Day Trading Notes

I have begun day trading the IWM ETF with long only positions. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• Today was a positive day with several good trading opportunities.  It is much easier to trade with the trend.  The size of my winners and losers is about the same for both positive and negative days, but my winning percentage doubles from about 25% to 50% when I go long on positive days. Today was my best day so far based on total return ($0.52) with a winning percentage of 56% and a win-to-loss ratio around 1.61.
• I think I finally found a good way to enter orders with the Fidelity Active Trader Pro software.  I began using  one triggers the other (OTO) orders to place a buy limit order near support, then when it gets filled it triggers a sell trailing stop limit order.  I size the trailing stop to be a little smaller than the ATR(10).
• I like adjusting the risk of my trailing stop based on the ATR(10) and the direction of the trend.  If the trend is up, I will use a slightly larger stop because there is larger probability that the trend will continue up before reversing against me.  If the trend is down and I am trying to time a reversal, I will use a smaller stop to account for the lower probability that a breakout will succeed.
• I used to be opposed to trailing stop orders, but they are good for a few reasons.  First, if I place a buy order near support and get a good fill, the odds are in favor of the price moving up.  If this happens, the trailing stop will help ensure that if the price then reverses, I will have a very small loss.  Second, the trailing stop order can track the actual order flow faster than I can.  It is even faster than the chart price action prints.  It is also even faster than the Level2 data feed.  So if the price spikes momentarily up several ticks and then retreats, then position will exit before I would have been able to register it visually.  Third, the point-and-click order entry method is very slow and the trailing stop ensures that I get a pretty good fill quicker than if I waited to place a limit order.  Finally, it gives me peace of mind that as soon as my buy order is filled, my stop order is automatically in place.  This helps manage my positions while I am working and helps reduce my risk while I am dealing with the daily distractions associated with my job.
• I began making a summary sheet of all my trades that tracks what was traded, how many shares were traded, entry price, exit price, time of exit, day of exit, and whether the market was positive or negative for the day.  I then analyzed my trades based on time of day.  My performance is the worst on the opening drive from 9:30 to 11am because of my slow order entry technique.  My performance is best from 12-2pm, which happens to frequently overlap my lunch hour, allowing me to focus all of my attention on the markets.  My performance drops off again from 2-4pm.
• For now, I will continue trying to trade all day.  It is obvious from my analysis, that I will have to address my trading methods to account for the different market environments throughout the day.  I am continuing to focus more on cutting my losses, but eventually I will put more emphasis on improving the size of my winners and my winning percentage.
• I still need a good way to analyze market breadth intraday.

Daily Trading Summary (09/07/11):

Number of trades (round trips) = 18 (10W, 7L)

Trade Size = 1 share

Average Win (Winning %) = $0.092 (56%)

Average Loss (Losing %) = -$0.057 (39%)

Win-to-Loss Ratio = 1.61

Average Return = $0.029

Total Return = $0.52

Day Trading Notes

I have begun day trading the IWM ETF. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• Today was another good day of trading. The market gapped up big on the open and trended higher for the rest of the day.  I was still able to keep my losses small and I scored 2 sizable wins (0.16 and 0.33), riding the trend for most of the move.
• I think my entries are improving.  It seems that is helping reduce my risk on each of my positions.  I normally try to limit my risk to one ATR(10) on the one minute charts.  My target profit is normally 2+ ATR(10).  It seems that this has been effective the past two days because my win-to-loss ratio has been respectable.
• I still got stopped out of one of my positions just before it ran up for a 0.30 move.  My stop was 0.01 from the lowest print on the shake out.  It would have been nice to catch that move.  I am still working on my entries to help reduce the odds of being shaken out.
• I still find it easier and more comfortable to buy into support and sell into resistance instead of buying a breakout.  It seems I get shaken out of my breakout entries far too often.  I need to develop better breakout trading skills because there is not always an excellent entry point at the bottom most support level.
• I played around with the filters in Fidelity's Active Trade Pro software to try and see if I could find a good market breadth indicator, but the filters were not useful.  They may be useful for finding other trading candidates, but they are basic filters and there is no customization.  Yet another downside of ATP.
• I did miss a couple of moves today.  I should just spend a week and enter every time my entry criteria trigger to get a good sense of the win percentage, which would help with my risk management by allowing my to determine an appropriate win-to-loss ratio.
• I felt a little better reading the tape today.  On my biggest win there was some huge buying.  The price had settled into support for about 5 minutes and I noticed that there were two exchanges with bids over 10000 shares.  I was able to get filled on a limit order 0.01 from the low, targeting the price of the large bids.  The price began moving upward and the buyers persisted on each small dip.  I would keep my stop loss just below the large bid price, riding the trend until the sellers put up some huge offers and the buying dwindled.  I was really pleased with my tape reading analysis on this trade. I need to target my buy limit orders coming into support, with large bid orders.

