Near bottom again,,,

So I again had another horrible week in trading and lose another -$1500 and for that I have stopped trading. Not because I want to but because my account is below $500. I do not even have $400 in my trade account. Ouch. It is still hurting, but that is life. It sucks to be bad at trading.

I stumbled upon an interesting site that updates daily of President Obama's overall national approval rating. Link. It is not fairing well, but I am not surprise. Many people had high expectations for him and because he has yet to bring America out of the recession people are losing their faith in him. President Obama has fought many battles to be where he is at today, and just because after 7 months the country has yet to get better it still shouldn't be fair to doubt in his abilities. Why it took President Bush eight years in office to get America through 2008. Why in the world could one expect President Obama to rewind eight years of President Bush's terms in less than eight years? America loves performance and wants it immediately.

President Obama has been much more transparent than form President Bush. He has been in front of America weekly if not daily on all issues facing America. Just because he can not fix everything of do everything he has promised in seven months is not fair. Yet this is America and without performance I am nothing. Life is cruel and unjust to all those that stay still and watch. I hope president Obama will surpass all expectations, because I always love routing for the underdog.

Trend Failure....

First off my apologies for the poor picture. I think it has something to do with my computer's screen resolution, which I will try to resolve before future posts.

What a devastating week for me. It can not get worst. The chart above illustrates that even if a trend is identified the market can still go the other way. Case in point. On Monday July 13, 09 I sold iron condors at 915/920calls & 825/830puts for about $0.60 excluding commissions. (I have been selling calls since march and been profiting from 10% to 35% weekly, however I was putting in 90% to 100% of my capital to achieve such profits. I consider this trading style being very aggressive and just down right crazy. Yet I give it my all to reading charts daily in knowing fully what odds I have of failing.) Anticipating on a bigger fall and wanting out of the money options expire worthless I went with the lower puts. Boy was that a huge mistake. The end result today is that the SPX ended above 915 therefore I lose all my capital in the trade. I did not do the exact calculation, but from the amount of options I traded the total loss comes close to $-34,120 not my biggest one sum lost experienced but largest of this year. I am worst of than I started at the beginning of the year. I will log in my mistakes in hopes others and myself can learn from them.

What happened?

Over the previous weekend I had the SPX chart reviewed upon the monthly, weekly, and daily trends. All trends expected a downward for the coming week. There was a head and shoulder pattern as shown on the chart below:

Not anticipating a significant up movement for the week I had the Fibonacci retracement line around $878.91 to $927.28. Anticipating the head and shoulder pattern would result in a right shoulder I went and shorted $915 calls. The 23.6% retracement was right around that value and not think the start of 2nd quarter earning season could be this optimistic the SPX shot upward for the next four days. The market as of 3:45pm EST of 07-16-09 has the SPX stand at 943.08! In less than four sessions the SPX index moved up 64+ points or +7.2%. (Note to self earning season is dangerous for indexes to swing up or down. Very dangerous.)

Mistakes:

1) The risk I put myself to gain 10% was not worth it. Understand if I had the patience and waited out this week I may have executed a lot better trades. I need to build patience, because sometimes the best trades are the ones I never make. This one should have been one.

2) I never done an iron condor trade until now, so this is my first trading the option spread and not knowing full well of its power I got slaughtered. Hey at least I am still breathing and alive. Yet barely. In any case I should have practice the spread before I went in it for real. Now that I have played it I will always remember this trade.

3) Following trends is good when it comes to trading but never put all your eggs in one basket. Again the risk to reward ratio was horrible in the method I choose to trade. Yet I should have know it wasn't a good week to sell calls. Earning season can be so unpredictable. Then again the market is always unpredictable.

4) I could not cope with this lose and stayed home isolating myself. If I had known how much I really could lose in this trade I would not have made the trade. Odds were in my favor at the beginning of the week, but it wasn't when it counted the most. I should not let this get to me, but learn from it. Yet a lot of money just gone out of my account again. I simply can not win. This type of mentality has destroyed my mind & body, and has created so many distractions. I clearly need to get my mind straight before I play again. Its just too much.

Looking forward to the Futures....

I am eating dinner as of 1:05am. Yes eating spaghetti with tostitos sauce while I type this post. I will try to make the story short. I was planning to eat chips with the tostitos sauce for dinner, but found the top portion of the jar growing white molds. As usual I disposal as much of the white mold sauce. I took what was left and heated it in a stove pot and mixed it with cooked spaghetti. There dinner served.

