Well, the weather has turned. The winds and rains are here...so I'm signing off. Unplugging all the electronics and sitting tight.
Take care and I'll see you on the other side.
Later Trades,
MT
Friday, September 23, 2005
Pre Rita
Well, looks like this hurricane is moving more east of us and might not be as bad as previously believed. That's the good news for us. Bad for Louisiana.
Also, there's hundreds of people stuck in Corrigan for hours (14+). The friend I was referring to in my previous post who's waiting on his family is still waiting. They left Port Arthur early yesterday and they've been stuck in the Corrigan area all day, all night, and now all of today. Nobody has any gas and they're really going through the ringer.
Another update. Apparently there are 20 to 25 tankers of gas heading from Fort Hood to the Huntsville/Riverside/Trinity area to deliver gas. That's the good news for all of us. But, that doesn't help those Corrigan people. Someone needs to get them gas and fast.
Well, I promised some pics and here are a couple of the lake taken approximately 1:00pm central standard time.
Calm waters
Another pic where you can view the water level in relation to the pier.
I'll post a follow-up to these pictures post Rita.
Wind right now just picked up pretty good. This could get interesting. I'll be disconnecting shortly after the market closes (3:00pm central standard time) and moving my PC to a safer location. Here's a view outside my home office.
As you can see...plenty of trees which should act as a buffer from the wind. Let's hope they can stand up to this wind.
Might be my last post for the day. I've got some more rat-killing to do in order to be ready for this hurricane. And family to take care of.
Take care,
MT
Also, there's hundreds of people stuck in Corrigan for hours (14+). The friend I was referring to in my previous post who's waiting on his family is still waiting. They left Port Arthur early yesterday and they've been stuck in the Corrigan area all day, all night, and now all of today. Nobody has any gas and they're really going through the ringer.
Another update. Apparently there are 20 to 25 tankers of gas heading from Fort Hood to the Huntsville/Riverside/Trinity area to deliver gas. That's the good news for all of us. But, that doesn't help those Corrigan people. Someone needs to get them gas and fast.
Well, I promised some pics and here are a couple of the lake taken approximately 1:00pm central standard time.
Calm waters
Another pic where you can view the water level in relation to the pier.
I'll post a follow-up to these pictures post Rita.
Wind right now just picked up pretty good. This could get interesting. I'll be disconnecting shortly after the market closes (3:00pm central standard time) and moving my PC to a safer location. Here's a view outside my home office.
As you can see...plenty of trees which should act as a buffer from the wind. Let's hope they can stand up to this wind.
Might be my last post for the day. I've got some more rat-killing to do in order to be ready for this hurricane. And family to take care of.
Take care,
MT
Rita and the Lake Area
You'd never imagine a hurricane was coming sometime today. The skies are clear, just a slight breeze, and finally the heat from yesterday has dissipated a bit.
I've gotten a few emails on the area I live and blog about. So, I've included a picture of the lake and surrounding areas in relation to the Gulf Coast and little Rita.
As you can see, we should be okay. It's far enough away from the coast that we hopefully will be able to avoid much of the damage little Rita is sure to cause. The concerning factor is which side of the hurricane will we be? If to the west...the winds and possible tornadoes spinoffs should be somewhat limited. If on the dirty side (east of hurricane)...then we'll be in for some very strong winds (75mph+) and the worst part...tornadoes. When hurricane Carla came through years ago...the dirty side spunoff over 100 tornadoes. Pretty scary if you ask me.
Please keep the people evacuating Houston/Beaumont area in your thoughts and prayers. There are many families still stuck in their cars. Two friends of mine are still waiting on family to get to their houses. Those families started driving early yesterday morning. It's a real helpless feeling when you're only an hour away from your destination and you're out of gas, water, food, and your stuck in a traffic for hours on end. Worst part about it is it's very difficult to bring anything to them even if you could get your hands on some gas...which is almost impossible.
Finally, take a look over at Bill Cara's site. He has covered Rita and its economic impact very well. Take a look at all the oil rigs that are likely to be hit from Rita this time around. I cannot imagine the damage this will cause.
Source: Rigzone via Bill Cara
As I'm finishing up this post...you can hear and feel the winds are growing stronger. Take a look at the recent satellite image of Rita and you can see it's coming. I'll post some pics later.
Take care,
MT
I've gotten a few emails on the area I live and blog about. So, I've included a picture of the lake and surrounding areas in relation to the Gulf Coast and little Rita.
As you can see, we should be okay. It's far enough away from the coast that we hopefully will be able to avoid much of the damage little Rita is sure to cause. The concerning factor is which side of the hurricane will we be? If to the west...the winds and possible tornadoes spinoffs should be somewhat limited. If on the dirty side (east of hurricane)...then we'll be in for some very strong winds (75mph+) and the worst part...tornadoes. When hurricane Carla came through years ago...the dirty side spunoff over 100 tornadoes. Pretty scary if you ask me.
Please keep the people evacuating Houston/Beaumont area in your thoughts and prayers. There are many families still stuck in their cars. Two friends of mine are still waiting on family to get to their houses. Those families started driving early yesterday morning. It's a real helpless feeling when you're only an hour away from your destination and you're out of gas, water, food, and your stuck in a traffic for hours on end. Worst part about it is it's very difficult to bring anything to them even if you could get your hands on some gas...which is almost impossible.
Finally, take a look over at Bill Cara's site. He has covered Rita and its economic impact very well. Take a look at all the oil rigs that are likely to be hit from Rita this time around. I cannot imagine the damage this will cause.
Source: Rigzone via Bill Cara
As I'm finishing up this post...you can hear and feel the winds are growing stronger. Take a look at the recent satellite image of Rita and you can see it's coming. I'll post some pics later.
Take care,
MT
Hurricane Rita
Houses were shut tight, and cloth wedged around doors and windows, but the dust came in so thinly that it could not be seen in the air, and it settled like pollen on the chairs and tables, on the dishes. -- The Grapes of Wrath
The mass exodus from Houston and Beaumont areas are causing all kinds of problems. Gas raids in particular. In my area today there were only 2 gas stations with gas and those stations looked like a Super WalMart parking lot. And you gotta realize...I'm talking small small towns. The type of towns where you blink and you miss em'. These towns haven't ever seen these type of crowds in their entire history. You're talking about a standard deviation breakout on the town populations.
And you definitely get a Grapes of Wrath sense while driving the roads. Families carrying their house in their cars & trucks. Not just one car but a caravan of cars traversing the highways. Moms following Dads, Aunts, Uncles, etc. All their belongings crammed into their trucks, uhauls, horse trailers, and cars. Kinda scary. Keep these folks in your thoughts and prayers.
Experiencing all this takes me back to my childhood days when we lived some miles north of Galveston off I-45. I cannot remember the name of the hurricane that hit...just remember my dad was gone (offshore oil drilling) and my mom and I were left to face the storm alone. That was back in the day when you were told to open up all the doors and windows in your home to allow the winds to pass through your house. Mom threw me into the bathtub and took my mattress and covered us with it. Yes, empty bathtub, mattress, all the doors and windows open...hurricane hits. Sounded like a freight train when it came through. I wanted to look so bad but mom just about smothered me trying to keep me safe.
The only other memory I have of that event was what it felt like to be in the eye of the hurricane. I can still remember the smell of the air...clean...distinctive. Of course, the sky was clear. Got a sense of awe for sure. That's about all I remember. I do think my dad was finally able to get back home and had to swim from I-45 to our neck of the woods to get home. Yes, I did say swim. Not sure, but think he just left his car on the side of the road. Funny the things you remember.
Other interesting things...I live a block or two from a lake. This community consists of lake homes (wood siding, pier&beam). About half are residents and the other half weekenders. Today when I drove home I took a look at who was home...almost every weekend home had at least 10 to 15 cars/trucks at the house. I guess, some have escaped up here. But, the reports on the news say this area will still get up to 100 mph winds from little Rita. So, say a prayer for these folks as well...and that includes me & my family.
Yes, we're hunkering down and going to tough it out. I spent the afternoon battening down the hatches, backing up my computer equipment, securing the boat, and smoking some briscuit for the storm ahead. Yes, every good Texan knows you gotta do some grilling during hurricane time. And a Corona or two to keep your sanity or lack thereof.
