Hey Cormac how's it going... some good questions! Here's my answers. Deron & Ed are setting up Si accounts today, so they'll be on the thread in short order.
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Question #1: In the past three months what has been your biggest trading mistake? (yes, we all make them)....I am not looking for specific trade details per se but for the trading fundamental/tenet/truism/theory that you violated and/or neglected...even better would be a new observation/awareness/perception that mistake was the catalyst for.
My biggest trading mistake was being too slow to switch to a bullish stance when the Nasdaq reversed off it's lows in April. As much as I pride myself on being nimble, watching the market for a change in sentiment, etc. I have to admit to screwing that one up. Some of my friends in this business (e.g. Tony Oz) absolutely NAILED the bottom, so I still have a few things to learn. I am very good at reading the market intraday, but occasionally miss seeing market turns in the higher time frames. As "middle-aged-man" used to say on Saturday Night Live, "I'm working on it!!".
My partners are very good at reading the major market turns however, so we've instituted some changes in the indices & indicators we monitor to improve upon this. There will be plenty of opportunities to hone this!
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Question #2: What are your individual risk/money management parameters per trading style...swing, intraday, short term, long term etc.?
We focus on scalping and swing-trading stocks and options. For stocks, the amount we will risk is a function of the issue's volatility. With highly volatile stocks like JNPR, SEBL, NVDA, BRCM (etc.) on an intraday trade typically our initial risk is anywhere from 0.5 pts to 1.5 points. We move the stops to breakeven ASAP, and often take profits on half the position when the gain equals our initial risk, and trail stops on the rest of the position to maximize gains, often getting 3-5 points out of the second half of the trade. For swing trades, initial risk is typically 1-3 points, and we are looking for 3-10+ point gains. We also trade listed stocks, some of which are relatively tame (they are posted intraday). Most of those trades are scalps, risking 0.2 to 0.5 pts to make 0.3 to 1 point. When we enter these trades, we are always watching/analyzing the broader market (Nasdaq and S&P Futures intraday trend, key support/resistance levels, etc), as well as the behavior of related stocks in the same sector, and the major market internals (Advancers, Decliners, Adv Vol, Dec Vol, TRIN, VIX, etc) to insure that we enter at a time when the odds are in our favor. Our accuracy varies depending upon market conditions, of course. We have found that a high accuracy rate (win/loss) does not necessarily correlate to high returns. You can see this in backtrading systems, too - the same thing applies to discretionary trading. Typically, the best returns in our style of discretionary trading are found with a 50-60% accuracy rate. For example, I may be stopped out of JNPR 3 times for a half-point loss, then take 6 points out of it on one trade. That's trading!
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Question #3: Given a fictitious trading portfolio of $750,000 and three different accounts: intraday, swing/overnight, and short term (2- 12 weeks)... how would you proportion this portfolio and would this remain static...if not what criteria (and when) would you use to shift said proportions?
We would put it all in one account, and trade it in different "modes" depending upon market conditions. This allows you to be much more nimble and take advantage of shifing market conditions, even intraday. When the market is trading sideways/choppy and with low volume, like the last few days, we become scalpers and don't take much (if anything) overnight. On the other hand, when the market trends, we will get into profitable swing positions and ride them, sometimes for days, with trailing stops and scalp around those positions.
We also daytrade and swingtrade options. We like to sell Premium, for example recently we collected 40 points of premium (when the trade was closed) in the $BKX (Bank) sector calls. We frequently sell "Collars" on the Nasdaq, keeping the position balanced to collect premium. We make a lot of use of both Bullish and Bearish vertical put/call spreads, to allow us to take both long and short positions (including overnight) with a clearly defined/limited maximum risk in the trade, and no worry about a gap move against us. We also daytrade long puts and call intraday, both on individual issues and on the QQQ's, OEX, and index options. Our option trading is very selective - we wait for conditions to line up strongly in our favor, even moreso than with stocks. |
