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

Wednesday, May 24, 2006

This Volatility Is Killing Me!

Gross: +$147.62
Net: -$30.82
Loss From Top: $187.26
Trades: 101
Shares Traded: 172000

Stocks Traded Today (net profit/loss):
Citigroup (C): +$275.57
Merck (MRK): +$84.97
Coca-Cola (KO): +$42.92
Corning (GLW): +$36.63
Bell South (BLS): +$28.94
Boston Scientific (BSX): +$16.46
Home Depot (HD): -$31.55
Bank of America (BAC): -$100.76
General Electric (GE): -$104.66
Hewlett Packard (HPQ): -$279.36

How opinions change so quickly! Last month I kept writing in my blog that I was getting tired of the "flatness" of the market and that I hoped that the market would move somewhere soon. Well here we are with at least two weeks of volatile trading....and now I'm complaining about too much volatility!

At least when the markets were flat, I could easily make money. There were limited moves last month, but when the overall markets did move, at least I was able to take advantage of it. But now it seems more of a challenge. Now, every time I get into a position, it quickly reverses. If I hold on to the loser, sometimes it may come back for a profit...but sometimes I end up getting out for a severe loser.

Obviously I spent a lot of time developing my trading strategy for a normal or flat market. It is clear now that it was not built for volatile markets such as these.

I think what I'll have to do during these volatile times is the following:
  • I'll reduce my share size to about half of what I'm used to. What appears to be happening right now is that when I'm in a big position, I'm able to get some of it out for a profit, but I end up having to get the other half out for a loser (because of the volatility, I initially see a profit, but I'm not able to get the entire position out before it reverses)
  • I'll have to get in and out of my positions quickly. If I see a profit, I'll get my entire position out (at the risk of missing out of a bigger move). Today I was frustrated because I had 3000 share positions and I was able to get the first 2000 shares out for a profit, but I would end up getting the last 1000 shares out for a severe loser (10+ cent losers)
Everybody's trading strategy is different. I know there are some traders that are loving the current way the markets are moving. But these are the same traders that have trouble making money when the markets are flat. It's give and take.

I guess I have to develop strategies for the various types of markets. That way, I can adjust and adapt.

Today I traded a lot. Again, because the overall market was volatile, there were lots of big up and down moves. I found myself constantly getting out of a position and quickly getting into another position to try to take advantage of the markets movements.

Unfortunately, there were no good trades today ($200+ profit trades)! Because the markets were so volatile, I wasn't able to capture many big moves on stocks before they reversed. Another thing that kept happening was that I would get most of my position out for a good profit, but the market would reverse so quickly, the remainder of my position was exited for a severe loss, thus offsetting most of the gains.

Good Trades

Bad Trades
10:08AM - Bank of America (BAC) was moving upwards and so were the Futures. The Futures moved upwards strongly so I got partially filled long 4300 shares. BAC initially moved upwards about 2-cents, but then the Futures tanked back down hard. I tried to get out as soon as I could, but ended up taking a severe loss. Got out as follows: 4-cent loser (2500 shares), 8-cent loser (1800 shares) ($244 loser before fees)
  • Well what can I say? The set-up was good, the charts looked good, and the Futures moved in a fashion that would make this a doable trade
  • I could have waited for this position to come back to try to get out at even...but I would have had to stare at a 10+cent loser for a few minutes (which is not what I'm prepared to do)
11:58AM - Hewlett Packard (HPQ) was uptrending nicely as were the Futures. Some resistance broke when the Futures popped up quickly so I got long 5000 shares. As soon as the Futures popped up, it started tanking hard. Again, I tried to get out of my position as soon as possible, but ended up getting out as follows: 2-cent loser (2000 shares), 3-cent loser (1100 shares), 4-cent loser (600 shares), 7-cent loser (1300 shares) ($188 loser before fees)
  • Again, another nice setup and the charts on both the Futures and HPQ were looking really good and resistance broke nice enough...only the Futures quickly reversed
  • This was another trade in which I followed my strategy to the letter...but in this kind of market, it didn't work
2:18PM - Citigroup (C) was uptrending slightly and the Futures were moving up. Some big resistance broke and the Futures started moving up. I got long 5000 shares. As soon as I saw some profit, I quickly tried to get my entire position out. I was only able to get some of it out for a profit, while the remainder of my position was exited for a severe loss. I got out as follows: 3-cent winner (1000 shares), 1-cent winner (1100 shares), 5-cent loser (2900 shares) ($104 loser before fees)
  • This supports my case for trading smaller sizes when the markets trade with such volatility
  • This position (along with most of my other positions during the day) was too big to get out for a profit before the position reversed


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