Now I will go back to trading. The title of this post was written like so on purpose. I just signed up for trading futures on TOS. I hope I can make a foturnate now, lol. I just better make sure not to lose my shirt. For over a month I have researched as much as I could on trading futures. One of my favorite blogs on trading futures is "eminiaddict". He truely is trying to help people out. All his service does not require a single fee. Heck he doesn't even have a donate link on his blog. Although I think he should make one. He is one and a million of wonderful traders willing to help beginners. Hopefully I can follow in his footsteps with this blog.

So the most popular future out there right now is this future contract called ES Mini. ES Mini is a future contract created by CME, (Chicago Mercantile Exchange) and the future corresponds to the S&P 500 Index. So the ES Mini is another way to trade indices. What makes the ES Mini so interesting to me is that it can be traded almost 24 hours a day from Monday through Friday! Any news that gets posted overnight during a weekday US stock closed session may still effect the ES Mini.

This is one step closer to a global market. To top it all off today I just learned that people in America can actually trade in Japan's Nikki 225 futures too. The ticker symbol is "NKD". I do not know much outside of the S&P, Nasdaq, and Dow Jones, but it could get interesting because now I am planning on trading before I go to bed. Man so excited I can not wait.

With all this excitement I know I am going to make stupid trades. So rather then playing for real I plan on using a TOS paper money account first. Get my feet wet with these so call futures contracts. There are quite a few out there. There are the ones following the Nasdaq- /NQ E-mini, Dow Jones- /YM E-mini, and plenty more from CME. (Check future contracts from CME.) I have noticed the /ES futures are the most traded contracts out of all futures by far so with signifcant amount of liquidty is in the /ES would mean it is easier to get in and out of trades.

Finally Results!

After all that procrastination I have my 2009 performance on Excel. It includes all commission deductions, wash sales, and expired options. What it does not include is the reduction of profit after taxes. (Technically I am still in the red so no taxes on loses yet.) I know I am still in the red but since April I have been hooked to a particular option spread that has brought me consistent gains. More on that in a later post. Now just look below to see how I have fared so far this year.

I began trading options around Nov '08 and haven't returned to trading actual stock shares ever since. Although I love options I have also had my worst ever losses with them. The main reason for the loses was my inability to factor in time decay. Me as a beginner thought naively that if I purchased an option worth $0.10 and sell it at a $1.00 I would make a 1000% profit. What I did not consider was the amount of time I had in order for the option premium to reach $1.00 before expiration. There lies my misunderstanding for option trades. When you pay to purchase an option and it expires out of the money, you get zip-poo in return. Nothing. Zero. Nada. A big fat O. So I did that for about the first five months of my option trading experience and racked in an amazing loss of over $30k. (How stupid is that? Probably ranks in the top 10 of all stupid things I did in my lifetime to date.) The chart above only covers year '09 but I had some terrible option trades in '08 too. The chart of my overall performance including 2008, the year I started trading is important to me. Important to me in many ways such as learning not to repeat the same mistakes and the fact that even if I hit any significant profit for 2009 it would still be overshadowed by the losses of '08. Hence I still have work to put together my overall lifetime performance results. That will be for another post.

Equilibrium

Today I read a little about the G-8 summit and came up with a hypothesis for the future of United State's economy. So the G-8 consists of:

Canada,
France,
Germany,
Italy,
Japan,
Russia,
United Kingdom,
United States,

All members were concerned about further deterioration in the global economy. Furthermore the IMF recently predicted a darker outlook on the world economy than previous estimates. Yet one can also read that all these countries are concerned about the emerging market. Why?

Emerging markets such as China, India, and Brazil are becoming bigger players in how the global economy operates. This was not the case when the G8 group was formed. This leads me to believe that the G8 is losing their grip on global wealth to the emerging market. To look good G8 discloses its willingness to work with the emerging markets to subdue a downward global economy, but in reality they are asking for help because they are drowning in debt. Also they are asking China and India to slowdown on industrialization for the sake of environmental welfare. Yeah right, like America would slowdown during their industrialization. Climate is only an excuse for trying to stop what can not be stopped.

In short America and the rest of G8 will soon have to acknowledge China, India and other emerging markets as full members of the so call "G8." (Not some lame term such as "Outreach O5.") Of course there is the G20 but when the day G8 is dismantled that is the day when its existing members have to accept the economy is truly globalized and all should have an equal say as in how the global economy should operate. Therefore America can no longer have the most and spend the most because the share of wealth is expanding from a domestic population to a global population. That does not mean America can not be prosperous, or does it? Too many variables to consider and it is driving me crazy.

