Friday, March 30, 2007

Too little, too late

Well, I couldn't save my month completely, but I got damn close.

P&L $1274

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.


tradercowboy said...

I really like how you doubled down on AGU, its something that I am still getting use to. Kudos to you for tacking on more.
I find that thin trading stocks that have a large spread are very difficult to trade in NYSE. I really depend on the open book and tape to determine how volatile a stock might be. Stocks that are over $80 are usually thin and very tough to trade. For POT, do you rely solely on technical trends in order to trade it?

Dinosaur Trader said...

Hey tradercowboy, thanks for the comment.

At this point, given how the hybrid has changed "tape reading", most of my trades are based on technical breakouts or sector moves.

In the good ole days you could rely more on the displayed quotes and try to discern from what was happening with the bids and asks which way a stock may move. Nowadays, I find this method unreliable since most stocks never show more than 1000-5000 on their quotes and there are typically hundreds of quote updates per minute. I just don't know how to keep up with the tape anymore. I think that decimalization may have increased the difficulty of tape reading as well.

Nevertheless, I trade POT mostly on technicals. I was anticipating a break below 155 today and it didn't happen. That's why I got so squeezed.