Wednesday, July 18, 2007

I Bleed, The Market Bleeds

For whatever reason, I traded like a complete fool this morning.

First off, I tried to short CPL while it ripped up.

There are a couple of things wrong with this trade. The first, shorting strength, is obvious and it's a mistake I make regularly. It's not a recipe for making money unless you see some type of topping action. Shorting into spikes because you're expecting them to "spike right back down" is a losers strategy. I'm getting it now. So, while I made this mistake I realized it and didn't get overly stubborn. I traded it twice and lost twice for a total loss of -$133. Nothing awful.

The other mistake with trading CPL is that it's just too "thin". Pre-hybrid market I found a real advantage to trading "thin" stocks because the tape was always really easy to read. Buyers couldn't hide and neither could sellers. Large "bids" moved thin stocks as did large "offers". I made a lot of money trading these stocks in the past. However, with the advent of the hybrid there is no longer an advantage to trading these stocks. In fact, there's a disadvantage because the spreads are often much wider than on thicker stocks.

Another bad trade was made in CPA. I made all of my trades in this stock between 9:45 and 10:15. Okay, now take a look at the graph... see anything? Nope. Me neither.

I made the trades in this stock for another bad reason... I told myself a story. The story went like this. TAM Airlines had that awful crash yesterday in Brazil. For that reason, people are selling TAM which I guess could have some justification. But then they went and sold GOL and CPA too.

This I felt, was unjustified.

So I got into the trade because I thought people would realize this was a silly reason to sell and buy the stock. Instead, I should have waited until there was some actual buying occurring, or until some sort of trend developed. As you can see, between 9:45 and 10:15 there was nothing but chop. And I, accordingly, was chopped.

Let's talk about a good trade.

I noticed pretty early on today that ARD was not joining in the big oil bounce that happened today. Stocks like WNR and NOV gapped down and then powered forward all day. ARD traded down and stayed down and then went into a flat base until the late afternoon. I actually bought this stock early, like around 11:00 when it first popped above $57. However, instead of panicking and selling when it dropped below $57 I held and added more when it finally popped around 3:30pm. So, I recovered from an early loss in the stock and managed to make it my best winner of the day, at $254.

Anyway, I'm never happy with losing money but I can live with $100 loss.

Here's the stats:

Best, ARD
Worst, CPA

shares traded, 16,400
13 stocks traded, 5 winners, 8 losers
total trades, 88

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