I stepped out of the elevator and expected to see polished mahogany walls, leather furniture and an attractive but protective receptionist behind a huge desk. Instead, the elevator doors opened into a huge room that was chopped into smaller spaces by cubicle walls. In fact when I stepped out, I nearly bumped into a cubicle wall that extended without break in either direction as far as I could see. Apparently space was very expensive on Wall Street and not a bit was wasted on aesthetics.
There were no overhead lights on, but there was a glow. The glow of hundreds of computer screens.
I heard screams and clacking keyboards coming from the other side of the cubicle walls. It was disorienting. I followed along the wall for some time, lost, and was relieved when my friend peeked his head out from behind a door and waved me into his office.
This room was smaller but just as strange. It was darker and uncomfortably hot. Ten traders sat crammed elbow to elbow staring at their screens except one older man who had an entire wall and six monitors to himself. When I entered, not one person looked up to acknowledge that a new person had entered the room. Instead, the older man picked up his telephone receiver and began to pound it over and over again into the phone cradle. He did this for 10-15 seconds until the phone broke apart. I was the only one in the room who seemed surprised.
I wore a suit. That was my first mistake. Everyone in the room was dressed very casually, even sloppily as if they hadn't left the room and showered or changed their clothes in days. Albert was involved in a couple of trades but it was nearly impossible to follow what was going on. He tried to explain but it was all gibberish. The background on his screens was black and all the quotes were red or green. The quotes flashed rapidly. He showed me graphs, the execution system. He explained what a "bid" was, what an "ask" was. He told me the specialists screwed everybody... whoever they were. He introduced me to a couple of other guys in the room. No one looked away from their monitors for more than a couple of seconds. Apparently they all had similar or at least complimentary styles of trading. They called out ideas to one another. When they called out a symbol they wouldn't use the letters, they would substitute words or lewd phrases for the letters so that no mistakes were made. So, for example, GI wasn't called out as Giant Industries, it might be called out as "Gay Indian". DF wasn't Dean Foods, it morphed into "Dick Face".
The guy who sat in the corner, a mathematics whiz, began to react to a trade he was involved in. He was short 3000 shares of a bank stock. He called me over. We watched the stock tick lower and I saw how his p&l increased with each trade down (remember, this was back when the market traded in 16ths... so every 16th was approximately $180). It was interesting in a way I didn't think my parents would have understood. It was especially dark in the corner and I felt like I was in a war-room fighting a battle against some vague enemy. We were winning.
The door to the room opened (I had already forgotten that there was a way out) and an attractive girl entered carrying a platter with snacks on it. She brought it over to Albert, then to the older man, then to the math guy. The older man said something to the girl. Five minutes later she was back with the platter and on it was a new phone.
I left a couple of hours later, squinting into the sunlight. It was warm and I decided to walk back to my apartment even though it was all the way uptown. I took off my suit coat and slung it over my shoulder. A stranger called out to me, "My, my, aren't we comfortable today?". And I imagine I must have had a look on my face. I was contemplating a career change. I had a whiff of freedom there in that small dark room. When I would return a few weeks later to sit in again, I would catch a whiff of something altogether different but nonetheless compelling.
Saturday, March 31, 2007
I stepped out of the elevator and expected to see polished mahogany walls, leather furniture and an attractive but protective receptionist behind a huge desk. Instead, the elevator doors opened into a huge room that was chopped into smaller spaces by cubicle walls. In fact when I stepped out, I nearly bumped into a cubicle wall that extended without break in either direction as far as I could see. Apparently space was very expensive on Wall Street and not a bit was wasted on aesthetics.
Friday, March 30, 2007
Well, I couldn't save my month completely, but I got damn close.
Best: AGU, $685
Worst: POT, -$319
#stocks traded: 14, 7 positive, 7 negative
total trades: 361
There's been some discussion on other blogs lately about position sizing. My trade in POT today was a perfect example of why you need to know the stocks you trade. I lost that $319 on two separate trades with 200 shares each trade. So I lost like, 75 cents each trade, very quickly. Clearly a stock that I can't trade with my "full" position.
On the other hand, I had 2500 shares for the AGU trade. It can take AGU a full day to move a point, whereas POT can move a point in 2 minutes.
I initiated a short in AGU when it broke through 38 around 10:20 or so. The stock then sold off a little and pulled back up to the figure but couldn't break through. That's when I doubled my position. He chopped around for a little while and played with the trend line I drew but eventually broke and I was able to cover for a decent profit. Part of the reason I was looking to short AGU was because the other fertilizer stocks were selling off at this time as was the general market.
Anyway, I thought that today the issue of position sizing really was important to me making money on a good trade and not losing too much on a bad trade.
Have a good weekend. I'll post a history article this weekend and if I can get to it, a monthly review.
Although I had a good day, I missed getting to positive on the month by $300... so for the first time in 8 years, I had a negative month.
I'll post my daily stats later. Also, this weekend I'll be posting a new piece of "history" and a monthly review.
Right now, I'm getting away from the computer for a couple of hours!
Posted by Dinosaur Trader at 4:00 PM
Thursday, March 29, 2007
You were able to draw a nice trendline on the futures today. The market basically sold off from the highs of the morning and bounced along this line until it broke it after 2pm today. After that, the market didn't look back, it just rallied. The only problem I have with the market from a short-term bullish perspective is that yesterday's sell-off was on higher volume than today's rally. As an IBD reader, that's not so great. Still, no one complains when the market is up 48 points... it's bad form.
I was able to catch a nice trade in CF because if you look at the two graphs, they are very similar. CF gapped up this morning and then trended down all day. Once the trend was broken, he rallied nicely. I had a decent amount of shares from 38.10 but sold a good chunk around 38.25 because I thought the trendline for the last 4 days or so would create problems. It didn't... so I sold out of a lot of shares "early". I'm not complaining though...
Best: CF $450
Worst: ITG -$100
stocks traded: 18. 11 positive, 7 negative
total trades: 221
Tomorrow is the last day of the month. With my last 2 days of gains, I have a shot of NOT having my first negative month ever. It will take an excellent day. Still, I'm not going to do anything stupid. It would be nice to get to even, but I don't want to jeopardize the progress I have made or the confidence I'm slowly regaining.
