Weekend Project: Optimize Your Trading For Better Profitability


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What do you have on tap for this weekend?  Gonna hit the bars with some friends? Hang out at the beach?  Perhaps you and your significant other are going to go to Home Depot and maybe Bed, Bath, and Beyond as well (if you have the time).

Let me be so bold as to suggest that you set aside a few hours this weekend for a project that will improve your trading….and your profitability.

This project can be as complex and in-depth as you want, but it need not be.  As long as you have a basic understanding of a spreadsheet program like Excel, just follow the outline below and you will be fine.

The first step is to download your trade history from your broker into a spreadsheet.  How far back you want to go is up to you, but obviously the more data you are willing to look at the better your results will be.

The goal here is to match up your opening and closing transactions to determine profitability. The best way to do this if you are a day trader is to sort the spreadsheet by “date and time” and if you are a swing or position trader by “symbol.”

Once trades are matched you might find it helpful to categorize them as “winning,” “losing,” and “break even” trades. The “break even” category should also include trades which were small wins or losses.  Once you match them up I suggest you color code the categories, with green, yellow, and red being the most obvious choices.

Now you want to go through each category and do some analysis by looking at the following;

Asset Class – Are there certain asset classes that you do better with than others?  That you do worse with?  A trader friend of mine who used to trade numerous asset classes went through this process and found out that he did worse overall trading equities than trading forex.  He dropped stocks and began focusing exclusively on forex to the benefit of his account’s P&L.

Instruments –  Here you are looking at the instruments within asset classes you trade to see what patterns emerge.  Are you a consistent loser with ETF’s?  How about leveraged ETF’s?  Do you do better with small caps or large caps.  Do your option profits come from in the money or out of the money options?  What forex pairs do you shine at trading?

Sectors –  Maybe you will find that you do better trading consumer goods stocks than pharma stocks.  You might be the axe in the NASDAQ E-mini (tech) and the donkey when trading oil futures (energy).  If you are crushing it in the $AUD make sure you know you are trading a proxy for commodities.

Time of Day –  Most historical trade data will not only have the date but the actually time that you entered the trade listed.  See if there is a pattern that you can identify.  Often the opening and closing hours are the good for trading, while the middle of the day is not.  Are your losing trades clustered around less than optimal times of day?

Length of Trade –  This is a critical area because even with a swing or position trade that you break even on, you still have to factor in how long your funds are tied up in those trades with no return.  Many traders don’t consider themselves day traders, but will find that in the few day trades they do take, they have a better win ratio than their longer term trades.

Price –  Where is the sweet spot here?  Are you coining money it the $20-$60 range of stocks?  Are you weak in the under $10 stocks but a monster in the $AAPL and $GOOG’s of the market?

Liquidity –  You won’t get this data from your history download but it’s easy to pull up the average volume numbers on the stocks in each trade category to determine if there is a pattern related to less or more liquid issues.  You can take this one step further if you like and browse the intraday charts of these stocks in more depth.  Many stocks that have what is normally considered “decent” volume can still move in a choppy fashion with wide spreads on an intraday basis, and a 5-min charts will show you that.

These are just some suggested filters and you can use whichever ones you think are most relevant.

In the end what you are trying to accomplish is to throw out any preconceived notions you might have about your trading and let the facts speak for themselves.  If you are open to what they are saying you can then start to eliminate factors related to your losing trades and emphasize the factors associated with your winning trades.

We all know that our weekend time is very valuable and it may seem a little bit tedious at first when starting this project.  But once you get into the process I think you will quickly see the value of it, and besides, nobody says you can’t still drink while you do it.

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What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).  Check out “The Best Of bclund” to get started.

Why Aren’t You A Millionaire From Trading?

One of the nice things about having a blog is the interaction it brings with those who read it.  I enjoy the comments, emails, and tweets I get each week about my posts; and I am happy to say that 99% of them are positive.  However, every now and then I get an outlier like this…

I think it’s best if you don’t try to do chart analysis on your site and just stick to your little stories.  I mean seriously, If you were so good at charting how come you aren’t a millionaire from trading?

That’s a fair question, and one that deserves an answer.  Sometimes other things happen outside of trading in our lives that effect our net worth.

