Tuesday, May 1, 2007

STKL Killed Me Today

My stop just hit on STKL, selling 1500 shares at 12.07 This really hurts as I had unrealized gains of 600 bucks this morning, and now I have realized losses of about the same amount. Nothing like a 1200.00 swing to ruin a Tuesday.

My stop also took me out of NTRI, selling 200 @ 60.16

My account is however still up for the year, but just barely. The only positions I have left now are MVIS and GIGM. While this has been a painful couple of weeks, watching my account lose 7% has convinced me that I need to develop a system. The amount of damage my psyche alone has taken from this hit is almost worse than losing the money. I have to have a system that I trust so that I can trade with confidence again.

30 comments:

Ragin' Cajun said...

Take a look at GSF before earnings.

mdawsz said...

If it makes you feel better I've lost over $20K in the last 2 weeks. There is nothin better than losing 20 large, especially during a period where the indices were on fire.

idlesin said...

I feel your pain in STKL. I too was long 1500 & got stopped out basically breakeven after watching $1600 in unrealized gains evaporate. Blew right through my stop at $12.07 & sold at $11.95.

Dogwood said...

Not to make your day any worse, but I have a system I trust but I am feeling like a complete incompetent right now!

I had an 18 percent profit in BRKR but it is down 22 percent today alone! Ouch.

Everything I own has been dropping for days, yet two weeks ago I was significantly outperforming the Naz Composite daily for over a week.

The only thing I have going for me at this point are stoplosses to limit the damage and numb the pain, and a system that kicks out buy and sell signals regardless of how confident I feel.

I have a system. I trust the system. But I'm not feeling very confident about my trading abilities.

I'm discovering that maintaining emotional equilibrium is much more difficult than developing a reliable trading system. The system is the easy part.

mdawsz said...

I should clarify that the losses I speak of are still on paper, but you get the point.

brent said...

Wood. VectorVest. The way I told you. It keeps you out of the market in general until a perfect opportunity comes along. I trade only 5-10 swing trades a year using this system and I have had 50% + gains 4 years in a row. Quality, not quantity. If ADGO.OB hits 2.50 this month, that will be the icing on the cake again along with MVIS. I am loaded 50k shares @1.92 in Adams. You know that feeling when you are sure something is going to go.. Like a MVIS under $3 or SWHC breaking out over $8,etc. You just need to be patient and wait for those sure bets to come along. I can't find much of anything on my Vectorvest right now so I am waiting and the next perfect pick will come, just need to wait. Buffet does the same thing.

Trading Goddess said...

Hi Woody!

I just came by because I want to bake a cake for your birthday next week and wanted to know what your favorite was.

Oh! And you simply must spill the beans on your age...I need to know how many candles to buy. ;)

Hope your day today is better than yesterday and just remember that tomorrow is always a new day.

:)

Woodshedder said...

Van Tharp says that there IS a Holy Grail for trading.

It is not the system, as some might think.

Instead the Holy Grail is mastering the emotional/psychological component so that you can trade your system.

mdawsz said...

TG, at stockalicious he calls himself "woodshedder73" so I've postulated that he is turning 34 this year.

Woodshedder said...

Brent, I smell what you're stepping in. I like that idea. I did look into VV after your last message, but it seemed too easy. Now I know that sounds ridiculous. Thanks though, I will look at the VV subscription and see if it fits my budget.

TG! You rock for remembering my b-day. I will be 34.

Actually, now that I've made the decision to trade a mechanical system, I feel a lot better. I wanted to develop a system years ago, but I got wrapped up in the excitement of discretionary trading and never followed through. Thanks for you kind thoughts though!

Woodshedder said...

M- you are smarter than you look!

Woodshedder said...

Brent, does VV make any suggestions for allocation? What kind of position sizing / risk mgmt. do you use? Also, do you suffer major drawdowns on the way to 50% gains?

Something I've learned about myself is that I'd rather sacrifice large returns than have drawdowns greater than say 20%.

mdawsz said...

