As I stated in my post Finding My Niche In The Numbers I have tried many different trading styles in the past year, but I have come to the conclusion that my niche is in daytrading stocks both long and short. However, I didn’t figure this out until after I had lost large sums of money in four swing trades. January has been a tough month for the market, and this translated into it being a tough month for me also. With the Fed cutting interest rates by 125bp in a matter of days, the wild 400-600 points swings in the INDU, and us moving to a new office, it was difficult to get settled in. However, this is not to say that I didn’t make mistakes in my trading. I will review my month of trading and point out what I did right, what I did wrong, and how I plan to learn from my mistakes.

Swing Trading

Swing trading has never really been my forte. Things move to slowly and I am always shorting too low, buying too high, or getting out too early on winning positions. I didn’t really realize how bad my swing trading abilities were until January. Looking at the month’s numbers, out of $8,735.99 in losses, I lost $6,249 of that in three trades. MA was my biggest loser by far coming in at $4,056 followed by SPWR at $1,727 and HES brought up last place with only $466. Other than the market being crazy, there were a few external issues that had an effect on our trading.

My wife got really sick the first week of January and ended up having surgery to remove her gallbladder. Needless to say, I was gone all week long and Tradeitup was left to baby-sit my positions. We were both supposed to be gone the next week to Texas and had planned on closing out our positions since we would not be able to manage them while we were away. Well, since my wife was sick, I was not able to go on the trip and we kept the positions open. Big mistake! Its funny how things totally unrelated to trading can creep in and change the outcome of an entire month?

Looking at these three trades individually, HES was not really a problem as I stuck with my stop and the loss was minimal. MA and SPWR were a different story. These two trades were totally my call, and came at a really bad time. I was long MA at the end of December, but closed it out with a $1,000 profit and then reopened the trade in January. I had a mental stop on MA at $200, but I didn’t have anything set in stone. I had a firm stop at $121 on SPWR which I honored. Here are some charts of where I got out of these two positions.

As you can see from the charts, both MA and SPWR sold off hard and fast after the open and it was straight down. I had my stops in on MA at 195 and 192.50 so at least I didn’t get stopped at the lows although it did come back up and close above my exits. I got out of SPWR at a good place considering it continued to dive into the close. Now to answer some questions that LP asked in the comments.

Question: Were you over leveraged?
Answer: No, I was not over leveraged. I had 200 shares each on MA and SPWR which is well within our leverage limits.

Question: Did you fight the market trend?
Answer: No, I don’t think these two trades were really against the trend; however I did end up buying at the top. I always try to stay on the trending side of the market. I have no skills in fading the market.

Question: When did you recognize the market trend?
Answer: I guess I realized the market was in a down trend after I got kicked in the balls on these two trades.

Question: Did you blow your stops?
Answer: I did miss my mental stop of $200 on MA. I got out at $195 and $192.50, so I guess I didn’t miss it by much considering that MA went all the way down to a low of $160.

Question: What, if anything, are you guys doing to reverse from this position?
Answer: I for one have given up on swing trading. I have come to realize that my strength is in daytrading, and I am going to focus all my efforts at improving my trading results there and leave the swing trading up to Tradeitup.

Daytrading

My daytrading results for the last two months of 2007 were stellar with a 72% win rate on my weekly numbers. I pretty much traded one specific system for most of that time and had very few big losing days/weeks. Consistency reigned supreme, and the markets were fairly easy to navigate. January proved to be much more difficult for me even though I didn’t trade any differently. On my daily returns I was positive only 6 out of 19 trading days or 32%. My weekly win/loss ration was 50/50 but my losing weeks were larger than my winning weeks.

Overall, I feel that the -$1,602 in losses I sustained in January were “normal” considering my profits in November and December were +$1,014 and +$2,555 respectively. I know there are going to good months and bad months and as long as I can keep my losing months below average I will be fine. I know that I need to continue to refine my strategy, but I am confident that my core strategy is sound. One additional note; on the day that I closed out my position in MA losing $4k, I was very frustrated and in the office by myself. I ended up putting on a trade in SRS and didn’t put in a stop. I was revenge trading and ended up taking a hit for $800 on that trade. So marking out this one lapse in judgment, I was only down $800 on the month, which is quite respectable. I am just glad that January is over and I can start clean in February, not forgetting the mistakes, but learning from them and trying like hell not to repeat them.

-Ainkurn