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

Wednesday, March 01, 2006

Patience is the Key - Impatience is also the Key

Gross: +$804.21
Net: +$742.41
Loss From Top: 0
Trades: 36
Shares Traded: 53910

Stocks Traded Today (net profit/loss):
JP Morgan (JPM): +$332.53
Hewlett Packard (HPQ): +$190.41
Micron Tech (MU): +$108.04
Advanced Micro Devices (AMD): +$94.65
McDonald's (MCD): +$34.97
Walmart (WMT): +$23.32
Pfizer (PFE): -$41.52

When I talk about patience, it is applied in two ways: patience in entering a trade (stalking your stock), and patience in exiting a profitable trade. When I talk about impatience, I'm talking about being impatient in getting out of losing trades (i.e. getting out of your losing trade as soon as possible).

Why is it that they say that 95% of traders out there will lose money? I think it's because they have their "patience" and "impatience" mentalities flipped - meaning that traders are impatient when they have winning trades on (get out too quick for a small profit), and too patient when they have losing trades on (waiting and hoping the stock comes back so that they can get out for no gain).

I know I have to work on patience when it comes to holding winning trades (riding winners), and I think I'm improving on exiting trades once they are 2-cent losers or more (though sometimes you can't help it when the stock jumps a few cents against you).

Today was really a test of patience. Yet another day of major morning moves, followed by a flat (I mean really flat) afternoon. After good morning gains, I began trading when the markets were flat. I put on 2 losing trades before I realized what I was doing and I'm glad I caught myself before it was too late. That's the reason why my # of trades are low today - it was a real test of patience. And believe me, I wanted to put on at least another 10 trades during the afternoon, but I managed to hold back.

Plenty of good trades today. First one was on Hewlett Packard (HPQ). At 10:25AM, HPQ was uptrending as was the Futures. There was mild resistance at the $33.50 level (about 1000 size on the ask), so I went long 3000 shares at $33.50 when it broke. Took my profit as follows: 3-cent winner (1000 shares), 6-cent winner (800 shares), 10-cent winner (1200 shares) ($198 profit before fees).

The next good trade came on JP Morgan (JPM). At 10:38AM, JPM was uptrending strongly when it encountered resistance at $41.65. There was about 3000 size on the ask when it broke. Went long 3000 shares at $41.65 and took profit as follows: 3-cent winner (1000 shares), 7-cent winner (1000 shares), 9-cent winner (1000 shares) ($190 profit before fees).

Last good trade to tell you about happened on Micron Tech (MU). At 10:52AM, MU approached the $16.00 level. There wasn't much size on the ask at $16.00 (maybe about 200 size), but the Futures ripped up hard, so I went long 4000 shares at $16.00. MU burst up, so I took out my entire position for a 5-cent winner ($200 profit before fees).

As you can see, all my major trades were done in the morning, but in the afternoon I had to try hard to stay awake! The overall market traded in such a tight range and as I mentioned before, I had to try hard not to trade. Near the end of the day, I did put on some profitable trades as the Futures kept making new highs on the day.

No real bad trades today (well, except for the two trades that were done in a trendless market), but I kept my losses to a minimum.


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