Don't Panic!!

[Cable Sal]

I haven't had chance to trial the stochastics over the weekend, I was hoping to do it today but aaargh, crisis, no broadband!

I can cope without broadband for trading, I have the iPhone app and telephone trading set up, but for analysis purposes, I can't do without broadband.

I tried my local wifi spot, they were down too. It seemed like a good excuse to trial my emergency contingency plan and decamp to a hotel (a little treat I give myself from time to time anyway), but my usual 2nd-home-in-the-city was suffering from the same problem. Seems like a biggie for BT then. I ended up in a rather nice city centre 4 star not too far from the office for tomorrow morning. Quite a distraction.

Anyway, back to the results of the weekend's work. I broke the rules of my trading plan last week by taking the duel AQP trades. The penalty for one breach is to amend my trading plan to cover the circumstance that caused the breach, so I did that yesterday. It was beginning to look a little old anyway, as it pre-dated my first trade (last Monday).

I got down to a bit of analysis work also (before the broadband crisis). I'm binning off Bovis (BVS), it's going nowhere in paper-trading, and extending the back-testing backwards a couple of extra months throws it into a loss. It's not looking like a compatible share for my method.

However, Ashmore (ASHM) is looking like a potential star. The two month backtest showed promise, I extended it to four months and it just kept on adding profit to pot. It's been in paper-trading since 30th September, which is only long enough for one trade to be initiated, but it's looking good. I think we might have a new star for the live basket by the end of October.

My trading plan at the moment requires a minimum back-test of 2 months and forward paper-trade of 1 month, this is because I haven't been able to identify yet exactly what it is that makes some shares compatible and some not. I think over time I'll find that compatibility isn't lasting, it's momentary. Part of my routine is to keep an eye on live shares losing their compatibility, in which case I would put them back into paper-trading until I decide to bin them off or reinstate them.

I'm contemplating increasing the minimum back-test period from 2 months to 4 months as it's not a great deal more effort (the effort is a one off jobbie per share), and it seems to reinforce the results. I tried extending the back-testing on all of the shares in the current basket, and the ones doing well did even better, and the ones doing badly did even worse.

I wasn't sure of the relevance of extending the back-testing so far, as I'm looking to see if recent-past performance is likely to predict near-future compatibility, but it seems to work. I'm not sure why, whether there's something inherent in my method that means that some shares' price behaviour patterns will mostly work and others have patterns that mostly won't.

It's not obvious which shares will work and which won't, as Inchcape showed me. I looked at its chart and thought that it's just too choppy, my method wouldn't be able to pull a profit out often enough to pay for the losses - but it proved me wrong, Inchcape's choppiness is perfect. 4 months of backtesting and nearly 4 weeks of paper-trading have managed to ride the waves really well.

One day I'll get it fathomed how to spot the shares that are most likely to make a profit in back-testing, but for the moment I'll just suck 'em and see how they taste!

Wishing you all good trading,

Sal

 

[Cable Sal]

Ooo, I thought I'd mention something else. My reward for doing everything that I'm supposed to do in a week (including paying the penalty for a single plan breach) is to reward myself with a song from iTunes. I rarely buy songs online because I'm paranoid of my music being held in the cloud, I like to have the hardware (CD) and upload it myself. There's some random tunes though that I like and would never get around to buying on CD, I'm happy to download them as I'd never get them otherwise.

This week's reward was Perfect Day by Lou Reed.

 

[Cable Sal]

Gosh, I'm glad I was too busy to tick watch today, I'd have been glued to the screen.

Everything skyrocketed! AQP daily's high came within 2 points of its limit, AQP Dec's high was 4 points off its limit, and FENR's high was a whisker more than 3 points off its limit. Helical is still a mile away, but made sturdy progress in the right direction. At EOD my account moved from being 51p in profit to being a whopping £2.19 above my starting capital.

In back-testing and paper-trading there's been a few occasions when the basket was overly long-biased and a fair wind from the FTSE 250 set a load of shares tumbling over their limits. There's a tendency for these circumstances to trigger lots of new "go long tomorrow" signals, many of which get stopped out as the FTSE retraces. I've tried numerous approaches to whittling down the number of false entry signals that I get on the back of a FTSE boost, but so far my overall profitability has always come out best in the models when I just accepted the signal and went back for another bite of the cherry.

