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.

Virtual Office, $7324, Dow, -34.95, 12,466.16.

Misstrade, $5368 on 8800 shares traded.
Evolution, $1287 on 30,000 shares traded.
Me, $1267 on 19,400 shares traded.
OBAT, $607 on 12,400 shares traded.
Denarii, $198 on 1800 shares traded.
Wincity, no trades.
Retardo, no trades.
Akalawoo, no trades.
Dehtrader, -$1403 on 430 shares traded.

What a crazy day. I mean, this market reminds me almost exactly of the market we were trading in August.

In the morning, even though the indexes weren't showing it, stocks were acting like crack addicts. Check out the fertilizers, the coals, the metals... heck, even the utility stocks were volatile.

Volume was great, as we traded over 2 billion shares on the NYSE. The VIX rose, although, once again, not as much as I'd expect. It's currently up .77 on the day at 24.11.

Anyway, like I said yesterday, once volatility on this scale enters the market, it doesn't just leave. In August, we got the rate cuts and then everyone went on their summer vacations and September was pretty lame. Here, in January, we'll get the rate cuts, but I think people will be sticking around.

Should be a fun winter. A trader can hope, right?

The Education Of Ben Bernanke

Huge NY Times magazine article.

Clarence, "the rodent of stock market volatility" Returns!

Morning Articles & A Video

Thank you "Ken Doll in Chief," for the inspriring originality there...

I thought this quote from IBD on buying stocks in this environment was perfect.

“Rather than try to find the one prince among 7,000 frogs, you'd be better off investing your time in analyzing your trades from the prior uptrend. Try to spot recurring errors in your method. In this way, you'll be better prepared when the market turns around.”

• SIVs Losing Value Rapidly
• Intel Reports Earnings
• Middle Class Freaks Out
• GOP Tossup
• FDA Approves Clones For Food. Who Does This Benefit???
  

Good Morning

Time: 6:35
Mood: Positive

Romney Wins Michigan Primary

Ken dolls everywhere gather to celebrate.

NOTE: Guiliani ran 6th with a strong 3%. Ron Paul, who was not allowed to debate in NH, ran 4th with 6%.

All of the major networks need to apologize to Ron Paul. The American people should pick the contenders in a Presidential race... not have them christened by the media.

Bob Dylan, "Chimes Of Freedom"

Slow And Steady

I tend to hate trading gap-down/gap-up days on the open. So I exercised a bit of restraint and discipline and stayed away for the first 10 minutes of chop.

My next 3 trades were all solid winners. I short AGU twice and made over 50 cents the first time and 40 cents the second time. My third trade was similar as I made a straight point shorting MOS. Thing is, since I'm still taking it easy, I was only trading 100 shares.

So while I didn't make huge money on these trades, they were successful. The more I make good trades and gain my feel for the market again, the more confidence I'll have. In time, I will build my size again and the money will come.

Anyway, I short AGU because he opened and tried to trade up through the low made yesterday afternoon. So when he traded above $70, I thought he would run into resistance because the market was so weak. You can see it here on the 30-minute graph.



My best stock of the day was COH. I'm really liking this stock lately because it trades fluidly and it hasn't been as volatile as the other stocks I normally trade so it's been a good stock for me to watch. I short him when he broke the opening range low and made a little money. However, I made more on the afternoon long.



I was looking long even though the market was getting smoked because the stock stabilized after some heavy down volume right around noon. After that, it started to show good volume bars on the upside and weak volume whenever it traded down. Also, TIF, another specialty/high end retailer was showing signs of life.

My worst stock of the day was CNX. This was a simple pair trade gone wrong. I was watching the other coal stocks go negative on the day and short a little CNX thinking it would play catch-up around noon. It did not.



I could blame myself for trading in the middle of the day. However, it wasn't a big disaster. I took the loss and let it go. As it turns out, I should have kept watching because it dropped sharply in the afternoon session.

Anyway, another good day of confidence building and learning. I'm getting my feel back.

Here's the stats:

P&L, $295
Best, COH, $144
Worst, CNX, -$119

11,800 shares traded.
10 stocks traded, 7 winners, 3 losers.

Virtual Office, $2614. Dow, -277.04, 12,501.11.

Misstrade, $3246 on 4000 shares traded.
Denarii, $624 on 400 shares traded.
Me, $295 on 11,800 shares traded.
Wincity, $84 on 350 shares traded.
Akalawoo, no trades.
Retardo, no trades.
Dehtrader, -$224 on 1770 shares traded.
Sanglucci, -$441 on 3400 shares traded.
OBAT, -$970 on 12,752 shares traded.

Wow, another bloodletting in the markets.

My father called me today and asked me if he should be worried about his portfolio. That means the market is starting to worry the "common man" who normally cares more about his golf game, or favorite football team.

Should the "common man" join the institutions in selling this market, a new element of fear would be thrown into the mix.

I mean, I imagine that demographically there are a lot of baby boomers who are retired, or close to it, who are wondering if they want to sit through another bear market.

When you get really, really old, why not just let your money grab 5% in some fixed income investment instead of chasing the 8-10% historical average that the market provides? Is that 3-5% extra worth the risk when the financial system looks like it's about to melt down, an idiot runs the country, and a bunch of clowns are trying to supplant him?

I'm thinking no, but then again, I'm not old yet.