Hey, I checked Traderfeed this morning for Part II of his post that was started yesterday on self-sabatoge. On today's post he linked an older post that has some very helpful articles on psychology and trading.
If you've ever been in a trading rut (and who hasn't?) or are planning on getting yourself into one soon, I highly recommend checking these articles out. They're at the bottom of the post.
To quote the band Sublime, "hard work good, and hard work fine, but first take care of head." Of course, I don't think they were writing about trading... Still, the point is that you can look at 1000 graphs a night, but if you're stuck in some bad trading patterns, spotting opportunities probably isn't your biggest problem.
Volume is lighter this morning than it was at the same time yesterday. And I hate the action on days like today. The futures gapped up on the GDP data but then sold off. It's hard to get short days like this because even though the market is trading down, there's plenty of bullishness anyway so the squeezes can be quick and violent. At the same time, it's hard to initiate longs because a lot of stocks gapped up and then got choppy... good entries were hard to come by... at least in this cave.
So anyway, I took it easy this morning. I'm up a couple hundred bucks but I don't have a winner or loser that's greater than $100. I'm going to spend the next hour looking at charts and then take a long lunch. Hopefully, in the afternoon things will be more interesting.
I haven't even spotted any freaky hybrid trades... (sigh).
Wednesday, March 28, 2007
I finally had a day without much drama where I just made small, smart trades. I caught CF and AGU as they broke recent downtrend lines. Even though the moves weren't huge I didn't have any bad losers, so I had a solid p&l.
Overall, the market sold off. However, the volume, though higher than yesterday, wasn't huge. With lots of eco-data still on the way this week, things could get interesting.
Best: CF, $483
Worst: TS, -$86
16 stocks traded, 9 positive, 7 negative
I still have a long way to go to pull positive for the month with only 2 days remaining. I'm going to get to sleep early and do good research again tomorrow morning so I can stay focused and try to end strong.
The guys in my office had high expectations for more Stewart commercials after the first one with Mr. P. This, I believe was the only other Stewart commercial. The real-life Stewart ran into legal trouble or something and they stopped the campaign.
Since I've been sabatoging myself for the last year or so, I found this post, "Trading and Information Processing: Why Traders 'Sabatoge' Themselves" by Traderfeed very interesting.
I strongly suggest you check it out if you haven't already.
Tuesday, March 27, 2007
Good for the bulls, I guess... there's a lot of eco-data coming out later in the week and BB talks tomorrow, so I assume lots of traders were watching today instead of trading a lot. They were the smart ones. I lost some money.
Best: MTW, $94
Worst: CF, -$189
So you see, I was planning on having a post called "CF Part II, The Upside" but things just didn't work out that way. I did indeed make some nice trades in CF and for a short while was my best stock of the day. But simply put, I over-traded today. I churned and I was burned.
I broke a cardinal rule of mine which is to not trade at all or trade very, very lightly between 12 and 2pm. That's when I went from green to red. More importantly, I lost confidence during that time and I was unable to pull together to make a single good trade during the last hour of the day.
Very frustrating. It will be difficult for me to meet my goal by the end of the week.
I spent the better part of the morning amusing myself by getting squeezed trying to short AB and getting smoked by buying CF. Clearly, the lesson I "learned" yesterday needed a little more time to sink in. As I was getting worked, I came upon a realization that I've probably had 1000 times before while trading but always forget. So this time, in order to remember it, I've written it down.
It's this... that you always feel your worst trade of the day is destined to be your best.
What I mean is that I kept getting short AB thinking that "once it turned" that I had the best opportunity to make some good money. Same with CF. I kept buying thinking that "once it turned" it would rip and there would be nice money to be made.
Hope and greed work together to kill the trader.
Here are the details of my trades in CF as the stock moved down from the open until around 10:20. The following account is pretty dry so I'd suggest following along by enlarging the graph by clicking on it. They're 5 minute bars.
At 9:50, just before the stock really dropped, I started buying. I bought 500 at 39.95. It became pretty clear that the stock wasn't through selling yet though, so I sold my shares quickly. Lesson learned! I sold 200 at 39.93, 100 at 39.85 and the last 200 at 39.65. A loss, but not bad considering that the stock still had over a point and a half to go before it hit bottom. Perhaps in the recent past I would have only sold half my position... anyway, I was pretty happy with my quick exit.
At 9:55, I tried again, and purchased 500 shares at 39.32. Again, I had to sell quickly, and sold 100 at 39.11 and 200 at 39.09. Not great fills, but take a look at the graph. The stock was selling off rapidly here. So rapidly in fact, that before I sold my last 200, I bought 500 more at 38.93. So I had 700 shares and I felt pretty sure, that the stock was due for at least a "dead cat" type of bounce.
I was wrong.
So, I sold 100 at 38.94, 200 at 38.88, and 100 at 38.93. I had 400 shares remaining. At this point, either the ticks were shooting up, or the stock flashed a bid, or maybe I was just feeling lucky, I dunno, but something convinced me that the bottom was in because I bought 800 more shares at 39.01. This was at 10:00. Less than 1 minute later, I sold 700 of those shares at 39. My confidence in the "bottom" lasted all of 40 seconds...
I sold 200 more at 38.98. So I only had 300 shares remaining. And again, the stock broke the low. So yes, I'm losing money at this point, but so far, I've been right in getting out of the majority of my shares just before the stock would break to new lows. I don't remember exactly, but even after all these wrong trades I was only down 3 or 4 hundred dollars in the stock. Not good, but not a disaster either.
I bought 200 shares at 38.85 and then 500 more at 38.95. Then, I sold 700 at 38.96. So again, I'm back to 300 shares. Just churning here... but now, the stock breaks again. Here comes the "disaster" portion of the trade. It's 10:03 or so...
Instead of selling a portion of my remaining 300 shares when the stock broke to a new low, I bought 400 more at 38.70. The stock broke lower, but it hurts more now because I have 700 shares. I sold 200 at 38.55, but then 1 minute later, at 10:12, I bought 800 more at 38.54. So I have 1300 shares. I sell 400 at 38.51. I have 900. I buy those shares back at 38.47... back to 1300. And then the stock breaks and before I can think, I buy more at 38.19. So I have 1700 shares and the stock breaks 38... I was down over $900 in the stock at this point and feeling pretty ugly about it.
