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

Friday, February 02, 2007

My Fat Friends

Gross: +$1,108.26
Net: +$1,048.31
Loss From Top: 0
Trades: 59
Shares Traded: 102400

Stocks Traded Today (net profit/loss):
Time Warner Inc. (TWX): +$373.90
Masco Corporation (MAS): +$241.96
CA Inc. (CA): +$140.93
Nabors Industries Ltd. (NBR): +$134.01
Motorola Inc. (MOT): +$102.43
EMC Corporation (EMC): +$93.27
Chevron Corporation (CVX): +$73.04
Arch Coal Inc. (ACI): -$22.58
Tyco International Ltd. (TYC): -$22.74
Valero Energy Corporation (VLO): -$65.92

What can I say about my fat friends? Let's see...

My fat friends are sometimes there when I need help...they can sometimes lend a hand when I need them....

But at the same time, they can also kick you when you are down...and sometimes when you are desperate, they'll push you into further desperation...

It's your classic love/hate relationship.

So who exactly are these fat friends of mine?

I'm talking EMC Corp (EMC), Motorola (MOT), General Electric (GE), and Time Warner (TWX) just to name a few.

I call these stocks my fat friends because they always have big sizes on the bid and ask...in other words, they are thick and slow moving. These are the stocks you can comfortably get in and out with 5000, 10000 or even 20000 share orders with ease.

Sometimes whenever I have nothing to trade or I want to make some extra profits, I often turn to these stocks simply because I can quickly take a 1 or 2 cent winner on a big position.

But sometimes when I'm in a jam or I find myself with negative profits, I sometimes resort to trading these stocks in an act of desperation and in an attempt to try to make a quick buck. Sometimes it helps, but sometimes it makes it worse.

My favorite fat friends include EMC and TWX because both of these are on the SHO list, which means I can short them on a downtick, which gives me more opportunities to trade them.

Today I found it difficult to find good trades because I didn't have as many stocks on my watchlist. For most of the day, the stock I did end up watching didn't really have any appealing charts to work off of.

And so, I looked to my fat friends for some help. There were a couple of times when the Futures would pop up or down and none of the stocks that were in the news showed anything good, so I ended up trading EMC, TWX or MOT.

I mainly took them for 1 or 2 cents each time on 5000 shares. At the end of the day, all those $50 and $100 winners on them added up. More than 50% of my profits today came from these fat stocks.

But I must admit, I really had to make sure I went in at the right time. There were many times in the past when these fat stocks would absolutely kill me because I couldn't time the trades right.

I traded for most of the day today, but then at around 2:30PM, my mind started to wander off and the overall markets were simply a bore, so I decided to call it a day.

One good trade versus no bad trades today.

There are a lot of things I'm going to be posting up this weekend, including my monthly review, my Weekend Reading, and my Monthly Trader Review Roundup, so if you've got time during your Superbowl party, come back for a visit!

Good Trades
10:08:49AM - Masco Corporation (MAS) had just broken the $34.00 level, came back down, and began to test the $34.00 level again. On the 2nd break of the $34.00 level, I tried to get long, but I didn't get any shares, so I managed to get long 1000 shares at $34.10. I took 600 shares out for some profit, but MAS was so strong, I decided to add more to my position, so I added another 1600 shares to my position at $34.25. I took my profits as follows: 2-cent winner (500 shares), 5-cent winner (500 shares), 6-cent winner (300 shares), 10-cent winner (800 shares), 22-cent winner (500 shares) ($237 profit before fees ; Long 1000 shares @ $34.10, Long 1600 shares @ $34.25 ; Out: 10:18:17AM)

Bad Trades
None.

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14 Comments:

  • hi,jc
    one month in the past,I made more than $10000 by trading TWX,almost just one stock.but now ,I can't take money from it.
    since hybrid market came in,I find I can't make profit by former strategies.
    I think I must change something,and serch for something new.
    Having a good weekend!

    By Anonymous wj, at February 02, 2007 5:49 PM  

  • Hi there,

    I see that you are trading very high volumes, sometimes more than $100000 in a single trade.
    May I ask how much percent of the money are yours and how much comes from your prop company?

    Just wondering, because the volume is really high.

    By Anonymous Anonymous, at February 02, 2007 6:33 PM  

  • Have you ever tried trading Nasdaq stocks ?

    Quentin

    By Anonymous Anonymous, at February 02, 2007 6:37 PM  

  • Jeff, you are doing very well. Continue in your steady pace and keep cutting them losses like you're doing. You ain't gonna have no problem if you stick to it. When it comes to "scalping" like you do, more shares = more money if you're as consitent as you are. Stay patient and that day is sure to come.

    I am glad to have come across your blog last year. It's an inspiration to read.

