteria).

The above chart represents a 70% winning trade rate and a P/L ratio of 3.35.

Now, here's the same chart, but now with all of the trades where I broke my rules thrown in.

Talk about a huge difference. The winning trade rate goes down to 48%, and the P/L ratio goes down to 1.21.

The bottom line is discipline and rules make you money. I've decided to put these charts up as backgrounds on my monitors, as a constant reminder of how much breaking my rules can cost me.

Getting Sloppy When Winning

2010-11-20T12:11:00.000-08:00

John Welsh has an excellent post here regarding the psychology of trading loss, and how people tend to increase their position sizes to try to make losses back...only to compound their losses.

I tend to have a different problem...a problem that I need to work on if I'm going to be successful at this long term.

When I'm losing, I'm usually pretty good at not increasing position sizes or trying to make back losses. My problem is when I'm winning.

When I'm winning, I find I have a tendency to get sloppy. I know I have a cushion, so I trade more aggressively...but too aggressively. I start to fudge on my trading rules. I start to lose discipline. And I end up losing my winnings.

I wrote a bit about the great day I had last week that put me over the PDT. Everything was going fine until Friday...and that's when the sloppiness started. I started breaking a number of trading rules, and it cost me most of last week's profits. Here's the rules I broke:

1. Too Big of Position Size. I follow Van Tharp's model of position sizing. This means that, wherever I put my stop loss, I should not lose more than 1% of my total trading capital if that stop gets hit. I have a bit over $30K in trading capital, so that means I shouldn't lose more than $300 on any trade. That also means I should size my positions accordingly.

I broke that rule on Friday. I was down about $500 for the day (my only red day of the week). I shorted ASTM around $4.03 when it looked like it was doing an afternoon fade. I put my stop above the HOD which was 4.23. That's a 20 cent stop, meaning my position size shouldn't be more than 2000 shares. However, I got aggressive, shorting 3000 shares in my IB account and another 700 in my Speedtrader account. It ended up being a fake fade, and I ended up exiting after hours (right before it tanked) at 4.24 and took a $600 loss (I held the position in Speedtrader). If I had stuck with only a 1000 share position in IB like I should have, I would've been out only $200.

2. Not Exiting on Exit Signals. I like to use a 10/60 cross to the upside on the 5-minute chart as an exit signal that a stock is not breaking down as I would like. With ASTM above, there was a 10/60 cross around $4.13. So I would've been out 10 cents rather than over 20 cents on the position. If I had used the position size that I should've used, my loss would've only been $100. I also broke this rule on Wednesday, November 17th, with BSFT. I shorted 500 shares of BSFT at $17.96 when it looked like an afternoon fade. But it continued to go sideways. I got a 10/60 cross to the upside, and I would've been out at $18.05 for only a $50 loss. But instead I added to 500 shares to my position on the EOD spike, and would take a significant loss on it a few days later. Finally, I did it with ZAAP yesterday. I shorted 5000 shares at 83.5 cents when it looked like it was fading. But, like BSFT, it kept going sideways. I could've gotten out at 85 cents for only a $100 loss after commissions, but instead I kept holding, and exited on the late day spike at 89 cents, losing $300 instead.

3. Not Waiting for a True Breakout. I like to go long 52 week breakouts on listed stocks breaking out on news, or on OTC stocks. On November 15th, KNDI had a 52 week breakout on earnings. It pulled back below the 52 week high of 6.70. Rather than waiting for it to rebreak the 6.70, I anticipated it and went in at 6.62. Well, it never rebroke it and I took a loss in the 6.40's. This cost me over $300. On November 16th, I longed BVTI on the $2 break. 2 was a resistance point, but wasn't the 52 week high. The 52 week high was 2.11, which it never got there. I ended up taking an over $200 loss at 1.89.

4. Not Exiting on Failure of Reason You Got In. On November 17th I shorted EDAP at 4.21 when it bounced green and was fading back towards red. However, it failed to go red and started consolidating at green. That was a cue to get out, but instead I held onto it until it broke the HOD's in the 4.40's. So rather than a $150 loss, I had a $300 loss.

5. Not Covering Short After Break From Consolidation. On Thursday November 18th, I was short BSFT from 18.25 from the previous day. It fell to the 18.20's, and then started consolidating. It then started to break upwards off of that. I should've covered for a $50 loss, but instead held and didn't cover until the next day at $18.62, increasing my loss to almost $200.

6. Not Sticking With a Stop. On Friday I longed CRM on the first break of $135. It was a small position with a wide 50 cent stop. It came back to my stop and I kept holding. I ended up exiting in the low 134's for nearly a $300 loss, when I should have had a $150 loss. I thought about relonging it when it hit 135 again but hesitated and it ended up going past 136.

Overall, trading too aggressively and not following my trading rules cost me over $1800, wiping out the majority of the great success I had last week. If I had followed my rules, I would've been green this week as well (although not by a huge amount). I generally have no problems with being disciplined after big losses...my problem is remaining disciplined after big wins. That is the thing I need to work on.

Bye, bye, PDT!!!!!

2010-11-09T20:28:00.000-08:00

If you have read my blog for a while, you know that I have not hidden my disdain for the pattern day trader rule. In fact, I have made past blog posts specifically about the rule, such as here and here. The rule made trading an uphill battle. First, if I made a mistake, it would cost me a day trade, and the 3 day trades per week that you are allowed is not very many. Second, I found that it would mess with my head psychologically. Sometimes I would take on too much risk and hold trades too long (because I didn't want to use up a day trade), or I would enter overnight trades that were a bit more risky. Third, I found that it would penalize me for good risk management. For example, I have a rule where, if I'm up at least 50 cents for a stock over $10 per share, that I move my stop to break even (so that I never let a profit turn into a loss). One day I was short BORN, it dropped about 55 cents from my entry, and then came back to my entry and I got stopped out. Then BORN went right back down, and I couldn't re-enter the trade because I was out of day trades. It was a trade I would've made $500 on, but I couldn't get back in because I was disciplined and followed my rules!

Well, as of today, I am finally free of the shackles of this rule. Sure, I was part of Cy Group for a while which allowed me to day trade freely, but I couldn't access their software from behind a firewall which limited me in how much I could trade with them (most of my day I'm behind a firewall). I was only able to trade from my Cy account for the first 1.5 hours of the trading day.

But now I'm truly free. I had enough money in all 4 trading accounts that I moved most to my Interactive Brokers account, closed my Cy account, and kept a small amount in my Speedtrader and Sogotrade accounts (although thinking about closing Sogo because their borrows have become horrendous). Combine that with some funds that I was adding every now and then, and I was just about there. Today I was about $500 short of that magic $25K mark in my IB account. I knew I had some money coming in tomorrow to put me over the mark, so I decided to just day trade freely today anyway even if I would get flagged. Well, I made about $1700 in my IB account today which put me over the hump, meaning the money that posts tomorrow is just extra cushion (made about $300 in my other accounts for about a $2K day total). Here's the trades I made in IB today which got me over the hump, all short trades except NCT which was long (which I shouldn't have done anyway...chased it a bit):

These will eventually be reflected in my profit.ly when I upload them.

Not only is the PDT barrier gone, but it opens up many opportunities for me in regards to buying power. Buying power can limit you in small accounts even when you have day trades available. I'll also be able to take bigger short positions in lower priced stocks because of the $2.50/share cash rule. I also will be able to re-enter positions when necessary. For example, I shorted URZ today at 3.99. It hovered in the 3.80's for a while, and came back up to my entry. I jumped back out to make sure it didn't turn into a loss. It then came back down to 3.88. I noticed that gold futures were dumping, so I re-entered the short. I ended up making one of my biggest profits of the day on it. Under the PDT, I wouldn't have been able to re-enter like that.

Now with the PDT barrier removed, it will be so much easier to make progress, and I no longer have the rule messing with my head.

It's so nice to have this rule in my rear view mirror.

An Alleged Pump-and-Dump Company and Its Natural Sweetener

2010-11-07T10:17:00.001-08:00

I’ve made a blog post over on Weightology regarding an alleged pump-and-dump company and a natural sweetener that they sell. Check it out here.

Gutter Update

2010-10-23T16:17:00.000-07:00

It's been a while since I posted to this blog. I thought I would give you all an update as to how trading has progressed for me.

I no longer keep track of my trades using Covestor. I now use Profit.ly. You can see all of my trades here, as well as in the widget over on the right side of my blog. Another widget shows my progress in terms of profits. Thus, if you are interested in following my trades, you can follow them there.

I have been making tremendous progress over the past few months, with my best performances thus far in my trading career. I am still trading under multiple accounts, although I am getting closer to finally having enough to overcome the limitations of the pattern day trader rule. Actually, if I combined the money in all my accounts, I would not be under the rule, but since I am a short-biased trader, I need to keep multiple accounts to maximize my chances of getting borrows. I am only about $6K away, though, of having enough to put most into one trading account so that I'm not under the rule, and then keeping $3-4K minimum in the other accounts so that I minimize my chances of missing good short opportunities.

I still keep statistics of my trading using TradePerformance. This has been invaluable to me in regards to becoming a consistent trader and finding a consistent edge. Over time I have learned what strategies tend to work for me and what strategies are not reliable. I am still learning and improving my skills, but I would not be where I am now if it wasn't for keeping detailed statistics of the various setups and strategies that I have been using.

I have become primarily a short-biased trader, as I have found I am more consistent from the short side versus the long side. I do trade from the long side but I look for very specific setups.

The majority of the strategies I use I have learned from InvestorsUnderground and from Tim Sykes. While I am not currently a subscriber of Sykes's services (although I have been in the past), I am still a member of InvestorsUnderground and have found their alerts and seminars invaluable. If you are interested in learning their strategies, you can check out the affiliate links here on my blog.

