Black Lips - Not A Problem

I just can't get enough of this song. If you like 60s era garage rock, check it out. It's the second song on that list.

More Help from Traderfeed

Hey, I checked Traderfeed this morning for Part II of his post that was started yesterday on self-sabatoge. On today's post he linked an older post that has some very helpful articles on psychology and trading.

If you've ever been in a trading rut (and who hasn't?) or are planning on getting yourself into one soon, I highly recommend checking these articles out. They're at the bottom of the post.

To quote the band Sublime, "hard work good, and hard work fine, but first take care of head." Of course, I don't think they were writing about trading... Still, the point is that you can look at 1000 graphs a night, but if you're stuck in some bad trading patterns, spotting opportunities probably isn't your biggest problem.

Slow morning

Volume is lighter this morning than it was at the same time yesterday. And I hate the action on days like today. The futures gapped up on the GDP data but then sold off. It's hard to get short days like this because even though the market is trading down, there's plenty of bullishness anyway so the squeezes can be quick and violent. At the same time, it's hard to initiate longs because a lot of stocks gapped up and then got choppy... good entries were hard to come by... at least in this cave.

So anyway, I took it easy this morning. I'm up a couple hundred bucks but I don't have a winner or loser that's greater than $100. I'm going to spend the next hour looking at charts and then take a long lunch. Hopefully, in the afternoon things will be more interesting.

I haven't even spotted any freaky hybrid trades... (sigh).

A Good Day

I finally had a day without much drama where I just made small, smart trades. I caught CF and AGU as they broke recent downtrend lines. Even though the moves weren't huge I didn't have any bad losers, so I had a solid p&l.

Overall, the market sold off. However, the volume, though higher than yesterday, wasn't huge. With lots of eco-data still on the way this week, things could get interesting.

Total: $998

Best: CF, $483
Worst: TS, -$86

16 stocks traded, 9 positive, 7 negative

298 trades.

I still have a long way to go to pull positive for the month with only 2 days remaining. I'm going to get to sleep early and do good research again tomorrow morning so I can stay focused and try to end strong.

The "other" Stewart commercial

The guys in my office had high expectations for more Stewart commercials after the first one with Mr. P. This, I believe was the only other Stewart commercial. The real-life Stewart ran into legal trouble or something and they stopped the campaign.

Trader sabatoge

Since I've been sabatoging myself for the last year or so, I found this post, "Trading and Information Processing: Why Traders 'Sabatoge' Themselves" by Traderfeed very interesting.

I strongly suggest you check it out if you haven't already.

Low volume sell-off

Good for the bulls, I guess... there's a lot of eco-data coming out later in the week and BB talks tomorrow, so I assume lots of traders were watching today instead of trading a lot. They were the smart ones. I lost some money.

P&L: -$217

Best: MTW, $94
Worst: CF, -$189

So you see, I was planning on having a post called "CF Part II, The Upside" but things just didn't work out that way. I did indeed make some nice trades in CF and for a short while was my best stock of the day. But simply put, I over-traded today. I churned and I was burned.

I broke a cardinal rule of mine which is to not trade at all or trade very, very lightly between 12 and 2pm. That's when I went from green to red. More importantly, I lost confidence during that time and I was unable to pull together to make a single good trade during the last hour of the day.

Very frustrating. It will be difficult for me to meet my goal by the end of the week.

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.

Wallstrip profiles GAIAM

This is a couple of month's old, but I thought I'd post it since it's one of my favorite companies (even if they send me 10 catalogues a week), it's doing well, and because the springtime is a great time to get back into a yoga routine.

Not to mention that "yoga breathing" is very helpful during trade disasters...

A stomach virus

Albert had been calling for months and keeping me on the phone for hours talking to me about the stock market. We went to a Yankee game one day and it's all we talked about. It was really boring. If you're not a trader, "bids" and "asks" don't mean crap... and even the idea of a guy named "the specialist" who controlled the way stocks moved and routinely screwed everybody seemed insane. But then, Albert had made $75,000 in the last month. He showed me the check. This caught my attention. Still, I wasn't going to make the decision to go further into debt and to take a job with no guaranteed salary or benefits lightly. So Albert invited me to "sit in" and watch him trade so I could get a feel for the job.

I didn't mind calling in sick to the job I was preparing to leave. The place was nice and everything, it was an internet company, one that eventually had success, but the pay was awful. Instead of a good salary, you could basically come and go as you pleased as long as you got your work done. There were other advantages as well. They served beer and pizza at company "meetings" and each week we all played softball together. Oh, and there was the day the head of the office brought in a few large cardboard boxes full of those little plastic balls that kids jump around in at indoor playgrounds... Fun? Yes. But I had student loans and bills to pay. Anyway, I received 100 shares of company stock priced at about 15 or so. The stock debuted in the 30s and on it's first day of trade vaulted over 100. I sold the next day in the 80s.

