BermudianOption trading journal

ABBV hit its profit target. Because I have only 1 contract, I can't manage the position any further unfortunately so I am going to sit on my hands for now and weather any price action that isn't too negative:


PYPL headed lower on the open and doesn't look like a trade I will take today. No dice on MU or NFLX either although the price action is great. Both gapped lower and then the move lower was faded within the first 30 minutes of trading. With NFLX there is nothing I would do to change my approach and that is just part of the game.

With MU however, given how bullish I have been on the stock, I think that I should've had a limit order to buy when price retraced instead. Some more deposits into the experience bank.


Looking to go long the benchmark as well if the price pulls back to the $271 level:

 

ABBV sold off. I am glad that I was content with the potential of losing money to make more money. With that said, I didn't have a criteria in mind of when to exit on a pullback being that my profit target was already hit. Don't want to risk my entire position for example. Looking at the chart now, I have constructed a new line in the sand:


Also, today, I grabbed some MU on a pullback and copped some SPY contracts (in my IRA though) on the dip as well. I have a tight stop so there is a chance I am stopped out if the market hasn't finished its retracement

 

I am definitely bullish at the moment (albeit cautiously). I see a lot more upside potential with stock than downside. Also QQQ is showing strength although it retraced from its intraday highs. Here is what I am watching tomorrow:

HBAN
Trade type: Consolidating in a range:

Entry & Stop Placement: Entry placed above the consolidation range, stop place below it


Target stock price:
$16.73 (or wherever Reward is 3x Risk)

Concerns
Trap/gap and fade potential (Where the stock opens lower/higher out of the current range, and then is faded immediately to the other side. I won't enter until after the first 30 minutes though so hopefully that protects me a bit.

Positives
Clearly defined range, stock is above an upward sloping 5 Day Moving average, bulls are in control but the stock doesn't seem as overextended as some alternatives since the bounce from the market sell-off

Set-up Grade
A+ (Nothing sexy about this set-up but a very clearly defined entry/exit has me relatively content with the trade )


INTC
Trade type: Ascending triangle

Entry & Stop Placement: Entry placed above area that looks like potential resistance, stop is below the low of today:


Target stock price:
$49.25 (or wherever Reward is 3x Risk)

Concerns
There is the possibility of a pullback that is deeper than the low of the day. Oh well.

Positives
There appears to be a lot of open sky above the resistance area. The stock has been showing sustainable higher lows since the lows put in on 2/9.

Set-up Grade
A- (A couple inconsequential things keep it from being an A+ trade like the lack of a really really strong stop placement or the 10 Day MA slightly further away than I'd prefer)


FITB
Trade type: Pullback to resistance-turned-support

Entry & Stop Placement: Entry above prior resistance, stop is below a clear support level


Target stock price:
$34.77 (or wherever Reward is 3x Risk)

Concerns
None whatsoever

Positives
Very very clear line in the sand with the resistance-turned-support and the stop level

Set-up Grade
A+

BBD
Trade type: Ascending triangle/ Reverse Head And Shoulders

Entry & Stop Placement: Entry above key price level, stop is below today's bounce:


Target stock price:
$12.59 (or wherever Reward is 3x Risk)

Concerns
Although the trendline isn't the deciding factor in my entry, it is a contributing factor and it doesn't look like price will adhere to it. It looks like it shows the essence of the trend fwiw. Also, this is not a US company so although it is liquid, I feel like it has a greater possibility to randomly gap lower than the average US traded stock.

Positives
Open air if price gets above $12.20 imo

Set-up Grade
A (Trendline issues)

 

Late entry:

HBAN
Trade type: Ascending triangle:

Entry & Stop Placement: Entry above key resistance , stop placed below the low of the close that touched the trendline


Target stock price:
$12.75 (or wherever Reward is 3x Risk)

Concerns
If I zoom out and look at the daily chart, the stock isn't quite as strong as I'd like. Also, unsure if BB as a company is fully out of the woods as it pivots in technology, so there is a slightly above average chance of a gap lower imo.

Positives
Clearly defined range, stock is above an upward sloping 5 Day Moving average, bulls are in control but the stock doesn't seem as overextended as some alternatives since the bounce from the market sell-off

Set-up Grade
A (Long term trend is a less than my ideal setup but I likey the chart a good deal overall)

 

Stressful open.

