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The Market Is A Ship Without A Rudder Heading into Year-End

One of the long-time readers of the site asked whether I have a 2016 outlook.  The funny thing about the market is I have no idea what it will do.  I can, at best, generate statistical probabilities.  However the outcome is ultimately random since each fresh sample is independent from the data set.  In other words, past performance is not indicative of future results.

Anyhow, I find my statistical vision spans two weeks at a maximum via the Exodus algorithmic engines.  My model generates statistics for 5 trading days and is part of the Exodus Strategy Session. Even equipped with these two tools, I find my ability to predict or envision stock market outcomes is most effective on an even shorter time frame.  This is why I do an auction theory report every morning, before the day starts.

My trades are based on statistics generated from actual trading–stats that show that specific trading “pictures” have worked well historically.  Again, past performance is not indicative of future results.  This is why you need to manage risk.

Stats are your research and just a part of the overall plan you need to trade.  You need “setups” defined as specifically as possible, a plan for tracking your performance, a list of issues you are working on, the most common errors you commit and your mechanism to fix them, and a risk profile for the capital you commit to any given plan.

Everything I am saying here pertains to trading.  Investing is a different animal.  This is when understanding your risk tolerance and expectations is key.  Also diversification, position sizing, and outsourcing your fundamental research to The Fly, in my opinion.  Also you need to embrace your inner lazy man and just let the investments work.  This is hard for people.

I have completely digressed.  Heading into year-end I only have stats going out to the close of tomorrow.  After that everything is neutral–all cycles are complete.  So I may elevate some cash and cruise into the new year.

Exodus members – the Strategy Session is published.  Be sure to check it out.

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Can You Make A Series of Good Decisions?

I can sit here and lament about losing money, especially the instances where my own trading folly resulted in a loss.  But mainly I scrutinize my missteps and reflect upon the time these mistakes waste.  Time, my friends, is the most important currency of all.  The corporations will fool you into thinking otherwise but at life’s core is the 40 good years you have to perform the work you enjoy and the success it brings.

The schools only take you so far and corporate jobs often peak and suck away at your soul.  Journalism always seemed fantastic, but the grass is always greener elsewhere, yes?  I am drawn to two types of work—trading and process engineering.  At the heart of both is data analysis.  Business is a series of statistically favorable decisions piled one on top of another.  Thus the role of the robot overlord is born.

I am a robot overlord.  I am encased in enough processing power build weather models for the local teevee network.  I have been mining data on the market for months, honing my helper algorithm Elroi to aid me in navigating the peaks and valleys of volume profile.  Do you know why I am doing all of this?

Because it is only a matter of time before the market returns to this ultraviolent state we see now.  It comes and goes, like the influenza.  I can see it coming and I want tools for trading it.  I don’t want to sell my swing trades, trades like the god damned LEDs.

If I am smart enough to see this coming and formulate a plan of attack for it, then eventually I will get my timing right.  I could blame Multicharts for breaking the Zenfire API on January MOTHER LOVING 1st  this year, but in reality I could use the Mirus DOM to trade manually.  I have been building a plan, a process document if you will, which details every single trading picture, every single entry, every single exit tied to each type of entry, and then coding said rules and extensively back testing them for merit.  All they while I grow my contextual big picture understanding alongside the fine people of iBANKCOIN.

I am just as excited as ever to be a Velcro-shoed futures trader.  I like order flow.  Order flow is pure.  I can see what everyone is doing, even the enemy robots.  I don’t care if order flow is arbitrage or an algo or a fund or the devil himself.  They all either hit the bid or take the offer.  And I can see them.

This post is not achieving any actionable point.  Just know The Raul will continue to plug away at the futures trading process until it’s refined into a consistently profitable methodology.

In the meantime, I will trade my way out of this paper bag a few of these stocks have me in and back to proper glory.  Top picks: THE MOST ULTRAVIOLENT MOMENTUM STOCKS THE MARKET OFFERS.  They are our only store of value.

