Thursday, April 24, 2008

Score One For "Old DT"

(long, rambling, not properly edited post alert!)

So I've spoken in the last couple of months about the trader that I used to be versus the trader that I want to become. But just in case, for whatever reason, you somehow overlooked what's happening here, I'll briefly summarize.

"Old DT" was the DT of the last 9 years. I was a very aggressive prop trader, taking whatever the market would give me, whenever it would give it to me. My game was mostly one of managing risk and hoping for gains. And it worked, quite well, for a very long time. Even last year, my worst year, I averaged about ten grand a month. However, once I dug a little deeper into my year, I realized that more than half of my gains came within only a few weeks in August. For the rest of the year I was mostly churning, making a little money, and getting very frustrated.

I blamed the hybrid market for much of my trading distress and I think that's fair... the mechanics of the market completely changed and so adjustments were necessary. However, I was slow to change and I haven't really been able to adapt. In addition, with all the new NYSE fees, my commissions went up drastically. So why fight it? Why trade a billion shares a day when my margins have been squeezed?

I figured it was time for a real shift in my style. That whole process took about a year. I'm just too old to want to fight the market and adapt to its new focus on super-speed. I like making a little money each day... that I can handle. I don't like having the drawdowns. That was something I never had to deal with pre-hybrid with any kind of regularity.

I know some new traders who love the hybrid... but for the guys who learned trading with "teenies" and "bids stepping up" it's been difficult. Many "old school" traders have struggled with the changes.

Anyway (this post is already way too long) the thing is, today was just one of those days where it paid to take extra risk and not necessarily wait for perfect setups. Sure, they were out there, but it was a day to trade sector momentum. When whole sectors trade in lockstep, irrationally, as the agriculture and fertilizer stocks did today, it sometimes pays to just jump in and get dirty.

So my best trades today were catching the bottoms in CF and MOS. I made a few points in each. Now, since I don't trade like this anymore, I only had a couple hundred shares of each. So my feeling is, on days where there is wild shit happening, I still have to throw down "old DT" style with smaller size. For the rest of the time, I'm going to stick to the calmer, more calculating, "new DT."

The problem with the "old DT" trades is that there's not much to discuss... it's more a "feel" game. CF "felt" overdone this morning when he bladed down below $136... there was no setup. It was a matter of playing a change in momentum... of sellers getting exhausted and bottom pickers moving in.

So I'll just discuss one "new DT" trade that I took in GS. This was an HCPG watchlist play. They were looking for a run to the $185 level.



As you can see, the stock based a bit around $182.50 and broke out. I didn't get involved because there wasn't good volume trading. However, once he moved over $183, volume came in, so I bid and hoped for a pullback. The guy came in, just under $183 and then ripped for the rest of the day. So here there was a plan, based on the daily chart in conjunction with the intraday, that worked out. Very specific, very controlled.

So I have this love/hate relationship with the "old DT." Last Thursday, for example, "old DT" lost $1400 trying to catch a top in CLF. The difference is that last Thursday there was no "juice" in the market, and CLF was acting completely different from the rest of the metals. So what I need to do, is pick my spots better for when "old DT" is gonna come trade. The "new DT" is gonna trade every day, and try to get the consistency back. With the consistency (which is already improving drastically... I've had 11 green days this month, and 6 down days) will come confidence. Then I'll start throwing size into my trades again.

Rambling, I know, but I'm not going back to edit that shit. Apologies...

In other news, the summer people are already starting to show here. My "neighbor" (he hasn't been in his house since last August) showed up today with his goddamn dog. It's out there barking right now. I hate dogs. But really, I hate owners who let their dogs out in their yard to bark all night.

If any of you happen to have a dog, and you leave it outside at night, and it barks, just let me know what that's all about, so I can better understand my neighbor. Perhaps if I understand why people do that, I'll hate him less and not shoot his dog.

Here's the stats:

P&L, $932
Best, CF, $665
Worst, BG, -$96

14,600 shares traded.
11 stocks traded, 6 winners, 5 losers.

NOTE: I just went through and realize that I've had 3 big down days this month that account for about $4000 in losses. I've only had one day where I was down over $500 and came back... so maybe I should really just stick to a -$500 daily loss limit. If I'm having a good day, it normally starts good right away.

10 comments:

Bluedog said...

Excellent post, DT. The fact that you're making $$$ in this market shows you have adapted. The dinosaur WILL survive. :) Now it's just a matter of fine tuning. Thanks for sharing your trading strategy. It's always interesting to see the reasoning through a setup. I was tracking JRJC today and almost bought at the break of $18.15 when I had a meeting to run to. If you have any setups for tomorrow that you're watching you should post them.

Cheers,
BD

PS, I'm drinking a dark & stormy now. It's amazing. You should go to my blog and watch how to make one. It'll help with your frustration with the barking dog.

Dinosaur Trader said...

BD,

I'll check out the "dark and stormy." Sounds good, though I don't drink much anymore... screws up my surfing!

2 days in a row of dawn patrol for me. With the sun rising at 6am right now, I'm shot.

-DT

Bluedog said...

They're pretty good, you should try one!

That's good you're getting your surf in. It's been pretty flat here lately except during the middle of the week when I'm at work, of course. haha.

Do you get on Wallstreak at all anymore? I've been on the past few days before work and haven't seen you.

-BD

OBAT said...

Your post takes me back to the good old days where you don't have to worry about getting hit with 20-30 cent slippage on your stops. You can come out with small losses even if you chase trades and succumb to other bad habits.

Nowadays you got to be calculating and patient. You got to combine charts, sector movements, market direction, and volume like what a real trader does. This change sucks, but maybe it's a blessing, because it forces you to learn really learn how to trade.

HPT said...

Nice post DT. We got some work to do. Sang and Evo, you listening?

Dinosaur Trader said...

OBAT,

Yeah, that's the thing... you could get away with more stuff in the old market because it was 20 times easier to control risk. The biggest change in the hybrid is the inability to control risk... stocks slip 30-60 cents through your stop and then bounce right back... so the temptation to not respect your stops is gigantic and can lead to bad judgement.

-DT

TraderCaddy said...

I really liked the market in the '80s and early '90s when changes took weeks to develop and you can get on and off without having a stroke. I loved trading the old Fidelity Select funds based on hourly trades when there were unlimited trades allowed for $25. There was a pricing lag of about 30-45 minutes on some of them and it was like growing a $$ tree. I had about an 80% win rate and I was actually having fun. A chimp could make $$.
Now those were the good old days.

Dinosaur Trader said...

TC,

That goes back further than my experiences, but it's heartening to see that old guys like you can at least still trade this market too. :)

BD,

I don't go to Wallstreak anymore... too many permabulls for me.

-DT

FX said...

Great post, you should do more of those unedited long posts.
Now when things are kicking back in nicely you should consider changing name, Dinosaur doesn't fit you so well :)))

When you lose much in a day it's just pain and torture, a lot of unnecessary feelings so better to stick with comfortable stop for a day, IMHO.

Dogwood said...

Since no one else addressed it I will. Shoot the dog. Any owner that allows their dog to stay outside barking all night is not a responsible pet owner.