Tuesday, June 19, 2007

A New Approach, But... Not Really

At 9:30am I slipped the Skygreen Leopards into my disc drive, leaned back in my chair and watched my screens blink madly at me. I imagined them angry at me for not engaging them. They must have wondered why I wasn't cursing at them.

But I was impassive and watched CNH with a bit of amusement as I imagined all the traders who got their balls ripped off in him trading the open. It made me feel smart. What a freaking lunatic!



For my first trade of the day, I shorted 100 shares of AMG at 129.73, this was at 9:46. As you can see, I didn't have to endure much pain in this trade, it worked in my favor almost immediately. I only threw in 100 shares because although it looked short term overbought I thought it possible he may get all the way up to 131 and I didn't want to risk too much right off the bat.



Anyway, I covered at 10:00 at 128.57. I'm still not sure if I should have. I mean, the first big question I need to answer about this new style is whether or not I should actively cover, trail stops down, or just leave my original stop in. In this case, ultimately, the stock went lower on the day.

It's already late so I can't get into everything about my day (I'm waking super early again tomorrow) but there were a couple of other trades that bothered me and that I didn't handle well.

The first was SPG which was my biggest winner of the day.



I bought 500 at 96.13 and figured if I put my stops just below the low of the day that I'd be risking about a half point. On the daily this stock has been crushed because it's a REIT and I guess it sold off with the rising interest rates. Anyway, I sold out early. 100 shares at 96.18, 200 at 96.37, and 200 at 96.85. But all of these were nervous sells. I mean, I was never as much as a dime out of the money on the trade but I was nervous whenever the market looked like it was weakening and sold really, because I was scared to lose.

It gets worse. Check out this beautiful graph for AB.



At 11:24 I bought 300 shares at 85.10 just before the breakout... right before the stock ripped straight up for 3 points. But guess when I sold... at 11:28 at 85.18. I really wanted to lock that 8 cent gain in... awful.

Finally, I get to my big loser on the day, CF. I short 500 shares at 56.50 at 2:20. When it broke the lows from 12:30, I thought it could break and follow the downward path that TNH, another fertilizer stock, was tracing. Anyway, 2:20 was basically the afternoon low on the S&P and the stock followed the futures up and squeezed me out at 57.15 for a $300 loser.



So anyway, I lost money. But I realized something that explains the title of this post. The way I've been trading for the past few months is just wrong. Everyone who has told me I was overtrading was exactly right. I am churning positions when I really don't need to.

I picked some good stocks today and had I let them run instead of getting nervous and covering, I would have made good money. I think it's a matter of readjusting and regaining confidence that I am actually buying stocks at decent levels. I mean, my entries weren't the big problem for me today, it was my exits.

It's the old rule, "Let your winners run".

What I realize is that this isn't really a huge change to my trading style. It's just calming it down... a lot. I don't need to reinvent the wheel, I just need to let the old wheel roll a bit and gain momentum and maybe it won't fall over so much... it's late and I'm going to let that corniness about the wheel slide. Hopefully you understand what I mean.

Oh, and GO LNN! Beat and raise! Beat and raise! Please! I held into earnings.

Anyway, here's the stats:

P&L, -$102
Best, SPG, $193
Worst, CF, -$297

shares traded, 9600 (about a third or a quarter of a "normal" day for me)
stocks traded, 9. 4 positive, 5 negative.
total trades, 78

4 comments:

Woodshedder said...

Dino- now you are getting somewhere.

And remember- it is probable that one could enter random stocks at random times and still make money in the long run if he has a good exit strategy combined with a good strategy for managing risk. IMO, entry is a small part, maybe 25% of the overall strategy.

I went through the same psycological mind f### as you, back when I left the VO. I was churning and burning. What happens after a big losing streak is that you get so scared of losing more that you can't stomach even the least bit of drawdown.

I think you've realized that now.

Now is probably where you start trading small, at least on entries, and pyramiding. Ride out a few drawdowns with 100-200 shares, get use to the feeling, realize that you can come back from it, and then trade size again.

Daniel said...

your blog is ostensibly about finance, yet it's hit my google blog search feeds not only for brightblack morning light but also skygreen leopards! preach on...

Dinosaur Trader said...

Wood,

Thanks, I hope you are right. It's all about gaining the confidence that I'm making the right decisions. Trading less will make it more likely that I really look hard at each trade and understand better what I'm doing.

-DT

Dinosaur Trader said...

Daniel,

I am a big fan of good music. I hope you find more here to your liking. This blog is about stock trading but in many of the posts, you'll find plenty about life and music.

Thanks for reading. Tell all of your music loving friends!

-DT