10/12/2006~10/18/2006
I should write down everyday a few lines about what I did the day, why I did so, whether it was a winner or loser trading...
And most important, I should write down my new idea or new findings or perceptions for the financial market.
10/12/2006:
I begin with my dairy today.
1. Trading: I sold 12 QQQQ $43 Nov call @ 0.45, I made 0.035 for each contract.
2. Evaluate: This trade is wrong, since QQQQ went up immediately after the Fed Beige book had been issued. Although I guess this bull market has not finished yet, I was not sure. I think it is still in bull because:
1) The price stands higher than its 20 EMA and;
2) The indices go up steadily even when bad news is out and;
3) The whole economic situation is just so-so according to current economic core indexes, because I believe that the stock market reflects the future economic indexes. And stock price also reflects Wall Street's expectation of the company's performance in the future.
4) I guess when all the news sounds good, the bull markets will finish. Because this month is 3Q financial report month, and the procedure just began, I think the bull market should not end so early before most reports have not been published.
5) Nov 7th is the mid term Election Day, and I don't think Republic will let stock market crash, which will definitely affects their seats in congress. I bet they will not take this risk and I believe they can control the financial market.
These 5 points should be tested in the long run.
3. New idea:
1) Think about the relationship between us stock market and currency (eur/usd);
2) Watch Dell, DNA, GOOG, YHOO, whose performance are interesting. Maybe I can get some hints on when the bull market should be over on currency and these stocks.
10/13/2006
1. Trade:
1) Still hold 60 contract of QQQQ Nov 42 Call.
2) Buy 30 QQQQ Nov 43 Call @ 0.65/contract.
2. Evaluate:
Because I am sure of the bull trend, so when indices pulled back, I bought.
And it can only be evaluated later.
3. New idea:
1) 20 day's EMA seems to be a promising reference of trend; of course it should be used in certain wise ways, I will watch, model and test it.
2) Try to find some stocks whose performance are uncorrelated with those major indices, and try to find some pattern. This could be a supplement to trade only indices.
10/15/2006
Today is Sunday.
I got an idea about a trading system which seems to be promising:
1. Enter long positions under following situations:
1) Basically, when 20 EMA breaks above 75 EMA, and at this time the stock price should be also above 75 EMA, especially after a very long time down trend and an oscillating period.
2) After a very long time down trend and an oscillating period, although 20EMA is still under 75 EMA, the close price breaks above 75 EMA.
3) After a very long time down trend and an oscillating period, although 20EMA is still under 75 EMA, the stock price is stable above 20 EMA ( for example, every time it goes down to 20 EMA, it rebounds).
2. Pull out the long positions:
1) When 20 EMA is under 75 EMA;
2) Stock price is under75 EMA;
3) More than 10 days, no new high close price.
10/16/2006
1. Trade:
1) Still hold 60 contract of QQQQ Nov 42 Call.
2) Sold 30 QQQQ Nov 43 Call @ 0.65/contract.
2. Evaluation: So the buy is wrong because I am unconfident with the buy, and fear that when the indices go down, this new buy-in will hurt more. When the market went down at the opening, I sold them with the lost of the commission, although the lost is minor, it is lucky, because if the market jumped down with a huge gap, I would also sell them at the market price. Overall speaking, I should try to do only the trade that I will not feel uncomfortable when the price goes down. Of course I can change my idea about this trade, it is just such a bet that if the price goes up immediately, I will earn the 0.05/contract and close the position; if it goes down immediately, I will cut the lose at 0.05/contract too. But I do not know which target it reaches first, so it is just a 50-50 bet, which is absolutely worthless.
10/17/2006
1. Trade: Bought 30 QQQQ Nov 42 call at 1.00, bought 35 QQQQ Nov 42 call at 0.95;
Sold 40 QQQQ Nov 42 call at 1.00.
2. Evaluation: the bought made at 1.00 was premature, because the indices were still going down without any sign that it would go up immediately, and I was afraid that it might go up in a few minutes and lose the opportunity to buy cheap, it was totally wrong. When the market went down further, this trade became a burden to me, and I suffered from the possible larger lost caused by this trade. Anyway, I need more patience, next time; I must buy when the indices begin to go up.
I think I sold the 40 at 1.00 is right, because although I believe that the market is still in bull, and the after market report of both Intel and Yahoo, which were downgraded by Wall Street, would beat the expectation and push the market up, anyway I don't want to bet so much, since it might be the first time I make money from the market by a systematic trading method.
