Saying that stock market prices are wholly unpredictable is like saying you went to a Sotheby's auction and you didn't know when people were raising their bids.

courtesy of Google Trends searching

so my former daytrading chatroom seems to be going somewhat to the wayside...

However, I have found an excellent new outlet via a public Skype chatroom hosted by the trader oulous. You can find me on Skype by searching for 'mhjacks'.

The chatroom can only be joined by a current member inviting you in; if you would like to join please message me on Skype. (my skype handle is mhjacks)

An article on the NYT website about the booming self-storage business.

Here's an excerpt I found interesting.

“Storage has my hopes in it,” said Mr. Martin, who sleeps on a foldout bed in his mother’s guest room. “I don’t tell anyone this, but at least once a week I go over and look at my couch, my refrigerator, my TV stand, my mattress and realize I did have a life, and maybe there’s a way to go back to it.”

I hope you know what I find wrong and incomprehensible about this statement.

April 1, 2008

1. Short 200 OWW at $7.02
2. Cover 200 OWW at $7.19 loss: -34.02

April 2, 2008

3. Short 300 COT at $3.4801
4. Cover 300 COT at $3.35 gain: +39

April 4, 2008

5. Buy 100 GU at $15.15

April 8, 2008

6. Sell 100 GU at $14.21 loss: -94.01

This one was particularly frustrating due to the fact I could have easily sold at several points for a profit, and possibly even over $80 profit. You can see some of my thoughts in this post: Anatomy of Failure, a bad GU trade.

April 9, 2008

7. Short 100 CRY at $10.1701
8. Cover 100 CRY at $10.25 loss: -$8
9. Short 100 IMMR at $8.11
10. Cover 100 IMMR at $7.90 gain: +21.01

April 10, 2008

I should have made this trade in my SogoTrade account... I ended up paying $9 commissions...
11. Short 250 PRTS at $3.98
12. Cover 250 PRTS at $3.85 gain: +23.48

now back to SogoTrade...

April 11, 2008

13. Short 300 NTZ at $4.00

April 15, 2008

14. Buy 500 MNKD at $2.00
15. Sell 500 MNKD at $2.18 gain: +90.15

April 18, 2008

16. Short 200 NXTM at $6.46
17. Cover 200 NXTM at $6.32 gain: +28.16
18. Cover 300 NTZ at $4.05 loss: -$14.97

This NTZ trade was silly on my part; this stock was going absolutely nowhere and just trading within a range. I should have taken an early profit and gotten out.

19. Short 500 EDEN at $2.59
20. Cover 500 EDEN at $2.36 gain: +114.99

April 22, 2008

21. Buy 500 MNKD at $2.08
22. Sell 500 MNKD at $2.10 gain: +10.60

Hmmm... just about out of free SogoTrade trades by now ain't I?

In order to avoid the SEC pattern day trader rule in case I want to liquidate my position intra-day, I do the next trade with Zecco, paying $9 roundtrip commissions...

April 23, 2008

23. Buy 500 CPSL at $3.66
24. Sell 500 CPSL at $3.7001 gain: +11.05

This trade was annoying, because I should have done 1 of 2 things: either sold into an early spike for gains closer to $50, or waited it out for a later spike, which did come despite the fact I got scared out of the trade.

April 24, 2008

25. Buy 500 CPSL at $3.6999

Back in CPSL again, and too close to the middle of its current range.

April 25, 2008

26. Sell 500 CPSL at $3.65 loss: -$34

April 28, 2008

27. Short 300 NXTM at $6.36
28. Cover 300 NXTM at $6.22 gain: +$42.20

This NXTM cover is where my free trades in my SogoTrade account ran out. It was good while it lasted, and I'd be down an extra $75 without those free trades!

April 30, 2008

29. Buy 500 MNKD at $2.25
30. Sell 500 MNKD at $2.49 gain:+$114

Account Balances

Zecco: $2514.35
SogoTrade: $2916.24
Current Total: $5430.59
Total Original Capital: $5250
Current Total $ Return: +$180.59
Current Total % Return: +3.44%
$ Change in April: +$309.64

My net change for the month of April was +309.64, which despite having some good luck, was largely because of a better definition and application of my strategy. However, please note that without the copious free trades from SogoTrade and Zecco, I would probably be sitting at a loss simply due to transaction costs. I have made well over 60 individual trades since opening my brokerage accounts; even if all of those were $3 SogoTrade commissions, I'd be sitting at +$0 and likely be posting a negative return.