Guys, here is a system, buy DivX.

Woodshedder said...

M- it looks like DivX is tanking AH. I'm truly sorry man. That sux! And you were so calm and patient, waiting for the report, and the company still bitch slapped you in the end.

Hopefull the CC will turn things around.

Bryan said...

I get consistently owned in a big way by STKL. You can blame this swing on me. Whenever I buy STKL with any short term speculation in mind, the stock is almost guaranteed to lock me into a Long position for 3 quarters. Here's to breaking even + commission!!

brent said...

Wood, I will take some time tonight to go over with you why and how I use VV. I hate "Stops" and "Risk mngmt" as it signals that one is not confident or informed enough in his/her position. Of course I don't go all in at any point but I have bet the farm sort of speak on a couple of stocks and that is why I am in the position I am in. Once you cherry pick from the 52 week high(this already means timing is ticking up), RV>1.4, <10 pps, than you start calling the CFO and anyone in your network that may have insight into this stock's dynamic. The stock having a RV of 1.40 or higher allready means that the stock has value. The fact that it is just breaking out into a 52 week(Virgin territory preferably) high means that there is probably a catalyst of some sort for it to begin realizing that value. VV only uses credible Earnings Forecasts. The RS (Relative Safety) feature can also give you insight into how reliable the RV rating is. I worked directly for one of the best Money Managers in San Diego for 4 years while attending college. I was called "Bloomberg Boy" because I would sit on it for hours a day doing screens and then test on AIQ Trading Expert Pro. Eventually, I learned all this shit was rubbish and would cause you to enter positions with out conviction or being in the know. Keep it simple stupid! Of course, you must also have a little bit of the 6th Sense to know that a stock like HANS or NTRI is going to explode. AMIE was one of my best picks ever. It was almst gauranteed when I bought it at twelve. Ueberoth's son had just taken over at a young age and the company had a 100+ million hoard of cash ($9cash/share) with no debt. The stcok was at $11.50. With Ueberoth's connections I knew they would buy the right asset. Stock is at $40. I will run some live trades with you on this system as soon as one I like pops up and you can watch for yourself.

Woodshedder said...

Brent, I'm walking out the door. I'll respond more in depth later tonight when I get home. I will add though that I'm learning conviction is the key to keep one holding out and sitting on hands for the big payoff.

NewEquity said...

I still love you Woodshedder. Stops are meant to save you money and it happens to the best of us sometimes.

Jeremy said...

Interesting stuff, Brent.

Woodshedder said...

Greetings jeremy to my blog. Glad to see you here. Unfortunately you've chosen another low spot in my equity curve to sojourn here...so it goes!

brent said...

Interesting. MAD shot up at the close(13.55 +1.15 (9.27%)). I have mentioned it several times to "The Fly" and he hasn't really responded yeah or neah. This came directly from my VectorVest Strategy and looks similar to ARA when it used to trade in the low teens (trades at $55). MAD is a South America Infrastructure metals play. Another good thing about VV is that it gives you good timing indicators on the broad market so you know better when to aggressively buy your favorite stock. I fucking sound like a VectorVest salesman. What the hell!

brent said...

Jeremy, I just think there are easier ways for all of us to make money on a consistent basis with out all the trading. Buffet has gone into this in detail. I just use modern technology to find 4-10 plays a year that are no brainers and invest more money in them. If one or two of them come back down below the 52 week break out, then you sell and move on. Pretty easy. That way you can spend more time with the family or whatever.

Dogwood said...

"Brent said: I hate "Stops" and "Risk mngmt" as it signals that one is not confident or informed enough in his/her position."

The problem is this approach isn't trading, this is gambling. I'm glad its working out, but not everyone has the stomach for that type of approach and just a couple bad trades can wipe you out.

System trading requires risk management and proper position sizing to maximize return while minimizing risk.

Woodshedder, I think there are few people trading systems because its boring. Once your system has issued enough buy signals to get you fully invested, there's nothing else for you to do but sit and wait.