Before this final break, I had been doing a good job of selling so that when the stock broke I was never too "committed" to my position. I never had that deer-in-the headlights, eyes glazing over, type of situation. Luckily, this time, the "disaster" only lasted a few seconds. The stock broke back up and sold 1600 of my 1700 shares above 38.40. So I went from being down $900 to being down $200-$300 in a matter of seconds. More importantly, I was still in the game mentally and I was nearly flat in my position so I was able to think clearly when the stock "tested" the old low and held.
This is a couple of month's old, but I thought I'd post it since it's one of my favorite companies (even if they send me 10 catalogues a week), it's doing well, and because the springtime is a great time to get back into a yoga routine.
Not to mention that "yoga breathing" is very helpful during trade disasters...
Monday, March 26, 2007
Albert had been calling for months and keeping me on the phone for hours talking to me about the stock market. We went to a Yankee game one day and it's all we talked about. It was really boring. If you're not a trader, "bids" and "asks" don't mean crap... and even the idea of a guy named "the specialist" who controlled the way stocks moved and routinely screwed everybody seemed insane. But then, Albert had made $75,000 in the last month. He showed me the check. This caught my attention. Still, I wasn't going to make the decision to go further into debt and to take a job with no guaranteed salary or benefits lightly. So Albert invited me to "sit in" and watch him trade so I could get a feel for the job.
I didn't mind calling in sick to the job I was preparing to leave. The place was nice and everything, it was an internet company, one that eventually had success, but the pay was awful. Instead of a good salary, you could basically come and go as you pleased as long as you got your work done. There were other advantages as well. They served beer and pizza at company "meetings" and each week we all played softball together. Oh, and there was the day the head of the office brought in a few large cardboard boxes full of those little plastic balls that kids jump around in at indoor playgrounds... Fun? Yes. But I had student loans and bills to pay. Anyway, I received 100 shares of company stock priced at about 15 or so. The stock debuted in the 30s and on it's first day of trade vaulted over 100. I sold the next day in the 80s.
It was my first stock "trade". It was also the easiest...
Between that and Albert's success, I was excited about this thing called the "stock market" which I hadn't thought about during the first 22 years of my life. And so the following Monday, I had a "stomach virus" and made the trip downtown.
Well, as noted in my intraday post, I really managed to screw up an otherwise decent day with my poor trades in FED. I need to talk to One Bad Trade... perhaps we should switch domain names...
Here's where I ended:
Best stock: IPS $298
Worst stock: FED -$548
My second worst stock was -$48. I had 4 winners for over $100. So really, if I could just erase the stupidity of FED I had a decent day. I can't erase that stupidity...
Hopefully, I can at least learn from it.
The silver lining for me today is that I had some decent success with limit orders. Normally, I trade at market. However, the hybrid market makes this a very sketchy proposition so I've been experimenting with limits.
Another positive sign for me was that I traded a lot. I made nearly 300 trades. It's important that I get involved in the market before the beginning of earnings season.
I'll have another "history" post up before the open tomorrow.
Well, things were kind of slow this morning until that new home sales data was released at 10. Then the fun began!
I was up a couple hundred due mostly to a decent IPS trade. When the data came out, I got short a couple of the mortgage lender stocks, RAS and CFC. My p&l shot up to about $700. Problem was that I then decided to start buying another lender when I saw CFC put in his bottom. This particular stock, FED, didn't give a DAMN that CFC had bottomed and I lost about $400 in him.
This was unbelievably stupid.
On the accompanying graph, I've marked where I was buying the stock with the light blue dots. Notice how the dots kept going down... and my p&l followed. So I'm $500 off my highs of the day here at 11:15 and I'm only up $230. This makes me very concerned that if I continue to trade I'll go negative. So I'm going to sit patiently and watch for the next couple of hours instead of trade.
Last week, Traderfeed put up a great post about The Anatomy of a Stock Breakout. I even posted a comment, thanking him and remarking that I often try to manufacture or anticipate trades instead of waiting for a trend to develop. Unfortunately, part of what I did wrong in FED was exactly that. I was anticipating a bottom and so I was burned.
Friday, March 23, 2007
Best: HRT, $203
Worst: POT, -$113
8 stocks traded: 4 positive, 4 negative
Best: IPS, $192
Worst: MTW, $78
13 stocks traded: 6 positive, 7 negative
Best: RDN, $467
Worst: FED, $128
16 stocks traded: 7 positive, 9 negative
Overall, I'm pretty happy how this week turned out. Yes, I missed the huge rally on Wednesday, but as JC eloquently posted over at A Scalper's Tale, "If I were to constantly mull over missed moves or mull over how much potential profit I could have taken had I been there, I'd probably second-guess myself at every turn and on every decision I make..."
True, true, JC.
Anyway, I had 3 positive days in a row. I averted a huge disaster on Monday, took a couple of days to clear my head and finished the week pretty strong.
Next week will be a somewhat dramatic one for me because in my 8 years of trading I've never had a net-negative month. I'm currently down a few thousand dollars for the month. I will have to have a solid week to pull positive and keep my streak alive.
Have a great weekend. Thanks for reading.
Congratulations to Wallstrip.com for getting a mention last night on Fast Money and then again today on the Closing Bell!
Lots of speculation about what's going on between Lindsay and Dylan. Great interview though. I love her lead-in.
I was torn between posting a classic or a new song. I chose classic.
Anyway, this is one of the most famous music videos of all time. What does he say in the end? Endless discussion and speculation...
I personally think the dude is a trader and he says something like... you just wait, in 8 years, there will be this thing called the Hybrid Market. It will make your life difficult. Should you fail to adapt to it, you will lay here like me... forever.
Not to mention the fact that the lyrics of this song apply directly to trading disasters. "You do it to yourself, you do. And that's why it really hurts."
Nothing great, but I'll take it.
After the new housing stats came out, it looked like the mortgage stocks started to jump a bit. I noticed that both RDN and MTG (which trade together) were close to breaking a downtrend on my 5-minute graphs.
So, I bought when they started breaking the trendline and it worked.
I took profits a little "early" I guess, but this was right when the futures were spiking down so I don't feel too bad about it. In fact, I started thinking the stock was "overbought" so I threw in a short order near the top. I had less conviction on the short side though, so I put in an order that was only half as big as my initial long. I've tried to provide details on the graph, but I'm not sure if you'll be able to read my writing. If you click on the graph, the image expands.