It didn't happen like that today because no limits were hit, but if we get another day tomorrow like today, then limits will be hit, I'll bank the profits, and then at EOD I'll get "go long tomorrow" signals for Wednesday.

I've tried working with longer limits, I've tried letting the profits run until it looked like the price was reversing, I've tried delaying a second entry for various lengths of time and other signals to occur, I even tried scaling out half the bet and letting the rest run. Without fail, the method that's worked best is to take the cash and go straight back in.

Fingers crossed for another happy day on the FTSE 250 tomorrow

Sal

 

[0007]

I've tried working with longer limits, I've tried letting the profits run until it looked like the price was reversing, I've tried delaying a second entry for various lengths of time and other signals to occur, I even tried scaling out half the bet and letting the rest run. Without fail, the method that's worked best is to take the cash and go straight back in.
Sal

I'd agree with that. If you find a trend just take the zigs and exit the zags (or vice versa according to long or short) and the profits mind themselves.

 

[Cable Sal]

Ouch, took a hurting today, the winds of the FTSE 250 blew almost everything south. Statistically I was due one though, so no worries.

AQP had the worst of it, being a mining stock, a particularly hard hit sector. AQP daily closed at 363.5, AQP Dec closed at 364.2, both below the price that I bought them at, wiping out yesterday's gain. Neither of them stopped out though, thanks to yesterday's gains providing such a massive buffer.

Helical closed at 321.1, down a bit from yesterday's 325.1 close, but still above the price I bought at. The average price across the day held firm, only 0.22 down on yesterday's average - well done Helical for staying steady during strong adverse pressure. Helical's in the housing sector so I'm surprised at its recent performance.

Fenner was today's star performer, still pushing upwards despite the market. It came within 2 points of its limit at its high, but closed at 252.2, 7 points below its limit and 1 point below yesterday's close. Its average price throughout the day was 252.38, 3 points above yesterday's average.

The average price (the average of the open, close, high and low) is a key figure in my methodology as it's a major factor in determining trend, and is something I track every day for each share in the live and paper-trading basket. I pay more attention to the average price than the close.

The positive news of the day is that despite losing a hefty £1.73 today, I still managed to close upwards of breakeven, my account ending the day 46p above my starting capital.

The two disappointments of the day:

1. I really thought that I'd finally get to see something hit a stop or a limit today. I can't validate my model until I've seen that it calculates exits the same way as IG does. I keep reminding myself to have patience, and I guess it's a good thing to have this journal as a place to blow off my impatience. I'm sure that I'll have plenty of opportunities in the future to wish that I hadn't hit a stop, it seems pointless to be wishing that I had now.

2. OMG, I'm still not getting a short signal from CSR. I keep preaching the mantra "the method knows better than me". It's proving to be a test to my discipline to stay out while I'm watching missed opportunities pass me by. But, the method that I chose does pass up the occasional opportunity - on average for every four trades that it passes up, three of them would have been unsuccessful. Maybe tomorrow?

I stuck to the plan, despite temptations, so all is good.

Sal

 

[Cable Sal]

First profits banked

Woo-hoo!! Crack open the champagne, party at my place and everybody's invited!! :clap: Okay, good, I've got that out of my system.

Phenominal volatility in the duel AQP shares took them both close to their stops then skyrocketed them both straight through their limits.

I went into my IG account during my lunch break to collect my middle-day figures and the first thing that I saw was that my account had jumped to +£2.55 above starting capital. The next thing that I saw was that AQP daily had disappeared from my open positions and AQP Dec was running a high profit. I glanced at AQP's low and high and they were so far apart I wasn't sure whether it had hit its stop or its limit. I had a brief heart-in-mouth moment while I checked my records to see what the values of both were, and confirmed that it had gone through its limit.

I then sat and tick-watched AQP Dec for the rest of my lunchtime to see if it would follow. nline2lo Like pots and kettles around the world, it didn't do anything while I watched it. Once I got home after work I checked again and yep, it had gone through its limit too.

