January 25, 2008
December Trading Ideas Spreadsheet Now Available
I’ve just sent out the spreadsheet (version 1.0) with the details of all the trading ideas generated by the Box in December. If you’re on the list and didn’t receive a copy, or you’re not on the list and would like to get a copy, just email me.
Brief summary:
- 34 Ideas in total
- 27 Shorts, 7 Longs
- 11 Ideas did not trigger
- 1 Triggered but not filled
- 22 Triggered and filled
- 6 Trades with Positive R (”winners”)
- 6 Trades stopped at breakeven (”scratches”)
- 10 Trades with Negative R (”losers”)
- Cumulative R for the month: +26.25
These figures will probably change a bit as I adjust entry and exit prices to reflect market realities that I expect list members will report to me. I want to make sure the trading record is as accurate and realistic as possible. Before you get excited about that +26R figure you should know that the Box is down around 9R so far in January. I’m a rotten salesman, I know. :)
UPDATE: Thanks to reader Jason M. for pointing out that the BLUD short on December 26, which resulted in a -1R loss, wasn’t properly accounted for — v 1.1 of the spreadsheet reflects this change. That was a material error for sure and Jason will get a free month of trade ideas for pointing it out.
January 25th, 2008 at 9:57 pm
Thanks, very useful…
January 25th, 2008 at 10:42 pm
Tamas: Are you on the list? The spreadsheet has all the details.
January 25th, 2008 at 11:22 pm
Congrats Chairman, but can you clarify something?
Your P/L is in “R”. As an accountant, you know that all “R” are not equal since 1R of a high-priced stock represents many more $$ than 1R of a low priced stock.
With 16 of the 27R coming from stocks that were trading at $20, would a trader have made any money after the losses on the high-priced stocks?
Theoretically, a 27R “gain” could still mean a net loss of real dollars.
A better comparison would have been: what if you had traded each one with $5000. Would there be ANY profits at all?
January 25th, 2008 at 11:30 pm
Trader Pete: All trades are sized to have equal $ risk, R is always R, it would be meaningless otherwise. I am not an accountant, I only play one on TV.
January 25th, 2008 at 11:48 pm
What’s the largest percentage of equity that R could represent, and still take every trade that the system has taken simultaneously (thus far)?
January 26th, 2008 at 3:00 am
Could you explain in detail what you mean by “all trades are sized to have equal $ risk”?
Does this mean that all the stops are the same $$ amount? Or does it mean every trade is made with the same amount of money? Or trade the same amount of shares for each?
From the spreadsheet, what I see is that 1R for a $100 stock is not the same dollar amount as 1R for a $20 stock.
January 26th, 2008 at 6:27 am
@Trader Pete: Let me start by explaining what I try to know before making a trade — 1) I always know in advance where I’m getting out when wrong — this is my expected loss; 2) I always have in advance a target where I think the stock will go — this is my minimum expected gain (which is always *at least* twice my expected loss). Without knowing in advance these two numbers I (or any trader imho) can’t make a trade.
Next I believe that one should never risk more than a fraction of 1% of total trading capital on any one trade. This means for a $100,000 account, for example, you could risk $250 or $500 or $750 on a single trade, but never more than $1000 (1%).
Once you figure out a dollar loss that you are comfortable with and it represents a fraction of 1% of your trading capital, then you should always size your positions to lose that amount when you are wrong.
Maybe I should write a post about this giving examples?
@Bill: I guess it depends on how much equity (risk capital) you have to start … are you asking what’s the minimum amount of trading capital you’d have to have to simultaneously take all the ideas with R consistently representing say $1000? That I haven’t figured out but it would be a large number. Maybe after reviewing the spreadsheet you can tell me. :)
January 26th, 2008 at 7:25 am
I’m not on the list and can’t see the spreadsheet. At the present, I’m trading a different timeframe so it’s not my bag. But as a salesman, you should be interested in what that number is, the minimum account balance needed to trade the system.
If you want to stick with R = x dollars, then you could do any amount ($500, $1000, etc) and a “customer” could scale it down to their size (I need a $500K account to have R = $1000, so I can do R = $5 [typical daytrader LOL] with this system.
