We’ve put the finishing touches on the latest version of the StockTickr Trading Robot. You can use it to automatically trade your Trade-Ideas strategies through your Interactive Brokers account. Here’s an overview of the new features – they open up a whole new world of strategies. We’ll be posting a series of posts over the next few days going into detail about some of the new features.

• Alert Exit – use another strategy to determine when to exit a position
• Trend Exit – use an additional strategy to exit all positions from a particular strategy
• Limit Entry Based on % of Spread – place your limit entry order based on a percent of the spread – great for strategies that trade large spreads.
• Partial Exits – use scale orders to automatically scale out of your positions within a particular strategy
• Real-Time Buying Power Awareness – shows up to date buying power in your account and monitors to skip orders that would be rejected due to running out of buying power.
• Relative Orders – option to use relative orders to enter a position. Also known as “Pegged-to-Primary”, this server held order automatically updates based on the bid/ask. See more details on the relative order.
• Market If Touched Orders – slightly different than a limit order, the market if touched order turns into a market order if a certain price threshold is met. See more details on the market-if-touched order.

If you’re ready to take your trading to the next level, go grab the robot and introduce some automation into your strategies.

Most traders, from beginners to professionals, know that keeping a trading journal is an important aspect of trading as a serious endeavor or career. Keeping a trading journal however takes effort and is all too easy to just brush aside and ignore while focusing on other areas in your trading. In this list I offer some key reasons I use to remind myself why maintaining a trading journal is worth the effort.

1. Accountability – when you keep track of your trades diligently, noting what reasons you had for taking them and how they turned out helps keep you accountable to the trades you’re taking as well as how you’re managing them.
2. A finger on performance – understanding how your methodology performs and monitoring its expectancy, win rates, and other parameters such as average winners and losers size can help tell you when things are either working really well and you should press your edge or when markets conditioned changed and you need to scale down or re-evaluate your edge.
3. Research tool – A trading journal can also be an excellent research tool that helps you improve your edge. This can be achieved in several ways, one of them is when you tag your trades and keep track of different variables like market sentiment, candles formations, your own state of mind, or any other variable you can then look for relationships between your performance and those variables. There are many times where I’ve discovered that some trades should be skipped and others traded with larger size as a result of researching my trading journal.
4. Self coaching – Aside from analyzing performance and quantitative data you may also want to keep track of your overall development progress as a trader, what habits are you trying to change, what goals are you setting for yourself and how are you doing in terms of achieving them. Without monitoring and tracking it becomes difficult to keep focus on those goals and all too easy to slip into bad habits again.
5. Keeping things in perspective – We’ve all been there, you’re having a really good week or a really bad week, the impact of this type of unusual performance can play havoc on our heads. It is human nature to put more weight on recent events than on statistics of the past 6 months or even years. A trading journal can help re-align our thoughts, expectations and overall mental state by showing us visually how the last bit of performance compares to our longer term track record.

This list of points isn’t revolutionary, but revisiting it helps remind me of why I’m keeping a trading log and how it helped me improve my trading over the years. Hopefully others will find some of these points useful as well.

As some of you have noticed I post my daily trading radar on Twitter each day that I trade. Since I started posting it I’ve gotten a lot of feedback and questions on how I generate my list and what exactly it is and how I use it. This post is an attempt to answer some of those questions.

How is the list generated?

I use two tools to generate my daily trading list. One is Trade-Ideas and their scanner product. I have a couple different scans that I use to identify candidates that I might trade. The other scanner I use is the scanner that is included in Interactive Broker’s Trader Workstation. I take the output from my scans and manually filter the list removing stocks that I know I will not trade (for example, buyouts often appear and have to be manually removed).

How do you determine what goes on your trading radar?

Through trading, backtesting, and using my trading journal I know what characteristics of stocks make it most likely for this particular trading system to be most profitable. Of course your mileage may vary.

Are you looking long or short for the stocks on your radar?

In general, I’m looking to trade with the trend. That is not always the case but mostly it is. So if a stock is gapping up I’d be looking long and if a stock is gapping down I’d be looking short.

Do you trade everything on your radar?

