Stocks and Position Sizing

The more I learn about stocks, the more I am realizing entries and signals are not as important as position sizing and exit strategy.

My current strategy is based on 50 day moving average pullbacks. If the price closes above the 50 day moving average, then I take a position. I find this is usually a good way to catch a trend at a discount price.

Since I am dealing with a small trading account while I experiment, I have set up stocks under $20 on my screener. You can adjust this if you need to.

http://finviz.com/screener.ashx?v=351&f=sh_avgvol_o500,sh_price_u20,ta_sma200_sb50,ta_sma50_pca,targetprice_above&ft=3&o=price

I am position sizing based on risking 1% of my portfolio and setting my stop loss based on ATR. I am still experimenting with this number, but lately I have been using between (2.5-3.5x) ATR (14) or ATR (21).

Here are two videos that show just how important position sizing is.

The following book should be a required reading for every aspiring trader.

Trade Your Way to Financial Freedom (Business Books) 2nd Edition by Van K. Tharp

 

My experience trading stocks so far..

During the summer of 2015, I saw an ad for a new app called Acorns on Facebook. The Acorns investing app works by encouraging you to invest your spare change. Using a system they call “round-ups,” Acorns monitors your bank account and automatically invests the change from your daily purchases. I started to research and even deposited a little money to see what could happen. I quickly found out, that Acorns is more for the long term.

Next, I discovered penny stocks and Robinhood. I bought a few hundred shares of a few stocks that were around 10 cents. I started to use stock profit calculators dreaming of what could happen if my investment went up to a few dollars.

A few weeks of playing with these stocks, I quickly lost some money and got my first lesson about bagholding.

I started to learn about technical analysis and different trading strategies on various websites. I eventually made the switch to a TD Ameritrade account thinking their trading platform and tools were better than Robinhood.

Within a few months, I discovered Stocktwits and found quite a few scammers selling courses and subscriptions to their trading chat rooms. I foolishly subscribed to a few of these thinking it would help me do better with stocks.

About 5 months of trading I started with $5500 of savings and lost more than half of it. I lost over $1000 in commissions alone from TD Ameritrade because I was trading quite a bit.

I ended up giving up on stocks for a bit convincing myself that the people on the other side of these trades are either very smart people who study the markets 24/7 or computers that have much faster executions than me.

In 2016, I started up my Robinhood account again and tried a few trend following strategies after reading a few books and had mixed results. I think I didn’t do as well as I hoped because I was looking for gains in a short timeframe and trend following is a longer term strategy.

Now in mid 2017, I am back to trading again with Robinhood. This time I am trading with $500 since I am still playing around with different strategies.

Here are rules I am following so far and I’m sure these will change as I fine tune in my latest strategy.

  1. Avoid Stocktwits and any other social media regarding stocks.
  2. Avoid Stock Picking Services and Gurus.
  3. Do not trade and stocks that are not on NYSE or NASDAQ.
  4. Do not trade stocks that have less than 500,000 average daily volume.
  5. Do not risk more than 1% of my portfolio on any trade given my account size.
  6. Position size using 2x-4x ATR (Average True Range).
  7. Buy stocks only during the last hour of the trading day.
  8. Add a stop loss on every order.
  9. Trail stops every time a new high of day is made.
  10. Do not exit any trade until stopped out.

 

I have discovered so far that the stock market is random and you have to take what it gives you. I am convinced if I can keep my losses small and let my gains run, I will be profitable in the long run. I will post more on the subject in the future.

A few books I have read along the way.

  1. How I Made $2,000,000 in the Stock Market by Nicholas Darvas
  2. The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management by Alexander Elder
  3. The Honest Guide to Stock Trading: Make Market-Beating Returns. Achieve Long-Term Wealth by Llewelyn James
  4. Technical Analysis For Dummies by Barbara Rockefeller

 

Also, if you are thinking about signing up with a guru, I highly recommend you check this site out first to help you avoid scammers: http://www.tradingschools.org .

RANT: Frontier and Internet Speed Tests

I currently live in a small town, Crossville, TN. This is a terrible place to live for someone tech savvy like myself. I rely on internet to do various jobs, including writing on this blog.

In my neighborhood, the only carrier available other than Satellite is Frontier and they are awful. I have to call them at least once a week to troubleshoot why my internet is so slow. This has been going on for over 10 years.

Recently, I started to research speed test accuracy and found some interesting information. It turns out, most speed tests are significantly inaccurate. Speedtest.net is a longtime favorite by most and I read that can be off as much as 40% because it is calibrated since it is flash based.

