Day Trading Tips

Day Trader's Bulletin Method: Part V

Recording Trade Transactions

To achieve and maintain top performance, it is essential that traders review their trades. In order to be able to accomplish this, you must keep accurate records of every trade. Additionally, this information is necessary so that you will know the number of contracts you have working in the market.

Daytrading can become very fast and frenzied. In order to keep up, you must record: the time of your trade, your ticket number, and the number of contracts traded.

Whenever price goes through one of your stop points, you must call your broker and immediately get the fill price and write it down.  You must be very organized in order to maintain the pace of daytrading:

“How many S&P contracts am I still in?  Ticket #6341 to buy ten Treasury Bonds just got filled -- at what price? What was my fill on ticket #6341? 105 and 16/32, okay ... I’m long ten Treasury Bonds. I just met my price objective on the S&Ps. How many S&Ps do I have?...”

You must know with certainty when you are flat in the market and how many contracts you have working in the market.

During the ordering process, I have said “buy” rather than “sell,” “two” rather than “ten,” and on and on.

You must keep accurate records; write it down. If I do miss any information -- number of contracts, fills, ticket numbers, etc. I call my broker back and get that information now.

If there is time before placing a broker order, I’ll write it down before calling.  Additionally, I tape record all my broker transactions. It is important you send a notice to your broker informing him of your intent to record all conversations for “accuracy and accounting purposes.”

If you end the trading day with contracts inadvertently working in the market, you will probably have a nasty surprise at the open of the next trading session.

At the Bulletin, we check, double-check and verify with our tape recordings all trades so that we know that we are flat at the end of the day. Since you may trade a different number of contracts than we, or you may inadvertently offset or enter more or less contracts than you thought, (it’s easy to do), it is mandatory that you keep accurate records.

Number of Contracts to Trade

The maximum number of contracts you may trade is shown for each trade on the Bulletin under Account Size Per Contract Amount.  Divide the dollar amount in this field into your account size; then round down to the nearest whole integer to obtain the maximum number of contracts in your contract set. 

This Account Size Per Contract figure reflects the interaction of the estimated maximized drawdown amount, current volatility, the Bulletin’s profitability parameters and a risk of ruin factor. The Account Size Per Contract value is optimized for two standard deviations (95% statistical probability) that you will not risk ruin.  Ruin in this case means losing more than half of your trading equity.

The actual number of contracts you trade should be 1, 2, 3, 4, 5 or multiples of 5.  If you use these contract set sizes, you will gain better fills both going into and exiting trades because these are the lot sizes that are normally traded on the floor.