Had a trade (HBAN) set up on Think Or Swim that failed because my deposit hasn't cleared so the trade was accepted yesterday but rejected when the order went live somehow smh.

I ran out of buying capital in my Think Or Swim account so I had to fallback to my OptionHouse account. However, there are no time criteria for contingency orders in there so I just had saved orders to trigger @ 9am. However, I have a daily meeting that runs from 9am - 9:15am. By the time I finished the meetings, the stock had ran without me lol.

Oh well. No sense in trading on tilt. I missed out on HBAN and BB in a major way. Potentially dodged a bullet with BBD though. We shall.

I will just have to watch for a pullback or for stock that haven't broken out yet.


Got some positions in my IRA fwiw (and those SPY calls I bought on the dip at support are doing well also)

 

Markets looking weaker towards the close

Closed out of my ABBV trade:

Reasoning about exit:
Markets look like they might head lower after giving back today's gains and retesting a key support area.

Concerns about exit: The trendline hasn't officially been broken. Giving back gains is not a sign that the markets will head lower. With that said, my price target was hit twice. Since the overall sentiment of the markets appeared bullish at the time, I didn't pull the trigger on an exit. I don't think there will be a third opportunity to capitalize...

 

Was stopped out of INTC. Nice pop with Micron though:

 

Finished The Power of Habit by Charles Duhigg. Great book with interesting takeaways that I will apply in this journal. Will try and type up a summary in the journal when I have more time.

I have the option of reading a book on trading next or a book on mentality next and I chose working on my mentality/mindset. Although my strategy could use some polishing, overall it is doing ok. My current concerns is my faith during drawdowns or bad luck breaks.

I have started reading Zen and The Art of Poker since it is about staying calm in a game of probabilities that is easily relatable to trading. I read the book years ago so I know it is good but just want to reinforce some of the lessons in it.

As for my trading account, MU has hit it's profit target. I like the bullish price action though so I am going to only close a portion of my position and let the rest ride to aim for 4.5R:


Currently entered a position in eBay

 

Stalking BBD after I missed my initial entry. Still unsure how I want to enter though:

 

RF
Trade type: No definitive pattern. Higher highs and higher lows, more frequent tests of the resistance level

Entry & Stop Placement: Entry above key price level. Stop placed below the second area that looked like support today.


Target stock price:
$20.86 (or wherever Reward is 3x Risk)

Concerns
If I draw a triangle, it suggests that another slight bounce lower could happen:


Positives
Clear skies overhead, so this can be a longer term hold if it gets on its horse. Financials in general look great (see:XLF)

Set-up Grade
A- (Decent stop but I wish the support level was more defined. The $19.30 level was more obvious for example.

MGM
Trade type: Kind of an ascending triangle. More about higher highs and higher lows:

Entry & Stop Placement: Entry above today's open. Stop below what looks like a clear support level:


Target stock price:
$37.15 (or wherever Reward is 3x Risk)

Concerns
Nothing comes across that concerns me on this trade

Positives
Price target is the next level of resistance. MGM isn't overextended like some charts since the February correction so I think that the reward outweighs the risk

Set-up Grade
A+ (Not perfect but definitely a sound looking trade)

 

Stopped out of MGM (same day trade) and EBAY today. With MGM, I see that a new high was put in at the open that was faded. The Bulls tried to regain control and that was faded even harder the second time and the selloff started. The main question for the future is whether I should raise my entry if a new high is tested and faded at the open:


Sold more of my MU position and have one contract open. I saw a triangle forming on the 3minute chart for MU right before I reduced my risk. In retrospect, I should've waited for the pattern to work/fail before reducing my risk. Relative to the potential reward, the risk was very low.

 

I was also filled on RF on a pullback: Highlighted where the fill happened:

 

Closed out of Micron completely. Ended up being a 4.8R trade. I exited because it was at a key price level and I saw some sellers on the short term timeframe. In retrospect, it wasn't a lot of selling and I was looking for an excuse to lock in profits.



There is still work to be done regarding how I manage winners but I really like that I reassessed a target price area outside of 3R when I saw the momentum and the potential overhead. With that said, there will be times that a trade goes against me when I swing for the fences so I have to remember trades like this that do go my way when I give it a bit of rope.