I am currently busy maintaining my Weightology site along with teaching a weight loss certification course and holding down a full time job, so I am still too busy to keep this site updated regularly. I still aspire to be able to trade full time at some point, and when I do, I'll be able to keep this site updated on a more regular basis.

Disclosure: I am an InvestorsUnderground and Tim Sykes affiliate and I receive a commission for products purchased through my affiliate links. I do currently use or have used both services and they have been instrumental in helping me become a more profitable trader.

Some New Non-Trading-Related Blogs

2010-05-24T14:25:00.000-07:00

I've got a couple new non-trading-related blogs up. Check them out:

Weightology

The Health Sleuth

Moving to Speedtrader

2010-05-11T17:17:00.000-07:00

Got caught in the MCGI dump today....no way could I get out in Sogotrade. So I'm moving funds from my Thinkorswim account to Speedtrader so I can have direct access for when I go long on OTCBB's/pink sheets and thus be able to get out more quickly when such situations arise.

Cash is a Position

2010-05-07T17:21:00.000-07:00

If you trade mainly using Tim Sykes's strategies like I do, you'll notice that there's been very few good Sykes-like opportunities the past few days. It's times like these where it's best to just stay all cash. I didn't make a single trade today. Remember, cash is a position too.

Not to say that there haven't been good trading opportunities the past few days. There have been, but those opportunities are only for the people with a lot of capital and the ability to scalp and day trade freely. But for the small account traders like me, it's best to be patient.

The Importance of Trading Capital

2010-04-23T16:10:00.000-07:00

In February, Michael Goode made an excellent video blog post on the learning curve for trading. MarketMonk responded with an equally excellent comment, eluding to how many people quit trading because they finally realize how difficult it is to trade with a sub-$25K account.

I want to expand on the importance of trading capital, and how a lack of capital can be a big hindrance to your progress. There are many ways that a lack of capital can make things more difficult:

1. The Pattern Day Trader Rule. If you have an account of less than $25K, then you are limited to 3 day trades per week. This can impede your progress in many ways. First, it doesn't leave you much room for error. I've had many times where I entered a trade that I shouldn't have entered. As soon as I realized I shouldn't have entered, I had to use up a day trade to get out of the trade. You can use up your 3 day trades per week pretty fast that way. Second, you might miss other good trading opportunities because you can't risk getting into a trade in the middle of the day and being forced to hold overnight when out of day trades. Interactive Brokers won't even let you enter a trade if you're out of day trades; sometimes I like to make trades right before the market close, but IB won't let me do that and thus I've missed opportunities that way.

Now, this doesn't mean you can't make progress under the PDT. It just makes it much more difficult, and makes progress much slower. Tim Sykes took $12K and turned it into over $25K in 2008-2009; however, he wasn't strictly under the PDT because he was using Thinkorswim, and Thinkorswim was very lax at the time about the PDT. In fact, I remember making 2-3 day trades each day with TOS in 2008 and never got in trouble for it (I have no idea how TOS got away with that). So while Tim still would've eventually turned the $12K into $25K, it would've taken him much longer with another broker (or if TOS had actually been enforcing the rule like they do now).

2. Day Trade Buying Power. Many people think of the pattern day trader rule when it comes to a sub-$25K account, but there's more that limits you than just that. You also have to deal with the limitations in buying power. It's very easy to generate a day trade margin call if you liquidate an overnight position, and then use those funds to make a day trade with. This has happened to me more than once. This happens even if you have 3 day trades available to you. To guard against this, you have to look at your buying power when holding an overnight position. For example, yesterday I held ROHI long overnight in my TOS account. My overnight stock buying power was reduced to around $700 when holding that position. That means that, even though I sold ROHI today and did not make a day trade, I couldn't buy more than $700 worth of stock today. That amount is not worth making any trades with. I couldn't risk entering a position in the middle of the day, knowing that I may have to exit in the same day (and thus risk incurring a margin call). So I was stuck to only being able to enter positions near the close, that I knew I would hold overnight. This was despite the fact that I had 3 day trades available in my TOS account. This can be frustrating when you see opportunities that you can't take advantage of.

This can be more of a problem if you have multiple small accounts, like I do (I have 4 accounts currently). Except for my Cy Group account, I have to constantly monitor my other accounts so that I don't incur a margin call, as my position sizes in each account are very close to my max buying power. The nice thing about multiple accounts is I at least get that many more day trades (and a better chance of finding borrows as borrow availability can vary from one broker to the next).

Now, you might ask why I don't just use my Cy Group account for most of my trading. First, I can't trade OTCBB or pink sheets with that account. Second, I can't access it from work as I'm behind a firewall (I only trade with my Cy account in the morning before I go to work)....I can only use brokers that have web interfaces.

3. Limitations in Short Position Sizes. Many brokers won't let you short stocks under $3. Of the ones that do, like IB, you need to have $2.50 cash in your account for every share that you short. So if I have $4000 in my account, I can only short 1600 shares of a $1 stock, even though it's only a $1600 position. This is particularly limiting if you want to short a sub-$1 stock (like a 50 cent one)....you can't take a position size big enough to make it worth it. So you may miss some of the sub-$1 pump and dumps (which there are a lot of).

4. Limitation in Positions and Position Sizes. This is a no-brainer. The more capital you have, the more and larger positions you can take. This increases the amount of money you can make. The most successful traders I see, like Michael Goode, have accounts of $100 - $200K or more. It can be tough to match Michael's success when you don't have the capital that he does.

5. Can't Do It For a Living. Even though you can be profitable with a sub-$25K account, don't expect to be paying the bills with the profits. If you try to withdraw your profits, you won't be left with enough to trade with.

This is all not to say that you can't be successful with a smaller account. You can, but you definitely have an uphill battle and many obstacles to overcome (which is why I am continuously adding a bit of money to my accounts each week so that I will no longer have these obstacles).

Anyone having problems with Sogotrade or SogoElite borrows the past few days?

2010-04-15T05:49:00.000-07:00

In the mornings, SogoElite has been telling me that certain stocks were "Not in short list" when I tried to short even though it was according to the Genesis website. It seems like NOTHING has been available to borrow in the mornings over the past 3-4 days, even though Sogo is often the best for borrows.

Today it's telling me that ROHI and CHCI are available, but when I put in a limit order in SogoElite to test it out, I get the "Not in short list" message even though they're there according to Genesis.

Anyone else having this problem?

Posting Frequency

2010-04-05T21:23:00.000-07:00

I'm going to be cutting down my posting frequency to 1-2 times per week. I won't be posting nightly watchlists anymore or daily profits. I'll most likely be posting a weekly profit along with 1 good trade and 1 poor trade each week.

You can still follow my daily trades on my Covestor accounts....my usernames are YngvaiMalmsteve and YngvaiMalmsteve2.

Watchlist for April Fool's (seriously)

2010-03-31T21:40:00.001-07:00

Short: JADA SSY NANX FIGI CDIV
Breakout: GSIGQ OSTK

Trade Recap 3/31/2010

2010-03-31T07:06:00.000-07:00

Out of day trades for the day so I'm done.

I'm disgusted with one of my trades today. I always enter longs on breaks off consolidation. I NEVER enter a long near the top of a big green 5-minute candle. But that's exactly what I did with FSII this morning, entering at 4.05 without giving it time to consolidate. And of course I ended up taking a loss on the big pullback.

And to add insult to injury, VSTNQ rocketed right after I exited my position. I had planned to get out if it broke 1.10 support which it did....only to see it bounce off 1.08 (my exit price) and now it's at 1.26 (my entry was 1.13 yesterday).

So in 2 days I wiped out my nice big profit from Monday. P/L: $-294.46

Video Watchlist for Wednesday 3/31/2010

2010-03-30T20:05:00.001-07:00

Trade Recap for 3/30/2010

2010-03-30T07:55:00.000-07:00

Quitting early today because I'm out of day trades. Tried shorting SERV twice but it was too choppy and illiquid. Also tried ABIO looking for an extension of the red to green move but that failed.

P/L: $-327.19

Trade Recap for 3/29/2010

2010-03-29T18:03:00.000-07:00

Solid day in the Gutter

P/L: $685.31

Trade Recap for Thursday and Friday

2010-03-27T16:24:00.000-07:00

Very disciplined trading for both days

Thursday P/L: $476.15
Friday P/L: $31.93

If you want to learn to trade the setups that I play, I highly recommend you check out Tim Sykes's products. Tim is having a 25% off sale until the end of the month. The vast majority of my trades are based off of strategies that Sykes teaches.

Disclosure: Long 600 shares MILL and 1500 shares ESPH. No other positions. I am an affiliate of Tim Sykes and I receive a commission if you purchase his products through my affiliate link

Watchlist for Friday 3/26/2010

2010-03-25T18:45:00.001-07:00

I'll post a Thursday & Friday trade recap tomorrow or this weekend.

SHORT: SSY GENT EHSI BKRS JADA
BREAKOUT: GSIGQ PVCT ESPH NNVC MILL AFOP

Disclosure: Long 1000 shares AFOP. No other positions

Wednesday Trade Recap & Watchlist for 3/25

2010-03-24T21:30:00.000-07:00

No video recap tonight. Shorted ARWR at 99.5 cents only to cover at 1.02. No other closed positions today.

P/L: $-35

WATCHLIST

Short: ARWR SSY EHSI SRGL GENT RDCM
Breakout: GSIGQ BVTI PVCT SRGL CHGY ISCO

Disclosure: Long 1000 shares SRGL, 1000 shares CHGY, and 1000 shares ISCO. No other positions

Tuesday Trade Recap & Wednesday Watchlist

2010-03-23T17:05:00.000-07:00

No video recap today. I longed GSIGQ overnight from 2.07 yesterday and exited today at 2.05 for a small loss, and then longed ARWR on the red-to-green move at 1.15 and sold at 1.19 and 1.26 for a small gain. Total P/L was about $4.

