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

Thursday, January 04, 2007

This New Fee Structure Is Killing Me!

Gross: +$972.30
Net: +$694.44
Loss From Top: 0
Trades: 116
Shares Traded: 250552

Stocks Traded Today (net profit/loss):
Time Warner Inc. (TWX): +$367.14
Limited Brands Inc. (LTD): +$283.68
Wal-Mart Stores Inc. (WMT): +$201.20
EMC Corporation (EMC): +$143.59
The Goodyear Tire & Rubber Company (GT): +$80.49
Chico FAS Inc. (CHS): +$13.55
Hewlett-Packard Company (HPQ): -$49.76
Advanced Micro Devices Inc. (AMD): -$75.15
Alcatel-Lucent (ALU): -$78.42
Constellation Brands Inc. (STZ): -$116.71
Pier 1 Imports Inc. (PIR): -$125.18

Yesterday I neglected to mention that the fee structure for using Island/INET changed to what Arca currently charges.

Again, to review, it'll cost you 0.003 cents per share to REMOVE liquidity using Island or Arca and you will receive a credit of 0.002 cents per share to ADD liquidity using Island or Arca.

My trading style involves a lot of removing liquidity. What I usually do is I'll hit size (and remove liquidity), while I try to add liquidity when exiting my position (I try to do this so that I can get the credits for it).

These last few months I've been using INET Rash simply because it was cheaper and if our company reached a certain monthly quota, INET would re-imburse us the charges for using INET Rash.

I like using INET Rash because what it does is that if you send out an order using INET Rash, it will fill you if there are shares on the Island book and if there aren't enough shares on Island, the balance of the order is routed to the NYSE.

I found that using INET Rash was pretty quick and I got shares most of the time (or at least partially filled on a large portion of my order).

BUT, with these new fees in effect, it really takes a chunk out of my profits!

IF I remove 10,000 shares from the book using INET, it'll now cost me $30. And if I exit my position in the same way, it'll cost me another $30 ($60 total). That means if I take a 1-cent winner on 10,000 shares, $60 will be taken away by INET....and this doesn't include any other fees!!!!!

Well, today I was very aware of this, so I make it a habit of punching in (removing liquidity) when getting into a position and trying to exit my position by adding liquidity using Arca.

Unfortunately there were many times I had to punch out of my position (remove liquidity) and as you can see, I paid almost $300 just in fees (mostly due to this new fee structure).

Boy oh boy, I'm going to have to be careful in the next little while and try to find ways to decrease the fees I'm paying.

I'll have to check to see if it is now cheaper just to send my order directly to the NYSE book instead of using INET Rash....I'll find out tomorrow.

I hate to do this again, but......

I really really hate afternoon trading!!!!!!

Just a little after lunch I was up over $600 and wouldn't you know it, I decided to stay and trade.

Well what happened?

I practically lost everything I had made during the day. Again, the afternoon was just sooo full of frustration that probably didn't need to happen.

Yes, yes, I know...I over-traded again. I think most if it was out of frustration - for losing money and wanting to make it back and as a result, I was jumping from one trade to another, hoping to catch a good swing.

All afternoon it was back and forth, gain and then a loss. I was lucky to catch a good move on Time Warner (TWX) late in the day (see good trades below). After that trade, I decided to call it quits.

Three good trades versus one bad one.

Unfortunately I'm not able to get a good chart of the Limited Brands (LTD) trade...there were some bad prints at the beginning of the day, which makes the intraday charts very hard to see.

I don't think I'll stick around tomorrow for the afternoon (well, unless I'm in the red!), so I better stick to my decision. We'll see

Good Trades
11:25:50AM - Limited (LTD) was moving up and so were the Futures. LTD came up to the $27.50 level and when it broke, I went long 2000 shares. LTD popped up once it broke...unfortunately I got out of the position too soon (quite frankly, I don't remember why I decided to exit this position). I got out as follows: 9-cent winner (500 shares), 10-cent winner (1000 shares), 14-cent winner (500 shares) ($215 profit before fees ; Long 2000 shares @ $27.50 ; Out: 11:27:43AM) (sorry, no charts for LTD)

