+ $8k in One Week (the new week one)

So trading with 200 dollars wasn't working. The reason why is because the platform doesn't allow for stop losses and/or trailing stops. So I'm counting those first four blog posts as an extended review of robinhood's trading platform. I liked a lot about it. But it doesn't work for me. 

Going forward I'll be posting exclusively about my paper trading account. I don't want to post my personal financial info for obvious reasons but I also want to demonstrate that I know what I'm talking about. I started a 200,000 paper trading account on Think or Swim. I love the software. In the first week, I made just over $8,000.  That's about 4% on the total portfolio. Also for perspective it would be %80 on a $2000. 

This is due to trailing stops. Well that and picking good stocks.

My general rule of thumb is if the stock is around 2 dollars or less I'll put a wider trailing stop. About 3.5-4%. This is because the percent fluctuates more easily with one cent changes and I don't want to get stopped out prematurely. Conversely, if a stock is priced over $5 I'll stick a trailing stop closer to 1-2%. Less volatility means I want to try to hit as close to the top of the current trend as possible. I let the machine close my position because it's less emotional than I am and I am the lazy trader after all. Might as well let them do the heavy lifting. As long as I'm coming out positive I'm happy.

You can't predict the future on the stock market, just place the odds in your favor. I look for stocks with strong trends because my philosophy is that trends continue more often than not... That's why it's called a trend. Subscribe to get my daily watch-list!

When to Hold

At the end of two weeks ago I had given back my returns from the first weeks gains after starting this blog. At the end of week three (last week) I was back up to $220 dollars or about a ten percent gain. It's decent but not where I was expecting to be. I need to tighten some screws on this operation. Let's take a look: 

Unfortunately I ended week two getting stuck for a week in CERC. The trade looked like it had good momentum, it was very bullish both on the long term and on the one day chart. I wanted to catch some momentum into the next day, but it dropped quite a bit. I didn't feel good about closing it and the reason is because it held support well. Here's what I mean:

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This is looking at a 9 month chart of CERC although much of it is cropped out.

This is about as complex as I will make a chart. Drawing channels and support and resistance levels is pretty arbitrary so I don't give it too much weight, however, it is another tool on the belt and has it's uses. I could see the trend was in tact, at least according to my own criteria and I felt comfortable holding the position. I held for a week and the momentum picked right back up and I closed with about a 7% profit. 

This is about as complex as I will make a chart. Drawing channels and support and resistance levels and all that is pretty arbitrary so I don't give it too much weight, however, it is another tool on the belt and has it's uses. I could see the trend was in tact, at least according to my own criteria and I felt comfortable holding the position. I held for a week and the momentum picked right back up and I closed with about a 7% profit. 

Side note: The amount of money shown is about $10 less than what is in the account on account of buying power. 

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You'll notice that I did exceptionally well on a day-trade with PIXY. I was pretty happy about that but then gave my profits back on OGEN. I seem to be fairly hit and miss with my day trades. My swing trades are simultaneously less volatile and more consistently positive.

My approach here is to be brutally honest with you but more importantly with my self. I think if I can be truly honest with myself about my flaws in my trading game I will improve much much faster than otherwise. Also, I want to point out that my watch-lists always outperform my own trading skill. We determined we have about a 70-80% accuracy when it comes to picking winning stocks based on our past history. You should check out our numbers for 2017 on the subscribe page at the bottom. Best of luck to all.

Declutter for Better Efficiency

A couple years ago I remember a day trade where I lost half my portfolio. Or almost did anyway. I don't remember the ticker but it doesn't really matter. I was trading with about 5k. Right after I entered, the market was halted and when it resumed I was down 50%. I was down $2,500. It was sickening. But I lucked the hell out. I had little experience at the time but I thought I would hold out overnight and catch the dead cat bounce. At least then I could gain a little back. It more than worked. I actually was able to close out the position flat with a sigh of relief. I don't think I could replicate that kind of luck again in this lifetime. Which is unfortunate, because I sure would have loved to be one of those guys that makes 400k overnight. Oh well.

I kept watching that ticker symbol and following what people were saying about it on StockTwits. After the bounce the stock did inevitably tank again. (Refer to my rule number 2 from last weeks post). People were so confused. They were citing all sorts of technical indicators. I heard things like "this is so oversold" or "just wait until that moving average crosses again, this will skyrocket". The mood in those forums turned to depression shortly after as it started to sink in that those who remained were left holding the bag. But still they insisted on believing their beloved technical indicators even though they led them astray.

In my opinion people tend to place too much emphasis on their favorite technical indicators. We've all see the screen shots of the "gurus" who have 20 multicolored lines crisscrossing their screen. They must be super smart in order to process all that info in a timely manner. I bet the secret to trading is hidden in there and if you buy their 1.5k program they'll tell you what they see in it all. Okay, sarcasm aside, technical indicators are developed by smarter people than I, and have legitimate uses. 

