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

Friday, October 06, 2006

Welcome To Phase III

Gross: +$554.66
Net: +$432.20
Loss From Top: $0.22
Trades: 86
Shares Traded: 105400

Stocks Traded Today (net profit/loss):
Walmart (WMT): +$185.71
Hewlett Packard (HPQ): +$153.27
Citigroup (C): +$117.87
Advanced Micro Devices (AMD): +$73.45
Exxon Mobil (XOM): +$32.40
General Electric (GE): +$16.60
Corning (GLW): -$4.77
Motorola (MOT): -$41.03
Micron Tech (MU): -$50.57
Home Depot (HD): -$50.69

Well well well. What a day to start showing all the benefits of the new Hybrid system - one filled with choppy sideways action. If you haven't heard, today was the start of Phase III of the Hybrid system that the NYSE is introducing.

Phase III began today on two stocks: American Express (AXP) and the Equity Office Properties Trust (EOP) and more will be added until every stock at the NYSE is included by the end of the year.

All the benefits of the Hybrid system (faster execution, more electronic component, the lifting of auto-ex restrictions) were on display on these two stocks...but trading on both of them couldn't be more boring!

Both of them were too thin to really take advantage of the new and improved auto-ex and both traded in a fairly small range. I had originally wanted to trade either of these today just to give the Hybrid system a test drive, but I found no opportunities at all.

Hopefully the next batch of stocks they put in Phase III will be thicker, more interesting stocks. We'll have to see.

I hope none of you lost big money on GM this afternoon...or maybe I should re-phrase that - I hope some of you MADE big money on GM this afternoon! When the news broke, I watched this sucker tank $3 within a half an hour.

I had wanted to get in on the action, but that stock was just totally insane! I heard one of the traders at another branch lost $12,000 within a few minutes on GM! Dang!

Today I didn't really do much. I didn't really like the way the markets moved for most of the day. After working on that list yesterday, I found myself really focused and I was really more conscious of some of the things I mentioned in my post yesterday.

I was a lot more patient for trades to show themselves (another day with low # of trades), I didn't automatically jump out of a position as soon as it became a 1-cent loser (though I had to stare at a 1-cent loser for a long time - it was really painful to hold!!!), I was quite surprised I was a lot more patient when holding on to winners (though the day was up and down a lot and so I didn't really have any good swings), and I really managed to take more risks today (though GM was perhaps a little TOO risky).

It was very hard to find opportunities today and so I just did what I could do and very few mistakes were made today.

No good trades and no bad trades today - just a lot of choppy sideways action and I found I wasn't able to take many good swings.

This weekend is the Canadian Thanksgiving (it's turkey time!) long weekend and I may or may not come in on Monday to trade.

With that, I welcome Phase III of the Hybrid system to the NYSE!

Good Trades
None.

Bad Trades
None.

9 Comments:

  • Nice job, would you share a few of your trades?

    By Blogger Glenn, at October 06, 2006 7:10 PM  

  • Hi JC,

    Great blog. I would like to know roughly what % of your orders get price improved by the specialist.

    Thanks! It sure looks like you are starting to get out of your rut.

    By Anonymous Anonymous, at October 06, 2006 9:34 PM  

  • Glenn,
    On days like today (when there's lots of choppy sideways action), I mainly take a lot of 2, 3, or 4 cent winners. Usually if I don't post any good trades (trades in which I made over $200), it means I've taken a lot of $50, $80, $120, etc, trades.

    Some of the trades I took yesterday include:

    At around 11:40AM, HPQ reached some heavy resistance at the $38.00 level. When it looked like the level was going to break, I went in long 3000 shares and prices just popped up. I got price improved for a 5-cent winner ($150 profit before fees)

    One in which I had to hold a 1-cent loser for a while was one on GE. Around 2:40PM, GE was uptrending and came up to resistance at $36.15. Big size looked like it would break and when the Futures ripped up, I went long 6000 shares. But it didn't and I had to stare at a 1-cent loser for a few minutes (usually I would have bailed out). Futures ripped again, but didn't break so I got out 3000 shares for break even and held the rest. Finally GE broke $36.15 and managed to get a 1-cent winner on the remaining 3000 shares ($30 profit before fees)

    Around 1:30PM, WMT came down to some mild support at $48.55. Just then the Futures popped down so I managed to get short 2000 shares. Took it for a 4-cent winner ($80 profit before fees)

    So throughout the day, I take these kind of winners and they all just add up (of course the losers just keep me in check too!). Because of the market chop, I wasn't really able to make any trades for some good swings. We'll see what next week brings. I wish you the best of luck to you and your trading!

    Anon@9:34PM,
    What an interesting question! I've never really thought about it and I've never really wrote it down in my trading journal. But if I were to estimate, I would say that maybe 10%-20% are price improved. Why is the number so high? Well, when I'm in a position and I see a sudden influx of orders come in, I put in an order to get out some of my position. Thus some of my position is price improved. With the new Hybrid system coming in, I'm not sure if this will change. I guess we'll have to see! I think I just have to stick to my rules and focus a little more to avoid bad days so we'll see if I can be a little more consistent in the coming days. Happy trading!

