QQQs and DJIA Correlation Turns Strongly Negative
4 months ago
Friday, April 25, 2008
Stop Losses
I have yet to learn how to execute a stop loss. The reason I didn't post for over two weeks is mainly due to my recent trade sessions. I have lost over $4000 in the span of three weeks. I have yet to learn my mistakes, because I see charts the way I see them and not leave when I needed to. Stubborn or not this is painful and I believe I have a lot to learn before I can actually play the market. This sucks...........
Friday, April 11, 2008
Pissed Off..............
So I thought I would be able to trade today, guess not. I just learned from my brokerage that cash trades once settled require an addition day to journey the fund into my margin account. What the... I am unable to make any profit for the week. Furthermore my holdings are falling in price value. What terrible timing to get a margin call.
I will be able to day trade on Monday and I will have a more cautious outlook because next week should be very volatile. Its a week were many companies post their 1st quarter's earnings. I must be patient and on the look out for big swings.
I think I am going to switch brokerages pretty soon. This is getting really annoying,
I will be able to day trade on Monday and I will have a more cautious outlook because next week should be very volatile. Its a week were many companies post their 1st quarter's earnings. I must be patient and on the look out for big swings.
I think I am going to switch brokerages pretty soon. This is getting really annoying,
Wednesday, April 9, 2008
Penny Stocks....
Unable to trade today I again missed out on a lot of shorts. The trading seems to be lacking lately, but still interesting to see it being so volatile. Anyways if I am unable to talk about the present I might as well take a step back into the past. History can be such a valuable lesson.
Around beginning of February '08 I scanned on a stocks screener website for the biggest gainers of the day. I stumbled upon stocks that had a +30% change in one day and thought it was definitely a gold mine. The stocks were cheap too, really cheap. Then I thought to myself, if I put $10k in one of these, I might get a $3k profit just in one day. I then went around websites after websites to see if I could find a stock that I knew could move up the following day.
I picked two stocks the following day and traded over $22k on both of them. Sadly I had to learn the hard way of what I was investing in. Penny stocks. Never would I have imagine I would loss over 80% of the $22k in less than two weeks. I went and did some research after the losses and learned that most penny stocks, about 99.9999999999999% of them are always bad investments. The main reason is because they don't follow the regulations such as NYSE and Nasdaq. Instead they are traded on the OTCBB. It stands for Over The Counter Bulletin Board.
The OTCBB is not as stringent as either the NYSE and Nasdaq when it comes to trading hence there are a lot of scams. One of the best websites to determine if a penny stock is a scam is stockgumshoe.com. The site is magnificent when it comes down to figuring out what stocks are truly worth investing and which ones are scams.
At the time my losses out weigh my gains by almost 10 folds! Yes, I had lost more than $25k in a matter of weeks, not months. February was also the time when I got my margin account approved, but was flagged with a free-riding violation. I was desperate to figuring out a solution, but was unable to for my losses kept piling.
If there was a silver lining to this is the fact that I will never, never trade a stock below a penny. By far the worst type of investment one can make in the stock market. I advise anything under a penny is not worth investing. Even if there are days where gains can go as much as 500%. Like the old sayings goes, "if its too good to be true, it probably is."
I will not disclose the penny stocks I traded because I simply don't want publicity on them. Yet I still hold one of them with over 85% loss from my original purchase price. To be truthful the main reason I am holding is because I am being optimistic. Hoping that the stock will rise back to the price of when I purchased it. Probably will not happen though. In either case, I also get the benefit of a remember of not to trade penny stocks when I see my portfolio. The 85% loss hurts, but I won't make that mistake ever again when I see -85% every morning.
Around beginning of February '08 I scanned on a stocks screener website for the biggest gainers of the day. I stumbled upon stocks that had a +30% change in one day and thought it was definitely a gold mine. The stocks were cheap too, really cheap. Then I thought to myself, if I put $10k in one of these, I might get a $3k profit just in one day. I then went around websites after websites to see if I could find a stock that I knew could move up the following day.
I picked two stocks the following day and traded over $22k on both of them. Sadly I had to learn the hard way of what I was investing in. Penny stocks. Never would I have imagine I would loss over 80% of the $22k in less than two weeks. I went and did some research after the losses and learned that most penny stocks, about 99.9999999999999% of them are always bad investments. The main reason is because they don't follow the regulations such as NYSE and Nasdaq. Instead they are traded on the OTCBB. It stands for Over The Counter Bulletin Board.
The OTCBB is not as stringent as either the NYSE and Nasdaq when it comes to trading hence there are a lot of scams. One of the best websites to determine if a penny stock is a scam is stockgumshoe.com. The site is magnificent when it comes down to figuring out what stocks are truly worth investing and which ones are scams.