I'll try to post some pics of pre-Rita and post-Rita for ya. And keep you updated on the progress in hurricane central. In the mean time, you can check out another blog covering the hurricane.
Last but not least check out the FundAlarm site. Take note of the experiment they're doing with a market-timing newsletter. I think it'll be interesting to see how this unfolds.
Later Trades,
MT
The mass exodus from Houston and Beaumont areas are causing all kinds of problems. Gas raids in particular. In my area today there were only 2 gas stations with gas and those stations looked like a Super WalMart parking lot. And you gotta realize...I'm talking small small towns. The type of towns where you blink and you miss em'. These towns haven't ever seen these type of crowds in their entire history. You're talking about a standard deviation breakout on the town populations.
And you definitely get a Grapes of Wrath sense while driving the roads. Families carrying their house in their cars & trucks. Not just one car but a caravan of cars traversing the highways. Moms following Dads, Aunts, Uncles, etc. All their belongings crammed into their trucks, uhauls, horse trailers, and cars. Kinda scary. Keep these folks in your thoughts and prayers.
Experiencing all this takes me back to my childhood days when we lived some miles north of Galveston off I-45. I cannot remember the name of the hurricane that hit...just remember my dad was gone (offshore oil drilling) and my mom and I were left to face the storm alone. That was back in the day when you were told to open up all the doors and windows in your home to allow the winds to pass through your house. Mom threw me into the bathtub and took my mattress and covered us with it. Yes, empty bathtub, mattress, all the doors and windows open...hurricane hits. Sounded like a freight train when it came through. I wanted to look so bad but mom just about smothered me trying to keep me safe.
The only other memory I have of that event was what it felt like to be in the eye of the hurricane. I can still remember the smell of the air...clean...distinctive. Of course, the sky was clear. Got a sense of awe for sure. That's about all I remember. I do think my dad was finally able to get back home and had to swim from I-45 to our neck of the woods to get home. Yes, I did say swim. Not sure, but think he just left his car on the side of the road. Funny the things you remember.
Other interesting things...I live a block or two from a lake. This community consists of lake homes (wood siding, pier&beam). About half are residents and the other half weekenders. Today when I drove home I took a look at who was home...almost every weekend home had at least 10 to 15 cars/trucks at the house. I guess, some have escaped up here. But, the reports on the news say this area will still get up to 100 mph winds from little Rita. So, say a prayer for these folks as well...and that includes me & my family.
Yes, we're hunkering down and going to tough it out. I spent the afternoon battening down the hatches, backing up my computer equipment, securing the boat, and smoking some briscuit for the storm ahead. Yes, every good Texan knows you gotta do some grilling during hurricane time. And a Corona or two to keep your sanity or lack thereof.
I'll try to post some pics of pre-Rita and post-Rita for ya. And keep you updated on the progress in hurricane central. In the mean time, you can check out another blog covering the hurricane.
Last but not least check out the FundAlarm site. Take note of the experiment they're doing with a market-timing newsletter. I think it'll be interesting to see how this unfolds.
Later Trades,
MT
Thursday, September 22, 2005
Quote of the Week
I find the The Kirk Report's quote today very appropriate:
"What we anticipate seldom occurs; what we least expected generally happens." - Benjamin Disraeli
MT
"What we anticipate seldom occurs; what we least expected generally happens." - Benjamin Disraeli
MT
Wednesday, September 21, 2005
Hope, Prayers, and Position Sizing
This Rita stuff looks pretty bad. From the looks of it...the path of the hurricane will come blowing right through my locale. I have several family and friends vacating the area just an hour south of me. We're told that everything should be okay here especially considering we're the first place you're able to stop when evacuating Houston/Galveston.
So, my wife picked up some essentials at the store today in case we stay. Speaking of stores and essentials...it is clear people are panicking. There are stories of people fighting over the last can of tuna and bottled water. As of now, all batteries, candles, water, and many other supplies are gone from the stores. My wife commented that she has never had so many people look in her shopping cart before. Seeing what she was buying...do they need that...this...etc. A bit of the sky is falling feeling seems to be happening. But, like I said, this Rita looks pretty bad. Last hurricane that blew through this way was Alicia and it was "only" a category 3.
We've decided to wait til' late Thursday night/early Friday morning to decide whether we stay or go. I figure by that time, the path will be a sure thing and hopefully the streets will be a little less congested up north of here. Of course, we'll follow the path less travelled. So, stay tuned. If we stay, I'll keep you posted on what kind of winds/rains we see up here. If not, I'll report what kind of damage happened when we return. Keep everyone down here on the Gulf Coast in your thoughts and prayers. Also, here's a couple of blogs (1, 2) from the Houston Chronicle that fills in some of the Rita details.
Before I get out of dodge, I wanted to leave you with a great little pdf on position sizing from Breakout Futures. I'm currently trying out the Adaptrade product, Market System Analyzer. They provide a free lite-version download to the product where you can load up to 15 trades to experiment with. The full version allows unlimited number of trades to analyze. I'll let you know my thoughts on this product once I test it a little more. Also, here's some great articles from Dr. Bryant covering Position Sizing to Monte Carlo Analysis to Trade Dependency to Equity Curve Trading. Read here. You can sign up for Dr. Bryant's free newsletters here as well as peruse the archives. Enjoy!
Later Trades,
MT
So, my wife picked up some essentials at the store today in case we stay. Speaking of stores and essentials...it is clear people are panicking. There are stories of people fighting over the last can of tuna and bottled water. As of now, all batteries, candles, water, and many other supplies are gone from the stores. My wife commented that she has never had so many people look in her shopping cart before. Seeing what she was buying...do they need that...this...etc. A bit of the sky is falling feeling seems to be happening. But, like I said, this Rita looks pretty bad. Last hurricane that blew through this way was Alicia and it was "only" a category 3.
We've decided to wait til' late Thursday night/early Friday morning to decide whether we stay or go. I figure by that time, the path will be a sure thing and hopefully the streets will be a little less congested up north of here. Of course, we'll follow the path less travelled. So, stay tuned. If we stay, I'll keep you posted on what kind of winds/rains we see up here. If not, I'll report what kind of damage happened when we return. Keep everyone down here on the Gulf Coast in your thoughts and prayers. Also, here's a couple of blogs (1, 2) from the Houston Chronicle that fills in some of the Rita details.
Before I get out of dodge, I wanted to leave you with a great little pdf on position sizing from Breakout Futures. I'm currently trying out the Adaptrade product, Market System Analyzer. They provide a free lite-version download to the product where you can load up to 15 trades to experiment with. The full version allows unlimited number of trades to analyze. I'll let you know my thoughts on this product once I test it a little more. Also, here's some great articles from Dr. Bryant covering Position Sizing to Monte Carlo Analysis to Trade Dependency to Equity Curve Trading. Read here. You can sign up for Dr. Bryant's free newsletters here as well as peruse the archives. Enjoy!
Later Trades,
MT
Tuesday, September 20, 2005
GoDaddy.com's BlogFest!
Never heard of Bob Parsons before today. Came across his blog via MyYahoo.com's neat little Daily Picks feature. Usually, I just give the sites listed a quick glance. And proceeded to do the same with Bob Parsons site. But, his words caught my eye. And they should catch yours as well. Some wonderful stories of how to make it in this world...starting from scratch and propspering in your chosen endeavors. Something all of us traders should read, learn, and do.
Start with this great post, Parson's rules for survival. This post briefly discusses his background but more importantly the rules that have become the foundation for his success. My favorites?
Some true words of inspiration for us all...by none other than the founder of GoDaddy.com? Wow, who woulda thunk it? :)
Later Trades,
MT
Start with this great post, Parson's rules for survival. This post briefly discusses his background but more importantly the rules that have become the foundation for his success. My favorites?
1. Get and stay out of your comfort zone. I believe that not much happens of any significance when we're in our comfort zone. I hear people say, "But I'm concerned about security." My response to that is simple: "Security is for cadavers."
Parson dives deeper in this post and makes the claim, "I would have accomplished nothing had I not stepped outside my comfort zone." How many of you are unhappy with what you've got and afraid to risk what you've got to get something better?
3. When you're ready to quit, you're closer than you think. There's an old Chinese saying that I just love, and I believe it is so true. It goes like this: "The temptation to quit will be greatest just before you are about to succeed."