I made close to $500 on the trade. All of my other trades today have basically cancelled out. So, I'm gonna take these profits and hold them until 2:30 or so. Then I'll take a fresh look and see if there's anything worth trading into the close.
I'll post the song of the week in a couple of hours.
Thursday, March 22, 2007
Money made: $134
Trades made: 60
Best stock: IPS $188
Worst stock: MTW -$78
I traded very lightly today. That MTW was a bit of a heartbreaker because I got stopped out of my short near the high of the day, just before it plunged 70 cents.
The IPS was also a short trade. Even though it was a winner, I screwed up my exits. I was short 600 shares up near the top and was scared out of most of my shares. I was scared out because I still can't figure out the mechanics of this market.
I am strongly considering opening up a second account in which I'll focus on longer-term trades. I don't think daytrading is dead, I just can't figure out how to manage the risk anymore. If you never know when a stock is going to spike 60 cents in one direction or the other it's hard to have to confidence to size up to make good money.
I figure if I take a slightly longer-term look I'll expand my loss (and gain) thresholds and those little intraday spikes shouldn't matter so much. We'll see.
I'm a dinosaur. I've been doing this job for too long in exactly the same way.
I've always been a "buy at market, sell at market" type of guy. I never messed around much with limit orders. However, I see that the hybrid market has radically changed the way stocks trade. I need to learn to trade in a new way or I will soon be extinct. Why? Because I'm having a very difficult time controlling my losses in this new market using market orders.
Here's an example. I buy LVS at the open and I'm filled at 93. Fair enough. The problem I have from a trading perspective is that in the past, I was able to put a sell stop order in at 92.80 or so and be reasonably sure than in a worst case scenario if my stop was hit I'd be filled above 92.70 thus limiting my loss on the trade to 30 cents.
But today, here's what happens. I buy at 93 and the very next trade is at 92.50. I've lost a half point in 11 seconds! 4 seconds (and 10 trades later...) it trades 92.40. What do I do here as a short-term trader? There are no longer any bids or offers to help me figure out what direction the stock may head next.
I feel like I've been successful for so long as a daytrader because I was always very successful at limiting my losses. I no longer have that confidence.
Does anyone have any suggestions on how to control losses in the Hybrid Market?
I'm all dinosaur ears.
Wednesday, March 21, 2007
Zeke's face was bright red. He seemed to be holding his breath. Beads of sweat covered his brow and collected on his eyebrows, which were soaking wet and dripping onto his keyboard. A large purple vein, not a normal feature of his appearance, was prominent on his neck and looked like a well-fed earthworm. His hair was pulled back, very tightly, into a ponytail. From his lips sprang the same word, over and over again. "Fuck, fuck fuck fuck fuck fuck... then it morphed into, "They're fucking me." He was staring straight at his computer screen and his hand was glued to the receiver of his phone even though the phone was currently hung up... it was like he was bracing himself.
They sat me next to Zeke so I could learn from him. Zeke didn't talk much, but I did learn from him. I casually looked over at his monitor. He was holding a couple thousand shares of VOD which in 1999 (before it split 5 for 1) was very volatile and trading well over 200 dollars a share. He was down over 6 thousand dollars in the stock. Just then, his phone rang. He tried to sound calm as he spat into the receiver "It's just this guy, he's fucking fucking me." He hung up and practically doubled his position. In a few minutes he was down over 10 grand in the stock and the risk manager of the firm, a large man who looked more like a bouncer than a man who was crunching numbers in a back office, paid him a personal visit. Zeke knew his time was up. A short conversation between Zeke and the risk manager, a man who everyone simply called "Mr. Bill", ensued and then Mr. Bill watched as Zeke closed out his position. Moments later Zeke put his very expensive headphones over his ears, gathered up his very expensive coat and his desk belongings and silently left the room. It was the first blow-up I had witnessed at close quarters. I had been trading for only 3 weeks. I looked at my position monitor. I was down $6.25 in my one position, 100 shares long of AVY. At that moment, I felt incredibly "light".
The next day, Zeke's desk was filled by some hotshot trader "from upstairs" who didn't say much and watched porn in a small video player that he strategically positioned in a corner of one of his screens. This is a small example of what the environment was like at my first firm, a place that I traded for my first few years. I paid exorbitantly high commission rates and was routinely yelled at should I be ballsy enough to try and get those rates cut.
But to get to the central question, the "why trade?" question that plagues me recently as I struggle it's important to remember these times. I trade because to me it's a certain kind of freedom. People wore what they wanted to at work. The only thing that mattered was "How much you up"? Office politics didn't exist... the rules were simple, the more you made, the more you mattered. It was easy to understand and competitive and eventually I thrived even if it was in my "under the radar" type of way. Let's put it in these terms, I never had more than 3 screens. The "hotshots" often had 5 or 6. Thing is, a lot of these "hotshots" eventually blew up just like Zeke.
Trading isn't about ego, it's about being right. And dollars and cents are the perfect metric for measuring how right you are.
The "righter" you are, the richer you are.
And this has been a good lesson for me. You are either right or you are wrong. You really need to not make excuses about why you are wrong. If you're wrong, you need to figure out why and "get right" as soon as possible. Zeke couldn't get out of that VOD trade because he couldn't admit that he was wrong. And he blew up. I think for me, I need to figure out how to trade this new hybrid market and stop complaining about it.
I won't stop with the "freaky hybrid trade of the day" post because I have fun with that, but I need to "get right" again and get on the green side of trades.
Tuesday, March 20, 2007
So after yesterday's debacle I've decided to get out of the house for today and tomorrow. I won't be able to post, but I'll work on part II of my trading history.
Please feel free to leave any Freaky Hybrid Trades in one of the comment sections.
Time to lick some wounds.
One last stocku:
talking to the screen
time for a small vacation
market doesn't care
Monday, March 19, 2007
Anyway, here's the story.