Meanwhile Fenner came within 0.5 of its limit, the buy price got across the line, it just didn't quite manage to get the sell price there too. Its limit is 259.52, its high was 259.2, it closed the day at 255.1, up 3 points on yesterday and its average price was 254.18, 2 points up on yesterday's 252.2. Oooo so close, maybe tomorrow. :cheesy:

Helical continued to climb its mountain towards its unlikely 338.54 limit, reaching a high of 327.7. It closed at 325.4, 4 points above yesterday's close of 321.1 and its average was 324.15, up 2 points on yesterday's average of 322.08. It's giving me a long signal for tomorrow, so I'm hoping that it'll continue on its way a little longer. It's closer to its limit than its stop, so there's a good chance that even if it's unlikely to hit its limit, it's more likely to give me a swing exit - an instruction to exit my long and go short instead - than it is to hit its stop.

I've learnt a lesson from that bad entry on Helical, and written a few extra bits into my trading plan. I looked over Helical's, Fenner's and CSR's historical charts and without getting into too much maths, I estimated that I do far better entering during my lunch break than before I leave for work, just after open. I've written that in the short-term, until I know better, I will restrain my active trading to between one hour after market open and one hour before close. That means it'll be mostly my lunchtime that I do my trading, but gives me enough lee-way for those days when lunch happens at a peculiar point in the day.

I've ended the day +£5.15 above starting capital, with Fenner looking promising tomorrow. I'm looking forward to reconciling my account from today's IG statement, at long last I can check how to model the exit values.

I've been putting a bit of thought into my trading plan, and I've restructured how it's written now that I know a bit more about what I'm doing. I used Tim's template, in exactly the order Tim had it laid out, to develop mine. Now that it's developed and it's in an execution and maintenance phase, it works better with the paragraphs in a different order. Restructuring has helped me understand what I should be aiming to do on a daily, weekly and monthly basis a bit better too.

Daily - focus on analysing the trades.
Weekly - focus on analysing the basket of shares.
Monthly - focus on analysing the methodologies.

Oh yes, one last thing. CSR jumped up today, and would have lost me £30 on yesterday if I'd been betting at full price. I'm right, the method does know better than me!

Sal

p.s. I've just noticed that I can change the title of my posts, it doesn't have to be the same as my thread. Well, fancy that.

 

[megamuel]

Re: First profits banked

Woo-hoo!! Crack open the champagne, party at my place and everybody's invited!! :clap:

Where is your place?! I'm up for a party! CBA readin the rest!

 

[Cable Sal]

Sam: Lol

So third time lucky today, Fenner hit its limit, bringing my account balance up to +£5.54 now. :cheesy:

Helical is still in there, reaching its highest high of the last few months, an average price of 3 points above yesterday, and closing 2 points above yesterday. If it's going to hit resistance it'll be now.

Time to move things up a notch, my minimum IG bet is now 20p, and I've got another long signal for tomorrow on Fenner.

During paper-trading and back-testing, across the whole basket of shares, for each entry I've been getting about one third hit their limits, one third hit their stops and one third exit early to swing price, more often in profit than loss. So, three limit hits on the run mean that I'm statistically ready for a losing streak, which is a shame, because it means my winning streak was a lower bet size than my losing streak is likely to be. Hey-ho, the perils of an early win!

Meanwhile, I'm still trying to puzzle out exactly which figures to sum to work out the individual share profits over time from the three banked profits. The December contract was easy, no money moves until you exit the contract, but with the daily rollovers of the others, including Helical, there's deductions and additions going on all the time. I can reconcile it, so I'm halfway there, all I need to be able to do now is to forecast / simulate it, so that I can get an accurate P/L for my paper-trades.

I'm not entirely sure yet, but at first glance it would appear that I might have made more cash on the quarterly than the daily AQP, even though the quarterly banked less cash on the final day. I'm not sure yet, the maths will tell me eventually.

I've got four quarterly contracts in paper-trading to see how they behave. The problem is that by the time they come out of paper-trading they'll be close to expiring, lol. A bit more planning needed here.

Sal

 

[Cable Sal]

My first 20p bet and this weekend's analysis

Time to double the stakes, I did what I was told and went long on Fenner during my lunch.

I bought Fenner at 20p per point at 262.15, which was a mile away from the low of the day, but still good enough that I'd covered the cost of the spread by close and it ended the day with a little profit. Nice.

Helical's high is still below its resistance, which in IG prices is 333.2. It's getting so close now, I'm guessing that if it breaks out north of that price I'll get my limit, otherwise it'll retrace and I'll get my swing.