P.S.- My first comment from Chris is about the VXV chart from TOS being incorrect. I acknowledge that VXV does not work on TOS but if you put in VXV.X it is the 3 month CBOE volatility. Just to verify like you asked I went to CBOE's website and downloaded the .csv file on closing prices on the VXV and today 07-07-09 it closed at 32.09 identical to the value read off of TOS. Thanks for the comment though, greatly appericate it.

Playing with Volatility ?

After reading an Article by Bill Luby about the VIX I decided to look into it deeper. The link to his article: "Take a Longer View on Volatility" Basically I wanted to see if the 10% difference between the 1month CBOE S&P500 volatility and the 3month COBE S&P 500 volatilty will produce a change in the direction of a trend.

The graph above has the green/red line representing the VIX while the blue line representing the VXV. I used 20 days data on an hourly chart. Notice on the closing of June 19, 09 the two lines % difference was significant. The one month volatility subsided that day versus the three month volatility. So what news could have reduce the one month volatility?

Not technically news but the market was set for a Quadruple Witching Day. Simply options were going to expire on that particular day and one would expect a lot of volatility on expiration dates, huh? This goes in line with Bill's theory that the VXV can not be affected as much on a daily event as the VIX. Clearly the volatility was still above thirty for the VXV and oddly enough the following trading day the VIX went beyond the thirty value. Just to add the following Monday the DOW dropped 200 points.

I added a Fibonacci line of retracement and for the following Monday, July 05, 09 the VIX seems posed to move up pass the 50% and 38.2% retracements. So what will this mean for the DOW? Well on Wednesday the VIX hit a bottom while the VXV hit 61.6% retracement. Then without warning the both indexes shot up. Each index gaining about 2 points, thats pretty signficant on a daily move. That day the DOW went up about 50 points. The following day the DOW dropped over 223 points, and the increase in volitilty indexes continued to race upward. My feelings are if the gap between the VIX and VXV are wider the more triple digits movement we will get from the DOW. Whether it will be up or down depends on a lot of factors, but reading through these charts I believe this coming week the market is pose for battle between the bulls and bears. (I know, I know a lot of people have been saying that, but I just got one more evidence as to this being true.) If the upside can not be sustained then we will continue with the downward trend for the past three weeks. Remember trend is your friend.

4th of July

Happy 4th of July to everyone.

I am happy with my results for the week. I could not sleep the night before the unemployment numbers were to be posted. Unfortunately the data did not fair too well and the market crumbled. With a short week for the markets I do not know if this coming Monday the market will go up or down. Odds are in favor of a bearish move, but the drop was so significant relative to weekly moves since March '09 lows I feel there could be a bounce from here.

In either case it is just my opinion and the market does not care about my opinions. On another note I have finally got into the green for the year, but after compute my 2009 federal taxes to date I fear the worst. my trades created a lot of taxes that I am required to pay and that reduces my profit down to a red number again. This leads me to the all so important progress chart.

I had promised to post my stock progress on this blog, but procrastination is my best trait so I have yet to done so. I decided to make it through Excel and post the data as a weekly line graph. There are a few factors I will incorporate into the chart that I have not seen other blog traders do. That is I will also post my entire life's trading results, and my profits after federal and state taxes. That way all these factors will help me get my yearly tax returns done promptly and give readers a different perspective about gains and losses. The data is in the works as I type this post and hopefully I can get it done before the end of next week.

6-23-09 End of the Day Update

First off I have decided not to produce an excel spreadsheet of my trades for 2009. Too much work. Yet I will somehow present my results graphically maybe with a line graph. Although I am still in the negative for the year I am slowly chipping away at the red. Patiently I am awaiting to get on the green side very soon and stay there for the rest of my life, lol.

Anyways nothing much happened today in the market. Not really surprising after the housing data was released. The news just was not enough to provide green shoot followers to have any momentum to push stocks higher today. Below is a graph of the daily chart of SPY.


Right after the housing data at 10am the SPY tumble below its daily vwap-pink line, which to me indicates a weakening in equities. However right around 888 SPY found support and pulled onto the vwap. The rest of the day the market try going higher but every time it failed and hit the vwap line. The SPY never gained any type of momentum to the upside even after yesterday's significant losses. This leads me to believe traders are uncertain about the market. With uncertainty comes lack of optimism and that makes the market sell off.