Daily Trading Summary (09/07/11):

Number of trades (round trips) = 7 (3W, 4L)

Trade Size = 1 share

Average Win (Winning %) = $0.167 (43%)

Average Loss (Losing %) = -$0.067 (57%)

Win-to-Loss Ratio = 2.47

Average Return = $0.033

Total Return = $0.23

Day Trading Notes

I have begun day trading the IWM ETF. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• The past couple of days the market has been in a strong downtrend, making it very difficult to trade from the long side.  Today there was some good trading on the long side as the market seemed to find a nice range with some good swings.
• I need a way to determine if I should be trading long or sitting on the sidelines.  In other words, I need an indicator to tell me when to bet big or small.  I am thinking of using multiple time frames to determine my short term bias.  For now, I will use a 10 day chart with 1 hour bars.  Using my my momentum oscillator on this time frame may help me improve my trade results.  When momentum is positive on this time frame, it normally stays positive for at least a day or so.  These positive momentum periods increases the chances that a breakout will follow through.
• USE THE MOMENTUM FROM DIFFERENT TIME FRAMES TO ALIGN TRADING BIAS AND IMPROVE WIN %.
• I really need to find a way to incorporate market breadth into my day trading.  I use market breadth in my swing trading and I feel like I am trading blind when I am day trading without it.  Unfortunately, Fidelity Active Trader Pro does not provide many options.  They do have the TRIN and advancers vs/ decliners, but I was really hoping for the TRIX or something more customizable.  I will have to find a solution to this problem.
• FIND AN INDICATOR TO MEASURE INTRADAY MARKET BREADTH.
• During the down days I have been working on my order entries/exits in order to trim my losses.  Things are progressing nicely as my average loss seems to be decreasing from around 0.11 to 0.07.  This should help improve my performance and risk-reward ratios.
• I need to find a easily accessible list of news events for the week.  I was caught off guard the other day when the ISM number came out better than expected.  The market had traded in a tight range for about 10 minutes.  The news came out and IWM immediately popped up about 1.00, trading over 1.5 million shares a minute for several minutes.  I had no idea what was going on, but I am glad I was not short at the time.
• FIND A LIST OF MAJOR NEWS EVENTS COMING OUT DURING THE WEEK.
• I am considering changing time frames to make trading a little easier with the distractions at work.  A 2, 3, or 5 minutes time frame may be better for my situation.  For now, I am going to continue to trade the 1 minute bars.

Daily Trading Summary (09/06/11):

Number of trades (round trips) = 6 (2W, 4L)

Trade Size = 1 share

Average Win (Winning %) = $0.205 (33%)

