Sunday, February 24, 2008

Open positions for February 24th

Here is the status of my current holdings:

Symbol Entry Date Entry Price Current Price Profit %
IDEV* 24/09/2007 6.62 5.20 -21.45
INFA 28/09/2007 15.72 18.08 15.01
AMSG 26/10/2007 26.68 24.45 -8.36
RCCC 22/01/2008 44.13 44.05 -0.18

I use a stop lose rule which is to sell the stock if it loss 10% or more. However, since I trade on a weekly basis the loss on IDEV ended in 21.45%. This was a result of a steep decline which occurred last Thursday. Usually after a strong move downwards we witnessed correction of different magnitudes. A day later the stock went up 0.8% but unfortunately the week was over. Nevertheless the stock was sold as the system ordered.

Thursday, February 21, 2008

What would you do?

Since trading at this point is just a hobby which I tend to change and become a full time trader I set myself a workout plan which include staying late two to three times a week and study the markets as much as I can by reading books on the subject, subscribing to various RSS blogs, developing and perfecting different systems and last but not least, writing this blog.

You could say I knew technical analysis was my cup of tea since the beginning. Graphs and different oscillators fascinated me from the beginning and since I come from the software industry I guess develop computerized systems was just an evolution thing. Developing computerize system takes a lot of time where one develop, test, tweak and do the whole thing over and over again  but once you are done all there is to do is follow the system signals, which most of you know, is not an easy task :).

Now here's my dilemma: I strive to improve myself by reading blogs, newsletters and books and thus hope to improve the way I trade. But since I follow the systems signals I find that reading about the current recession or the credit crunch or looking at a graph explain why I should buy gold is irrelevant to me.

I feel I have reached a point where reading few more posts in various blogs wont expand my knowledge in the direction I need.

Let me know what would you do in my place.

Tuesday, February 19, 2008

Keep track of the changes you make to your system

In the early stage of the system development I was a bit absentminded. Lots of idea went trough my mind while I was going to sleep and were hastily tested in the following day. I jumped from one setup rule to the other while trying to find my golden egg. As time passed and the system started to mature I have noticed I occasionally repeat testing the same rules I tested before. The reason for this was because I didn't keep track of the changes I made to the system. The funny part is that I work as software developer for more than 10 years. In the software industry you have no choice but to use Source Control Management (SCM) tools which allows you to keep track of the changes one or more developers have made to the application during its development stage. SCM is also useful for branching which is the act of going back to a previous version and start a different version. For example when you go from version 1.0 to version 2.0 but still need to support version 1.0 by writing fixes and updates.

To overcome the problem, what I did was keep track of the changes I made to the code in Excel file. I created a table with the following columns:

Version - I've decided to keep every change I made in the script to a new file and label it with a new version number for example 1.57, 1.58.

Based on version - as described above, a script might branch into several different scripts as you test different ideas based on the same version. This is why it's important to know what version your current code is based upon so you can track the changes made between two scripts incase you want to incorporate them later on.

Changes Made - a short description of the changes made to the script. This should be one or two sentences long and only need to remind you what was changed. For example Modified the SMA to use 50 days period instead of 100 or Added another check to make sure the stock is liquid enough by checking  the volume over a period of 3 months.

Using Monte Carlo tool I also collect the following statistical data regarding  the performance of the system:

No of trades - The total number of the trades issued by the system. You need to remember that the simulator generates numerous trades which are not used in the final simulation as they might overlap with each other. For instance a simulation might use 140 trades (for a given period) while the there are over 500 raw trades. When using Monte Carlo simulation, the program randomly uses all the raw trades in order to generate new simulations and thus make sure the system performance well if other trades were chosen.

Total Average Profit - used to measure the average profit of all the simulation runs. I use 2000 runs to check each version of the script to minimize the random effect. This means the program generate 2000 different simulations based on the raw trades and only then it calculate the average profit.

