While working on my new intra-day trading strategies at the start of the week, I fell victim to a couple of "fat finger" trades, where I entered the trade order wrong and the automated secondary trade did something unexpected, as in cost me money.  Damage was minimal, but it negated the results of a good trade. I was clearly a bit rusty in the shorter term fine tuned trades arena.

After I improved with my trade order entries, things moved along much more smoothly as I started getting better at timing the short term fluctuations. The results were good with respectable returns...MUCH better than last weeks big score of $1.32, haha!

As I anticipated, the con of shorter term trading is I wasn't "loaded up" for the breakout on Thursday. I caught a piece of it, but I didn't have a big position to sell near the top like I would if I were just swing trading. However , the "pro" is the shorter trading profits pretty much made up for the bigger gains if I just held onto the positions.

I'll have to work on balancing the intra-day trading with also keeping and open swing position to get the best of both worlds.

 

 

Last Sunday people from around the world participated in "No Pants Day" which originated in NYC several years ago.

 

 

 

 

 

 

 Here's the global news perspective of the event:

 

 

It's like they took a page from a common bad dream and turned it into an annual event.

I assume it must be a full day event since I can't imagine anyone showing up to work without pants.

 

So, did anyone "forget" to wear their pants this past Sunday?

 

 

 

With the flu this year striking early, hard, and reaching epidemic strength, it's important to be aware of how germs can spread far and wide through coughing.

 

 

 

 The proper way to cough and contain germs ala funny video instruction

 

 

 

Started trading this week for the new year- hoping to move onward and upward from last year.

Market movement was pretty slow this week - taking a break from the last couple of weeks of hyper Fiscal Cliff Washington drama that sent the market gyrating up and down.

One of my goals this year is to be patient and wait for high probability trades, so that was my focus most of the week as I practiced restraint and just watched/analyzed market movement.

The market had a lot of choppiness this week with an occasional mini surge to run through stop loss orders. That made it better for shorter term trading rather than swing trading. By focusing on the movement this week though, I realize that there's a good amount of profit potential if one can successfully navigate the choppy nature of the market.

Unfortunately I still need some more practice in this area of short term trading, as I thought I saw some trading opportunities, but still wound up jumping the gun at times.

I did manage some good trades as well - but they basically paid for the mistakes.

 

The net result of trades set a new record:

 

This ranks as my lowest positive weekly return. Whoop whoop!

 

Well, at least it kicks off the year to a positive start!

 

 

Yearly Return Summary for Main Market Indices:

Dow Jones: +7.26%

S&P 500:    +13.41%

Nasdaq:      +15.91%

 

It was a strong year for the Bulls. Anyone who invested in an index fund would have gotten similar returns. This means that these are the bars to beat if one is actively trading an account, since investing in an index fund requires minimal effort while trading takes much more time and energy.

These are also the numbers to compare against mutual fund or brokerage returns of investments by fund managers if you have one. After all, they are charging management fees to beat market returns.

Also, take note of how the market ended so well despite all the negative news that the market dealt with this year - sluggish economy, anemic jobs creation, and never ending infighting in Congress between Republicans and Democrats over US debt and entitlements. This is why using news as a true gauge for market bullishness or bearishness can be dangerous.

 

My first post of 2012 had the following about my trading goals:

 

"2012 should be where it all comes together - the intersection of knowledge and opportunity coupled with proper risk management which should make for an amazing year, end times or not. =)"

 

So let's see how things turned out...

 

 

As you can see, the results were indeed amazing. Total performance return for the year is 342.17%. It's hard to fully believe the level of success reached. 2011 saw me transition from feeling like I was learning "how to trade" to actually being a trader. I felt I finally had the necessary understanding and edge needed and 2012 was the test of that.

Analyzing the chart further reveals some good info:

The rate of climb increases over time, which indicates my trading skills were improving during the year. At the same time, volatility was also increasing as I was working on improving my methods, meaning that my risk management needs some work. The two come together in November where I had both my worst daily decline and my best daily gain of the year.

The daily chart of the year reveals the big battles waged during each month, but the monthly chart smooths it all out:

 

 

 

Looking at this chart, it appears everything was smooth sailing the entire year.

 

Quarterly Results:

Q1 2012 30.88%
Q2 2012 49.30%
Q3 2012 87.03%
Q4 2012 20.99%

Average  47.05%

The relatively low returns of the 4th quarter were largely due to me starting to get ahead of myself with trying to hit home runs instead of focusing on the base hits and doubles. The market then proceeded to show me that I still need to show it the proper respect and that I'm not as "invincible" as I thought I was.

 

 Note: Trainman = Market

 

 

Time Performance

 

Performance is mostly low key during the 1st 3 months but starts picking up with increasing intensity after that. The first half of the year I was in a long term swing stock position and also trading futures and options. The second half of the year saw less stock activity and more option and futures trading, which increased trading volatility.

While the negative high volatility fell between -10% and -15% , the positive high volatility was within the +15% and +25% range - which shows my gains were stronger than my losses. What makes trading difficult are the feelings that are generated within you when you are at market extremes which can interfere with your rational decision making.

Also notice there is typically a dive down prior to the greater move up. This is showing the problem I had with getting into a position too soon and having it move against me before the move I anticipated starts to happen, which I often wrote about during the year. Getting into positions too soon added risk and reduced returns.