First off, I am on my third marriage and the previous divorces pretty much cleaned me out each time.  Also, in the late 80’s and early 90’s I had a massive coke habit and snorted tons of money up my nose.  Lastly, I severely under-budgeted for my gender reassignment surgery, so that really hit me hard in the pocket-book as well.

HAH…..I got ya!  The truth is, I have only been married once and I’ve never even tried any kind of illegal drug.

This comment does raise an interesting point though….”What the hell do you want from the other traders you interact with?”

Last week there was what only could be described as a “hit piece” put out on a very well-known member of our trading community (don’t ask me to go into more specifics on it or who it was about).  The author is well-know dick so I don’t really give it much credence; but it also made me wonder why he went to all the time and effort to write a piece on somebody who a far as I can tell (and the story confirmed) hasn’t done him any wrong.

People are often confused about what the purpose is of social interaction, especially so when it comes to the area of trading and finance.  True, there are a lot of people out there whose advice (and motivation) are suspect at best and criminal at worst.  There are also a lot of people who have great insight and are well-respected on subjects ranging from trading to craft beer selection.

But at the end of the day, none of them are asking you to babysit your kids or watch your house with their wacky fraternity brothers while you go out-of-town for the weekend.  The vast majority of them are throwing out free content that you are under no obligation to listen to.

Yet I still find that a lot of people feel a need to obsess over these interactions and are continually acting like they are Chris Hansen on “To Catch a Trading Predator.”

In poker there is a term called “table police.”  This is a guy who makes it his business to get into everybody’s shit whether it involves him or not, and he designates himself the arbiter of what is “correct” and what isn’t at the table.  There are too many of these types in the world of trading as well, and I find that they tend to fall into four different categories….

The Checker –  This is the guy that “fact checks” every thing you say and in the process completely misses the forest for the trees.

“Um…yeah, so last week you said you said you were going to buy $AAPL in the low 630’s, but it only went down to 634.00 which is the ‘mid’ 630’s, so how can you be long the stock this week?”

The Doubter –  This guy doubts EVERYTHING you say.

“So you are telling me that you need to breathe air in order to live?  Hmmm….I find that as unlikely as when you said you sold your $JPM last week.”

The Investigator –  Wannabe “Magnum P.I.” types (a private investigator TV show from the 80’s for you young punks).

“From what I found out, it looks like you once sat next to a guy in high school whose sister’s boyfriend’s father once sold a bagel to Bernie Madoff’s chauffeur.  You sir are a low-life stock scam artist.”

The General “Dick”– You can’t satisfy this person no matter what you say, they just want to harass and harangue you.

“Sure, you took  three hours out of your trading day to walk me through those charts you posted, review my recent trades, and give me the formula for the proprietary scans you spent fifteen years developing.  And yeah I traded two of your recent free picks for big wins, but there is NO WAY you could seriously be a trader because you actually talk about non-trading things on you blog at times.  It’s so obvious.”

In life an interesting phenomenon begins to take place as you get older.  You find that your resources are not infinite.  Financial resources, physical resources, mental resources, and time resources become more limited, not because you have less of them, but because you begin to realize the things that are important in your life and tend to focus your resources more exclusively on them.

Wasting your resources on fighting Quixotic battles with “trading enemies” is a losers game so I am going to give you a quick and easy test to tell whom to trust and whom not to so that you can avoid those battles.

Here it comes…..drumroll please……..

Is the content that they put out valid?  That’s it.  It’s that simple.

But what if they are not really trading?  If their content is good, you should not care if they are really faking it.

What if they are a liberal, a conservative, an ex-con, a commie, a Bieber fan, a penny stock operator, a Kardashian, or an alcoholic drug using carney who once punched the Queen of England in the face?  What the hell do you care?  As long as you are not trying to become their real world BFF or have a GFE with them then your main goal is to find good content and use it to your advantage in your trading.

And if their content is crap?  Unfollow, unfriend, or unsubscribe and move on.  Or just interact with them about craft beer.

By the way, how do you know that I’m not a millionaire from trading?

Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).  Check out “The Best Of bclund” to get started.

How Technical Analysis Shows What Smart Money Is Doing First

On my regular Monday morning “Business for Breakfast” hit this week I talked about how technical analysis shows “smart money’s” footprints first, what sectors are rising from the dead, and why gold and silver will eventually become worthless.

(click image to start audio)

Why not subscribe to bclund.com for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).  Check out “The Best Of bclund” to get started.