Experiment, Part 3

(Again, please forgive the sloppy post. I will clean it when I have more time.)

So, what am I going to do? I have to change. And I know of no better way of doing that right now that taking my "experiment" from today and applying it to real life tomorrow.

So, I am going to go into trades with the idea of buying or shorting them for THE DAY. If by 4pm I am still in a position I will re-evaluate and see whether or not I should hold it another day.

I will have to increase my loss limits a bit. I can't expect to buy a stock and have it trade in my favor right away anymore. Normally, I don't like to lose more than $100 on a bad trade. This assumes a position size of 400-500 shares. That's my average. So I was looking to keep my risk to .25. That just rarely happens anymore.

Not one of my trades today that would have made me money had I bought (or sold) and held to the end of the day went more than 50 cents against me (except TNH, but he's a freak). The losers all moved more than a half point from my entry.

Also, that first half hour accounted for some of the wildest swings in the stocks. In the past, I loved wild swings... not anymore. Straight up and down with no easy way to get out of positions is not a recipe for making money. So, for the first 15 minutes of the day I will not enter positions and I will be very careful to enter any position before 10:00am.

I will buy or sell stocks and give them 50 cents from my entry. If I am correct in my entry, and in a good position I shouldn't have to endure much more pain than that.

I know many people use percentages and stuff to identify loss levels. I may get there, but for now I'm sticking to what I'm used to, and that's identifying loss levels based on real dollar amounts. But I'm open to suggestions.

After the first hour or two of trading, when I have entered a bunch of positions I'm just going to set my stops and leave. I need to break the habit of trading in and out. I think I can only really do it in this way, cold turkey, by walking away. My wife, who used to be a trader, is going to watch them (just in case anything crazy happens) and call me if necessary.

We'll see what happens. It's an experiment. I'll try this tomorrow and modify it as I go along.

It's just like starting over!

Experiment, Part 2

(Excuse, in advance the somewhat rambling post... it's been a long day and I don't have time to edit much).

My little experiment leads me to believe what a lot of people have told me here for some time; you can't make consistent money daytrading this market. Actually, I think I understood it in February, it has just taken me some time to accept it.

Daytrading, as it existed in the past, is dead.

It has been killed by the Hybrid market and new fees. No longer can you buy or short a stock and easily define your loss limits (within a quarter point), place a stop there and do well. Things just whipsaw too much (perhaps exacerbated by the "sweeps") and there are simply too many pockets of illiquidity to trade as I once did. So you end up with a lot of losers because stocks chop outside of your loss limits too easily. They trade too loosely too often.

I'm not saying it's dead for everybody, I know there are still some people making good money, but it is dead for me.

I have tried to adapt. In the past, I never touched Limit orders. No one I knew did. If you wanted stock, you went market and you normally got a decent price. When you wanted out, you sold at market or your stop was triggered.

Now, you simply cannot trade with market orders. You just really don't know where you are going to get filled. You can't read the tape, it moves too fast... sometimes the quotes update 10 times IN ONE SECOND! This is crazy and I still can't imagine who it benefits. But for a market-order-using-tape-reading-day-trader it has had disastrous consequences.

I thrived in the market between 2000 and the first half of last year. Back then, in the pre-hybrid world it paid to get involved with a lot of positions. You hoped to have 65% winners at the end of the day with small losers and one or two good winners. Now, it's hard to take a "small loser."

Take CNH for example. It's a perfect example of what happens to me over and over again in the hybrid market. It was my first trade of the day:



I bought 400 shares at the opening price, 52.23. It traded up a little and so I bought a couple hundred more at 52.33. But, by 9:32 or so, the bid on the stock dropped down to 52 and only 100 shares were showing there. I had 600 shares. If I chose to sell, I'd get 100 shares at 52, and then the rest, well, who knows where!

So, seeing no rhyme or reason behind the move, I hesitated, hoping that the whip down would lead to a quick whip back up and I put a sell stop for my shares at 51.75. The stop was triggered and I was filled at 51.49 and 51.52... so I lost a straight 80 cents on 600 shares.

Back in the day, I NEVER lost 80 cents on a trade, especially if I was holding 600 shares. I'd rarely lose over 25 cents! But these types of losses in CNH are all too common for me now.

And really, I don't know how to make them stop. So, I can't make these trades anymore...

An Experiment, Part 1

My daily post today will be different from daily posts in the past.

One thing isn't different, I lost money again.

Here are the stocks I traded today, in alphabetical order, with my P&L total for each.