And I also doubt that the scene appeared in the middle of Nov, 2004 would take place again now, though very likely; but I cannot bet on such things.
3. New idea:
1) Keep watching those stocks broke up or down their 20 and 50 EMA.
2) Should start watching gold also.
3) Study the in/out of MM from the daily performance.
10/18/2006
1. Trade: Sold all 90 QQQQ Nov 42 call at 0.95, then bought 60 back at 0.825, then sold them all at 0.80. Just before close, bought back 15 at 0.8.
2. Evaluation:
Today is terrible. It is the first time I experienced the really horrible OE week. Although I experienced several times of OE week, I learned almost nothing from those experiences because the trading strategies I used before were different with the present one. I used to concentrate more on the local, minor changes of the indices, while I follow the trend presently, and this strategy seems more promising and profitable. Since it is the first time I follow the trend in such a long period (about 1 month), I am quite unconfident about my judgment, that is why I made a lot of mistakes in this round.
What I have learned from this round of trade is listed here:
1) Last Wednesday (10/11), I sold all my positions at the opening when the open was a gap down; I kept my 30% profit, though the indices went up almost immediately after I had sold them. I waited and thought that the MM would not be so nice. I was right, in the afternoon, the indices went down and dramatically at the same time, a small plane hit one building in New York City, a lot of people remembered "911" at the time and began sold their stocks crazily. I will never forget the situation, when huge quantities of stocks were thrown out, I was lucky because at this time I found that obviously, the MM would not let the market go down and within a very short period of time, the volume was huge. And at that time, I was really clear (there are only limited times that I am so confident with my judgment) that the market's direction could only be up. I immediately bought in $4800 call option, it was really right.
2) The second day (10/12), there was a jump up in the opening then after a few hours flat, the indices went up rapidly, and just in a day I made 50% in my account, I didn't sold them; it was right at that day.
3) The third day (10/13) was another bright day for me, I made another 5%. At this time, I should have paid more attention on the feelings of those people in the Chinese stock forum, where almost all the bear's were desperate. I should have noticed that this was always a signal predicts reverse.
4) The forth day was the last day I can realize my more than 60% profit, the indices continued going up in the morning, but went down in the afternoon. At that time, I absolutely noticed that QQQQ was weak compared to other major indices, but I was still immersed in the happiness of making a lot money, I did not think those difference a big thing, of course I did think about it, but I am not sure whether I should do something in response to such a situation. When it was near close and the price was $1.25/contract, I made the decision that I just hold it, if it went down the next day at $1.2/contract, I would sell it without hesitation. This sound reasonable because there is a possibility that it would go up further in the next day, unless I was so unlucky that there was a big gap down in the next opening.
5) I was unlucky, at the next opening, the indices plunged and the price was just 1.05!
I know what happened has nothing to do with luck; I should have combined the desperation of the bears in the last Friday and the morning of this Monday with the weakness of QQQQ relative to other major indices in the afternoon of Monday when I made the decision to hold the positions. This is a great lesson for me.
In this day, as my anticipation, the indices went down in the morning but went up in the afternoon, I also added some positions, which was also right, but:
6) At today's opening, the indices jumped up, I was happy about that. But just for a while, QQQQ failed to went up and after 15 minutes, it began to go down. At the moment I hesitated a little while because I still thought it could be an oscillation, and would go up a little while later. I was wrong, it went down in a terrible way, this time I decided to sell them at 0.95/contract thought I missed the best price within the day. Then I was right, it went down continuously and then began to rebound. I bought them back at 0.85 at the rebound, but this seems to be premature because I then noticed that the atmosphere in the Chinese stock forum was still rather optimistic, I did not think it a good thing. Definitely, I need such kind of experience to relate the atmosphere of the forum to the possible trend of the market. Anyway, I sold them a little while later at 0.825, I felt comfortable to do that. And at the close, I bought back a little bit of them at 0.8 by using my profit of this round of trade, which is around $1500. My thinking is, if I was right, I made a little more money, if I was wrong, at most I made no money at this whole round, but I learned a lot, it is the best thing for me since I always lost money and then got experiences, this time, if I did not lose any money, it would be a progress.
Of course I still think that this uptrend is not over yet.