 

Distribution of Returns

 

 

Reflecting on the results, it was an awesome year. While I know I left quite a bit of profit on the table, I'm also aware that I managed to dodge some serious bullets, so it balances out.

The results show that I've arrived as a trader and the objective of being able to trade for a living is moving from dream to reality. These are exciting times - finally reaching this elusive milestone.

It also shows that an individual not connected with a Wall Street or prop trading firm can successfully trade the markets from home in the age of super technology like high frequency trading computers dominating the landscape. It may take an extraordinary amount of time and effort in developing a working understanding of the market to create a repeatable profitable edge, but the fact is it can be done.

What next? for 2013, my continued goals are pretty clear- reduce risk while maintaining/improving on performance. Focusing on being more patient before initiating positions will go a long way towards helping in that area. My time should also start to free up as less research and analysis is needed on my developed methods. So I can be more social and less hermit.

 

The quarter ended well, but it had the most volatility of the year.

 

 

Looking at that November plunge still looks as disturbing now as it did when I posted the monthly performance stats. I hope I've learned enough to avoid repeating a descent of that magnitude.

On the other hand, as bad as the drop was, the rise back up to profitable levels matches it in power - even more so since it requires more effort to make up for losses since you are starting with less capital. Looking at it that way, from the October peaks, the drop was over 50%, while the performance to return to that level and higher was over 100%.

 

4th Quarter Performance Vs Indices

 

 

Trading for this month was cut short thanks to all the "Fiscal-Cliff" drama that was making the markets pretty skittish. Still in all, it was a good month.

 

I had no desire to get caught on the wrong side of some big market move inspired by some surprise Washington budget negotiation news. When the market gets very news sensitive like this "Fiscal Cliff- will we go over or not?" event, the market moves more into pure casino mode where it's either going to zoom up or down based on that specific event.

At that point, it's basically a big gamble to take a position on either side until the decision is made.

Some folks like taking on that risk because the rewards can be great - the market jumped a significant amount once it looked like a deal would be made in time. Those who were long made a very nice profit fast while those on the wrong side had heavy losses.

I try to avoid being in the market when analysis is dominated by a singular news event. I'm a trader, not a gambler.

 

December Performance Vs Indices

 

 

 

It's hard to believe 2012 has come and gone. In some ways I think back and what I was doing in January seems like only yesterday.

It's true that the busier one gets, the faster time feels like it's moving. It's amazing and scary how quickly time passes!

One time when I was on a deep sea fishing trip, we were assigned numbered bags to store any fish we caught. My number was assigned and it turned out to be 13. Rather than get let negative superstitious connotations get to me, I called it "Lucky 13" instead and didn't worry about it.

Turns out I caught the most fish for the day, despite being my first time deep sea fishing.....much to the trip organizers and fishing veterans chagrin. The experienced folks weren't getting any action on their lines while I kept getting bites and reeling them in. That was a fun day. =)

I'm still waiting for my brokerage to tally out the last market day of the year so I can do my trading summaries for the month, quarter and year- that will be fun!

 

Happy New Year to all!

 

 

Just when I thought we were all but guaranteed to fly off the cliff, if only for a few days, initial reports state that a tax agreement has finally been reached in Washington and the Senate will vote on it tonight with the House voting on it Wednesday.

The terms of the deal appear to be the following:

1) The income level that will have the Bush era tax cuts expire will be $400K+ for individuals and $450K+ for couples. There will also be some caps on deductions for individuals making over $250K and couples making over $300K.

2) Permanent fix for AMT tax problem.

3) Low income households get 5 year extension on credits for college tuition.

4) Inheritance tax on estates rises from 35% to 40%, current exemption amount of $5 Mill still in place

5) Long term unemployment benefits restored and Medicare payments not reduced to doctors for 1 year for each.

 

Still on the table for discussion- how to handle the automatic Sequester cuts- which will likely be kicked into next year's discussion for the new Congress to handle.

 

 

 

 

I saw a proprietary trading firm site while browsing the web one day and discovered they had a projected earnings list for traders with them.

I thought it was pretty interesting so here it is:

 

 

To bring everyone up to speed, proprietary trading firms such as Maverick will typically loan a trader money based on the amount that the trader deposits, and in return for that will take a percentage of the profits the trader makes.

So for example, level 1, the trader most likely has $5000 on deposit and Maverick is loaning them the additional $20K. If this trader loses $1K, they are taken off trading for the rest of the week. If the trader loses a cumulative amount of $5K, they are removed from the program. The company is taking out 30% of any profit the trader makes, if any.

The projected earning levels and "rankings" are interesting. Obviously, the title of "Associate", "Master", or "Elite" are subjective to the levels given, but it does show you the open-endedness of trading income potential. It also gives traders working there goals to shoot for.

 

Clearly, the Associate trader at level one has a tough road to climb since if the projections and minimum trading pace/performance ring true, they are only expected to earn around $10K, and that's before taxes are taken out. I suppose one could do that if they had roommates or were still living with family to keep costs down. But that 30% deduction from the company is a hard hit. It should make people consider just waiting until they build up enough capital to trade on their own without needing a loan so they can keep all profits made. The company deducts less as one builds up money to move up to Master level and higher, but that's still a sizable bite from overall profits, especially considering the tax man will be taking a cut as well.