I stepped it up to 300 shares today and did three trades. Unfortunately none of them worked out so I ended up with a $260/4.12 Z loss. Here is another reason why I don’t attempt to make predictions about the market.
HET. This is usually where I post the chart but flicker isn’t working so use your imagination or your own charting software for 10/2/2006. Anyhow, this stock reportedly received an offer for about $81 per share. Now I know that stocks don’t go up to the price of the buyout even if it’s confirmed since it takes time for the actual thing to go through. Of course when I saw the stock retrace to 75.60, and allow me to go long on 76.00 I was picturing a good day. Even if it just went up to 77 it would have been good. Of course, I got stopped out because logically, the stock made it’s only moves during the first 45 minutes of the day.
I got stopped out of GILD, which eventually went down but not much. The only candidate that would have worked out for me today would have been GIGM, but I couldn’t short any shares. That’s the way it is sometimes. Tomorrow I’ll trade with 200 share and see what the market brings.
October 2, 2006 at 7:28 pm
Hi there. Sorry you had a bad day. GIGM was the only stock I saw worth trading today, also.
I’m wondering how you think your forward performance compares with your previous testing (with 1.14 R expectancy)? It would appear that there’s some sort of discrepancy? That would be the gap to focus on bridging, wouldn’t it, rather than adjusting your share sizes back and forth?
October 2, 2006 at 9:56 pm
I made necessary changes to that strategy because I realized that expectancy was largely dependent on two really good weeks in august. I made changes in a way where I took less trades ,the expectancy was more or less constant acroos different time periods, and the drawdown was considerably less. I know I’m risking an enormous amount of what’s left of my account with the increase in size but I have enough faith in the strategy to do so. I”m already close to zero, and my size decreases as my equity size does, so if I’m wrong then i’ll lose my money anyhow. However, if I’m right, I’ll get to 3k quicker, cash a check , and I’ll definitely decrease my size relative to my account size.
October 3, 2006 at 8:08 am
I’m curious about your position sizing. If you are using a constant R why are you trading a set number of shares on each trade??? I think you’d get more bang for your buck using the percent risk position sizing model. In other words, set R to some % of your equity, figure out how many dollars that is and then divide that dollar amount by the number of cents between your entry and your stop to get the number of shares to trade. Check out my position sizing post to see how using that position sizing model can improve you rreturns.
October 3, 2006 at 5:18 pm
Mike, I can only trade round lots, so I can never get an amount close to an exact R per se. I measure my R by my average risk per 100 shares (which was my fixed size) and it comes out to about 21 cents per share. I have a max range a bar has to have for me to get into the trade so the average has managed to stay around 21-25 cents per share regardless. I’m changing my shares traded on a given day based on my account size. I’m using a big percentage of my equity, since it was so little to begin with, but as it gets bigger I’ll be bringing the percentage down.