YHOO, ENCY, JOYG and EBAY

Posted on May 25, 2006
Tags: Day Trading |

Phew what a day.. it looked like things were on the move again and I had a few candidates. Here’s a summary of the results.

YHOO - I got in long but it proved too early and I got stopped out for -1R.
ENCY - Same as YHOO, it stopped me out before starting to move up again, not only that but I had nasty slippage which resulted in -1.2R
JOYG - Looked like a classic short candidate with good probabiliy alas it didn’t work as the rally held up and I was stopped out for another -1R.

At this point I was -3.2R for the day, not a nice thing to have. This is on top of the -3R of the last 2 seesions meant I made a new “record” drawdown of -6.2R (previous maximum drawdown from March was -5R). I was facing two possible courses of action, call it a day or continue to play my system. I decided to just do what I always do and just follow my rules putting my trust in probabilities, past experience and the system, kind of like a sailor puts his faith in following the rules of folding your sails and waiting for the storm to subside expecting to come out OK but also knowing that real damage is a possibility.

The last position to close out was EBAy which managed to save the day’s P&L. I closed half of it at around 3:30 (2.5R) just in case the sellers came in again as they did over the last couple of weeks. The other half was closed EOD for total of +3R.

So the final P&L for today is -0.2R due to the slippage. Not a good result but it could have been worse. On the other hand considering the run I had in mid May it’s no surprise I’m giving some back, so far about a third of May’s profits I think, as well as returning to the average hit rate (which was unnaturally high for most of May). It’ll be interesting to see how things move from here.

Comments

4 Responses to “YHOO, ENCY, JOYG and EBAY”

iain on May 28th, 2006 8:05 am

Glad it worked out for you carrying on after a sequence of losses. A more cautious approach would be to impose a timeout and go back to sim for the day if a daily R limit exceeded. Maybe also have a weekly R limit. That way you know you are setting boundaries for potential losses but then one must have criteria for participation again. Insurance against the psychological damage of a potentially really bad day which you don’t want to extend further.
eyal on May 28th, 2006 3:36 pm

Iain, thanks for the comment. This was my thought process as I was going through that day’s trades:

1. I’ve seen this happen before, just like I can have a day where 3 out of 4 positions work well, similarily I can have 3 out of 4 that don’t work. Similarily with the drawdown, statistically it was still within the normal pattern.

2. I did not compromise on the trade quality and the trading plan. Each trade was evaluated independently and a position initiated if it met the requirements. Sometimes I have zero candidates and no trades and sometimes I have 4-5. I usually take most candidates (limit of 4 mainly for ease of management).

3. I also recognized that one of the reasons it was tough to go through the day is that I had just upped my R size and so every move seemed exaggerated. Sticking to thinking in terms of R rather than $ amounts helped quite a bit in this case.

So basically I just stubbornly stuck to executing my system the best way I could. Indeed it could have resulted in a big down day, as you know, that’s the risk when dealing with probabilities, strings of heads or tails do occur.
iain on May 30th, 2006 4:25 am

Hi Eyal, I guess I am more cautious than you. If I start a losing streak I am out until I figure out what is going on.

Take low volatility for example. I have found conditions really tough for a few months and I reckon I am not alone judging from reports of hedge funds etc. So for me this means trying to learn new skills to cope with what may persist as a low vol range for some time (notwithstanding occasional spike), or just tighten up on existing skills.

But its good to know other folks can approach things differently and I admire your sangfroid.
eyal on May 31st, 2006 3:51 am

Thanks Iain. I’m in a learning process, sometimes I hit and sometimes I miss. I stuck with the plan because I associate more mental ‘pain’ with Not having followed it.