Trading – Page 3 – Bobby's Trade Journal

Market Analysis – Oct 27th

So the last week was pretty red. It was a brutal week for securities. However, many option traders made out good money. Buying puts was a profitable tade strategy last week. Additionally, a more risky move would have been to write calls. Covered calls would be less risky while the naked would have been very risky. Looking back tho, it is easier to say that any call writing would have been profitable.

So that means after a lot of red days, there’s bound to be some slight rallies and green days. Many people project that Monday would be green. I was not expecting Monday (today) to be green. I was anticipating that Tuesday (tomorrow) will be green. Since today has closed red, that leave the rest of this week to show what the markets will do. As logged in my journal earlier, I’m all in on the MSFT Nov 27 calls at an average of .44. Currently, it is trading at .05. Today’s range was .05-.13. This trade is not doing well. It is down 88%. The only reason to hold now is to hope for the best and hope that before Nov 22 it will rise and profitable. If not, then depending on market strength it might still be ok, to get out at 40-50% loss with the lesson learnt and memorized. Going in to live trading, one of my rules was to never put all the money on one trade. However, the real life is very different. The lure of averaging down and making a quick buck is so strong that while watching myself break my rules I couldn’t stop it.

Now, the pressure is on to never repeat that same mistake again. However, I must first close this trade. I have till Nov second week to decide whether I”ll be getting out with profit, with partial, or with complete capital loss.

Intraday Analysis – Grim Outlook

Market Analysis - Oct. 22, 2008 - Intraday

Current market analysis shows that despite the grim outlook, the markets might rally up before EOD. This is based on the indexes forming wedges. Interestingly, the Nasdaq composite index is much higher, though following the same trend, as the other two indexes/indices.

Update: The grim part of the outlook was correct. The bottom was broken on those wedges and the DOW closed a good 400 some points down.

Day End Market Analysis

Today was a wierd day for the markets. In the morning the market headed up but then reversed directions late morning. This could be consistent with the normal market trend where it starts off in one direction and then late morning turns. However, it reversed again and headed up towards afternoon and formed a second top. Toward close, it just headed down like crazy. So it would appear to have just charted a double top. Hopefully, that fall won’t be that hard.

Normal conditions have been indicating that there might be small rallies in the market and then a longer term decline. However, if this starts the decline, that will be most inopportune time to have averaged downt to .50 on 20 Nov 27 MSFT calls.

Time will tell. There is a GTC order for limit of .70 set in my account ready to go and close out the position. However, it MSFT doesn’t hig 24.50 or during the day, the target of .70 might not be reached.

Form the morning’s close of yesterday position, the profit was $50.00. So the total account value before opening new trades was ~ $1187.00.

New trades are for 20 contracts (over exposed here) and should have been only for 10. But this is the emotional thing that got in the picture and said, it’s probably gonna fluctuate tomorrow and it’s better to buy more and average down and increase position size. Ideally, the first trade should not have been opened. The first position was at a price of .53 but without looking at the overall market direction or considering any technical indicators. The second position seems to be a little on the ok side. If the markets don’t fall thru the bottom of the screen tomorrow, the trade should be fine.

Closed Out The Position At .65.

For a profit of $50. That’s 8% profit for investment of $600.00. Not much!

I have become convinced that when the profits run, let them run. However, when the markets aren’t moving much, it’s better to make a small profit and close position. Better to have cash on hand ready for opening a new position than to sit and wait out the market and wait for it to make more profit. Nov 27 calls were at .70 at one point but that was before I got a chance to monitor the markets today. I had set a limit for $1.00 last nite, but wanted to move it to .70 last nite. Didn’t get to it due to being busy. However, set a .65 limit and it executed sometime before noon.

Reentered the position at .53 for 10 Nov 27 contracts. Not much movement either way. But hopefully it will have a nice $50-$100 payoff. I know I could wait for more, but since Oct. is free trades, it feels good to enter and exit positions as if playing Forex – trade without abandon on the commissions point.

Another benefit of holding overnite is that it won’t count as a daytrade for the PDT rule.

Monday Morning is Positive!

So the Monday morning open was going down for a while but then it started heading back up. Bought 10 Nov 27 MSFT Calls at .60. It’s been up and down a little. We’ll see. This should rally to the upside soon. Even if there’s not rally, the options should head up slowly since the security price will be heading up.