Monday morning, bright-eyed and bushy tailed. AXR reported earnings. They beat on top and bottom line and they are gapping up. The stock has nearly been cut in half in the last 2 months, so I figure, "Why not give it a whirl?" I figured I'd buy 500 shares at the open and keep a close eye on it. If you read this blog last week, you know it won Freaky Hybrid Trade of the Day "honors" on Friday, so I knew what I was getting involved with here. A thin, volatile stock that just released earnings. "So", you might ask, "Dinosaur Trader... knowing this, why would you trade this stock? Your confidence has been down, this stock is nuts... sounds like you could get hurt here."
At this point, I may answer that the dinosaurs went extinct for a reason, they couldn't adapt. That may soon be my fate too if I don't start listening to the voice of reason more. The real answer is that I sniffed opportunity. It's why you make any trade.
I thought I'd buy and it'd trade up rapidly since it'd been so beaten up in recent months. I thought the small float and the thin trade would benefit me, that's why I bought a large position (500 shares is a "large" position in a stock that could move 2 points on 3 or 4 trades) at the open. In my head, I saw the stock gapping up and moving immediately higher. I envisioned panic buying and short covering and I saw me selling 2 or 3 points higher.
The exact opposite happened.
By 10:15 I was nearly down 3 grand and sweating...
Here's what happened. The stock opened and immediately broke lower.
Look at that first 5-minute bar, the stock had a 2.5 point range in the first 5 minutes. It took 30 seconds and only 3300 shares for AXR to move from 87 to 84.50. Almost every trade was a trade for 100 shares and almost every trade smacked the bid. Having a bullish mindset on the stock made it nearly impossible for me to react quickly enough. It's hard to go from bullish to bearish in 30 seconds. Instead, I thought, "well, there's the shakeout and now comes the bounce." I was wrong. I threw in a sell-stop for 200 shares at the new low, or 84.49, and was filled somewhere in the high 83s.
I was still long 300 shares of a stock that was trading straight down.
But still, I was waiting for the "bounce" to tell me it had all just been a bad trade. I put another sell stop in at a new low which at the time was 83.06 and sold a couple hundred more shares at 82.87 and 82.71.
I had 100 shares left and I was down close to $1500. I'd been trading for all of 15 minutes.
Immediately, the stock bounced back up over 83. Convinced that the bottom was in, I bought 400 shares at 83.47. The "high" of that bounce was 83.48... the stock immediately broke 83 again. I sold all of my shares at 82.88 and I was down almost $2000.
It's 9:50. I've managed to lose $100 a minute since I started trading.
The next drop was nauseating but luckily I was out of the stock. But when it traded down to 80 I decided to buy again. I was filled almost a point higher, at 80.93. The stock yo-yoed right back down to 80 and I sold 200 at 80.15 and 100 at 80.02. That was the problem... the old low was 80.01 and I was filled at 80.02. The stock didn't break the old low. So, I bought again... 400 shares at 80.57.
The sellers wanted more blood though.
The stock quickly broke 80. I sold 200 at 79.34. It ripped above 80 again. However, this time I was just happy to get out close to my last buy so I sold my last 200 at 80.34. I was down over $2500 with no more shares in the stock.
My eyes were more or less glazed at this point. I was down $2500, which eclipsed my gains of last week by over $1000. Add these losses to my losses of the week before and I was nearly out of capital. I was expecting a call from the risk manager. I sat staring at the screens watching them blink light blue. The great irony of the morning was that every other stock on my screen except 2 others (I have over 100 stocks on my screens) were green. The market was up almost 100 points. I walked downstairs and made a cup of tea. My wife and I traded insults.
I came back up and saw that the stock was trading between 77 and 78. I bought 300 shares at 77.76 and put a stop in at 77. Miraculously, the stock traded up. I bought 100 more at 78.60 and then quickly sold 100 at 79 and another 100 at 79.04. I got nervous and sold 200 more at 78.74 and 78.68 and I was out of the stock again.
The stock broke lower and then bounced. I bought 200 shares at 78.20. At 10:15, the stock resumed it's dive. I sold 100 shares at 77.11 but then bought 300 more at 77.56. So I was long 400 right before the stock broke 76. I have no idea what my p&l showed at this time, but I was probably into my firm's capital. I'm quite sure that my name was in red on some screen in someone's office and that they were dispassionately discussing my fate.
My 2 year old son was in the next room with my wife. He was screaming at the top of his lungs, "No pants! I don't want my pants on Mommy!" They were getting ready to go to "cooking" class. I stuck my head out my office door. "Would you get his fucking pants on and get the fuck out of the house? I'm down 3 or 4 grand and I'm trying to be calm and you guys are in here screaming and I can't get out of my own fucking way!" I sat down at my desk, and I remember quite clearly, that I was talking to myself and shaking my head but I don't remember what I was saying.
I sold 200 shares at 76.65. A minute later, I bought 200 shares at 75.59, and then 200 at 75.85. The stock seemed to be calming down. I heard the door close as my wife and son left for their class. I bought 200 more shares at 75.71 bringing my position up to 800 shares.
In a few minutes, the stock would spike a couple of points allowing me to release 100 shares at 78, 79, 78.56, and 78.72. Later I would sell more at 78.90, 78.35, 78.20 and 78.39. After all of the drama, I had pared my loss in the stock from over $3000 to just over $100. My p&l stood at $97. I was physically and mentally exhausted.
Now if only I could repair the damage this trade caused to my marriage...
So, when my wife came home I apologized for being a stressed out, red-faced lunatic. She understood, kind of. We spoke and both agreed that maybe I need to get away. So, for the next 2 days while the Fed has their meetings I'm on hiatus.
Cue the Mary Onette's song (#4) "Lost".
And then, hopefully, the Deerhunter song (#29) "Like New".
Friday, March 16, 2007
Today's "honor" goes to AXR. Yes, it's a thin stock but nonetheless, what happened between 10:23 and 10:31 was freaky. Let's discuss:
In this 8 minutes, the stock traded only 2900 shares on the NYSE but managed to rip almost 2 points. As is usual with the hybrid, there were no bids to indicate strength nor volume... there were just 100 share prints lifting offers and taking the stock up.
Favorite highlight: At 10:30:16, the stock traded 100 shares at 86.72. One second later, the stock trades 100 shares 48 cents higher at 87.20. 100 shares shouldn't move any stock 48 cents in 1 second if you want your market to make any kind of logical sense. But that's just my opinion.
