The Holy Grail

Three years ago, while browsing the forums on the Tradestation website, it was then I came across my first instance of "the holy grail". Guys were chatting about the prospect of finding a strategy - a mechanical strategy - that one could trade with, and essentially print money untill their heart's content. Of course none of these guys had found the holy grail, but they were sure intent on looking.

I was skeptical about this holy grail. If one existed, surely it would exist no longer, because everyone would be on board and the market would crush them... wouldn't it?

Yes.

Hence none existed.

But no, it does exist. Over the past two years, through much delight and much loss, I know I have found the holy grail of trading. Before everyone gets excited, it's not a strategy that I can program in Fortran and hand out at $2000 a pop. It's not an overnight fad. It's not a method that will last for a week, and then reverse and crush an individual. This is tried and tested. This is true. And I believe I have found it.

My lowest low was the best two weeks of trading ever. Up $5500 in those 9 days, it seemed nothing could stop me. And that's exactly what did. After that, it was found.

The holy grail.

But it needs tested. It needs proof. The testing begins March 3rd, 2008.

Let's see what happens...

Monday 25th February 2008

Got rid of most of the remaining CROX on the late bounce.

$-600

Thursday 21st February 2008

CRUSHED! I got out of the LEH trade too early (for only a small gain) and left the CROX trade open. Then tried to SHORT RIMM, got blown away, then tried to reverse the trade to get blown away again. It was a perfect scalp trade in both directions, problem was I was in the exact opposite as I should have/would have been if I was scalping with discipline. I'm a loser.

I also got out of the AAPL and NYX options... actually just before they tanked more, so i did the right thing for now.

I definitely won't be trading till Tuesday now. I need to re-group. The weekend!?

$-1500

STILL holding 350 CROX @ 28.16... wtf!?

People ask me my strategy. The chart below shows you a perfect play as far as I'm concerned. Unfortunately, I did the complete opposite of what I should have done. Swap the Blues with the Reds and it's perfect.


Chart of the Day

Wednesday 20th February 2008

Managed to get out of the rest of Crocs by setting some buy orders well below the open. Actually got Crocs trade positive (impulsiveness got me into a mess and again discipline got me out) but kept holding 400 shares at 28.16. Will try to sell in the next couple of days. Started opening a position in LEH today. I'm short 550 @ $54.97 at the end of the day. Will fade in again tomorrow morning on any rise, but I doubt we'll see any. I don't know why I don't just scalp. I guess it takes too much "watching" and "acting" all day. I'm quite bored with it, even though I do well at it. Today was much more relaxing for me, I guess.

The fed report looked AWFUL. If tomorrow goes higher, expect a rally to 12900+ on the DOW, but I'm definitely expecting a head fake and a big down day tomorrow. We shall see.

Holding Long 350 Crox @ $28.16
Holding Short 550 LEH @ $54.97

$-360

Tuesday 19th February 2008

Got destroyed in the A/H by Crocs. Don't know what I was thinking (I guess I was getting bored with scalping) so I took a small position in Crocs just before the close. Instead of getting out when I had the chance, I decided to go long. Got crushed. And to make it worse am still holding 700 shares at $29.69.

$-1250

Friday 15th February 2008

An easy morning with a couple of quick scalps and a nice fading short on GS in the first 30 minutes. Trade the News got me a couple of bucks with ILMN and GME breaking up on news... I was in for less than 1 minute on each and made $200 off them... can't complain. The less you try to make, the easier it is to make. This has been a really good past couple of days.

The weekend!

+$400

Chart of the Day

Thursday 14th February 2008

Before this morning I very nervous about trading today, because of the gambling that has started to creep into my trading. Actually yesterday was one big casino for me. I've been very lucky a number of times, so this morning I went back to basics. I stuck to one stock, one strategy, and got one outcome. Good results from little risk and about an hour's work. I'll post the LEH chart with my entire day's trades after the weekend.

Nice!

+$365

Chart of the Day

Wednesday 13th February 2008

Luck again was on my side. Most of the day I was trading by the seat of my pants... not good, not good at all. Was up $700, then lost a bunch, then tried to recover it... was looking ominous there for a while, but ended ok. I gotta calm down.

+$430

Chart of the Day

Tuesday 12th February 2008

Wowser... i just had a brain explosion, hence I'm ending it for today... really stupid stuff. Got impatient on an upside reversal on POT, and went in way too early... was down over $1100 at one stage... ended up getting out on the reversal, paring gains at $151.25 (actually this was for a loss) and out at $151.85. All that for a $36 gain... I'm an idiot. See the chart below for NOT WHAT TO DO if you want to feed your family.