The FTSE 250 was just a touch below its 5 day average today, indicating that it'd give anything heading south a little boost. I excitedly checked CSR - maybe at last I'd get a short signal from the most profitable, albeit laziest, share in my basket. But oh no, CSR is now giving me a long sentiment. It's average price has been a higher high three days on the row, indicating that it's trying to trend upwards. This isn't the same as giving me a signal to go long, it still has to breakout out of its 5 day range and have the wind of the FTSE 250 heading in the same direction, neither of which it's done. But it's definitely not going short in the next few trading days.

I put a little time this evening into working on my IG statement reconciliation, and I'm able to model the costs and profits properly now, so I'll work on applying proper P/Ls across my paper-trading over this weekend and see what I really would have made (approximately). I'm still making big assumptions about going short, but I'll be moving the estimate a huge step closer to reality and it shouldn't be a massive difference once I can model the real short cashflow. It's not terribly important for comparing this share with that share, but when I'm comparing this method with that method, it can make a big difference to be a little bit out on my assumptions.

Now that I've figured out how to calculate the overall profit of a closed trade (obvious once I'd got it), I can see that I did make quite a bit more on AQP Dec than AQP daily (£1.95 vs £1.71). I'm not sure why yet, whether it's to do with the way that IG charges, or whether the increased spread on the quarterly contract caused a greater risk, which made me set a greater limit. It'll come out of this weekend's analysis, and that'll give me a steer whether I should be trading daily or quarterly contracts. I'd prefer daily, as my historical data stays relevant over time, but money will win this fight.

My account balance is now £6.19 above breakeven. Cool.

Sal

 

[megamuel]

Drinks on Sal! Mine's a pint!:cheers: Keep it up Sal!

 

[Cable Sal]

This weekend's analysis is suggesting that quarterly contracts will return a significantly better profit than trading the daily equivalents. (Back-testing is showing >25%.) I've got four December contracts in paper trading, due to go live (if they maintain performance) in early November. That's only enough time to get in one or two trades before it gets too close to contract expiry, so I've started collecting data on ASHM's and INCH's March 11 contracts to back-test and put into paper trading to see how they perform.

I'm still not clear whether quarterlies are returning better profits because:
a) I've widened the stops / limits to accommodate the extra spread;
b) The cost structure is different and works better for my average week and half trades;
c) The ATRs of quarterlies are slightly different, just a little lower, a little smoother; or
d) An assumption error in my calculations.

If it's a) then the same treatment should also work on the daily prices, but they're already showing signs of being a bit stretched to reach their limits. Anyway, time will tell.

Today's trading was a bit dull. Fenner dropped below its starting price, but not scary close to its stop, Helical retreated a touch, but nothing much. A bit of a bland day really. Fenner's drop had quite an impact on my account balance, as its trading at twice the bet size of my previous winners, 20p a point. The account balance dropped from £6.17 to £4.67 above starting capital, oh well, still in profit.

Tomorrow should be more interesting, I've got a "go long" signal from CSR - which feels like a bad move, but my spreadsheets really do know better than me, so I'll do as I'm told and place the trade. If Fenner has another day like today then it'll stop out, but at least I'll get to validate my model for long stops then. Helical is in there for the long haul I think, it broke through its resistance yesterday, reaching its highest level for well over 6 months, we'll see if it keeps it up.

And finally...
As I've previously mentioned, I wrote into my trading plan that if I stuck to the plan all week I'd treat myself to a song from iTunes. There's all kinds of random stuff that I've never got around to buying - usually because I buy albums on CD, and if I don't like the artist enough to buy their album, I miss the one single that they released that I did like. Sunday's reward was Black Velvet by Alannah Myles. It's a song written about Elvis, but I like it because it has that unique sound of southern rock. You can feel Mississippi in that song, the languid heat, the stillness, the buzz of the mosquitos. I'll be back in the deep south for Christmas, but it shan't be quite so hot then.

 

[Cable Sal]

Re: DOH!!

Schoolboy error!! I was so focused on trying to get the best price / spread for CSR, I didn't notice that the deal ticket I'd opened was for CSR December. Oh boy, trigger happy. So, I've just gone long on CSR December. It's not a catastrophe, CSR Dec gave me a long signal last night, at the same time as its daily equivalent, but it's still in paper-trading and I had no intention of trying out my duel trade experiment again. If I was going to duel trade a daily alongside its quarterly equivalent, I wouldn't have chosen this trade, which I don't think is the most likely success my spreadsheet has picked out.