AB, -$31.58
AGU, -$130.39
AIT, -$23.24
AMR, -$165.91
ARD, -$3.18
BBY, -$186.41
CF, $81.07
CNH, -$188.74
GWW, -$54.39
HXM, -$117.56
KMT, -$27.51
LNN, $76.65
LVS, -$40.46
MON, -$79.88
MOS, 129.67
SJW, -$119.40
TNH, -$271.45
VNO, $131.11
UBB, -$182.81

total (net) P&L, -$1155

Here's the same list. However, this time I just calculated what I would have made in the stock had I stuck with my initial purchase (or sell) and held until the closing price.

AB, $54
AGU, $55
AIT, -$48
AMR, -$290
ARD, $489
BBY, $39
CF, $21
CNH, -$632
GWW, -$215
HXM, $0
KMT, $45
LNN, $59
LVS, -$354
MON, -$35
MOS, $140
SJW, -$13
TNH, $1350
UBB, -$192
VNO, $525

total (gross) P&L, $998

As you can see, had I just made the initial trade, and then held all day, I would have made money today. Of course, I don't think anyone really trades like that. And the results are a little skewed by the volatility of TNH. But even if I took out my big winner and big loser, I'd still be up.

Since this post has the potential to be very long (and I'm short on time right now) I'm going to break it into a couple of parts. Expect more later this evening.

Virtual Office, $403. Dow, -23.41, 13616.07.

Misstrade, $1872 on 6100 shares traded.
Evolution, -$314 on 56,800 shares traded.
Me, -$1155 on 30,200 shares traded.

With only 2 other traders besides myself reporting today, it's hard to get a read on how the day really was. One look at the indexes says it was dull, and choppy.

It's the summer. The tape is quiet, volume is extremely low and traders are on vacation. So it goes.

My daily post may not come until later this evening. Time for a bike ride.

Iron And WIne, "Boy With A Coin"

From Black Flag to Iron and Wine. Dinosaur Trader has you covered.

Black Flag, "Nervous Breakdown"

This just about fits my mood.

Insanity

You may be sick of me breaking my trading rules all of the time and then whining about it. Imagine how I feel... it costs me money.

I don't have much to say about today. I had some good trades early in ARD (short) and LAZ and AB long. However, once again, I ate those profits up with lots of small losers. So at lunch, when I walked away, I was up a little.

I went to the park for a few hours and got to enjoy some time with my wife, daughter and some friends. I had a great time, it's perfect weather here.

But when I got back to my desk at 3 I was reckless. I started buying MON when I thought he was popping out of a base to the upside in the 65.10 - 65.20 area. He never got above 65.21 but I kept buying even as he went against me for 20 cents and broke the fig. I finally washed out of the position in the 64.90s and decided it was time to short.



I got short in the 80s and watched the stock descend to the 70s. Then it popped back up into the 80s where I short more. This time, it didn't break .80... it just hung around. Then it popped up and I got out of my position at .95 losing a dime. That wouldn't be a bad loss, but for some reason I was trading MON (both long and short) with more size than I normally do. I lost $500 in the trades altogether. An awful way to end what was otherwise not an awful week for me.

Like I said in the VO post, Einstein definied insanity as "doing the same thing over and over again and expecting different results."

When I am done with this post I am going to write that quote on a piece of paper and hang it on the wall behind my screens. I need something to change the way I'm doing things around here. Because really, I'm just spinning my wheels these last few months and I'm sick of it.

One step forward and two steps back gets old fast when you have a family to support.

Here's the stats:

P&L, -$520
Best, AB $151
Worst, MON, -$752

shares traded, 36,800
stocks traded, 18, 8 positive, 10 negative
total trades, 182

Virtual Office, $1275. Dow, +85.28, 13639.00.

Misstrade, $1160 on 6800 shares traded.
Evolution, $704 on 47,600 shares traded.
Denarii, -$69 on 2000 shares traded.
Me, -$520 on 36,800 shares traded.

A mixed day for the VO.

Another day where the indexes gapped up and then chopped around. However, once again, there were some interesting individual movers among stocks among them, AB and TNH.

ET had a nice bounce day off his renegade trader loss from yesterday. I was flat all day until the last hour of trading when I threw $500 down the toilet because I got stubborn with a position.

I think Einstein said insanity was doing the same thing over and over again and expecting a different result... he might have been onto something.

One VO note: Dehtrader will be on hiatus for awhile. Just about half of the VO is on hiatus. Summer doldrums indeed!

Have a great weekend everyone. Enjoy the weather.