Monday: $28 (hahahah)
Best: CRS $349
Worst: TNH -$163
25 stocks traded: 11 positive, 14 negative
Best: FED $501
Worst: PCP -$74
15 stocks traded: 6 positive, 9 negative
Best: SQM $762
Worst: GHL -$296
20 stocks traded: 13 positive, 7 negative
Best: TNH $409
Worst: SQM -$512
13 stocks traded: 4 positive, 9 negative
Best: SQM $469
Worst: TNH $391
11 stocks traded: 4 positive, 7 negative
Total: $1612 Weekly Profit
Not a bad week excepting Thursday, which hurt. I think it's strange that on a couple of days my best stock then turned out to be my worst stock the next day and vice-versa. Not sure what that means exactly, other than perhaps I do well in a stock and I think I'll do well again, so I get more aggressive in it and then I get smoked. But still, that doesn't explain why my worst on some days becomes my best the next. Who knows? It probably means nothing. But I'll be watching for this pattern more now.
Enjoy your weekend. It's St. Patrick's day tomorrow. Don't do anything stupid.
Check out this article from TradersMagazine.com that reports on a study that contends the NYSE is really no better than an ECN since the implementation of the hybrid system.
Big Board Loses Edge As Price Improvement Drops
Of course, if you trade the exchange daily, you probably already know that trading has gone straight downhill since the advent of the hybrid system. But if it helps you to know that it's not just you and that it stinks universally, then check out the article.
Thursday, March 15, 2007
An old dear friend of mine, who I hope to have guest blog someday, gave me a great idea this evening. "Write some stock market haiku," he said.
So, without further ado, here is my first jab at "stocku".
No green on my screen
Oh my god I am so smoked
Like a long-dead fish
Unfortunately, I couldn't follow up my nice day yesterday with another one today. Worse, I had a "feeling" that today was going to be a choppy, do nothing kind of day but I got sucked in nonetheless.
Best stock: TNH $418
Worst stock: SQM -$511
13 stocks traded, 4 positive, 9 negative.
154 total trades.
As promised, here's what TNH looked like and why it wins freaky hybrid trade of the day honors.
The chart, though inexcusably choppy, doesn't tell the whole story. What's important is how erratically this stock moved on such light volume.
9900 shares moved the stock down 1.5 points in 20 minutes on mostly 100 and 200 share prints. There was never an offer shown to indicate any type of selling pressure. This move was simply 100 share lots smacking 100 share bids and causing the stock to move straight down.
In addition, the quotes were updated over 600 times during this time period, or about once every 2 seconds. An overflow of information but unfortunately, none of it was useful in helping one discern what was happening in the stock or why it was moving down. Remember the art of tape reading? For decades it was a reliable tool on Wall Street, no longer. The hybrid system has killed tape reading.
Trades like this make me and many others doubt the integrity and overall feasibility of the hybrid system. And this is no anomaly. Really, there are literally hundreds of examples of trades like this. And lest you think I'm complaining because I somehow got wrecked in the stock, that's not the case. It was one of my better stocks today. I just happened to be watching it at this time and thought I'd highlight it's craziness.
I've decided to create a new daily entry into the blog that I am lovingly calling the Freaky Hybrid Trade of the Day.
The first stock that I am nominating for this dubious distiction is TNH and the freakiness that associated the trading in this stock today between 9:40 and 10:00am.
I will post a detailed analysis of the freakiness at the end of the day.
If you would like to nominate any stocks for the Freaky Hybrid Trade of the Day "award" please do so by adding a comment.
Wednesday, March 14, 2007
Well, the end of the day is near and that was a nice bounce we had there starting just before 1pm. Best thing about the action today was the volume. In contrast to the rallies of last week, this one had some good volume. I especially like the way the market went below the lows of last week and even dipped below 12,000. That probably scared a lot of the "weak sisters" out and may just give us a chance to rally further. Who knows though? I'm just a trader and thus, my long-term vision is awful. Read the IBD the next week and let them tell you if the correction is over.
Anyway, I had my first good day since the disaster that was last week. I didn't get stubborn and try to short the market during it's midday run. I got long some stuff and even increased my position size since I regained a little confidence throughout the day.
Here are some stats:
Best stock of the day: SQM $763 (this on an early morning short)
Worst stock of the day: GHL $295 (the one stock I shorted during the rally)
My top 3 stocks all were in the fertilizer sector. I always find it easier to trade a sector because if one is working, it gives me confidence that one of the others may work as well. I used to do this all the time with oil stocks, but it's been awhile since I've traded them actively.
The key for me is to wake early tomorrow and build on the confidence I regained today. It's more important right now for me to focus on keeping my losses small than to worry about making big trades for gain.
I'll work on making my end of day stats more readable and clean. I still have a lot to learn about getting this blogging thing right.
Well, I've now officially "teamed up" with Pitchfork to embed their playlist onto this blog. You can access it over there to the right. Just click the green "play" button.
Sweeeet. Blogging is fun. Trading is fun too, but you still need music.
Enjoy the music.
Not all of the songs are great. I'm gonna try to edit out the ones that drive me nuts and keep the others.
Hope you like.
Here's a link to the Webinar hosted by the NYSE regarding the Hybrid Market.
I found this minimally useful as far as helping my trading strategy, but at least it helps you understand the terminology on the Hybridtalk blog.
Anyway, here's the link.
Enjoy! Don't forget, you'll never get that 40 minutes back!
Between 12 and 2 in general it's just not a great time to trade.
This isn't a rule or anything, but you should definitely think about paring back on your positions and being really sure before you initiate any new ones.
More often than not, I give back profits or lose more in the middle of the day.
Just a thought.
Here is a link to pitchfork's forkcast.
Even if trading isn't going well, at least you can listen to some good music.
And hey, if trading is going well, even better!
My current favorite songs are:
Lost-The Mary Onettes
To the East-Electrelane
That Summer at Home-The Twighlight Sad
Eyes Are At The Billions-Cortney Tidwell
Well, this morning, the crazy hybrid actually came to my rescue! I saw the futures getting stronger into the 9:30 open so decided to buy 400 POT at the open.
I was filled on the opening print of 12,400 shares at $154.92 200 shares later, the stock was trading over $156.50. Think about that. It took only 2000 shares, in 100 share lots mostly, to make the stock rip a point and a half. I sold all 400 shares into the "strength" over $156.50 and was happy with the profit. Of course, in subsequent trades in the stock, I lost about a quarter of what I made... but I'm not complaining.
