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

Friday, December 15, 2006

My Love/Hate Relationship With GE

Gross: +$148.30
Net: -$108.43
Loss From Top: $582.71
Trades: 121
Shares Traded: 218066

Stocks Traded Today (net profit/loss):
Weyerhaeuser Company (WY): +$296.33
Quiksilver Inc. (ZQK): +$106.23
Darden Restaurants Inc. (DRI): +$86.17
Lowe's Companies Inc. (LOW): -$11.39
Citigroup Inc. (C): -$11.71
United Technologies Corporation (UTX): -$16.95
J.C. Penney Company, Inc. (JCP): -$26.87
American Express Company (AXP): -$33.24
ConocoPhillips (COP): -$38.88
Worthington Industries Inc. (WOR): -$59.38
Home Depot Inc (HD): -$63.49
US Bancorp (USB): -$105.35
General Electric Company (GE): -$229.87

Sheesh!

I know today was a quad witching day, but this day could have, and should have been much better than it was.

Early into the trading day I put on some pretty good trades and I was quickly up a bundle within a half an hour of the trading day.

But then I started trading General Electric (GE).

I've always had a love/hate relationship with this stock. On some days I am able to make some good money trading this stock - and on other days I will lose a bundle.

Several months ago I told myself I wouldn't trade this stock again....but lately it's been quite active and I couldn't resist.

But trading GE today was such an emotional roller coaster ride...

And since my position size on GE today was quite large (5000 or 10,000 shares), the profits and losses were also large.

There was literally 1000's of dollars that could have been made on my part. I went long several times using 10,000 and 5000 shares and as you can see, GE had a huge run up.

The problem was that GE was moving much like AMD yesterday: 2-cents up, 1-cent down, 3-cents up, 2-cents down.

As a result, I had several rather large winners and several large losers.

For a good hour I traded this stock...I'd make $400, then lose $200, then lose another $200, then make $250, then make $200, then lose $200, then lose another $250....

Even though GE moved in a nice trend in the morning, I couldn't weather the storm and every time a position went against me for a few cents, I ended up jumping ship.

And I knew that GE was trending up and I knew I just kept getting chopped up and wouldn't you know it - the ONE time I decided to hold a temporary loser, GE decides to go severely against me...an 8 cent loser on 5000 shares ($400 loss).

At that point I decided I had enough of trying to trade GE....I felt as though I would probably blow myself out of the water and my frustration with the stock would just continue to mount...so I decided not to trade it any more for the rest of the day.

However, after I decided to stop trading GE, I was looking at a $600 loss from top (the amount I had lost from my peak profit on the day).

And unfortunately the markets wouldn't offer any real good opportunities for the rest of the day (just chopped everywhere).

It's too bad too - I had some success trading some of the thinner stocks today and had I ignored GE today, I would have probably ended up positive today.

It seems like lately I've been bitching about the thicker, more actively traded stocks - yesterday I bitched about AMD and today I'm bitching about GE. Maybe I should not trade these stocks altogether.

I would rather trade a few times on thinner stocks and take bigger profits than to trade stupid stocks like GE and MOT....there are just too many players playing around on those stocks and I seem to be the fool that keeps getting fooled.

Perhaps if I do intend on trading stocks like GE and MOT, it should be on smaller share size. Because they jiggle around too much, I can't handle looking at a few cent losers on 10,000 shares on these kinds of stocks (I'd panic and jump ship).

Maybe had I just traded 2000 shares at a time on GE, things would have been different...at least I would have been more willing to hold onto temporary losers.

Another thing I should note is that GE is now Hybrid and so maybe I should just get used to stocks moving like that.

In short, I should have just watched the charts, but something inside me just screams for me to get out of a position if I see a $200 or more loser on my hands (which GE did many times to me).

I'll work on that.

As the day came to a close, I found myself pissed at the markets for not giving me any real good opportunities to get myself out of a jam and I was just completely frustrated with the market action.

Oh well - things could have been much worse had I continued to trade GE (I happen to stop trading it when it stopped trending).

I'm not going to bother listing out my good trades and bad trades made on GE (there were three good trades and four bad trades on GE today...all simply because I was using bigger share size).

Not including the GE trades I had one good trade and one bad trade. The bulk of my losses today were all because of GE (I managed to lose close to $600 on it before I stopped trading it).

I would trade many times during the course of the afternoon, but I ended up "stuck" where I left off after I stopped trading GE.

Anyways, this post seems a little sloppy (at least typing it up seemed kind of sloppy)....my mind isn't really too focused into writing this up right now....I just want next week to start so I can get back to trading.

I'm still quite happy with the thinner stocks I've been trading lately...next week I'll step it up and go in with 1000 and 2000 share positions. This may mean that I might lose a lot more, but the rewards will also be greater.

I'm not going to bother posting up charts...I'm completely exhausted after today's emotional roller-coaster ride.

Have a good weekend folks....stay safe and take care.