I did a few google searches and came across speedof.me and test.my and these tests are supposed to be more accurate because they HTML5 based and they download different packet sizes to take an average.

Frontier has been fighting with me saying my speeds are right where they need to be because the Frontier Speed test, that is based on Ookla (speedtest.net), shows the speeds they are looking for. If I check my speed on any other speed test, it is 50% or more lower.

I am paying for 12mbps since that is the fastest available in my area. Frontier Speed Test gets as high as 13mbps, but other speed tests are showing closer to 4mbps.

I am using a NETGEAR – N900 Dual Band Gigabit Wifi Router (WNDR4500v2) that was recommended by one of the field techs that visited a few years ago. If I use the Frontier Modem built in wifi, I get even slower speeds.

I am going to continue to fight with them until they get me the speed I am paying for.

Make sure you’re not getting ripped off from your ISP. Check your speed here: http://internethealthtest.org/

If you are a Frontier customer having issues, I recommend to contact the executive team and bypass the people at the bottom. https://frontier.com/office-of-the-president-form

Playing Gigs During Summer Months

So I this has been a summer of learning for me after playing guitar since 1998. I have been playing quite a few of outside gigs with my duo The Gosh Darns. Some of these shows have been in weather close to 100 degrees and very high humidity (75% and up). First thing I notice playing acoustic guitar is my hands are sweating a lot and fingers are dragging on the strings.

Always doing research, I discovered a lot of pros use baby powder and/or corn starch to keep their hands dry while playing guitar during summer months. I tested it out last weekend at two gigs and it worked perfectly.

Another problem electric guitarists run into is using tube amps outdoors. I am mostly playing acoustic these days, but in my research I found out it is pretty common to use some kind of fan pointed at the back of the amplifier to help keep the tubes from getting excessively hot. Seems like a good tip.

I still have nothing but good things to say about the D’Addario Humiditrak – Bluetooth Humidity and Temperature Sensor. I just ordered another one of these units for my electric guitar. It takes the guess work out and I can maintain a good relative humidity in my acoustic guitar case by either using silica gel or bamboo charcoal if too wet, or an oasis humidifier if too dry.

Any working guitar players out there? What are your tips for playing during summer months?

The Marcus King Band

Marcus King Band

I discovered the Marcus King Band a few months back. I went to a local blues jam and they had a Marcus King Band song playing during one of their breaks. At first, I thought it sounded a little like something Derek Trucks might be a part of, then I used my Shazam app on my iPhone to find out the artist and the song.

Since then, I have seen the Marcus King Band twice live. The first show was in Nashville at 3rd and Lindsley in Nashville, TN. There were a few special guests at this show. One of my favorite guitarists, Jack Pearson was there, along with Warren Haynes, who rarely shows up to a club gig so that was a real treat. The second show was at the Revelry Room in Chattanooga, TN. It was my first time at this venue and I didn’t like it as much as 3rd and Lindsley personally. The Marcus King Band still put on a great show.

I highly recommend you check out a show from this killer band soon before they get too expensive to see live.

Which Domain and Hosting Company do I prefer?

I have been building websites since the late 90s. You can view some of my work at drewjweb.com. I have settled on two companies for my needs these days.

Namecheap.com

For domains, I recommend, NameCheap.com. Like the name, they are cheap and pretty consistent with their prices. Plus their user interface is very easy to use and navigate. I have had to reach out to customer service a few times and have had a positive experience every time.

For web hosting, I recommend, HawkHost.com. I was working with a developer on a project a few years back who was from Jamaica. We were talking web hosts one day and he mentioned HawkHost. I checked them out and have been using them ever since. They are cheap and reliable.

UPDATED: Thrift Stores and Reselling on eBay

I have been selling on eBay since the late 90s either on my personal account or at one my previous jobs. I have a lot of experience selling items so I thought maybe I could make an extra side income buying used items to resell on eBay.

I checked out a few thrift stores and ended up finding a few items to start with.

Vintage White 1563 Sewing Machine

First item was a Vintage White 1563 Sewing Machine. When I saw this item on the showroom floor at the thrift store, I figured it had to be worth more than the tagged price. I checked on my eBay app and saw some White sewing machines bringing up to $1000 so I took a chance. When I got home, I did a little more research and saw that this particular model is selling between $75-170 so I listed mine right in the middle. I paid $25 at the thrift store for it.