 

It has been a topsy-turvy market and I have been whipsawed around. I had to work around internet issues at home for the last week as well which made DD harder. I didn't review as many charts as I usually do, but I did manage to watch a webinar or two and do some reading. Mentally I am improving even if it isn't quite reflected in my P&L just yet. Weathering the drawdowns is a big part of the game anyways. Previously I'd cut and run when things got bumpy but I'm sticking things out because I know there is light at the end of the tunnel and that in spite of the volatility, I have what it takes to overcome this and push myself to be one of the few traders that is consistently profitable.

Update on Areas for Targeted Attention

• Create hard rules for entering symmetrical triangles and pull backs. I sat down and started to create a mental model of what constitutes a high probability trade versus a lower probability trade. I have been doing this to a degree when I started grading my entries as well. I still have some work to go but I'm glad to make progress. I am contemplating reviewing stock after I enter instead of just prior to the entry and after the exit.
• Number perfectly managed trades > Number of trading errors: I need to review February 2018 before I can decide on this one.
• Create shorter timeframe screener that follows your regular trading beliefs: Did not accomplish this. Not interested in shortening my timeframe at the moment and will remove it from my goals
• (Continue to) Grade set ups before and after each trade: I have started taking (more) screenshots to explain my trade exits. I think this will strengthen my understanding of my mindset during trades.
• Set Price Alerts for ETF charts: Completed
• (Continue to) account for Short Interest where possible: I have worked to implement this in my trading but it is hard to get consistently accurate short interest information anywhere. Nasdaq is the consistent, reputable source but they don't have any easy way to scan for the highest performers and I won't be manually.
• Spell out your trading strategies in a more transparent manner: In retrospect, much of the journal is a way to give the squeaky wheel the grease and then listen for more squeakiness elsewhere. So far so good and I want to keep on keeping on.

New Areas to Target with Attention

• Create a better mindset around stop losses: I am guilty of being disheartened and disengaging from the markets when I encounter multiple stop-outs. However, this is the most important times because this is how tuition is paid and I gain insight on what needs to be adjusted to become a better trader. If I shy away from the educational experiences. I will slow down my learning and make the process take longer than it needs to.
• Track and review progress weekly: I think that I am lightyears better as a trader than I used to be thanks to my review and journal. In an effort to push myself even more, I want to consciously remind myself of my goals regularly so that I am conscious of the big picture.
• Remember what you are doing it for: Speaking of the big picture, I recently found out that a great way to motivate yourself to do smaller or more mundane tasks is to remind yourself of the end goal. Whenever I am dragging my feet on due diligence or feeling a little lost, I will remind myself of the rewards like a new Chromebook or trading for a living from a fancy high-rise apartment and being able to structure my life however I see fit. I can see myself starting my day off at the gym, checking my positions at the open, and then spending the rest of my day reading, exploring the city, traveling or enjoying my hobbies. That is the end goal and what I need to remember every time I get a little disenchanted.
• Create more mental models: I believe that I have been entering positions and then passively waiting for either a stop-out or a profit target to be hit. I don't want to overmanage my positions, but I want to be more proactive in locking in profits. I think that the way to do this is to focus on having a mental model of how I expect a high probability trade to develop and cross-referencing my position(s) as well as the overall market for confirmation.

Update on Interesting Topics that might be worth delving into

• Statistics I am interested in how even random price action is often partially predictable based on probabilities
  • Haven't dedicated much time to this yet. I did purchase a popular book on Technical Analysis and will pay closer attention to things like Fibonacci retracements and the likes before delving into more theoretical topics
• Price action trading: I want to supplement my current trading strategy with a better understanding of price action outside of pattern recognition
  • Price action has taken a back burner after I started exiting positions prematurely due to it. I think that I will hone in on price action more so during key price areas.
• Increasing the size of Option Spreads: Currently I don't use a lot of size for Calendar spreads or Vertical Spreads. Once I become more confident in these strategies, I would like to increase my size so that they have similar capital allocated as my single leg positions.
  • I haven't used many spreads in 2018. If volatility continues higher this might be revisited in a major way, especially for longer term trades in my IRA.
• Trading within a neutral/bearish market: There is nothing to suggest that 2018 will be Neutral/Bearish but the Bull market cannot last forever. I want to stay ready so I don't have to get ready.
  • There is uncertainty in the market still. My reaction is to reduce risk by trading smaller positions.
• Swing-trading Futures contracts: I think that Futures trading has the most amount of people trading for a living. I want to create a better understanding of the Futures markets to see if I want to head in that direction.
  • Lower interest in this idea for the time being. May revisit it after consistency returns in my Options Trading
• Personal trading psychology: I feel like I was pretty level-headed in 2017 but I did stress a few positions going against me. Also, I found myself 'wishing' that the markets would go in my direction which means I was exposing myself to bias often. I am going to dust off and reread my copy of Trading in the Zone to nip this in the bud.
  • I have honed in my focused on this for most of 2018 (including the fact that I am currently reading Zen and The Art of Poker). I have made a lot of progress in being more conscious of how I am feeling as is evidenced by my new goals above.
• Trading on/around Earnings Reports: I have avoided Earnings Reports thus far but I want to delve into strategies that capitalize off of the volatility.
  • We are near the end of the Earnings Season and this has not been a focal point.I can set some alerts for range bound stock to try and leg into some positions perhaps.