+$430


Chart of the Day (Brain surge)

Upside Morning

It's been a strong morning for the markets. Buffet coming out and saying he'd "save" the municipal bonds is very bullish for stocks, although I think we'll probably get some pullback in the afternoon. I probably won't trade anymore today - I'm up $340 from some play with GS, but I tend to make mistakes in strong trending markets (ie chasing) so I have to be careful. My options in NYX and AAPL are running pretty well too, so I'll take the upside with those.

Salute!

Dow Jones News

I have a question for anyone/everyone out there. I currently do not use a news service, but hear that Dow Jones News is very good and have realized in the past that it could have saved my ass from doing stupid things following an analysts note or what-not that you don't read in yahoo finance until the end of the day. Is Dow Jones News worth the cost? Does it update immediately that something happens, such as an analyst upgrade/downgrade etc... the Comtex News Service doesn't really say anything meaningful in real time. If you use DJ, could you give me a review of sorts??

Thanks!

Trading Strategy Today

Someone asked me about my trading strategy. In this market, with all the chop and multiple reversals, fake-outs etc, it's fairly easy to scalp. Of course you have to be disciplined if something does eventually break-out or down. BSC today was always going to be weak, so I chose that to short on any strength. It worked pretty well all morning (I did go long at open before realizing that it had been downgraded this morning!!)

Virtual Office

As of today, I am the newest member of the Virtual Office. DT runs it from:

http://dinosaurtrader.blogspot.com

Check it out!

Monday 11th February 2008

Gotta jet early today...

Scalped BSC all morning, that was pretty much it. Quite choppy, so it worked out well for me.

+$445

Bought 1 NYX June 75 Call

I put a bid in earlier in the day for $5.30 and it executed on a dip. I'm pretty happy with the price on a June $75 call. I'm definitely going to hold onto this one, unless there is a big spike in the coming days, which I doubt.

Friday 8th February 2008

I'm done! It's early but I have work to do and I broke almost every rule I wrote about last night. Today is not a day I should be playing around. I think I had a drawdown of $600 at one stage. I'm out!

I actually went back in and scalped some AAPL to the upside after I wrote this and then proceeded to almost get destroyed by 2 reversal trades on ICE. Then went back and messed around some more... and some more... and some more... NOW I'M OUT!!!

It was my best week ever, quite amazing considering it wasn't mistake free. I got lucky a number of times. $3290 for a week isn't bad... makes up for some of January...

+$380

New Rules for February and Beyond

After the debarcle that occurred in January with the MA trade (one trade in one month essentially) and the significant losses made last year on holding stocks overnight, my new, very firm rule is not to hold positions overnight - except options. This will prevent me from using the "I'll hold overnight" to justify a losing trade.

In general I have NEVER lost money scalping my basket stocks. I have only ever lost money by trading something I've never traded before out of boredom or spontaneity OR by holding overnight.

Rules:

1) No holding Equity Positions overnight (Options are for overnight swing trades ONLY)
2) Don't momentum scalp oversold/overbought situations and don't "double down" those positions
3) Only buy options on down days (preferably consecutively down) when the stock is overbought/sold in multiple timeframes and only in the last hours of trading (sell options into a rally if possible)
4) Don't hold losers for more than a few minutes
5) Hold winners longer in the right climate
6) Don't trade against reversals! (reaffirming (2))
7) Take a break after a big loser/multiple winners
8) ONLY trade my basket stocks EXCEPT on earnings breakouts or breakdowns

I will add more when I think of them!

Thursday 7th February 2008

Had a fairly risky/rough day. Got lucky in the pre-market with a short on BSC that just made it to the target before reversing for the rest of the day. Sold the ICE Call for a $210 profit at around 10am. Missed a good deal of further upside, but at that stage it looked like the market was going lower and ICE was already up over $10. Made some dumb/risky plays on AAPL late in the day, which is true to my usual bad timing in the afternoon. Lost half of what i'd made and then made it all back with Longs on ATVI on good earnings. I'm taking a break tomorrow (unless something really good sets up), this week has been steller in a Profit sense.

+$970

Wednesday 6th February 2008

Did well in the morning, but started messing around in the afternoon. It really could have been alot worse than it was - I took way too much risk for no reward... my usual "boredom" problem. Went long on CSCO into earnings... earnings came out flat thus i got out for no gain/loss. Went short following the growth negativity and made a couple of bucks off that play.

+$960

Bought 1 ICE March 140 Call

Bought at $4.50, ICE is tanking today. I'm looking for it to reverse around the 120 support.

I'm also starting to fiddle around with not much going on. I need to quit!! It is my big problem, getting ahead in the morning and killing the whole thing in the afternoon. I'm up $500 right now. I should quit for the day.

Sold 1 AAPL April 150 Call

Sold for $5.00... only wanted to keep one long-term

Tuesday 5th February 2008

Today I scalped short on everything. GS, BSC, AAPL were the main ones. Maybe a little in the A/H going long DIS and JDSU.

I also went long 2 AAPL $150 April calls for $4.65 each.

+$980