Average Loss (Losing %) = -$0.068 (67%)
Win-to-Loss Ratio = 3.01

Average Return = $0.023

Total Return = $0.14

Day Trading Notes

I have begun day trading the IWM ETF. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• Today was not a very good day for me in terms of trading.  I felt like I could not do anything right today.  The market was making some moves up and down, but the moves were really choppy and I got ripped up all day long.  Breakouts to the upside rarely seemed to follow through.  Levels were difficult to play because the price would consolidate for a few bars, then shoot up all of the sudden during one bar to the upper half of my range.  I could not enter/exit fast enough to take advantage of these momentary spikes. 
• There seemed to be a lot of selling pressure today.  Unfortunately, I only trade long right now.  The easy money was in the shorts with nice long, clean trends.  Most of the day I wanted to start shorting, especially when my early longs were not working.
• I created a summary of all my trades so far with performance metrics broken down by the hour of the day.  I trade best during the middle of the day.   My winning percentages during this time is around 52% and my win to loss ratio is 2.27.  This may be due to the fact I can follow the market more closely during lunch with very few distractions or it could be due to the lower volatility.  Things seem to move a little slower during the middle of the day, so it is easier for me to analyze what is happening.
• I don't seem to trade well on the open or the close when there is a lot of volatility.  My winning percentages during these times is around 25% and my win to loss ratio is 1.11, that is pretty bad.  This is primarily due to the order entry methods on the trading platform.  I will need to be more selective when choosing my entries.
• I started getting frustrated today.  My first 4 trades were losers.  I started getting stupid and entered a position at 73.75 when my indicators said it was a bad time to enter.  Then I was really stupid and averaged down at 73.71 on the same position with no indication of increased buying. DUMB!  As soon as I entered that second position, the market ripped down and I loss -0.19 and -0.15 on the positions for a total loss of -0.34.  They were my largest losses of the day.
• I recognized during the day that I was getting frustrated and my trading style was not working well, but I continued to try to trade.  If anything I need more experience in all types of markets so my actions were more for education than anything.
• Although today was by far my worst day, I did get good practice at cutting my losses short.  Besides the two poor trades mentioned above, the rest of my losses were less than -0.09, with an average loss of -0.06 (not including the two stupid trades from above).  I have to be pleased with that because I know if I can keep my losses around this level during a good day, it will lead to a very profitable run.
• I need to develop some rules to stop me from trading if things aren't working.  Something like an intraday loss limit or setting a limit on how much money I can give back.  Perhaps if there are 3 bad trades in a row, I should shut things down.  Right now I am still trying to learn, so I will continue to refine my skills.  I will need to consider such rules in the future, especially when I begin increasing my size.
• There was a long uptrend in the last hour of trading which I tried to 4 times, but 3 of them were losers.  The trend was very choppy with an ATR10 around 0.11, which isn't bad if the trend is moving up quickly.  This trend was grinding up slowly, in a choppy manner with some ugly candles.  My indicators said there was buying strength for almost the entire trend.  If I had had some more patience, my positions could have been more profitable.  I kept trying to enter when the price broke up to a new level, but the breakouts were not clean.  I should have entered on pull backs to the EMA7 and rode the EMA7 all the way up for about a 0.70 gain.
• WHEN BREAKOUTS ARE FAILING, ENTER ON PULLBACKS TO THE EMA INSTEAD OF BREAKOUTS TO NEW TRADING RANGES.
• I need to make a summary of all my trading rules for entry and exits.  I should add it to the sidebar of the blog for easy access and editing.

Daily Trading Summary (08/31/11):

Number of trades (round trips) = 24 (7W, 16L)

Trade Size = 1 share

Average Win (Winning %) = $0.07 (29%)

Average Loss (Losing %) = -$0.07 (67%)

Average Return = -$0.027

Total Return = -$0.65

Day Trading Notes

I have begun day trading the IWM ETF. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• Today I felt like I made a lot of progress when it came to letting my winners run during an uptrend.  I had thought about my entry and exit criteria and made some improvements which turned out to be profitable.
• The 7 period EMA on 1 minute charts seems to be a good indication of the short-term trend.
• I was down early today as my first three trades were losers.  Then I began to find my groove and out of my next 11 trades only one was a loser (-$0.07).  I was able to capture most of a strong up move during this sequence with the three consecutive trades of $0.40, $0.17, and $0.02.  I was able to exit near the top of the trend.  I did miss some portion of the middle of the trend, but I can improve my entries next time.  I closed out the day with two losing trades of -$0.02 and -$0.10.
• My last loss of the day was a very bad entry.  The price shot up and I was afraid it would get away from me so I entered hastily instead of waiting for a better opportunity. My indicators even told me that upside momentum was at an extreme.  I need to focus more on timing my entries at better prices.  As soon as I entered, the price dropped $0.10 and I exited during the uptrend.  Later the price ended up trading higher than my original entry, with several opportunities to enter at good prices.
• Today was a new personal best in terms of total return.
• I felt like I was able to understand the tape a little better today.  I was able to make some timely entries and exits based on the tape.  It seems that IWM normally posts depth of 1000 shares or less, but there were several instances today when the buying and selling came on strong and exchanges were posting orders of 10000-20000 shares.  I was also able to spot could support and resistance points based on when the large order came into the tape.  I will try to create some posts summarizing what I saw in the tape, which should provide some good learning experience.
• I use a ten period average true range to give me some idea of what I am risking.  I know I have to be very careful when the ATR is about $0.20 and make sure my entry points are good.  When the ATR is below $0.10, I usually look to scalp trades for a target profit of $0.05-$0.10 because the price is usually range bound and moving slowly.  Fills are easier at my target prices with lower ATR.
• A vast majority of my trades were entered with limit orders.  I am feeling more comfortable with my system of order entry/exit.  I begin with 4 preset orders: buy limit, buy market, sell market, and sell limit.  Once I have entered with a buy limit order, I then change the buy market to a sell market.  This will be my emergency exit order.  I also change the sell market to a sell limit, which becomes my target loss order.  My final sell limit order becomes my target profit order.  I adjust the limits on the profit/loss targets as the price moves.  This systems seems to work well and usually gives me some good fills.
• There were a few times today that I would place a buy limit order and the market would come down just above my entry price, then take off.  I spent the one whole uptrend chasing the price with my limit orders, which were never hit.  Sometimes you just need to get into the trade and sacrifice that penny, instead of sacrificing a $0.20 move.
• I would still like to improve my average win to average loss ratio.  It seems to be hovering around 1.4.  given that my winning percentage is often around 50%, that doesn't give me much room for error.

