A QCOM Two-Biter

It’s been a while since I posted a two-biter on this blog. Here’s one that happened on QCOM, an old friend (by which I mean a stock that’s been on my core list for years, not a favourite, because of course we don’t have favourites!):

A profitable trade on the stock QCOM

This trade was never great from the start, with the price dithering and going sideways. Still, QCOM is a stock I’ve traded for many years and is generally quite predictable and reliable. Also, chip makers were heading south in general (we never look at a chart in isolation). So the entry was worth the risk, and indeed for a few minutes it all looked okay.

Then momentum faded. Rather than hope it might turn around, the strategy says exit (and the golden rule says never let a profitable trade turn into a losing one). So I was out with a paltry 14 cents / share. Still, $140 is better than a kick in the teeth, and provides a buffer for another entry should one come along.

And indeed one did come along, less than ten minutes later. With momentum picking up again, and the buffer of the previous trade, the risk on the new trade was very low. This time things dropped further and faster. The final exit came when momentum turned, giving a profit on the second bite of 74 cents, so $880 combined.

People often tell me they get stopped out of trades (which is a problem, because we shouldn’t use stops as exits), and that they then watch in horror as a few minutes later the price goes their way. I’m always puzzled by this. It’s as if people have some kind of rule that says when you’ve had a losing trade on a stock you can’t trade it again for the rest of the session. It’s like a loss (or break even, or smaller than expected win) somehow makes a stock temporarily toxic — to be avoided until the poison wears off. But that’s a folly. A good setup is a good setup regardless of what came before. I never rule out a stock because I might have taken a loss on it earlier. There are many other reasons I might miss a second bite at the cherry, but a disappointing first entry is never one of them.

Trade, 23rd May 2019

No massive winners today. Tesla could have been interesting but volume was high and it was too choppy for me. Facebook had a lovely setup, but that happened at lunchtime so I was long gone. We don’t need four-figure trades every day to make a good living though. Indeed we don’t need them at all. Just stack up a few modest wins like this one on ROKU and our account balances will grow.

A profitable day trade on ROKU.

Strictly speaking the entry here could have been quite a bit earlier because we had a lovely triangle pattern and an obvious exit. I went with the classic entry, and the obvious exit when momentum dropped away.

$500 won’t set the world alight, but as I say, stack up a few modest wins like this each day and we can make a decent wage.

You’re A Wizard, ARRY

A couple of good’uns today. First up, ARRY:

A profitable day trade on ARRY

This was well signaled and worthy of the earlier entry. That meant there was enough profit in the pot to ride out the ending a little. Had I gone in later I probably would have exited around the $24 mark. As it is, this yielded $1,330 per thousand shares traded, making it by far the most profitable trade of the day.

The magic of margin means just $6000 in a trading account would be sufficient to have traded a thousand shares of ARRY. Math isn’t my strong point (as we know), but assuming such an account size, I make that a 22% return on investment — in one day. Well, one morning. Well, about half an hour, really. Spellbinding stuff.

Next up, AAPL, because we haven’t checked in with that stock for a while:

Day trading Apple stock

The entry here wasn’t quite so gob-smackingly obvious, so I was more conservative on the exit, getting out at the first target for $600. Holding longer would have got us over the $1000 mark, but hindsight is 20/20 and recklessness can cost us a lot more than missed opportunity. All in all, not a bad day at all.

DISHing Up The Profits

A couple of very nice trades to start the week. First up was DISH, which was just screaming out to be shorted.

A day trade on DISH earns $1030 profit.

It was only decent to oblige, and fifteen minutes later when things calmed down and momentum shifted, it was time to get out. $1,030 profit on that one. It wasn’t the most profitable trade of the day in pure profit terms, but it was the most profitable by another measure — more on that in a moment. The accolade of most profitable trade of the day in dollars gained went to Tesla (again).

A day trade on Tesla earns $1,110 profit.

This was right at the end of the morning so I nearly missed it. But with all that volatility around the important $200 price point, a trade was always going to be on the cards.

As I’ve mentioned, Tesla is a stock I’m learning the nuances of. Which is why I got out without hesitating at the point I did. That made for $1,110 in about six minutes or so (not that the timing matters).

Tesla continues then, to offer hefty rewards to the bold. It’s a high-priced stock, but we can always adjust our position size to something suitable to the price tag. Even cutting the size of this trade by ten would have yielded an easy hundred bucks for a few minutes in the trade. And of course, margin is there to help leverage these moves.

However, if we look at the profit gained for every dollar risked in the market, the DISH trade blew Tesla out of the water. For the same capital that was put on the line to trade 1,000 Tesla shares, it would have been possible to trade 6,000 Dish shares. That’s theoretical as the slippage on such size would have been something to take into account. Still, even if we assumed five times the size, that makes the Dish trade potentially worth more than five grand.

One of the great things about trading stocks is that ability to size up and down according to budget and risk. It’s easy to start small with tiny risk and work up to much larger sums as an account and experience grow. It means stocks are accessible to traders of any level of experience.