Oh well, in for 20p, in for 40p... Just because I made an error and bought the wrong thing it doesn't exempt me from doing the right thing, so I went straight in and bought CSR spot too.

I'm glad I learned this lesson at 20p not £10 a point!

Sal

 

[Cable Sal]

I'm still kicking myself for going long on the wrong CSR contract yesterday, but it seems a good enough lesson that I'm losing on both of them, lol. At their current rate of play they'll both stop out tomorrow and I'll get to validate the long stop cost model for both daily and quarterly contracts in one foul swoop.

Both Fenner and Helical dropped a bit yesterday then recovered today, so after slumping to +£3.67 last night, my account has recovered to +£4.60 today. Doing alright really.

Inchcape has come out of back-testing and paper-trading with flying colours, its last 6 trades outperforming CSR, Fenner and Helical on all three fronts: profitability, trade success ratio and average R ratio. It's total trade performance was up there with them too.

I've found it useful to compare the performance of a share's total test and live trades with its performance over the previous closed 6 trades, it helps me to see if a share is going "off the boil", losing its compatibility with my methodology.

Keep on truckin'

Sal

 

[Cable Sal]

First stop

Well the two CSRs stopped out today, and some interesting stuff has come about because of it. In reality, they stopped out by a whisker, before the price recovered to quite a safe place, but in the world of my spreadsheet they didn't stop out, their stops were wide enough to allow them that breathing room.

Meanwhile, in reality, Helical came within a hair's breadth of tripping over its limit, and my spreadsheet says that it came out.

It think I can see the cause of the inconsistency - it's the spread. In reality for a stop to get triggered only one half of the spread has to cross the line, compared to triggering a limit, when both halves of the spread have to cross the line. I think my spreadsheet is working with the actual price, rather than allowing for the spread.

I need to take a closer look at the formulae, more than I have time for tonight, and decide whether to build in a little adjuster to make it more accurate, or whether to just put in a manual tweak for when the model didn't quite match reality in a live trade. It depends on the impact, how often in my paper-trading prices have got quite so close to stops and limits that reality would have had a different result to the model.

Good to know.

The two CSR stops at 20ppp nearly took out my profits from the three prior successes at 10ppp, I noticed at midday that my account had dropped to +66p above starting capital, but between Helical and Fenner today it's ended +£2.60 above base, so well done those two.

As previously mentioned, Helical barely has to think about going north and it'll trip its limit, so we should see that happen tomorrow. My spreadsheet, which assumes that Helical did come out with profits already, has given me another long signal for tomorrow. I'm in a bit of a quandry about how I stick to the plan with this inconsistency, I think if Helical has come out before my lunch-time trading window tomorrow, I'll go long again, that's the equivalent of reality catching up with the model in the nick of time. If Helical doesn't hit its limit early enough in the day, then I'll hold off going long again until I've sorted out how to handle the spreadsheet inaccuracy.

In another exciting development, my new star performer Inchcape has given me a long signal for tomorrow too, so I'll be placing my first trade on that one.

It's gonna be a busy Friday lunch time.

Sal

 

[Cable Sal]

Trading Model v10

It's been a weekend of hard number crunching for me. It turned out that the little inconsistency about the mid-price triggering stops and limits in my model, rather than the spread high or low, had a huge effect on my profitability.

I built in a spread adjustment for the stops first, and found that with the existing settings many trades stopped out within their first day or two of trading. I had to add a little extra to the stop distance to give the trades some breathing room. I then built in the spread adjustment for the limits, and found that overall it brought down my reward:risk ratio from around 1.85:1 to around 1.22:1 on a successful trade.

That's too close for comfort. In my trade plan I draw the line at 1.20:1 as a rolling average performance for any individual share, including the unsuccessful trades; any lower and I pull it out of live trading and put it back into paper-trading. Overall, I'm aiming for 1.40:1 or above, but everything goes through a bit of doldrums every so now and then. If the successful trades are only returning 1.22:1, then I need a higher success ratio to ensure a profit.

