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

Thursday, April 06, 2006

You've Gotta Know When To Hold 'Em

Gross: +$581.62
Net: +$462.04
Loss From Top: $125.90
Trades: 67
Shares Traded: 108800

Stocks Traded Today (net profit/loss):
Citigroup (C): +$228.69
Walmart (WMT): +$201.02
Merck (MRK): +$69.43
Boston Scientific (BSX): +$46.81
Hewlett Packard (HPQ): +$35.01
General Electric (GE): +$24.58
Corning (GLW): +$7.21
Micron Tech (MU): -$38.25
Home Depot (HD): -$112.55

Today all the traders had to be done by 3PM because they were going to take down the system for maintenance. I guess they're still trying to fix the problem from yesterday. And no - I checked - they are not going to give me that $800 profit from yesterday...rats!

In the morning, the markets traded in a choppy fashion, but later traded a little more smoothly. The first few trades were losers for me (kept getting chopped out of my position). But as the afternoon rolled around, I was able to make some good money here and there.

I made a fantastic trade on Citigroup (C) at around 10AM (see below). It took a whole lot of patience, but I'm glad I waited and did not panic when the trade initially went against me. This is something I'm working on...just knowing when to hold on to trades to give them a little more time for them to work out.

On this particular trade, it went against me by about 2-cents on 5000 shares and I was staring at an unrealized loss of $100 for the better part of almost 3 minutes. But I knew there was some good support for my trade and the Futures were curving back up, so I held it for a great profit.

But on the flipside, I lost a bundle on another trade on Citigroup (C) near the end of the day. The reason I lost money was because I held onto my position for too long and I didn't know when fold 'em (and get out of a losing position).

This is going to be the trick...just knowing when to hold 'em....and knowing when to fold 'em.

Now that I'm trading 5000, 6000, and 8000 shares at a time, I've really got to give these positions time and I have to be brave even if the position initially goes against me. The trick will be knowing when to get out at a loss so that I can control my losses.

This will mean that in the next little while there might be a position that will seriously go against me and I might have to take a severe loss.

From now on when I highlight the good and bad trades, I'm going to put reasons why the bad trades were bad. It's not very useful if I highlight a bad trade and not learn from it.

Good Trades
10:09AM - Citigroup (C) looked like it caught some support at the $48 and the Futures looked like it caught some support as well. There was also some good size at the $48.00 and the $48.01 level. So I went long 5000 shares at $48.03. Initially it went against me and the size at $48.01 got wiped out, but I held. Eventually I got out of my position as follows: 7-cent winner (900 shares), 8-cent winner (4100 shares) ($391 profit before fees).

12:28PM - Walmart (WMT) was downtrending when the Futures tanked. I managed to get short 3000 shares and got out as follows: 3-cent winner (2000 shares), 4-cent winner (1000 shares) ($100 profit before fees).

Bad Trades
9:37AM - Home Depot (HD) opened and immediately started going down. Futures were trading in a choppy manner. HD then paused for a bit when I noticed that the offer kept getting hit, even though there was only a size of 1 showing. I saw 5000 shares, 11000 shares, 3000 shares, and so on hitting the offer, even though it showed a size of 1. I figured someone had put some hidden size at that level so I went short 1000 shares (just to test the waters). Before I could even blink, the trade went against me 5 or 6 cents. To make matters worse, the Futures ripped up just then. Had to get out for an 11-cent loser ($110 loser before fees).
  • This bad trade shouldn't have been put on. Firstly, the Futures were choppy for the first half hour of trading or so - thus it's anybody's guess where HD would have gone
  • Also, I should have been smarter and noticed that HD might have had some support forming and I should have clued in on the fact that the bid also refused to budge even when big sell orders came in
2:15PM - Citigroup (C) was approached the $48 level. It had massive size showing (1000+ size) on the offer at $48. It slowly broke and the Futures were uptrending at the time. I got long 5000 shares at $48 when I thought it would break. Initially it did, but it moved up a few cents (I got some of my position out at the time), but then came back down. I tried to give it more time, hoping it would come back (by the way - "hope" is very very bad in trading), but I ended up losing more than I should have. I exited my position as follows: 2-cent winner (2000 shares), 3-cent loser (1000 shares), 4-cent loser (1000 shares), 5-cent loser (1000 shares) ($80 loser before fees).
  • Before getting into this trade, I was reluctant to go long because it seemed like the size at the $48 level was very slow to break - as though the demand was not really there. As soon as I hit "Enter" to get long, I already felt uncomfortable
  • Once I was long, I should have tried to exit my entire position for a 1-cent winner when the $48 level finally did break. The reason was that the Futures then started coming back down and there was no flurry of buy orders when the $48 level broke (which usually happens when significant levels break).


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