WATCHLIST

Short: MSEH ARWR SSY
Long: LTUM CHGY GSIGQ NNVC

Video Recap for 3/22 and Watchlist for 3/23

2010-03-22T19:58:00.000-07:00

Today's video is brought to you by Chris Impellitteri. Watchlist is in the video.

P/L: $-274.04

Watchlist for 3/22/2010

2010-03-21T16:36:00.000-07:00

No video watchlist tonight

SHORT:

SOMX....looks like it might gap down if the after-hours action mean anything....might be a tough play....but could also be a good long on red-to-green action

MSEH....looked like it was going to tank on Friday but it held up....still waiting for the massive tankage day.....borrows are tough to find though

ZANE....looking for crack of 2.45 support

LONG:

BBX....two big down days now....looking for a bounce on red-to-green

HMNA....same as BBX

GSIGQ....watching for the 2.04 break

Trade Recap for 3-19-2010

2010-03-20T10:08:00.000-07:00

No video recap today. On Friday I shorted HMNA in my SogoElite account for a small gain. No other trades.

P/L: $134

Have a great weekend!

Position Sizing and Scaling Out of Positions

2010-03-18T21:01:00.000-07:00

This video blog on position sizing is brought to you by Yngwie Malmsteen.

This next video blog, on scaling out of positions, is brought to you by Dream Theater.

Make sure also to check out the last post on today's trade recap and tomorrow's watchlist.

Video Trade Recap for 3/18 and Watchlist for 3/19

2010-03-18T20:56:00.000-07:00

Today's video recap is brought to you by Steve Vai and Jing Pro.

P/L: $459.83

Today's video watchlist is brought to you by the Swedish band Evergrey.

Stay tuned for my next post which will cover position sizing and scaling out of positions.

St. Patty's Day Video Recap & Watchlist

2010-03-17T21:59:00.000-07:00

In honor of Saint Patrick's Day, the intro song is "Celtic Legends" by Borislav Mitic. Watchlist is discussed in the video.

P/L: $318.36

Trading With The Alien: Trade Recap & Watchlist

2010-03-16T21:44:00.000-07:00

Today's video blog is brought to you by Joe Satriani and Jing Pro.

P/L: $295

Watchlist:

MSEH....waiting for the inevitable tank
AENY....watching for break of 3.10 support
EMIS...watching for 1.50 break
XFN...watching for continuation from today's move
ENT....watching for 3 break

Video Trade Recap for 3/15, and Watchlist for 3/16

2010-03-15T19:41:00.000-07:00

Today's video recap is brought to you by Symphony X and Jing Pro.

P/L: $-231.50

WATCHLIST:

MSEH....watching for the inevitable day it tumbles
IPCI....first down day, potential short or long
ZANE....short on break of 2.75 support
EMIS....watching for a breakout
PPCO....watching for a breakout

Video Lesson: Recognizing When to Cover a Short

2010-03-14T13:14:00.000-07:00

Today's video lesson is brought to you by Yngwie Malmsteen and Jing Pro.

My First Video Trade Recap

2010-03-12T18:53:00.000-08:00

Finally my first video trade recap, brought to you by Jing Pro

P/L for Thursday and Friday: $302.93

Sogotrade and PDT update

2010-03-10T21:52:00.000-08:00

I recently made a blog post about scaling out of trades with Sogotrade and how it relates to the pattern day trader rule. Dave Whitmore, the president of Sogotrade, was kind enough to respond to my blog post. Thus, while Sogo's software will count scaling out of a trade as multiple day trades, you can call them up and they are happy to roll them into one day trade.

Thank you Dave for providing this information.

Trade Recap, Watchlist for 3/11/2010, and the Dilemma of the Part-Time Trader

2010-03-10T21:29:00.000-08:00

No time to post screenshots or charts tonight....too busy finishing up my JOPP articles before a deadline

The Dilemma of the Part-Time Trader

Shorted ZANE today at 2.94 then had to go to work....set a stop at 3.03 and got stopped out for a $-65.06 loss. It was in the low $2.80's before I left and I debated whether to get out. It was in my new SogoElite account and so I knew I wouldn't be able to access from work. I could've exited with a $100 gain or so, but I knew I wouldn't be able to re-enter in the middle of the day at work, and ZANE was too good of a setup. I didn't want to set my stop higher than 3.03 as that would be too much risk. If I were to do the trade again, I would've taken half off the table, then set my stop at $3.15. Thus, the most I could've lost on the day would've been $50 had the stop been hit, but I would still have given room for the large potential downside that ZANE has. I will keep this in mind next time I find myself in a similar situation.

I did reshort ZANE at the market close in my normal Sogotrade account.

Watchlist

Mostly short watches again

Short: ZANE CNAM CHGI CPWM XFN AENY MSEH

Long: ESPH BVTI (looking for red to green move) ENT BLGW (looking for 1 cross)

Disclosure: Short 900 shares ZANE. No other positions

UPDATE: I checked my SogoElite account today and apparently the trade exited at 2.99 even though my stop was 3.03. Thus, I've updated my loss to 65.06.

Lots of Stuff on Watch for 3/10/2010

2010-03-09T17:52:00.000-08:00

Too many tickers to post charts tonight.

All short watches

ZANE....held $3 pretty well today but now we've got a red floater

TEAR.....I thought about shorting this into the close today as it had faded all day, but I didn't like how it was already down 30%

CNAM.....only if it breaks $8.95ish support

SAEB.....pretty illiquid....would like to see one more up day with more volume

BVTI is going vertical

CHGI had its second strong up day today

CPWM is a real company but is looking overextended

MGH had a big move today....would like to see a gap and squeeze to create an even better setup

XFN starting to look toppy

AENY is a known pump and dump with a bounce and now a red candle

Sogotrade and the Pattern Day Trader Rule

2010-03-09T16:26:00.000-08:00

If you use Sogotrade like I do, there's something you should be aware of regarding the pattern day trader rule.

You want to be careful when scaling out of positions using Sogotrade. The other brokers I use (Interactive Brokers and Thinkorswim) count the opening and closing of a position as a day trade. Basically, you can scale out of a position and it won't count as multiple day trades.

For example, if I buy 300 shares of a stock, sell 150 shares 1 hour later, and the other 150 shares 2 hours later, most brokers will count that as 1 day trade.

However, I learned today that Sogotrade's system will count that as 2, which is pretty messed up. What if I put in an order that only gets partially filled, and thus have to re-enter another order? Sogo will dock you 2 day trades for that.

What happened was that on Friday, I bought 300 shares of CNAM near $9. I sold 150 shares on the first spike to 9.50ish, took some more off near $10, and finally took the last bit off later. Sogo counted that as 3 day trades and gave me a Day Trade Minimum Equity Call.
I called Sogo and got it straightened out. But anybody using Sogo should be aware of this....their system will dock you multiple day trades if you like to scale out of positions like I do.

Trade Recap Wednesday 3-9-2010

2010-03-09T06:50:00.000-08:00

Covered CNAM at 9.24. Got lucky that it opened around 9. Chalk this one up as a learning experience.

P/L: $-69.04

Quite a string of red days for me in a row. It's a combination of mental errors, along with some good trades that just didn't work out. Just need one solid profitable trade to end the streak.

Out of day trades today, so I won't be entering any trades unless maybe right at the market close.

Trade Recap, and a Lesson about Thinkorswim Charts & Earnings, and Shorting into Close

2010-03-08T16:10:00.000-08:00

No screenshots today.

Bought 600 shares CMRG at $4.04 but it was a failed breakout and I got out at $3.99 for a small loss.

Thinkorswim Charts and Earnings Reports

What I really want to talk about is my TIVO short today, and how it relates to Thinkorswim and charting. If you use Thinkorswim, the daily chart will show a company's earnings on the day earnings are released. What I didn't know was Thinkorswim will show the estimated earnings before the actual earnings are released. This nearly cost me big today...fortunately I had a small position.

I shorted 200 shares TIVO at $17.09 early in the trading day. My Thinkorswim chart showed an earnings of ($-0.12) before the market open. This gave me the false impression that TIVO already released its earnings; I didn't realize that this was the earnings estimate. I held my TIVO short all day. Since it was going to close red, I decided to hold overnight.

Suddenly, right after the close, I saw TIVO spiking big-time, with crazy up and down price action. I checked the news, and saw that earnings were released. Luckily I got out after hours on the pullback to $17.36 (which was my original stop anyway). I was fortunate that TIVO didn't spike more than what it did.

So my lesson here is to never assume that earnings are already out just because I see the number on my TOS chart. I need to check to see if it's the estimated or actual earnings. I would've never held that short into the close, and I would've been out to break even on the trade.

P/L: $-94

Shorting Into Close

In the past I've written about red floaters and shorting into the close. If the stock has had a big run-up, the stock has its first down day, and there's a red candle above the upper bollinger band, the odds are high of a continued drop the next day. I've run stats on this using Stockfetcher and it holds true statistically. This can be important if you're out of day trades and you can't risk entering a position in the middle of the day.

However, one thing I've noticed is that it's much better if the stock has bounced off its intraday low. I was out of day trades today in my Sogotrade account, so I shorted CNAM near the close at $9.01....it met all my criteria. This was very near its intraday low. However, seconds later the stock closed at $9.45!!!!!! This is not the first time where I've gotten blindsided a large order at the close....this has probably happened to me 3-4 times now. I've noticed that every time I've been blindsided, it's when the stock looks like it's going to close near the LOD. I went back and looked at past charts of red floaters and it looks like the most successful overnight ones are the ones that don't close near the LOD.

So, just based on past experience, I think I won't be shorting red floaters near the close if they're close to their intraday lows....just too much risk of a bounce, either at the close, after-hours, or the following morning. Currently CNAM is hovering around 9.25-9.30 after-hours, which isn't too bad, but not where I would want it to be.

No watchlist tonight since I don't have any day trades available tomorrow so I'll just be watching my overnight CNAM position.

