Tuesday, May 13, 2008
Respecting Stops
I think most of the time, when traders say they need to respect their stops, they're talking about the stops they place to control downside risk.
They'll set a stop, say, at $50, and if the stock comes down to $50.10, they then move that stock down to $49.85 or something, to give the position "more room." Then, some traders even add more...
I am, of course, familiar with that particular trading problem... I've been there. However, I'm having a slightly different problem with my stops lately.
Lately, when I'm in a winning position, instead of following the stock up with a stop, I cancel my stop and sell at market, only to watch the stock continue to move in my favor. I think this comes from my current "confidence crisis" because I'm so afraid the stock is going to reverse and take me out at a loss, that I sell and take whatever profits I have.
I know this is not unique.
I think that ultimately, it's a better problem to have than cancelling stops on the way down and not being able to accept losses, only to watch them mount. However, it may be equally frustrating.
I had a few cases today where I sold out of positions instead of respecting my stops... with longs in YGE, MLM and GWW. Had I simply respected my stops, I'd be green, instead of slightly down.
First, MLM. I showed good patience not getting involved directly at $115, because I suspected a hosejob. I bought at $115.21, when it emerged from the base. The position immediately looked good, because it got some volume right away. This was an HCPG watchlist stock, with the target as $116. I checked the daily and saw that back in February, it gapped down from $116.96 and so I thought if it had some mojo, that it could even fill that gap. So I placed a sell limit at $116.24 and watched to see what would happen.
At $116, it hit some turbulence... but really, in retrospect, very, very minor turbulence. Still, I was afraid the stock would reverse back to my entry, so I took my $60 gain instead of respecting my stop and my target. Perhaps I was so afraid to lose my gains because this trade basically brought me flat on the day... still, had I respected my target, I'd be up $28 on the day instead of down $14.
The next stock, GWW, was one from my watchlist. I was expecting a run to $89. Again, I bought at a very good time, and was not really in danger of losing money on the trade.
As you can see, the stock ran straight through $89, picking up volume along the way. It ran easily up to $89.50 before taking a breather and forming a tight base between $89.35 and $89.50.
I save the most heartbreaking for last. YGE was another HCPG play and a run to $24 was expected. While the stock jerked traders around early, it cleaned up nicely into the afternoon. I think the main problem I had with this particular trade was that it came in the middle of the day... a time I don't like to trade actively.
As you can see from the graph, I completely fucked up this gem. I kept buying higher and getting more and more nervous... Really annoying to look back at that and think about what could have been.
Meanwhile, I have him blogrolled, but if you want to see how a trader at the peak of his game handles some of these same trades, go check out Wall Street Warrior.
Anyway, today was a battle. But really, I only have myself to blame for losing money in KSU, a complete waste of a stock. I need to avoid losing money in shit like this...
Bottom line, if I can have more bad days like this, where I lose only $14, I'll be a happy trader. Despite my poor performance, I can take some positives out of today.
Here's the stats:
P&L, -$14
Best, YGE, $249
Worst, KSU, -$170
13,600 shares traded.
10 stocks traded, 5 winners, 5 losers.
Virtual Office, -$1272. SPY, +.05, $140.51.
Ainkurn, $282 on 300 shares traded.
OBAT, $230 on 11,000 shares traded.
Tokyo, $135 on 1115 shares traded.
Retardo, no trades.
Me, -$14 on 13,600 shares traded.
Timmay, -$450 on 600 shares traded.
Sanglucci, -$1455 on 35,000 shares traded.
Still a quiet market out there, but with significant movement in energy names... in fact, today kind of felt like the 'ole, "sell financial, buy energy, ags and commodities" play from earlier this year. Only problem with that is that the ag names mostly dropped...
Also, FLR knocked the cover off the earnings ball ripped, creating "pin action" rallies in SGR and JEC.
My real office was at 50/50 again... the VO got a little smoked. However, score one for the kids from Mississippi. Perhaps in the ultimate irony, when I'm poor and they're rich, we'll trade houses or something... developing...
Anyway, it's that day I hate... the house is about to be overtaken by ravenous 3-year olds since we're hosting "playgroup."
Have you ever been to one of those drive-thru safaris at a theme park? You know the kind where a wild group of Baboons run out from a cluster of trees to rip the headlights off your car? Playgroup is like that... so I need to get the heck out of here... However, I'll have an extensive daily post up later this evening.
Free And Legal Music
Back in the early 90s, I liked Nine Inch Nails. I haven't bought an album of theirs since The Downward Spiral, but I'll listen to the new one, because it's absolutely free.
Check it out.
Keeping Perspective
After the cyclone in Mynamar and now the earthquake in China, your "quiet boring life" doesn't seem so bad, huh?
You never know when your "quiet boring life" will be turned upside down, so these kind of events should serve as a constant reminder to be thankful for what you have, when you have it. Perspective is all important.
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