Ok, first of all, the GDX position. This is a PERFECT example of why I go with quality and using leverage as a tool when no other tool will do the job rather than the approach of cheap leverage, controlling a lot of shares and hoping for a lotto ticket home-run.
The GDX November $25 Call was down as much as -75% at one point, in fact it may have been even more so this is why having time and quality (in the money) are useful, rather than taking a large loss (relative to the position), it turned out to be much smaller.
As I explained, I do like Gold, GDX, NUGT for the longer haul and I kept the core long NUGT position in place after closing a trading position Wednesday. The GDX option in my view was likely as good as it gets if we get a pullback like I suspect, options are not like stocks, they lose value every day and it is conceivable that in two weeks GDX could be 5% or higher than it was today, yet the contract itself could be worth much, much less, maybe back down to -75% and it would take an unreal move to get it back to where it was today, this is because of Theta or time decay that is priced in to the premium of an option contract which is not present in an equity like NUGT, this is why I often chose equities for longer term positions.
At the cost basis of $1.95 on 30 contracts, the fill came in at $1.77 so the loss was -9.23% or about $426 which is still around 0.5% and well under the 2% rule.
I sometimes show you the rank of our tracking portfolios, I may start a trading portfolio in which I can really set up positions with proper risk management and position sizing as a way of sharing more about risk management, but for now I just have to guesstimate position size as to stick with the 2% rule and still allow enough room to track all of the ideas I put out, I WOULD NEVER TRADE SO MANY IDEAS IN ANY PORTFOLIO, BUT THAT'S WHY IT'S A TRACKING PORTFOLIO.
So in theory, because I'm not swinging for the fences with trades or because in my view a tracking portfolio is way too over-diversified and kills performance, I would not expect to do very well vs other "competing portfolios. One thing I found by using this tracking portfolio for example is that core shorts on down days are outperforming the market by 700%, if the SPX is down 1%, the core shorts tracking is up 7%, that's a very high beta for such a large number of ideas. The other thing I learn from this is how retail traders are thinking and positioned.
For the week our options tracking portfolio which was I was VERY conservative with because the market looked like this and the 3C signals were pointing to the same...
This tells me that the majority of traders and especially options traders this week were crushed if we can rank 45 of 837 with only a +6.89% gain on the week.
If you look at the SPX chart above once again, I think you'll see why trades were crushed with that tight choppy range and the ATR falling way off to $1.42 vs. $2.08 the previous week.
I think there are a couple of lessons to take home from this, 1) being know where you are within the 4 stages of a trend and trade accordingly 2) Use the right tool for the job, any short term trades without leverage just didn't have a very good shot at reasonable gains vs. the risk or just sit the period out until a better looking environment develops, 3) Listen to your indicators and don't force the trade, let the trade come to you. We had very few positions this week because there were very few short term signals aligned and the chart above is the reason why. Not taking a position is taking a position and sometimes it's the best position to take; it's a lot easier to keep it than it is to make it.
Finally, I always look at the market first and then look for the trade. I've heard and seen this for over a decade, about 2/3rds of any stocks given movement is due to the market's movement and the Industry group is second most influential with the actual stock being the least influential. Many traders have this backwards, they pick the stock and then hope the market cooperates. Recently as I was reviewing a Risk Management page written by none other than the SEC, they said the exact same thing, according to their studies, the market averages account for 66% of the movement of any given individual stock on any given individual day.
Ok, to the new site which is a lot further along than what you'll see here, but below we have the Risk Management calculator which may help me to create a trading portfolio as I can accurately asses risk/position size and management decisions quickly.
No information about your trade or portfolio is visible to anyone including myself, nothing is retained. You just put in your portfolio size without margin, the price of the asset you are considering, your anticipated stop and whether it's a long or short trade. This is enough information to give you your position size based on the 2% rule, however I added something more.
Since the most difficult part of risk management is protecting against the a.m. gap, I try to always keep my positions below 15% of total portfolio value, that means if my portfolio is $10,000 and the stock is $10 then 15% is $1500 and I wouldn't buy more than 150 shares so if there is a -10% gap down, my maximum loss is $150 which is below the 2% rule's maximum loss of $200 for a $10,000 portfolio.
You submit the risk data and you get this back, how many shares based on the 2% rule and how many based on the maximum percentage of portfolio that you selected. This is a very easy way to quickly asses different width stops and find the ideal situation for your trade, quickly and efficiently.
Right now this is what the header and colors look like, when logged in there are many more tabs across the top for different areas of the site. The site self-refreshes like StockTwits so you don't have to keep refreshing or wait for an email update, instead you can choose to only have the post types you select in your profile page, delivered to you, say for instance "Trade Ideas" only. I have seen quite a few APPS on my smart phone that will take emails and forward them to your phone as texts so you have the option of doing something like that as well, but as soon as a new post is up, the site will refresh.
I'm interested in opinions about colors, contrast and what's easy on the eyes.
It's a little hard to see below, but this is part of the member's profile page where you have your username, you can enter your password and it will be checked for security/strength; you can load a picture or an avatar of yourself that appears next to your name in a section we have for members to upload charts of their favorite trade ideas.
Keep reading...
I have added a Biographic section, you don't have to fill it out, but if you do, you'll be able to see the average of how all members answered. Many of the questions I included will help you see what others struggle with or how others feel about certain situations and you'll find out that a particular "Thing" that bother you may in fact bother 80% of the members where you thought it was just you. The questions are also designed to help you think about certain aspects of what we do, I think it will be far more useful and more interesting than you can imagine. All data that you submit is 100% private, no one including me or any staff will ever see anything beyond an average of all members with no identifying information and there are NOT any questions about your portfolio size or income or anything inappropriate.
I THINK THE INFORMATION WILL ALSO HELP ME TAILOR MY ANALYSIS AND POSTS TO BE AS USEFUL AS POSSIBLE.
I'll be sharing more as it comes online after it's tested, but we are VERY close. All current members will receive an email with a code, a temporary password and instructions on how to set up your account and personal password. The site is automated to handle new members who sign up after the site launches which will give me a lot more time to do what is most important, also current members will will be grandfathered in at the current monthly subscription rate, new members after the launch will pay a bit more, it's just my way of saying Thank you to all of you, many of you have been with me since the start when it was only 3 posts a day!
I'm going to have at least 1 post up this weekend in addition to the normal Sunday night post, I'll be mostly working on the new site the rest of the time, but the new post will be the trade set up and analysis for AAPL, PCLN and GOOG, all of them looking very interesting, especially PCLN and GOOG. Maybe I'll put those out on video.
For now, enjoy your weekend, please send your comments in while there's still time, thank you.
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