End of year

I've traded with several brokerages and I'm currently with thinkorswim and very happy. Since I started trading with them during January of last year I've made over 550 trades. Most of those are options trades although a couple hundred are currency trades. It's been a long year and I've learned a lot.

I'm not trading any stocks tomorrow but I might trade some currency. Since I'm on break from school and have plenty of time, I'm going to take the opportunity to do an in-depth performance review.

I want to find out what I did right and wrong, what worked and what failed, and how I can improve. It's important to face facts. It's easy to say that I will avoid making the same mistakes. It's a lot harder, and much more important, to see the evidence. Taking an objective look at performance really forces me to deal with the issues that are holding me back.

After doing some quick number-crunching for my December trades I've come to 4 conclusions:

1. Less is more- The number of trades I make is inversely correlated to the amount of money I make. I'm better off sticking to a few good ideas

2. Go for longer trades - Trades I hold for under a week are less successful and less profitable than the ones that I hold for over a week

3. Focus on the big picture- I find the best setups on a daily timeframe

4. Stock is an option- A lot of my trades would be better done as stock trades instead of options trades

Over the next 4 days I'm going to be spending a lot of time in Excel crunching the numbers for the entire year and getting some hard stats.

Performace review

Since starting the blog I've done 4 options trades and have 2 open.

The first 4 were in AMAT, XLF, SPY and MPWR. All the trades were profitable I made about 3.5% on my account.

Currently I have a MSFT put I bought for .86 that closed at .81 bid .83 offered.

I also have a CNP Aug 09 put I bought for .85 which is trading .60-.85.

AMAT: Good trade, bad execution. Instead of buying an April put I should have bought a Jan or Feb.
XLF: I'm happy with that trade
SPY: Stupid trade. I see setups for trades intraday in SPY but that doesn't mean I should take them. I have to keep timeframe in mind.
MPWR: Good setup and profitable trade, but a dumb trade from a risk perspective. The spreads are too big to mess with trading in for any short period of time.

Short eur/aud

Shorting eur/aud with a stop around 2.065

Intraday update

Sold the AMAT put at 12:49 when AMAT was around 9.73. On the 30 minute MACD, slow stochastics, and RSI are all going up. The moving averages are consolidating, price is above them, and the faster moving averages are headed up. It also couldn't take out yesterday's low.

Given AMAT's volume I'm surprised by how little options activity there is. I'll avoid trading it because of that. I also should have bought a Jan. or Feb option instead of an April.

MSFT

Here's MSFT on a daily timeframe. Still in a downtrend and below the 10, 20 and 50 day moving averages.


On a 20-day, 30-minute timeframe MSFT has been putting in lower highs and finding support at 18.90. It headed down this morning and tested the support.
On the 10-minute timeframe the trend is down and it broke the support at18.90. I bought a put when it broke the support and I've place my stop around 19.30

Monday MSFT MPWR

I sold the MPWR put for 1.30 and I had bought it for 1.20. I don't like trading an option where I'm the only volume and the stocks itself isn't very liquid. It might go up or down but I would rather not be involved in options with low liquidity.

Shorted MSFT this morning, more on this later.

ES and 30year

The S&P is getting into a tighter range. The first thing I wonder is if it will make a big breakout of the range, or if it's entering a period of lower vol.

It could rally to 900, hit the descending trendline, head lower and break support at 825. December could be a rounded top that completes in Jan. and it retests the lows.

Or we could head higher, break through 920 and maybe head to 1k.

Or trade in a range between 825 and 925.





The 30-year looks bubbly. The volume is also decreasing. The trend is still up though

Friday CNP

I put on a long-term short position in CNP.

Here's the lifetime chart. I think it's important that it wasn't able to make new highs during 2007.
Here's the 5-yr weekly. Peaked in July 07 and is in a downtrend. It sold off badly in Oct. and has since retraced up to the 13.20 area which was past resistance and support.
Here's the 1yr daily. Huge fall in Oct., but the it rallied back to 13.20. The stock has been losing momentum and turning over. MACD looks bearish. I bought an Aug 09 put and I'm stopping out if the stock goes above 13.50

Wednesday

My recent options trades have re-lit my passion for stocks. I've gone through a couple hundred charts and found some great trades on a daily timeframe.