The reason why I have a problem with it all is because in general, TI's show rolling averages of past information. There are only a few metrics that are measured live. Those are what I prefer to base my trades on. They are price action, volume, and level 2's. Everything else is secondary for me. This bare bones approach has been effective for determining both day trades and swing trades. 

The strength of decluttering is speed. Some traders argue that you must study a stock for months before you buy it. That doesn't make sense to me when I have all it's history right now. Building months more history while I watch doesn't exactly give me an advantage. It's just boring. I want to be able to analyze several stocks a day within an hour. This shouldn't come as a surprize, I am the Lazy Trader after all. I can tell within a minute if I'm not going to buy a stock. It only takes a little bit longer than that to determine if it looks interesting for a possible trade. After watching the price action for a little while I determine a good entry and then I make my move. This minimalist approach is not without weaknesses, however, no strategy is perfect. 

I don't know if it's a hobby or seeking confirmation of my thought process or flat out just to inflate my ego but I still like to get on various forums the day after a stock had a major spike. I am always astonished, and sometimes annoyed, that there is always a new generation of bag holders born. The conversation never changes either. It's like there's a script for these guys. Seriously, check it out sometime. I think they must learn the dialogue from the actual pumpers who are long gone by that point. I also think these must be the infamous 9 out 10 traders that fail and give up.

Anyway, my point is this: things don't need to be complicated to be effective. My dad always said, the best approach when working on something is K.I.S.S. Keep It Simple Stupid. I mean I got good grades (mostly), but I'm not sure how I feel about my dad always calling me stupid. And I mean constantly. He always used to do this joke where he would put his hand on my head like a spider pulsating up and down and would ask, "You know what this is? It's a brain eating spider. You know what it's doing? Starving." Or if I ever got a brain freeze he would say, "You have to have a brain to get a brain freeze. Now I, on the other hand, I can get a brain freeze." But to be fair he is the smartest person I've ever met so I guess it's not without merit. Plus I turned out relatively successful and functional so I can't really complain. Also, I won't apologize for my many tangents.

Anyway, back to the topic. Don't let yourself get analysis paralysis. When I first started trading I thought that having a lot of technical indicators up on the screen looked sophisticated. It made me feel like I knew how to do something no one else could easily understand. And that works if my goal is to be braggadocio. But it isn't. I want to trade well and make money. If that's what you want too, then in the words of my dad: Keep it simple stupid.

Inertia

In physics there's a concept called inertia. A simplified definition is resistance to change in motion. You've experienced this when driving and taking a turn. When your body leans to the opposite side of the turn, it's resisting the change in motion. In other words, your body wants to continue in the direction it was going until another force comes and causes the change. This is how I think of stocks. They want to continue on the trend they are on and continue to do so in absence of another external force. 

The trick is to identify the trend. In my opinion, the only way to do this is to use a set time frame. If someone ever says they think a stock will go a certain direction but fail to give a time frame, then that information is useless. This is part of the problem I have with most forums where they rate stocks either bullish or bearish. You almost never know if the person is saying the stock is bullish for the next hour or year. Knowing which would drastically change your strategy. For swing trades I generally am focused on shorter term trends, like the week or month. However, if a stock is in a breakout, I will look at the long term trend to see what the stock is going to return to. After all, the breakout is strongly resisted by the overall direction the stock was already going in.

I once heard a story of a weather man describing what it was like trying to predict the weather in the earlier days of forecasting. He claimed that the forecasters were usually just about 50% accurate. Not great. But if they would just say "the weather tomorrow will be the same as the weather today," they would get closer to 70% accuracy as they were only wrong during transitional stages. While this story is purely anecdotal and basically hearsay, in my experience stocks behave much the same. They keep doing basically what they have been doing except during transitional stages.

These ideas give rise to a couple rules I generally stick to:

1. Trade the trend.

2. Breakouts will return to the original trend.

All other information is designed to get you to more accurately enter and exit positions. 

That being said, let's look at the trades I made this week. I had a rough week this week trading. I basically returned the money I made last week on a couple poorly executed day trades. I timed my entries perfectly but bungled the exits. I finished the week off at 202.89. A total of a 28.46$ loss or a net -12%. 

This is mostly due to one trade I made on OREX. Here is what happened:

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I hesitated due to the volume on the stock. That was my mistake. I was expecting bigger gains and then I was expecting a run that never came. Instead of looking for the indicators, which are in fact relatively easy to spot in live trading, I was hoping for a bigger win. It's a lesson that I have to re-learn every now and then because now I'm going into week three as if it were week one.