It's kind of funny that most of my good trades have ended up in my SogoTrade account. Of course, since my SogoTrade account was opened much later, and I didn't start getting a strategy together until early last month, it's not surprising. Also, SogoTrade has much better short inventory than Zecco, so sometimes I am unable to make profitable short trades in my Zecco account purely because I can't borrow the shares I need from Penson.

haha! suckers

Pop Quiz

Q. Who benefits most from inflation?

A. People whose networth is largely tied up in marketable assets (benefit from rise in nominal price of assets). People that take out lots of debt (when money is cheap, it's easier to borrow). In other words, rich people, specifically ones that own businesses.

Q. Who is hurt most by inflation?

A. Everyone that's not in the previous list, i.e. not the moneyed interests that promote the use of such worthless measures of inflation.

Pictures are worth a thousand words.

Go check out this -$116,736.90 loss in a Forex account.

And to top it off, these losses were made with borrowed money!

Ouch ouch ouch.

What I'm curious about is whether he had any sort of hard stop where if he lost X amount of money, he wouldn't let himself trade anymore. I'm guessing not. Also, is this death by a thousand cuts or the result of multiple big blowups? (thousand cuts would at least imply some sort of risk management system)

I assume that these excess losses were caused by the inherent use of leverage within the Forex market. Leverage is icky for beginning traders, stay away. You have to have very solid risk management to begin using leverage.

Although my account is down from my initial deposit, I think if my losses get around $500 I will probably freak out and stop trading. Trading is fascinating and all that, but my goal is to NOT LOSE MONEY.

This guy made a huge mistake - he was trading with money that he could not afford to risk. His mom's money, his broker's money, his bank's money - all possibly the worst sources of capital possible. He was compounding leverage; not only was he trading in a leveraged market, he was trading borrowed funds!

Certainly makes me feel quite a bit better about the -$94 loss I had on my GU trade the other day. However, that loss still lies far outside the bounds of my risk model, and represents a failure on my part in enacting my methodologies.

March was an interesting month. I saw my losses deepen while I simultaneously started using my 25 free trades up from SogoTrade. It's quite fortunate that I didn't have to pay commissions for this month. When I'm dealing with perhaps twice the size that I'm comfortable dealing with now, it might not be such a big deal.

As it was, I learned this month that I need to size my positions more appropriately so that my trades do not control my behavior. Also, I was using AMD largely as an index proxy, and this methodology started to have no edge as AMD started diverging from tracking the indexes (particularly XLF) and slowly sank beneath the waves.

Worthy of note is that I went into this month holding 300 shares of JMBA long that I originally purchased at $3.05 a share.

March 4, 2008

1. 10:53 Buy 250 AMD @ 6.50
2. 11:50 Sell 250 AMD @ 6.51 Net Gain: $2.47
3. 12:21 Buy 250 AMD @ 6.52
4. 15:07 Sell 250 AMD @ 6.61 Net Gain: $22.47

March 5, 2008

5. 11:50 Buy 100 COIN @ 15.9699
6. 13:10 Sell 100 COIN @ 16.12 Net Gain: $14.99

March 11, 2008

7. 10:36 Buy 300 AMD @ 6.17
8. 11:24 Sell 300 AMD @ 6.27 Net Gain: $29.95

March 12, 2008

9. 11:35 Buy 300 AMD @ 6.61

March 13,2008

10. 10:28 Sell 300 AMD @ 6.51 Net Loss: -$30.05
now there are commissions...
11. 11:08 Short 300 AMD @ 6.50
12. 12:03 Cover 300 AMD @ 6.63 Net Loss: -$48.02

March 14, 2008

13. 12:15 Buy 300 AMD @ 6.45
14. 12:44 Sell 300 AMD @ 6.40 Net Loss: -$24.05
15. 9:48 Sell 300 JMBA @ 2.31 Net Loss -$226.53 (I held this one way too long and should have cut it at <$100 loss. Rookie mistake.)

March 17, 2008

16. 11:15 Buy 300 AMD @ 6.35

March 18, 2008

17. 14:51 Sell 300 AMD @ 6.39 Net Gain: $2.95 (when will the AMD garbage trades stop?)

March 19, 2008

Now we're on SogoTrade... free trades again but no stops! Unfortunately I briefly continue my madness before massaging my strategy into place. I also start trading more than one position at once, which is VERY BAD for my novice state. Henceforth, I will trade only one position at a time. Also, I begin to learn to work with more appropriate position sizing, but not before some mistakes...