12:34:48PM - EMC Corp (EMC) was moving up while the Futures were sideways. I was watching EMC because there was some big size that kept moving up and so I went long 10,000 shares. I waited and waited and waited for this position to go somewhere. I put out two 5000 shares orders on Arca (just so I could get my spot in line). I sat back and started to relax a little when suddenly EMC starts running up! I literally jumped out of my seat...I didn't expect EMC to do such a thing and before I could cancel my orders to exit, I was filled. I got out as follows: 3-cent winner (5000 shares), 4-cent winner (5000 shares) ($350 profit before fees ; Long 10,000 shares @ $13.42 ; Out: 12:46:41PM)

3:30:39PM - Time Warner (TWX) was moving up and so were the Futures. I waited for the $22.40 level to break and when it did, I went long 10,000 shares. TWX popped up from there and I got out as follows: 4-cent winner (5500 shares), 5-cent winner (4500 shares) ($445 profit before fees ; Long 10,000 shares @ $22.40 ; Out: did not record)


Bad Trades
2:24:26PM - EMC (EMC) was moving up while the Futures were sideways. EMC was making new intraday highs and when it looked like it was going to break the intraday high again, I went in with 10,000 shares. Well, it started to fall back and I panicked a little (and it looks like I was the only one who caused that blip on the charts) and got my position out as follows: 2-cent loser (5800 shares), 3-cent loser (4200 shares) ($242 loser before fees ; Long 10,000 shares @ $13.16 ; Out: 2:31:26PM)

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9 Comments:

  • hey there

    why dont you try using BELZ, i think its cheaper then arca, and now since its hybrid, there wont be any lag

    also, i also have trouble with afternoon trading.....i find the most success when i wait until 2:00 to trade....when i trade from 1-2, i get burned....just wondering at what time do you start your tradin in the afternoon

    By Anonymous Anonymous, at January 04, 2007 6:19 PM  

  • fees kill cats. how about isi and super montage and bloomberg?

    By Anonymous Anonymous, at January 04, 2007 6:31 PM  

  • Anon@6:19PM,
    Thanks for your comments. BELZ, hrmmmm, I'm not familiar with that ECN. I'll have to ask around to see if that is available for us to use. I would say that between 12 - 3 is when I end up losing a lot of money. During the last hour of trade, I've had mixed results...sometimes I'd lose everything, but sometimes I make back what I lost (like today). However, I do find that if I stay for the afternoon, I can't seem to make it through the day mentally (I get tired and I'm constantly fetching more coffee). I like the idea of taking the afternoons off (gives me time to relax), but at the same time, I'm always worried I might miss some great trading...I'll have to figure out what works best.

    Anon@6:31PM,
    Thanks for your comments. Yea, this afternoon I started using ISI again after seeing some of the ridiculous fees I was accumulating (though I wasn't 100% sure if using ISI was cheaper). I'm also sooo used to the keys I push that several times today I automatically pushed the INET Rash keys instead of ISI. I'll also have to double check to see what the fees are for Bloomberg and for SuperMontage.

    Thanks all for your suggestions! Keep them coming! I'm not very knowledgable when it comes to the various ECNs. The only ones I use currently are: ISI, Arca, INET, INET Rash. I don't really bother with things like Arca route, Arca market, or any market orders.

    Again, thanks for the suggestions!

    By Blogger J.C., at January 04, 2007 6:52 PM  

  • ::raises hand:: eh oh oh!! I know I know! I know how to reduce your fees! I know I know!! Start trading like the guy who makes over $100k in your firm and trade with some cents! no wait trade technical setups for dollars! Look at Trader Mike - gap fade specialist, Trader Jamie - technical trade specialist, Trader Tim - short selling/put buying specialist, Trader Cal - Futures specialist, Simply Options Trader - options specialist....the list goes on and on, and I read your blog daily and it's like your floundering around all day chasing stocks for nickels....Look! This is not the professional way to trade, you need to form a plan, plan the trade, find setups, watch for breakouts/downs...come on man, one day, ah let's say 15 years from now, you're going to have a lot more experience under your belt, and when you look back to now you're going to say, "what the hell was I doing?" I mean you traded 11 stocks today, 6 of which were profitable, 5 which were losers. What was your reasoning for trading a bland stock like Pier 1 Imports? It's had a 25 cent range in the past 3 days, what the hell were you thinking??? RIMM, GOOG, and BIDU have had $10+ ranges, now do not tell me you can't watch the futures rip up and catch a $1 move on 2000 shares, for a quick $2,000 profit. You need someone to teach you, or you just need to quit. Your trading style is a mockery to the business, mere sand box level when there are advanced ways to trade such as spreads on options, futures, hell even draw some trendlines. I wish to help you not mock you, and please consider this constructive critisism. Just think about it, find stocks that move more than $0.25 cents in the past 3 days....and you'll instantly have better canidates to make more money, but when you make poor choices on your trading list, your net income suffers the most.

