Thursday, August 11, 2016

Thursday's Small Lots

I entered five new small-lot positions today, using a strategy that I'll explain a bit further down in this post.
symsharesentry dateexit dateentry price per shareexit price per shareresult $result %annual ratedays heldtactic

As seems to be happening more often than I like of late, my various strategies for trading keep drying up on me.

Chart Patterns: After the Buy
by Thomas N. Bulkowski

Earnings plays using options? Low implied volatility has brought that grinding to almost a halt. (Today's two trades were a welcome exception to the new normal.)

Trading signals using options? A shrinkage in the number of signals combined with low volatility has brought that strategy low.

And now, small lots trades through a no-free brokerage, Robinhood Financial, has now sailed into the doldrums, primarily because of a shortage of upward trending stocks. 

My strategies all rely on making many small trades, in order to allow the normal statistical distribution to come into play. I find a presumed edge, something that will skew the outcome in my favor on average, and then play the averages.

When trades dry up, statistical distribution has no way to act, increasing the risk of ending up with a string of losing outliers.

The fix I'm trying out from today is to require five small lots trades daily. If my normal sources -- earnings announcements, trading signals -- fail to produce five, then I'll make up the difference with a random pick of symbols rated "Strong Buy" by Zacks Investment Research. Their rating method tends to have a greater than 20% edge compared to a purely random selection, so the elements I need are in play.

By random, I mean truly random. I generate a list of symbols from Zacks, sort them randomly, and then pick the first five that also have uptrending MAC histograms, the trend component being a reqirement for all of my small lots trades.

The tactic will be labeled as "zacks", to company the present "earns" for earnings announcements and "signal" for trading signals.

I'll be sizing these trades at $50 apiece, with the normal variance caused by stock pricing.

Exits will be handled, as before, by the MACD histogram. If it starts trending down, then I exit the trade without waiting for a MACD cross.

By Tim Bovee, Portland, Oregon, Aug. 11, 2016


Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Small Lots: A new strategy discusses the thinking behind the analysis that identified these trades and can be read here. The symbols noted in this post are intended fortrading on a commission-free platform such as Robinhood Financial.

I can be reached via comments on Private Trader posts or by email at


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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