    By Blogger Jeff, at February 02, 2007 9:40 PM  

  • scalping becomes more and more difficult when NYSE turned into hybrid. and quant-trading like Barclays' doing can also kill those prop traders. quant-trading software can make big size contrast to lure prop traders pop in while it then push price against prop traders and makes them cut loss. that's why scalping is becoming hopeless.

    By Anonymous Anonymous, at February 02, 2007 10:06 PM  

  • hi ,man
    I am wondering what is the quant-trading software.how does it work?
    recently,I have found the big size is very deceptious.

    By Anonymous wj, at February 03, 2007 7:08 AM  

  • WJ,
    Thanks for your comments. Yea, I used to also always trade those kind of stocks like GE, MOT and TWX...but a couple months ago I found I was having trouble making profits off of them...hopefully you can find your way soon!

    Anon@6:33PM,
    Thanks for your comments. At the prop firm I work for, the capital is 100% theirs...in return they take a percentage of what the traders make. The branch manager sets how much buying power a trader has and obviously if you are good, they'll increase it. My buying power is currently set at $900,000, but I rarely use that much.

    Quentin,
    Thanks for your comments. I haven't tried trading Nasdaq stocks yet...the prop firm has currently given me entitlements to trade the NYSE only and if I wanted to trade the Naz, I'd have to pay an extra fee. Maybe once I get better at this, the Naz is definitely something I'd like to try.

    Jeff,
    Thanks for your comments and many thanks for the kind words and advice. I was also kind of glad you had started posting again at your site so I'll be reading and waiting from your return from your little trip...

    Anon@10:06PM,
    Thanks for your comments. I would agree with you...only up to a point. I know there are several traders at the office who are hurting right now simply because they do too much Level II trading (i.e. trading based on the Level II). This is exactly why I've stepped away from such trading because there are too many tricks being played on them...However, if you use charts to determine your entries and exits, a scalper should have far more success. Lately I've made it a point to refuse taking a trade based simply on what the Level II says...instead it's based entirely what the charts say.

    WJ,
    Thanks for your comments. I'm not 100% sure what the Anon@10:06PM was talking about, but I think it's probably some kind of black box system...hopefully Anon@10:06PM can respond to your question

    By Blogger J.C., at February 03, 2007 8:47 AM  

  • Barclays Capital employed over 100 PhDs of math for quant-trading which basically is an auto-trading platform utilizes algorithms to trade over 1000 stocks without human intervention. It exploits the weakness of prop traders, i.e. their cut-loss limit is usually several cents(e.g. 3 cents typical in Swift Trade), and has made significant profit and success. If you still like scalping according to size or cutting loss at 3 cents, you are more likely to die ugly...

    By Anonymous Anonymous, at February 03, 2007 8:52 AM  

  • Anon@8:52AM,
    Thanks for your comments. Well said indeed! :) I'm so surprised at the number of people who trade purely on what they see on the Level II...in fact, I don't think I know of a consistently profitable trader who trades this way (most have random results at best). I think another key point you mentioned in your comment is the close stop-loss...I can imagine the number of people constantly getting stopped out, only to see the stock continue in the direction of their original trade. Needless to say, traders of this nature had better learn their lessons otherwise, as you say, they'll die ugly! Good luck to you and your trading!

    By Blogger J.C., at February 03, 2007 5:14 PM  

  • Sure,I have seen all those student traders who follow 3cent cut loss rule in one Swift Trade branch have died, no exception. Only those who ignore this stupid rule could succeed. That means Swift Trade's training mode has died.

    By Anonymous Anonymous, at February 04, 2007 9:23 AM  

  • I found I have learn much about daytrader.
    this is a good blog!!and the host always keeps open door!!

    By Anonymous wj, at February 04, 2007 11:58 AM  

  • Anon@9:23AM,
    Thanks for your comments. I guess it varies from branch to branch as to how flexible they are with their trainees...at the branch I'm at, they usually don't bother you unless you're holding onto a 30-cent loser for more than a few minutes. As for Swift's training...I agree they don't teach you much, but I think it also allows traders to discover what works for them and what doesn't. If everyone were to follow a specific way or style of trading, I'm sure they wouldn't last long...

    WJ,
    Thanks for your comments and again, many thanks for your compliments! Hopefully with some of the links I post, you can learn a lot more...there are many other great bloggers out there, so do check them out!

    By Blogger J.C., at February 04, 2007 9:53 PM  

  • well, a 30cents range is quite enough and that's why your branch is much better managed..:)

    By Anonymous Anonymous, at February 04, 2007 10:37 PM  

  • Anon@10:37PM,
    Thanks for your comments. Hopefully some of those branch managers out there are a little smarter and give traders a little more flexibility - especially with the trainees. I'm quite sure that many would-be great traders have quit before they could even prove themselves...oh well, I guess it's those branch managers' loss for losing such great potential traders...the best of luck to you and your trading!

    By Blogger J.C., at February 04, 2007 10:51 PM  

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