BIDU, Baby

A quick one to end the week’s trading. Here’s BIDU:

This trade was slightly unusual in that I traded into the EMA, which is something I generally avoid. But the EMA is only a yellow flag, not a red one. With plenty of other green flags around, I judged that the odds and probability were sufficiently in my favour.

As always, I was ready for a very fast exit. The advantage of these kinds of trades is that you know very soon after entering if it’s working out or not. If it starts going against me right away, I’m gone.

In this case, I was on the right side of the momentum and out as soon as that faltered around a logical exit.

Good Wholesome Fun

A couple of nice wholesome textbook trades today. The first one was not the largest winner of the day, despite producing a healthy $840 profit. Here’s the chart for FTCH:

A day trade on FTCH

The early drop was precipitous and a trader more on the ball than myself could well have taken the earlier entry to more than double their profit. I made do with the regular signal and took my profit at the first sign of trouble. 

There was lots around to trade (AAPL and ROKU doing it for the core stocks for example), but this one at the end of my morning was worthy of inclusion here:

A day trade on the AOS stock

Regular readers know I like to be done by midday, so taking a relatively late entry like this is less common for me. But hey, momentum was wild as the price dropped off a cliff. There was a high probability that it would all be over in a matter of minutes, and indeed it was all over in a matter of minutes. About ten. So that was a $100/minute trade right there, and still out in time for lunch.

There are excellent, easy trades to be had in every session when we trades stocks. Never a dull day.

Trade, 15th May 2019

It’s been a while since I posted a Facebook trade, so let’s rectify that situation:

Trade on FB

All standard stuff here, with a clean entry and an exit when momentum dried up. Another four-figure profit from a single trade. There’s a lot around at the moment, and core stocks like FB, TSLA, and ROKU are bringing home the bacon. But we must never become complacent — pre-market research is still the order of the day; we cannot rely on core stocks to provide the goods every day. 

More Tesla (Trade, 14th May 2019)

Here’s another Tesla trade, this time to the long side:

A long trade on Tesla stock for $1730 profit.

As with yesterday’s TSLA trade, I probably could have squeezed a bit more by getting out a tad earlier. Still, $1,730 profit isn’t bad, even if this time it took almost ten minutes to get there.

Before anyone asks, I didn’t enter earlier because the momentum wasn’t really there.

We Are Always Learning

I’m often asked about program trading, and whether computers make better traders than people. The theory seems sound. If execution is everything, and if our own psychology is our biggest barrier to success, then why not remove the human element altogether and let a machine do the work?

The answer, as I’ve touched on before, is that a good human trader can usually beat a computer algorithm, because humans are infinitely adaptable. Where a machine sees fixed rules, we see the nuance in every potential trade. We can bend the rules. Sometimes we can bend them to get into a trade earlier than our rule says we should. Sometimes we stretch a rule to stay in for longer because the probability is that doing so will yield a higher profit. And sometimes we can look at a trade that should, according to the rules, be a perfect entry, and say no, this one clearly isn’t going to work. Bending and adapting rules on the fly can keep us out of bad trades and make winning ones more profitable.

But more than just being able to bend rules, human traders are able to learn new things as we trade. We can spot new patterns, learn to see the small differences between stocks that a computer is unlikely to be able to pick up on (I say unlikely because I know ‘machine learning’ is a hot topic these days, and perhaps computers are getting better at this stuff).

Anyway, all of this is by way of introduction to the trade I wanted to post today, on Tesla:

Anyone who has read my stock trading book will recognize the setup here. It is, well, textbook. What’s interesting is the exit. My strategy offers a number of ways to determine when to exit a trade of this type (so already it’s something a computer would have trouble with). As I trade Tesla more often, I’m learning more about how the stock behaves on a micro level, and I’m able to use that new knowledge to fine tune my exits. I’m far from perfect — technically I could have gained an extra couple of hundred dollars on this trade — but I’m squeezing out a little more than if I just mindlessly followed my own rules.

TSLA is just a stock like any other of course, and it behaves largely like any other. But there are small details about it that I am noticing again and again. Combined, these are enabling me to take short sharp trades like this one, which netted $1,600 profit in a shade over five minutes.

Learning to read individual stocks is definitely not necessary to succeed in day trading, and indeed I would advise against trying to do so until consistently profitable (and possibly at all). But once day trading hits the ‘boring’ stage, the stage where every day is much the same and we’re just going through the motions, studying a stock and learning its ins and outs can inject some new interest and motivation to the job.

Four Figures In Five Minutes

Just one chart today, because it’s a lovely one:

 A four figure profit from a five minute trade on ROKU.

ROKU was up from the off, and presented at least three excellent setups. There was even more in the afternoon for anyone who trades that part of the session.

For me, it was the regular morning entry, and an exit at the first sign of trouble which coincided with a regular exit point. That put $1,150 profit in the pot. For anyone trading a strategy that holds longer, it wouldn’t have been that hard to bump that up to $2k.

As I say, there was a lot of sideways action after the initial morning flourish, then we headed north again.