An NYSE Scalper's Tale - A Trader's Diary

Monday, March 13, 2006

I Got "Chop"ed to Pieces!

Gross: -$110.45
Net: -$284.88
Loss From Top: 284.88
Trades: 76
Shares Traded: 172614

Stocks Traded Today (net profit/loss):
General Electric (GE): +$57.25
Coca-Cola (KO): +$40.89
Pfizer (PFE): +$4.29
Sprint-Nextel (S): +$1.06
Hewlett Packard (HPQ): -$39.27
Bell South (BLS): -$53.69
Disney (DIS): -$77.49
Electronic Data Systems (EDS): -$81.61
Bank of America (BAC): -$135.29

My trading slump continues...For several weeks now, the markets have been very choppy and I am constantly finding that my trading strategy just doesn't work very well in such conditions. I hope the overall market can break out of this trading range and start moving in a definite direction soon.

This morning, I think I was a little too aggressive and by 10:30AM, I was already down almost $400. At that point, I took a little break and I tried to figure out what I was doing wrong for the past couple days. I came to the conclusion that the last little while, the market has been fairly choppy and I was holding positions a little too long (in the hopes they would move more in my favor) and so I decided that I should be taking small winners when I can get them.

Also, the last few posts I've been stressing patience in holding winners and I still stand by what I wrote, but only when the markets are trending! I've been making the mistake of holding positions too long when the markets are trendless and/or choppy.

You see, what was happening was that every time I got into a position, I would watch it go 1 or 2-cents in my favor, but I wouldn't get out, hoping for more profit. What would happen is that because the Futures (or market) was so choppy (would pop up, then pop back down; later it would burst downwards, but would immediately pop back up), my trades would move initially in my favor, but would reverse and I end up getting out for a 1 or 2-cent loser.

I've also recently started trading larger share sizes (5000 or 6000 shares at a time), which in a choppy market, may cause difficulty, especially if I have to get out of a position as soon as possible. Today is my all-time record for the number of shares traded today and I probably overtraded today. Again, when trading big size, a small loser ends up looking big.

For the rest of the day after 10:30AM, I started taking small winners here and there, but a bad trade on Disney (DIS) set me back a little and I could not recover.

The bad trade on Disney (DIS) occurred at around 2:02PM. There was massive resistance at the $28.50 level (close to 5000 size on the ask). I thought the level was going to break when the Futures popped up, so I tried to get long 5000 shares at $28.50. I got partially filled for 3400 shares and I cancelled the balance of the order when it looked clear that the level was not going to break. In a true market chop fashion, as soon as the Futures popped up, it popped back down again and before I could blink, DIS went against me a few cents. I got out for a 4-cent loser ($136 loser before fees).

So this is what I'm going to do when I trade tomorrow:
  • if the market is choppy, I'll get in and get out quickly (taking 1 or 2-cent winners); I'll continue to do this until the market decides which way it wants to go
  • in the mornings, I'll trade a light number of shares (maybe 2000 or 3000 shares) as a kind of "warm up" to the trading day
  • I'm also going to temporarily reduce the number of shares I trade (4000 or 5000 shares max); at least if I do get "chop"ed to pieces again, I will not have lost as much money
  • I've also noticed that I am starting to ignore some of my trading rules; I think this stems from the fact I'm trying to trade a large # of shares and anytime I see a stock that is capable of handling my order size, I trade it recklessly - I'm going to focus and make myself more aware of when I should and should not trade
If I cannot break out of this trading "funk" tomorrow, I will take Wednesday off to update and review my trading strategy. I usually do this at the beginning of every month, however I have not had the time to do it yet for this month. I will obviously have to add strategies for when the markets chop around like it has the last few weeks.


Post a Comment

<< Home