No, if a candidate produces a setup then I will trade it otherwise I won’t. Some days there are no setups and other days every stock will setup although both of those cases are pretty rare.

How can I use the trading radar you generate each day?

However you’d like. You are welcome to somehow include it in your routine or completely ignore it. If you do use it somehow, I’d love to hear about it. You can contact me on Twitter or here.

Will you post which trades you actually took?

No. It’s not that I care that much about telling people what trades I took, it’s that it would take too much time to post it.

What time do you try to post the trading radar by?

I usually try to post the list to Twitter by 9:50, sometimes sooner sometimes later. I might try to automate the postings at some point.

It’s 9:55 and I don’t see the list yet. Are you there?

Probably not. I take days off every now and then.

I have a question that you didn’t answer.

Feel free to contact me or leave it in the comments below and I’ll answer it.

We’ve recently removed the requirement that our automated trading robot users have to have purchased the Trade-Ideas Odds Maker. It is still highly recommended that you purchase and use the Odds Maker so you can backtest your ideas and easily compare trading results to your backtests.

That said, we know there are traders out there who have already proven their system without using the Odds Maker and want to use the power and ease of Trade-Ideas and StockTickr to automatically trade their strategies and track their trading performance with the trading journal.

Now the only fees that are required to use the StockTickr Trading Robot are:

StockTickr Pro Subscription: $49.99/mo
Trade-Ideas Standard Subscription: $65/mo

Existing subscribers can download the robot here or you can try it for free by taking the trial.

A while back I posed a question about following a trend or reverting to the mean – two well known strategies. Given a specific subset of stocks defined in the post would the edge be long or short? Weijei‘s comment was very close to correct.

It turns out that there is a definite edge to the downside on stocks that have gapped up on heavy volume. If you buy at the open the following day and then hold until the next day’s open you’d end up with a win rate of 38% with total percent gain of -286%.

However, if you sold short at the open and held until the next day’s open you’d end up with a win rate of 68% with a total percent gain of 899%. There’s no doubt at least in the short term that there is more of an edge with a reversion to mean strategy with these types of stocks.

Here’s the same chart in ENT. It shows that there would have been a small gain by shorting the following day. Look also at the days after – it looks like there might be a longer term trend following edge worth exploring.

(Chart generated by the StockTickr Trading Journal)

A few weeks ago I read Paul Kedrosky’s post on how contrarianism is a fad and how he thinks that most contrarians are just posing for the camera. Jason Goepfert wrote a nice rebuttal (with an eye-catching title) about how there’s good reason to be a contrarian in certain situations. He used an example of the S&P 500, but how would the strategy work for individual stocks? You rarely see the types of forceful moves in the overall market that you do in individual stocks almost every day. Surely these types of moves generate some follow through.

I’ve done some backtesting in this area. So given this universe of stocks:

• Price is between 0.50 and $60
• Average volume is above 100,000
• Volume on trigger day is greater than 2,000,000
• The range on the trigger day is greater than 20% of the stock’s price
• Volume on the trigger day is at least 50% above average volume
• Closes at least 10% higher than its 10 day moving average

Here’s an example of ENT a few days ago:

(Chart generated by the StockTickr Trading Journal)

So my question for you: Is there a trading edge on the long side or the short side after these types of moves?

What’s your guess? Let me know in the comments below.

TraderInterviews.com has a great interview with the Downtowntrader, Joey Fundora. He gives some very detailed information about exactly how he trades including his various strategies, the tools he uses to scans the market, and the trading journal he uses.

Tim Bourquin is a masterful interviewer as always. Nice interview, Joey!

There are many ways that trading can frustrate you, but one of the most frustrating situations is when you get stopped out of a trade only to see it continue in your direction. It could have been a very profitable trade but you were stuck with a loss. Here’s a trade I took in CRM that shows this exact situation. I was stopped out by a few pennies only to see the stock continue down:

A lot of traders will take a stock completely off of their radar after they’ve had a loss in it – that’s understandable. What’s the only thing that’s more frustrating than taking a loss in a trade? Taking two losses in the same stock.

