TradingSim.com; SMAs; Bollinger Bands

I found TradingSim.com. It's awesome. They give you $50,000 paper money capital with $200,000 in margin. You can replay the past 25 trading days for stocks in NASDAQ, pause, fast-forward, use indicators. Sex on the beach.

On the first day, I did fine - came out to about $48,000, so that's a 10% loss. Okay. Relax.

On the second day, I ran the account into the ground. That sucked so much.

By the fifth day, I stopped losing altogether. Instead, I would routinely make 1.50-5.00%.

I've been playing around with some of the indicators on TradingSim.

Simple Moving Average (SMA)

I read a short article about SMAs on Wall Street Survivor. Apparently when the 50 and 200 periods intersect, you know what to do. Long-term, it looks fine. However, on the short-term, it's often far too late, far too early, or even suggests precisely the opposite of what you should do.

Bollinger Bands

I found a book called Bollinger on Bollinger Bands. I haven't read it yet, but I switched on his indicator and tried to figure out something from it. After a few theories, it hit me. I realized that often times when the price passes decisively above the top band, the stock will just keep rising. On the other hand, if the price just dances above the top band, a rise may come later. The reverse seems true for the bottom band. Pretty sweet.

Reading Trading to Win: The Psychology of Mastering the Markets by Kiev has helped me notice an interesting emotional phenomenon. I discovered this as I was killing my first $50,000:

Precisely after entering the market, the price would often move strongly against me. It became so predictable that I had an ingenious idea: Every time I would feel anxious to buy, I would sell and vice versa. Somehow, I found this method supremely satisfying - as if I was profiteering off my own emotional clumsiness. I became so good at doubting myself that I stopped losing. Thus began my current winning streak.

I have a creeping suspicion that there are cunning, well-funded groups which know exactly how the masses think and feel about the market at a given time. Just as the masses enter, these guys nudge the market in the other direction and make an killing.

Now, my strategy is a little less ridiculous. I wait until about 10:30 AM and enter just when I see a trend forming. If I do not see the trend, I don't enter. Sometimes I exit if the trend loses momentum or if I became unsure. Sometimes I leave my money in for the entire day. Also, I try to only trade on the half-hour. It prevents me getting caught up by my emotions. As much as I enjoy the "Let's do the opposite of what I want to do" Dance, I try to avoid it.

Right now, that's my trading strategy: up in the air - anchored only by novice intuition and the occasional Bollinger Band.