Smith Corona SD650 Memory Portable Electronic Typewriter

The second item I found was a Smith Corona SD650 Memory Portable Electronic Typewriter w/cover. I remember reading somewhere that typewriters are somewhat desirable on eBay. For the $6 I paid, I figured I couldn’t lose. They are bringing around $50 on average on eBay sold listings.

Vintage Bell & Howell 1623 Projector

The last item from this thrift store trip was a VINTAGE BELL & HOWELL 1623 MULTI MOTION 8 AND SUPER 8 PROJECTOR. This was another older item that I knew I should be able to make something more than the $10 I paid for it. I listed it for $40 which is about what they are bringing on average.

As far as eBay used pricing, I usually look at sold listings and I make a spreadsheet with all of the used values I can find. Then I take an average and start my buy it now price around it and go from there. At the time of this post I have 1056 feedback on eBay and 809 are from selling.

So far I am mostly looking for older unique looking items to resell. I checked sold listings on eBay to make a judgement if something is a good buy. If I can sell these 3 items at my asking price, I will turn the $45 I paid after tax into around $180 after fees. A $135 profit is pretty good for about an hour or two of work. I will continue to post my journey thrifting as I find more stuff to buy and sell.

 


Update 8/8/2017

Well so far I have sold 2 out of the 3 items. These purchases are looking to a bust. Thinking I am going to stick with buying/selling/trading music gear since I know more about it.

 

Vintage WHITE ZigZag Sewing Machine 1563 Zig Zag Stitcher : I ended up selling this for $75 plus shipping after being listed about a month.

Here is the breakdown

$27.44 item cost with tax

$75 sell price

$37.52 shipping charged

$14.63 eBay and Paypal Fees

$32.20 shipping cost

$38.25 net profit

 

VINTAGE BELL & HOWELL 1623 MULTI MOTION 8 AND SUPER 8 PROJECTOR : I ended up selling this for $38 shipped after being listed about a month.

Here is the breakdown

$10.98 item cost with tax

$38 sell price

$0 shipping charged

$4.94 eBay and Paypal Fees

$12.02 shipping cost

$10.06 net profit

 

So I am at $48.31 total profit so far. No interest in the Typewriter yet. Might have to donate it back to the thrift store. Lol

Maton Guitars Event in Franklin, TN on July 11th, 2017

Maton Guitars Event in Franklin, TN on July 11th, 2017

I bought a brand new Maton Acoustic Guitar about a month ago from Artisan Guitars in Franklin, TN. I have wanted one of these guitars for a long time and finally broke down and bought one. I had to sell my Martin 000-15m that I played for the last few years to help finance it.

Artisan Guitars invited me to a Maton Guitars Event that was held about a week ago in Franklin at the Little Brick Theater. It was their way of saying thanks for buying a Maton from them. It was a real treat. I got to see Andy Allen (Custom Shop Builder at Maton), Tommy Emmanuel, Joe Robinson, and a 12 year old kid from Croatia named Frano Zivkovic. The amount of talent on that stage was incredible.

Anyone looking for a great playing acoustic guitar that sounds incredible amplified should check out Maton guitars. There are only 4 dealers in the US and luckily Artisan Guitars is only a little over 100 miles away. I can’t wait until I can get enough money to buy another one. They are THAT good..

Guitars and High Humidity Don’t Mix

Wet Guitar Image

For the last month or so, I have been driving myself crazy trying to find out why my acoustic guitars were becoming hard to play and sounding like someone stuffed a towel inside. After some research, I discovered the high humidity lately in TN was the culprit.

I found the following recommendations on the web and here’s how they worked for me:

1) Eva-dry Edv-1100 Electric Petite Dehumidifier, White – I tried this for a few days in my closet and couldn’t tell any difference in the sound or playability.

2) Ever Bamboo Guitar Dehumidifier Bag Set w/ Bamboo Charcoal (3-50 g, 2 Pack) – At the recommendation of Taylor Guitars, I found this stuff and it seems to work as described. I put it in my hardshell case with the guitar for a few days and it pulled out a little moisture, enough to drop the relative humidity in my case.

3) Eva-dry E-150 Moisture Eliminator Pouch – This ended up working the best for me. They have another unit, New and Improved Eva-dry E-333 Renewable that can recharge by plugging into the wall. I may go that route next time.

Knowing what I know now, I would recommend to leave your acoustic guitar in the case when you are not using it during the hotter months. If you have an iPhone, I highly recommend in investing in one of these: D’Addario Humiditrak – Bluetooth Humidity and Temperature Sensor