Summary of today’s trades

Posted on December 15, 2005
Tags: Day Trading |

Another dull P&L day.

Stopped out trade: MEDX -0.5R
Dead-in-the-water trade: GNSS (+0.3R)
Lunch money trade: ATVI (+1R)
Frigging missed trade: AEL (BIG Zero R)

Others I’ve watched and skipped
KOSP - Thought it run down too much with first two bars. Obviously I was wrong. I should have known better on this one.
FMD - Didn’t like the first bar and three indecisive bars which followed it. Good skip.

Problem of the week: small R gains are insufficient to offset inevitable small R losses.

Comments

8 Responses to “Summary of today’s trades”

Michael on December 15th, 2005 10:53 pm

I feel your pain with regard to the small R gains and missing the short in KOSP today! I also whiffed on a short of CERN around 90 today. :-(
eyal on December 16th, 2005 12:25 pm

Thanks Mike.
BULL TRADER on December 16th, 2005 7:30 pm

what does R mean?
eyal on December 16th, 2005 8:46 pm

Hi John, The R concept is from Van Tharp. Here’s a short description from one of his books:

Van K. Tharp’s investing rules

1. Whenever you enter into a position, always have a predetermined exit point at which you will concede you were wrong about the position.

This is your risk (R), and if you lose this amount, you have a 1R loss. Even if you are a buy-and-hold investor, you should have some point at which you will bail out of an investment because it is going against you (e.g. a drop of 25%). This rule essentially sets up all position sizing rules.

2. The golden rule of trading is to cut your losses short (1R or less) and let your profits run (more than 1R, i.e. a multiple of R).

Let’s say you buy a stock at $50 expecting the price to go up $10, a 20% gain. You decide in advance to exit if the price falls by $1. Now assume that you have four failed breakouts (i.e. 4 x 1R losses) before you have your $10 gain (in this case a 10R gain). You were right only 20% of the time, but your losses totaled minus 4R and your profits totaled plus 10R. Your total gain was thus 6R, six times your initial risk.

3. When the total sum of your R-multiples for all of your trades is positive, you have a ‘positive expectancy’ system. You must have a positive expectancy system to make money in the market.

Expectancy is the sum of your R-multiples divided by the total number of trades. Thus, if you have 50 trades which give you a total R-multiple of 20, then from your 50-trade sample, you would estimate your expectancy to be 0.4. In other words, over many trades, on average, you will make 0.4 times your initial risk on every trade.
BULL TRADER on December 17th, 2005 4:50 am

interesting!! thanks for clarifying eyal
Trading Signal on December 17th, 2005 1:50 pm

curious about your rough entry/exit time for MEDX. I am shorting it at this point. thanks
eyal on December 18th, 2005 4:20 am

Hi, I entered above the 4th bar on the 15min chart and exited just below the low of the 5th bar on the 12:15 bar. Does that help? :)
Trading Signal on December 19th, 2005 10:55 am

ok, I see what happened. you entered MEDX long trying to catch the momentum and you rode it for a few bars but it did not reach your >1R target and turned against you. you had a pretty tight stop loss so you bailed out with only 0.5R. I was actually watching this thing dropping, very fast. this drop strengthened my opinion that it was a weak stock from that point on. but of course, it is still trading higher than where I started shorting it the next day…