Read further into this rule here. I really love this rule. I cannot tell you the number of times I have almost given up only to dig deeper and realize success was just around the corner. Or as my mom used to say when I was about to give up on something as a kid..."Climb that Mountain! You're almost to the top. Don't give up now."
9. Measure everything of significance. I swear this is true. Anything that is measured and watched, improves. Parson explains further in this post.
14. Solve your own problems. You'll find that by coming up with your own solutions, you'll develop a competitive edge. Masura Ibuka, the co-founder of SONY, said it best: "You never succeed in technology, business, or anything by following the others." There's also an old Asian saying that I remind myself of frequently. It goes like this: "A wise man keeps his own counsel."
Wish I understood this 10 years ago when I began my school of hard-knocks in the trading world.
The above articles and quotes are included with the permission of Bob Parsons (http://www.bobparsons.com) and is Copyright 2005 by Bob Parsons. All rights reserved.
Some true words of inspiration for us all...by none other than the founder of GoDaddy.com? Wow, who woulda thunk it? :)
Later Trades,
MT
Monday, September 19, 2005
Larry Connors Link Fest
Larry Connors needs no introduction. The CEO and Co-founder of TradingMarkets.com. And the co-author of the ever popular Raschke book, Street Smarts. I noticed Connors has setup a blog here. He mentioned he wrote a Connors Weekly Battle Plan that I have clearly missed in my Internet readings for the past 3 years. Luckily, the articles are still available here. So, check em' out while you can...
Connors performs an interesting test on buy and hold, buying everyday on the open and selling on the close (no overnight risk), and buying everyday on the close and selling on the next morning's open (only overnight risk). The results? Never forget we get paid by taking risk...not by avoiding it. Read here.
The Month-End Effect. I've tested this system idea before. I believe the recent tests are aimed towards the small-cap & micro-cap market. Basically buying at the end of the month and selling at the beginning to capture the big boys in action. Theory is that hedge funds now report their performance numbers every month instead of every quarter. Connors gives a good breakdown of his tests on this idea here.
Excellent piece on NOT buying breakouts. I have to admit, several of my long-term system setups are breakouts to new highs. Buying breakouts does work...but don't be afraid to explore the dark side...buying breakdowns. Read Part I and Part II. Also read the follow-ups here, here, and here.
Interesting little edges shared. Fans of the consecutive closing highs will enjoy this little tidbit. Read here and scroll to bottom where it discusses Finding the Best Opportunities In a Declining Market.
Great post on what happens when you buy what the general public believes. Believers in the 200 dma may want to read a bit of this article. Also gives away an interesting system idea. Read here.
Fantastic interview with the great Nelson Freeburg. Nelson challenges the view that money management is the vital ingredient to success. Entry and Exit are the key. And I tend to agree. Read Part I and Part II.
This piece is for the discretionary traders out there. Insight into how buying panics are created and the possible ways to take advantage of them. Read here.
Later Trades,
MT
Connors performs an interesting test on buy and hold, buying everyday on the open and selling on the close (no overnight risk), and buying everyday on the close and selling on the next morning's open (only overnight risk). The results? Never forget we get paid by taking risk...not by avoiding it. Read here.
The Month-End Effect. I've tested this system idea before. I believe the recent tests are aimed towards the small-cap & micro-cap market. Basically buying at the end of the month and selling at the beginning to capture the big boys in action. Theory is that hedge funds now report their performance numbers every month instead of every quarter. Connors gives a good breakdown of his tests on this idea here.
Excellent piece on NOT buying breakouts. I have to admit, several of my long-term system setups are breakouts to new highs. Buying breakouts does work...but don't be afraid to explore the dark side...buying breakdowns. Read Part I and Part II. Also read the follow-ups here, here, and here.
Interesting little edges shared. Fans of the consecutive closing highs will enjoy this little tidbit. Read here and scroll to bottom where it discusses Finding the Best Opportunities In a Declining Market.
Great post on what happens when you buy what the general public believes. Believers in the 200 dma may want to read a bit of this article. Also gives away an interesting system idea. Read here.
Fantastic interview with the great Nelson Freeburg. Nelson challenges the view that money management is the vital ingredient to success. Entry and Exit are the key. And I tend to agree. Read Part I and Part II.
This piece is for the discretionary traders out there. Insight into how buying panics are created and the possible ways to take advantage of them. Read here.
Later Trades,
MT
Saturday, September 17, 2005
ADD and Jay-Z
I came across this forum on Traders having ADD tonight and thought I'd share. Take note of acrary's post on keeping a small notebook with you in order to record the multitude of ideas popping through your head (I do this). Also pay attention to his NLP technique to clear the mind before the trading day. I use a variation of this method each and every day. My variation is instead of one blank sheet of paper...I use several. Ha! One look at my desk and you'll see scratch paper everywhere. All wonderfully organized by my dyslexic brain. :)
Keeping focused has always been one of the main problems in my life with ADD. I'm sure you can tell that from the wide ranging topics my blog has covered. :) One of my top coping mechanisms is music. After writing down all the things I'd like to accomplish for the day...I start up my music shuffle and get on with my rat-killin'. My song of choice to start the day? Oh yeah, there's nothing like starting the day with Jay-Z's U Don't Know...
Open the market up...$1 million, $2 million, $3 million, $4...18 months, $80 million more.
Later Trades,
MT
Keeping focused has always been one of the main problems in my life with ADD. I'm sure you can tell that from the wide ranging topics my blog has covered. :) One of my top coping mechanisms is music. After writing down all the things I'd like to accomplish for the day...I start up my music shuffle and get on with my rat-killin'. My song of choice to start the day? Oh yeah, there's nothing like starting the day with Jay-Z's U Don't Know...
Open the market up...$1 million, $2 million, $3 million, $4...18 months, $80 million more.
Later Trades,
MT
Friday, September 16, 2005
Larry Williams Interview and Templeton Insight
First check out Maoxian's Wise Words from John Templeton here. Oh yeah, I was truly scared when putting on the QQQQ option trade back in April. But, you can't beat an average profit of over 200% from that one trade. To be honest, made my year. Templeton's words ring true, "The art of successful investment is counterintuitive."
Next take a gander at RealWorldTrading's recent interview of Larry Williams (father of the Michelle Williams) Interesting tidbits from the interview?
Well, everyone have a great weekend. Tomorrow is Father-Daughter day for yours truly. A day filled with getting doughnuts, watching movies, working in the garage, eating popcorn, and just chillin' like a villain. Or as my daughter puts it, "Chill like a Vill."
Later Trades,
MT
Next take a gander at RealWorldTrading's recent interview of Larry Williams (father of the Michelle Williams) Interesting tidbits from the interview?
Larry's daughter, Michelle, won the World Cup trading championship at age 16 following one of his systems turning a $10,000 account into $110,000. Aye-chewowa.
Larry disses Gann charts, Fibonacci, and TA concepts but has seen a relationship between stock prices and the new moon cycle (astro-finance).
I like his thoughts on the 50 lowest priced stocks, seasonality of the different sectors, and trading with the insiders.
Well, everyone have a great weekend. Tomorrow is Father-Daughter day for yours truly. A day filled with getting doughnuts, watching movies, working in the garage, eating popcorn, and just chillin' like a villain. Or as my daughter puts it, "Chill like a Vill."
Later Trades,
MT
Wednesday, September 14, 2005
TraderMike's Survey Results
Check out TraderMike's Survey Results. Interesting stuff. What I found most interesting is he liked two of the comments I made on the survey:
Kinda cool that he found my comments interesting. Guess we have more in common than the name. :)
Speaking of surveys...I'm too lazy to put together a great survey like TraderMike's. But, if you have any ideas...something you'd like to see...other topics you're interested in...please leave a comment or drop an email (mike@taylortree.com).
System Update
I'm in the process of researching another system idea. This one's a bit of a departure from my normal system development. It involves more of a fundamental approach than technical. And truth be told, the gathering of data for testing the idea will be challenging. But, as they say, the harder you work the luckier you get.
Later Trades,
MT
Don't care anything about watchlists and stock ideas. I care about the process of being a trader, methods and mechanics used, and styles followed and observed. Any content focused on those guidelines I would enjoy reading.