I'm not so good at ensuring high success ratios so I tinkered with the settings again, increasing the limits by about 1.75%, adding about 4 points to each trade's target. It brought the reward:risk ratio back up to an average of about 1.87:1. It took a lot of trial and error to get there.

Increasing the reward:risk ratio from 1.22:1 to just 1.60:1 meant that the existing pattern of trades morphed into something new. Trades no longer reached their limits when they used to, and stayed in much longer. That meant less trades, and fewer successful "2nd bites of the cherry".

However, defeat not being an option, I went on with the refining process. Quite remarkably I found that it didn't seem to alter the new trading pattern when I incrementally increased the limits, all the way up to the current average of 1.87:1. There's still a bit of safety factor in that, I could afford to push it a bit higher, but each time I'm increase the likelihood that the average trade will fail to bank any cash at all.

I tested the new specification on 6 shares, across five months of data for each, so I'm fairly confident. I converted all of the daily contracts in my basket of shares first, I've still got the quarterlies to do. So far so good, I'm eeking out a little more profit than before I started to tackle this issue.

My trading landscape is quite different, less homogenous. In last week's version of my model, I simultaneously monitored 3 methodologies: Method 8 which is the bedrock for the other methods, Method 9 which came out consistently the most profitable, and Method 10, which though not as profitable, had the highest R ratio and success ratio, so would be a good fallback if funds started getting tight.

This week's improved accuracy model still monitors the same three methodologies, but now individual shares significantly favour one or other of the methods. For example, £10 bets on 6 AQP trades would bring in £640 if Method 8 is followed, but would lose £586 under Method 10. In contrast, INCH loses £17.57 on 6 trades under Method 8, but banks a profit of £982 under Method 10. Method 9 still takes the lead on profitability, but not as significantly as previously.

I understand why I'm seeing this new behaviour and the mechanism behind it. I think it's a reaction to the longer time period that the shares are trading for (the average trade is now 2-3 weeks rather than 1-2 weeks). I think the answer is not to fight it, not to try and resolve it, but to accept it and trade each share according to which method is giving the best results. I'll keep monitoring all three methods across the basket and see what happens.

There's also a bit of a shake-up in the performance league table too. Some of the shares took a bit of a battering under the new regime, some shone. CSR has dropped from being a star performer to being a mediocre middle runner, INCH has stormed ahead to the number one spot, banking twice as much as any of the other shares in the full 5 month timeframe.

Meanwhile, back in reality, I've got three 20p trades on. Fenner, Helical and Inchcape. I've altered their stops and limits to reflect current thinking, but none of them align with the pattern of trading that I'm currently running. They're not in synch with the new specification, I would've placed those bets earlier / later under the new regime. Oh well, I'll let them come out one way or the other (Helical looks like it's going to stop out tomorrow) and then wait for the new model to give me new trade signals for them.

The account value is fluctuating under the burden of three newish 20p trades, down to +£0.77 above starting capital at close on Friday, it's up to +£2.10 at end of play today.

 

[Cable Sal]

Weekend reward tune

This weekend my reward for sticking to the plan all week (even though I made an error on the CSR purchase, it was unintentional) was to buy myself a tune that has escaped my collection. The 2007 version of Ecstasy by ATB, a sweet little trancy arm waver.

 

[Cable Sal]

Top of the roller coaster?

Oh woe is me! I'm no longer a consistently successful trader.

Well, that's not strictly true - it depends on how you look at it. My three stopped out 20ppp trades have wiped out the profits from my four successful 10ppp trades. Hehehe, my optimism doesn't cave that easy, it's a technical loss not a real one. I'm down £3.09 on my starting capital.

I've made five 20ppp trades so far, all going long, three have stopped out, Fenner and Inchcape are battling adverse trading weather to hang on in there up until now.

So, exciting times afoot. My spreadsheets are showing everything turning a corner, I mean like everything! I've seen this happen in my back-testing, when all of the shares in the basket aligned their swings within a few days of each other - either to go long or short - and it's when I've made the most theoretical profit.

AQP spot and Dec10 went short a few days ago on Methods 8, 9 and 10, but they're still in paper-trading.
ASHM needs one more day with a lower average price and it'll swing short.
CSR doesn't know what it's doing, it's got personal problems.
FENR needs one more day with a lower average price and it'll swing short.
HLCL has given me a short signal on Method 8 yesterday, Methods 9 and 10 tonight, the same with Helical Dec10, but it's still in paper-trading.
INCH has given me the signal to get out of my long trade and go short, all Methods 8,9 and 10 in agreement.