Tick tock tick tock…

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Snowballing

snowballs

 

We’ve had good fun poking the stupidity of Morgan Stanley in their downgrade of AMBA this month. We banked some nice coin along the way.  The recent leg up in our aging index rally has been mostly to the benefit of old men and their mega cap stocks.  The snoozers, if you will.  We participated where appropriate, riding LO and PPC, but to be honest I could have held less crack rock and more bourbon and cigars, the preferred vice of old men.

But today we saw the speculative juices begin to sizzle.  Today we had WUBA pulling out the tits, Emily Ratajkowski style.  Today was for the brazen and the bold, with social media saying, “not.just.yet my friend.”  So my portfolio finally caught a decent boost.

I think there is more in store and I implore iBankCoin readers to get in line at the feeders: names like GRPN, Z, FB, TWTR, and TRIP.  Pay special attention to TRIP as it appears poised to rip.

I am 95% long and low on cash.  I had to sell PPC today to buy Zillow.  I have so much money tied up in LEDs right now and they are not doing a thing, except for bleeding me modestly.  This industry is ice cold, yet I love it.  What is an intermediate term speculator to do?

We caught the Apple breakout yesterday via 12631 service.

Top picks into the turkey: GOGO, YELP, and Z.

I have huge positions in CREE and BALT, yet I do not mention them as top picks.  Hmm…they need to DO SOMETHING.

PS I pretty much spoon fed this NASDAQ rally to you this morning

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You Will Take Your Day of Terror and You Will Like It

Month:  November

Day(s) of Terror: 1 2

If you find yourself staring down the barrel of an anti-momentum ray gun, with losses being sprayed all over you face and chin, fret not oh wet one.  Every honest speculator who graduated from QE University knows you get TWO DAYS MINIMUM of sheer terror per month.

They keep you H honest.

As you can imagine, my book is down today, 3% to be precise.  The reasons are multipronged, from the dick handlers at Morgan Stanley to the collective short sellers, the royal short seller if you will, to the news which came from Mr. Icahn while I was eating a late day taco.

Funny little bit of commentary really, I was short the NASDAQ futures for over two hours today, from noon to like 2:30pm, with my fingers sore from hovering inches above the hotkey to close my position.  It was a scalp gone terribly awry.  I kept my focus and was able to ride through some noise to get some profit on the trade.  I closed it perhaps 5 minutes before the whole shit house went up in flames.  Instead of riding my steed to glory I was soliciting street meat.  Truth be told I would never hold through that entire move lower but I certainly could have extracted a few hundred more pesos.

GOGO caught a downgrade from Redcoat Simon Flannery today and went spiraling lower.  It was only a matter of time, in days, before either a British air raid or any other hit piece sent GOGO lower.  If you bought shares of GOGO the minute they gapped up post earnings, you are still up a cool 11% right now.  I commend you for flying in my ranks.  Let me sum this up so we can move on—Paul Revere was not around to warn us about the British coming.  Flannery has been covering telecom for over 20 years.  He is old and will be in the diaper long before me.  Morgan Stanley downgrading AMBA was an opportunity to buy.  So is this.

I closed SFM, AAPL, and YGE.  I only like one of those companies beyond a trading vehicle.  This lifted cash a tad over 20% to allow me entry into better pictures.

I bought more WLT, this is the look I like right here.  This is now my third largest position, behind AMBA and PPC.  The chicken don is still poised to ARISE.

Finally let us discuss TSLA.  It is coming in on me and I am thrilled.  May it rally to bring in some dumb money and then fail hard into year-end.  Then zombie chart.  Then you will all turn your gay commentary to another CEO so I can have Elon all to myself.  That’s when I go full size.  Until then, or upon further notice, I am patiently waiting to add more exposure.  We have to kill off the hot money studs.

Today was my day to make money actively and I didn’t.  Now I have to just sit here and brood.  I call it getting my Ryan Gosling on.