Disclosure: Short 300 shares CNAM. No other positions.

Watchlist for Monday 3/8/2010

2010-03-07T20:03:00.000-08:00

Sorry about the lack of trade recap on Friday....had too much going on and couldn't post. Basically took a larger loss than normal on the VSTNQ red-to-green move when I got cocky and took a larger position than normal. I did have a decent gain on a CNAM long, a small gain on a BEE long, and losses on the failed GRT and BELM breakouts. Overall loss on Friday was $-200.40.

I'll try to make a future post about position sizing and my VSTNQ trade to show the mistake that I made, and why I added to my position when I shouldn't have.

No time to post charts tonight....been too busy writing articles for Journal of Pure Power.

WATCHLIST:

Short: MCGI ZANE VSTNQ GLRP CHGY SCOK CNAM TIVO
Breakout: NLS OCNW SCLX IRLD CMRG

Trade Recap & Lesson, and Watchlist for Friday 3/5

2010-03-04T20:13:00.000-08:00

Another mismanaged trade today. MILL gapped way up. I tried to sell part of my position on the gap but it dropped very quick. It bounced, and I held. When it failed to break the HOD the second time, that was the time to think about selling. It had support at 3.20. Knowing it was a OTC stock, this time I wasn't going to wait for the break of support before I sold (like I did with NVLT). The bid was at 3.23 and the ask hovered between 3.25 and 3.30. I decided to wait to see if the bid fell below 3.23, and I would sell if that happened.

Well, the bid dropped to 3.20, so I decided to sell. I put in an order to sell at 3.20. I was using Sogotrade, which doesn't always have the best execution. Top that off with slow OTC execution and that's trouble. The bid fell below my order, so I re-entered an order for 3.18. It fell again, so I re-entered. The stock started falling quickly now, with the ask coming down as well. I finally got out at $3.02 for a $-90 loss. Fortunately my position was small.

Today's lesson is that when I'm playing OTC stocks, I need to give some room. If the bid was at 3.20, I should've put in a limit order to sell at 3.15 or so, to give me some room in case the bid dropped out from under me. This is especially important on a more illiquid OTC stock; MILL was only trading 200K shares per day.

I also should've realized that when MILL gapped and crapped, I should've just exited on the bounce around 3.30, as gap & craps rarely come back to re-test their HODs.

But that's the game of trading....every trade is different and every trade you learn something new. I've been at this for about 1.75 years now and I still learn something new almost every day.

Went long BELM at EOD on the earnings breakout

WATCHLIST

No charts tonight.....way too many tickers on watch

Short: VSTNQ ZANE SCOK CHGY CNAM XFN MCGI

Breakout: GRT OCNW BEE JAZZ VHC GGWPQ ETM BELM

Disclosure: Long 700 shares BELM. No other positions

Trade Recap & Watchlist for 3/3/2010

2010-03-03T21:02:00.000-08:00

No time to post screen shots or charts tonight.

Basically scratched on a VSTNQ short today (short at 0.51 and should've covered at 0.40 but I got greedy and ended up covering at 0.51 again), and a small loss of commissions on a MDVN long.

P/L: $-28.58

Went long MILL near the close and holding

WATCHLIST

Just MILL for me

Trade Recap & Watchlist for Wednesday March 3rd

2010-03-02T21:15:00.000-08:00

Sold ESPH today for a scratch when it couldn't convincingly continue its breakout

P/L: $-4.85

WATCHLISTS

SHORT .... lots of OTC stocks on short watch

CHGY...potential short if you can find borrows, or potential long on red-to-green

VSTNQ....first down day after big run up, and a red floater

HEPI with a lot of green candles.....I think it's time for a red one.....

SQNM also with a lot of green candles....it's time for red....

BREAKOUT WATCH

GRT on the 4.50 break

PCYC on the 6 break

MILL looking to test 52s

SOMX on the 4.80 break

OCNW consolidating

Disclosure: No positions

Trade Recap & Watchlist for 3/2/2010

2010-03-01T18:52:00.000-08:00

One losing trade on the low float preleader CIIC. Probably should've had a tighter stop and recognized a bit quicker that it was going to fail at its move....I tried to get out at 2.26 but the bid fell too fast. It did bounce back to 2.30 but no way was I going to keep holding to see if it would do that

Went long ESPH near the close, looking for the gap

P/L: $-145.03

Watchlist

The ESPH breakout

Also still watching LTUM, GRT, and PCYC

Disclosure: Long 3000 shares ESPH. No other positions

Watchlist for Monday March 1st

2010-02-28T14:45:00.000-08:00

No charts tonight since it's pretty much many of the same tickers, except for the potential earthquake play TAYD

Short: IFLG (only if it breaks 7.80 support)
Breakout: LTUM GRT SFN ESPH PCYC SCSS TAYD

Losing Streaks....Some Statistics

2010-02-27T18:39:00.000-08:00

On Friday I had 6 losing trades in a row.

This post is to show how losing streaks like this are perfectly normal. What I like about using TradePerformance Lite is that it tells me my longest winning and losing streaks for each strategy I use. Here's the winning percentages of the primary trading strategies I use, along with the winning streaks and losing streaks.

Buying Perfect Morning Technical Breakouts
Winning %: 70%
Maximum Consecutive Winners: 8
Maximum Consecutive Losers: 4

Buying Afternoon Breakouts
Winning %: 71%
Maximum Consecutive Winners: 9
Maximum Consecutive Losers: 4

Shorting Over-Extended Stocks in the Morning
Winning %: 73%
Maximum Consecutive Winners: 16
Maximum Consecutive Losers: 5

Shorting Over-Extended Stocks in the Afternoon
Winning %: 71%
Maximum Consecutive Winners: 8
Maximum Consecutive Losers: 3

Buying Red-to-Green Moves on Heavily Shorted Stocks
Winning %: 76%
Maximum Consecutive Winners: 10
Maximum Consecutive Losers: 2

Buying Low-Float Preleaders Under $5 and Up on Significant News
Winning %: 70%
Maximum Consecutive Winners: 9
Maximum Consecutive Losers: 5

All Strategies Combined
Winning %: 72%
Maximum Consecutive Winners: 22
Maximum Consecutive Losers: 8

So, you can see that, even when you have a 70%+ winning percentage, you can still have significant losing streaks. You can see that I had losing streaks of up to 8 in a row. But you can also see that I had as many as 22 winners in a row.

Stats like this can help you trust your edge when you're in a slump. As long as you faithfully follow your trading rules, and the stats indicate that you truly have an edge, then you can have the confidence to keep trading your edge even when you've had numerous losers in a row.

Trade Recap for Friday 2/26/2010

2010-02-27T17:45:00.000-08:00

Despite trading my usual strategies, I had 6 losing trades on Friday.

CHCI was a low float preleader that spiked briefly but failed to follow through with a good move. Then I played the VHC breakout and that failed as well.

I played the MPET breakout and that failed to hold $2. Then I played the MCGC breakout but I chased it a bit....had a stop just under $5.14 support and got stopped out.

IFLG spiked out of the open and then started looking weak.....I shorted just under $8....it hovered around $8 for a bit, but then big bidders started stepping in and I got squeezed out. Then I played the OSUR breakout but the breakout was weak and I got stopped out at the end of the day.

Six losing trades for a total P/L of $-559.49.

That's a big hit for the day, but I'm not upset about it, because I followed my strategies (except for chasing MCGC a bit) and none of them panned out. I'm more upset about Thursday's trading since I broke rules and also didn't take profits. Of course, Thursday's and Friday's results pretty much wipe out my excellent day last Friday.

When you look at it, it's only an average loss of $-93 per trade. That's less than 1% of my total equity per trade, which fits in with Van Tharp's model of risk management and position sizing.

Losing streaks are quite normal. I still have a 70% winning trade rate for the strategies I'm using. I'm going to try to make a post about losing streaks tomorrow, just to show how they are a part of the game even when you have a 70% edge.

Watchlist for 2/26/2010

2010-02-25T19:46:00.000-08:00

I won't post charts tonight since many of the tickers are the same as what I've been watching the past week

SHORT: IFLG.....this time if I have a profit I'll take it

BREAKOUT: LTUM GRT SFN ESPH WEL OSUR OCNW VHC ETM PCYC SCSS

Trade Recap for 2/25/2010

2010-02-25T08:01:00.000-08:00

Completely screwed up today big-time.....a couple big lessons learned

First came my overnight position in NVLT.....I figured I would sell if it dropped below 30 cents....well it did but I couldn't get out despite putting in a market order.....and I ended up getting out at 26 cents.

Two big lessons here. First, I should've never entered.....I should've waited yesterday until I saw it break the HOD (which it never did). That way I would've known that buyers were in control. Instead I was entering while it was still in a channel.

Second, when it failed to move out of the open today and started to test .30, I should've gotten out then....that was the sign that things were no longer predictable. Waiting for the break below .30 at that point was too risky.

So I ended up taking a big loss on a trade that I actually had a very small position on.

Then came IFLG. I was up nicely on my position, short from an average of $8.32. It gapped down today and was below $7.

It hovered below $7 for the first 25 minutes of trading. I like to exit on an exit signal or support level....I was aiming for low $6's as a target since that was the next support. The other potential exit signal would be a 10/60 cross to the upside on the 5 minute chart. Well, it wasn't close to either.

IFLG then broke back above $7. I waited as it was still red on the day and I figured it was just a small spike.

But it kept spiking....

and spiking....

....then it tested green.....

.....then it went green.....

.....but it was still below $8, so I figured I would keep holding as that would be the next important level....

....then it broke $8.....

Finally it got back to my average price, and I couldn't risk a profit turn into a big loss, so I jumped out at $8.38 for a $24 loss.

I was up over $500 on this trade and I lost all of that.

I have to remember....this stock was EXTREMELY low float. As soon as it broke back above $7, that was the time to get out.

