Tuesday, November 27, 2007

Radiohead, "Jigsaw Falling Into Place"

Trading Lightly

I've been losing money lately trading the open, so today, I traded very lightly for the first few minutes. I took small profits in MBI (long) and MTW (short) but mostly watched.

At around 10:00 am, I noticed BIDU made a new high on the day, but on light volume. So, like the big trader I am, I short 50 shares at $339.

Why does it happen that on trades where you throw down small size you catch the big moves? I covered around $330 and kicked myself for not "going crazy" and shorting 100 shares.

At approximately the same time, I made a nearly identical trade in FSLR. The only difference is that I held FSLR for slightly longer and covered a few points off of the bottom.

The bounce in these two "former" leaders convinced me of the strength of the rally today and removed my bearish bias pretty quickly. The problem was that I hadn't gotten long, I had only covered my shorts. At this point, I was up around $1100 on the day.

For the rest of the day, I threw money away in dribs and drabs as I tried to get long stocks only to be shaken out and watch them go higher. Case in point, FLR, my worst stock of the day.

Truly, at around 3:00 I "knew" this stock was heading higher. It had broken the downtrend it had been in since 1pm on strong upside volume. The fact that I couldn't get in, add to and hold my position highlights perfectly what is currently wrong with my trading.

In fact, I traded FLR so poorly that it ended up being my worst stock of the day as I lost $152 in him. Here are my trades:

14:28 Buy 200 @ 133.50 (200)
14:29 Sell 100 @ 133.25 (100)
14:33 Sell 100 @ 132.50 (flat)
14:58 Buy 100 @ 132.90 (100)
15:04 Buy 100 @ 133.14 (200)
15:05 Sell 200 @ 132.80 (flat)
15:07 Buy 200 @ 133.19 (200)
15:08 Sell 100 @ 133.17 (100)
15:10 Sell 100 @ 133.43 (flat)

The patience thing... I still need big work there. Clearly, on my first trade I was too early. Trading the way I do, I should never take a point loss on a stock. However, I was trading with very small size here so I was trying to trade with some conviction.

Pretty much, you can see me going crazy there. The worst thing is that it closed at $136.21. What can I say? I just fucked it up. I'm getting in and out of stocks too much when often I am "right" about what moves they're going to make. I'm simply getting shaken out.

I think reviewing my trades each day will start to help me regain confidence in the decisions that I'm making.

And the big silver lining of the day was that I didn't add to a losing position once. This really helps positions stay "light" psychologically. I mean, when you start adding to a losing position, you're getting attached to it and "hoping" which is exactly what you don't want to be doing when you trade.

Here's the stats:

P&L, $626
Best, BIDU $423
Worst, FLR, -$152

13,400 shares traded.
16 stocks traded, 7 winners, 9 losers

Virtual Office, $4880. Dow, +215, 12,958.44.

Dehtrader, $988 on 5590 shares traded.
Me, $626 on 13,400 shares traded.
Akalawoo, $442 on 6 contracts traded.
Evolution, $433 on 65,200 shares traded.
Wincity, $48 on 100 shares traded.
Denarri, -$32 on 200 shares traded.
OBAT, -$125 on 16,400 shares traded.

I'm confused.

I mean we have volatility today yet the VIX was down over 2 points. We also had decent volume with about 1.6 billion shares traded on the NYSE, with over 1.1 billion of that to the upside. Score one for the bulls.

But there is something nagging me about this market. Never have I been so correct on which way the market is going to move but felt so powerless to profit from those moves.

Whereas in August the market volatility yielded traders gobs of money, this volatility has a different feel altogether. Why is this market so difficult to trade?

I blame the robots.

Humans don't bid the futures up 10 points in 10 minutes. It just doesn't happen that way without some type of news event. Robots however, are fearless. If their "program" or whatever, tells them to buy futures, they buy, stupidly, spiking the market this way and that.

I've said it many times before. Fuck the robots. Then again, who knows? Maybe in 20 years robots will send my kids to college.

Anyway, it was a pretty good day for the VO. But man, you just know Dehtrader wanted $12 more dollars...

Strong Bounce

In fact, strong enough that I'm done being short for awhile.

I caught nice downside moves in BIDU and FSLR. However, seeing them all bounce so strongly leads me to believe that there's a lot of money on the "buy side" of the market today that will be buying the dips. That means trade will be "squeezy."

Better to be the squeezer than the squeezed.