18. 11:51 Buy 300 AMD @ 6.30
19. 13:35 Short 300 HALO @ 5.75
20. 15:39 cover 300 HALO @ 6.00 Net Loss: -$75.02

March 20, 2008

21. 12:25 Short 100 CHNR @ 17.20
22. 15:24 Cover 100 CHNR @ 16.95 Net Gain: $24.98

March 24, 2008

23. 10:06 Short 200 VVTV @ 5.81
24. 10:45 Cover 200 VVTV @ 6.10 Net Loss: -$58.02
25. 15:45 Sell 300 AMD @ 6.20 Net Loss: -$30.03

is the AMD madness over?

March 26, 2008

26. 9:55 Short 300 BPAX @ 3.31
27. 11:26 Cover 300 BPAX @ 3.16 Net Gain: $44.98

March 27, 2008

28. 10:34 Buy 100 SOLF @ 13.14
29. 12:08 Sell 100 SOLF @ 13.80 Net Gain: $65.98

March 28, 2008

30. 14:16 Short 300 BPAX @ 4.70
31. 15:33 Cover 300 BPAX @ 4.50 Net Gain: $59.98

Conclusion

From these numbers, I had realized losses of -$222.97 for March 2008. With the addition of $90.09 in realized gains from February, I have lost -$132.88 since I started trading.

However, I must have messed up somehow, because my account balances don't quite jive with my trading journal.

Account Balances
Zecco: $2588.68 (deposits of $2750)
SogoTrade: $2533.40 (deposit of $2500)

So according to this, I'm down -$127.92 - I'm not sure really sure where I messed up my numbers although I do know there's a little bit of money market interest floating around.

Lessons Learned

Only be present if there is opportunity.

If you feel like you need a second opinion on whether to take profit right then and there, TAKE THE PROFIT.

Size positions correctly. Too big and there's too much perceived risk. Correctly sized positions lead to rational decision making.

Also, although I don't like SogoTrade, I do like the little account balance graph they give you.

Thus ends my trading month of March. I would be violating the pattern day trader rule to make a trade on Monday or Tuesday of next week.

I'm realizing a lot of the people coming here are probably wanting to open these accounts in order to day trade or perhaps participate in sucker's rallies, not sure which. (maybe the sucker's rallies are over by now? probably not...) anyways... You can find a link to the day trading chat that I now frequent here. It's skype-based, so keep that in mind. (ez as pie to use but sometimes not so good with firewalls at workplaces and such...)

5/2/2008: SogoTrade now has only a $500 account minimum, and you still receive 25 free trades.

UPDATE: One thing I have noticed about SogoTrade is that it has a good short inventory for a deep discount broker.

UPDATE: go here to see some issues I have had with SogoTrade

If you're having trouble deciding on a broker, this article of things to think about when choosing a discount broker can give you some food for thought.

Although I have been trading for only a couple months, I have opened up two separate brokerage accounts. One is with Zecco, and the more recently opened account is with SogoTrade.

SogoTrade is a very basic broker. They have an excellent pricing structure, but there are only two basic things you can do - buy stock or short stock.

The platform in general caters to the investor that is not particularly active, even though they offer a $1.50/trade with $10 subscription plan for more active traders (versus the $3 trades, you break even after 7 trades in a 30 day period). They currently do not (although they say they will soon) offer stops, stop limits, or trailing stops. (UPDATE - SogoTrade now offers stop and stop limit orders as of 4/11/2008) This is very important, especially when you have a position that you want to manage while you are away from the markets. Also, SogoTrade does not offer IRAs. One perk for long-term investors is that SogoTrade offers free DRIP for most major issues. This could potentially be a great place to store all your dividend-producing ADRs so you can harvest foreign tax deductions.

There is a $2500 minimum opening deposit, and currently they are running a promotion where they give you 25 free trades to use up within 90 days. This is the main reason I decided to open an account. Another reason is that after I use up the 10 free Zecco trades each month, I'd rather pay $3 a trade than $4.50 a trade, and conceivably could pay as low as $1.50-$2.50 a trade. Unfortunately, the limited choice of orders makes using the account somewhat frustrating for my purposes.

I do like their flash watchlist, even if it could be quite better and a bit less delayed. It's interesting, because now that I have 2 brokerage accounts, I have two sources of quotes, and sometimes they don't match up with each other. Sometimes volume numbers will take quite a while to sync up.

one thing to note if you like the penny stocks

For SogoTrade trades of stocks priced less than $1.00, an additional fee of ½ of 1% of principal value applies.