I doubt I'll trade anymore today. I'm just too disgusted with my trading. And I can't reshort IFLG today because I would risk a margin call.

P/L: $-332.86

Trade Recap & Watchlist for 2/25/2010

2010-02-24T20:43:00.000-08:00

Made about a 6% gain off of shorting TXCC from yesterday's watchlist. Even though I was short from 2.68, I had to take 200 shares off the table at 2.74 because I got a warning from IB that I had gone negative on my excess liquidity, and I didn't want to risk being forced to cover. Also went long NVLT in the afternoon which I'm currently holding.

Small loss on the failed SFN breakout from yesterday's watchlist. Too bad I was tied up in that because AGYS had a beautiful breakout which I couldn't enter because I didn't have the buying power.

Added to my IFLG short position

P/L: $137.41

WATCHLIST:

Short watch.....

IFLG with the first down day and a red floater.....a lot more downside....I'm currently short

CIMT is a red floater with potentially more downside....IB didn't have borrows in the morning so I missed the morning tank, although I should've checked for borrows near the close as red floaters make for good shorts into the close if it's the first red day

Long watch.....

NVLT gapped down 80%......I'm currently long for the bounce

Other long watches (mainly the same ones from previous posts): LTUM GRT PIR SFN NNVC ESPH MTSN ISCO MNAP SCSS WEL OSUR

Disclosure: Short 400 shares IFLG and long 5000 shares NVLT. No other positions

Trade Recap & Watchlist for 2/24/2010

2010-02-23T21:33:00.000-08:00

Another late night for me so no time to post trade screen shots or charts.

Basically sold WAVX today for a loss on the failed breakout and LTS for a gain. I'm also currently short IFLG.

P/L: $-14.13

WATCHES:

Finally we're getting some nice stuff on short watch......IFLG CIMT TXCC AENY

Breakout watch....mostly the same tickers, with a few extras......LTUM AGYS GRT PIR SFN NNVC ESPH MTSN INHX ISCO MNAP

Disclosure: Short 200 shares IFLG. No other positions.

Trade Recap & Watchlist for 2-23-2010

2010-02-22T20:26:00.000-08:00

No time to post charts tonight

Just a small gain & small loss today, but I'm up decently on my overnight LTS position

P/L: $-15.10

WATCHLIST

Finally some stuff on short watch.......SCOK IFLG.....these are both pretty illiquid so if I play them it will be with a small position

Mainly the same stuff on breakout watch: LTS WAVX LTUM AGYS GGWPQ GRT PIR SFN NNVC ESPH MTSN

Disclosure: Long 3000 shares LTS and 1000 shares WAVX. No other positions.

Watchlist for Monday February 22

2010-02-21T16:47:00.000-08:00

Nothing on short watch

BREAKOUT WATCH:

NR with a breakout....I'm currently long

ESPH just touching a breakout....I'm currently long a small position

Still watching LTUM for 1.41 break

Still watching AGYS for 10 break

Still watching GGWPQ

Watching GRT for 4.53 break

PIR is consolidating

LTS is consolidating

SFN is consolidating

Disclosure: Long 400 shares NR and 1000 shares ESPH. No other positions

Statistics: Shorting in Morning Versus Afternoon

2010-02-20T15:05:00.000-08:00

Last week I compared the trading statistics of buying breakouts in the morning versus the afternoon.

In this post I'll compare shorting in the morning versus the afternoon. Tim Sykes (whose strategies are the primary ones I follow) often says that shorting in the afternoon is safer than the morning, as the risk of a squeeze are higher in the morning.

Here are my stats for shorting big run-ups in the morning versus the afternoon. I define "big run-up" as a stock that is 80%+ off its 5 day low. Keep in mind that these stats are where I follow my trading rules, including not shorting anything in the first 5 minutes of trading. I don't go for morning panics anymore because I've had too many situations where I've gotten squeezed. So these morning stats mean I'm shorting anywhere from 6:35 AM PST to before noon PST. These stats are since the end of September.

Shorting in the Morning:
# of trades: 175
Winning Percentage: 73%
Ratio of Gains to Losses: 2.76

Shorting in the Afternoon:
# of trades: 14
Winning Percentage: 71%
Ratio of Gains to Losses: 8.85

You can see that my winning percentage is nearly identical. However, my ratio of gains to losses is way better in the afternoon, which means my losses when shorting in the afternoon tend to be smaller. This is in agreement with Tim Sykes's comments that there is a lower risk of a squeeze in the afternoon.

However, you can also see that there aren't that many good afternoon opportunities. The vast majority of my shorts have come in the morning, mainly because that's when the opportunities have presented themselves.

A gain/loss ratio of 2.76 in the morning is still excellent (I want any trading strategy I use to have a minimum ratio of 2), and it shows that I have had an edge when shorting in the morning.

DISCLOSURE: I am a Tim Sykes affiliate and I receive a commission for any products bought through my affiliate link.

Trade Recap for Friday 2/19/2010

2010-02-19T17:47:00.000-08:00

Solid day today

Opened my first trade with Sogo today...gotta love the zero commissions for the first 100 trades

P/L: $847.59

I'll try to make a post this weekend about shorting in the morning versus the afternoon.

Disclosure: Long 1000 shares ESPH and 400 shares NR. No other positions.

Trade Recap & Watchlist for 2/19/2010

2010-02-18T20:29:00.000-08:00

Longed VHC today on the breakout....currently holding

P/L: $0

My Sogotrade account is now funded and ready to go, and I put in an application for SogoElite today.

WATCHLIST

No worthy shorts on my list

BREAKOUT WATCH:

I'm currently long VHC

Watching LTUM for the 1.40 break

Watching FRZ for the 6.30 break

AGYS looks like it wants to break $10 really bad

Watching GGWPQ

Watching LLEN for the 8.09ish break

Watching GRT for continuation

Watching DDD for continuation

Disclosure: Long 700 shares VHC. No other positions

Trade Recap & Watchlist for 2/18/2010

2010-02-17T22:19:00.000-08:00

Another late night for me so again, no time to post charts or detailed trades.

P/L: $37.95

I'm closing my Cy account and am going to move the funds to SogoElite (probably under my wife's name as Sogo won't let me have margin accounts under both Sogotrade and SogoElite). I'm finding I'm just not progressing in the Cy account. I tend to lose some discipline when I can day trade too freely. My other accounts are growing despite being under the PDT rule in those accounts.

I'll still have the issue of not being able to trade the SogoElite account from work, but at least I'll be able to trade OTCBB's, I won't be paying $100/month in data fees, and my commissions will be nearly cut in half as I won't have to pay ECN fees anymore. I'll probably be more focused and selective with my trades as well since I'll be limited on day trades.

WATCHLIST

SHORT: BLGW RNN

BREAKOUT: WAVX GPX TSHO LTUM FRZ AGYS LTS ACLS GGWPQ

Trade Recap and Watchlist for 2/17/2010

2010-02-16T21:34:00.000-08:00

No time to post charts or detailed trades tonight.

Basically took losses on failed afternoon breakouts of CPE and SNSS. Also took a small loss on being too aggressive on an RNN short. Currently long CNXT

P/L: $-214.82

WATCHES:

Short: RNN BLGW

Breakout: CAGC WAVX MTSN GPX TSHO LTUM AGYS

Watchlist for Tuesday 2/16/2010

2010-02-15T21:02:00.000-08:00

No time to post charts tonight

SHORT:

BLGW....getting the manipulated look....would love to see it pull an eventual NXTH

RNN....looking overextended

BREAKOUT:

AENY CPE LTUM AGYS TSHO PIR OCLR NLS

Buying Breakouts: Morning Versus Afternoon Stats

2010-02-12T21:07:00.000-08:00

Tim Sykes has talked about how your odds are better when you buy breakouts in the afternoon versus the morning.

As I've shown in other posts, I've been keeping meticulous stats of all my trades using TradePerformance Lite. I've kept separate stats for buying breakouts in the afternoon versus the morning. When I say breakout, I'm talking about a stock breaking a resistance level and hitting a 52 week-high or close to it. While there are other types of breakouts, these are the ones I play.

These are stats since early November.

Morning Breakouts:

Ratio of Gains to Losses: 1.94
% Winning Trades: 55%

Afternoon Breakouts:

Ratio of Gains to Losses: 4.21
% Winning Trades: 81%

Obviously, Tim is right in that your odds are much better when buying a breakout in the afternoon versus the morning. There's a lot more fakeouts and strong pullbacks in the morning.

However, there are still nice breakouts to be played in the morning. It's a matter of narrowing morning breakouts down to the absolute best opportunities.

I broke the morning stats down into two categories. The first I would define as "perfect technical morning breakouts." These would be stocks that have a very clear, almost perfect resistance line on the 52-week chart, where the stock has tried multiple times to break it but has failed. GKK is one example of a perfect morning breakout that I played:

The other category would be any breakouts that don't fit that category. For example, maybe the stock is breaking off recent consolidation but there's no clear resistance line. CEP is an example:

When you split the morning breakouts into these categories, the stats are telling:

Perfect Technical Morning Breakouts:

Ratio of Gains to Losses: 16
% Winning Trades: 87%

Other Morning Breakouts:

Ratio of Gains to Losses: 0.56
% Winning Trades: 41%

Obviously, the edge to buying morning breakouts dramatically improves if you focus on the "perfect" breakouts. However, there aren't a lot of these....I only have 15 such trades since early November. Keep in mind that all of these trades stick to my 5-minute rule....I won't touch any stock that breaks out in the first 5 minutes of trading...there's too much risk of a pullback.

With afternoon breakouts, the setups don't need to be as perfect. I just like to make sure the stock is breaking off recent consolidation with volume, and that it has a history of continuation after breaking out.

In the future I will post a comparison of shorting in the morning versus the afternoon.

Disclosure: I am a Tim Sykes affiliate and I receive a commission for any products purchased through my affiliate link.