Daily Trading Summary (08/30/11):

Number of trades (round trips) = 16 (8W, 6L)

Trade Size = 1 share

Average Win (Winning %) = $0.11 (50%)

Average Loss (Losing %) = -$0.08 (38%)

Average Return = $0.026

Total Return = $0.41

Day Trading Notes

I have begun day trading the IWM ETF. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• Today was a very interesting day.  Although the market was up significantly, I was unable to capitalize on the move because I need to...
• LEARN HOW TO TRADE BREAKOUTS!
• Today should have been easy money because the market just continued upward in long long trends with very small pull backs, and that was my problem.
• Today began with a strong opening drive to the upside, followed by a sizable sideways consolidation, followed by another strong breakout and surge to the upside.  I had difficulties trading the breakout and opening drive.  I feel uncomfortable jumping into a MOMO price movement because I cannot adequately define my risk:reward like I can on a range play with identifiable levels.
• I need to practice identifying secondary and tertiary entry points in a trend move.  I often forgo entering a trend unless I have got in at the bottom.  I am hoping that a video review of the days action will help improve my ability to enter a trend in multiple places.
• I also need to improve my order entry speed/type.  I feel uncomfortable entering a breakout position because if the position reverses quickly, I have to enter another order quickly.  I practiced entering some contingency and OTO orders to help with this problem.  The issue will require more thought.
• I think the best way to play a breakout may be to setup a buy limit order before the breakout.  In addition I should setup a contingency or OTO order to sell at my stop loss and target profit.  The target profit part is the trickiest with the breakout.  I could place a trailing stop limit sell order to follow the breakout, but the trail size is an issue.  I also could place a stop loss limit order after the breakout has moved a certain distance.  If the breakout continues to move, I can cancel and replace the order with a higher stop loss limit sell order.
• I am thinking of playing the opening drive with a preset market buy order in addition to a preset stop loss limit sell order.  If the market opens up, I can place my buy order and then set the stop loss limit based on my fill.  Just a thought...
• It would be nice to find a day trading mentor that could teach me the nuances of reading the tape and different strategies.

Daily Trading Summary (08/29/11):

Number of trades (round trips) = 3 (0W, 3L)

Trade Size = 1 share

Average Win (Winning %) = N/A (0%)

Average Loss (Losing %) = -$0.02 (100%)

Average Return = -$0.023

Total Return = -$0.07

Day Trading Notes

I have begun day trading the IWM ETF. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• Today flet better trading.  It was an up day with long tradeable trends, but I was nto able to capitalize on the trends as much as I wanted to.  My entries and exits are getting better and I feel more comfortable executing limit orders.
• I started the day with two losing trades trying to go long in the initial downtrend.  I had some signals that an uptrend may be starting, but the attempts failed.  I should probably avoid trying to call the bottom on a strong opening drive to the downside.  I was pleased with my ability to continue trading and rally from being down early to being positive.
• I try to limit my losses to $0.10 per trade, but Fidelity's Active Trader Pro platform has been giving my some problems.  It is hard to enter orders quickly unless they are prepared well before entry and exit.  The platform also froze for a few seconds during one of my trades so that I could not exit correctly.  I took a large hit of -$0.21 because of it. I need to find a better way to enter my stop loss entries.
• LET YOUR WINNERS RUN!
• There were a few great long trends to the upside today of more than $0.40.  I was able to get great entries at the beginning of the trends, but i would always exit well before I had signs that the trend was exhausted.  I normally determine levels for a trading range of $0.10-$0.20.  I set a limit order to exit at the upper range. Several times today the trend was powerful enough to plow through my upper limit and continue going for >$0.30.  I need to capture this move!  I noticed that these trends tend to stay above the 7 period EMA, but that could be coincidental.
• I need to learn to read the tape.  I recorded my entire day of trading using the SMRecorder software.  It worked beautifully!  I am looking forward to reviewing my trades and turning points in the price to see if I can identify what happen in the tape during reversals and trends.  I will begin posting some videos on the blog was I make some progress.  there seems to be very little information on the web about reading the tape.  I am hoping this will be a valuable resource for me as well as others.
• The volatility in IWM was greatest for the first few hours.  The volatility reduced signifcantly the rest of the day until the close.  I need to try to capitalize on the early volatility with as many winners as possible.  It would be difficult to dig myself out of a hole once the morning volatility wanes.
• My average trade length is about 2 minutes.  This is more likely a function of balancing my day trading while I am at work dealing with meetings, coworkers, phone calls, etc.  I still need to learn to hold my trades longer to capture more upside.  Perhaps I should try using a trailing stop in combination with a stop loss limit order.

