Goodbye 2011

So there goes my first year of trading.  The bottom line is that I lost 9.8%.  I made all kinds of mistakes, but certainly no luck to help alleviate, only jinx to boot.  If my trading skills were sub par, or my emotions went out of control, I could live with the failures.  But not if I made the above weaknesses irrelevant, and went with pure gambles (e.g. BBBY earnings) or followed some gurus (e.g. @the_real_fly) or any combinations thereof, and lost 9 out of 10 times.  The year was a failure and I can unequivocally say that I cannot make a living out of full time trading.  I might make it a hobby as long as I play small.  To that end, I am concluding this blog site and move to a new one where I can blog random thoughts, and not exclusively about my portfolio value and trading, “full time” or not.

To give myself some justice, I’d picked one of the toughest years to trade.  SPY finished just about flat.  But it went up as high as 9% and went down as low as 14.5%.  Tumultuous and brutal in between, to say the least.  That pretty much says that most of the perma bears and most of the perma bulls lost money unless you were a successful day trader.  And as jinx would have it, this year was the year I decided to follow a proprietary long term indicator, which basically means buy-and-hold for a long period of time (so far it means holding short for the past 8 months).   And unfortunately that pretty much made me a perma bear (albeit an objective one) for the year.

As an additional consolation, my respected The Fly remarked on the last trading day of 2011:

I’ve failed to live up the gold standards of investing excellence in 2011. I attribute my setbacks to the unprecedented level of sheer fuckery, where traditionally reliable correlations failed, in exchange for low percentage outcomes. Meaning: all of the things I’ve learned and come to rely on, through the many years investing, was thrown into a blender, resulting in random outcomes. Randomness is my enemy, as it cannot be controlled.

He was up as much as 17% in November, only to be hit by some roadside bombs such as DECK in December, and ended the year “barely a winner”.  2011 was his worst year since 2002.

There is hope and inspiration, however, as can be seen through @buyonthedip’s YTD paycheck.

It is amazing that with so many bad news through out of the year, ranging from natural disasters to European sovereign debt crises, that the US stock market still finishes flat.  Actually, the Dow Jones even finished up over 5%.  So in that light, the bulls did remarkably well.  Through all the bearishness, there were constant second thoughts a.k.a. fears as I held my SPXU:  the Presidential Cycle, the S&P 1,400 target by most investment firms, and QE3.  And on occasions when I went long, there’d be fears of the macro-economic doom-and-gloom and that fact that I was fading the long term indicator.  Many sleepless nights for sure.  My hair has gone notably gray and thin as a result.   One nice thing about going into 2012 is that the bar has been set pretty low in 2011.  Much like earnings expectations, when one sets it low enough, it’s bound to be beat.   Let’s hope I beat my 2011 performance in 2012!

Thank you for following my journey in 2011.  It was a journey of mostly follies, blunders, and jinxes, sprinkled with some minor successes.  I wish it was the other way around. LOL!  But I know it may have provided some psycho-therapies for some of you.  If nothing else, at least that was something positive out of this whole endeavor.

Happy New Year!

Portfolio Value: $128,500

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Market Is An Untamed Beast

Even if you raised a tiger in captivity as a pet, he will someday return to his beastly nature and kill you.   I did not grow up with the market, and do not know the market dynamics fully, and yet I was tempting the market as if I do.  The only way to “tame” the market is to take stop losses, which I found to be extremely against my pride-based human nature.  Today I ate another humble pie.

It’s the Friday before Christmas Eve.  The market had a small gap up but plenty of over laps during the Open Range(OR).  Based on the OR denoted by the first blue square in the 5 minute chart below.  I had thought today would be a boring range bound day.  I thought I’d fiddle around in small day trades.

Then my respected Dr. Fly tweeted that he added TZA, the triple bear small cap ETF.   While he was holding 75% long 25% cash right now, all I saw was the fact that he’s added TZA for the second time this week.  (Seeing only things I want to see is another deadly human nature in trading.) All of a sudden, I was “coerced” into becoming aggressively short, as opposed to my earlier planned, low key “ceremonial” 100 share adds of SPXU while keeping my position small for the rest of the year.   I lost sight of the fact, and I even blogged about it, that the greed for bonuses would propel the market to rally, especially with the YTD breakeven level being so close.  I lost the sight of the Santa rally with Christmas just 1 day away!   For the day, I’ve instead added 100 SPXU, 500 SDS, and 200 TZA to my portfolio!!  With Dr. Fly hedging his longs with TZA, and the SPY going up against a confluence of resistance today (200 day SMA, last year’s close, and the 6 month down trend line — see daily chart below), I felt somewhat justified.