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Less Indeed Was More

We are treading water up in the market highlands and when the air is thin thoughts tend to mend together into a blur from lack of oxygen.

I made only one adjustment to my portfolio today, reducing my exposure in CREE to a more manageable ¾ size into earnings tomorrow.  I intend to carry ¾ through earnings and use up to a 1.5 position size to trade my way out of any correctionsIf they gap higher, I will simply buy more shares at a greater price.  However I won’t go full size into earnings because as much research as I have done on the opportunity in lighting, my edge is stronger as a technician.  After the sale, I have about 20% of my equity portfolio concentrated into the LED industry via CREE, RVLT, and LEDS.

I want AIXG again, but I may take a pass because it trades in a ghetto way.

PPC has me 10 percent in the hole on a full sized position after two quick trading sessions.  Sometimes all the fancy timing and indicators get smashed with the gravity hammer that is unknown risk.  How was anyone to know a salmonella outbreak would occur the next day?  The stock has undergone heavy selling pressure over the last two days and it is likely to continue tomorrow.  We are coming into an area I believe to be support.  Should it not behave as support, and buyers do not react to the prices as if they are a discount (a reaction like when you touch a hot plate) I will cut my 10% loss.  Being a 10% position, this trade potentially lopped 1% off my book.  It sucks, but I live to fight another day.

PPC still has to work through earnings on Halloween before it gets into its seasonal sweet spot so it appears I was at least one day early on this long.

My other menace stock is ADHD.  The little bastard stock lacks discipline and needs to be made stronger by correction and medication.  HEAVY MEDICATION.  That will teach this stock to misbehave…talking rubbish about ghosts and imaginary friends when it should be memorizing Bible passages.  No, I have not been watching too many scary movies.

CLNT is set up right to be the next winner in the Chinese lottery.  Shorts, I have one simple question, are you feeling lucky punks?  Well, are you!?

Everything else is just wiggling around, waiting for proper order flow to dictate direction.  The RVLT daily chart has the exact picture I hunt for daily, but I suppose I am partial to the name.  I still have a very large position after all.

I traded the /NQ like a jackass today.  I overtraded and clocked a 22% win rate.  I over traded after writing less is more in my morning analysis—that’s what gets my goat.  Futures trading is all about bringing you A-game and following your plan to the T.  There can be no deviation.

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Trade Log and Portfolio Position Analysis

That title was my attempt at the driest headline ever.  The anti-click bait because I don’t want non-core readers peering too deep into my mind.

– Raul

My feel for index future trading is warming up this week as I continue to focus the bulk of my day trading activity to the /NQ.  I have been the beneficiary of these large ranges, capturing a good portion of the range with my trades.

What’s working?

  • Staying on the right side of the market – it was much easier to take longs today
  • Wide EMAs – when my exponential moving averages are wide I have a greater edge
  • Modest price targets – getting a scale off at 1.5 points builds a ton of emotional capital, allowing me to manage the remainder of my position better.
  • Taking cues from the /ES but trading the /NQ

What’s not working?

  • Stacked EMAs – my edge deteriorates when my EMAs converge too tight (CHOP!)
  • Afternoon trading – I took two meetings today.  Afterwards I could not focused and botched a trade

Midweek progress:

33 trades, 25 wins, 76% win rate

Goal:

50 trades, 75% win rate.  I can build size onto this.  50 trades is the minimum threshold to consider any set of data to be statistically significant.

I have to keep in mind that trading opportunities are much more bountiful in this wildly indecisive tape.  Large daily ranges certainly benefit day/scalp trading.

About half of my trades last less than one minute it is beautiful my friends, instant gratification that would satisfy the most impatient gambler.

I put out a quick note on the /ES this afternoon when a large divergence occurred between the cumulative volume delta and price.  That turned out to be a solid trade signal.  I have noted the occurrence several times now and it now merits a proper backtest.  Just add that to the ole ‘to do’ list.

