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

Tuesday, October 10, 2006

Have I Found My Kryptonite?

Gross: +$296.80
Net: +$125.28
Loss From Top: $592.03
Trades: 86
Shares Traded: 155310

Stocks Traded Today (net profit/loss):
Exxon Mobil (XOM): +$144.81
Corning (GLW): +$118.53
Advanced Micro Devices (AMD): +$102.19
Ford (F): +$42.91
Walmart (WMT): +$42.19
Home Depot (HD): +$8.68
AT&T (T): -$37.15
American Express (AXP): -$46.19
Hewlett Packard (HPQ): -$57.73
General Electric (GE): -$59.50
Pfizer (PFE): -$132.97

Was I ever pissed when I left the office today! But sometimes it takes days like this to discover a problem and perhaps even do something about it.

So what happened that got me all riled up?

Check out my "Loss From Top"...I lost almost $600 in the last 45 minutes of trade! This is not the first time something like this has happened. In fact, this kind of thing has happened to me many many times before.

On my way home after my anger dissipated, I started thinking how or why this keeps happening to me? And I think I have a solution/answer.

I don't know why it never occurred to me earlier. Afterall, I've mentioned it several times in past posts, but for some reason I could never put the pieces together. So what is my problem?

I suck when it comes to afternoon trading!

How many times have you seen me mention in my posts about how patient I was in the morning, how good I was following my rules in the morning, and how good I was at preserving the profits in the morning?

And how many times have you seen me mention losing a lot of money in the afternoons in my posts?

Plenty!

I don't know what it is - perhaps it's my inability to concentrate or remain focused. Maybe the stress from the morning leaves me exhausted when the afternoon rolls around. And no matter how much coffee, how long I go out for a walk (today I actually went out for a nice long stroll at around 1PM), or how much time I kill doing other stuff, it doesn't seem to help my trading in the afternoons at all.

Quite honestly, I can sort of feel it too. In the mornings I'm usually excited to get the day started and I'm full of energy, but by the afternoon, all the waiting for good setups and all the excitement of the morning has me mentally exhausted and I find myself giving big sighs (those "I'm bored" type of noises) a lot in the afternoons.

From my trading results and my trading journal I can see that in the afternoons I will either:
  • lose a lot of money
  • make very little
  • I'd lose a lot in the early afternoon and I'd have to spend the rest of the afternoon trying to play catch up
Of course, there is the occasional afternoon where I make a good trade here and there, but these are far and few in between.

And so with that, here are some new trading rules I will add to my "Trading Rules and Strategies" document (one day I'll post it up....one day...):
  • If you have a net profit of $700 or more by lunch, take the rest of the day off
  • If you have a net profit of $500 or more by 2PM, take the rest of the day off
  • Reduce your overall risk (reduce share size) as the day goes on - by 2PM or later, you should be trading 1/3 to 1/2 your normal trading size; this is to preserve whatever profits you may have accumulated
  • If you are net negative, the above rule does not need to be enforced
I know some of you out there may disagree with some of these new rules. But my take on this is that I just want to stop the bleeding and string together at least a few decent trading days. I cannot tell you the countless $1000's I have lost in afternoon trading.

Hopefully this also gives me more time to myself - there are countless things I would like to do (read some books, work on other blogs, continue my learning of a new language, etc) that I have yet to find sufficient time to do.

I'll give these rules a trial run in October, since I'll be missing several trading days this month (I've already missed one and I'll be missing another 5 trading days later in October).

Today, I also have to blame myself for taking too much risk in the afternoon. The one trade that killed me was on AT&T (T) at around 3:48PM (see bad trades). There were several things wrong with the trade that made me feel uncomfortable, but yet I put on a relatively big risk (big share size).

There was a "Master Trader" (a trader who nets $120,000+ within a calendar year) in our office that would come in in the mornings, trade for about 2 hours, then go home. He'd net $800 to $1200 in the mornings, then call it a day. I guess either he'd rather do other things in the afternoons or he sucked at trading in the afternoons.