Good Trades
9:44:58AM - Weyerhaueser (WY) was moving up while the Futures were moving sideways. WY came up to some size on the offer and when it broke I went long 1000 shares. I originally meant to go long only 500 shares and when I realized I was long 1000 shares, I quickly dumped half my position (probably not a good move). Anyways WY kept going up and when it looked tired I exited the balance of my position. I got out as follows: 15-cent winner (300 shares), 16-cent winner (200 shares), 40-cent winner (200 shares), 50-cent winner (300 shares) ($307 profit before fees ; Long 1000 shares @ $73.50 ; Out: 9:47:14AM)

Bad Trades
10:49:58AM - Citigroup (C) was moving up but flattening while the Futures were moving up. I went long 2000 shares (not too sure what the reason was) and just got chopped up. This trade was shortly after my emotional affair with GE and I was not really in a good state of mind and this trade should not have been put on. I got out for a 6-cent loser ($120 loser before fees ; Long 2000 shares @ $53.79 ; Out: 10:50:13AM)

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3 Comments:

  • I wonder if you've thought about styles other than scalping. Seems to me it's rather easy to get chopped if you bail after losing a cent or two.

    By Blogger wincity, at December 15, 2006 10:42 PM  

  • Scalping is a great strategy if you are good at it. If it's not your thing, it will never work -but if it is your thing...
    You don't tie up capital, your risk is nil (in the larger scope of things), and the consistency of your trading profile affords you a mental stability that aids your trading. Try a three week drawdown on for size...it mucks up the confidence.
    The problem of course is that the focus on the short term also blinds you to your overall stability. The red position seems like a disaster, when in reality your positive expectancy is what you should focus on.
    I've a trick that I use when playing stocks that are trading like GE was today. The two things to keep in mind are that the stock absolutely running and that the stock is in a powerful uptrend (no new lows, never coming down even when your scalper instinct and the tape tells you that it could or should). This goes on over time; doesn't have to be much time (half an hour, say, or the stock just refuses to really downtick despite lackluster futures in the indices). I call this overwhelming evidence. When I see proven, overwhelming evidence, then this is the trick.
    I wait until I see an entry point, and then I wait for it to look bad (a downtick; or the specialist dropping his bid a few levels and the ECNS on the bid thinning out) and for it to hold there. I enter the position then, when I would be getting out had I taken the trade earlier. With a quarter- or usually half-size position. If it downticks again, I double the position.
    This goes entirely against instinct (for we scalpers), but the key is to have identified that overwhelming strength. I also let these positions run longer than normal. These are the situations where the expectancy is the highest because there are fewer games being played -people have been caught wrongfooted and they are stampeding in or out of the stock. The specialist and the powers that be will do everything to shake us out -but once you can see that they're overwhelmed by the order flow, and you have to see that first, then you can start counterpunching. Doesn't happen in every market but it sure is happening in this one. AMD was a cherry. GE likewise.
    By the way, to let the position run isn't habit -but when the circumstances dictate, once I manage the position until it's profitable (when I would close out) then I tell myself to forego the profit. For example, once it moves up four or five cents (only in these overwhelming evidence scenarios), I call the trade a scratch. That way I don't close it unless it ticks below where I entered. If it does, then I repeat the process of entering again. If it doesn't, then I ride it until I really can't physically hold it any longer.
    I've actually taken the P/L numbers off of my screen, and changed the red and green highlights for open positions to blue and orange.
    Anyways, these are the best edge that a scalper has. If you're playing regular moves, you're fighting against a specialist and against people with a bigger stick. In these overwhelming scenarios, you have full advantage of your real edge, which is taking the prices from the larger players whose hands are forced. Get them competing for a stock against each other and they can't afford to mess around with it.
    Once again let me stress that you have to see the overwhelming evidence, of which the best proof is that when you wouldn't even consider buying it -it still goes up. Sometimes you get knocked on these things, but in my experience they are the highest expectancy plays that you can find -thus the increased hold time (and take partial profits as it keeps running, by the way) more than makes up for the occasional blunder. This really is our edge -that we are fast and that we see every tick -and nowhere is it more beneficial to us than when the slower, larger players really have to get in or out of a stock.

    Cheers.

    By Anonymous Anonymous, at December 16, 2006 12:15 AM  

  • Wincity,
    Thanks for your comment. Yea, it's something I'm working on and I think I am making strides in that department. My hold times are getting longer and it's something I'm starting to get accustomed to. Once I feel comfortable holding positions for an hour or more and once I feel comfortable being able to watch a temporary pullback in my position. I'll keep working on those things!

    Anon@12:15AM,
    What a very insightful comment! It's another one of those comments that could be a post all on it's own! Thanks! I can definitely see how doing things the way you do takes full advantage of a position - especially one in which a trend is strong. One of the things I could of done (which you mentioned) was to initially get in with a smaller position and add to it if there is overwhelming evidence. The problem I think I was having was that I was going all-in and whenever I do that, I have a tendency to get jiggled out of a position often. With some of the new things I'm trying (trading thinner stocks), I'm usually good in doing what you had described (I am willing to hold onto a losing position if there is overwhelming evidence). This is something I should apply on thicker stocks as well. What a great comment you left! Thanks!

    Have a great weekend everybody and let's see what Monday brings!

    By Blogger J.C., at December 16, 2006 9:50 AM  

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