    By Anonymous Anonymous, at January 04, 2007 7:41 PM  

  • Anon@7:41PM,
    Thanks for your comments. I must agree with many of the things you've stated and I know it's mere constructive critisism. I would like to one day become the trader you describe, but this will take time on my part just to get comfortable with what to look for. I must admit that trading PIR was a poor choice...it stated poor same store sales this morning and I had thought there would be more action on it than there was today. Unfortunately the three stocks you gave as examples (GOOG, RIMM, and BIDU) are all Nasdaq stocks...at the prop firm I work for only allows me to trade NYSE (for now). One day I'll get entitlements for Nasdaq, but for now, I'll stick with NYSE. I also know that the way I trade may seem like a mockery to the business (and many from the prop firm have been accused of this), but if I'm able to pull some money out of the markets, then a mockery of the business I shall make of it. I do have a plan (it's a 6-page document) that outlines all the technicals rules and setups I trade. Hrmmmm...I wish I could pull a $1 move on 2000 shares everyday...heck, there should be 100's of millions of millionaires out there! I'll keep working at it and it'll take me some time to weed out those bland stocks (like PIR), as I have only recently started trading stocks that are in the news. I hope you can follow along and see where I go from here!

    Good luck to you in 2007!

    By Blogger J.C., at January 04, 2007 9:16 PM  

  • I don't know... I disagree with a lot of what Anon741 said.

    Sometimes a stock that only moves in a 25 cent range for a while is desperate to break out. So, I don't think that automatically makes it a bad choice to watch... especially if there could be action based on news. Maybe trading it when it didn't end up moving could be considered a mistake.

    The flip side of stocks that move several dollars at a time, is that they can also move against you at the same accelerated pace, which means your risk is bigger, which means you should typically trade less shares of them (I think scalping them for a few cents is also much more of a coin flip, since they move so much on a whim). So, it's not like they are a free lunch.

    And pigeon-holing Trader Mike as a gap fade specialist is doing him a disservice.

    And you can't use phrases like "what the hell were you thinking???" and "your trading style is a mockery to the business", and then make it less offensive by claiming it's constructive criticism. That falls a little flat, I think.

    By Anonymous Richard, at January 05, 2007 3:21 AM  

  • Richard,
    Thanks for your comments and thanks for coming to the rescue (again!). I could probably understand where Anon741 is coming from IF I were struggling or constantly losing money, but his comment came totally out of left field and one I wasn't really expecting. I do know that if I want to one day do this on my own, I'll have to adapt and change my trading style a bit, but for now, I still consider myself in a "learning" stage. What you stated about those wide-ranged stocks is exactly the reason I don't trade those kind of stocks too much. I'm not going to worry about Anon741's comments too much and my response was more out of politeness than anything else. I want to wish you good trading Richard and a great 2007!

    By Blogger J.C., at January 05, 2007 7:31 AM  

  • What software are you using? We've had arca rebates working for a while (but .003 c/share cost for removing) but not for ISLD. Arca routes out, ISLD doesn't here.

    By Blogger Jeff, at January 05, 2007 9:01 AM  

  • Jeff,
    Thanks for your comments. The software I work with is an in-house developed one done by our prop firm. At our office, we have regular ISLD, and we also have ISLD Rash (the one I described in the post). Check your fees...starting 2007 (i.e. now), ISLD now charges the same as Arca.

    Good luck to you in 2007!

    By Blogger J.C., at January 05, 2007 8:47 PM  

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