Daily Trading Summary (08/26/11):

Number of trades (round trips) = 15 (8W, 7L)

Trade Size = 1 share

Average Win (Winning %) = $0.12 (53%)

Average Loss (Losing %) = -$0.10 (47%)

Average Return = $0.015

Total Return = $0.22

Day Trading Notes

I have begun day trading the IWM ETF. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• I experimented with placing trades using market orders.  The fills were much faster, but the prices were not as good as with limit orders.  I have missed several trades trying to use limit orders.  I may try to get a feel for trading by using market orders, then improve my trading by working on placing limit orders instead.
• Because the trading platform uses point-and-click execution, I need to have several orders ready to execute in succession.  For instance, I should have my initial buy order, my stop loss sell order, and my target sell order ready to execute before I execute my buy order.  It may also prove valuable to have one extra sell order ready to go just in case.
• ALWAYS TRADE WITH SHORT-TERM MOMENTUM!
• Since I am only placing long trades, I need to avoid trade to fade down trends.  A sideways consolidation or uptrend needs to be established before I enter my long trades.  There were three separate trading periods today: the morning was a down trend, midday was an uptrend, and the close was a downtrend.  Almost all of my trades in the morning and into the close were losers because I was trying to call the bottom of the downtrend, while almost all of my midday trades were winners because I was trading with the short-term momentum.
• I need to come up with a clearly defined list of factors that will help my define when an uptrend is starting or ending.  Once i have that list I need to review the price action from the day to get used to spotting the signs.
• It is important to identify levels and trade those levels.  In an uptrend, I should try get long near the lower level and ride it to the upper level.
• LEARN HOW TO READ THE TAPE TO IMPROVE TRADE PERFORMANCE!
• I will begin using SMRecorder to capture video of my screen during the trading day.  This way I can monitor and review the action in the tape and how that translates into price action on the chart.  Optimal settings seem to by 8 frames per second with a compression ratio of 60%.  This should allow me to record the entire days action with 3Gb.  With this video, I will be able to review the market action in the evening and on weekends to improve my tape reading skills.
• Look into trying to scalp the opening drive.
• I still need to play around with the trading platform layout to improve the my order entry/exit skills.

Daily Trading Summary (08/25/11):

Number of trades (round trips) = 11 (4W,  7L)

Trade Size = 1 share

Average Win (Winning %) = $0.14 (36%)

Average Loss (Losing %) = -$0.11 (64%)

Average Return = -$0.020

Total Return = -$0.225

Day Trading Notes

I have begun day trading the IWM ETF.  As a novice trader, my initial focus is developing good methods for day trading.  I will frequently chronicle notes on my market observations and performance to track my progress.

• I trade the IWM commission-free, but I can only trade it from the long side.  The commission-free trades are huge because they allow me to focus on making good trades (with small trade sizes) without worrying about eroding my account with fees.
• Order execution is critical.  I am familiarizing myself with the new trading platform.  Unfortunately, there are no hot keys for placing trade orders.  I have to use the point-and-click method.  I need to determine the best way to place my orders.  I am using limit orders.  I work full-time, so I will not always be able to actively manage my position once it is initiated.  I am currently evaluating multi-contingent, OCO, and OTO orders.
• I am limiting myself to one open position at a time in only IWM until I gain more experience.
• I need a way of defining if IWM is in a short-term down trend and I should take profits quickly, or if is is in a short-term up trend and I should let my profits run.  I will summarize my trade performance to determine the size of my winners/losers and my expectancy.
• It is easy for me to exit trades at my stop points.
• It is difficult for me to enter trades.  I find that I am missing fills on my limit orders by a few cents.  Once I miss my target entry, I tend not to try and re-enter.  This is especially bad if it is followed by a long trend.  I need to practice entering a trade quickly and exiting quickly if it moves against me because I can't afford to miss those moves.
• My goal is to break even each day while I am learning.  As my skills develop, I would like to be able to exceed the daily movement in IWM on a per share basis.  Example, today I made $0.15 per share while IWM closed the day up $1.01.  I would like to have exceeded $1.01 per share.

Daily Trading Summary (08/24/11):
Number of trades (round trips) = 6 (3W, 3L)
Trade Size = 1 share
Average Win (Winning %) = $0.15 (50%)
Average Loss (Losing %) = -$0.10 (50%)
Average Return = $0.025
Total Return = $0.15