Tomorrow will be interesting to see if stocks can end positive. FOMC will post their results of their meeting around 2:15pm(Est). Anything can happen depending on what the FOMC says. Yet the trend seems to continue from last week which was a down week. So I would rather stay away from the market tomorrow until the FOMC results if all possible. It is too uncertain with the market being neutral today and usually any major news will result in major swings either up or down. In the long run I feel the market will go down due to the uncertainty.

Really Not Organized...

After reading my old posts I realize how disoriented I am. The stock market sucks. Makes life difficult and confusing. I wish I did not lose so much in '08. Now I have to make significant ground. Anyways what I mean to write is to hopefully, before the end of the month post an excel spreadsheet of my progress. I clearly have failed to do that, and there is no excuse.

Now to get myself even more confused I want to document an interesting discovery for the SPX weekly options. (Take note that there options that expire on a weekly bases. CBOE- Chicago Board Options Exchange had provided certain options to expire either at the end of a Thursday or Friday of a trading week.) I love these options because I am winning. I feel I am better when I make a weekly trade then a monthly or daily. Its not to say I would not lose more or win more. It is just my preference. In any case if your curious CBOE's link about weekly options:
http://www.cboe.com/micro/weeklys/introduction.aspx

1. SPX (Settlement on a Friday Morning.)
2. XSP (Mini-SPX, Settlement on a Friday Morning.)
3. OEX (100 of SPX Components on a 1/10th size, Settlement on the end of a Friday trading day.)
4. XEO ((European 100 of SPX Components on a 1/10th size, Settlement on the end of a Friday trading day.)

A word of caution these options except for XEO, are cash settlements. That means on settlement day there is no ownership in the stock when you hold one of these expired options. Instead you either pay the difference or recieve the difference in price between your option and the strike price. For instance if you purchased an OEX call option at 400 and at Firday's settlement the strike price of OEX was 440, you actually get $40*100 minus the premium for purchasing the option. There is no stock purchase and vise-versa if you sold a call, or also known as naked short a call or covered call, at 400 you would automatically be required to pay $40*100=4000 and minus the premium you got for selling the call. The "100" simply comes from the fact the the option is actually worth a multiple of $100. Hey I did not make the rules.

There is a subtle difference in XEO versus OEX. You can settle OEX at any time before or at the end of the OEX option expire date. XEO on the other hand can only be settled on settlement date. I only see this difference as a drawback to trading the XEO options but then again there maybe a scenerio where XEO would be better than OEX.

I babble long enough and still haven't posted my discovery on the SPX. For the week of June4 options on SPX as of Friday, June 19th's closing price the picture below are the vertical options.

Notice the 900/925 put options have a mark of $8.40 when the intrinsic value=present value is only at $3.77. There is a big volume of 144 put contracts traded versus 22 call contracts on the 900/925 spread. The put spread has over 200% difference between the instrinsic and mark value and on top of that the instrinsic value of the call spread is a little over 25%! Either someone or the market is telling us this upcoming week is a down week. I am playing on that and will trade through OEX instead because the contracts do not have such a spread between the intrinsic and present values relative to the quantity of contracts traded so far.

Is this True Prosperity?

Every Chinese New Years there is the traditional ritual of married adults handing out red envelopes to friends' and relatives' children. Though today I am adult I still receive red envelopes because I am not married. (I do not know why Chinese people have this ritual, but if I have to make an educated guess it would be to share one's prosperity to the people they care for the most.) Take note if you are not Asian or never received a red envelope that usually there is money in them.

Out of random last week I started looking over into all the red envelopes I received through the years. Each year my pile of red envelopes grows with the very recent ones at the top of the pile. (I do not put the money into a bank even though I lose out from inflation. I consider the money to be special. Although that does not mean I don't spend it, lol.) Anyways what I found astonishing maybe a rare occurrence but it is something to take note of.

My envelopes at the top were mostly five dollars while the ones at the bottom were twenties and tens. If I have to guess I started this collection about 8 to 10 years ago and all the people that usually gives me red envelopes did so every year. I found it very interesting that I get less dollars each year even though the United States has a yearly average of 3% inflation. It seems to me my relatives and close friends are getting poor or being cheap. In my pessimistic opinion they are worst off today than 10 years ago.

