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

Tuesday, June 06, 2006

Out Of Sight, Out Of Mind

Gross: +$1,137.59
Net: +$1,036.64
Loss From Top: 0
Trades: 64
Shares Traded: 103216

Stocks Traded Today (net profit/loss):
Micron Tech (MU): +$273.13
Home Depot (HD): +$231.59
Corning (GLW): +$144.39
Hewlett Packard (HPQ): +$139.26
Citigroup (C): +$93.91
Bank of America (BAC): +$81.56
Walmart (WMT): +$52.32
Tyco (TYC): +$16.21
JP Morgan (JPM): +$4.24

After what happened yesterday, I changed a couple of things in the way I trade. And it seems to have paid off.

I truly believe that trading is about 50% skill/analysis/judgement and 50% psychology. It would seem as though I have real problems with the psychology part (because I always seem too emotionally charged especially when things are not going my way).

And so, here are a few things that I changed today (which seemed to work like a charm):

  • I refused to look at my net profit during the day. I had no idea of how much I was up until near the end of the day.
I find that many times I get frustrated when I see how much my net profit has gone down after a bad trade, which ultimately affects the next trade I put on. I also find that if I see I'm close the next round number (i.e. $700 or $800), it also affects my thinking (and I usually end up losing money on the next trade). Since my net profit was out of sight, it was out of mind

  • After every trade or every once in a while, I closed my eyes, took a deep breath, cleared my thoughts and got ready for making the next good trade. I will forget the previous trade ever happened (regardless if it was a good trade or not) and tackled the next trade with a fresh mind
This allows me to look at the markets with an unbiased view. Often times when I am angry or trading on emotions, I usually want to have revenge on the stock that lost me money and try to take the reverse trade (i.e. if I went long and lost money, I'd get angry and say "Fine! If you want to go down, then I'll short!", which usually makes me lose more money)

  • I reduced my share size (2000 shares) on any trade in which one or more of my trading rules are not met, but I still wanted to put on the trade.
These kind of trades include bounces (in which I try to go long after the market has tanked hard, hoping for a bounce in prices). I found that this helps satisfy my need to trade (i.e. fill the void whenever there are currently no opportunities and it helps keep me out of those "I'm bored" type of trades)

  • I adjusted my share size according to how strong the trade looks. If the uptrend on a stock is strong, then I'll use bigger shares. If the uptrend on a stock is only slight, then I'll use less shares
I'd also like to thank a fellow trader for giving me some encouraging comments (thanks Kelly!). It really put what I'm doing into perspective and re-enforced the idea that what I'm doing through this blog will actually help me in the long run.

That being said, I think being shutdown yesterday was worth it and was not in vain. I'm just so glad that I decided to sit down and review my trading day yesterday (I was sooo close to not wanting to review that day). By forcing myself to review my problems, I was able to make some adjustments to help my psychologically.

The trick will be to see if I can pull more of these $1000+ days.

Good Trades
9:56AM - Home Depot (HD) was downtrending as were the Futures. HD approached the $37 level. The Futures tanked and the $37 broke, so I got partially filled short for 1800 shares (I attempted to short 4000 shares). I got out as follows: 12-cent winner (800 shares), 14-cent winner (1000 shares) ($231 profit before fees)

10:32AM - Micron Tech (MU) and the Futures were uptrending. The Futures ripped, I got long 6000 shares. Got out as follows: 2-cent winner (2000 shares), 5-cent winner (2000 shares), 7-cent winner (2000 shares) ($260 profit before fees)

10:53AM - Corning (GLW) and the Futures were downtrending. GLW reached the $24 level. When it broke, I got short 3000 shares. I got out as follows: 3-cent winner (1000 shares), 6-cent winner (2000 shares) ($150 profit before fees)

12:41PM - Citigroup (C) and the Futures were uptrending. The Futures ripped, I got partially filled long 2400 shares (out of 5000 shares). Got out as follows: 2-cent winner (500 shares), 9-cent winner (1900 shares) ($181 profit before fees)

Bad Trades
9:43AM - Citigroup (C) and the Futures were downtrending. I saw something on the Level 2 and I got long 3000 shares. Citi and the Futures kept going down and I had to get out for a 4-cent loser ($120 loser before fees)
  • I think what happened here was that I wasn't completely awake. After I got out of this trade, I asked myself "What am I doing????". This trade should not have been put on
  • As part of my new way of trading, this trade did not phase me and I was able to keep my emotions in check


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