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

Friday, September 15, 2006

Like Watching Paint Dry

Gross: +$1,033.00
Net: +$835.61
Loss From Top: 0
Trades: 147
Shares Traded: 158000

Stocks Traded Today (net profit/loss):
Walmart (WMT): +$508.15
Home Depot (HD): +$312.49
Advanced Micro Devices (AMD): +$69.04
Exxon Mobil (XOM): +$68.59
Motorola (MOT): +$1.77
Corning (GLW): -$124.45

Today I really focused on only trading when stocks were trending. Unlike the last two trading days, I was willing to wait and to be patient for these stocks to start moving today. In fact, my trading rules specifically state that I should not trade if there is no trend (on either the stock, or the Futures).

But on Wednesday and on Thursday, I tried to be patient, but most of the stocks I was watching never really had any good, smooth moving trends to trade and as a result, I tried to trade them (even though I knew I shouldn't). I wish I could have the previous two trading days back.

I would rather do very few trades and make some decent profits (but be bored out of my mind waiting for something to happen) than to have the days I had on Wednesday and Thursday.

Today I focused in on only a few stocks so that I could watch to see if a trend was about to begin. When they did start trending, I'd wait for confirmation of the trend, then I'd scalp them on their way up (or on their way down).

Because I was willing to wait, for most of the day, I just sat there and watched the charts and the Level II prices. Everyone else around me was tapping on their keyboards, slamming their fists on the desk and swearing out loud...but I was just sitting there, watching.

I sometimes wonder if the other traders think that I hardly trade at all. It would seem to them that everytime they walk by my trading station, I'm not in any position and I'm just sitting there watching.

You may think that doing about 150 trades a day is quite a lot, but most of the other traders at where I work average 200 - 500 trades a day.

The trader who sits beside me once asked "You don't trade very much do you?" and my response was "I'm just waiting for the charts to show me something", to which he replied "Man, I couldn't do that...I would need to do something". He must have thought that watching the charts for about 80% of the time was like watching paint dry.

Don't get me wrong...I get bored too and quite often I'll trade, breaking my rules (and usually end up losing money), but today I made it a point NOT to trade. By doing this, all I'm doing is just improving the probabilities that my trades will work in my favor.

Walmart (WMT) and Home Depot (HD) has some nice intraday moves and I was able to take advantage on some of them. I really goofed up on Corning (GLW) today...I tried trading when a trend emerged, but it just moved so choppily that I eventually got chopped out several times.

Two very good trades versus no bad trades. I was quite surprised that both of these big winners came on smaller share sizes (one was on 2000 shares, another on 3000 shares). Upon review, I really should have used a bigger position...I'll need to work on that next week.

In the meantime, enjoy your weekend and I'll see you all back here on Monday.

Good Trades
9:46AM - Walmart (WMT) was moving down and so were the Futures. I got short 1000 shares at $48.61 when some size broke and when the Futures started tanking, I got short another 1000 shares at $48.60. The Futures really tanked and so did Walmart. I got out of my position as follows: 14-cent winner (1000 shares), 15-cent winner (1000 shares) ($290 profit before fees ; In: 9:46:22AM ; Short 1000 shares @ $48.61, short 1000 shares @ $48.60 ; Out: 9:48:08AM)

11:54AM - Home Depot (HD) was downtrending and testing the $37 level while the Futures were also downtrending. I missed the initial break of the $37 level, so when then Futures started tanking, I got short 3000 shares at $36.99. At first, it looked like HD wasn't going to move, so I got 1000 shares out too early. Well as soon as I got 1000 shares out, HD just went into a freefall! Huge market orders to sell were hitting HD and I got price improved on one of my orders and held the last 1000 shares I had. Then another market sell order hit, so I got price improved yet again. I got out as follows: 1-cent winner (1000 shares), 19-cent winner (1000 shares), 24-cent winner (1000 shares) ($440 profit before fees ; In: 11:54:58AM ; Short 3000 shares @ $36.99 ; Out: 12:00:32PM)

Bad Trades
None

7 Comments:

  • I apologize for the awful colors and the awkward template...