My book is up 1.25 percent today led by LEDS which is back to my cost basis and GOGO which is just marinating ever so nicely.  Zillow traded nicely too, making a move which is still of the dead cat variety but I will take it.

The most troubling news today came inside the premium halls of iBankCoin, where an esteemed member of our secret society informed me ADHD in fact develops non-stimulant, non-amphetamine medicines for treating ADHD.  I share my thoughts for record keeping purposes and also to solicit feedback from people I know are much smarter and more informed then I am.  That blows my core thesis to bits and I am now trading a stupid price chart with no back story.  Damn those Israelites for having the best ticker symbol ever and lacking the amphetamines to back it up.

Every day I want to buy TSLA and SCTY because Elon Musk is the best CEO of my lifetime.  He sets the standard for corporate communication, scientific acumen, and risk tolerance.  Instead I go out and play the Chinese lotto and buy crap stocks like LEDS and ADHD.  In short, I want to focus down to my core and start buying TSLA and SCTY.

LONGS, sized largest-to-smallest:

CREE, ONVO, RVLT, USO, LO, Z, GOGO, ADHD, LEDS, CLNT, F, IMMR, MJNA, and O

Cash 10%

I’m reposting Eminem because he crushed all these little boy rappers:

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Stock Pickers Market and Deviating from The Trading Plan

For most of my tenure as a trader stocks have been treated like a singular asset class and thus tightly correlated to other macro instruments like bonds, the US dollar, gold, and oil.  The binary nature drove me to studying futures because if all stocks were hell-bent on moving as one, I might as well trade them all simultaneously with an ass load of leverage.

I love the futures markets.  They are pure order flow with no dependence on a company and their decisions.  But seeing good companies and more importantly good charts succeed even while the market chops around is exciting.

It makes me want to concentrate more funds into stock trading.

I got caught on the wrong side (the long side) of the quick drop this morning.  Even though I preach plan adherence, I deviated and had to take a ton of heat on my trade.  The poor entry, paired with a non-market related event which shall not be mentioned but which has officially created a rule, caused me to shake out of my long—I shit you not—one tick off the morning swing low (about 11am).  No less than five minutes later, what I had expected—a bit of a bounce to cut my loss into—occurred.

This was a huge setback to my futures trading, huge.  I am so sick of setbacks incurred from plan deviation.  They are huge drains on emotional capital.

I went and had some tacos with a friend.  We talked about hunting mushrooms and it was quite the stimulating conversation and helped clear my mind to assess everything.  Trading structure will be restored for tomorrow’s action and it is good to make these mistakes while trading small, believe me.

Focusing so much energy on work and trading futures allows me to think much more slowly about stocks.  The more I learn from the excellent traders and stock pickers here at iBankCoin the better this approach feels.  My book is up 2.5% today while the Big Board chops the UNCH.

RVLT is a big part of the green portfolio, but it is getting plenty of help from IMMR, MHR, YGE, BALT, and FB.  My account is straight crack rock and ripping.

I see a huge consolidation occurring, as if we are waiting for news flow to get this party started.  Bull or bear, a party is near—I can hear the bass rumbles in the distance.  Until this decision is clearly made, I will hold the line, 90% long.

My slow money is in AIXG, LO, RVLT, MJNA, FB, O, F, and CREE

My fast money is in AMBA, IMMR, MHR, YGE, BALT, RBCN, and CLF

I still hold a sharp edge in the futures market and my win/loss ratio shows it.  The p/l however does not yet because of setbacks.  This isn’t over until I win which is simply a matter of time, not if.  This week however, my stock gains are casting a bright glow on my futures losses.

