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

Tuesday, August 29, 2006

Not Doing Your Homework Can Be Costly

Gross: +$465.34
Net: +$243.99
Loss From Top: $46.39
Trades: 141
Shares Traded: 231132

Stocks Traded Today (net profit/loss):
Advanced Micro Devices (AMD): +$334.59
AT&T (T): +$131.27
Home Depot (HD): +$65.64
Walmart (WMT): +$26.33
Ford (F): +$12.74
Hewlett Packard (HPQ): -$2.55
Micron Tech (MU): -$11.08
Exxon Mobile (XOM): -$23.53
Citigroup (C): -$37.28
Motorola (MOT): -$38.79
Corning (GLW): -$231.36

Usually when I get home from work, I'll review my day by going through my trading journal. Then comes dinner, then maybe this blog or I'll go out for an after dinner walk with my wife.

After I finish working on this blog, that's when my homework starts. I'll review the charts and news for the core stocks I trade, making note of any support/resistance levels. I will also make note of any economic numbers that are on tap for the next day and finally I end my day by reading through a whole bunch of blogs, news on stocks, and stocks reporting earnings.

Well yesterday night I got kind of busy and I kind of rushed through my homework. Somehow I made a note that consumer confidence was to be released at 10AM, but I didn't make note that the FOMC minutes were also being released at 2PM.

When I trade, I like to be out of all positions when these kind of numbers or events occur and I will usually trade the reaction off of those numbers/events.

Well just before 2PM, I got into a big long position when suddenly the markets appeared to be tanking. At that moment, I was thinking "what the heck is happening? Is something going on?". I quickly got out of my position (with a small, but sizeable loss), and I started looking around, watching CNBC and the news to see what had just happened.

I quickly got a glance about the FOMC minutes being released and at that point I was thinking "Damn it! I'm missing the move!". Needless to say I was ill prepared for this event to occur and I found myself jumping into one trade after another without really assessing what was going on. In the back of my mind I kept thinking "Darn it! I'm gonna miss out on this great move!".

My heart was pounding and I was a little red-faced when I realized what was going on, so I felt I had to do something to take advantage of it by getting into something..anything!

My thinking wasn't very clear during that moment and somehow in a span of 15 minutes I lost $600! During that volatile period, I jumped into longs when they were supposed to be shorts and I jumped into shorts when they were supposed to be longs.

I remember I just sat there after that little flurry of losing trades, not believing what had just happened! I lost $600 in a blink of an eye!

So folks, here's a clear lesson on why you should do your homework. Since my dog ate my homework yesterday night, it cost me $600 today.

I re-collected myself and managed to make most of it back during the rest of the afternoon. All in all, another not-very-impressive day. I've learned my lesson and you can be sure I'll be doing my homework tonight...

Good Trades
11:27AM - Ford (F) was moving upwards while the Futures were ranging. Ford was approaching it's intraday high at $8.10 which had a bit of size on the offer (about 1500 size). When it was about to break, I went long 10,000 shares. I got out as follows: 2-cent winner (5000 shares), 3-cent winner (5000 shares) ($250 profit before fees; In: 11:27:04AM ; Long 10,000 shares @ $8.10 ; Out: 11:30:03AM)

3:21PM - AT&T (T) has a strong uptrend going while the Futures were also uptrending. I went long 10,000 shares when there was an opportunity and got out as follows: 2-cent winner (5000 shares), 3-cent winner (5000 shares) ($250 profit before fees; 3:21:03PM ; Long 10,000 shares @ $31.20 ; Out: 3:23:27PM)

Bad Trades
11:35AM - Ford (F) was uptrending while the Futures were sideways. Coming off a good trade, I decided to go long 10,000 again on Ford. I suddenly saw big size on the offer while spooked me out of my position. I got out for a 2-cent loser ($200 loser before fees; In: 11:35:51AM ; Long 10,000 shares @ $8.14 ; Out: 11:36:55AM)
  • I think I was too quick in getting into this one...I thought the offer was going to break again, but instead I was met with huge size on the offer
  • Knowing Ford, I could have been a little more patient with this one...whatever I see on the Level II doesn't mean a thing when it comes to thick stocks like Ford
2:01PM - Corning (GLW) started downtrending while the Futures were tanking. I went short 4000 shares on some crossed ARCA shares. Well, I pretty much went short at the low of the move. The Futures then started ripping and I got out as follows: 4-cent loser (2000 shares), 6-cent loser (2000 shares) ($200 loser before fees; In: 2:01:56PM ; Short 4000 shares @ $21.81 ; Out: 2:03:12PM)
  • This was the first trade I did when I realized that the overall markets were moving because of the FOMC minutes...I wasn't really prepared and a million things were going on in my head...all I saw was that things were going down, so I went for the first stock I saw and went short
  • If I were prepared for the FOMC minutes, I would usually wait for the first initial move made by the markets; I do this because the first initial move maybe a false one...but in this case I just felt I needed to do something because I was missing out
  • This would be the first of several losing trades in a row...for the next couple of trades I would get long at the wrong time and I'd get short at the wrong time...when it was all said and done, I had lost $600

2 Comments:

  • I forgot about the CC report and I went nice an long in two trades just before. Moving nicely in my favour and then poof. I usually check knighttraders site as he lists all the plays that matter. I forgot to do that this am... so easy to err. I also listen to live news but sometimes I am not listening and need a 'can you repeat that button'. I was ready for the fed stuff tho.

    By Blogger Glenn, at August 29, 2006 7:27 PM  

  • Glenn,

    Thanks for your comments.

    Yea - I just don't like it when you're in a trade and the markets move suddenly (when you are not expecting it) when it could have been prepared for. I can understand if it is a sudden event that catches everyone off guard (like a declaration of war, etc), but my Fed mishap could have been avoided.

    As long as I learn my lesson...

    JC

    By Blogger J.C., at August 30, 2006 9:20 PM  

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