Looks like getting out of XLF was a good idea for the moment.

I have very little interest in currency right now and I just don't have a feel for the market.

Short aud/usd

Shorting aud/usd. Adding more if it break .6766

Sold XLF

Sold the XLF put since it was getting down it's area of previous support around 11.50. I also wanted to get less short.

Holiday exposure

I'm thinking about what I want to do with my put positions. Right now I have profits in all of them but they look like they have more upside and the stocks are acting fine. The problem I'm having is with the holidays. There is a holiday, a weekend and another holiday. I'm uncomfortable having much exposure going into 2009, especially with the inauguration.

Tuesday currencies

My equity puts are doing well, but this week I feel like I don't have a good feel of the currencies.

I'm loosening up stops and taking smaller positions. eur/aud looks like it's making a nice head&shoulders, but it's been hard getting short.

Here are the charts I'm watching

EUR/AUD

EUR/AUD looks toppy

Monday

AMAT has been boring today. Can't seem to break below 10. I'm guessing it will get ugly if it does.
Sort of dull day. No volume. I bought a put in MPWR which is doing well.

I also bought a put in XLF when it broke this trendline.
It's a bit tougher to get a feel my current performance since thinkorswim calculates P/L based on the mark of the option. What it can be sold for varies, especially in less liquid stocks like MPWR. Currently I'm up about 6%, but that's rough number.

Haven't done much in currency today.

Traders, Guns & Money

I got a copy of "Traders, Guns & Money: Knowns and unknowns in the dazzling world of derivatives" by Satyajit Das today. It's really good so far. The most educational books are often the stories told by people in the field.

Thinkorswim also put out their quarterly magazine thinkMoney which I'm looking forward to reading.

I've been looking at stocks and I'm in a bind. With my options strategy I'm a premium buyer. When the VIX went through 40 I transferred most of the money out of my options account to make sure I wouldn't trade because I didn't want to be buying premium with the VIX so high. Now I have a lot of ideas but not enough money.

I've found 4 stocks that that make great trades from the short side and I'm already short AMAT. I feel like I should at least one long position.

My AMAT position is an ITM April put. Given the timeframe of the trade I'm thinking about either buying a cheaper Jan. option or doing a vertical.

End of week

Unless SPY drops below the trendline I drew earlier, I'm done for the week.

Here is a trade I did in SPY . Followed the trendline up until it ran into resistance at the VWAP.

Didn't make much after commissions. Probably not a good day to be trading either because there isn't much volume and it's expiration. I also should have sold near support instead of thinking it could break the trendline.

I still have the put in AMAT and my options account is has a loss of .2% for the week.

I didn't do much currency trading today because I didn't want to open new positions before the weekend. I'm up 5.38% in that account.

Watch SPY

There is a lot of downside risk if we break. I've got my put order queued

AMAT short

AMAT has had a big move up from its November low at 7.80.

There is resistance at 10.85. It's been slowing down and breaking through ascending trendline. I bought an April put around 10.27 and my stop is 10.55.




I'm watching SPY also.

Friday, new charts, no sleep

I did some work on my charts and came up with this style. I really love the way it looks. It's clean and very easy on the eyes.

I've been trading for the past 8 or 9 hours. Focusing on trading for this long has given me a great feel for the market. After watching things for that long you see how things develop and anticipate moves better. There were trades I wanted to take but didn't because I don't want to stay awake any longer.

I'm trading a lot smaller than I used to. I really prefer it though. There isn't any emotion involved. Focusing on achieving a performance target changes my trading too. No more going through the cycles of greed and fear in hopes of hitting a homerun. I'm more focused. I wait for setups, calculate risk, take some profits. It's much more business like.

But at this point in the morning I'm tired and want to go to bed. I had shorts in eur/jpy and gbp/usd which I closed too early. I'm going to avoid trading this late since my need for sleep is influencing my decisions.