More background on how you became a trader, what enabled you to trade for a living, and how easy/hard it is to trade for a living. Trials and tribulations, my friend, trials and tribulations.
Kinda cool that he found my comments interesting. Guess we have more in common than the name. :)
Speaking of surveys...I'm too lazy to put together a great survey like TraderMike's. But, if you have any ideas...something you'd like to see...other topics you're interested in...please leave a comment or drop an email (mike@taylortree.com).
System Update
I'm in the process of researching another system idea. This one's a bit of a departure from my normal system development. It involves more of a fundamental approach than technical. And truth be told, the gathering of data for testing the idea will be challenging. But, as they say, the harder you work the luckier you get.
Later Trades,
MT
Thursday, September 08, 2005
A little Humor
A coworker sent this site to me today. Thought I'd share it with ya'll considering the recent rant about Catching Fish. See lures & jigs here.
Later Trades,
MT
Later Trades,
MT
Wednesday, September 07, 2005
Catching Fish
I received a rather funny comment last night from my post, "New Broker and Atlanta."
Here's the comment:
I guess the anonymous fellow didn't like my recent choice in brokers. Ha! And don't you just love the final stab, "Amazing the lack of knowledge." Since the pooling of client orders are just one of the many reasons why I've always liked Ameritrade as a broker. As I've mentioned in several of my posts...I don't require direct access and the like to trade my systems. Like Livermore who grew up and prospered in the bucket shops...I've learned to trade in the Ameritrade-type environment. I'm comfortable there and all my systems are geared to that environment. When I step away from that environment...many of my advantages are gone. And perhaps like Livermore's return to the bucket shops to rebuild his grubstake...I've always returned to the Ameritrade's of the world.
Could I do better with learning direct access? Changing my style and systems up? Perhaps this article by Scott Barrie will better address the question. Read Wonderful Fishing here.
My favorite quotes in the article?
Perhaps I'll explain a bit more as to the type of fish I'm trying to catch in regards to trading. I'm not looking to throw myself into the pit where people are smarter, faster, and frankly more talented than I am. And more importantly, have more money and better resources at their disposal than me. My goal is to avoid those crowded stomping grounds. I'm constantly in search of the places the big boys and girls can't get to. That's why I trade low volume stocks which are often times low priced stocks. I only trade the Nasdaq stocks because of the type of orders I enter. Then I develop & trade strategies that take advantage of the conditions present in these types of stocks. After many years of trading this way you begin to see all the different things an Ameritrade type of environment will present and you learn and adapt. You also discover new strategies to take advantage of this limited environment.
So, if I liked Ameritrade so much why did I switch to a direct access broker? The reason? A new system and the need for less than $5 commissions to trade it. With my Ameritrade commissions above the $5 mark and with a failure of them to come down to reach that area...I was forced to switch. I didn't know about Izone at the time and the only places I could find that would reduce my commissions were direct access brokers like IB and MB Trading. But, at a cost...at least half of my orders would be filled at the same cost Ameritrade was charging in commissions. I was hoping some would be charged below Ameritrade due to the share price and quantity bought/sold.
After real-world testing the system I quickly began to see that #1 the system's performance depended more on the commission costs than my backtests showed, and #2 the majority of my commissions were pretty close to the Ameritrade cost level. So, I was forced to decide...shut the system down or find cheaper commissions. Luckily I found Izone and after trading with them for three weeks I'm happy to report my system is back to profitability.
Here's my equity curve showcasing the effects commissions and trading environment can have on a system:
As you can see, once I switched...profitability returned. Not because the market improved or better fills. But, because commission costs were reduced significantly.
Again, this is not a diss on MB Trading. I was treated very well by MB Trading and I strongly believe they're one of the good guys in this industry. Perhaps one day I shall return to direct access and if I do I would choose MB Trading again. But, for now I'm content with my current fishing equipment. As the article I linked to above mentions...the tools aren't as important as catching fish. And I'm catching plenty of fish...despite the amazing lack of knowledge. Ha!
Later Trades,
MT
Here's the comment:
Do you realize that using an Ameritrade company that you're doing nothing more then emailing your orders in and they're pooled against other client orders? Amazing the lack of knowledge.
I guess the anonymous fellow didn't like my recent choice in brokers. Ha! And don't you just love the final stab, "Amazing the lack of knowledge." Since the pooling of client orders are just one of the many reasons why I've always liked Ameritrade as a broker. As I've mentioned in several of my posts...I don't require direct access and the like to trade my systems. Like Livermore who grew up and prospered in the bucket shops...I've learned to trade in the Ameritrade-type environment. I'm comfortable there and all my systems are geared to that environment. When I step away from that environment...many of my advantages are gone. And perhaps like Livermore's return to the bucket shops to rebuild his grubstake...I've always returned to the Ameritrade's of the world.
Could I do better with learning direct access? Changing my style and systems up? Perhaps this article by Scott Barrie will better address the question. Read Wonderful Fishing here.
My favorite quotes in the article?
I took my trusty fly rod, my brother used a spinning rod and a spoon as did my son. However, my daughter Katherine (aka "Kallie Pally") was set up with her little $5/Barbie fishing rod (a pink push button caster with pictures of Barbie on it, reminiscent of an old Zebco), a bobber and a worm... really to include her and keep her busy while the boys fished. Well, after about 20 minutes of getting nothing - in one of my favorite childhood holes - her bobber went under water, while the boys had not even gotten a strike. She reeled in a beautiful 13" brown trout, and taught the rest of us to fish. She taught us a lesson... not the tackle but the tactics (bait) which makes fish bite.
The lessons learned fishing in a river or on the world's bourses are similar, but the one I walked away with this time is that the tackle and equipment is not that important as long as one can find the right bait and present it where the fish are.
Perhaps I'll explain a bit more as to the type of fish I'm trying to catch in regards to trading. I'm not looking to throw myself into the pit where people are smarter, faster, and frankly more talented than I am. And more importantly, have more money and better resources at their disposal than me. My goal is to avoid those crowded stomping grounds. I'm constantly in search of the places the big boys and girls can't get to. That's why I trade low volume stocks which are often times low priced stocks. I only trade the Nasdaq stocks because of the type of orders I enter. Then I develop & trade strategies that take advantage of the conditions present in these types of stocks. After many years of trading this way you begin to see all the different things an Ameritrade type of environment will present and you learn and adapt. You also discover new strategies to take advantage of this limited environment.
So, if I liked Ameritrade so much why did I switch to a direct access broker? The reason? A new system and the need for less than $5 commissions to trade it. With my Ameritrade commissions above the $5 mark and with a failure of them to come down to reach that area...I was forced to switch. I didn't know about Izone at the time and the only places I could find that would reduce my commissions were direct access brokers like IB and MB Trading. But, at a cost...at least half of my orders would be filled at the same cost Ameritrade was charging in commissions. I was hoping some would be charged below Ameritrade due to the share price and quantity bought/sold.
After real-world testing the system I quickly began to see that #1 the system's performance depended more on the commission costs than my backtests showed, and #2 the majority of my commissions were pretty close to the Ameritrade cost level. So, I was forced to decide...shut the system down or find cheaper commissions. Luckily I found Izone and after trading with them for three weeks I'm happy to report my system is back to profitability.
Here's my equity curve showcasing the effects commissions and trading environment can have on a system:
As you can see, once I switched...profitability returned. Not because the market improved or better fills. But, because commission costs were reduced significantly.
Again, this is not a diss on MB Trading. I was treated very well by MB Trading and I strongly believe they're one of the good guys in this industry. Perhaps one day I shall return to direct access and if I do I would choose MB Trading again. But, for now I'm content with my current fishing equipment. As the article I linked to above mentions...the tools aren't as important as catching fish. And I'm catching plenty of fish...despite the amazing lack of knowledge. Ha!
Later Trades,
MT
Tuesday, September 06, 2005
New Broker and Atlanta...
I've switched brokers again about 3 weeks ago. MB Trading was great but the per share pricing was beginning to hurt the performance of the new system I'm trading. So, had to act fast and switch to a broker that was #1 cheap and #2 priced commissions based on trade not shares. I chose Izone. They're an arm of Ameritrade and their trading interface is one and the same. That's a good thing since I'm very familiar with the interface and thus no learning curve to overcome.