Yearly average profit - using the Monte Carlo program I can switch to different periods and check how the system performed in each of them.

Total Average Drawdown -one of the most important parameters you want to know about your system is how much money it might lose on average. This should suite your mental capabilities and should not be overlooked.

Yearly Average Drawdown - same as above but only on a yearly basis.

Probability to achieve X% Profit - using the average profit and average drawdown the program calculate the probability to achieve X% profit.


I believe keeping track of your work methodology is one of the most important steps bringing you closer to become a professional trader. In my mind tracking the changes signal you understand that becoming a trader takes time and effort and not working upon impulse.

For sample screenshots you might want to visit this blog entry.

Monday, February 18, 2008

Open positions for February 19th

Here is the status of my current holdings:

Symbol Entry Date Entry Price Current Price Profit %
IDEV 24/09/2007 6.62 5.96 -9.97
INFA 28/09/2007 15.72 18.31 16.48
AMSG 26/10/2007 26.68 24.85 -6.86
RCCC 22/01/2008 44.13 43.98 -0.34

Monday, February 11, 2008

When to keep out of the market

When developing a system based on a bullish trend following one needs to make sure the system doesn't trade in a bearish market. This will help minimize the false trades which are bound to happen in opposite trends. To overcome this problem I needed to identify the market direction. My idea was to use one of the indexes as a gauge. Since the main market I trade (although the system performed well in other markets as well) I tried to use the Nasdaq composite (^IXIC) and its SMA to determine if we are in a bearish or bullish period. If the index moved under its SMA I would stop buying until the index moved back above its SMA. I also checked whether I should also close all my position when the market is turning bearish but that turned to be wrong and this is why I am keeping my current positions. The results were outstanding. The system's total profit for the test period improved by 100%. (the simulated period last between November 2002 and November 2007). I was trying to further improve the result by using the QQQQ instead of ^IXIC which turned out to be a good bet as you can see from a previous blog.

I was looking at historical data for the QQQQ to see how long did it stay under its SMA using my current system settings for the SMA period. In the crisis of 2000 the QQQQ had stayed below its SMA from September 2000 to November 2001, went up for 2 months and then dived for another 10 months. That's a long period were you're not buying anything and hopping you wont need to sell anything due to stop loss. But one cannot argue with historical data and statistics.

I hope the current recession will not hold that long but if it does  I will have to find something else to do with my spare time (as if trading on a weekly basis takes too much of my time).

Sunday, February 10, 2008

Open positions for February 10th

Here is the status of my current holdings:

Symbol Entry Date Entry Price Current Price Profit %
IDEV 24/09/2007 6.62 6.13 -7.40
INFA 28/09/2007 15.72 18.41 17.11
AMSG 26/10/2007 26.68 25.25 -5.36
RCCC 22/01/2008 44.13 44.03 -0.23

Tuesday, February 5, 2008

Expand your knowledge

Know your Federal Reserve Chairman - An interesting piece on Ben Bernanke's track toward the long awaited job.

Brett Steenberger share his favorite posts for 2007

Excellent blog by John Forman of The Essential of Trading about how to take the long view when trading

According to The Institutional Investor it seems everyone, including the big players had their share in the last market turmoil.

Trader's Narrative believe we are in the beginning of our way up, back on the trend's back.

Barry Ritholtzl post in "TheStreet" reveal What Investors Need to Know About Historical Data.

Sunday, February 3, 2008

Open positions for February 3rd

It seems the decline was restrained and we might hit market bottom. This does not mean we'll see the market soar in the following days or even weeks but I believe we will not see steep declines as well.

Here is the status of my current holdings:

Symbol Entry Date Entry Price Current Price Profit %
ARTG 24/09/2007 3.00 4.24 41.33
IDEV 24/09/2007 6.62 6.45 -2.57
INFA 28/09/2007 15.72 18.54 17.94
AMSG 26/10/2007 26.68 25.87 -3.04
RCCC 22/01/2008 44.13 44.25 0.27