Hrmmmm....maybe he and I share the same affliction to the same Kryptonite...

Good Trades
11:21AM - AT&T (T) and the Futures were trending upwards. AT&T (T) was testing some resistance at $32.50 when suddenly the Futures ripped up hard! I quickly went long 10,000 shares and got out a few seconds later as follows: 3-cent winner (2800 shares), 4-cent winner (7200 shares) ($372 profit before fees ; In: 11:21:13AM ; Long 10,000 shares @ $32.50 ; Out: 11:21:45AM)

Bad Trades
3:48PM - AT&T (T) was strongly uptrending while the Futures were testing some resistance. AT&T (T) just looked so strong that I wanted to get in on the action. I went long and got partially filled for 8700 shares @ $32.80. Unfortunately, there was hardly any size backing up my trade and the Futures could not break resistance and AT&T (T) fell. I got out as follows: 2-cent loser (4000 shares), 6-cent loser (4700 shares) ($362 loser before fees ; In: 3:48:26PM ; Long 8700 shares @ $32.80 ; Out: Did not record)
  • First of all, AT&T (T) had just finished a near-vertical move straight up; I should have been cautious with this one
  • Another thing was that the Futures kept bouncing against some resistance and it couldn't break - I knew that if the Futures could not go further up, it'll come screaming back down; I should have waited for a clear break on the Futures if I had wanted to get long
  • Position size was way too big on this one - there was hardly any size behind my trade and if this position went against me (which it did), I'd have trouble getting out (which I did!)

8 Comments:

  • hey, like the blog....quick question regarding your trades....when you say that you are gettin 10,000 share positions, are you using average price or are you getting in at the prices you want.....im guessing you dont use NYSE, but rather the NYSE ECNs, like NYSE X.....is that correct????

    By Anonymous Anonymous, at October 10, 2006 7:02 PM  

  • JC......from your stats it appears trading in the afternoon is a crapshoot at best. Considering how many trades you do in a day I can understand by the time the afternoon rolls around
    you are not as sharp as the morning session. That reality is not lost on most traders either.

    Just an idea, but maybe try for 1 week trading in the morning session for good or ill and see if your results are improved and take the rest of the day to research other trading ideas you might have.

    By Anonymous StockRoach, at October 10, 2006 7:15 PM  

  • yo jc. i read somewhere before saying that there is such a thing as an unwritten rule about timing in trading- do not trade between 11.30 and 2.30.

    By Blogger ryuu, at October 10, 2006 7:47 PM  

  • JC, same thing happened to me all the time. Many days I could gain several hundreds in first 2 hours session, then I spent the rest of day to trade thousands shares to only gain less than 50 dollars, or loss all my gains. In my trade statistics analysis, I saw last hour trading can be profitable but not 12:00pm-3:00pm.

    BTW, I will click those Google Adsense ads to see if it can bring you a tiny side income.

    ZBS

    By Anonymous ZBS, at October 10, 2006 8:06 PM  

  • Anon@7:02PM, StockRoach, Ryuu, and ZBS,

    Thanks for your comments.

    Anon@7:02PM,
    Thanks for the compliment. I'm what you can call a "puncher" - I punch size and I get into a position all in one shot (well, for my bread and butter trades). So when I say I get long 10,000 shares, it means I hit the size on the bid/offer and get filled on the entire thing. Sometimes I'll go through the NYSE (send my order directly to the specialist) - usually if I don't see any ECN shares. But usually I'll use INET-Rash; it routes to most ECNs (except Arca) and if I cannot be filled on my entire order, the balance gets routed to the specialist. But most of the stocks I trade can usually handle the size of my orders (GE, MOT, T - these are all fairly thick stocks). The way I trade, I mainly look for big sizes on the bid/ask and wait for a good opportunity to punch/hit the size when it breaks.