To not just be a one sided opinion I can list some reasons why I receive less money each year:

1) I work full time so adults consider me capable of making lots of money therefore I do not deserve more from them.

2) Over the years my extend family has grown. Cousins have gotten married and started their own families. Therefore a lot more children to spread the amount of wealth.

3) This ritual of passing out red envelopes has gotten a little old for the givers and they do not consider it as important as it was when they were younger. I can give an example. Usually a 20 something guy would got out to bars to socialize. He probably would spend whatever little amount of money he has on beers and games. When the same guy is in his late 30s or early 40s his priorities has changed. He probably has most of his money paying down a mortgage and/or debt. Priorities with givers has also changed. They are getting old therefore they need to save more to ensure they are well off when they retire.

To come full circle I am writing this excerpt because I feel people today are living on less than 10 years ago. The gap between rich and poor has expanded. What I have here is one more example.

First Dive Into ETFs

ETF= Exchange Trade Funds

On 1/2/09 I naked short a call of QID @ 63 for $1.00 premium. The option expired out of the money at 1/16/09. I therefore made a profit on the premium of $100-commission. Note though 1/19/09 the stock value was above $63. If the previous trading day the stock closed above $63 instead of 1/19/09 my call option would have been in the money. I would have then short 100 shares of QID @ $63 each. I got lucky.


I probably would have made even more of a premium if I had sold the call on 1/1/09 before the big fall on the second. Although I had a clear trend that the stock was going down on the 2nd. Contrary to the trend the stock went up for most of the next two weeks. Fortunately there was not enough of an upward momentum to push the stock back over my call price by expiration. ETFs are very dangerous if kept to long and soon I will learn it the hard way. This has a happy ending but where there is a winner there is also a loser. I lost big on another ETF and paid dearly for it. That trade is for another day :(

On 1/6/09 I made another naked short call. This time I aimed specifically on a financial stock, ACAS. As of 2/26/09 the closed stock price is at $1.38. I wished I put a lot more money shorting this. Dang it!


In any case I made naked short call at 7.5 with a premium of $0.70. Graph below shows when I purchased it. The graph illustrates the collapse of the stock all the way to expiration date.

For ACAS was a perfect short after doubling in four days in my opinion. Again I profited on the entire premium minus commission. On the 6th I recalled there was a lot of optimism from President Obama believers that the economy was stabilizing. I gambled that we weren't by shorting at the peak. Rather then directly purchasing a put I went with a naked call because of the high premium. I would only lose if the stock value went above $8.30 by expiration date. On the monthly chart of ACAS is the deterioration of and destruction. Worried that a significant upswing would continue was in the back of my mind. Therefore I ignored the stock after this successful trade.


Talk about losing faith in a company. The char looks so familiar to Lehman Brothers and Bear Stearns of 2008. Respectively symbols of the companies are LEH and BCS and are long gone.

I will update next post with my gains/loss of 2009 on an Excel spreadsheet.

A new year....

I suppose after a rough 2008 I can do better in 2009. That is not the case though. As of today my account's outstanding balance is $115. Take note of the fact that every two weeks I put in $1200 into the account and I have done this more than 26 times. I have probably lost over 70k to date and once I have my taxes done I can post my 2008 grand total of losses.

I wanted to start organizing my life. 2008 was a very in-productive year for me. A year I would want to forget. 2009 is not starting out any better. I was gradually load my trades up onto the blog in search of a education for myself on why I make the mistakes I make.

My first trade for 2009:

Daily Chart for the Past Three Months on XLF

Technically I purchase the options in 2008 but they expired in January 2009 and I held them pass 2008 so I am considering this trade as part of my 2009 trades. In any case the purchase was a dismal failure. Clearly the options expired below the call value, this is call "out of the money", option. Out of the money options are worthless once it expires. The opposite of out of the money options are "in the money options."

For reader's expansion of knowledge during the day of option expiration any in the money options are automatically transfer into stock purchases and the premium of the option becomes worthless. Follow this example. If I purchased one Nov '08 50 call option of MOS for $1 premium the total cost of my investment is $100+commissions. The $100 is called the option's total premium cost. Total premium is calculated by option premium times 100. Every option that has yet to expire has a premium. The premium will be zero once the option expires. Ergo all options will always end up having no worth.