It was my first stock "trade". It was also the easiest...

Between that and Albert's success, I was excited about this thing called the "stock market" which I hadn't thought about during the first 22 years of my life. And so the following Monday, I had a "stomach virus" and made the trip downtown.

A damn shame...

Well, as noted in my intraday post, I really managed to screw up an otherwise decent day with my poor trades in FED. I need to talk to One Bad Trade... perhaps we should switch domain names...

Here's where I ended:

Net: $138

Best stock: IPS $298
Worst stock: FED -$548

My second worst stock was -$48. I had 4 winners for over $100. So really, if I could just erase the stupidity of FED I had a decent day. I can't erase that stupidity...

Hopefully, I can at least learn from it.

The silver lining for me today is that I had some decent success with limit orders. Normally, I trade at market. However, the hybrid market makes this a very sketchy proposition so I've been experimenting with limits.

Another positive sign for me was that I traded a lot. I made nearly 300 trades. It's important that I get involved in the market before the beginning of earnings season.

I'll have another "history" post up before the open tomorrow.

2 steps forward, 1 step back

Well, things were kind of slow this morning until that new home sales data was released at 10. Then the fun began!

I was up a couple hundred due mostly to a decent IPS trade. When the data came out, I got short a couple of the mortgage lender stocks, RAS and CFC. My p&l shot up to about $700. Problem was that I then decided to start buying another lender when I saw CFC put in his bottom. This particular stock, FED, didn't give a DAMN that CFC had bottomed and I lost about $400 in him.

This was unbelievably stupid.

On the accompanying graph, I've marked where I was buying the stock with the light blue dots. Notice how the dots kept going down... and my p&l followed. So I'm $500 off my highs of the day here at 11:15 and I'm only up $230. This makes me very concerned that if I continue to trade I'll go negative. So I'm going to sit patiently and watch for the next couple of hours instead of trade.


Last week, Traderfeed put up a great post about The Anatomy of a Stock Breakout. I even posted a comment, thanking him and remarking that I often try to manufacture or anticipate trades instead of waiting for a trend to develop. Unfortunately, part of what I did wrong in FED was exactly that. I was anticipating a bottom and so I was burned.

Lesson learned?

Weekly Stats For The Week Ending 3/23

Monday: $236

Best: HRT, $203
Worst: POT, -$113

8 stocks traded: 4 positive, 4 negative

Tuesday: vacation
Wednesday: vacation

Thursday: $142

Best: IPS, $192
Worst: MTW, $78

13 stocks traded: 6 positive, 7 negative

Friday: $437

Best: RDN, $467
Worst: FED, $128

16 stocks traded: 7 positive, 9 negative

Overall, I'm pretty happy how this week turned out. Yes, I missed the huge rally on Wednesday, but as JC eloquently posted over at A Scalper's Tale, "If I were to constantly mull over missed moves or mull over how much potential profit I could have taken had I been there, I'd probably second-guess myself at every turn and on every decision I make..."

True, true, JC.

Anyway, I had 3 positive days in a row. I averted a huge disaster on Monday, took a couple of days to clear my head and finished the week pretty strong.

Next week will be a somewhat dramatic one for me because in my 8 years of trading I've never had a net-negative month. I'm currently down a few thousand dollars for the month. I will have to have a solid week to pull positive and keep my streak alive.

Have a great weekend. Thanks for reading.

The Interview The Entire Street Is Talking About!

Congratulations to Wallstrip.com for getting a mention last night on Fast Money and then again today on the Closing Bell!

Lots of speculation about what's going on between Lindsay and Dylan. Great interview though. I love her lead-in.

Just- Radiohead

I was torn between posting a classic or a new song. I chose classic.

Anyway, this is one of the most famous music videos of all time. What does he say in the end? Endless discussion and speculation...

I personally think the dude is a trader and he says something like... you just wait, in 8 years, there will be this thing called the Hybrid Market. It will make your life difficult. Should you fail to adapt to it, you will lay here like me... forever.

Not to mention the fact that the lyrics of this song apply directly to trading disasters. "You do it to yourself, you do. And that's why it really hurts."

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.

For all you dinosaurs... click it in there!

And if you're not a dinosaur, enjoy it anyway! I'll try to dig up some more of these old commercials and post them here from time to time... to keep the energy levels up!

A slow day of consolidation

Money made: $134
Trades made: 60

Best stock: IPS $188
Worst stock: MTW -$78




I traded very lightly today. That MTW was a bit of a heartbreaker because I got stopped out of my short near the high of the day, just before it plunged 70 cents.

The IPS was also a short trade. Even though it was a winner, I screwed up my exits. I was short 600 shares up near the top and was scared out of most of my shares. I was scared out because I still can't figure out the mechanics of this market.

