Wednesday, January 16, 2008

I Love Limit Orders & Robots

For months, really since the beginning of the Hybrid, it has been clear that market orders are a dead end. Not only do you incur larger fees when you use them, but you can pretty much guarantee a bad fill.

With my old company, I was perhaps a little too used to my software and I had a hard time changing my habits of entering market orders.

Since I've been forced to use new software, I set up hot keys with limit orders and have worked to use them almost exclusively. Incidentally, on Friday of last week when I lost over $600, my limit orders were disabled and I had to use market orders all day. I'm not saying that's the only reason why I got smoked, but I bet it played a small role.

I'm finally getting used to limit orders and how to trade with them.

Okay, now about my day. I was having a very slow morning, but also a profitable one. I was entering small trades and consistently making right trades. I was up a couple hundred dollars but more importantly, my win/loss ratio was excellent. That's just the type of thing that builds confidence.

Anyway, that's when I noticed the massive carnage taking place in the fertilizer stocks.

After trading so conservatively all morning, I was loathe to take risk and lose my hard fought profits, modest though they were. However, I also realized that I'm not going to make money taking 15 cent trades with 100 and 200 share lots.

So I seriously fought myself but entered an order to buy 200 shares of AGU and was filled at $61.61. The stock ticked lower. However a brief scan of the other ferts showed them all bouncing. I sold 100 shares at $61.44, but then bought 300 at $61.36 for a total of 400 shares. As it turns out, the low of the day was $61.26.

I sold 200 right away with limit orders up in the $61.70 range. And when the stock pulled back again without breaking the low, I added another 400 shares at $61.52. So I had 600. I sold most up at $62.20 before it pulled back below $62 again. I missed the run from $62 to $64, mostly because it ripped on pretty weak volume.

Anyway, it was a solid trade, I made $490 in the stock. It was the first volatile trade I've been involved with since I moved to my new company. Also, I finally added some shares. Trading with 100 shares is fine, but you really need to catch big moves for the dollars to add up.

My favorite trade of the day was in PCR in the afternoon.

I was watching the futures bump against a trendline that had been in place for the last couple of hours. Volume was building. PCR had been in a tight base since noon. When it painted red candles, it did so on low volume. So I thought, should the market pop he was a good candidate to buy. I picked it up at $37.25, right before it ran a point.

Today I focused a lot of volume. Back when you could read quotes, "tape read," traders relied on bid and ask sizes to tell them where the volume was and where it was going. The Hybrid Market has rendered that strategy dead. So watching the volume bars has become that much more important. It's really a traders only indication that there is interest in the stock. PCR showed good volume the entire move. That gave me the confidence to hold.

Anyway, this has been a rather rambling post so I'm just going to let it die. I feel good about having a good day. It was my first in over a month.

Here's the stats:

P&L, $1267
Best, AGU, $490
Worst, PEG, -$102

19,400 shares traded.
21 stocks traded, 15 winners, 6 losers.


Sanglucci said...

heeeeeeeeeeeeee's baaaaaaaaaaaaaaaccckk!! haha nice day DT!

Ragin' Cajun said...

nice trading!

Dinosaur Trader said...

Thanks, guys.


Jawbreaker said...

Good trading DT. Your energy is much better also. - tony

ainkurn said...

good to see you back in the game. i can't believe that you now love robots, what's the deal? I barley edged you out today with right at $1,600 on 6 trades. way keep the VO on track dino.

tradelikemike said...

Good to see that you are back on track.

Speaking of robots, any time I enter more than 5000 shares at a time I'm instantly pennied. It's driving me crazy. Damn algo programs.

Dinosaur Trader said...


C'mon now... I don't really love robots. I was just trying to fool them. And listen, if you want in on the VO, send me an email.

Same for you, (size player) Mike. But yeah, the algo programs suck. Damn astrophysicists should be studying stardust, not stocks.


tradelikemike said...

Thanks for the invite. The problem is much of my trading is centered around the gamma of my options positions. The results would be skewed because of it so my results would be misleading. Although I do scalp from time to time intraday.