    By Blogger J.C., at October 07, 2006 10:28 AM  

  • JC,

    Well done as a scalper! One cent stop looks pretty tight. Why not trade less shares and have larger stop? If you trade 2000 shares for 1-cent stop, you can trade 400 shares for 5-cent stop. It could give your good setup more room to work out and could aim for 10-cents profit. I guess the reasons could be 1)it limits potential plays (more 5-cents movement in market than 10-cents movement); 2)you have that huge buying power and do not want to let it sit aside.

    ZBS

    By Anonymous ZBS, at October 07, 2006 1:16 PM  

  • @JC: As always, another enjoyable entry. Thanks for keeping us up to date on the new NYSE developments, too.

    @ZBS, it's an interesting line of thought, but it's not clear to me that it's a win. You are suggesting trading 1/5 the size to maybe get twice the per-share gain. 2000 shares for 5 cents is $100, whereas 400 shares for 10 cents is $40. So, you'd have to prove to yourself that the win % is a great deal higher with the wider stop. And also don't ignore the possibility that you can stop yourself out at 1 or 2 cents, and then get back in for 5 cents gain if it turns back around (for a net win of 3 or 4 cents at 2000 shares, which is still higher than $40).

    By Anonymous Richard, at October 07, 2006 2:41 PM  

  • Richard, sorry I mis-typed the numbers in there, I meant to have same reward:risk ratio but different share size. if 1 cent risk shot for 2,3,4 cents profit, 5-cent risk should should go for 10,15,20 cents profit. My point is that 1 cent is too tight and can easily be stopped out.

    By Anonymous ZBS, at October 07, 2006 5:27 PM  

  • ZBS,
    Thanks for your comments. #1 is correct - by trying to take bigger movements, it really limits the trades I can do. Also, since I'm in and out of my positions within a relatively short time, I need bigger share size to make it worth my while. Another thing is that I don't have patience (which we all know I'm trying to work on :-)) and so I feel more comfortable taking 2-cents on 5000 shares in 30 seconds ($100 profit) than taking 20-cents on 500 shares in 15 minutes ($100 profit). Of course, I would love it if I can have both big share size and patience (i.e. take 20-cents on 5000 shares in 15 minutes for $1000 profit) - I'll try hard to get the best of both worlds!

    You are also correct in saying that having a 1-cent stop is too tight. Most of the time when I get into a position, I expect that it goes in my favor right away (with the way my trading rules and strategies are setup) and so, many times I feel a little uncomfortable when it doesn't (which is why I am more prone to exiting for a 1-cent loser).

    I am currently working on holding these 1-cent losers for a bit longer to see if they eventually work in my favor. By doing this, it also means that my potiential risk is higher (I may lose more than 1-cent if the position doesn't go my way), which in turn, means that I must take bigger winners (to keep the risk:reward ratio intact). Doing all of this will require patience on my part - again, something that's hard to come by.

    I just hope that one day I have the patience and consistency that you have! You've done very well and I hope to achieve the kind of results you are achieving in the near future. Keep it up! I'll be following your progress!

    Richard,
    Thanks for your comments. You know that all of us appreciate all the hard work you put into your site as well. I've always respected your advice, what you've written and your comments. Keep up the great work!

    By Blogger J.C., at October 08, 2006 12:27 AM  

  • Thanks for sharing that JC. I think your system is a great way to go, you keep your BP fluid. The question I keep thinking about is how do you stop out so easily and consistently? Don't you ever make a mistake, hold a loser in hopes, or the trade just spikes against you? Perhaps the Nas is a bit diff than NYSE, but if I am in a trade it can go +/- .05 or more in a split second, I guess that is a dumb thought as if I traded MSFT or CSCO they would not do that. And those are the types you would trade on the nas with your share size I assume. So the basics are if your trade starts to go against you, you give it very little room to do so and you get out and move on to the next trade?

    By Blogger Glenn, at October 08, 2006 12:18 PM  

  • Glenn,

    That is essentially correct - if the trade starts to go against me, I give it very little room and exit quickly and I move on to the next trade. The reason I do this is because my trading strategy is setup in such a way that I only get into a position if I think the stock will go in my favor immediately. How do I do this? I get in on either level breaks (significant support/resistance breaks in which big sizes on the offer/ask are involved) or I get in on sudden movements made by the Futures (I will do this if the stock has been moving with the Futures).

    If, for some reason, the level doesn't break or the stock doesn't move when the Futures rips/tanks, then I know there's a problem and I'd rather get out than to hang around to see what happens next.

    Of course, there is always that occasional time when the stock just spikes against you (hence my "Bad Trades" section). However, I've noticed that with some of the thicker, slower moving stocks, I can hold on to a temporary loser (because the risk of it going severely against me is lower) and if the stock has been trending, I can be patient with it and the stock may continue it's trend.

    On the NYSE, some stocks like AMD and Exxon Mobil can move +/- 0.05 or sometimes even +/- 0.10 or 0.15 cents in a single print, which is why I trade these stocks with a smaller position. You will rarely encounter this kind of move on stocks like GE, or EMC.

    Hope it helps and good luck!

    By Blogger J.C., at October 09, 2006 10:32 AM  

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