Ron Paul on The Colbert Report

Mojave 3, "In Love With A View"

Another gap up and chop around. Less a trend and more like an explosion. Thus far anyway... we're only an hour into the trading day.

Thank goodness for HANS. A tip of the hat to "the Fly" for that call.

Anyway, I always have tough times trading on days like these so I'm taking it easy.

Here's a song. If you're a Wilco fan you'll probably like this tune.

Dinosaur Jr., "Freak Scene"

How's this, Chud?

A Green Grinder

I would have been much better off today had I stopped trading at 10:30.

At that point I probably had a 10-2 win-loss ratio with a couple of decent winners. I was up over $1000. I recognized this and even wrote, here, on this damn blog that I was just going to chill and wait for good setups.

I can tell you this, discipline is a problem for me.

But at least I have identified it as a problem... I only came to understand this very recently.

As the cost of trading goes up and my profits have decreased it only makes sense for me to try and trade more efficiently. This, and cutting massive loss days (which have occurred about once a month recently), is really what I hope to achieve in the near future.

I gave money back in 3 stocks.

The first was CPT. Just a quick chop on 800 shares for a near $200 loss. Happened almost immediately. I took the loss and moved on. I was really pissed too... the good thing is instead of getting all vengeful I just took the stock from my screen and moved on.



The second was in CROX. This was probably my biggest winner early. I got a good short off, covered some at good prices but let the rest come all the way back past my entry. I guess I was hoping for a big break. Actually, that's exactly what I was doing... I need to stop looking for big strikes and take smaller winners here and there. Tighter trailing stops should help this problem.



The third stock I gave money back in was LNN. This was the most disappointing give-back because I broke my 3-trade rule. After making some decent money on the run-up from 34.5 to 35.5 (I actually missed the first half point of the run because it really seemed to come out of nowhere) I probably bought the stock 10 more times hoping for it to get back to the highs. I lost on probably every one of those trades. Again, there's a silver lining... it's that I kept my size extremely small. But it was no less frustrating because I lost so consistently.



My "winner" today was TNH. Funny thing is that I only traded the stock twice today and both times with only 100 shares. I just nearly made 3 points on one trade.



I bought at 100.25 and sold at 103.12. Anyway, he really held up and never came back to catch my buy limits which after that morning run were just under 101. So I missed the run in the afternoon.

Altogether I never complain when I finish green for the day so I won't. However, I need to get back into walking away now and then. Back in the go-go days I had no problem trading the first hour and then taking 3 and 4 hour lunch breaks. I used to walk the labyrinth by Trinity Church, hang out at Bowling Green... in short, I did anything besides sitting and staring at the screens all day.

I think I tend to sit here and get locked in because I am trying to make up for lost time. Since I haven't done well in many months I'm trying to make back all the money I "should have" made. This is clearly a mistake. I am aware of it now. Time to get back to the future.

UPDATE: I just realized I didn't post my stats... my stuff is down for the night so here's what I remember...

P&L $294
Best, TNH
Worst, LNN

shares traded, 24,000?
stocks traded 18? 10 positive, 8 negative?
total trades, 176?

Just guessing, but it's probably fairly close.

Virtual Office, -$3341. Dow, +71.62, 13553.97.

Me, $294 on 24,000 shares traded.
Misstrade, $136 on 1600 shares traded.
Denarii, $47 on 2400 shares traded.
Dehtrader, -$639 on 17,500 shares traded.
Evolution, -$3279 on 75,600 shares traded.

Well, it was a bloody one today.

After the first hour of the trading day, things got choppy. Choppy in the same way they were yesterday morning before the afternoon breakout. Just ugly out there.

Anyway, while it's a summer Friday tomorrow there will be some significant numbers released. Perhaps we'll have some good movement. Also, it's an expiration day.

I read a lot of other bloggers who say they avoid trading these expiration days. I find that odd because sometimes expiration days can be volatile. Volatility is a necessary factor for good trading environment in my book.

Let's keep an open mind for tomorrow. You never know!

The Machines Are Taking Over!!!

Great article on algorithmic trading here.

Hat tip to Shortdabull for bringing the article to my attention and to Musings of A Trader for posting it there.

The Go! Team, "Grip Like A Vice"

A little departure, but trust me. This song is damn catchy.

Truce

Late last evening, an emissary from the "Catifada" entered my room and delivered to me a manifesto.

This manifesto listed a number of demands, including "not moving the food bowls", "not moving the litterboxes", and "giving new toys if out of the house for more that 3 days". Besides the last demand I thought these were reasonable requests and I read further... towards the end, amidst lots of incendiary language regarding "the little one who chases and screams", an obvious reference to our daughter, was a compromise.