What bothers me is that there was never any real buying interest in the stock. 2000 shares should just not move a stock so drastically. Because there was no buying interest and this was basically an artificial move caused by the thin and loose trading of the hybrid market the stock has since declined. It's now off over 2 points on the day trading near 153. If you were a "ma and pop" investor trying to buy this stock today you were simply done a disservice by the hybrid system. In the old trading world, 2000 shares at the open would have been eaten up and I doubt the stock would have ever seen $155.5.
Please feel free to comment on any crazy things you witness that are due to the wild fluctuations of the hybrid market. I'm really just trying to find my footing here in this new marketplace and would love to hear about any strategies that any of you are employing successfully.
Tuesday, March 13, 2007
Light volume rallies and heavy volume sell-offs. Not really much smoke and mirrors here, the market is weak and weakening further.
I'm frustrated beyond belief as a lot of my shorts that I got washed out of in the low volume rallies, SPY, AOB, GOOG, and CFC have taken big hits today.
The only short I really caught today was FED and it's my best stock of the day. I'm currently up $587 in him and have covered most of my position.
My two worst stocks of the day are heartbreakers. AGU and MTG. I was short both, just a little early apparently... in fact, I've learned something about timing these last two weeks. IT IS EVERYTHING. You can be right ultimately but if your timing is off YOU ARE WRONG.
Oh, and if anyone thinks the hybrid "system" hasn't made stock trading erratic, take a look at the trades in POT in the first half hour of the day. NYSE stocks never used to trade so wildly so often. I hope something changes in time.
Monday, March 12, 2007
Some end of the day volatility in the steel stocks brought me into the green for the day. Barely.
I traded 25 stocks today and made 289 trades.
I made money in 11 stocks and lost money in 14.
My best stock of the day was CRS. I made $349 in him.
My worst stock of the day was TNH. I lost $162 in him (see earlier post for trade anatomy).
Today was slow. That's right... yet another LOW VOLUME RALLY. And while I'm very bearish about this market short term, it's getting more and more difficult to watch these rallies slide by. I really need to rid myself of my bearish opinion on which way the market is going so I can free myself to trade intraday. Since I've been cut off from holding overnight positions for the time being, I should simply focus on intraday action.
I did a good job of cutting my losses today except in TNH. That trade was a nightmare.
I caught a spike in CRS at the end of the day and made over a point in the trade. I hate trades like that, but I'll take it right now.
It's all about getting my confidence back so that I can boost my position size again and get on the right side of trades.
A slow day. Low volume... no volatility, "best not to take much risk", I thought.
Then how do I explain what happened to me in TNH? A momentary lapse of reason I suppose? Not sure how to label it, but I know it happens over and over again to myself and others trading the market. I also know that if it happens too much, you're definitely doing something wrong.
Perhaps I was still burning about getting stopped out of my TNH long at 51.62, I don't know. I do know that when I looked up and saw the stock spiking up to 55 that I thought it MUST be a short. The market itself seemed weak to flat and none of the other stocks in the fertilizer sector were showing such strength. So I began to short. I was immediately wrong. However, instead of covering and taking a 20-30 cents loss on my 400 share position, I got stubborn and decided to short more. I 'knew' that if I covered and took the loss that the stock would definitely turn lower.
I began to hope the stock would turn in my favor... a sure sign of impending disaster.
Anyone who has traded for any amount of time will tell you that hoping a stock will either go up or down means that you are in some serious doo-doo. By the time the stock got up near 56, I was short 800 shares and down over $700 in the stock.
The stock traded above 56 and then shot down 75 cents very quickly. I would have loved to cover some of my short here but it was nearly impossible... the spreads were showing offers in the 60 and 70 cent range. Even though the stock was trading in the 30s had I entered a market order, I would have been filled at the offer.
Thank you for nothing, hybrid market.
So I waited, hoping some more that this was the break I was waiting for...
However, the stock was not done going up.
As quickly as it shot down, it ripped back up, taking out the old high and posting a new high at 56.22. I had put a buy stop for 200 shares at 56 and was filled around 56.19 or so. Ugly... my loss in the stock was now close to $1000 and I was still short 600 shares. Sounds like fun, no?
56.22 happened to be the top. I ended up covering most of my shares around 55.20 and some around 54.70. I actually used limit orders because I have lost faith in market orders. Is it only dinosaurs that use market orders? I cut my loss in the stock from close to $1000 to only about $150 but it wasn't because I did anything right. I was slow to close out a losing position and I got burned because of it. The fact that I made back some losses by being short when the stock did eventually drop was really just dumb luck.
And, as is often the case, when you get into a bad situation with one stock all of the other trades you have on at the same time tend to suffer as well. For example, the strength (that I was shorting) in TNH made me take a look at the other stocks in the fertilizer sector. I thought, "Well, TNH is strong and POT is strengthening, maybe I should pick up some AGU 'down here' in case he rallies..." That was mistake #2. I bought AGU around 39.45-39.50 and all the stock has done since that time is slowly trend down. Last I looked, it was trading below 39.25. At least I nipped that loss in the bud.
Then, while all the excitement of the fertilizer sector had my attention, my FED short was actually WORKING. However, I was so concerned with my blossoming loss in TNH that I never added to my working FED position.
So my reasonable $150 loss from the morning grew into a nearly $1000 loss and has now settled in around -$250 for the day. It's been unpleasant.
I can't believe the market is up again!!!
I'm down $150. I was up $150. There's just no trading this market right now.
Let me share a couple of frustrations...
OMG. I bought this stock around 10am near 39.50. About 10 minutes later I was stopped out at the low of the day. Nothing new there, that's been happening consistently for the last 8 years. What IS different is the way the stock traded immediately after I was stopped out. In the past, if you get stopped out but you still like it, you could get back in. Not today with OMG as it spiked almost a half point right after the stop-out... that's how stocks trade in the new hybrid market. Poorly.
Same exact thing happened with LTM at almost exactly the same time. Go figure.
One last frustration. My worst stock of the day is TNH. I bought it around a quarter after 10. Only 200 shares because I'm currently trading small and trying to get my confidence back. So I stop 100 at a new low and the other hundred just below the figure. The first 100 I got at a fair price losing 10 cents or so. The hundred I stopped below 52 however were triggered and I was filled at 51.62. The low of the day. And of course, (because this always happens when you are in a slump) the stock ran straight up after that. Argh.