Trade Recap for Friday 2/12

2010-02-12T19:41:00.001-08:00

No trades today.

I'll try to make a post this weekend about breakout stats.

Have a great weekend!

Question about Historical Intraday Charts

2010-02-11T20:41:00.000-08:00

If any of my readers know where I can find historical intraday charts (for example, if I wanted to study some of the huge breakouts from a few years ago like PDO), please let me know.

Trade Recap & Watchlist for Friday 2/12/2010

2010-02-11T20:40:00.000-08:00

Small loser in Cy account today, but decent winners in the other 2 accounts.

I'm going to stop buying pullbacks on morning breakouts (which I did with LNUX today). In the stats I'm keeping, I'm finding there's not a consistent edge doing that....afternoons are much better. I'm going to post about this in the near future.

P/L: $317.81

WATCHLIST

SHORT:

BLGW has got the manipulated look. Might be a while before the end comes though

LONG:

Still watching AENY

Still watching CPE

Watch LTUM for the 1.40 break

XXIA

AGYS....$10 break could be big

Disclosure: No open positions

Trade Recap & Watchlist for Thursday 2/11/2010

2010-02-10T20:19:00.000-08:00

Played LIOX today in my Cy account, going long 300 shares at $3.10 but the breakout didn't hold and I was stopped out at $2.98. I don't have the trade screen capture because I entered the trade before I went to work and my stop got hit while I was at work.

I did go long NFP on the afternoon breakout.

I sold my GNXP position today at 1.06 when it broke 1.07 support (only to see it bounce back up), for pretty much just a loss in commissions. I did go long APPA on the afternoon breakout.

P/L: $-71.02

WATCHLIST

SHORT:

CRWG is a pump....just a matter of when the dump will come

BREAKOUT:

NFP...I'm currently long

APPA from yesterday's watchlist....I'm currently long

Hopefully AENY will hold these levels for a few days and get ready for a new breakout

Still watching CPE for the 3.15 break

Watching IKAN for the 2.62 break

Watching LTUM for the 1.41 break

Disclosure: Long 300 shares NFP and 1000 shares APPA. No other positions

Trade Update & Watchlist for Wednesday 2/10/2010

2010-02-09T19:38:00.000-08:00

Bought some GNXP right before the market close as it was flirting with a breakout

WATCHLIST

Nothing on the short side

BREAKOUT WATCH

AENY....I wish I had played this one near the market close rather than GNXP....but 5.59 is the 52-week high so it could still be a good long on the break of that

MITI is still on watch

APPA creeping up towards 52s

CPE....52 week high is 3.15

HEK.....barely hit a 52-week high today then pulled back a little bit....but hung near the HODs nicely

GNXP....I'm currently long

The Sogotrade account was activated today. Now it's just a matter of getting it funded.

Disclosure: Long 1000 shares GNXP. No other positions.

Trade Recap Tuesday 2/9/2010

2010-02-09T08:05:00.000-08:00

Not much to talk about today....small profit off a small position on the preleader CLWT, and a break even on JOEZ when it couldn't follow through with the breakout

P/L: $35.06

Probably won't do any more trades today. I've got no day trades in my IB account, and I would risk a day trade margin call in my TOS account if I were to enter another position and have to exit it today for some reason. And my new Sogo account isn't funded yet....which is too bad because there are some nice OTCBB plays today.

The only way I'll enter a new trade today is right near the market close if there is a good opportunity.

Trade Recap & Watchlist for 2/9/2010

2010-02-08T18:22:00.000-08:00

It's the wife's birthday tonight so no time to make a detailed post or post charts.

Took a loss on 2 failed afternoon breakouts today

Still holding JOEZ

P/L: $-147

I'm opening a Sogotrade account and moving some of my Interactive Brokers funds there. I'm pissed that I missed the gimme short on NXTH today, and Sogo had borrows. Of course I never bothered to check Thinkorswim and apparently they had shares.

This will give me 2 accounts under Genesis....my Cy group account (where I can short stocks under $3, but can't play OTCBB's) and the Sogo account (where I can play OTCBB's and can access the web trader from work, but I can't short stocks under $3).

Overall this will give me 4 trading accounts: IB, TOS, Sogo, and Cy Group.

I'm debating whether to move the Cy account to SogoElite. It's a tradeoff. I can freely day trade with Cy, and it's direct access so executions are lightning fast, but I pay around $100/month in data fees. Plus I have to pay ECN fees. We'll see....it will also depend whether I can have a Sogo account and SogoElite account simultaneously.

WATCHLIST

Short: JYHW

Long: AENY MITI SFN APPA CPE GNXP JOEZ

Disclosure: Long 1400 shares JOEZ. No other positions.

Watchlist for 2/8/2010

2010-02-07T21:04:00.000-08:00

Sorry that I didn't have a detailed post this weekend regarding trading strategies or statistics. I wanted to post one but I've just been swamped this weekend, and of course I had to watch the Super Bowl as well.

I also apologize for not posting any charts tonight.

SHORT: NXTH (a known pump & dump)
LONG: AENY MITI SFN

Trade Recap February 5th

2010-02-05T18:28:00.000-08:00

Not much to talk about today

I eventually sold NDN at $15.45 but it's not on the trades above because I had set an OMS stop in Laser when I went to work. My stop got hit when I was at work, and you can't get back into Laser after 3 PM PST.

You might be wondering why I didn't take profits when NDN was around $16. I've been analyzing a lot of the breakouts that I've played, and it turns out that I'm not letting them run enough. The vast majority have gone significantly further than the point where I sold. A perfect example is ISCO, where I was in at $1.23, and sold at $1.27, only to see it go to the $1.80's. Or when I was in LUNA in the $3.20's and sold in the 3.60 - 3.90 range, only to see it go to near $5. So I've decided to hold onto breakouts longer, putting a break-even stop at my entry when I'm up about 5% or 50 cents on a $10+ stock, and at least holding the stock overnight.

P/L: $-14.32

Trade Recap, & Watchlist for Friday 2/5/2010

2010-02-04T21:15:00.000-08:00

More breaking rules today....I played JOEZ premarket when I never play things premarket....luckily I kept my positions small so it didn't hurt me too bad.

PCYC broke out nicely today off of yesterday's watchlist but I wasn't keeping an eye on it, and I was at work so I didn't have my StrategyDesk alerts. Man I get ticked when I have a stock on my watchlist that moves and I miss it.

No time to post charts tonight....I'm really tired right now....

Total P/L: $-91.84

WATCHES

SHORT: NXTH

BREAKOUT: JOEZ NDN

Trade Recap, and Watchlist for Thursday 2/4/10

2010-02-03T17:20:00.000-08:00

My day was similar to Reaper's

Total P/L: $-602.33

What went wrong? Lots of things. Overtrading, chasing breakouts rather than waiting for consolidation, and blindly following IL and Tim Sykes even though the trades they made didn't fit with my style and were not trades I would have made on my own.

90% of the trades that I made today in my Cy account are trades that shouldn't have been made. If I had made the trades I should've made, it would've been a small gain today....but instead it was a big loss.

I also shouldn't have made the ACLS trade in my TOS account....there was no clear consolidation before the breakout.
That's the biggest thing I need to work on when going long....making sure I only buy breakouts off of intraday consolidation. I sometimes chase if an alert goes off and I see the breakout on the day chart, without ensuring that there was some type of basing or consolidation on the intraday chart. I will write a future post about this.

CRWG made up almost half of my losses today. I don't regret playing it....it was breaking off consolidation with some volume. It just failed to have a strong breakout. My stop was a bit wide but it had to be because of the spread and liquidity.

WATCHLIST

Nothing looks good for a short.

CNLG might be a good bounce play if shorts cover on red-to-green.

PCYC is consolidating...potential breakout.

Trade Recap, and Watchlist for Wednesday February 3rd

2010-02-02T21:22:00.000-08:00

Not a good day in my Cy Group account, but my gains in my other 2 accounts more than made up for it. I did miss a big gain by hesitating on the preleader BSDM.

I'm considering taking the money out of my Cy account and putting it in another broker. I'm having trouble growing my Cy account because I basically only have 90 minutes to trade with it in the morning. I can't trade with that account from work since there is no web interface, and Laser doesn't have OCO order capability so I can't set stops and profit targets and leave....I generally have to close out all my trades. I miss all the good afternoon trades in that account, along with some good mid-morning trades, which is tough because if I start off the day with a loss, I often miss the opportunities to make the money back. Generally the only trades I'll hold are ideal short setups that I feel comfortable holding over multiple days. If I enter in the morning, I'll set a stop and then go to work.

The thing I like about Cy, though, is the good borrows. I could switch to Sogotrade, which has a web interface and is also under Genesis Securities, but Sogo does't let you short stocks under $3, and I hear a lot of bad things about their trade execution. We'll see....I haven't decided yet.

Total P/L: $237.16

WATCHLIST:

No time to post charts tonight

SHORT: CNLG (tough to find borrows for this one)

BREAKOUT: ACLS SFN ETM HZO MSPD UAUA MAPP MMR LPX

Trade Recap, & Watchlist for February 2nd

2010-02-01T19:53:00.000-08:00

A couple small winners in the Cy account today.....then I had to go to work and missed the big upside move in CNLG

Shorted PEIX on the break of $2 support in my IB account....will hold as long as it stays under $2....would like to see it dip to $1.75ish support where I'll probably cover

Longed ISSI at $6.25 on the afternoon breakout in my TOS account....it closed at $6.39 and I'm holding overnight

P/L: $58.75

WATCHLIST

Only shorts on my watchlist tonight

CNLG

ISCO

My Trade Performance Using Tim Sykes Trading Strategies

2010-01-31T09:17:00.000-08:00

Similar to how Reaper has posted his performance using trading strategies taught by Tim Sykes, I wanted to post about my performance using these same strategies.