This is one of the reasons that I separated my account into two pools. One is the long-term trend following system that is very boring to run, then the smaller account is used to teach myself how to day and swing trade.

brent said...

Dogwood,

You stated:

"System trading requires risk management and proper position sizing to maximize return while minimizing risk."

Of course, they would not be selling you there systems if this were not the case, so of course you will "Stop" away and commision your profits away. The naked eye with a fundamental understanding of the financials, future catalysts, and supportive TA are a much better "stop".

I could continue to go into this but I don't have the time right now. I 100% disagree with this "Myth" and so do the best "Investors" in the world. Traders are like borgs and get burnt out with Heart issues over time.

Broker A said...

"Guys, here is a system, buy DivX."

Those words will be remembered forever, in infamy of course.

Jeremy said...

How's it goin' Woodshedder? Glad to be here. Cool blog.

Brent's case for making only a few "no brainer" trades echoes the beliefs of the legends in Market Wizards (and all of the "greats," for that matter). I believe in such a highly-selective approach 100% -- but the problem is that I love to trade. I can't make 5 trades a year-- not when "the addiction" forces me to make 5 trades per week. (And since I don't pay commissions, there's nothing but my better judgment to stop me.)

But I'd suspect that I'm not the only one with that problem. Even Fly has to roll the dice sometimes (e.g., today's misguided speculation in DIVX). Presently, I'm trying to figure out how to force myself to be more patient and trade less. I've got a few ideas -- we'll see what happens.

Trading Goddess said...

Thanks mdawsz. Honestly, it has been a while since I myself have been to stockalicious. I want the ability to have one hundred stocks (or more) and the ticker to show, not the company name.

34 .... *sigh* Oh! To be young again! Where is that fountain of youth??

btw, Woody? This is just my unasked for opinion, but you might want to put a link under that pic (so people know what you got it for). ;)

And of course, again... anytime you want to spend the weekend at my house, you are more than welcome!

Now, smile! The sun will come out tomorrow! And I am always of the mind so long as you didn't lose it all, you can make it back and then some.

Happy trading to you my friend!

Dogwood said...

Brent said:

"Of course, they would not be selling you there systems if this were not the case, so of course you will "Stop" away and commision your profits away."

A properly designed trading system will not commission away the profits. Commissions and slippage are accounted for in the system itself.

Also, don't confuse system trading with buying some black box computer program that spits out buy and sell orders using who knows what criteria. Using Trading Blox or Wealth Lab to develop trend following systems is a completely different animal than black box systems promising 500 percent per year profits.

I've read the Market Wizards books three or four times and the primary lessons I received from those books are thus:

1) Most of your profits will come from just a few trades with spectacular returns, but you have to take a lot of small losses along the way.

2) Always know where you are going to get out of a trade before you get in. The pros may trade in size too big to have stop losses in place, but they all have mental stops they use to exit a trade if it goes against them.

Curtis Faith provides a perfect example of this type of approach in his book Way of the Turtle.

In the example, I believe there were 16 losing trades before the profitable trend kicked in. Each of those losing trades were stopped out to preserve capital so the trader would be around long enough to ride the trend.

3) You have to use a system that fits your personality profile. If you don't then you won't follow the system.

If you have a personality that can handle the stress of placing all your chips on one bet, then go for it. I don't recommend it from a risk management perspective, but its your money not mine!

If you don't want to dedicate hours every night or each week to finding the next buying opportunity, then spending hours, weeks and months developing your system and then simply executing buy and sell orders as they occur may be the right approach to take.

Personally, my ultimate goal is to automate my system trading so I don't have to do nightly stock scans.

Finally, the only lesson from Market Wizards that really matters: There are thousands of ways to make money in the market, pick one that works for you and stick with it.

Woodshedder said...

Dogwood, it is uncanny that you have taken away almost the exact same things as I from the Wizards series and Curtis's book. Good stuff.

Anonymous said...

Brent,

What VV strategy did you use for your 50% returns?