Optionshouse slow

Optionshouse is slow. I put in a request for a margin trading account last week and it is still "processing". Hopefully, it will be done by Friday so I can make my first spread trade.

Spread trades on the SPY

Tomorrow once I have my account funded in Optionshouse, I will start making some spread trades on the SPY. I will use this blog to document my strategies and how they do...

Citigroup is a beautiful stock. It goes up and down and then up again. If the market is down, you should invest in Citi. Then over the next 10 days, wait for the stock to go up - and it certainly does. Exit when the profits are decent and then wait for another down day. It IS that easy :)

I added eTrade and started investing out of it. eTrade is costlier than bank of America self directed investing, but it provides a lot of functionality which is very useful. I have also added more capital to my trading account.

I am getting the hang of swing trading - which is primarily what I described above with Citigroup. The investment is done with a view to catch on to 'swings' in stocks.

Over the next few days, I will also try my luck on market timing - i.e. being fully invested in the market during up days and staying in cash during down days.

Citigroups earnings

I am back after a gap of 6 weeks almost.

First of all, I realized that day trading cannot be done daily - at least by me. I am learning to sit on losses, which is key. The money for day trading should be thought of as a resource to make more money. Profit and loss are part of the game. I am getting to that mentality.

Second, there is money to be made before earnings announcements. Citi was widely anticipated to provide great Q2 earnings since Goldman and JPM had already done so. I brought Citi stock (5K) 5 days before earnings and it grew 20% during the days leading up to the announcement. To the surprise of many, Citi did badly and the stock was set to go down. I exited my positions before the plummet began. That is the good part.

Given I was following Citi for 4 days, I thought I 'know' this stock and can make some quick profits based on 1-2 cent trading i.e. putting in large amounts of money and wait for the stock to rise 2 cents and take all the money out. That was the bad part. I tried making a quick buck but the stock moved in the opposite direction and kept on doing that. I decided to hold on to the stock for a few days till it comes back to the same levels, which it did today. I sold off the stock fro exactly the profit that I was supposed to make in 1 minute - however, this trade took 5 days.

Overall, I am running at 27% profits in 3 months. Has been good for an iPhone, a camera and a laptop. Below is the total graph. I am using days of trading on the x-axis (before I was using actual dates of the trades) as there was a huge gap in between.

Day trading week 7

Total profits in 7 weeks: 18% of capital employed
Profit in week 7: 0% of total capital employed
No trading done

I didn't trade this week either. I sleep too late and always turn off the alarm before the market opens. 

Day trading week 6

Total profits in 6 weeks: 18% of capital employed
Profit in week 6: 0% of total capital employed
Rest week: No trading done

I didnt trade this week. Had a stressful work week and I saw last week how external stress creates a bad trading day. This is one of the few lessons that I really followed instead of just documenting.

Monday should be interesting as I cant wait to get back. The earnings seasons will also start kicking in and there would be a few volatile stocks waiting to be pounced upon!

Day trading week 5

Total profits in 5 weeks: 18% of capital employed
Profit in week 5: (3%) of total capital employed
Bad week: First week of loss

Perspectives on week 5:

Day 3 was that of a big loss. Put money in SAFM which delivered profits 3x of analyst estimates. You would think that a $42 stock would rise at least 10% with such great news. I put in money at around $45 thinking it would atleast go to $46 during the day. It ended up at $44. With no stop losses, I lost a big chunk there. I kept the stock overnight hoping (!) that it will jump the next day. It hardly jumped and stayed close to $44 at which point I decided to exit.

Day 4 was again a dissapointment but my mental state was also to blame. Some personal stress and trading suffers. Lost may 0.5% there.

Lessons learnt:

Companies like SAFM was "old school" (SAFM does business in poultry). Their stocks trade horizontally between big news events and big news events do not move them much either.

Learn to take losses and put stop losses. Day 4 was useful in that regards since for the first time I was ready to take a modest ($200) loss without hoping and waiting that the stock will rebound. I still hadnt put a stop loss but as soon as I realised that more losses may be ahead, I pushed myself to close the position.

Do not keep daily targets. The common theme in my mistakes has been the urge to get close to my daily target (~1% of capital). I am learning to remove this mental goal of that target. It was especially apparent when I took the first calculated loss (instead of hoping that the stock will turn around).

I also got upgraded to "Active Trader" status with my broker. Though I still dont have access to Level II qoutes, I have more technical analysis tools with me. Since I am accustomed to Google finance, I will have to break that habit and learn to move towards the tools provided by the broker. I will be able to momentum trade with information about bids and asks (though not as good as Level II quotes). Next trading session will be key as I will be prone to mistakes due to the new set-up with the active trader tools.