Knowing what R is, in relation to account size, does two important things. It converts the bet to a Kelly betting, non-Martingale scheme, and it allows you to calculate an annualized rate of return under slippage and commission assumptions.
Just a couple of thoughts.
January 26th, 2008 at 7:44 am
Bill: Yes, I’ll try to come up with a number for the minimum account size … I expect it will be several hundred thousand dollars, even for a small R value like $500 or $1000. I’ve always gone by the “fraction of 1% of risk capital on any one trade” which is reasonable I think.
January 26th, 2008 at 8:24 am
Yeah, it’s an important number. Calculating it has kept me out of LTTF on futures. :-)
If it’s more than a few thousand dollars, or a couple of dozen thousand, it will automatically rule out a large section of your prospective customer base - thereby leaving them to swing index futures at 10-20x leverage and “provide liquidity” to failing Phrench banks.
January 26th, 2008 at 8:40 am
Bill: LTTF? My projected customer base is around one dozen, give or take. :)
January 26th, 2008 at 8:44 am
Long Term Trend Following (LTTF). Basically a basket of 20+ futures contracts, traded long or short, with holding times measured in months. To keep initial risk low in terms of R%, and keep the “risk of ruin” low (an important point lost on many futures traders), one needs LOTS of money.
Do you think there are as many as a dozen day/swing traders with that kind of capital, who don’t already have a methodology that they follow?
January 26th, 2008 at 8:46 am
Umm, when I say a “as many as a dozen …” I’m referring to the traders for your black box, not the LTTF futures idea. Just to clarify - I should have been more clear in the first place.
January 26th, 2008 at 11:29 am
Bill: I don’t think of my service, soon available at the low, low rate of $19.95 a month, as a “methodology” … they’re just simple ideas for people to consider.
January 26th, 2008 at 12:17 pm
$20/$500=4%, so that’s pretty good for a trade cost + opinion compared to what I used to pay Muthah Merrill for ADvice in the Dark Ages of the 1970’s. :)
Cheers!
January 26th, 2008 at 12:25 pm
Tom: Yeah but when it’s -$500 you can’t call me up to bitch like you could with the used stock salesmen at Mother Merrill.
January 27th, 2008 at 1:16 am
Chairman ,
Here is my problem with the black box. Too many picks.
Most of the people don’t have the unlimited Capital to trade all the picks that the Black Box throws about.
So the “pick and choose” part falls on the trader and if he/she misses just one winner , that makes a huge difference to the overall results. So , here is my idea. If you look at the big winners , waiting for an extra day (or even two days) after the trade gets triggered , will weed out the duds , while still catching the winners. If you can incorporate that into your scan , you have a winning system here , IMO.
January 27th, 2008 at 2:24 am
Observer: Regardless of how good the black box stock picks are, in the name of diversification, one can always trade a smaller amount, you know.
January 27th, 2008 at 5:26 am
Hence my emphasis on R as a percentage of capital.
:-)
.
January 27th, 2008 at 8:42 am
observor: Yes, this is a very good point since you have to figure on having, say, ten open positions at any one time … if your initial risk (R) is very small, say $100 (which would be 1/10th of 1% of a $100,000 account), you probably won’t be able to open ten simultaneous positions. I’ll have to run some numbers and see what the minimum account size the ideas would demand, but I expect it will be several hundred thousand.
January 27th, 2008 at 12:19 pm
so who wants to pool our money together to form a Chairman Fund?
700k, 26R/mo*,R=$1000 = >44% yearly return
*guess what the asterix is going to say :)
700k, (26 + -9 / 2)R, R=$1000 = >29% yearly return
January 27th, 2008 at 12:34 pm
Dan: January may end up being -26R (forget about the other 10 months) for a 0% yearly return. :)
January 27th, 2008 at 1:17 pm
Dan - It’s all good, except there is no fixed dollar amount for R.
January 27th, 2008 at 11:12 pm
“I expect it will be several hundred thousand dollars, even for a small R value like $500 or $1000″
where do you think I got 700k? Need hard numbers to get hard percentages.