So far so good. They integrate very well with QuoteTracker software. Fills have been very good. Overall, I'm pleased. And have to add that QuoteTracker is really the driving force behind making everything I'm doing work.
I'll continue to monitor Izone's performance and let you know of the good and bad.
Update on my day job projects. The majority of them are complete, in production, and being used like there's no tomorrow. So far so good. The real test will be this Friday when they run final payroll. Cross your fingers.
I've also discovered an EDI conference I'll need to attend in Atlanta this coming October. Should be a fun trip. Have some family in the area so plan to learn a lot and do some visiting. After all the hard work I've put in and more importantly number of hours...I think I'll extend my stay and make a vacation out it. If anyone has any good recommendations for places to stay & vist in and around Atlanta...please let me know. Last time I've been in the area was back in my AT&T days when I did a brief teaching stint at the Alpharetta location. I saw very little daylight since I ended up taking the graveyard shift in training the job operators. Hopefully, on this trip, I'll have a little more time to see and do.
By next week, I should get back to the normal grind again and start writing better more content-filled articles.
Until then...
MT
So far so good. They integrate very well with QuoteTracker software. Fills have been very good. Overall, I'm pleased. And have to add that QuoteTracker is really the driving force behind making everything I'm doing work.
I'll continue to monitor Izone's performance and let you know of the good and bad.
Update on my day job projects. The majority of them are complete, in production, and being used like there's no tomorrow. So far so good. The real test will be this Friday when they run final payroll. Cross your fingers.
I've also discovered an EDI conference I'll need to attend in Atlanta this coming October. Should be a fun trip. Have some family in the area so plan to learn a lot and do some visiting. After all the hard work I've put in and more importantly number of hours...I think I'll extend my stay and make a vacation out it. If anyone has any good recommendations for places to stay & vist in and around Atlanta...please let me know. Last time I've been in the area was back in my AT&T days when I did a brief teaching stint at the Alpharetta location. I saw very little daylight since I ended up taking the graveyard shift in training the job operators. Hopefully, on this trip, I'll have a little more time to see and do.
By next week, I should get back to the normal grind again and start writing better more content-filled articles.
Until then...
MT
Saturday, September 03, 2005
Sad Times
Today was a rough day as a father. My city is one of the cities accepting the Louisiana flood victims. In addition to donating money...I'm hearing and seeing many children in need of toys, coloring books, crayons, dolls, cars/trucks, and school supplies that they lost in the flood. These children are really in bad shape...taken out of their homes, nothing to do, faced with attending new schools with none of the comforts of home.
So, I figured this would be a great opportunity to get my daughter to help out by giving up some of her toys, books, crayons, and paper to these children in need. Needless to say her reaction to hearing about the children losing their homes and belongings and the subsequent abundant giving up of her favorite toys broke my heart. Something I thought would take up just a short amount of time ended up being an all night event. I actually had to stop her from giving away everything. Then spent the rest of the night explaining who took their toys away and who took their homes away. She didn't want to go to bed because she was worried about these children. I wasn't prepared for this.
I cannot, for the life of me, imagine what questions the parents who lost their homes and possessions to Katrina are having to answer to their kids this week. My heart goes out to them.
Please do what you can for the flood victims. And please, please do what you can for the communities supporting them. Many of the communities across Texas are taking in way more than they can handle. This will effect schools and teachers which are already maxed, budget-constrained hospitals, and small churches hosting them. Money is always good but get creative with your help. Often everything goes to the food, clothes, water area. But, there are kids that will need lunchboxes, backpacks, and other school supplies that will begin starting a new school from kindergarten up to college. Think also of the teacher's needs...teaching and supporting more kids. Some of these schools already don't have enough money for textbooks, computers, etc. The list goes on and on.
Realize most of the people are staying in large stadium-like places, sleeping in cots, with little to no privacy. While it's better than nothing...local hotels would surely be better. In fact, I'm amazed at the random acts of kindness going around where the local people are buying a few day's hotel stay for the people they meet. Doesn't sound like much...but think about it...after what they've been through...wouldn't you want a nice warm shower and soft pillow to lay your head? In privacy? Even if it's just for a night or two.
Take care,
MT
So, I figured this would be a great opportunity to get my daughter to help out by giving up some of her toys, books, crayons, and paper to these children in need. Needless to say her reaction to hearing about the children losing their homes and belongings and the subsequent abundant giving up of her favorite toys broke my heart. Something I thought would take up just a short amount of time ended up being an all night event. I actually had to stop her from giving away everything. Then spent the rest of the night explaining who took their toys away and who took their homes away. She didn't want to go to bed because she was worried about these children. I wasn't prepared for this.
I cannot, for the life of me, imagine what questions the parents who lost their homes and possessions to Katrina are having to answer to their kids this week. My heart goes out to them.
Please do what you can for the flood victims. And please, please do what you can for the communities supporting them. Many of the communities across Texas are taking in way more than they can handle. This will effect schools and teachers which are already maxed, budget-constrained hospitals, and small churches hosting them. Money is always good but get creative with your help. Often everything goes to the food, clothes, water area. But, there are kids that will need lunchboxes, backpacks, and other school supplies that will begin starting a new school from kindergarten up to college. Think also of the teacher's needs...teaching and supporting more kids. Some of these schools already don't have enough money for textbooks, computers, etc. The list goes on and on.
Realize most of the people are staying in large stadium-like places, sleeping in cots, with little to no privacy. While it's better than nothing...local hotels would surely be better. In fact, I'm amazed at the random acts of kindness going around where the local people are buying a few day's hotel stay for the people they meet. Doesn't sound like much...but think about it...after what they've been through...wouldn't you want a nice warm shower and soft pillow to lay your head? In privacy? Even if it's just for a night or two.
Take care,
MT
Sunday, August 28, 2005
Interview with Andy Beyer
Check out the recent interview of Andy Beyer via TradingMarkets. A truly insightful interview with a gambling legend. Some of my favorite quotes in the interview:
Read more of this great interview here.
Later Trades,
MT
It was a tremendous edge to have the figures at a time when most people didn’t use them or even believe in them. I can only draw an analogy to the stock market – if the concept of the P/E ratio were unknown to, or its importance was disbelieved by the majority of people buying stocks, and you were about the only guy who knew what the P/E of different stocks was, it would be a tremendous advantage and I had that advantage for many years.
So a lot of my emphasis now is on watching races and taking notes on all the horses and you’re trying to see things and spot subtleties that other horseplayers may not see -- to try to get an edge that way.
I think that most horseplayers will tell you they’ve had a successful year, it’s not because they have been brilliant at grinding day-in and day-out profits, but because during the course of that year, they have made a certain number of big scores that more than compensate for all the inevitable losses along the way.
Read more of this great interview here.
Later Trades,
MT
Wednesday, August 24, 2005
Link Fest!
Very sorry about this folks...but I'll be light on posting this week and next. I have 3 major projects that just landed on my desk that will require almost all my time. Like I said in a prior post...August is my busiest time of year...and this year is proving to be no exception. So, please be patient with the lack of my usual content.
To keep it light and to give my aching brain a break from all the programming I'm doing...let's have a link fest post. Here are some posts that caught my eye recently. Enjoy!
Take a dig through Niederhoffer's Daily Speculation site. Pay particular attention to the following articles:
TraderMike has a great article on his Thoughts on Day Trading.
And that's it from the TaylorTree...where my brain hurts...I'm tired...need rest...but I must go on like a good soldier and knock this code out! Do I feel a vacation coming on after all this is over? Hmmmm....
Later Trades,
MT
To keep it light and to give my aching brain a break from all the programming I'm doing...let's have a link fest post. Here are some posts that caught my eye recently. Enjoy!
Take a dig through Niederhoffer's Daily Speculation site. Pay particular attention to the following articles:
Relativity, by Dr. Mike Ott - I found the discussion on whether things considered popular at the time would have been popular regardless of the time most interesting. Examples given are Einstein and music. This little post hits right to the core in my overall view on life: Don't pay so much attention to the person and their abilities...the key is the application of an idea or philosophy that fits the surrounding environment. Would Jim Rogers have been so wealthy if he hadn't caught the commodity bull of the 60's and 70's? How about John Henry? Would he own the Red Sox if he implemented his simple little trend following system with a rather scary drawdown money management formula in the 90's versus the commodity bull of the 60's & 70's? Better yet...dig deeply through the Market Wizards books and you'll notice a very common theme. Most of the wizards found success at a critical point in the trading landscape. Marty Schwartz and the trading of the financial futures is just one example. So much attention is focused on the greatness of a person when much of their success came about due to being able to take advantage of the landscape. Of course, the other side of the coin is that's the greatness of the person...having the insight/luck/guts to recognize and take advantage of the changing landscape and opportunities it brings. Ha!