I have been trading using methods taught by Sykes (with some of my own little tweaks here and there) since I started this blog in June 2008. However, I never really kept track of my performance using his system. Back in September of 2009, I discovered that the TradePerformance Lite software, which I use to track my trades, has the ability to break performance down by different trading strategies. So, starting September 18th of 2009, I started categorizing my trades into various strategies, including different strategies taught by Sykes. These strategies include: buying breakouts (separated into morning and afternoon), shorting over-extended run-ups (separated into both morning and afternoon), shorting pump and dumps, and his TIMAlerts service.

I have been experimenting with a variety of trading strategies, but so far, Sykes's system has by far been the best performing for me. In fact, my Interactive Brokers account, in which about 90% of my trades have been in Sykes's style, is now up 76% since April of last year, and I'm hampered by the pattern day trading rule in that account. My Cy Group and Thinkorswim accounts have not performed as well in that time frame, but I also have been experimenting with other trading strategies in those accounts. I also only recently re-opened my Thinkorswim account, and my position sizes are very small in my Cy account.

Here is a chart of my total cumulative profit since September 18th. Keep in mind that most of these trades are in my Cy Group account, where I tend to only use about $1K per position (or less). The profit would be dramatically greater with larger position sizes.

Here is a chart of my profit/loss by individual trade

Here is my equity curve by day

Here is my profit/loss by day

Here are the statistics for the trades. You can see my overall trade win % is 72.3%, and my ratio of gains to losses is 3.69. At one point I had 17 winning trades in a row, and I've only had 6 losers in a row. One thing to keep in mind about the TradePerformance software is that if you scale in and out of positions like I do, it will count those as separate trades. For example, in my last SIRI trade, I scaled in at 0.795, 0.8101, and 0.802, and then took my profits at 0.8593 and 0.857. TradePerformance counted this as 3 winning trades. So my 17 winning trades in a row is not going to be 17 winning positions in a row....it will be less than that.

Another thing to keep in mind is that these stats don't include trades where I broke my trading rules. The reason I keep trading statistics is to know if there is an edge to a particular strategy. However, if I break a trading rule that is related to a particular strategy, then it's not the fault of the strategy....it's my own fault.

If you are interested in Tim's strategies, I highly recommend you check out his DVD's. Pennystocking Part Deux and TimFundamentals Part Deux are the best ones. Now, keep in mind I am a Tim Sykes affiliate, which means I do receive a commission for every product bought through my affiliate link. However, I am very honest in my assessment of Tim and his products; in fact, you can see that not all my reviews of Tim's products are positive (like my review of his Shortstocking DVD). While his strategies are not scalable (which is a good thing in that you don't have to compete against big account traders and Goldman Sachs computers), they are by far the best strategies for people with small trading accounts such as myself.

In a future blog post, I will further break these stats down by the various types of plays.

Disclosure: I am a Tim Sykes affiliate and I receive a commission for products bought through my affiliate link

Watchlist for Monday February 1st

2010-01-29T17:03:00.000-08:00

Posting the watchlist early....nothing too exciting

SHORT

Not much.....PEIX is showing a bear flag....crack of $2 support could make for a big drop

LONG

Again, not a whole lot

SBGI keeps making the list

CEMJQ on the 1.65 break with volume

LTS on the 90 cent break

Friday Trade Recap

2010-01-29T09:17:00.000-08:00

Made about a 5% gain today playing the preloser YTEC...other trades were pretty much a wash

Sold my SIRI position today for a 7% gain

Sold my ISCO position at 1.27 when it tried twice to break 1.30 and failed

Total P/L: $401.46

Market Preleaders on Watch Friday 1/29/2010

2010-01-29T05:47:00.001-08:00

SNV PMCS LSCC KERX JNPR ROSG NUVA

Also watching YTEC which has gapped down 40+%

Trade Recap, & Watchlist for Friday 1/29/2010

2010-01-28T21:35:00.000-08:00

No time to post charts tonight.

Traded preleaders in my Cy account today, but most were losers. One I broke my trading rules (NFLX)....if I'm at least 50 cents up on a position, my stop is moved to the break-even point....but I didn't do that and let a profit turn into a $60 loss. I'm considering rethinking the way I trade preleaders a bit....after keeping stats, I'm not sure I have as much of an edge as I'd like.

Went long on ISCO on the morning breakout but it pulled back sharply and I took a loss. In fact, 2/3 of today's trading losses were on ISCO since I had a 2000 share position. I rebought in the afternoon when it decided to break out again.

I also went long this afternoon on SIRI on its breakout. SIRI has a nice history of gapping and running after breakouts. I would love to see a move to 88 -90 cents tomorrow. It was already up a bit after hours.

Also for some reason I was short a half-share of LYV from my sale yesterday....not sure how that happened...I covered it today.

Daily P/L: $-280.14

WATCHLIST

Nothing on short watch.

Breakout watch: SBGI XTXI GNW ALD ISCO SIRI

Disclosure: Currently long 2000 shares ISCO and 6000 shares SIRI. No other open positions

Market Preleaders on Watch Thursday Morning 1/28/2010

2010-01-28T05:54:00.001-08:00

ETRM MEG EK NFLX FBC PFBC WSTL APPY NTY NOK ASYS OSK CCMP RGEN VICL NENG TER BLL LIFE RCL GMCR CAH IBKC PROV CBEH

Trade Update & Watchlist for Thursday 1/28/2010

2010-01-27T17:06:00.000-08:00

Made a poor trading decision in the afternoon today....bought ISCO in my Thinkorswim account, trying to anticipate a breakout (rather than waiting for it to happen first), only to see it dump right after my entry. Fortunately my position wasn't too big so it didn't cost me too much.

Despite the mistake I still have a nice profit for the day.

Revised P/L for today: $592

WATCHLIST

SHORT

Not much.....I might short PEIX if it can fall below $2 support

BREAKOUT WATCH

SBGI

ISCO is 11 cents off of a 2-year high

CEMJQ

SPRD

Trade Recap for Wednesday 1/27/2010

2010-01-27T07:49:00.000-08:00

Quitting trading early today with a nice profit. With the way the market is acting, I doubt there will be any good afternoon breakouts to play. If there is and I play one, I'll make a new post.

Not much action in the Cy account today....played a few preleaders for a tiny profit

Finally got my 369 shares of LYV today....sold some premarket and the rest after the open for an average sell of $12.01

Total P/L: $691.90

Market Preleaders on Watch Wed Morning 1/27/2010

2010-01-27T06:08:00.001-08:00

KTCC GIB CPE SIFY MNI SANM FICO EMKR ME ROK DV ALTR GILD PXP PLT TEL ATI BA BG APC JVA PMTC DSPG

Trade Recap, and a Sparse Watchlist for Wednesday 1/27/2010

2010-01-26T20:10:00.000-08:00

TRADE RECAP

Shorting SMTX and longing DEAR from yesterday's watchlist worked today in my Cy Group account, although I didn't let my DEAR profits run enough.

In my Thinkorswim account, I sold my overnight position in CNXT at 4.30 for a small profit....but again didn't quite let it run....could've sold it in the 4.40's - 4.50's.

I'm still holding TKTM in my Interactive Brokers account. TKTM trading was halted last night since it is merging with LYV. I am supposed to receive 1.474 shares of LYV for every share of TKTM I own. LYV closed at $12.15 today. I have 250 shares of TKTM at $15.05, for a cost basis of $3763. I should be getting 369 shares of LYV. If I can sell the shares of LYV at its current price of $12.15, I would receive $4483, pocketing a $720 profit or so. I don't know when I'm supposed to get my LYV shares. Hopefully I'll get them soon enough to where I can sell LYV while it's still up above $12.

Today's P/L: $150.05

WATCHLIST

The only stock on watch for me is SBGI...watching for a breakout

Market Preleaders on Watch Tues morning 1/26/10

2010-01-26T05:45:00.000-08:00

THLD MRNA IMOS ALKS AMLN VMW VLTR YMI DVAX BSDM HLCS PRXL MTG SHW ZION TLAB NVO ABC BHI TRV ASH SI

Trade Recap, and Watchlist for Tuesday 1/26/2010

2010-01-25T21:37:00.000-08:00

TRADE RECAP

Big drawdown day in my Cy Group account. I regret longing GNVC....there was no clear consolidation and I was chasing it. AEZS was another long I regret....again, I didn't wait for consolidation. The other frustrating aspect is, since I work full time, I usually have to leave my home computer about 1.5 hours into the trading day. Sometimes I have open trades that I have to close out prematurely, not letting the profit run as much as I would like....that happened on my DEAR short today. There were also a few good afternoon shorts (like GNVC) that I missed.

Decent day in my IB account....made an OK gain by shorting HAFC. I'm currently long TKTM on the breakout.

I also am currently long CNXT in my Thinkorswim account on the breakout

Today's P/L: -132.16

Currently long overnight CNXT and TKTM

WATCHLISTS

SHORT

SMTX is the only thing on my short watchlist....can't find any news behind the move

LONG

DEAR has had a couple big red days....watching for shorts to cover on a red to green bounce....

Still watching EVC for a break

Still watching LTXC as well

Watching SBGI for a breakout

Market Preleaders on Watch Monday Morning 1/25/2010

2010-01-25T05:51:00.000-08:00

KERX AEZS PVTB MED ISR ETN

List is short because I only watch preleaders that are up on significant news. Interactive Brokers is showing me a lot more preleaders but many are up on fluff, nothing, or because market futures are up

Watchlist for Monday 1/25/2010

2010-01-24T10:13:00.000-08:00

SHORT WATCH:

DEAR had its first down day. Possible more downside from here

GNVC made a big move on Friday, now 80%+ off its 5-day low:

HAFC had its first down day on Friday. I missed the morning panic, and wasn't paying attention to potential of a second entry. Read my last my blog post on what to do if you miss a morning panic. I also thought about shorting when I saw it trading sideways around 2.25, and I again I passed, only to see it drop to $2. It closed at $2.18, so it still has more potential downside.

