Sunday, July 16, 2006

The Fresno Paper Trades

Remember those dozen stocks that my father and I identified as possible shorting candidates when I was in Fresno? Well, I got to thinking: what if I entered the trade and managed it (stop-loss) as I've been taught. This meant going through the charts on each of the dozen that we had on our watchlist, plugging the numbers into the spreadsheet that Matt Gildea gave out as part of the 2nd Session of Master Trader to evaluate the reward:risk ratio. Out of the 12 stocks that had good technical setups, 6 had a favorable reward:risk ratio of > 3:1 at the time.

I was really interested in the untainted, unadulterated truth about how effective this trading system is, and therefore made these back-dated paper trades based only on the information the stock was giving up to that time. That is, I didn't look to the future to make the decision. That would ruin the results, and although it may be good for my ego, it certainly wouldn't do much for feedback on my system of trading.

Following the system, 3 (CLE, CPKI, CNB) out of the 6 were stopped out for meager gains, one probably would end up being a very small loss given the disparity between the Bid and the Ask. Obviously there's a problem with stocks that begin with the letter C, so I'll avoid them in the future ;-). One more (EBAY) would have been stopped out for a nice gain of 6.75%. I actually re-entered trades on EBAY, CLE, and CRL because the re-entry looked good, and am currently holding those in addition to the remaining 2 (PLL & STN).

The bottom line is it averages out to roughly 3% (on amount risked) in 2 weeks using straight stock trading (not options). A very promising beginning to my paper trades. I'm now current and will not be back-dating any of my paper trades in the future. I placed 2 trades on my Interactive Brokers account, which will hopefully be filled tomorrow. Now that I don't have the ability to see the future direction of the stock, the truth will be unavoidable. Along with the truth I can tailor my trading style to suit my risk tolerance as I get a feel for actually entering and maintaining my (paper) trades day in and day out.

5 comments:

Greg said...

My brother and I are going to Master Trader in Chicago starting Wednesday. I also signed up for the additional 16 week program that will start in a few weeks. We're scheduled for Advanced Covered Calls in August.

I was researching Russ Whitney and finding that alot of folks don't like him. The complaints had me quite concerned. But I found your blog which restored my confidence. Most of the critics seemed to have chickened out without giving the technique a chance. Apparently, Whitney bought the company after it had developed its training ideas. A slide from the $199 seminar showed a pie chart for investments. One slice was real estate. The presenter just said that was there because the owner made his money in real estate.

The sales pitch may have been over-the-top, but the training in the online videos is top-notch.

I have made a few trades with TradeKing using tight entries. A couple went the wrong way and the technique kept me out while three short bids gapped over my entry prices and continued on down, showing that I was able to make some proper predictions while not getting in when I was wrong. I got 500 puts on one stock that started the wrong way but now is in the money while a long stock buy has gone up about 11 cents in one hour. Woohoo!

I figure this technique should be wrong a third of the time, right but not up to the target at least a third of the time, and meet or exceed the target the rest of the time. The first two should nearly cancel out, leaving the good ones as profit. There may be an ocassional price that goes haywire up or down, but we're as likely to be long as short in the position so those should cancel out in the long run, if the first one doesn't break us. That's why they teach protection.

Win often and lose small!

Anonymous said...

"I was researching Russ Whitney and finding that alot of folks don't like him. The complaints had me quite concerned. But I found your blog which restored my confidence."

TOO FUNNY!!!

Note that comment was posted after what...only a couple DAYS of a blog? And that was sufficient to "restore my confidence"? OMG this is freaking hilarious!!!

Go ahead...make Russ richer, that's your choice, but holy hell you guys are retarded. I only hope for your sake that you're at least not doing these rediculously ill-informed trades on borrowed money. Either way, this is Darwin @ work.

Thanks for the entertainment.

Trader Taocode said...

Thank you Darwin-fan, I'm glad that even an anonymous coward can find my blog entertaining. It takes some real stones to call someone retarded without giving your name. Please come back and enjoy often!

I'm not here to restore anyone's confidence. I'm merely letting the world have a look at one of TMTT's student's experience. I am providing this as a service to others to make a more informed decision about EduTrades/TMTT. It was something I looked for when I signed up for the classes > 2 months ago. It's an experiment on my part... one that I feel is unique and hopefully useful to those that are interested.

If you think I'm blindly pro-TMTT, you are mistaken. I keep my tone neutral because until this point, I have nothing worth complaining about their materials or teachings. I'm merely beginning to put what they teach into practice on paper trades. If what they teach doesn't work, then we'll all know soon enough.

You obviously know more about trading than any of us, how's your portfolio doing?

Greg said...

Following up after the seminar in Chicago:

The class was well-organized and well-taught in the Chicago Board of Exchange. The strategies are presented with reasonable justifications. (Matt was the instructor.)

TMTT seems to be one of several independent training companies that were bought and combined into the Wealth Intelligence Academy.

Why someone would choose ignorance and reject a system for wealth building for fear that someone might make a buck off of them is beyond me.

Trader Taocode said...

Greg, I'm glad you enjoyed the class. I can imagine it's a pretty intense 3 days knowing all that needs to be covered.

There are varying opinions about how to make money in the markets. They boil down to 3 main philosophies/theories. I touched on this in my post about Effecient Market Theory. You really should take a look at: stockcharts.com's overview about "Why Analyze Securities" if you haven't already.

I think TMTT does an excellent job reducing the amount of information to the most core issues in order to fast-track you on a successful path; securities analysis could be a bottomless pit that you may never emerge from.

A couple things to keep in mind: there are people that make a living trading and the people teaching you are just that. If you're going to learn how to do something, you should learn from those that do it themselves. Taking advice from someone who doesn't have any experience on the subject is like the blind leading the blind. I think sticking to what TMTT has to teach and maintaining a disciplined approach to your trading will yield better results than any other form of investment. It may take time to get there, but I think we're on the right path.