Each option is a contract between a seller and a buyer. The example has me as a buyer of one call option. Each contract is the given opportunity to purchase 100 common shares of the stock. If MOS was to hit $(50+1) or above by Nov '08 I would make a profit but if it does not I loss my $100. Lets just say MOS reaches $53 by Nov '08 expiration. My brokerage will automatically transfer 100 common shares of MOS into my account in exchange of $5000+commissions. Now note that my $100 spent on purchasing the option is gone. Vanished! The $100 is gone period.
What I do have is 100 shares of MOS. If I sell the stocks at $53 then I would have gained a total of $200-commissions. I can also keep the shares and not sell it. The shares are just like any other shares a investor can purchases therefore they do not expire. You have just witness an in the money option. In the case of out of the money the option's premium is zero at expiration date and owner of the option gets nothing. (Note brokerages will always transfer you the shares in exchange of dollars when options are in the money. Brokerages do allow investors to ask not to make the exchange, but no investor would do that because the options will become worthless even if it is in the money.)

Usually investors do not hold options on expiration. There are a couple of reasons why. One investors tend to trade options through its premium just like they trade stocks through the stocks' price value. Second investors may not have the actual amount of cash required to make the exchange for in the money options. For instance in the example earlier if I did not have at least $5000 in my account then I would not be able to purchase 100 shares of MOS.

Options always expires every third Friday of a month. If you short a call or put option there is a SEC fee. I only found this out when I read my account balances. Usually the fee is about $0.01 per option. Click Link for more info.

OK back to the trade I made on XLF. I purchased 2calls@17 for $0.08 premium. What I was thinking was financial stocks would stop following. I was wrong and the end result was I lost $16+commissions.

Mistake 1) Never try to catch a falling knife. If the stock trend is downward, then don't expect its value to rally up any time soon. As simple as that.

3 Strikes and I am out!

1st Strike:

7-15-08: I shorted 4000 shares of FHN for $21,892.37. The day started out negative for financial. The overall trend was downward for most financial so I thought shorting financial was a
safe bet. Never did I thought the market would change so quickly.



I was actually correct that the stock would fall. What I didn't anticipate was the sharp increase. When it hit $5.43, I was tempted to buy back the shares but it quickly moved back to $5.45 range. In less than two minutes later the stock moved passed $5.47 and I still held. Stubborn me! The trend of the stock was upward as of 10:15am. Stubborn me kept my shorts hoping for a fluke. In the market, never hope. Hope never works. I waited till I was hit with a margin call. By then it was the 17th of July and the buy back price was at $7.99.




The final tally including commissions came out to be: -$10,099.75

It feels like I have learned nothing after all the trades I have made since Jan of '08. I knew it was an up trend but I was stubborn. To look back on this trade the lessons I learned:

1) "Trend" is your friend when you are on the right side. If a stock looks to go up then buy not sell short. I should have left around $5.75 at the end of the first day with a buy back on the stock. I would have only lost approximately $1150. I was naive and stupid to stay with it and took a big hit. Do not fight the trend, as a meager player I will never win.

2) "Quality not quantity" the downward trend on the day I shorted the stock seemed to accelerate. So I made a huge risk in shorting the stock. I spend over 50% of my assets on that one trade. Only to anticipate a meager $0.05 to $0.10 per a share profit. The trade really wasn't worth it for the money I was risking. All in all if I had shorted 1000 instead of 4000 shares I would have only risked about 13% of my assets and lost approximately $2750 if I bought back at $7.99.

This trade is my largest single trade lost to date. The next two mistakes were much more heart wrenching. I will continue tomorrow on strike 2 of my three dreadful mistakes in a row.

I have losted almost everything.

I have not posted for a very long time, because I have lost too much in the market. I am again below the $25k required for a day trader and I do not have the liquidity to pay off the margin. It is over for me as a day trader for a long time to come. I can not believe after all the nights I stayed up late analyzing stock charts and business news I can still get f**ked.

I clearly am not a day trader. Without the adequate liquidity I can no longer trade as freely as I please. I am not a number out of the 90%+ that loss money in the market.

I have yet to tell anyone of all my loses. If I have to guesstimate it would be somewhere around $130k. Yes I have lost that much. Later maybe I will post a chart of my progress. My biggest mistakes were shorting financial stocks. I did it three times and lost over $15k just on three trades!

Oh man, I don't have the heart to post the exact losses yet, but I must in order to learn from my frustrating mistakes. I did this upon myself, and I regret playing in the market. There is no easy money in life.

Progress Since Jan. to Apr. '08

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...........

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,

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.

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."

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.