SOMX is a red floater and could be a good short on green to red or break of 2.30 - 2.35 support to fill the gap to the downside. SOMX might also be a good long on red to green action if it can hold these levels.

BREAKOUT WATCH:

EVC consolidating

LTXC on breakout watch

Watch LIEG for the $1 cross....this one is illiquid though....I'd like to see some more volume

What To Do When You Miss the Morning Panic

2010-01-23T22:11:00.000-08:00

In a recent post, I talked about the 5-minute rule and how it can help prevent you from getting squeezed near the open.

Of course, the 5-minute rule also means you will miss morning panics. In fact, 3 out of the 4 stocks on my last watchlist had quick morning dumps. So if you shorted aggressively, you would've profited nicely. However, remember that shorting aggressively out of the open will generally squeeze you more often than get you a profit....at least that's how it's generally worked out for me. Going for the morning panic can often be a risky move.

Now, just because you miss a morning panic doesn't mean you won't get a chance for another entry. One thing I've noticed with quite a few morning panics is that you get a very large bounce as shorts cover their positions to lock in their profits. You can take advantage of this to find another short entry, using the "support becomes resistance" concept when there is a major breach of support.

Let's look at HAFC as an example. HAFC had a quick morning dump on Friday. I nearly broke my 5-minute rule and was about to short at 2.50, but I hesitated, and it dumped quickly. If I had been paying attention, I could've found a second entry on the bounce after the panic. Here's how it could have been played.

Here's how HAFC looked before the market open. This is a 1-minute chart. Note the support around 2.40.

HAFC opens, showing initial signs of a spike in the first minute

Minute 2: HAFC spikes towards 2.60....I'm stalking for a short entry. The bid dropped to 2.50 and I had a chance to enter, but I hesitated.

Minute 3: I miss the 2.50 entry as HAFC falls to 2.40, although I am following my 5-minute rule. Now the question is whether HAFC will break 2.40 support

Minute 4: Holding 2.40 support so far

Minute 5: HAFC tanks below 2.40 support down to the low 2.20's as stop losses are taken out....the morning panic is done

Here's how the 5-minute chart looks. Now, just because I missed the morning panic doesn't mean it's too late to find an entry. Under the concept of support become resistance, I should now predict 2.40 to be resistance, and anticipate a bounce to near that level. At this point, it would be good to put in a sell limit order in the 2.36-2.38 range (to ensure a better chance of a fill), anticipating resistance at 2.40.

Sure enough, HAFC bounces to 2.40. If I had put in a standing limit order just under resistance after the morning panic, I would've likely been filled for a good entry. I could've then placed a stop loss around 2.45 in case 2.40 resistance doesn't hold.

HAFC never makes it back above 2.40 the rest of the day, and ends up falling to the low 2's.

The 3 stocks that had quick morning panics on Friday (DEAR, HAFC, and ISR) all had bounces to a resistance level that had previously been a support level. So you could've gotten a high probability entry on all of these if you missed the morning panic. In fact, shorting the bounce may be a safer and higher probability entry than going for the initial panic, as morning squeezes tend to happen more often than morning panics.

The other advantage of doing this is that, if you use direct access trading (such as Cy Group), you can save yourself on commissions by getting a rebate by adding liquidity with a limit order. In fact, you can get rebates of .0029 - .0032 cents per share if you add liquidity with ECNs like EDGX or ISEQ.

From now on, I'm going to try to make a detailed post on trading during the weekend. It may be a post on trade entries, trade exits, developing watchlists, my stats on various trading strategies, etc. Because I currently work full time, I'm only able to post watchlists on the weekdays. Since I have more time on the weekends, I'll definitely try to make a post similar to this one every Saturday or Sunday.

Market Preleaders on Watch 1/22/2010

2010-01-22T05:36:00.001-08:00

SOMX CNXT JCI RINO ANDS ISRG IGT

Watchlist for Friday 1/22/2010

2010-01-21T19:38:00.000-08:00

Yesterday's watchlist worked out pretty well. Remember that sometimes the things that are on my short list can make good longs on red to green action (taking advantage of aggressive shorts covering their positions). I went long both DEAR and HAFC today for some nice gains. In fact, almost all my plays today came off yesterday's short list.....two longs (DEAR and HAFC), and two shorts (TIBB and MBHI), all of which I made profits on. Today's only loss was on CEP, which was on yesterday's breakout watch (it tried to breakout today and it failed).

Tonight I only have stuff on the short watchlist.....no good breakout setups out there

DEAR was a nice long today on red to green.....looking for a fall below 2 tomorrow

HAFC was a good long today on red to green.....really setting up for a nice short now....this is #1 on my short watchlist

ISR gapped up today on cancer treatment news.....could be a potential play long or short tomorrow....

BOFL....low float banks have really been running lately

Market Preleaders on Watch 1/21/2010

2010-01-21T05:38:00.001-08:00

ISR STX EBAY SNSS PLXS EL FCS STKL FITB KEY FFIV WDC DOX AUXL ESI MRNA CYTR IMMU CPHI

Watchlist for Thursday 1/21/2010

2010-01-20T21:18:00.000-08:00

No time to post charts tonight....here's the watchlist....

SHORT: DEAR FRGB TIBB MBHI HAFC GRAN

BREAKOUT LONG: ACLS PCYC CEP XRTX

RED TO GREEN LONG: PFSW

Market Preleaders on Watch 1/20/2010

2010-01-20T05:47:00.000-08:00

DEAR LXRX CREE RMBS SIRI ARWR ACLS EAT DEER LAB UQM COV IOC AMED BK NTRS

Watchlisty for Wednesday 1/19/2010

2010-01-19T18:32:00.000-08:00

SHORT WATCH:

VLYF keeps going....probably tough to find borrows though

PFSW could be a good long or short. Long on red to green, short on green to red or proper fading action. Might be tough to find borrows....neither Genesis nor Interactive Brokers had borrows today

GRAN with ANOTHER green day. I shorted today at 1.90 (probably a bit too aggressive on the short...should've waited to see if it would crack the LOD) only to get squeezed out on the 2 break. Will be looking for an opportunity again tomorrow.

BREAKOUT WATCH:

PCYC showing a bullish triangle

Watch TSYS for the 10.50 break

SBGI closed right at 52s....watch for continuation tomorrow

Watch NEXM for the 84 cent break

Watch CREG for the 4.95 break

Market Preleaders on Watch 1/19/2010

2010-01-19T05:55:00.000-08:00

IMOS ENT GNVC BLDP HLCS NLST CRDC AVII MRNA DSCO RNN WMB OMN PH WPZ VECO SSYS WMZ

The 5-minute rule, Investimonials, & Tuesday's Watchlist

2010-01-17T14:25:00.000-08:00

THE 5-MINUTE RULE

I'm going to show you an example of how breaking your own trading rules can cost you.

One of my trading rules is based on Johnny Vento's 5-minute rule. Basically, I don't enter any trades in the first 5 minutes of trading (the exception being OTC stocks where borrows are limited and you need to grab shares quickly). What's funny is how many times I've broken this rule, and how it's cost me nearly every time. Trading is one of those activities where it seems like no matter how many times you touch a hot stove, you forget what it was like to touch the hot stove and you end up touching it again.

Here's where I broke this rule a number of days ago with shorting CYCC.

First, here was the setup. The date was January 12th. CYCC had more than doubled off its lows, and finally showed its first down day. It was showing support at 2.40. The plan was was to short on the break of that support. Here's the trading action from January 11th, as well as the premarket action. You can see the support at 2.40ish. This is the 5-minute chart.

Now for the 1-minute chart. CYCC opens and quickly starts to drop, falling below 2.40. I go short at 2.35, looking for the morning panic.

Next minute....CYCC looking like it might stabilize, but it's still under 2.40 support....

Next minute....CYCC back over 2.40, but it's still red for the day....

Next minute....CYCC now breaks to a HOD and starts spiking....I jump out at 2.47 for the loss....

CYCC continues to spike.....

Here's the 5-minute chart for the day. Now you can see if I had waited 5 minutes like I usually do, I would've saved myself from a losing trade.

What's funny is how many times I've gotten squeezed when trying to short near the open. The fact is, morning panics don't happen very often, and to really profit from them, you've got to be really quick (which I'm usually not). About the only time it's really worth shorting near the open is if it's an OTC stock and you need to grab borrows before they're gone. I simply find that trying to go for morning panics is generally not a very high probability trade.

What's also funny is I've had the 5-minute rule for over a year now, yet I still occasionally need to get burned to be reminded of why I have that rule.

INVESTIMONIALS

Tim Sykes has set up a new website called Investimonials. On this site, you can review all kinds of financial products, including websites, brokers, trading systems, and blogs. You can gain points and prizes for writing reviews. Yes, you can even review my blog, which is currently ranked #8 out of trading blogs. I'd be happy to hear your feedback about my blog on Investimonials. One piece of feedback on there is that I don't update this blog enough. I'm trying to change that now, although it's not easy given that I'm only trading part time and I have a full time job.

WATCHLIST FOR TUESDAY 1/19/2010

Remember that Monday is a holiday, so the markets aren't open.

SHORT WATCH:

GRAN is still #1 on my short watch list. I shorted on Friday at 1.85, but it held up and I jumped out at 1.89 for a small loss. It's now had 7 green days in a row.

PFSW....huge move on Friday

MSEH showing the manipulated look....tough to find borrows....I'd like to see it go higher anyway

NWCI looking over extended....an OTC stock so borrows may be tough to come by

LONG WATCH:

FMCN....watch for the 18 break

FSII still consolidating near 52s

JYHW broke out on Friday. I'm currently long from 1.79.

IMSC....watch for the 0.65 break

EVC...watch for the 3.60 break

XTXI still on breakout watch