Pro Tip:  Like any business, be sure you are sufficiently capitalized.  Better yet, have other revenue streams so this learning process doesn’t come with the added stress of keeping a roof over your head.

http://youtu.be/cJT1xvDOMB0

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Shrinking Targets Ahead of The Fed

My journal work these last two weeks brought attention the fact that I had been nailing my entries, but getting stuck in trades, losing interest, and then just managing to scratch them and lose a few bucks.  I think this behavior was a byproduct of our coiling markets ahead of the Fed.

What worked really well this morning was taking smaller profits.  Thus far I have taken three wins in the futures: two in the spooz and one in the 6E.  I would still be in two of these trades, contemplating scratching them for losses, had I not lowered my profit expectations by one to two ticks. 

This is adapting, this is surviving.  You must be one with the flow, one with your environment.  I strongly believe once the market gets some visibility (after the reaction to the Fed reaction) we will return to an environment where I can push my profit expectations back to their planned levels.

I cut EXK, no other portfolio adjustments.

Be amorphous, like water.  And stay calm if the market gets wiry around 2pm.  Perhaps listen to The Buena Vista Social Club:

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Speaking of Reality Checks

shark

My apologies for being a bit light on the pen today and yesterday, I have simply not had the time to properly address you, kind people of the interwebs.

You may be familiar with the Sold Too Soon club and its proud members, but I’ve become a certified member of the Bought Too Soon club.

Dips, I’ve been buying them too soon.  The problem with buying too soon, good people, is YOU HAVE TO TAKE HEAT, lots and lots of heat.

Then, you pay quite a bit of money to see your trade through.  Such is the case with my new stud picks SKF, RBCN, and EXK.

These are all trades to me, nothing more. I literally have a few cents more patience in all three.  You know what that means right?  I risk getting a larger loss via an overnight gap.  It’s hard for me to overly concern myself with such things though.  It seems silly to live a life of worry at such a tender age.  I still like these trades.

LED is working this week and I want a fund of LED firms.  So far, I have it owning CREE, AIXG, and RVLT.  I want more of all of them and a side of LYTS and OESX.

Stocks were mixed today, but overall down.  The same goes with my swing portfolio.

But your boy RAUL did work today, regaining all of the Bossram losses from last week.  As you may have noticed, the /ES has been a snoozer.  Seeing in advance the need to recoup my losses and suspecting the /ES may offer insufficient opportunities to do so, I pegged out the i7s all weekend to build a high probability trading picture in the /6e aka the Euro dollar.  I used to trade this instrument three years ago and I remember why—it’s a wiry SOB.  Chalk it up as beginners luck if you’d like, but I pulled another 0.0040 out of the /6e today, putting me back on track to increase my position size by the end of October.

This very much pleases me.  I’m not taking excessive risk either.  The gains have come faster because the /6e is on the move and setting up more often.

In summary, the /ES rolled over a bit today after taking out a trend line I drew on my chart.  That’s some advanced analysis.  Value migrated higher, we printed a neutral day which tends to show up near inflection points and tomorrow is Friday the 13th.  Hide your wife.

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Week 1 Future Trading Performace

Well it was a modest week of making money, until today.  In two quick swooshes the market took back my gains and more resulting in a losing week.  In my defense and in the defense of my cycles, this was a rough week to get started for the following reasons:

1. Holiday shortened week

2. Wednesday never once pulled back

3. Thursday (yesterday) was a freakishly quiet, like five in one hundred occurance

4. Today was a news driven monster truck rally

What’s interesting to note is this week’s losses did not damage my ego whatsoever, where I normally feel a bit aloof and edgy.  I think it’s because I’m sticking to my well laid plans.  The laws of large numbers will kick in next week, and I should recapture most, if not all of these losses.

All that being said, I lost money my first week live trading Bossram Alpha.  It only had one losing week backtesting from March 1 – present…go figure.

Before commissions, Bossram lost $675.00 and Elroi, the jackass helper robot lost $25.00 aka outperformed me this week by losing less money.

As a result, 10k has nearly become nine.

With more screen time, days like these will be some of the best of the year.  For now, they’re modestly priced classes in humility and market skill.

 

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