That said, it could make sense to keep those stocks on your radar to trade again. The problem is determining whether it makes sense to take the trade if a setup occurs after you’ve been stopped out already. When you re-enter trades, you’ll undoubtedly be stopped out a second time periodically. This can be psychologically difficult to endure and this situation often weighs more heavily in your mind (“Why didn’t I learn my lesson the first time I was stopped out?”).

The StockTickr Trading Journal provides a great way to keep track of this using tags (a.k.a. categories). Tagging your trades in your trading log lets you track and analyze subsets of your trades. When I started re-entering trades that I was stopped out of, I would assign those trades the tag “ReEnter”. This allowed me to compare how these “ReEnter” trades were performing compared to my trading system overall.

After accumulating several of these trades over time, it turns out that these ReEnter trades were outperforming the system overall – in fact, they were significantly better than average. These results were telling me that for this particular system that I trade, re-entering trades made a lot of sense – even if it’s psychologically difficult. Having this type of data available to analyze certainly makes it easier to take trades where your fear is telling you not to.

Will you re-enter trades in your system? I’m interested in hearing what others have to say about this practice.

Let’s say your trading is going pretty well – you’re trading a good strategy that you’re making consistent profits from and you’re comfortable with. Good traders never rest on their laurels, so you’re ready to take the next step. The existing strategy you trade never consumes all your buying power, so you’ve got some capacity for an additional strategy.

So what’s your next step? Research a completely new trading strategy, right? Not yet, I say. If you are already trading a profitable strategy, many times there are ways to improve, adapt, or add on to it to make more profits – sometimes a lot more. So before investing a lot of time in developing a completely new strategy which can be a long and arduous process, first look at the strategy you already trade.

This has a couple of obvious advantages – you’re already intimately familiar with how your system works and you already have a mountain of real, live trading data to test with which is always more valuable than pure backtesting with is 100% theoretical.

Here are some ways to look at your existing system to try to improve it:

1. Use a Profit Target – Look for ways to add a target order or modify an existing one. Targets are great for a lot of strategies because they lock in profit and they free up capital sooner.
2. Adjust Your Stops – Most traders use stops that are too tight. Look at your existing strategy and see if you can make more money by using a larger or smaller stop distance.
3. Find More Opportunities – If you’ve already got a profitable strategy, it often pays to relax your filter rules to generate more entry signals. Even if you end up with a strategy that is slightly less profitable per trade, the increased opportunities could be well worth it.
4. Look For Fewer, More Profitable Opportunities – This is the opposite of the previous item. It might make sense to trade fewer but more profitable opportunities by tightening your entry criteria a bit. Often times you’ll find that you can make the same amount of money with fewer trades (and therefore less risk). This can free up valuable buying power to allocate to other strategies.
5. Automate your Strategy or Part of It – How are you spending your time when you trade your strategy? Are there aspects of that routine that could be streamlined or eliminated? Perhaps the strategy could be completely automated. Maybe the strategy can be modified slightly to be automated.
6. Look For Cheaper Commissions – If you’re trading big enough, this could save thousands of dollars a month. Changing brokers can be a pain, so make sure the pay off is going to be worth it before going through the hassle of moving money, learning a new platform, etc.
7. Backtest Losing Trades in the Opposite Direction – Let’s say you’re trading a long strategy and 40% of those trades end up stopping out. What would happen if you took those trades that stopped out and traded them short? Think about it – the trades that stop out have invalidated your long “thesis” with your original strategy. Maybe there’s an edge on the short side with those trades.

Have you found any of these to be fruitful in your own trading? Which was most valuable? Any other approach that you’ve found helpful?

I’m scheduled to give another talk this year on automated trading at the Las Vegas Traders’ Expo. I’ve heard from a handful of users that they will be at the expo and we’ll be meeting up there. If you’ve never been to the expo, I’d highly recommend checking it out. There are a lot of speakers who you’d recognize giving talks on a whole variety of trading topics – definitely something for everyone.

Here’s a free signup link if you’re interested in attending.

My talk is called Automated Trading with the Odds In Your Favor and will be bright and early on Saturday, November 21 at 8AM. It will be a modified version of the talk I gave last year, so even if you saw it last time there will be some new stuff to see.

If you are attending and would like to meet up, definitely drop me a line and let me know.