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Here's all the trades I made for the week. Again, it shows a few dollars less because I can only trade with what is called buying power. You'll notice that my swing trades were mostly profitable with LGCY being the highest gainer at about 7% profitability. I think the highest potential profit from that stock could have been 10% from the time we sent out our watch-list on the previous day.

Set backs like this happen. 

A really good friend of mine is a pro MMA fighter. I've never met someone so motivated to achieve their goals. As of yet, he is undefeated and quickly on the rise. Every match he walks out into the arena to the song Tubthumper by Chumbawumba. It's a ridiculous name for a song.... and a band. But the message of the song conveys in a humble way, that my friend is undefeatable, because even if he loses a match, he's coming back for more until he's the best. That's how I feel at the end of this week. I took one on the chin. Now it's time to shake it off, learn, improve, and get back at it.

Enjoy.

Week One

Before we start talking shop, I think a more formal introduction is a better jumping off point. You see, I am not yet a full time trader, I am an aspiring full time trader. What I do for a living is forensic science. I am a Forensic Serologist, which means basically that I spend my days searching for, extracting and analyzing DNA evidence for criminal cases from all across the United States. I love my job. It's fulfilling, the people are awesome (albeit a little weird and that includes myself), and challenging. It is what I went to college for.  It's what I dreamed about doing ever since I gave up on my high school dreams of being in a band. My dreams going forward include things like travel, becoming an amateur astrophysicist, reading more books than I already do (which if you knew how many I read you might ask why) etc. I see the stock market as a tool I can use to get to do those things.

Luckily I found a second passion. One that I plan on eventually trading in for. No pun intended. Day trading offers opportunity. I'd bet that's why you're into it. You already recognize this fact. Well I want the same thing, and I'm working to get it. That's why I built this site. That's why I track numbers on a daily basis and have been for years. That's why I started this blog. That's why I sell my watch-lists. I want to have the freedom to one day quit my day job and live off of my day trade profits and whatever meager income this site generates. I want to be able to move anywhere in the world on a whim and still have a career.

Still, I recognize that being a day trader doesn't come easy. I work hard to keep up. So you may ask why I called this blog the Lazy Trader. Two reasons, neither of which is that I'm a lazy person. First, I take a more hands-off approach to trading. I keep it simple, which is the opposite of a lot of what I see out there. Second, I want to convey that this can be done without having to dedicate 16 hours a day to it. Currently I can't afford to be a full-time trader, so I must trade when I can which basically translates to when I'm allowed to. Which is not all the time. Which brings me to my current game-plan.

I want to take a slightly different approach here. I want to show people that they can trade with a tiny amount of money even if it's for nothing more than a hobby or practice. Using such a small amount, at least to begin with, means playing by a few specific rules. I have to mostly swing trade. I can only do three day trades every five rolling business days, which means I try to make them count. It also means that I use a commission free trading platform. Paying a commission with such a tiny account would eat away all my profits.

I will never spend any of the money I make. I intend to compound it, then as the amount of money I have grows I will modify my strategy. At first I will only be able to buy and sell one stock at a time rolling the entire amount over into the next trade. As my account grows I will diversify more and more frequently. Eventually, I will do an overhaul to the strategy as required. This will be when I hit about 2K to 5k. So it's a ways a way. For now I will keep it straight forward and easy. 

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As you can see, I had a profitable week. I started with $201.60, and ended with $234.47. (I know the last buy shows $219.12, this is because I can't use all my money on every trade due to buying power). That means I had a total profit of 20.17% for the week. Not too shabby. 

I lost money on the last couple trades of the week. That's okay. It happens. But I was profitable on the week and that's what matters. The trade on MBRX that lost was because I saw what I perceived to be bullish activity that indicated a decent probability of future strength. I bought with the intention of selling rather quickly after the next run which I expected within the next 15 minutes or so. It never came. Support held up well but the bullish activity was dwindling so I left. No harm no foul. Using the same technique I've had upwards of 50% profits within ten to twenty minutes, but hanging on to such a position for a long time is risky. So I took my loss, entered a good looking swing position and held for the night. Turned out that swing trade also lost. All other trades last week were profitable so I'm pretty stoked on that.

This next week I will likely have to wait until Friday to make any day trades so I hope there are stocks in play that day. Otherwise I will swing trade every day until then. 

Final notes on my strategy:

I find stocks by looking for a trend and momentum. It's basically as simple as that. I look at live indicators not rolling averages. I always assume breakouts will fail (it's right like all the time). I close positions that are down and hold positive trends as long as possible. Lastly, starting with $200 dollars may seem futile or even laughable but let's say I maintain 20% gains per week. Due to compounding, in twenty weeks I would hit five thousand. In 49 weeks I would hit one million. Obviously that's not going to be possible but I'd settle for a fraction of that. Time will tell if my strategy if sustainable. Here's to hoping that it is.