OUCH! At least the limit is $1. TradeKing has its lower limit at $2 for extra commission charges on cheap stocks.

Also, no Pink sheets or OTC BB stocks

one thing that does really bug me about SogoTrade

Their marketing photographs. Am I supposed to identify with these d-bags?

ranked in order of awfulness
• 
  WHY ARE YOU SO HAPPY YOU'RE BUYING STOCK?!

  INVESTING/TRADING IS NOT A FREAKING BEACH PARTY

  take your nice, clean, matching white collared shirts and go home

  and learn how to shave

• 
  If SogoTrade actually has any customers that could have stepped right out of this photograph, please direct me to their residence so I can thieve the valuables that their wealthy parents have provided them with.

  Also, grow some balls dude. Your woman's teats have more testosterone.

• 
  Am I supposed to take it that opening a SogoTrade account will allow me to frolic in the park and on the beach all day? Hope always sells I suppose.

  Also, there is NO WAY that kid came squirting out of these two.

shameless plug

If anyone wants to sign up for a SogoTrade account let me know... I can get 25 free trades for referring you! And you will receive my, uh, eternal gratitude! You gotta meet the account minimum of 2500 and make at least one trade for me to get my 25 free trades. Of course, you also get 25 free trades. think about it! :)

Just click on this link to get 25 free trades when you sign up with SogoTrade, and I'll get 25 free trades too! Best of all it's only $500 account minimum now - it was $2500 minimum when I signed up.

Also, if you want something awfully similar to SogoTrade, but with a few more bells and whistles, check out SogoElite. Many of the terms are similar, however the most important point for me is that if you wish to withdraw assets to the point that your account value drops below $2500, you have to submit an ACAT form or close your account. SogoTrade simply requires a 2500 minimum opening deposit, and you have to keep the money in there for a bit (10 days maybe?) if you want to go and take most of it out later.

However, SogoElite has real charts (it's a software-based account) unlike the garbage that the web-based SogoTrade platform spits at you. That and the stop orders I want is a pretty good deal for just not being able to withdraw your account below $2500.

SogoElite is also for active traders - you can receive free real-time data on the basic plan if you make at least 10 trades per month.

It's March 11, 2008. The Dow has had its biggest gain in over 5 years, rebounding heavily after a report by the feds that they are adding liquidity.

As usual, I tried playing AMD. I realized a paltry gain of $30, buying 300 shares for $6.17 at 10:36 and selling for $6.27 at 11:24 - however I missed a lot of potential gains in this spike. I should have held on for a bit more in gains. $50 would have been the max profit for this particular trade. If you notice, I missed seeing the last big volume spike up to 800,000 that capped off the initial buying spree.

If I didn't have to deal with that pattern day trader rule, I would have likely re-entered at the inflection point you see in the graph below. I find that using a market index or two is very useful as a point of divergence/convergence for an equity price, with the index typically leading except at points of market confusion.

The reason I got out of the AMD trade so early was because of the downtrending index, and I didn't see the second volume spike in that rally until too late. I was too skittish and quick to take profits.

Either way, I should have simply held on to my AMD until late in the day, the gains were quite astonishing. Bear market rally? My potential profit was somewhere around $90. Since I only realized 30 of those dollars, I have $60 of opportunity cost. Therefore I am -$30 for the day. Hopefully, I can stop losing and break even (or more!) at some point.

you gotta have an edge

The opportunity cost represents the edge that I missed out on. If I have a negative profit after factoring in opportunity cost, I have obtained less than half my available edge.

This is on a trade where I didn't lose money - statistically likely to be only 50% or less of my trades. Half of my edge is the bare minimum.

If we assume that I should have re-entered, I left on the table another $75 or more of gains considering my position size. Where's my edge? I barely have a toehold.

The market was out of control today, and on two trades that I saw - only one of which I acted on - I could have made $125. I walked away with less than a quarter of that.

words of wisdom from Brett Steenbarger

Dr. Brett tells us how we cannot equate market movement with opportunity, and to do so leads to wasteful perfectionism.

Although it might appear that I am doing exactly that, I assure you I am not. My primitive trading system, although still in its infancy, provided me with the ability to gain at least some of the available edge out there in terms of the entries that I identified.

I don't expect to participate in every market move, far from it. In this instance however, I had a reasonable belief that there was to be an imminent move, and I did not act on it. This represents true loss of opportunity; in trading, this only occurs when we identify a transition point and fail to act on our ideas.

More wisdom from Dr. Brett regarding 'the edge'.