Year End Review

I have been a full-time trader for 9 months. I did pretty well in June, July, and October. By end of October my trading capital increased 80%. But in November and December, I gave back most of the profit. By year end I only gained around 20%.

When I initially started full-time trading, my monthly goal is $4,000. After several months’ good performance, I did not satisfy with the goal any more and increased the target to much higher level like $10,000 per month. The higher target pushed me to take more risk and over-trade which eventually led me to the disaster ending.

The bad end result forced me to make several changes in year 2008. First, I need to rejoin the normal 9-to-5 job world for more consistent income. I wish I can find a new job in next 3 months. Second, I need to change my trading strategy from counter-trend to trend following. In my previous counter-trend trades, I did not honor my stop all the time. In my back mind, the new higher high deserves adding short position than cutting loss. In new trend following strategy , I found out it’s much easier to cut loss at stop price as I tested in past several days. Third, 15-min charts give me better pattern and less stress than 3-min charts.

After I find a day job, I will change my focus from day trading to dividend stock investing. I will buy and hold dividend growth stocks, may also write some covered call for those stocks. If I do well, the passive income from dividend and option premium should be a steady income stream.

Dummy Setup – LEAP

I watched about 14 gap stocks, only LEAP has a good entry point for dummy setup.

Dummy Setup – SUNH, ZGEN, PSYS

Three gap stocks setup for a dummy entry.  The entries are near the 3 EMA on 15 min charts.

Dummy Setup – DRYS, ARTC

I am changing my strategy from counter-trend to trend following. The dummy setup is one strategy I will focus on. Here is some gap stocks with nice dummy setup.

one point a day

I was pointed to David Marsh’s “one point or better every single trading day” concept by MtM site to learn a wonderful tactic which may well serve my trading problem.  David says,

When I first started trading this method I realized how easy it was to make 1 point trading, usually within 30 minutes. I had a hard time leaving the table with just one point—so I continued trading longer. Some days it worked great and I would make 2 to 4 points. Other days I would give some back and struggle to get back to where I was. Finally I realized that just taking 1 point a day was perfect. 

From David’s blog, he stopped trading after he made 1 to 1.5 points in most days. By leaving trading desk early with profit, he can do other things he wants.  I think this tactic can also help him to keep the trading mindset sharp. Every positive day can give him more confidence, but one point profit cap can prevent him from over-trading.

One of my trading problem is over-trading. I normally gain several hundreds in first 30 to 60 minutes, then I keep trading all the day to give back the early gain and lose some more. If I could stop trading after I gain certain amount of money or stop trading after 1 hour, my trading performance could be much better than it is now.

3R Play – CELG

CELG gapped down and dropped more to its 3 X normal range. It set up a long entry for profitable trade.

FORM 3R Play

FORM break down from consolidation and dropped more than 3 x normal trading range.

Three questions to ask for a trade

Ray from Tradingsuccess.com listed these 3 questions along with trade management questions. I should ask myself those questions for any trade I take.

  I look for certain factors to take a trade:

• What is the trend? Is it likely to continue or change? This gives me my strategy.
• Are the conditions for low risk entry present: Do I have a zone, setup and entry patterns?
• Where is my initial stop and core profit target area? Is the risk/reward one that is favourable?

Dividend Income for 2007

Several personal financial bloggers reported their year 2007 dividend income(PFblog and 2Million), it’s good to check mine too. My holdings include dividend stocks and income trusts.

The total cost for these stocks and income trusts is about $90,000. I sold some income trusts in Q4 after they stopped dividend payout and showed capital loss. Most of my current holdings(except NBD,LB, FC.UN) increased their dividend/distribution in past 3 years, I am expecting them to continue the trend.

I plan to buy more stocks and REIT so I can have $20K dividend income 5 years later.