It's particularly exciting that all of the methods are giving me the same signal at the same time, every time that's happened in the past it's given me successful trades - 100% success ratio - 1.88 average R ratio on spots, 2.07 average R ratio on quarterlies.

I'm up to 50ppp trades too, it's almost about to get serious!

 

[Cable Sal]

Where it's all up to

Lordy lordy! Has it really been that long since I updated my journal? I knew I'd been letting it slip, but it only seems like a couple of weeks, tops, since I was here last. I'd best give a rundown on what's been going on.

P&L and bet size

I went negative a bit further than my previous post - I think the lowest I got was about -£6 on my starting capital, but even then if I'd been betting all bets at the same rate I'd have made a profit. Winning at a lower bet price and losing at a higher bet price counters all efforts at letting profits run and cutting losses. I was only negative for a few days all in, the profits started to creep up shortly after. I'm currently about £11 above starting capital, a little down on my best showing of £12 a couple of days ago.

It's all still small money, but I'm still proving the principle to myself at low bet rates, and happy with that. IG have moved me on to normal bet size now, so I'm trading minimum bet size, which was £1/pt on the one trade I've made at full price. My intention is to move up to £5/pt then £10/pt as I get confident, impatient and over-eager. £10/pt is the price that all of my paper-trading and back-testing is conducted at. I'm happy to know that as I get confident, impatient and over-eager, I've got something planned to stretch my ego out of its comfort zone, rather than getting bored and making a rash maneuver.

Portfolio

I've been as negligent with my basket of shares as I have been with maintaining this journal. I've been following my trade plan's instructions at binning off the dead dogs once it looks like they're no longer worth the risk, but not putting in the effort to find new shares for the basket. Consequently, my basket has shrunk down to a handful.

I binned off AQP, despite making good profits on it, I came to realise that my method works best with securities that mostly trend with the FTSE, or at least don't trend contra-FTSE. That means keeping away from miners and metals. Looking over the period of back-testing, paper-trading and live-trading, I'd got the feeling that I'd been quite lucky to grab the profits that I had. I'm very opposed to wanting to "feel lucky" in my trading.

I binned off CSR, despite it being a previous star performer. I was lucky (that word again) to get stopped out for a measured loss on my unintentional duel trade that I mentioned a few posts ago. It caused a lot of number-crunching as I realised there was a flaw in my model, (which is now fixed) and both CSR trades stopped out when they should have continued trading. The next day they reversed and I would have been getting quite excited at the prospect of them hitting their limits. A day or two later they gapped massively at open, like 15% or something, my £10/pt paper-trading which had continued without being stopped out showed a loss of £600+ on a supposed risk of about £140. I looked a bit more closely at CSR's opening-gap history, and found that its frequent gaps, which I sometimes made money on, seemed to synchronise with news releases about on-going court cases over patent issues. I really don't want to be betting on the twists and turns of a court case. I've kept them on a rejects watchlist, maybe once it all blows over I'll have another look at them.

Most recently I've stopped tracking and paper-trading most of the daily contracts. My methods have consistently shown better results on the quarterly contracts, so I'm not going to place a trade on a daily contract. With time at a premium I wanted to shed some of the effort in daily maintenance so that I could get on to developing some new prospects for my basket.

I'm left with the following:
INCH daily - I've still got a trade on from before I binned the dailys
HLCL Dec - to be replaced by HLCL Mar once it's out of paper-trading this weekend
FENR Dec - to be replaced by FENR Mar once it's out of paper-trading this weekend
ASHM Mar - trade on, +£7 running at the moment (not included in my £11 P&L above)
FENR Mar - paper-trading about to complete
FLTR Mar - added to back-testing today
HLCL Mar - paper-trading about to complete
INCH Mar - ready to go as soon as the INCH daily trade closes and I get another signal

So that's 5 unique shares, with only 4 suitable for live trading. I need to be up around 10 in live trading with a couple in back-testing/paper-trading to show any decent results. I've gotta get my finger out.

Christmas is coming

I thought I'd mention that in case nobody has noticed. I've no idea what happens to the markets during the Christmas period. Does business continue as usual? Do prices go a bit haywire and spiky as volumes fall off? Does stuff drop in price as institutional buyers need to sell off to close their positions before going on holiday?