At the time my losses out weigh my gains by almost 10 folds! Yes, I had lost more than $25k in a matter of weeks, not months. February was also the time when I got my margin account approved, but was flagged with a free-riding violation. I was desperate to figuring out a solution, but was unable to for my losses kept piling.
If there was a silver lining to this is the fact that I will never, never trade a stock below a penny. By far the worst type of investment one can make in the stock market. I advise anything under a penny is not worth investing. Even if there are days where gains can go as much as 500%. Like the old sayings goes, "if its too good to be true, it probably is."
I will not disclose the penny stocks I traded because I simply don't want publicity on them. Yet I still hold one of them with over 85% loss from my original purchase price. To be truthful the main reason I am holding is because I am being optimistic. Hoping that the stock will rise back to the price of when I purchased it. Probably will not happen though. In either case, I also get the benefit of a remember of not to trade penny stocks when I see my portfolio. The 85% loss hurts, but I won't make that mistake ever again when I see -85% every morning.
Pattern Day Trade Margin Call!
I received a margin call today and learned what I did wrong. After looking throughly at my brokerage margin rules I "thought" I had figured out how to use margin. Boy was I in for a surprise.
Mistake- I was already listed with "free-rider" violations in January and this came back to haunt me. Due to a 90 day penalty for the violations I am unable to have trades in cash be immediately transfer into margin until settlement of the trade. Settlements usually take three days from the day you purchased the equity. I purchased a stock in cash and overused my amount by just a little over $2000 hence receiving a margin call for the amount. The trade did not automatically transfer into margin because of my past violation and I will have to wait until Friday till I can trade again.
Luckily the pattern day margin call has five days to clear and so my trade in cash will move into margin by Friday. If only I could have bought $2000 less of equity I would have had enough for the $25k requirement in my margin account, damn.
To clarify the situation I will explain the significant penalty with a free ride violation. When you purchase a stock with cash, you need to let the trade to settle. The settling date will take time, usually three days. Once the trade is settle, you are allow to sell the stock. If you trade the stock and you use the proceeds to purchase another stock before the settlement date of the first stock you have incurred a free ride violation. What irony for once in my life I don't want something for "free" that is a free-riding violation. Dang.
The Federal Reserve Board formed a rule "Regualtion T" where trades made in cash require a T+3 days in order to settle. "T" is the trading day and plus three days. When you have a free ride violation, the account can only be trading in cash. However the cash trade must settle before you can use the cash again. Time is money!
When an account does not have a free ride violation and you make a trade in cash with the full amount in your core account, you actually do not have to wait T+3 in order to trade with the cash. At first it's appears deceiving until you realize the simplicity of this rule. The reason an account without a free ride violation can use the cash trade on the same day, before settlement, is because of margin. The cash used to move into the trade may be moved into the unsettled portion of the account, but the cash amount is still considered apart of your $25k limit for a pattern day trader margin account. That way you can still trade with margin even though the cash unsettled for the trade will not effect the buy power of the account. Remember though the trade must still be settled in order for the user to again trade the proceeds from the cash trade. Take note that most brokerage will draw your cash trade into your margin after settlement, which is what I am aiming for. I just didn't know about the settlement deal until today, damn.
I had many stocks in mine to short today and it was a wonderful day for shorts, too bad I suffered from a gain. I actually have a lost right now from the cash trade I made yesterday :(
I can look at the bright side, by Friday I will have my buy power back and probably doubled because the equity I purchased had a 30% margin requirement. Either way I learned a little more about the rules and regulations.
Hey it could have been worse, I could have lost every $$$ by now after all those mistakes I made. Geee, I really wonder how fair I can go with this. I just hope I can break-even before the end of the year. Again I remind myself, "take what you can get, and nothing more."
Mistake- I was already listed with "free-rider" violations in January and this came back to haunt me. Due to a 90 day penalty for the violations I am unable to have trades in cash be immediately transfer into margin until settlement of the trade. Settlements usually take three days from the day you purchased the equity. I purchased a stock in cash and overused my amount by just a little over $2000 hence receiving a margin call for the amount. The trade did not automatically transfer into margin because of my past violation and I will have to wait until Friday till I can trade again.
Luckily the pattern day margin call has five days to clear and so my trade in cash will move into margin by Friday. If only I could have bought $2000 less of equity I would have had enough for the $25k requirement in my margin account, damn.
To clarify the situation I will explain the significant penalty with a free ride violation. When you purchase a stock with cash, you need to let the trade to settle. The settling date will take time, usually three days. Once the trade is settle, you are allow to sell the stock. If you trade the stock and you use the proceeds to purchase another stock before the settlement date of the first stock you have incurred a free ride violation. What irony for once in my life I don't want something for "free" that is a free-riding violation. Dang.