Also check out Lobster and Trading Gangs, by Victor Niederhoffer. Interesting insights into the protection of territory whether it be lobster spots, the trading floor, or the general public.
And finally, read The DailySpec Dept of Education Continues, With a Second Market Tutorial, by Phillip J. McDonnell. Gives away an interesting little way to determine the optimal trade size. Don't miss this one...especially if you're a believer in the Kelly Formula for trade size.
TraderMike has a great article on his Thoughts on Day Trading.
One of the best parts of his post is the discussion on commissions. Mike mentions this was one of his biggest changes and I definitely agree. Failure to focus on commission costs in regard to your trading is just asking for trouble. And more importantly asking to be sent to the poor house. What most people out there don't realize is you can take an extremely profitable trading system and apply a small increase in commission costs and go broke trading it. Trading capital is also an extremely important but often neglected topic. Most traders will fail simply because they're trading capital is too small. Or let's put it another way...you pretty much have to be perfect in order to profitably trade with a small amount of capital and high commission costs to boot. And to show you just how neglected trading capital is...look no further than Trader Eyal's Weekly Poll. And yes, I'm the only person who voted that Trading Capital was the most important success factor in Trading.
And that's it from the TaylorTree...where my brain hurts...I'm tired...need rest...but I must go on like a good soldier and knock this code out! Do I feel a vacation coming on after all this is over? Hmmmm....
Later Trades,
MT
Tuesday, August 16, 2005
The Rising Tide
I'm busy to say the least. One of those times where your mind is on a million things and you can't rest. Even when you're resting...you're working. Thinking scenarios out in your mind. And I'm getting hit on all fronts. My day job has just entered the scary busy season. You know, the time when you do whatever it takes to get the job done...even if that means no sleep, no lunches, nothing. Just get it done. Hopefully, in after a few more weeks I'll go into the scary support season. That's when you sit on pins and needles hoping and praying all of what you've done works! Ha!
I've also been plenty busy implementing all the new technology changes I've introduced into my trading environment. I've got so many things to do now each night...I can barely keep up. First there's my data source updates via TC2005. Then Wealth-Lab Multi-Scans. Then R batch jobs. Then loading symbols lists into Trade-Ideas Pro. Then wake up the next day and submit orders and quickly configure Medved QuoteTracker's Trade-Ideas integrated window. Whew! That's enough to confuse even a full-time trader, I'd think.
I don't really have much to comment on this week...mainly because time is of the essence. But, I wanted to give a quick update on how MB Trading, QuoteTracker, and Trade-Ideas are working together. One word, AWESOME! I'm serious. I cannot believe how seamless the whole process is. With QuoteTracker you can create several different Trade-Ideas windows to choose from. And you can configure these windows to submit Trade-Ideas alerts into a portfolio you created in QuoteTracker. From there you can right-click or Ctrl-T on the symbol and trade it. That's where the built-in MB Trading stuff works like a charm. You can submit your orders, watch the order log, and check on your fills and positions all from within QuoteTracker. Not too shabby.
So, so far...so good.
Also, I haven't really posted much about my R work. I've been planning too...but until then you really should check out The Learning Blog's R post. Dan is much more advanced than me in R. Heck, cracking open the badboy and tweaking it to your liking is definitely beyond my skill levels. So, if you have any R questions...especially in regards to econometrics...check him out.
My use of R? Mostly just creating methods to analyze my trades and ascertaining patterns in the data. Kinda like Mark Cook's use of trading journals in the Market Wizards interview. I especially liked the part where he helped one trader become profitable simply by eliminating Fridays from his trading regimen. So, instead of writing my trades down on paper...I enter them into comma-delimited files via Excel and load into R and perform various analysis. I will also take my backtests from Wealth-Lab and analyze via R. The great thing about R is that you can run it interactively and batch. The batch mode is what I use the most. Again, hopefully I'll write a post about some useful R commands and scripts that help analyze trades. Until then check out this baseball article to get you started. Heck, that's what got me started.
Side Note:
I recently purchased a Dewalt 10" Heavy-Duty Compound Miter Saw from Home Depot. No, I'm not spending more money. I received a $200 gift card for my John Deere L111 purchase. And there's nothing better than getting a gift card to Home Depot!!! The grown man's candy store! :) Now, my next project is building a miter stand. Oh yes...there's always something at the TaylorTree. Ha! And yes, then I'll have to spend more money. :)
Last and certainly not least...this is something for you parents out there. My daughter is having a little trouble with her letters. So, I created a game tonight that was a lot of fun and hit on various aspects of learning. I cut up 7 pieces of construction paper into 4 squares each. Then I grabbed a marker and wrote the letters A, B, C, and D on the squares of paper. In the end, I had 7 A's, 7 B's, 7 C's, and 7 D's that totalled 28 squares of paper.
Now, for the fun stuff. I told her this was the ABC game. And she has to hide in her room...then I'd hide all the pieces of paper in the living room for her to find. The key to the game is she can only find the letter I said. So, when she first came out I told her she could only get the letter B. But, before she could get the papers...she had to tell me something that started with the letter B. Of course, this was the hardest part...so I ended up telling her and then she raced like a rabbit hunting the letter B. Then after she found all the B's....I told her she had to lay out all the papers she found and count them so we'd know if she got them all. If she found them all then we'd proceed to the next letter I chose. As you can see...she ended up learning letters, meanings, counting, and the best of all...treasure hunting. :) A pretty fun and inexpensive game to play with your little toddler.
Later Trades,
MT
I've also been plenty busy implementing all the new technology changes I've introduced into my trading environment. I've got so many things to do now each night...I can barely keep up. First there's my data source updates via TC2005. Then Wealth-Lab Multi-Scans. Then R batch jobs. Then loading symbols lists into Trade-Ideas Pro. Then wake up the next day and submit orders and quickly configure Medved QuoteTracker's Trade-Ideas integrated window. Whew! That's enough to confuse even a full-time trader, I'd think.
I don't really have much to comment on this week...mainly because time is of the essence. But, I wanted to give a quick update on how MB Trading, QuoteTracker, and Trade-Ideas are working together. One word, AWESOME! I'm serious. I cannot believe how seamless the whole process is. With QuoteTracker you can create several different Trade-Ideas windows to choose from. And you can configure these windows to submit Trade-Ideas alerts into a portfolio you created in QuoteTracker. From there you can right-click or Ctrl-T on the symbol and trade it. That's where the built-in MB Trading stuff works like a charm. You can submit your orders, watch the order log, and check on your fills and positions all from within QuoteTracker. Not too shabby.
So, so far...so good.
Also, I haven't really posted much about my R work. I've been planning too...but until then you really should check out The Learning Blog's R post. Dan is much more advanced than me in R. Heck, cracking open the badboy and tweaking it to your liking is definitely beyond my skill levels. So, if you have any R questions...especially in regards to econometrics...check him out.
My use of R? Mostly just creating methods to analyze my trades and ascertaining patterns in the data. Kinda like Mark Cook's use of trading journals in the Market Wizards interview. I especially liked the part where he helped one trader become profitable simply by eliminating Fridays from his trading regimen. So, instead of writing my trades down on paper...I enter them into comma-delimited files via Excel and load into R and perform various analysis. I will also take my backtests from Wealth-Lab and analyze via R. The great thing about R is that you can run it interactively and batch. The batch mode is what I use the most. Again, hopefully I'll write a post about some useful R commands and scripts that help analyze trades. Until then check out this baseball article to get you started. Heck, that's what got me started.
