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

Thursday, December 07, 2006

Tricks Are For Kids

Gross: -$260.44
Net: -$407.29
Loss From Top: $565.00
Trades: 76
Shares Traded: 99404

Stocks Traded Today (net profit/loss):
DirecTV (DTV): +$98.96
UnitedHealth Group (UNH): +$30.52
Rite Aid (RAD): +$23.74
Best Buy (BBY): +$8.45
Bell South (BLS): +$7.18
The Hershey Company (HSY): +$7.18
Eli Lilly (ELI): -$20.23
Biovail Corp (BVF): -$32.45
Advanced Auto Parts (AAP): -$72.11
Home Depot (HD): -$78.93
The Gap (GPS): -$162.92
Alcatel-Lucent (ALU): -$216.70

If tricks are for kids, then I'm an infant.

I fell for many tricks in the afternoon, which resulted in a lousy day on my part.

I felt as though I couldn't really get anything going all day even though there were quite a few stocks in the news.

As usual, charting gave me some problems again, but hey, what's new?

I wasn't able to catch any real good moves in anything today. All day it was win some here, lose some there, and the overall markets just seemed to jitter around all day, making it more difficult for me to follow through on my trading rules.

By lunch time, I was barely squeaking out a profit.

But then after lunch, I just kept falling for trick after trick and even though none of these tricks were for big hits, they all quickly added up.

I fell for these tricks (like a baby) - and when I realized it was a trick, I was crapping my pants (like a baby) trying to get out of my position and once I was out, the stock continued in the direction I had originally intended, which left me wining (like a baby).

So what kind of tricks are we talking about?

Things like big sizes on the bid/offer that appear real and were often tested, but never broke. I'd then get into a position with the big size being my support. Well, after a few more tests, the big size was pulled from the offer/bid and had me screaming for the exits. Once I was out, big size would come back and push things in the original direction I wanted it to go.

Others included big sizes that would push prices down and a clear downtrend formed. More and more size kept coming on the offer and pushed prices down and down. Then I manage to get short then all of a sudden, all the big sizes on the offer disappear and big sizes appear on the bid and push prices up...I remain patient during the initial push up, but then prices keep going higher and I have to run for the exits and of course, once I'm out, big sizes appear on the offer again and push prices back down and continue the downtrend.

I guess on choppy days like this, I have to come to expect for this to happen and for all the magicians to come out and play their tricks on everyone.

So why was I so foolish and why did I keep falling for these tricks?

Here are some possible reasons:
  • I'm pretty good in putting up with a sideways choppy day like yesterday, but maybe having two choppy days in a row really tested my patience and I felt that any day in which I don't trade is another day of lost profits
  • I wasn't completely focused and because I missed some good moves by some of the stocks in the news (missed them because I was busy trying to fiddle with those blasted charts), I felt I needed to do something
  • Since we were choppy for most of the day, I felt that I could just disregard what was going on with the Futures...well choppy Futures leads to choppy stocks and that's what happened all afternoon to me
  • I started trading the Level II simply because the charts were not showing me anything
  • I kept trying to trade that stupid stock Home Depot (HD) in the afternoon - it kept showing big sizes (that were real) that would disappear, reappear, get filled, then more big size would show up again, some hidden sizes started showing up, the big size would show up on the other side....just a crappy stock to trade
I really have to learn from these mistakes. I don't have patience in anything I do and waiting out choppiness is something I really need to work on, which will also require patience of me.

Perhaps I should really focus on reducing the number of trades I put on in an effort to put on only good, high probability trades.

Also, instead of thinking that a day with very few trades with little profits is a waste of a day, I should instead think that a day of no profits is better than a day of negative profits.

Surprisingly no good trades nor any bad trades.

In the afternoon I was thankful that I was fairly conservative and only used 1000 shares in all my positions. But being chopped and tricked out of positions for 5-cents here, 3-cents there, 7 cents there quickly added up and resulted in todays final numbers.

Oh well - at least I'm not going to cry about today (like a baby)...just put today in the books and move on...just gotta trade smarter tomorrow and try to regain my focus.

Good Trades
None

Bad Trades
None

Labels:

7 Comments:

  • One trader from downtown branch (maybe in your branch, I assume you are not in Asian branch at Dundas) once showed me the trick as you described when he was trading. I'm sure many day traders or prop traders with huge buying power do the same tricks everyday. Therefore Level II size strategy is really not reliable any more.

    By Anonymous Anonymous, at December 07, 2006 6:51 PM  

  • What do you use to find "news" stocks? Are you looking at just gap stocks or any stock in the news? If so are you using Briefing or is their a free site you know of?

    By Anonymous Anonymous, at December 07, 2006 7:46 PM  

  • Anon@6:51PM,
    Thanks for your comments. I've got to remember not to trust what I see...instead I should trust what I see on the charts. I just gotta stay focused

    Anon@7:46PM,
    Thanks for your comments. I usually check out the usual news sources for news on stocks (marketwatch.com, finance.yahoo, google finance). At the office, they have Briefing.com available (which I use to see what's gapping), and during the day I'll check finance.yahoo for biggest % gainer/loser and biggest volume.