I am strongly considering opening up a second account in which I'll focus on longer-term trades. I don't think daytrading is dead, I just can't figure out how to manage the risk anymore. If you never know when a stock is going to spike 60 cents in one direction or the other it's hard to have to confidence to size up to make good money.

I figure if I take a slightly longer-term look I'll expand my loss (and gain) thresholds and those little intraday spikes shouldn't matter so much. We'll see.

How do you control risk in the hybrid market?

I'm a dinosaur. I've been doing this job for too long in exactly the same way.

I've always been a "buy at market, sell at market" type of guy. I never messed around much with limit orders. However, I see that the hybrid market has radically changed the way stocks trade. I need to learn to trade in a new way or I will soon be extinct. Why? Because I'm having a very difficult time controlling my losses in this new market using market orders.

Here's an example. I buy LVS at the open and I'm filled at 93. Fair enough. The problem I have from a trading perspective is that in the past, I was able to put a sell stop order in at 92.80 or so and be reasonably sure than in a worst case scenario if my stop was hit I'd be filled above 92.70 thus limiting my loss on the trade to 30 cents.

But today, here's what happens. I buy at 93 and the very next trade is at 92.50. I've lost a half point in 11 seconds! 4 seconds (and 10 trades later...) it trades 92.40. What do I do here as a short-term trader? There are no longer any bids or offers to help me figure out what direction the stock may head next.

I feel like I've been successful for so long as a daytrader because I was always very successful at limiting my losses. I no longer have that confidence.

Does anyone have any suggestions on how to control losses in the Hybrid Market?

I'm all dinosaur ears.

How I learned to stop worrying and love the hybrid market

Zeke's face was bright red. He seemed to be holding his breath. Beads of sweat covered his brow and collected on his eyebrows, which were soaking wet and dripping onto his keyboard. A large purple vein, not a normal feature of his appearance, was prominent on his neck and looked like a well-fed earthworm. His hair was pulled back, very tightly, into a ponytail. From his lips sprang the same word, over and over again. "Fuck, fuck fuck fuck fuck fuck... then it morphed into, "They're fucking me." He was staring straight at his computer screen and his hand was glued to the receiver of his phone even though the phone was currently hung up... it was like he was bracing himself.

They sat me next to Zeke so I could learn from him. Zeke didn't talk much, but I did learn from him. I casually looked over at his monitor. He was holding a couple thousand shares of VOD which in 1999 (before it split 5 for 1) was very volatile and trading well over 200 dollars a share. He was down over 6 thousand dollars in the stock. Just then, his phone rang. He tried to sound calm as he spat into the receiver "It's just this guy, he's fucking fucking me." He hung up and practically doubled his position. In a few minutes he was down over 10 grand in the stock and the risk manager of the firm, a large man who looked more like a bouncer than a man who was crunching numbers in a back office, paid him a personal visit. Zeke knew his time was up. A short conversation between Zeke and the risk manager, a man who everyone simply called "Mr. Bill", ensued and then Mr. Bill watched as Zeke closed out his position. Moments later Zeke put his very expensive headphones over his ears, gathered up his very expensive coat and his desk belongings and silently left the room. It was the first blow-up I had witnessed at close quarters. I had been trading for only 3 weeks. I looked at my position monitor. I was down $6.25 in my one position, 100 shares long of AVY. At that moment, I felt incredibly "light".

The next day, Zeke's desk was filled by some hotshot trader "from upstairs" who didn't say much and watched porn in a small video player that he strategically positioned in a corner of one of his screens. This is a small example of what the environment was like at my first firm, a place that I traded for my first few years. I paid exorbitantly high commission rates and was routinely yelled at should I be ballsy enough to try and get those rates cut.

But to get to the central question, the "why trade?" question that plagues me recently as I struggle it's important to remember these times. I trade because to me it's a certain kind of freedom. People wore what they wanted to at work. The only thing that mattered was "How much you up"? Office politics didn't exist... the rules were simple, the more you made, the more you mattered. It was easy to understand and competitive and eventually I thrived even if it was in my "under the radar" type of way. Let's put it in these terms, I never had more than 3 screens. The "hotshots" often had 5 or 6. Thing is, a lot of these "hotshots" eventually blew up just like Zeke.

Trading isn't about ego, it's about being right. And dollars and cents are the perfect metric for measuring how right you are.

The "righter" you are, the richer you are.

And this has been a good lesson for me. You are either right or you are wrong. You really need to not make excuses about why you are wrong. If you're wrong, you need to figure out why and "get right" as soon as possible. Zeke couldn't get out of that VOD trade because he couldn't admit that he was wrong. And he blew up. I think for me, I need to figure out how to trade this new hybrid market and stop complaining about it.

I won't stop with the "freaky hybrid trade of the day" post because I have fun with that, but I need to "get right" again and get on the green side of trades.