The Federal Reserve Board formed a rule "Regualtion T" where trades made in cash require a T+3 days in order to settle. "T" is the trading day and plus three days. When you have a free ride violation, the account can only be trading in cash. However the cash trade must settle before you can use the cash again. Time is money!
When an account does not have a free ride violation and you make a trade in cash with the full amount in your core account, you actually do not have to wait T+3 in order to trade with the cash. At first it's appears deceiving until you realize the simplicity of this rule. The reason an account without a free ride violation can use the cash trade on the same day, before settlement, is because of margin. The cash used to move into the trade may be moved into the unsettled portion of the account, but the cash amount is still considered apart of your $25k limit for a pattern day trader margin account. That way you can still trade with margin even though the cash unsettled for the trade will not effect the buy power of the account. Remember though the trade must still be settled in order for the user to again trade the proceeds from the cash trade. Take note that most brokerage will draw your cash trade into your margin after settlement, which is what I am aiming for. I just didn't know about the settlement deal until today, damn.
I had many stocks in mine to short today and it was a wonderful day for shorts, too bad I suffered from a gain. I actually have a lost right now from the cash trade I made yesterday :(
I can look at the bright side, by Friday I will have my buy power back and probably doubled because the equity I purchased had a 30% margin requirement. Either way I learned a little more about the rules and regulations.
Hey it could have been worse, I could have lost every $$$ by now after all those mistakes I made. Geee, I really wonder how fair I can go with this. I just hope I can break-even before the end of the year. Again I remind myself, "take what you can get, and nothing more."
Friday, April 4, 2008
Gain/Loss
I have yet to update for the past few days because I have been trying to account my trades for the past week. I guess I will just be jumping about my pass trades and my most recent, because I want to measure my progress in day trading.
As of today I am able to invest on margin up to $34,000. I have saved what I could and get what I could into my trade account and my progress for the week is shown below.
I have purposed a hypothetical situation of profiting each trade session at 1% of my initial investment. The following day will be a 1% increase from the previous day. Continuously accumulating at 1% of the invest I should be able to double my investment in 70 trading sessions. That is approximately 14 weeks of trading. Can it be possible, to have $34,000 in profit in less than four months. I will report my progress at the end of each week.
From the graph I posted for the week, on the 5th trade session I made a brutal mistake. I shorted (VRTX) and did not leave until it was too late. The lost hurt financial and mentally because the session ended with Down Jones moving up almost 400 point gain on April FOOLs day 2008! Surely I was a fool that day.
My actual gain is behind by over $600. because of that significant loss on the fifth trade session. Clearly I will need to somehow make this up. Here comes another mistake.
Mistake- Avoid rushing into a trade even if you feel it has a great potential to increase/decrease. I simply didn't wait and made plenty of bad trades. For instance in session 6 I lost plenty from a (BAC) trade. I would have been over my hypothetical value by the 7th trade session if I had not rush into trades just because of instincts. So remember it is better to wait and miss a chance than to jump in and get hurt bad.
The moral of it all is "take what you can get and nothing more." I had one trade where I spent $6000 and only profited $5 after commissions. Even though it was only $5 and half of that goes to taxes, I came out ahead. If I had stayed with the stock that day I would have ended with over $50 loss plus $20 commission fees.
As of today I am able to invest on margin up to $34,000. I have saved what I could and get what I could into my trade account and my progress for the week is shown below.
I have purposed a hypothetical situation of profiting each trade session at 1% of my initial investment. The following day will be a 1% increase from the previous day. Continuously accumulating at 1% of the invest I should be able to double my investment in 70 trading sessions. That is approximately 14 weeks of trading. Can it be possible, to have $34,000 in profit in less than four months. I will report my progress at the end of each week.
From the graph I posted for the week, on the 5th trade session I made a brutal mistake. I shorted (VRTX) and did not leave until it was too late. The lost hurt financial and mentally because the session ended with Down Jones moving up almost 400 point gain on April FOOLs day 2008! Surely I was a fool that day.
My actual gain is behind by over $600. because of that significant loss on the fifth trade session. Clearly I will need to somehow make this up. Here comes another mistake.
Mistake- Avoid rushing into a trade even if you feel it has a great potential to increase/decrease. I simply didn't wait and made plenty of bad trades. For instance in session 6 I lost plenty from a (BAC) trade. I would have been over my hypothetical value by the 7th trade session if I had not rush into trades just because of instincts. So remember it is better to wait and miss a chance than to jump in and get hurt bad.
The moral of it all is "take what you can get and nothing more." I had one trade where I spent $6000 and only profited $5 after commissions. Even though it was only $5 and half of that goes to taxes, I came out ahead. If I had stayed with the stock that day I would have ended with over $50 loss plus $20 commission fees.
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