The "prisoner" would agree to use the litter box if he could be released from the bathroom for the evening. The "prisoner" would use the box before the release occurred.

My wife and I concurred and quickly agreed to this truce.

The truce, while on shaky ground has so far held. No new "roadside bombs" were left in the kitchen today. A new catnip-filled carrot was offered to the "prisoner" as a show of good faith and all seems well. We will see if tensions flare again. If they do, the punishment to the "prisoner" will be swift and strong.

As for trading, I've had some solid trades early today and now I'm taking it easy. I caught a nice early run in TNH, BTU, AGU and a nice short in CROX. And other smaller gains elsewhere. One complaint is that I haven't sized into any of these runs. Still, without any significant losers to note (besides one in CPT, a piece of shit stock that has now been removed from my screens) I feel I am solidly in the green.

I will now be patient and scan for solid setups. It's about closing strong instead of giving it back.

Johnathan Richman & The Modern Lovers, "Roadrunner"

My Day

Fucking Cats

Hello, my name is Dinosaur Trader and I've had bearish thoughts....

(pause)

Whew! Well, I'm glad I got that off my chest. It's important, because the last time I got all bearish, after the friggin blowup in February, it took me months to get over it... truth be told, I may not be over it yet.

Anyway, today is the worst kind of day for me. Friends and family alike will listen to the news, see that the Dow was up 187 points and ask me expectantly, "So, did you do well today?"

NO! I SUCKED! AND FOR THE RECORD, JUST BECAUSE THE MARKET IS UP DOESN'T MEAN EVERY DAMN TRADER IN THE WORLD IS MAKING MONEY!

I have some anger issues today. I'm working on it. Fucking cats. He's down there, locked in the bathroom wailing away and to be honest, I don't give a damn. I can be a stubborn prick. He can stay in there until he learns how to use that goddamn box. If you're confused by this aside, read my post from earlier today. My entire house reeks of cat urine.

Anyway, what went wrong today? I just got chopped. No big disastrous losers, just too many medium sized losers. It feels ironic to say this on a day when the Dow ripped, but I just didn't see many easy opportunities today. Check the VO, I wasn't the only one...

Not sure how to explain it but I think on some level I just couldn't believe the market was ripping so much. So every time I got long, I looked for quick exits and didn't let my winners run. More often though, I was putting my stops too close and getting stopped out. So I suffered the death of many small cuts, not the death of one fatal blow to the skull.

My best trade of the day was a UBB long right after the Beige Book came out. But even in that trade I sold early. Later I bought back and got chopped. Sigh...



My worst trade of the day was in my old friend TNH. After the 11 am run-up, I thought he'd flay the shorts by consolidating and making a new high. Eventually, this is what happened. He just dropped much lower while consolidating than I expected. What was especially frustrating is that I sold 15 cents from the low of the move... I just missed being able to hang in there and avoid a loser. But, as it was, I took the loss.

Later, after 2pm, I would take over a point out of him on the long side. So we're good again. No hate for TNH today. Just a medium loss in him, $368.



Anyway, I know how the VO did but I'd love to hear how others did. Please feel free to share how your day went via the "comment" section. And if you're interested in posting to the VO, shoot me an email.

I'm still confused how I failed to find more winners today...

Here's the stats:

P&L, -$484
Best, UBB, $304
Worst, TNH -$368

shares traded, 49,600
stocks traded, 24, 9 positive, 15 negative (there's the rub)
total trades, 327 (too much churn on a day where I never had traction)

Virtual Office, $1389. Dow, +187.34, 13482.35.

Misstrade, $2365 on 5600 shares traded.
Evolution, $385 on 64,700 shares traded.
Denarii, -$134 on 2000 shares traded.
Me, -$484 on 49,600 shares traded.
Dehtrader, -$743 on 6000 shares traded.

It was an uninspiring day for the VO.

Yes, yes, Misstrade made good money again but the sun also came up today. I hardly notice anymore.

Outside of that, it wasn't an easy day. The morning was downright choppy and that move at 10:00am seemingly came out of nowhere. Then we were back to chop until the Beige Book was released at 2. That's when the market really ripped.

Anyway, it was an impressive move. When the market moves that much, I discount volume which today, was again on the lighter side, at least on the NYSE where it about equalled the amount traded yesterday.

It's hard to tell what the market is going to do next. Perhaps the answer is right there. The market may not be ripping up thousands of points anytime too soon but after today, it doesn't look like it's about to tank either...

Time will tell.