Experiment, Part 2

(Excuse, in advance the somewhat rambling post... it's been a long day and I don't have time to edit much).

My little experiment leads me to believe what a lot of people have told me here for some time; you can't make consistent money daytrading this market. Actually, I think I understood it in February, it has just taken me some time to accept it.

Daytrading, as it existed in the past, is dead.

It has been killed by the Hybrid market and new fees. No longer can you buy or short a stock and easily define your loss limits (within a quarter point), place a stop there and do well. Things just whipsaw too much (perhaps exacerbated by the "sweeps") and there are simply too many pockets of illiquidity to trade as I once did. So you end up with a lot of losers because stocks chop outside of your loss limits too easily. They trade too loosely too often.

I'm not saying it's dead for everybody, I know there are still some people making good money, but it is dead for me.

I have tried to adapt. In the past, I never touched Limit orders. No one I knew did. If you wanted stock, you went market and you normally got a decent price. When you wanted out, you sold at market or your stop was triggered.

Now, you simply cannot trade with market orders. You just really don't know where you are going to get filled. You can't read the tape, it moves too fast... sometimes the quotes update 10 times IN ONE SECOND! This is crazy and I still can't imagine who it benefits. But for a market-order-using-tape-reading-day-trader it has had disastrous consequences.

I thrived in the market between 2000 and the first half of last year. Back then, in the pre-hybrid world it paid to get involved with a lot of positions. You hoped to have 65% winners at the end of the day with small losers and one or two good winners. Now, it's hard to take a "small loser."

Take CNH for example. It's a perfect example of what happens to me over and over again in the hybrid market. It was my first trade of the day:



I bought 400 shares at the opening price, 52.23. It traded up a little and so I bought a couple hundred more at 52.33. But, by 9:32 or so, the bid on the stock dropped down to 52 and only 100 shares were showing there. I had 600 shares. If I chose to sell, I'd get 100 shares at 52, and then the rest, well, who knows where!

So, seeing no rhyme or reason behind the move, I hesitated, hoping that the whip down would lead to a quick whip back up and I put a sell stop for my shares at 51.75. The stop was triggered and I was filled at 51.49 and 51.52... so I lost a straight 80 cents on 600 shares.

Back in the day, I NEVER lost 80 cents on a trade, especially if I was holding 600 shares. I'd rarely lose over 25 cents! But these types of losses in CNH are all too common for me now.

And really, I don't know how to make them stop. So, I can't make these trades anymore...