Side Note:
I recently purchased a Dewalt 10" Heavy-Duty Compound Miter Saw from Home Depot. No, I'm not spending more money. I received a $200 gift card for my John Deere L111 purchase. And there's nothing better than getting a gift card to Home Depot!!! The grown man's candy store! :) Now, my next project is building a miter stand. Oh yes...there's always something at the TaylorTree. Ha! And yes, then I'll have to spend more money. :)
Last and certainly not least...this is something for you parents out there. My daughter is having a little trouble with her letters. So, I created a game tonight that was a lot of fun and hit on various aspects of learning. I cut up 7 pieces of construction paper into 4 squares each. Then I grabbed a marker and wrote the letters A, B, C, and D on the squares of paper. In the end, I had 7 A's, 7 B's, 7 C's, and 7 D's that totalled 28 squares of paper.
Now, for the fun stuff. I told her this was the ABC game. And she has to hide in her room...then I'd hide all the pieces of paper in the living room for her to find. The key to the game is she can only find the letter I said. So, when she first came out I told her she could only get the letter B. But, before she could get the papers...she had to tell me something that started with the letter B. Of course, this was the hardest part...so I ended up telling her and then she raced like a rabbit hunting the letter B. Then after she found all the B's....I told her she had to lay out all the papers she found and count them so we'd know if she got them all. If she found them all then we'd proceed to the next letter I chose. As you can see...she ended up learning letters, meanings, counting, and the best of all...treasure hunting. :) A pretty fun and inexpensive game to play with your little toddler.
Later Trades,
MT
Friday, August 12, 2005
Too Busy to Post
Sorry everyone. No post this week. I've got a major project on my hands and doing everything I can to finish it.
Hope everyone has a great weekend. See you next week.
MT
Hope everyone has a great weekend. See you next week.
MT
Friday, July 29, 2005
Part II: Scale Fish not Trades
In part I, I mentioned how scaling into trades ends up increasing the complexity of your system while reducing the edge and thus your profitability. Now, on to scaling out of trades.
Scaling out of trades is pure magic. Yes, magic. The more I think about scaling out of trades...the more I realize how powerful this technique is to your system. Think of it this way. Scaling out of your trades gives you the chance to create trading systems that are 100% profitable. How in the world can you beat that? :)
Let's get to work. Here's the 1st example we'll work with:
Full Deck Method
Starting Equity: $35,000.00
Symbol: XYZ
Shares: 1,000
Entry Price: $35.00
Exit Price: $52.50
Gain/Loss%: 50.00%
Gain/Loss$: $17,500.00
Results:
New Adjusted Equity: $52,500.00
Net Profit%: 50.00%
Net Profit$: $17,500.00
Win Ratio: 100.00%
Number of Trades: 1
Not too shabby for an old dog like yourself, eh? Keeping your deck fully loaded throughout the trade thus capitalizing on the big 50% move.
Now, what happens when you attempt to scale out instead? Let's keep it simple, we'll break the scales into quarters and scale out at the 6%, 18%, 32% profit mark, and then let the remaining quarter ride. So, here's what the trade looks like:
Scale Out Method
Starting Equity: $35,000.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $525.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $41.30
Gain/Loss%: 18.00%
Gain/Loss$: $1,575.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $46.20
Gain/Loss%: 32.00%
Gain/Loss$: $2,800.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $52.50
Gain/Loss%: 50.00%
Gain/Loss$: $4,375.00
Results:
New Adjusted Equity: $44,275.00
Net Profit%: 26.50%
Net Profit$: $9,275.00
Win Ratio: 100.00%
Number of Trades: 4
Wow! That's rough. The Scaling Out Method cut our profits almost in half when compared to the Full Deck Method. What kind of magic dragon you've been puffing Taylor? But, there's another layer hidden behind these numbers. This hidden layer is a roller coaster filled with ups, downs, and a whole lotta nothins that earning 50% on your investment requires.
What if I told you that in order to achieve that 50% return you had to witness a run-up to $46.20 (32% profit) then a fall back down to $37.10 (6% profit)? That's a 20% drawdown in the trade or $9,100.00 in paper profits just wiped away.
Now, you're probably thinking...no way! I have trail stops buddy! I'd never trail my stops 20% or more from the high/close/whatever. If that's true then you'd never achieve that 50% profit for this particular trade example. And since trail stops are a whole nutha beast let's move on.
So, back to the example. If you scaled just like we discussed before...instead of $9,100.00 paper profits vanishing along with your hopes for the trade...only $2,275.00 is lost (4th scale still open) while $4900 (3 scales sold) in actual profits are locked-in. This Scaling Out Method works to lock in your profits but more importantly reduce the drawdown in the trade.
Let's keep testing. What if in the example above we had another trade after the XYZ stock. This new trade was in the ZZZ stock and believe it or not lighting does strike twice in the same portfolio because this trade worked just like the XYZ stock. Hit every mark...but instead of climbing back from that 20% drawdown from the peak of 32% profit...it never came back? And instead you were forced to close out with the paltry 6% profit. What kind of details would that give us...
Full Deck Method
Starting Equity: $35,000.00
Symbol: XYZ
Shares: 1,000
Entry Price: $35.00
Exit Price: $52.50
Gain/Loss%: 50.00%
Gain/Loss$: $17,500.00
New Adjusted Equity: $52,500.00
Symbol: ZZZ
Shares: 1,000
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $2,100.00
Results:
New Adjusted Equity: $54,600.00
Net Profit%: 56.00%
Net Profit$: $19,600.00
Win Ratio: 100.00%
Number of Trades: 2
Max Equity Drawdown: -19.69%
Scale Out Method
Starting Equity: $35,000.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $525.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $41.30
Gain/Loss%: 18.00%
Gain/Loss$: $1,575.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $46.20
Gain/Loss%: 32.00%
Gain/Loss$: $2,800.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $52.50
Gain/Loss%: 50.00%
Gain/Loss$: $4,375.00
New Adjusted Equity: $44,275.00
Symbol: ZZZ
Shares: 250
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $525.00
Symbol: ZZZ
Shares: 250
Entry Price: $35.00
Exit Price: $41.30
Gain/Loss%: 18.00%
Gain/Loss$: $1,575.00
Symbol: ZZZ
Shares: 250
Entry Price: $35.00
Exit Price: $46.20
Gain/Loss%: 32.00%
Gain/Loss$: $2,800.00
Symbol: ZZZ
Shares: 250
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $525.00
Results:
New Adjusted Equity: $49,700.00
Net Profit%: 42.00%
Net Profit$: $14,700.00
Win Ratio: 100.00%
Number of Trades: 8
Max Equity Drawdown: -5.33%
Now where getting somewhere. The Full Deck had 2 winning trades, $19,600 profit, and a -19.69% system drawdown. Scaling Out had 8 wins, $14,700 profit, and -5.33% system drawdown. So, who's the winner?
Well, the Full Deck Method still earned almost 10% more in profits than the Scaling Out Method. But, with 300% more in system drawdown I think it's fair to say the Scaling Out Method provides the better return for the amount risked. Throw in just one more trade that is a loser to boot and the whole ball games changes. Currently, the win ratio on both systems are 100%. But, with a loser added to the mix the Full Deck Method would drop down to a 67% win ratio. While the Scaling Out method at a worst case scenario would still achieve an 89% win ratio. And could be better if just one of those scales were made before the trade turned into a loss.
What do you think? A way to lock in your profits, free up your money quicker, let some profits ride, reduce your system drawdown, and increase your win ratio to boot. Not too shabby, eh? But, what I like even better is again...where else do you get the chance to create new trading systems with guaranteed profits?
Now, please don't get picky on me. I'm not counting slippage and commission costs into the mix. Feel free to do that when analyzing your own trades. And the 6%, 18%, 32%, and let it ride scale is just an example. By all means, test out different combination of scales in your own trades. Should be enough to keep you busy for a good long while. :)
Rants:
I've been a programmer for 10+ years now. This has involved working with many other programmers both old and new. Know what the most common fault I have witnessed over these 10 years? The failure to test ideas. The failure to test programs. We think it should work, so it must. Ha!
Just what do we have against testing? Why do we feel the need to pontificate on things that can easily be tested? It's a really strange phenomenon that even I'm guilty of from time to time. And I know better!
I think the key is this: Avoid trying to prove an idea with logic and speculation. Use logic and speculation to create ideas and use testing to prove whether those ideas are indeed valid. Maybe logic is not the correct term here. But, I hope you get my meaning.