    StockRoach,
    I was actually thinking about trading only the morning for the rest of this week, but I'll see how I feel (unless I'm losing badly, it's kind of hard to drag me off the trading floor!).

    Ryuu,
    Heheh - yea, I try my best to follow that rule and I've done a fairly good job of trading less during those times. What I usually do now is I will not trade unless there is a strong move in the Futures and stock - even at that, I'd get in with smaller share size simply because it's lunch. Unfortunately today I lost money near the close and I can remember several times losing money near the close (which makes me irritable on my way home from the office).

    ZBS,
    Yea - I usually find that I'm at or near my peak profit just before lunch starts...and then from there, it usually goes sideways (and I pay fees for my trades) or I lose some of those profits. Maybe it the lunch...maybe after I eat it, my body and brain go into "digesting" food mode...And thanks for the support! Keep up the your good trading!

    By Blogger J.C., at October 10, 2006 8:46 PM  

  • Once I had a boring office job and I found that I simply was unable to concentrate on boring office details full out for 8 hours a day. I talked to my doctor friend (a smart person) and he said the same thing - that if he was not 'engaged' in the work, he simply could not concentrate like that on boring routine work - he said it sort of 'drove him crazy'.

    I concluded that I may have some one of those fancy alpabet syndromes and I need variety. When I trade, I have to be careful that I do not just 'get bored' watching a trade and close it out on small profit just to be able to change what I am doing. It sounds stupid, but after hearing many trading blogs complain about 'watching paint dry' I suspect that I am not alone. Then the problems set in such as impatience, lack of full concentration, poor judgement. Right now, I stop after a few hours when I get to that point. Also it may be that I am so new to trading that it requires an immense drain of energy to focus and process things to the degree necessary. Leave if you can, try different approaches.

    By Anonymous Anonymous, at October 10, 2006 11:59 PM  

  • About the rules: I like the idea and the thinking behind them. But, I wonder if you really want to make any decisions based on your $ P/L. It might be right for you; I just know that it never works for me. Back when I used to make many trades per day, if I was negative in the morning, history has shown that trading all day at full size usually hurt rather than helped. Also, beware thoughts like "if I can just make another $150 by noon, I can leave for the day."

    I think the key sentence in your post is "Quite honestly, I can sort of feel it too." If it were me, I'd be making rules based on how I feel. Making bored noises? Go home, even if making money. Feeling great in a trending market? Why stop just because Ive made $700? I could certainly see helper rules like, if I lose 1/2 my morning profits in the afternoon, I walk away.

    Just something to think about--and best of luck in any case! I'm not trying to change your mind or anything. And I think the ads look good.

    By Anonymous Richard, at October 11, 2006 12:22 AM  

  • Anon@11:59PM,
    Thanks for your comments. Perhaps another thing I might need to do is to do something more engaging to take up some time and to keep me awake. It seems to me that if I bring in books or something to read or do (like crosswords, etc), I find myself wanting to fall asleep even more! I'm going to try to figure all of this out to see what works best for me. In the meantime, good luck in your trading!

    Richard,
    You make very good points! After I had published my post, worrying about my P/L $ came into my mind as well and I think that may not be a great idea. Late last night I was thinking that I'll fall into the same trap as the "trying to hit $1000" syndrome.

    Currently, I don't look at my P/L during the day except for maybe around lunch and maybe in the middle of the afternoon (around 2ish) (which was the reason behind the 12:00 and 2:00PM times), but I can forsee myself actually staying regardless of these rules (mainly because of how I feel - if I've got profits, it's kind of hard to drag me off the trading floor).

    I think I've got to find what works for me. If this is a real problem for me, I should take StockRoach's advice and just trade in the morning then leave regardless of my profits. Another thing I could do is just leave if I find the overall markets aren't providing enough oppporunities. Hopefully the rules I listed can morph into something more useful than it's current form.

    In any event, happy trading! We'll see how today goes!

    By Blogger J.C., at October 11, 2006 7:32 AM  

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