So I'm down $150. My only good trade is LVS which I've made about 40 cents on. Volume is really light today. It's probably a good day to take things easy. Can't force trades.
If you like music while you trade, check the latest Forkcast on Pitchfork. Here's the link... it's like a mixtape of the best recent music they've reviewed.
I had a wonderful weekend. So good, in fact, that I didn't think about trading at all and I didn't read any books on the topic either. My IBD was never delivered. I took that as a sign to just relax.
This morning I woke late, forgetting that the oil burner was scheduled to be cleaned. So, unshowered and unshaven I met a man who reeked of oil at the door and let him into the basement. He told me about his pets. He had a beautiful blue bird that he taught how to say, "Pretty Blue Bird!" that was eaten by a lizard that he normally kept caged. He also has ferrets... 6 ferrets.
I then had a brief conversation with my daughter. "I got socks! You got socks?" Then she showed me the wrapper of her fruit leather. "Mine is blue. Your pants are blue. They match!" Everything is amazing when you are 2.
The point of all this is that I haven't done too much morning research yet. The CFC news is worrying and, bearish as I am, I wouldn't be surprised if the market takes a hit.
We will see. Good trading!
Friday, March 9, 2007
This past week was very hard for me. I was wrong consistently. Worse yet, I recognized that I was wrong but continued to "fight the market" nonetheless. This compounded the pain of being wrong and turned it into something far worse; stupidity.
At times like these, sometimes it helps to be reflective. To ask questions. One question that has come up over and over for me recently is, why trade? Why put myself through this? It's been months since I've made real money. I'm stressed out and I'm dying the death of a thousand small cuts. Not to mention the two very large cuts that I suffered this past week...
Well, to answer that, I need to delve a little into my past. I have to remember the beginning of trading. What was life like before I began to trade?
I remember all too clearly my ex-bosses fat knuckles laying on her desk before me. She had asked me to write a memo, a menial little task. I wrote the memo and a half hour later there I was sitting across from her staring at those fat, pasty white knuckles as she ripped my little memo to shreds.
I remember getting paid $26,000 a year in my next job and having to fight (unsuccessfully) for a $500 a year raise that was promised to me. And I still remember the phone call I received from a friend of mine who had recently started trading when he told me that he had just nailed down $75,000 in one month. That's when I quit that job and decided that I would learn how to trade.
Now, just as a reference point, it is not easy to make that much money in one month... or at least, it was never easy for me. I've traded now for 8 years and have probably made upwards of $75k in a month 5 times. And I haven't made that much in a month since early 2001...
The early days, those days where I was learning were great. I was told to "paper trade" and to watch the market. I was told that it would probably take 6 months to really learn the sectors and the stocks and that I should just focus on learning and not worry too much about the money. There were hundreds of different traders in the office, but it was easy to discern a few main "types of traders". Think high school where you had the jocks, the nerds, etc. With traders, there were the retracers, the trend traders, the news guys, the freaking psychopaths... I learned quickly that I hated to lose and that I was very conservative with my trading style.
I'll write more tomorrow. This could go on for a very long time and it's late. I really need to read a bit.
Best stock: HRT $800
Worst stock: BLK -$672
26 stocks traded: 16 positive, 10 negative
Best stock: AB $820
Worst stock: SPY -$1750
23 stocks traded: 7 positive, 16 negative
Best stock: HRT $659
Worst stock: POT -$1533
19 stocks traded: 6 positive, 13 negative
Best stock: CFC $148
Worst stock: SPY -$156
7 stocks traded: 3 positive, 4 negative
Best stock: TNH $395
Worst stock: SPY -$252
13 stocks traded: 5 positive, 8 negative
Total P&L for the week: -$7277.55
Perhaps my worst week ever as a trader. Lowlights included being reigned in by the Risk Managers at my company and nearly losing all of my capital.
In short, seemed like a great time to start this blog. I already learned something just by looking at these stats. I should not fight the market. I was trading the SPY all week and losing because I was bearish and the market was rallying. It doesn't matter if those rallies were coming on no volume they were rallies nonetheless and I shouldn't have been shorting them.
I plan on doing some reading this weekend to get my head straight. When I've slumped in the past it has helped me to read books on trading. I'll report any special wisdom to the blog this weekend.
At 2:30 I was pretty short and had run my profits for the day up over $600... I was slow to cover however and now most of my profits have been squeezed away. I am now up only $125 on the day and I'm still net short as the market looks to be strengthening.
At least I'm still green...
Posted by Dinosaur Trader at 3:22 PM
Another day where the market is starting to weaken as we head towards the close.
One little piece of advice for anyone currently in a trading slump. Cut your size drastically. I'm taking about the initial size that you start positions with. And then, trade EVERY idea that you have. And, as always, cut your losses quickly.
If you stand and watch the market for too long you may never get your mojo back. That's not to say that a day off here and there isn't a good idea. It's just that when you take days off, take them OFF. Leave your desk, go take some deep breaths. Listen to the birds sing.
Posted by Dinosaur Trader at 1:35 PM
Sleepy day. Volume has been steadily dropping all week long. If today continues as it's going, it will be the lowest volume day of the week. Another low volume rally...
I'm still a little amazed this market is going up. I was really thrown a loop after the drop last week and then all the low-volume rallies this week. It's hard to trade effectively when you keep expecting the bottom to drop out.
My best trade so far today was getting short 400 TNH at around 53.85, 20 cents from the high. I screwed up on the covers though... I bought 100 back at 53.74, 52.65, 52.41 and 52.38. The stock is currently trading at around 51.15. Still, I net $424 on the trade. Since my worst loser on the day is -$169 (an overnight SPY short) I'm positive on the day. Sprinkle in a few other small losers and another minor winner and I'm up a whopping $185.
I just received a call from the home office. I don't have enough equity to carry overnights anymore. They are breathing down my neck. Cue the Wilco song "Company in My Back".
This is the first time in my trading career where I've even been on the radar of the Risk Management guys and I'm not happy about it. Need to regain my confidence and trade through this.
Posted by Dinosaur Trader at 12:30 PM