Anyway, volume exploded today after yesterday's mediocre levels. We traded over 1.8 billion shares and the VIX ran up a bit, .53 to 23.43.

I found the VIX interesting today. I would expect it to run more on such a down day. Also interesting is the fact that one of the more disciplined traders in the VO, OBAT, had a big down day. This just shows how damn hard trading is... everyone has their dog days.

Let's see what happens tomorrow. Earnings season is upon us. The volatility may just be starting.

Morning Articles Of Note

• Citigroup Posts Record Loss
• Biofuels... Europe Ahead Of The US Again On Green Policy
• The Commodity Boom, it's different this time. Hey, at least there's no inflation!
• When I'm 81, I'll be retired.
• Jimmy Carter: I Got What America Needs Right Here.
  

Citigroup: Net Loss of $9.83 Billion & $22 Billion In Writedowns

And then it trades higher...



Oh good. Back to reality.



NOTE: C also cut its quarterly dividend 40%.

Good Morning

Time: 6:44
Mood: Guilty (I snoozed)

The Byrds, "I Wasn't Born To Follow"

Building

As you know, I woke up this morning in a good mood. I wasn't just in a good mood, I had been anxious all weekend to trade. I have to say, it has been awhile since I was so motivated to trade.

Unfortunately, when I opened my software, I had a few problems. I won't bore you with them, they have to do with my transition. But basically, I couldn't trade early.

So I barely traded. Because I could fit it all on one screen, I decided to cut and paste my order window, for your entertainment. There it is.



As you can see, I'm trading with very light size still.

Anyway, I had a decent day. I was very happy about my trades in COH, both sides.



My first trade came right around 10am, when the stock rallied hard off the lows up near the opening price. I figured it may hit some resistance, and with other high end retailers getting spanked (TIF, ZLC) I felt pretty good about the trade. So I went size and "smacked" the stock down with a 200 share short order.

I covered 100 at $26.11 because I still have remnants of suckiness. My original plan had my stop up at $26.30, or over the opening range high of the morning. For whatever reason, I got nervous and covered half. Of course, I kicked myself immediately afterwards as the stock broke the figure and headed below my original sale price.

Anyway, you can see what happened on my order screen. When I covered the 200 shares around 12:25, I meant to only cover 100 but entered 2 orders accidentally. A total learning mistake.

I also caught some of the move on the way back up after 2pm. This time, I "sized up" with a 500 share order and a 100 share add. As I get more comfortable with my software and the market again, this will be my normal position size for most stocks.

My worst trade of the day came close to the close in DSL.



At around 3:40, DSL broke its downtrend on the 5-min on huge volume. I bought 300 shares a few minutes later. Unfortunately, the stock topped out and rolled. I placed 3 separate stop orders in the stock, one below the green bar that broke the downtrend, one below the prior 5-minute bar, and one at the low of the afternoon. Each of them were hit and I took the loss.

Despite my low volume and P&L total, today was a great day for me. I took a lot out of my trades and felt very in control and emotionally stable. I mean, I didn't get emotionally involved in any one trade... I entered, set my stops, and for the most part, let them work or fail.

I'll be in bed early again and hope to wake and do more research tomorrow.

Here's the stats:

P&L, $149
Best, COH, $162
Worst, DSL, -$65

8 stocks traded, 5 winners, 3 losers
4800 shares traded

Virtual Office, -$3637. Dow, +171.85, 12,778.15.

Me, $149 on 4800 shares traded.
Dehtrader, $102 on 1100 shares traded.
Wincity, $56 on 650 shares traded.
OBAT, $32 on 16,800 shares traded.
Retardo, vacationing
Akalawoo, no trades.
Denarii, -$25 on 600 shares traded.
Sanglucci, -$492 on 4000 shares traded.
Misstrade, -$640 on 1600 shares traded.
Evolution, -$2819 on 92,600 shares traded.

It was a slow, low volume, low volatility day in the market. We traded just over 1.4 billion shares on the NYSE and the VIX dropped .78 to 22.90.

It's like, over the weekend, people forgot that the market is going to zero, and decided to come in and buy stocks today with very little conviction. This created a very wishy-washy type of day.

But despite the overall trading malaise, there were some ridiculous moves made in the Agricultural and Fertilizer sectors. These sectors just keep on giving volatility to stock traders.

Meanwhile, the VO basically got smoked. You'll find that in this type of trading environment that the cream really does rise to the top.

More on my "huge" day later...

Lindsay's New Digs

I'm guessing her new vlogging gig has something to do with political culture and events. That's cool, she can still do nude scenes now and then...

Au Revoir, Lindsay!

Lindsay has moved on.

One can only hope that her acting career fails and that she ends up in b-movies doing sex scenes, sooner, rather than later.

Kidding, Lindsay! (As if she reads my third-tier blog.)

People Hoarding Money, Food

It's an interesting coincidence, but the last time personal consumption declined was when "Bush, The Father" was our president back in 1991.

From the article: "...the country may be experiencing a rare decline in personal consumption, not just a slower rate of growth. Such a decline would be the first since 1991, and it would almost certainly push the entire economy into a recession in the middle of an election year.

There's something about the Bush family that just doesn't inspire confidence in regular people. Check the full article, below.

Americans Cut Back Sharply On Spending

Good Morning

Time: 6:30
Mood: Positive