The market then first broke out of the OR, and then reached the OR target (2nd square) without hesitation, into the positive territory (> 125.87) for the year.  It then consolidated around my 200 day SMA of 126.10.   I thought at this point the pros had all left for Christmas and that’d be how the day finish.   Again, I couldn’t sit tight for some reason and took one last scalp near the final minutes.   Alas, the market beastly nature came in full view.  Out of no where, it rocketed into the close and I was trapped with 500 shares of SPY short.  What a way to end the week!!    Not only is my personality hazardous to be a trader, my luck is incredibly jinxed.  Plus, I don’t seem to be able to learn from past lessons.   Full time trading is simply a wishful thinking.

Merry Christmas!

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Want Quick Profit? BBBY

So I hold a small amount of SPXU bearish ETF while expecting the market to grind higher.  The market was going higher and yesterday RIGHT before the close I saw a posting on a forum from a worthy trader:

Look at the BBBY chart
I bought calls for earnings tonight.

Whatever my mentality was at the time wanted me to tempt the jinx and take a gamble.  I went ahead and bought 3 Jan 62.5 calls.   A few minutes later, BBBY earnings was out and the price tanked!

Re: Look at the BBBY chart
Hope no one followed me on that. EPS was a nice beat, but low quality as BBBY bought back lots of shares. Guidance was in line. Not good enough.  I don’t know if it missed revenues. The chart was primed to explode upwards. Didn’t work out.

I surrender.  As of right now near noon time, BBBY was down over 6%.   That’s pretty much all of the ($561) premiums down the drain.  I just don’t get any break, do I?

You see, setting a target for my portfolio value is BAD.  It’s almost like a small version of “getting rich quick” mentality at play.  Oh, I’m almost there, I want to finish the year above $130K.  To get there quick:  Let me take a gamble, may be I’ll get lucky.   The trade goes against me; no, the portfolio is not allowed to go down because I’m so close to my target.  Blah, blah, blah…  This was what happened and I got just the opposite of what I wanted.

Meanwhile, SPY is up another .60% around 125, adding fuel to the fire.  This year is doomed.

UPDATE:

Market is now closed.  To add insult to injury, the whole day I was buying BBBY shares — to get even, you guessed it right.   It’s human nature and I’ve never learned that repeated lesson thus far.  59.18 held premarket, but it turned out to be the HOD once the market opened.   Gapped down and crapped until noon.  Since noon BBBY went down another 1.6%, and the whole time I was buying.   It didn’t bottom until 2 pm.   At that time I was down ($500)!   Look what someone’s 1 liner in a forum could do to your bottomline!!    Fortunately, it did bottom and I was able to be spared of a wipeout and came out with a small gain.  Check out the bottoming pattern, by the way, classic.  Failed at 1, but as usual, the 2nd try did much better.  Too bad the 200 day SMA at 56.41 was not too far away.  I was afraid it would be tested; otherwise, I would have gone in big at 2 or hold on to my position a bit longer.  Heck, I was just thankful I came out in one piece.

 

SPY ended the day up 1% at 125.27.  Not far away from YTD breakeven level at 125.87.  Surely it will get there, especially with the seasonality.  I added a ceremonial 100 shares of SPXU today.

Portfolio Value: $128,400

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Here Comes The Santa Rally

Frankly I don’t know and don’t care what moved the market today. I’ve grown tired of having every news from Europe to shake up the market.  The bottom line is that SPY was up over 3%, and the Dow over 330 points; and that the market finished on HOD.

The bears definitely got run over by a freight train and got taken to the cleaners at the same time.  Fortunately, as stated yesterday, I was running thin on my SPXU shares.   So I didn’t feel that much pain today.  Still, SPXU was down over 9% with my portfolio down some $1,000.   In the process I’ve also grudgingly added 300 shares of SPXU.   Frankly, the expectation of a 2008 style sell-off that never came has become something of a broken record.  So the stake had to shrink accordingly.

The 200 day EMA on SPY was reclaimed today by the bulls.  As a matter of fact, every major MA was reclaimed by the bulls except for the 200 day SMA.  And in spite of the monstrous rally, the RSI on the 60 minute was only 64, far from overbought.   And the 3 month up trend line was tested yesterday and confirmed today.  Plus, SPY is now only 1.5% away from turning the year positive.   The odds are really against the bears.