    Blogger had some problems this morning and I'm not sure if this has anything to do with it. It would appear as though everyone who uses the same template is having the same problem (Tim Knight's page is also like this).

    I hope to have this awful background color and template problems fixed soon...

    Regards,
    JC

    By Blogger J.C., at September 15, 2006 6:41 PM  

  • JC: Good job! I really like to see how a scalper like you trade, that's cool. Keep it up.

    I'll check out your blog in Taiwan as well. I mean, when I am back to hotel :)

    Have a great weekend.

    Gav.

    By Anonymous Gav, at September 15, 2006 8:03 PM  

  • Do you check the pnl threads at elitetrader.com - in comparison, you are doing quite good trading - money-wise.

    By Anonymous Anonymous, at September 15, 2006 8:12 PM  

  • Great blog!!

    I read this comment from you a few days ago

    "HOWEVER, on Nasdaq, the credits are much higher and I know several traders that make lots of money just by trading credits."

    Can you give me more detail on how one can do this.

    Thanks!

    By Anonymous Anonymous, at September 16, 2006 7:04 AM  

  • To all,

    Thanks for your comments.

    Gav,
    Thanks for the support! I hope you have a great time over there in Taiwan!

    Anon@8:12PM,
    Yup, I check the numbers on the P/L thread at EliteTrader everyday. I just wish I was as consistent as some of those guys...and I wish I could post up some of the numbers that they post daily...I'll keep trying and hopefully I'll get there!

    Anon@7:04AM,
    On both Nasdaq and NYSE, you can trade for credits. But Nasdaq offers higher credits. On the Nasdaq, you get credits for removing liquidity (meaning you are removing shares that are on the Level II). So, for example, lets say you get 0.003 cents per share credit if you remove liquidity.

    Now let's say you are trading Microsoft (MSFT) and you see that there are shares on the offer. Now lets say you buy 10,000 shares from the offer (you remove shares showing on the offer). Now you've just made a quick credit of $30 (0.003 * 10,000). Now lets say that MSFT moves up 1 cent and you get rid of the shares at the same price you bought them at by removing liquidity again (i.e. you hit the size on the bid). You've just made another $30 from credits. So, even though you bought and sold at the same price, you made $0 on the trade, BUT you've made $60 in credits.

    Some of the credit traders obviously use much bigger share size to do this profitably...if you use 50,000 shares, then the same trade described will make you $300. Using 100,000 shares, you've made $600. Do this many times during the day, you can make $1000's (there are many who trade this way at the firm I work for and some make good consistent money...I'm talking like $5000+ daily!!!).

    The amount of credits you get depends on the ECN...from what I can see, if you use ATTN (Attain) to get in and out of your trade, you actually make 0.004 cents per share for removing liquidity (which appears to be the highest).

    With the new fee structure that the NYSE announced for using ARCA, it would seem as though the credits they are offering is slowly creeping up to Nasdaq credits (NYSE announced 0.002 credit for ADDING liquidity). Maybe one day soon the other ECNs will offer higher credits in the hopes of improving volume on the NYSE.

    I hope that answers your question, if not, post up another comment and I'll answer it as soon as possible.

    Regards,
    JC

    By Blogger J.C., at September 16, 2006 7:24 PM  

  • qUESTION:

    I use TradeStation. You watch the futures for a change in trend to confirm the correlating moves in HD or WMT etc... What is the ticker symbol you use for the futures?

    Trader turned scalper.

    paulcupp@comcast.net

    Thanks.

    By Anonymous Anonymous, at September 17, 2006 6:28 PM  

  • Anon@6:28PM,

    Thanks for your comments.

    The current symbol for the e-Mini S&P Futures I use is ESZ6. Every few months you will have to roll it over to the forward contract.

    Please note that you will probably need a data feed from the CME (Chicago Merc Exchange) and will most likely cost you extra per month (you'll have to find out how much from TradeStation).

    Hope it helps!
    JC

    By Blogger J.C., at September 17, 2006 11:15 PM  

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