I'm heading off for a bit of an American adventure this Christmas, and my data collecting will suffer because of it. If I've got trades on while I'm heading for the airport I'm not sure if I should pull them out or not. My average trade runs for something like 3 weeks, so should I really stop trading at the beginning of December? My original plan had been to not start live trading until Jan11, to avoid this precise issue. But oh well, I got impatient, and I'm quite satisfied that I dived in earlier than planned. What to do now though?

Rewards (or not)

The lack of journal writing, and the lack of portfolio development means that I've not been able to justify treating myself to my weekend treat of getting myself a tune from iTunes. On the other hand, because I've been sticking very rigidly to the rest of my plan I've not treated my shortfalling as a breach of discipline either. I've not been a Bad Sal, I've just not been a Good Sal either!

I didn't get to mention my last two rewards. My been-a-Good-Sal-for-a-month reward at the end of October was to decamp to a hotel for the weekend, where I could do my month-end number crunching with a little luxury laid on. I won't be getting that at the end of November The last time I qualified for a been-a-Good-Sal-all-week reward I treated myself to Romeo and Juliet by the Killers. I loved the original by Dire Straits, (I would, I'm a girl) but I loved this cover even more.

I'm definitely going to be a good Sal this week because I really, really want Dustbowl Dance by Munford & Sons before I go Stateside. One of my friends over there is descended from ancestors who were poverty-stricken by the Dust Bowl crisis. It's a fascinating bit of American history, Wikipedia does a fair write-up on it, but Dustbowl Dance captures the human impact of the guilt and shame felt by the destitute survivors.

Sign off

That's all for now, I'll be back soon, I promise.

Sal

 

[qsera]

Must-hang Sal(ly) now baby...... !

Go get um tiger ..

very true.....:clap:

 

[Cable Sal]

Choosing candidates

Hehe, thanks.

I've been busy with the spreadsheets in the last few days, my aim being to boost the number of securities that are available for live trading by January. Selecting new candidates for testing has been a bit of a black art for me, I've put some parameters in place, but beyond that it's been a case of suck-it-and-see. Some candidates did remarkably well, others shockingly bad.

I've been looking at the charts of what's worked and what hasn't, and I think I'm starting to be able to spot on a chart the patterns that might be compatible with my methods. I thought it would be interesting to publish my analysis / hypotheses here, and then I can look back on them in January and see what worked and what didn't.

One of my best successes has been with Helical Bar, a thinly traded stock with a price that falls and climbs quite smoothly and significantly compared to its ATR. My last four paper-trades have been successful, each taking a chunk out of a rise or a fall. I'm nowhere near maximising how much profit could be collected by these trades, but I'm happy with the mechanistic approach that my methodolgies use. They miss a few opportunities, but there's always another chance at a bite of the cherry.

Less successful, but still long-term profitable is Fenner, which looks more predictable as a chart than Helical, but my methodologies keep throwing out some dodgy short signals. (In defense of my methodolgies, I have to say that they do a far better job than me at picking the winning trades!) I haven't had any signals to act on Fenner recently because the underlying data has been too choppy to define a trend.

So, charts that look like either of those two work fine for me. Things that don't work: sharp changes in trend, steps up or down, habitual opening gaps contra to the prevailing trend, spikes, saw tooths and plateaus.

Once I'd got a picture in my head of what works and what doesn't, I went for a browse around the FTSE 250, sticking to prices in the 200 - 400 range, and volumes above 100,000. I picked up Filtrona a few days ago, and now I've added another four candidates to that list.

Filtrona: I'm not so sure how this one will turn out, it's got the nice hillocks of Helical, but there's a few nasties in the chart that might stop out too often.

SThree: Another one with a shape a bit like Helical, and the one I think is most likely to turn a profit.

Yule: My back-testing should pull profit from its climb, but what about its recent fall? We'll see.

Farnell: I'm not sure about this one, it might not be smooth enough for my methods to get their teeth into, worth a go though.

ICG: I'm sure this is a reject from the very first basket of securities that I experimented with. I decided to give it another go, as Methods 8, 9 and 10 are somewhat different to the early prototypes that it failed with.

We shall see how they get on.