Recently in Lessons Learned Category

At the start of the year I set out to try a little experiment. I wanted to document my trades of a $10,000 account using my swing trading methodology on options of the QQQQ's. My goal was to achieve greater than 50% returns on the account in the year. That was a very aggressive goal and I purposely set the bar high on this trading account.

One thing I learned is a year is a very long time. In the middle of the year I had to pull out some of my money and it took some time to get it funded again. I tried to track and document every trade in this account but a couple of them were to fast and furious to get listed here. Another life event was that I was laid off my day job in the middle of November. Since then I have been concentrating on obtaining new employment and not trading as much as I want.

Today I'm taking a look at my trading log and I find that I started the year in this account with $10,000. The account now sits at $12,204. That represents a greater than 22% gain for the year. That is a great return compared to a loss of 38% in the S&P500. I feel like I have done a great job with this account considering the market conditions and also the constraints on my time.

I will continue to trade and document this account on this blog as much as I can. I feel it is a great tool to help improve my trading methodology.

The Q's opened up this morning with a sharp 1% decline on the open. I was very tempted to get into the market today to play what I think will be some decent volatility in the market. However, I looked at my schedule and decided I just don't have time to follow the market this week.

That is one hard lesson I have learned in the past. If you don't have time to watch your positions, you have no business doing a trade. So I will not be trading this week. I will be doing last minute tasks getting ready for Christmas. All the presents are bought and wrapped, but it is amazing how much is still left to do.

I wish you and yours a Merry Christmas. With that I leave with you a great video I found on YouTube. It is an excellent take on an old 80's Christmas classic.

Well alot has happened in the last month.

In August I had an open position of 40 contracts of the QQQQ Sep 40 calls (QQQIW) with a cost basis of $0.80. I started this trade and it basically fell out of bed. I ended up closing the trade with a greater than 87% loss when I sold the contracts for $0.10 at the beginning of September.

This was well before the "Black Monday" we had this week. Before this trade I was up over 40% on the year and after the trade I was up 12% for the year. That type of hit was hard to the portfolio and the main reason was I took my eye of the ball on an open trade. You can't wish and hope a trade into profitability and you have to take your losses when they hit your stops.

Then some family issues came up and I had to take all of the funds from this trading portfolio out to pay for some unexpected expenses. So it looked like my experiment of trading $10,000 this year was over. In addition to this my day job we went through a major reorganization that took a fair amount of my time.

The good news is that all of my money was out of the market during this massive downturn in the market and I didn't loose anything. The bad news is all my money was out of the market and I was unable to profit from this massive downturn.

Last week I was able to refund this account with some additional funds (roughly about $5000.) So I'm starting to trade again, but with less money than before. Today I made a quick day trade to get my feet wet and purposely invested less than 10% of my portfolio so I can get the feel of the market back.

I expect that we may see a retest of the lows from Monday this week, but with various bailout bills and attempts by the government I have to stay nimble with the trades.

I have been a busy boy the last couple of days and it looks like my workload will be busy for sometime. With that the posting has declined and also my decision making on my portfolio.

You would think I would learn not to have an open position on when I'm not able to watch it. Well my current call options on the Q's are down more than 80%. That should teach me an nice lesson. My daytrade is now working into a swing trade that I will be lucky to get out at break even. I have some time today to watch and see if I can get some money back on this trade. But with options expiration next week, the chances are slim unless we get a big move sometime today. If these were June options I would have more time to get back to even or profitable.

As they say.... "stupid don't get paid."

Today is May 1st and I figured I would document the performance of my trading. I should do this on a monthly or at a minimum on a quarterly basis so I can document my performance in this trading journal. I currently track all of my trades via a Google Docs spreadsheet. I love Google Docs, it works great when you need information from any location in the world and allows me to track my trades from work, home, or anywhere I can get a net connection.

I started the year with my Qswings portfolio at $10,000 and as of May 1st the portfolio is now at $11,860. So I have gained about 18% in five months. I have made 29 trades and 16 of them were profitable. I was burned by the first couple of losing trades by being too heavily invested (over 25-40% of the portfolio in a single trade.) I have since tried to limit each trade to 10% of the portfolio on average so any loosing trade doesn't impact the total portfolio as much.

My goal for this portfolio is to double on a yearly basis. It is a lofty goal and I'm falling behind a bit currently. However, I'm not complaining to much since I'm still doing well and in the green.

The market wants to head higher and is providing some additional lessons learned. Right now the futures are pointing to a positive open.

S&P 500 (JUN) +8.75  | Nasdaq (JUN) +10.50  | Dow (JUN) +72 

The Q's are currently trading up 0.21% pre-market and my puts are now down 25% and will be down more at the open. I could have gotten out of the puts a couple of days ago with a nice 30-40% gain, or I could have gotten out yesterday morning at break even. I'm now faced with the decision of, do I take the loss now, or do I wait to see if my indicators are correct? I know that the gaps down below will be filled. The question is, will that fill happen in the next couple of days, or could it be months or years from now? The basic tenant of gaps is they are always filled, but there is never an indication of when that fill will happen.

All of my indicators say we are overbought short term and I think I just need to trust those indicators. Another part of me is also conflicted because I do believe that the general market direction is now pointing higher for the next couple of months and maybe playing these counter trend moves is trying to be too aggressive. Ahh the joys of trading the market.

Yesterday I was feeling the pain of getting in early on my call position. I was very close to selling at a near 50% loss yesterday, but the chart kept telling me the Q's were going to head higher. I guess this is where patience pays off. The buy of additional shares to lower my cost basis helped and I was able to close out before lunch today with a 25% gain on my position. The $45.75 level on the Q's are showing some resistance and I wanted to get out while I could with a profit. So with this trade I was in with 70 contracts of QQQQ Apr 46 Calls at a cost basis of $0.40 and out at $0.50 for a 25% gain.

I think my next move will be for a down move over the next couple of days.

One thing I need to work on is setting up better stops. I have been finding that the stops I set are too close and I usually have to ride out past them to let the trade run for a bit.

Here is the pre-market update for today. Futures are set to head higher on the open today. The point at which I sold my 50 contracts yesterday at a loss was almost the exact bottom of the trading yesterday. I'm glad I still kept 10 contracts in. I guess one lesson learned is I had too big of a trade on and cutting it down to 10 contracts was more comforatable to stay in the game. A lesson learned, is to go in lighter next time. Maybe time for a new rule, no more than 10% on any given trade.

S&P 500 (MAR) +12.00  | Nasdaq (MAR) +16.25  | Dow (MAR) +74 

QQQQ Pivot Table

R2	R1	Pivot	S1	S2
49.24	48.71	48.07	47.54	46.90

A big lesson learned. I need to take my stops when I set them. That has always been an issue I have been trying to fix and was one of the reasons for starting this journal. I need to create a plan and stick with it. The sell off on Friday accelerated and took out the the lows of November. I expect to see a rebound rally on Monday and I will cut my losses as much as I can into that rally. The current trend is still heading down. Unless the Fed does some heroic maneuvers, we are going to be seeing lower prices for some time.

Pre-market the futures are pointing to a higher open.

S&P 500 (MAR) +6.75  | Nasdaq (MAR) +6.25  | Dow (MAR) +49 

R2	R1	Pivot	S1	S2
50.43	49.42	48.82	47.81	47.21

Shown below is a 6 month chart, the Q's are currently sitting on the longer term support line in the trend channel and we are in oversold territory. However, we can get lower and more oversold. With contracts that expire in a couple of weeks, I need to take back what I can quickly.