I’m sick and tired of trying to be a hero from the bear camp.  The most I can do now is to just keep my positions small, just short of staying 100% cash.

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76.40 Fib Retracement of the OR

Missed the day trade entry on the 76.40 Fibonacci retracement of the open range.  Left my desk 3 minutes before the hit (see circle) to check what my wife wrapped for my niece for Christmas.  Enough said.  I had to boycott the market for 30 minute before I did anything emotional for “psycho therapy” which most likely mean fading the market by going long.  I’m glad I walked away (Edit: the 2nd time that is).

Update:

Today SPY broke the horizontal support, but caught the 3 month uptrend line.  I exited another 200 shares of SPXU.  Too bad I don’t have much left (800 shares is all) as there’s been no meaningful rebounds to add.   I would have exited 500 shares but the selling seem relentless and my shares were becoming scarce.  It still amazed me that the fund managers were so close to making the year green and yet let it drop back down in the last few days of the year, amidst the Santa rally season.

Portfolio Value: $130,400

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23.6/76.4 Fib Extension

It’s only midday.  I drew the Fib extension of EXK based on yesterday’s high and low to gauge the progress of today’s gap down, while there is no support any where in sight.  Guess where it bottomed?  Yes, my favorite Fib 76.4.  Over and over again, especially when there is no other obvious support/resistance.  The Fib 23.6/76.4 are good pivot points to watch.  Made a few coins on EXK long trades today.

Today the market followed through to the downside from yesterday’s FOMC statement of no additional liquidity, coupled with Germany’s tough stance as far as conditions for bailing out the European debt crisis.   FXE, the Euro, broke the all-important 131 support, jacking up and Dollar, and bringing down the equity market.  Commodities, including GLD, sold off as they were being sold to raise cash.  GLD broke the 200 day MA’s and bounced from the critical 153.61 horizontal support.   It was an epic day today.   I helplessly sold 1/2 of my remaining SPXU holding on today’s selloff, leaving me just 1,000 shares.  It’s hard to imagine the money managers would get so close to making the year green and then give up around Christmas.   If the market continued to sell off relentlessly as I unload my short positions, then I submit to the jinx.  I’d been trading scared and getting burned out by the violent market.  At the point, I just want to end the year with reduced loss.  1,000 SPXU shouldn’t shake up my portfolio too much.

Portfolio Value: $130,000

Update @ 3 pm: Attempted a short on double top on the Fib 23.6 made even more coins than the longs earlier.

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Couldn’t Sit Tight

I had run out of patience in this market and could not sit tight today.  According to Jesse Livermore, this is how one would beat himself.  Here’s a living example:

I saw a tweet about DMND down over 20%.  I looked the chart and the “get lucky” mentality crept in.  Wow, the day before the same stock went up 50%.  With this kind of volatility, I might just get lucky.

I saw the price hugged the down trend line in the morning, but I did not set any buy stop — which was probably the key mistake.  Suddenly, the price rocketed out of no where, even over the morning high.  At the point my mental state was totally out of balance, bummed to be exact.  I resented missing the huge move, so as the next bar broke the morning high (see 1) for the second time, I hastily entered long and set a VERY modest target.  The intent was just for “psycho-therapy” for missing the rally.  As jinx would have it, my target was 2 cents shy from being reached!  (This had been a recurring scene by the way — 2 cents shy from taking a green only to have the price reverse into the red territories in a hurry.)  No stop was placed because I thought it was a quick 10 cent scalp in this volatile stock.  The price dived and I was trapped.

The price then consolidated and I became hopeful and actually doubled down the moment price showed the first sign of breakout (see 2).  It quickly reversed and sold off.   It was a disaster costing me about $300 when I finally took the loss on the backtest of the 20 MA.

I should have quit for the day because it was obviously not my day.  But instead, I lost discipline and wanted to get even.   This was another big mistake, violating another old lesson.   I got caught shorting during SPY’s closing spike and incurred another $100 loss.  See 3 below.  As soon as the break-out of the OR (blue line) failed, I entered short.  And thanks to the jinx once again, this had to be the time that prices broke out of the rectangular trading range.   The stock went higher into the close with increasing volume, indicative of a possible green gap tomorrow.

With SPY down over 1.5%, my portfolio only gained $1,100, thanks to my disastrous day-trading folly.  It would have done $400 better had I just sit tight and kept my disciplines.

Portfolio Value: $128,900

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