Side Note:
If you've had a good day, week, month, or year...do you reward yourself for trading well? I haven't really done this before but I'm beginning to think this is a good idea. If all you do is roll the profits back into the business then where's the reward for all your efforts? Usually, my reward or gratification comes from the creation of new systems or learning of new tools/ideas/methods. And of course, writing this blog helps to communicate my thoughts to an audience that can understand and appreciate what I do. That's a reward in itself. But, maybe Rod Tidwell is seeping into my brain and a little part of me is shouting...SHOW ME THE MONEY! Ha ha.
Anyway, upon this theme...I'm thinking about getting a Kodak Digital Camera (EasyShare DX7440 4MP with 4x Optical Zoom for a little reward. I'm a photo-taking newbie so if anyone has any comments on this camera or any other good digital cameras in the $200 - $300 range, please let me know.
Scaling out of trades is pure magic. Yes, magic. The more I think about scaling out of trades...the more I realize how powerful this technique is to your system. Think of it this way. Scaling out of your trades gives you the chance to create trading systems that are 100% profitable. How in the world can you beat that? :)
Let's get to work. Here's the 1st example we'll work with:
Full Deck Method
Starting Equity: $35,000.00
Symbol: XYZ
Shares: 1,000
Entry Price: $35.00
Exit Price: $52.50
Gain/Loss%: 50.00%
Gain/Loss$: $17,500.00
Results:
New Adjusted Equity: $52,500.00
Net Profit%: 50.00%
Net Profit$: $17,500.00
Win Ratio: 100.00%
Number of Trades: 1
Not too shabby for an old dog like yourself, eh? Keeping your deck fully loaded throughout the trade thus capitalizing on the big 50% move.
Now, what happens when you attempt to scale out instead? Let's keep it simple, we'll break the scales into quarters and scale out at the 6%, 18%, 32% profit mark, and then let the remaining quarter ride. So, here's what the trade looks like:
Scale Out Method
Starting Equity: $35,000.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $525.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $41.30
Gain/Loss%: 18.00%
Gain/Loss$: $1,575.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $46.20
Gain/Loss%: 32.00%
Gain/Loss$: $2,800.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $52.50
Gain/Loss%: 50.00%
Gain/Loss$: $4,375.00
Results:
New Adjusted Equity: $44,275.00
Net Profit%: 26.50%
Net Profit$: $9,275.00
Win Ratio: 100.00%
Number of Trades: 4
Wow! That's rough. The Scaling Out Method cut our profits almost in half when compared to the Full Deck Method. What kind of magic dragon you've been puffing Taylor? But, there's another layer hidden behind these numbers. This hidden layer is a roller coaster filled with ups, downs, and a whole lotta nothins that earning 50% on your investment requires.
What if I told you that in order to achieve that 50% return you had to witness a run-up to $46.20 (32% profit) then a fall back down to $37.10 (6% profit)? That's a 20% drawdown in the trade or $9,100.00 in paper profits just wiped away.
Now, you're probably thinking...no way! I have trail stops buddy! I'd never trail my stops 20% or more from the high/close/whatever. If that's true then you'd never achieve that 50% profit for this particular trade example. And since trail stops are a whole nutha beast let's move on.
So, back to the example. If you scaled just like we discussed before...instead of $9,100.00 paper profits vanishing along with your hopes for the trade...only $2,275.00 is lost (4th scale still open) while $4900 (3 scales sold) in actual profits are locked-in. This Scaling Out Method works to lock in your profits but more importantly reduce the drawdown in the trade.
Let's keep testing. What if in the example above we had another trade after the XYZ stock. This new trade was in the ZZZ stock and believe it or not lighting does strike twice in the same portfolio because this trade worked just like the XYZ stock. Hit every mark...but instead of climbing back from that 20% drawdown from the peak of 32% profit...it never came back? And instead you were forced to close out with the paltry 6% profit. What kind of details would that give us...
Full Deck Method
Starting Equity: $35,000.00
Symbol: XYZ
Shares: 1,000
Entry Price: $35.00
Exit Price: $52.50
Gain/Loss%: 50.00%
Gain/Loss$: $17,500.00
New Adjusted Equity: $52,500.00
Symbol: ZZZ
Shares: 1,000
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $2,100.00
Results:
New Adjusted Equity: $54,600.00
Net Profit%: 56.00%
Net Profit$: $19,600.00
Win Ratio: 100.00%
Number of Trades: 2
Max Equity Drawdown: -19.69%
Scale Out Method
Starting Equity: $35,000.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $525.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $41.30
Gain/Loss%: 18.00%
Gain/Loss$: $1,575.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $46.20
Gain/Loss%: 32.00%
Gain/Loss$: $2,800.00
Symbol: XYZ
Shares: 250
Entry Price: $35.00
Exit Price: $52.50
Gain/Loss%: 50.00%
Gain/Loss$: $4,375.00
New Adjusted Equity: $44,275.00
Symbol: ZZZ
Shares: 250
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $525.00
Symbol: ZZZ
Shares: 250
Entry Price: $35.00
Exit Price: $41.30
Gain/Loss%: 18.00%
Gain/Loss$: $1,575.00
Symbol: ZZZ
Shares: 250
Entry Price: $35.00
Exit Price: $46.20
Gain/Loss%: 32.00%
Gain/Loss$: $2,800.00
Symbol: ZZZ
Shares: 250
Entry Price: $35.00
Exit Price: $37.10
Gain/Loss%: 6.00%
Gain/Loss$: $525.00
Results:
New Adjusted Equity: $49,700.00
Net Profit%: 42.00%
Net Profit$: $14,700.00
Win Ratio: 100.00%
Number of Trades: 8
Max Equity Drawdown: -5.33%
Now where getting somewhere. The Full Deck had 2 winning trades, $19,600 profit, and a -19.69% system drawdown. Scaling Out had 8 wins, $14,700 profit, and -5.33% system drawdown. So, who's the winner?
Well, the Full Deck Method still earned almost 10% more in profits than the Scaling Out Method. But, with 300% more in system drawdown I think it's fair to say the Scaling Out Method provides the better return for the amount risked. Throw in just one more trade that is a loser to boot and the whole ball games changes. Currently, the win ratio on both systems are 100%. But, with a loser added to the mix the Full Deck Method would drop down to a 67% win ratio. While the Scaling Out method at a worst case scenario would still achieve an 89% win ratio. And could be better if just one of those scales were made before the trade turned into a loss.
What do you think? A way to lock in your profits, free up your money quicker, let some profits ride, reduce your system drawdown, and increase your win ratio to boot. Not too shabby, eh? But, what I like even better is again...where else do you get the chance to create new trading systems with guaranteed profits?
Now, please don't get picky on me. I'm not counting slippage and commission costs into the mix. Feel free to do that when analyzing your own trades. And the 6%, 18%, 32%, and let it ride scale is just an example. By all means, test out different combination of scales in your own trades. Should be enough to keep you busy for a good long while. :)
Rants:
I've been a programmer for 10+ years now. This has involved working with many other programmers both old and new. Know what the most common fault I have witnessed over these 10 years? The failure to test ideas. The failure to test programs. We think it should work, so it must. Ha!
Just what do we have against testing? Why do we feel the need to pontificate on things that can easily be tested? It's a really strange phenomenon that even I'm guilty of from time to time. And I know better!
I think the key is this: Avoid trying to prove an idea with logic and speculation. Use logic and speculation to create ideas and use testing to prove whether those ideas are indeed valid. Maybe logic is not the correct term here. But, I hope you get my meaning.
Side Note:
If you've had a good day, week, month, or year...do you reward yourself for trading well? I haven't really done this before but I'm beginning to think this is a good idea. If all you do is roll the profits back into the business then where's the reward for all your efforts? Usually, my reward or gratification comes from the creation of new systems or learning of new tools/ideas/methods. And of course, writing this blog helps to communicate my thoughts to an audience that can understand and appreciate what I do. That's a reward in itself. But, maybe Rod Tidwell is seeping into my brain and a little part of me is shouting...SHOW ME THE MONEY! Ha ha.
Anyway, upon this theme...I'm thinking about getting a Kodak Digital Camera (EasyShare DX7440 4MP with 4x Optical Zoom for a little reward. I'm a photo-taking newbie so if anyone has any comments on this camera or any other good digital cameras in the $200 - $300 range, please let me know.
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