Newly Formed Rules

• No more entries prior to 9am: I realized when reviewing my trades that a lot of positions were executed when a gap was faded. If a chart interests me leading into the open, I will use my ThinkOrSwim account (that has the ability to add a timestamp to contingency orders). After 9am has passed, any trades I am watching, I can execute it in my regular e*Trade account.
  • This has been going well so far. I have been kept out of some losing trades thanks to this new technique.
• Review all the trades I made for the entire quarter at the end of the quarter: I have to review my trading as a whole occasionally so that I can reflect on the impact on the changes in my strategy and hopefully put the progress I have made in a large, meaningful context.
  • I will be doing this at the end of March.
• Document the reasoning/thought process behind exits as they happen: I want to understanding the reasoning behind each exit so that I can objectively analyze it at a later date.
  • I have done this with my winners but I am yet to do it with my losers. Because I have been letting the market stop me out, there is no conscious decision on my end to intervene and stop myself out.

 

Getting ready for bed. Looking at BMY & CSCO tomorrow.




Currently in CSCO ZION and ORCL. Neither of which I have traded well unfortunately. I want to go long SPY but my stop would have to be set pretty far away so I will wait for volatility to contract before I go long.

 

Thoughts
Reworked my DD a bit so that it is less subjective and more focused on a checklist of sorts. Will look to refine it some more this week but I am keen to make things more objective and concrete in terms of a good trade vs a bad trade. Here is an example:


Today I thought about it and my end goal is to make money trading. I think that I have had blinders on a bit when it comes to trading stock instead of options. I convinced myself that I had 'graduated' to option trading and that stock trading was not sustainable. However, there are very high probability setups that I have been avoiding because the option liquidity is terrible. I am hesitant about the idea of tying up a lot of money in a stock position but I am going to have to get over that. There are plenty of people trading stock for a living and I don't want to limit my money making abilities, especially since my trading is glorified stock trades anyways. This week, my goal is to set up a screener for stock trades and figure out money management. I need to determine max position size, minimum liquidity, minimum market cap and calculating risk per trade.

One setup set to potentially trigger tomorrow:

EBAY
Trade type: Technically a triangle but only noticed that in retrospect:


Entry & Stop Placement: Entry above key price level. Stop placed below the recent low.


Target stock price:
$46.4 (or wherever Reward is 3x Risk)

Concerns
None

Set-up Grade
A+ (Decent stop but I wish the support level was more defined. The $19.30 level was more obvious for example.

 

Currently in DNR (A+ Set up)



Tomorrow I am looking to get into:

GLUU
Trade type: Breaking out of a consolidation range:

Entry & Stop Placement: Entry above key price level. Stop placed below the recent low and moving average


Target stock price:
$4.19 (or wherever Reward is 3x Risk)

Concerns
None

Set-up Grade
A+ (.5 away from a perfect score)

PRTY
Trade type: Breaking out of a consolidation range:

Entry & Stop Placement: Entry above key price level. Stop placed below the recent low and moving average


Target stock price:
$16.95 (or wherever Reward is 3x Risk)

Concerns
None

Set-up Grade
A+ (.5 away from a perfect score)

 

Had a successful January but it has been rocky AF ever since. This is the most volatile market we've seen in years though so nothing like playing a game on 'Hard' setting to get better quickly.

Setups that match my criteria 100%:



Setups that match my criteria 95%: