A Trade In SPY

Man, last week was so tough, it was difficult to find a trade that I wanted to highlight.

On Friday, I lost money. However, before I lost money, I was actually up decently. At one point, I was even top dog in the RO.

It was a brief moment.

What got me there was a long trade. I had been watching the $89 level on SPY. It's hard to remember if I came up with this wonderful support level on my own or if it was pointed out to my by the HCPG collective. (As an aside, a bunch of pansies read that newsletter.)

Anyway, not only did this approximate level represent the price on the downtrend line from the late November rally, but, making the support even stronger, theoretically, was the 50dma at $89.07.



So when we moved down to this level in the SPY, I started long positions in SPY and a couple of other names. I'll just highlight the SPY trade, since it was the impetus for the whole trade.

One little caveat... I bought and sold SPY many times trying to jump the gun on this one. And so I was down quite a bit before the support was hit. Looking back, it's hard to know what the heck I was thinking. This market rewards patience.

Things have changed from the gunslinging trade we were enjoying just a few weeks ago... again, adapt or die.

So I picked up all the SPY I wanted, between $89.20 and $89.28. I couple thousand. I only got so aggressive because support was either going to hold and I was going to be okay, or it would break and I would immediately exit. The low of the day at this point was $89.14, so I was realistically risking $250 to $400.

Support held. However, volume didn't exactly flood into the market like I was hoping. Instead, it slackened, so I immediately started to take profits. I sold 1200 of my 2000 share position between $89.43 and $89.57. With some profits locked in, I could now afford to sit back and watch a bit knowing that even if it came all the way back to the lows, the worst case scenario was a breakeven trade.

$89.75 became a sticky area that SPY couldn't fight its way above, so I exited 400 more shares at $89.67. So I had 400 left.

Now, I decided to move this last 400 stop to my entry instead of waiting for a new low. I'm never sure what to do in this situation... keep the stop at my original level, or move it up. Because I was down on the day and unenthused by the volume from a significant support level, I opted to move it up. As a result, at 10:30, I was stopped from the trade at $89.25.

Shortly after, the stock made a new low, but held $89. I thought it could be making a double bottom, so reentered the long and bought 1000 shares at $89.31. I put my stop at $88.99 and told myself to just walk away.

In fact, I didn't walk away. I never do...

I exited 300 SPY when it got up to the sticky $89.75 area just after 11am and then watched the stock slide backwards all the way back to my entry. This action blew. 20 minutes later I had another opportunity to exit and I sold another 200 at $89.90. I was happy the $89.75 level broke but looking back, I should have taken a friends advice and used that level, $89.70-$89.75 to stop the last 500 of my position...

Instead, I ended selling 100 more at .50 and the rest at $89.33.

Going forward, without a significant uptick in volume and volatility, I'll be following more trades like this, where I can put on some size by what I deem to be an "important level."

A Couple Of Trades, Some Squiggly Lines

Like I said in an earlier post today, I miss speaking directly to you, cherished reader, about the actual trades I've been making. Largely, I've been pressed for time, as I haven't had any time intraday, to work on posts since the market has been on crack.

However, after my nasty loss yesterday, I find myself up a little this morning, and not looking to press my luck, I'll discuss a trade or two that I made, and also talk about some squiggly lines that I find helpful of late.

I didn't have any strong feel about direction today, after yesterday's extremely fucked up close, so I decided to simply watch my most up and most down filters, and just take the opposite sides of extreme moves with small share size. I used small size because I assumed I'd go out of the money a bit before the stocks turned in my direction.

My best short of the day, came in WLL.



My best long, was in WFR. However, I really screwed this one up a bit...



I liked this strategy today, because I didn't have a feel for the market move. I kept my size small so I wouldn't get "tilty." I had no idea why the stocks were making the moves they were making... it wasn't really important. It's more like playing a mechanical move... things can't go up or down at that pace forever, so start small and just look for a counter move to take back your shares.

Now, about the squiggly lines... a few months ago you may recall that I was trading the HCPG way. This is breakout trading, mostly, as you're looking at a specific level and hoping the stock trades it and never looks back. This market hasn't really been rewarding classic breakout trading.

Anyway, a few months ago, "Trader B" told me to watch the Bollinger Bands "to get good prices, yo." This has helped me immensely because I have taken to a recent strategy of scaling into positions instead of buying a chunk at a certain level. I think, though maybe it's just because the market has been working this way recently, that this strategy makes far more sense in a Hybrid environment.

I will delve into that idea deeper in a later post. It deserves more attention from me since this blog originally began due to my consternation with the Hybrid system.

Maybe We're Onto Something Here

I couldn't tell you the last time I traded and nearly made 50 cents for every share I traded... it's been a long while. I felt like Misstrade out there! Was it the surfing, the new trading style, or HPT joining the VO? We may never know for sure...

Anyway, the day started off with a bang as LNN reported excellent numbers and gapped up a couple of points. I stayed long 400 overnight into the earnings report.



It was my best stock of the day as I net $1281 in him.

My next best stock was AGU.



After the stock ran to new highs around 11am, it pulled back sharply. The reaction bounce at around 11:30 couldn't bring the stock to new highs, so I began to short. I short 400 at 44.80 and then 200 more at 44.77. And then I had to be patient.

I covered 100 shares at 12:16 at the price of 44.42 and was immediately angry with myself. The market was feeling weak, other AG names were showing signs of weakness and I knew I should have just held.

My next cover came at 1:38, 200 shares at 44.15. While in retrospect this too was an early cover, I didn't think it was too bad because the stock hit the figure and bounced sharply. Also, at that point, the futures looked to be improving.

I covered the last couple hundred shares very near the close, around 43.60. So this was a trade that I was in for 6 hours. That's a very long hold for this trader. I net $453 in AGU.

Anyway, I had similar trades in CF and DE netting about the same. Both trades were shorts and in both case I again didn't jump to cover. In short, I made good trades in the names.

It has always helped me when an entire group of stocks is acting strong or weak. Today, the entire group of AG names started acting weak at about the same time. Check charts of POT, TNH, CF, DE, CNH, AG and MOS. There was a lot of money to be made in a sector trade here today. When my confidence builds again, trades like that can be month-makers. Patience...

Anyway, I had one other good trade today in BEN. I caught a 4 point drop between 1 and 4pm. The only bad news about this trade is that I only had 100 shares. I had limits for more above where I got the 100 shares off but they were never hit. Still, I was very happy that I didn't cover into the spike-down at 3pm. I could have, but I decided instead to see if it would run further. It did and I made an extra $100 because of that patience.



As important as my winners were today it's worth noting that my biggest loser was for -$36 in AB. Also important was my winner to loser ratio, 8 winners and 2 losers.

So while LNN started my day off with a bang, it was less than half of my total gains. I simply traded well today and I hope I can keep it up tomorrow.

Anyway, here's the stats:

P&L, $2977
Best, LNN, $1281
Worst, AB, -$36

shares traded, 7000
stocks traded, 10, 8 positive, 2 negative
total trades, 55

I Just Missed IT

My day was dominated by TNH, so I will post here all of my trades. This will give you an idea of how close I came to hitting this one out of the park today. I'm not taking anything away from my day today. I'm very happy with the results, but I just missed a real breakout for myself and I am a little frustrated. I'm sure that may sound a little obnoxious given the profits I made today, but when you trade day in and day out, it's also about trading well. I mean, just feeling like you did a good job, made some nice trades. There's a satisfaction in that separate from the money made. Yellow indicates short sales, my position size is reflected in the parentheses to the right of the trade.

9:37:33 Short 200 @ 99.72 (-200)

9:39:27 Buy 100 @ 98.88 (-100)

9:50:05 Buy 200 @ 98.85 (100)

9:50:17 Sell 100 @ 98.53 (flat)

9:51:54 Short 100 @ 98.50 (-100)

9:52:40 Short 100 @ 98.34 (-200)

9:53:59 Short 100 @ 98.06 (-300)

10:10:25 Short 100 @ 96.69 (-400)

10:13:45 Short 200 @ 96.95 (-600)

10:18:54 Short 100 @ 97.45 (-700)

10:30:56 Buy 100 @ 95.46 (-600)

10:33:06 Buy 200 @ 94.52 (-400)

10:35:07 Short 200 @ 96.20 (-600)

10:44:12 Buy 100 @ 95.26 (-500)

10:45:18 Short 100 @ 95.90 (-600)

10:52:01 Buy 300 @ 96.94 (-300)

10:58:46 Short 200 @ 96.31 (-500)

11:07:28 Buy 100 @ 94.83 (-400)

11:32:45 Buy 100 @ 96.20 (-300)

11:38:43 Buy 200 @ 94.99 (-100)

11:50:30 Short 100 @ 96.30 (-200)

12:00:41 Buy 100 @ 95.36 (-100)

12:50:38 Buy 100 @ 96.47 (flat)

13:27:03 Short 100 @ 96.79 (-100)

13:45:22 Short 100 @ 95.36 (-200)

13:52:35 Short 100 @ 95.68 (-300)

14:07:57 Buy 100 @ 93.48 (-200)

14:47:29 Buy 100 @ 92.24 (-100)

15:15:13 Buy 100 @ 92.24 (flat)

15:18:56 Buy 200 @ 89.10 (200)

15:19:06 Sell 100 @ 88.50 (100)

15:20:21 Sell 100 @ 89.36 (flat)

15:23:35 Buy 300 @ 88.80 (300)

15:24:26 Sell 100 @ 88.64 (200)

15:25:10 Sell 200 @ 88.41 (flat)

15:30:48 Short 200 @ 88.52 (-200)

15:35:35 Buy 100 @ 88.74 (-100)

15:36:09 Buy 100 @ 88.76 (flat)

15:47:49 Buy 600 @ 84.92 (600)

15:48:07 Sell 300 @ 84.56 (300)

15:48:31 Sell 100 @ 84.50 (200)

15:50:18 Sell 100 @ 85.53 (100)

15:50:35 Sell 100 @ 85.42 (flat)

Total Profits in TNH $2786 (net).

Anyway, so that was my day in TNH. For the record, I lost over $2000 in him on Friday. I was a day early on Friday. Looking back, that really screwed me up today because I was so nervous trading the stock. Had I not lost that confidence in him on Friday I may have had the nerve to hang on to more shares. It was so obvious to me today, even in the morning when he wasn't trading down aggressively that the buyers were gone. Bids would appear and then get hit, or step back. On Friday, a bid would send the stock up 80 cents...

This was a near miss. But I think I learned a lot between Friday and today. I hope it will benefit me next time I see a monster trade like this.

Anyway, here are the stats:

P&L, $3340

Best, TNH, $2786

Worst, AG, -$495

shares traded, 49,600

stocks traded, 17, 5 positive, 12 negative

total trades, 324

Only add to winning positions

I made that rule the title of today's post because it's the reason why today was the first day I made money all week. Also, after today, I feel I've learned that my constant violating of that rule is also a major reason why I have been in such a slump for so long.

I'm not saying that I've completely isolated my problem that easily and quickly, but today, simply because I was conscious of adding shares only to winning positions things went much smoother for me.

First and foremost, this rule prevented what could have easily turned into a disaster for me in BTU in the early morning.



I bought 200 shares of this stock near the open at 45.35. I bought it because it had pulled back for the last 2 days on light volume after a strong run-up on strong volume. Anyway, it went up and so I bought 100 more shares at 45.48 a couple of minutes later. I decided to take some profits right away because it broke above .50 and the market (at that time) was acting jumpy. I sold 200 at 45.59 and stopped 100 at the low. I was stopped out of that 100 shares seconds later at 45.27. So, it was a small winner.

The stock bounced off a trend line that I had drawn on a 60-minute graph that had held since last week. So, I bought again and was filled at 45.40. Less than 10 seconds later the stock came down and took my stop out at 45.25.

I bought again, this time at 45.33. Again, the stock broke the low of the day and stopped me out seconds later at 45.17.

The key here is that I only lost $41 in the stock even after getting all choppped up. That happened because I only added to my position once, and that was on the trade off the open that I made money on. On every losing trade in BTU I kept my losses small because I never added to the losing positions.

Most important, because I wasn't adding to losing trades, I never felt like I was "fighting the market". I was losing, yes, but I was accepting the losses and moving on, not building bad positions and getting caught up mentally in them.

Of course, if you check that graph I was basically stopped out near the lows of the day and then the stock ripped 80 cents. Frustrating? Yes, but not debilitating.

I don't like to lose more than 20-30 cents in a trade. It means I get stopped out a lot, but as long as I can keep the losses small, I can make money.

Anyway, so here's my good trade.



I was watching RAS today because I saw he was close to breaking the downtrend line, that has been in place since late March, on a 60-minute graph . When MTG, another stock that I feel is loosely related, began to rally despite a poor earnings report, I bought a couple hundred shares of RAS at 26.21 and then 100 more at 26.23. This was right around 10:05.

This was clearly an example of me anticipating a trade, a topic that Michelle B. tackled today over at Trader Mike's site. The trend line that I was hoping to see RAS break was still a quarter-point away, so I figured this would be a safe place to initiate a position. Even if he didn't break the line I would be able to get out with a small gain or, in a worst case scenario, break-even. And I figured with the market looking stronger and with other stocks in it's sector rallying that it was worth trying to buy RAS a bit "early" in anticipation of a break.

Anyway, it worked. A few minutes later, RAS ran up to 26.50, breaking the trend line and stopping me into 100 more shares at 26.52 so I had 400 shares of a stock that was acting how I wanted it to. When he traded below 26.50 for a couple of minutes without breaking it's uptrend line for the day, I took the opportunity to buy 200 more shares. So now, I had 600 shares and the stock was breaking the 60-minute downtrend line. I felt pretty good about it.

When the stock advanced to 26.67 but then slowed, I sold 400 shares at 26.61, taking some profits. But I kept my eye on the stock. When it broke 26.67 I added again to my position at 26.70 and again at 26.78 bringing it back up to 400 shares. I held through a base between 11:30 and 1:00 and once the stock broke out of that base, I was in the clear. I sold towards the end of the day at prices ranging from 27.30 to 27.47. All told, it was the best "feeling" trade I've made in a long time.

Anyway, here are the numbers:

P&L, $543

stocks traded, 16: 8 positive, 8 negative
total trades, 172
volume, 15,000 shares

CF Part I - The Downside

I spent the better part of the morning amusing myself by getting squeezed trying to short AB and getting smoked by buying CF. Clearly, the lesson I "learned" yesterday needed a little more time to sink in. As I was getting worked, I came upon a realization that I've probably had 1000 times before while trading but always forget. So this time, in order to remember it, I've written it down.

It's this... that you always feel your worst trade of the day is destined to be your best.

What I mean is that I kept getting short AB thinking that "once it turned" that I had the best opportunity to make some good money. Same with CF. I kept buying thinking that "once it turned" it would rip and there would be nice money to be made.

Hope and greed work together to kill the trader.

Here are the details of my trades in CF as the stock moved down from the open until around 10:20. The following account is pretty dry so I'd suggest following along by enlarging the graph by clicking on it. They're 5 minute bars.

At 9:50, just before the stock really dropped, I started buying. I bought 500 at 39.95. It became pretty clear that the stock wasn't through selling yet though, so I sold my shares quickly. Lesson learned! I sold 200 at 39.93, 100 at 39.85 and the last 200 at 39.65. A loss, but not bad considering that the stock still had over a point and a half to go before it hit bottom. Perhaps in the recent past I would have only sold half my position... anyway, I was pretty happy with my quick exit.

At 9:55, I tried again, and purchased 500 shares at 39.32. Again, I had to sell quickly, and sold 100 at 39.11 and 200 at 39.09. Not great fills, but take a look at the graph. The stock was selling off rapidly here. So rapidly in fact, that before I sold my last 200, I bought 500 more at 38.93. So I had 700 shares and I felt pretty sure, that the stock was due for at least a "dead cat" type of bounce.

I was wrong.

So, I sold 100 at 38.94, 200 at 38.88, and 100 at 38.93. I had 400 shares remaining. At this point, either the ticks were shooting up, or the stock flashed a bid, or maybe I was just feeling lucky, I dunno, but something convinced me that the bottom was in because I bought 800 more shares at 39.01. This was at 10:00. Less than 1 minute later, I sold 700 of those shares at 39. My confidence in the "bottom" lasted all of 40 seconds...

I sold 200 more at 38.98. So I only had 300 shares remaining. And again, the stock broke the low. So yes, I'm losing money at this point, but so far, I've been right in getting out of the majority of my shares just before the stock would break to new lows. I don't remember exactly, but even after all these wrong trades I was only down 3 or 4 hundred dollars in the stock. Not good, but not a disaster either.

I bought 200 shares at 38.85 and then 500 more at 38.95. Then, I sold 700 at 38.96. So again, I'm back to 300 shares. Just churning here... but now, the stock breaks again. Here comes the "disaster" portion of the trade. It's 10:03 or so...

Instead of selling a portion of my remaining 300 shares when the stock broke to a new low, I bought 400 more at 38.70. The stock broke lower, but it hurts more now because I have 700 shares. I sold 200 at 38.55, but then 1 minute later, at 10:12, I bought 800 more at 38.54. So I have 1300 shares. I sell 400 at 38.51. I have 900. I buy those shares back at 38.47... back to 1300. And then the stock breaks and before I can think, I buy more at 38.19. So I have 1700 shares and the stock breaks 38... I was down over $900 in the stock at this point and feeling pretty ugly about it.

Before this final break, I had been doing a good job of selling so that when the stock broke I was never too "committed" to my position. I never had that deer-in-the headlights, eyes glazing over, type of situation. Luckily, this time, the "disaster" only lasted a few seconds. The stock broke back up and sold 1600 of my 1700 shares above 38.40. So I went from being down $900 to being down $200-$300 in a matter of seconds. More importantly, I was still in the game mentally and I was nearly flat in my position so I was able to think clearly when the stock "tested" the old low and held.

Finally, a decent trade.

Nothing great, but I'll take it.

After the new housing stats came out, it looked like the mortgage stocks started to jump a bit. I noticed that both RDN and MTG (which trade together) were close to breaking a downtrend on my 5-minute graphs.

So, I bought when they started breaking the trendline and it worked.

I took profits a little "early" I guess, but this was right when the futures were spiking down so I don't feel too bad about it. In fact, I started thinking the stock was "overbought" so I threw in a short order near the top. I had less conviction on the short side though, so I put in an order that was only half as big as my initial long. I've tried to provide details on the graph, but I'm not sure if you'll be able to read my writing. If you click on the graph, the image expands.

I made close to $500 on the trade. All of my other trades today have basically cancelled out. So, I'm gonna take these profits and hold them until 2:30 or so. Then I'll take a fresh look and see if there's anything worth trading into the close.

I'll post the song of the week in a couple of hours.

The perfect storm

(To read this post, I suggest tuning into track #50 over on the Forkcast. It's the Black Lips song "Not a problem.")

Anyway, here's the story.

Monday morning, bright-eyed and bushy tailed. AXR reported earnings. They beat on top and bottom line and they are gapping up. The stock has nearly been cut in half in the last 2 months, so I figure, "Why not give it a whirl?" I figured I'd buy 500 shares at the open and keep a close eye on it. If you read this blog last week, you know it won Freaky Hybrid Trade of the Day "honors" on Friday, so I knew what I was getting involved with here. A thin, volatile stock that just released earnings. "So", you might ask, "Dinosaur Trader... knowing this, why would you trade this stock? Your confidence has been down, this stock is nuts... sounds like you could get hurt here."

At this point, I may answer that the dinosaurs went extinct for a reason, they couldn't adapt. That may soon be my fate too if I don't start listening to the voice of reason more. The real answer is that I sniffed opportunity. It's why you make any trade.

I thought I'd buy and it'd trade up rapidly since it'd been so beaten up in recent months. I thought the small float and the thin trade would benefit me, that's why I bought a large position (500 shares is a "large" position in a stock that could move 2 points on 3 or 4 trades) at the open. In my head, I saw the stock gapping up and moving immediately higher. I envisioned panic buying and short covering and I saw me selling 2 or 3 points higher.

The exact opposite happened.

By 10:15 I was nearly down 3 grand and sweating...

Here's what happened. The stock opened and immediately broke lower.

Look at that first 5-minute bar, the stock had a 2.5 point range in the first 5 minutes. It took 30 seconds and only 3300 shares for AXR to move from 87 to 84.50. Almost every trade was a trade for 100 shares and almost every trade smacked the bid. Having a bullish mindset on the stock made it nearly impossible for me to react quickly enough. It's hard to go from bullish to bearish in 30 seconds. Instead, I thought, "well, there's the shakeout and now comes the bounce." I was wrong. I threw in a sell-stop for 200 shares at the new low, or 84.49, and was filled somewhere in the high 83s.

I was still long 300 shares of a stock that was trading straight down.

But still, I was waiting for the "bounce" to tell me it had all just been a bad trade. I put another sell stop in at a new low which at the time was 83.06 and sold a couple hundred more shares at 82.87 and 82.71.

I had 100 shares left and I was down close to $1500. I'd been trading for all of 15 minutes.

Immediately, the stock bounced back up over 83. Convinced that the bottom was in, I bought 400 shares at 83.47. The "high" of that bounce was 83.48... the stock immediately broke 83 again. I sold all of my shares at 82.88 and I was down almost $2000.

It's 9:50. I've managed to lose $100 a minute since I started trading.

The next drop was nauseating but luckily I was out of the stock. But when it traded down to 80 I decided to buy again. I was filled almost a point higher, at 80.93. The stock yo-yoed right back down to 80 and I sold 200 at 80.15 and 100 at 80.02. That was the problem... the old low was 80.01 and I was filled at 80.02. The stock didn't break the old low. So, I bought again... 400 shares at 80.57.

The sellers wanted more blood though.

The stock quickly broke 80. I sold 200 at 79.34. It ripped above 80 again. However, this time I was just happy to get out close to my last buy so I sold my last 200 at 80.34. I was down over $2500 with no more shares in the stock.

My eyes were more or less glazed at this point. I was down $2500, which eclipsed my gains of last week by over $1000. Add these losses to my losses of the week before and I was nearly out of capital. I was expecting a call from the risk manager. I sat staring at the screens watching them blink light blue. The great irony of the morning was that every other stock on my screen except 2 others (I have over 100 stocks on my screens) were green. The market was up almost 100 points. I walked downstairs and made a cup of tea. My wife and I traded insults.

I came back up and saw that the stock was trading between 77 and 78. I bought 300 shares at 77.76 and put a stop in at 77. Miraculously, the stock traded up. I bought 100 more at 78.60 and then quickly sold 100 at 79 and another 100 at 79.04. I got nervous and sold 200 more at 78.74 and 78.68 and I was out of the stock again.

The stock broke lower and then bounced. I bought 200 shares at 78.20. At 10:15, the stock resumed it's dive. I sold 100 shares at 77.11 but then bought 300 more at 77.56. So I was long 400 right before the stock broke 76. I have no idea what my p&l showed at this time, but I was probably into my firm's capital. I'm quite sure that my name was in red on some screen in someone's office and that they were dispassionately discussing my fate.

My 2 year old son was in the next room with my wife. He was screaming at the top of his lungs, "No pants! I don't want my pants on Mommy!" They were getting ready to go to "cooking" class. I stuck my head out my office door. "Would you get his fucking pants on and get the fuck out of the house? I'm down 3 or 4 grand and I'm trying to be calm and you guys are in here screaming and I can't get out of my own fucking way!" I sat down at my desk, and I remember quite clearly, that I was talking to myself and shaking my head but I don't remember what I was saying.

I sold 200 shares at 76.65. A minute later, I bought 200 shares at 75.59, and then 200 at 75.85. The stock seemed to be calming down. I heard the door close as my wife and son left for their class. I bought 200 more shares at 75.71 bringing my position up to 800 shares.

In a few minutes, the stock would spike a couple of points allowing me to release 100 shares at 78, 79, 78.56, and 78.72. Later I would sell more at 78.90, 78.35, 78.20 and 78.39. After all of the drama, I had pared my loss in the stock from over $3000 to just over $100. My p&l stood at $97. I was physically and mentally exhausted.

Now if only I could repair the damage this trade caused to my marriage...

So, when my wife came home I apologized for being a stressed out, red-faced lunatic. She understood, kind of. We spoke and both agreed that maybe I need to get away. So, for the next 2 days while the Fed has their meetings I'm on hiatus.

Cue the Mary Onette's song (#4) "Lost".

And then, hopefully, the Deerhunter song (#29) "Like New".

TNH - The Freaky Hybrid Trade of the Day!

As promised, here's what TNH looked like and why it wins freaky hybrid trade of the day honors.

The chart, though inexcusably choppy, doesn't tell the whole story. What's important is how erratically this stock moved on such light volume.

9900 shares moved the stock down 1.5 points in 20 minutes on mostly 100 and 200 share prints. There was never an offer shown to indicate any type of selling pressure. This move was simply 100 share lots smacking 100 share bids and causing the stock to move straight down.

In addition, the quotes were updated over 600 times during this time period, or about once every 2 seconds. An overflow of information but unfortunately, none of it was useful in helping one discern what was happening in the stock or why it was moving down. Remember the art of tape reading? For decades it was a reliable tool on Wall Street, no longer. The hybrid system has killed tape reading.

Trades like this make me and many others doubt the integrity and overall feasibility of the hybrid system. And this is no anomaly. Really, there are literally hundreds of examples of trades like this. And lest you think I'm complaining because I somehow got wrecked in the stock, that's not the case. It was one of my better stocks today. I just happened to be watching it at this time and thought I'd highlight it's craziness.

Freaky Hybrid Trade of the Day

I've decided to create a new daily entry into the blog that I am lovingly calling the Freaky Hybrid Trade of the Day.

The first stock that I am nominating for this dubious distiction is TNH and the freakiness that associated the trading in this stock today between 9:40 and 10:00am.

I will post a detailed analysis of the freakiness at the end of the day.

If you would like to nominate any stocks for the Freaky Hybrid Trade of the Day "award" please do so by adding a comment.

Anatomy of a (near) disaster

A slow day. Low volume... no volatility, "best not to take much risk", I thought.

Then how do I explain what happened to me in TNH? A momentary lapse of reason I suppose? Not sure how to label it, but I know it happens over and over again to myself and others trading the market. I also know that if it happens too much, you're definitely doing something wrong.

Perhaps I was still burning about getting stopped out of my TNH long at 51.62, I don't know. I do know that when I looked up and saw the stock spiking up to 55 that I thought it MUST be a short. The market itself seemed weak to flat and none of the other stocks in the fertilizer sector were showing such strength. So I began to short. I was immediately wrong. However, instead of covering and taking a 20-30 cents loss on my 400 share position, I got stubborn and decided to short more. I 'knew' that if I covered and took the loss that the stock would definitely turn lower.

I began to hope the stock would turn in my favor... a sure sign of impending disaster.

Anyone who has traded for any amount of time will tell you that hoping a stock will either go up or down means that you are in some serious doo-doo. By the time the stock got up near 56, I was short 800 shares and down over $700 in the stock.

The stock traded above 56 and then shot down 75 cents very quickly. I would have loved to cover some of my short here but it was nearly impossible... the spreads were showing offers in the 60 and 70 cent range. Even though the stock was trading in the 30s had I entered a market order, I would have been filled at the offer.

Thank you for nothing, hybrid market.

So I waited, hoping some more that this was the break I was waiting for...

However, the stock was not done going up.

As quickly as it shot down, it ripped back up, taking out the old high and posting a new high at 56.22. I had put a buy stop for 200 shares at 56 and was filled around 56.19 or so. Ugly... my loss in the stock was now close to $1000 and I was still short 600 shares. Sounds like fun, no?

56.22 happened to be the top. I ended up covering most of my shares around 55.20 and some around 54.70. I actually used limit orders because I have lost faith in market orders. Is it only dinosaurs that use market orders? I cut my loss in the stock from close to $1000 to only about $150 but it wasn't because I did anything right. I was slow to close out a losing position and I got burned because of it. The fact that I made back some losses by being short when the stock did eventually drop was really just dumb luck.

And, as is often the case, when you get into a bad situation with one stock all of the other trades you have on at the same time tend to suffer as well. For example, the strength (that I was shorting) in TNH made me take a look at the other stocks in the fertilizer sector. I thought, "Well, TNH is strong and POT is strengthening, maybe I should pick up some AGU 'down here' in case he rallies..." That was mistake #2. I bought AGU around 39.45-39.50 and all the stock has done since that time is slowly trend down. Last I looked, it was trading below 39.25. At least I nipped that loss in the bud.

Then, while all the excitement of the fertilizer sector had my attention, my FED short was actually WORKING. However, I was so concerned with my blossoming loss in TNH that I never added to my working FED position.

So my reasonable $150 loss from the morning grew into a nearly $1000 loss and has now settled in around -$250 for the day. It's been unpleasant.

I can't believe the market is up again!!!