    Hope it helps and happy trading!

    By Blogger J.C., at December 07, 2006 9:24 PM  

  • I can feel your frustrations with many of aspects you have mentioned. I have been trading for about 6 yrs now and every year got better for me in terms of $. I had a great start this yrup until aug 06', where I lost a decent chunk of $ and my 1st negative month of the yr. I've had negative months from Aug till Nov of this yr. Why am I telling you this? Bids dissapearing and reappearing,..I see on a constant basis,...many of the scalpers I know are having a very difficult time... But why so if this market is on this uptrend?? Algorithms! How daytraders once profited from basically "front running" SIZE orders(Large Bids/Offers), is now used against us...for the most part. These Alogo's are so precisely tuned,...they know daytraders sentiment,.mentallity, emotions,..and risk tolerance...They know showing a big bid will invite buyers and vice versa. What traders(scalpers mostly) once used to profit off, was what the big guys were losing on, because they many times ended up paying higher for stock or a large short would get filled way lower due to everone downticking and selling in front of this large seller. So instead of showing "real" orders, they now use Algo's to fill their orders, which executes orders on ecn's and NYSE with avg 300 share lots. Why?? Number one reason is not to have market impact on a large order, they can fill a 50k, 1mill share order w/o anyone seeing or knowing that order is in place. They can post large bids, multiple ones as well to create buying interest and vice versa,...then suddenly dissapear,...as we so often now see. The tape,and the OPEN book is being manipulated to fill orders. I have never seen so much "backing away" as I do now. I based my trades on price action, another words reading the tape. I've had heavy success doing so espicailly the 1st half of this yr. Now......most of the time Im wrong,...and wrong bad due to my position size. I was able to identify a buyer or a seller w/o the specialist showing size,..and I would join them...I was able to buy as stocks were going down because I saw the buyer..while everyone else is either shorting or getting scared. I was able to profit of this quite well! NOT ANYMORE. Im wrong many, too many times, with that strategy. Sometimes I can see on the ecn's what going on...but it's very difficult to watch ecn's NYSE prints and open book,..and still many times Im wrong...which I used to be so often right about. Anyway,...trading to make a few cents was never an interest for me,...now making 5c seems like a struggle. Just a few points, some advise I can give you. Trade the morning more aggressively,..most moves are done by 11:30am,...the real moves. Lunch is usually slow and the afternoon can be tricky cause the real buyers/sellers are already filled,..much of the time. Try and see if u stop trading by lunch how your P&L would look like. Glad too see you keep your losses so tight,...a definite MUST in this market! Market going HYBRID,...doesnt seem very friendly to the daytraders. Jan of '07 most if not all will be HYBRID. Personally,...I have been doing much more focusing on swingtrading...holding for days with smaller size,...using technicals. The intraday wishwash is over bearing for me personally. At the same time..I have been catching some decent trades for 3-7 pts..something I would never be able to do as a daytrader...Im using smaller size to train myself and learn more..I"ve been a heavy advocate for technical's and am using my experience to pick the stocks. It is far more gratifying when you can capture a much bigger move then trading all day for PENNIES. Keep up the good work(your consistency), and I wish you success.
    PS Keep an open mind
    PPS I like the stocks you picked for Fri..I will be watching them,
    TY,
    Michael.

    By Anonymous Anonymous, at December 08, 2006 1:09 AM  

  • Michael,
    Thank you soo very much for the very insightful comment! I've always been interested in how other traders have evolved as time goes by and your story is definitely inspiring! I can definitely relate to many of the points you mentioned in your comment...I've got to trade a lot smarter and you are right about morning trade.

    I know that a lot of other traders in the office are having a similar experience as you...since the summer till now they are having a difficult time making money and finding consistency. Hopefully we can all adjust accordingly to get back to profitability.

    I want to wish you the best of luck in your trading and I really want to say thanks for the excellent comment!

    By Blogger J.C., at December 08, 2006 7:36 AM  

  • Hi JC
    Michael is on the right track. If you research iceberg orders and skyscraper orders, you will start to get a glimpse of what is going on. You need to understand that market depth is a before shot of the supply/demand equation and the tape is what has happened, it is a balancing act to get the correct information from the two.
    With market depth keep an eye on where they are trying to pen the sheep, where the shark is and where the sheep dog is rounding the sheep up.
    Best Wishes
    Down Under

    By Anonymous Anonymous, at December 10, 2006 5:24 AM  

  • Down Under,
    Thanks for the great comment! I'll start investigating iceberg and skyscraper orders! I also love the metaphor! I'll have to keep those things you mentioned in mind and at the same time, keep an eye on the charts. Thanks for the advice and thanks for the encouragement!

    By Blogger J.C., at December 10, 2006 4:09 PM  

Post a Comment

<< Home