There’s no guarantee’s in the market but as the markets stabilize and as more traders start buying and selling and as investors slowly starting bargain shopping it should return to the previous normals. All experts and Federal Chairman and others indicate it will a while before that happens. However, for traders it will get boring real quick to sit and not buy and sell. That is what a trader does. So the markets should slowly move up barring any other major issues. Overall trend will most probably be negative. That is to say the while for now the markets may stabilize and rise a little, they may not rise to previous levels and may with each dip start to make lower highs.

Options Expire Today

Options expiration date is something many day trader do not trade. This is to avoid volatility and unexpected trade turns. Since day traders are looking to make quit 1-5% gains depending on what their risk tolerance and target percentage profit is, they need quick action. Additionally, it needs to be a decisive trade.

On the other hand, for an options player, is the volatility a good things on expiration day. Obviously, you don’t really need to be buying something Friday morning that will be worthless, one way or another, by EOD. So what’s the plan in this type of market? It is good to clear your head and just take a break. It is also a good idea to still watch and learn the market, though. Yet, more options abound. Once can trade for scalps in the stocks, or switch to next month options. Example, the Nov 27 calls that I sold yesterday at .62 are worth 1.05 today. that means it would have been 100% profit if I had held. My profit was 13%. My understanding is that one should never consider profit worth any less than what it is – profit! A profit is better than an alternative whether that alternative is a loss or a breakeven.

MSFT is still underpriced and will be fun to buy. I just don’t want to buy today and see a bear Monday, because that will make me hold it longer. On the other hand, the same Nov 27 calls will be definitely worth more by Nov. since MSFT normally ranges 25-28 on a consistent basis. It’s always got it’s risks, but plays normally don’t offer such good rewards as when securities are undervalued and will shortly rebound.

A Trade of Success

So the early market mood was negative. In the morning the markets were down and the Indices were all pointing down. However around 11am CST some hope started showing. After reading online sentiment that it is turning I decided to treat it as such.

This doesn’t matter in terms of my trade. I had already some 10 Nov 27 Calls on MSFT at 0.59 from yesterday. I was assuming it was low enough and would go up. It was around $23.xx per share. However, today it was even lower. This caused my options to lose value. This mornings fall caused more falling in the options price. I decided to average down at .50 with 8 more contracts. Needless to point out that Nov calls wouldn’t expire until Nov 22nd and as such were not losing time value. If left alone, without averaging down, they would still be profitable. However, I would have to wait until they did. This way, the trade is cleared, the funds settled, and conservative gains locked, and few more days in Oct. to use Zecco’s commission free trades.

Total cost average for 18 contracts was .55. I had set a limit order for .62. Towards, the end of the day the markets rallied and the MSFT went up. The options ran up and executed.

Total profit: $126.

Current balance: $1138.02.

Welcome Reader

This blog is my trade journal. I have started with an original balance of $1,000. Zecco is having a commission free month during october due to bad economy. They said it was their way of helping. So far 5-6 trades later, I have saved almost 30 bucks or so (at 4.50 a trade and .50 per options contract).

As I trade, I will try to catalog the experience as best as possible. I will also try to have some trade ideas outlined and detailed here to help me stay on course and to help any readers who might be interested in reading.

Goals:

Not to lose the original investment. This maybe be easy sounding but it is very difficult. Many traders lose their original investments many times before they become successful traders. This is why many stock market veterans recommend paper trading, reading, development a trading strategy, developing a money management plan, etc. before starting. I have not done that in a literal sense on paper yet. But I have practiced with practice accounts and felt the excitement and the disappointment of trades going my way or their own way. I have realized the importance of having money left over to play another day.
To make this $1,000 into $2,000. Not a big goal. Very conservative considering many people have goals such as $1,000 to $1,000,000. My goal is not overload myself with the burden of having to stay in the trade longer to make more per trade to get to a big goal. Just to learn to be consistent and shoot for small trades. Hopefully, keeping a trade journal will also help me in keeping track of when to stay in longer and when to get out faster. When to make the original investment back and keep free securities for playing longer.
To learn as much as possible about different investment and trading styles.

So begins the journey!