Anyway, I'm up 5.78% since Tuesday afternoon.

Quick aud/usd trade

I went short AUD/USD expecting it to get down to the first yellow trendline. I got that very quickly, and some extra.



It's taking longer than I expected to get money back into my options account. I'm not sure I can make my 10% in December but I'll see how it plays out.

In my currency account I'm up 3.75% since Tuesday so I should be able to hit my 10% target for December.

Having goals has really changed my trading for the better. Working toward that goal really helps to focus on making money, keeping risk down, and not over-trading.

The weather is supposed to be awful and most people have gone home for break. The rest of today and tomorrow are probably going to be spent trading and reading.

EUR/CHF

Lately I've been trading EUR/CHF a lot. Right now I'm long with a stop at 1.5495. One reason I like it right here is the opportunity. I'm long at the bottom of the channel so I have a tight stop with a lot of upside. It's also very possible that it breaks the channel and heads lower. In that case I reverse the trade and it sets up nicely as well.

TBT

Bought TBT at 37.50 for my long-term account.

Crazy

Got out of EUR/CHF short too early. I tried a small long in USD/JPY and got stopped out. Up 1.3% now. It's just crazy right now and I'm not even sure where to begin.








I'm also surprised by the treasury market. The 13-week is back to 0. The 30-year hit a low of 2.583%.Island reversal? TLT is not going to end well.

Closed EUR/CHF

Closed EUR/CHF trade. On the hourly chart it could be setting up a head and shoulders pattern. If that happens I wouldn't be surprised for it to retrace up to 1.5830.

The 15 minute timeframe is messy because of the rate cut, but looks like it's making a deformed inverse H&S. And it also can't make a lower low. I set my stop to 1.5770 and got stopped out.

The trade made 69 pips and the return on my account capital was 2.08%. So I need to make 7.92% to make my December goal.

















My EUR/USD stop (orange circle) was at 1.3430. Price it 3429 before reversing and making a huge move higher. Having a idea of where price is going isn't the hardest part about trading. The hardest part is trading that price. You need to find good entry and exit points and manage risk.

In the case of EUR/USD I forgot the big picture. It looked bullish on a daily timeframe but I was trying to trade in a shorter timeframe.

Tuesday 12/16

Today I was watching CNBC and the markets right before the fed announcement. My favorite part was right after the cut you hear an off-camera Rick Santelli yell "Look at the Euro!" while someone else was talking.

I'm still short EUR/CHF which is doing alright.

Once I'm done with finals I'm going to organize everything.

I'm going to track my options and currency trading separately.

Trade risk/reward will be measured as a percentage of the account capital.

I'll also start monthly performance goals and keep track of drawdowns.

The rest of this month is messy with the holidays.

My goals for the rest of the month in both accounts is 10%. It's a bit arbitrary but it'll be a starting point.

Closing thoughts for the night

1. I got "Derivatives" by Paul Wimott from the library today. Hopefully I'll have time to finish it over break. It's also very expensive so I hope nothing happens to it.

2. I'm going to focus on my daily charts than before and look for bigger moves.

3. There are going to be more quotes and references to Reminisces of a Stock Operator. I don't have enough. I also don't think it's possible to have too many though.

Monday Night Trading

Final exams are taking their toll and I'm at point right now where I'm too tired to sleep.

After this post, instead of doing risk/reward in terms of pips I'm going to do it as a % of portfolio.


















I'm always away from my computer when EUR/CHF hits the top of its channel. I want to be short if it breaks that ascending trendline. Whether I'll be awake to short it is another question.





















I going short EUR/GBP position on around .8945 with a stop at .8970.

This is a risky counter-trend trade so I'm keeping my stop tight and making a small trade.

It happens

EUR/USD hit my stop at 1.3430 and went 2 pips lower before reversing and hitting 1.37. Ouch.

Trade 3 & 4 Update

Trade 3 - Short EUR/CHF got stopped out again. Lost 86 pips.
Trade 4 - I moved the stop on EUR/USD up to 1.3430.

Trade 4 - Long EUR/USD

Long EUR/USD from 1.3417 on a breakout. Stop 1.3380

Trade 3 - Short EUR/CHF

Short EUR/CHF again, from 1.5714. Stop at 1.58.

Better view of EUR/USD

Early is wrong

"Think Like a Fundamentalist; Trade Like a Simple Technician" - Dennis Gartman

Timing doesn't just affect how much money you make in a trade, it often determines whether you'll be able to stay in the trade.

I don't usually do fundamental trades but lately I can't stop thinking about treasuries. With the 13-week trading negative and the 30-year at 3.06 I fee like this has got to reverse at some point.

TBT is the UltraShort Lehman 20+ Treasury ETF. TLT is just the regular.




One things that stands out to me in TBT is the huge volume lately. It was introduced in May and didn't do much volume up until recently. Since it is a relatively new ETF it doesn't seem like this volume is from people who bought it over the summer and are dumping it now. It's also probably not volume from shorting since it's hard to borrow and it would be much easier to just buy TLT. TLT isn't doing huge volume lately though. Because of this I'm thinking that the volume in TBT is people getting long and betting against Treasuries.

It looks like it could use a little more time to bottom. I'll be looking to get long sometime next week and stop out below 42.

Shorting Treasuries here is still risking and I'm not going to hold TBT down to 20 if I'm earlier/wrong. Capital preservation is key and I can always reenter later.

EUR/USD thoughts

EUR/USD had a big up move this week. Since last Thursday EUR/USD was rising under an ascending trendline. This trendline held 4-5 times. However there was also aggressive buying on pullbacks. Every time it fell there was buying before it even got down to its supporting trendline. This wedged the price in and eventually broke to the upside and moved 300 pips.

The way to trade this would have been to buy on a break of the resistance and stop-out below the last trendline.

Now EUR/USD is making a range from1.325-1.34. If price breaks lower 1.31 could be support. If it break higher 1.38 could be resistance.

I'm bullish on EUR/USD for now, but this has been a fast move and some consolidation in the range would be a good sign before heading higher.

Close Trade 1 - Short EUR/CHF

No chart since I'm having trouble with Prophet. EUR/CHF went down at first and got to 2.4x risk, but then reversed was stopped out at break-even.

I'll call it a week and start studying for finals now

Close Trade 2 - Long AUD/USD

AUD/USD got stopped out for a loss of 40 pips. The initial move up broke through both the resistance at .67 as well as the descending trendline from mid-October.

It's looking pretty weak right now.

EUR/CHF is a bit of a channel down with choppy action.

EUR/USD looks strong. A pullback to 1.31 would be a great place to buy.

Trade 2 - Long AUD/USD

Long AUD/USD @ .6720. Stop at .6680. 40 pips risk.

AUD/USD looks like it's putting in a bottom for now. Broke above .67 which was resistance and pulled back a bit for a retest.

Trade 1 - Short EUR/CHF

Short EUR/CHF at 1.5788. Top of channel. Stop at 1.5830.

I want to take half off at 1.5650

Update 1:30AM CST: Moved stop to 1.5785. With the spread this break-even.

Due Diligence

I bought SPY when I was 16. It was anti-climactic.

Over the course of the next few years I started trading. For periods of time I had stock in Raytheon, Deere, Google and Apple. My style consisted of news, fundamentals and a lot of hope.

This was from 2006 to mid-2007 so it was hard to lose money.

I began to trade more and understand some basics of technical analysis. I read a lot of bad books and a few good ones. Several months were also spent on a search for a "holy grail" trading system.

In January 2007 I had little understanding options, but began trading them. I learned through experience and losing money. During July of 2008 I began trading currency with 100:1 leverage. I use less now.

I don't think trading can be taught, it's something that is learned through experience and the loss of money.

Trading is about psychology and calculated risk-taking. Fundamentals matter in investing.

I can't do a good job describing my style of trading. Hopefully it will be apparent in the trades.