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

Tuesday, March 13, 2007

Unbelievably Bad....

Gross: -$525.00
Net: -$542.46
Loss From Top: $542.46
Trades: 17
Shares Traded: 13600

Stocks Traded Today (net profit/loss):
American Oriental Bioengineering Inc. (AOB): -$19.52
International Game Technology (IGT): -$26.50
Dick's Sporting Goods Inc. (DKS): -$37.23
Countrywide Financial Corporation (CFC): -$73.73
The Kroger Co. (KR): -$385.48

My trading these few weeks have been unbelievably bad.

I can't seem to get the ball rolling and my results seem almost random at best.

So far in my short trading career, I have never encountered such a trading funk. Lately, it seems almost routine that I start the day off with a couple of losers and depending on how I handle it, I either make it worse or I'm barely able to climb out of a hole.

I must admit that all of this is a new (but rather unpleasant) experience to have to go through.

My trading woes seemed to have started on the day the Dow dropped 500 points briefly and ever since then, I haven't been able to get my act together.

I have a feeling that I might be changing one too many things all at once and as a result, I'm not sure what I may be doing right and what I may be doing wrong. I've been trying to change the stocks I trade, I've been messing around with new entries, and I've been messing around with the length of time I hold onto my trades.

By changing so many things at once, it makes it very difficult to pinpoint exactly what changes are causing the problem.

It reminds me very much about programming. When writing out code, you want to stage the changes so that if something doesn't work out, you know exactly what part of the program you have to fix.

But what I've done was write out the whole program first, only to find out that at the end it doesn't work.

Where do I begin? Where's the bug? Which part of the code is not working? Well I can tell you that finding that bug will take a lot longer to find than had I staged, tested, and implemented the changes to my trading.

Today was just another reminder that what I'm doing doesn't appear to be working (at least in this trading environment anyways).

Like many of the days I've had lately, I started the day with a couple of losers....nothing too big and my losses were manageable.

Those first few trades I found myself trying to anticipate a break either to the upside (break of an intra-day high) or downside (break of an intra-day low), but all I ended up doing was getting long at the upper end of a trading range or getting short at the lower end of a trading range.

I had been waiting for quite a while for Kroger (KR) to setup and when it finally did, I put on a position that I felt completely comfortable with. This time, I waited for it to completely break (i.e. make a clean break of a couple of cents and continued to look strong).

I went long 1000 shares at $26.50 and I really did feel comfortable leaving it to work itself out while I watched other stocks for opportunities.

What I didn't expect was a rather wicked chop at around 10:30AM after Kroger (KR) made some statements during it's conference call on it's earnings.

When I heard over the loudspeaker than KR was making some sort of announcement, I quickly flipped back to KR and saw that I was looking at a $200+ loser on my hands.

At first I felt panic and all I wanted to do was to exit my position as soon as possible as it blew past my stop-loss. But I decided to wait as I saw KR try to fight back. KR climbed all the way back to my break-even point, but the rapidly fell again, blowing past my stop-loss yet again. Then KR fought all the way back up to my break-even point yet again, but fell back down, blowing past my stop-loss
for the third time.

I really felt uncomfortable at that point and I decided to dump everything for a $193 loser (see bad trades below).

After a few minutes, I saw that KR had continued it upward move and I simply felt like I was a fool for getting out.

I kept watching KR (as this appeared to be the only stock that was moving at the time) and maybe some of my emotions from the previous losing trade on KR was still with me when I decided to get long again on KR....

Unfortunately I got long near the high of the day (I was somehow thinking that KR owed me money or something) and I would eventually have to take another bad loser on it (see bad trades below).

My day was done and by 11AM, I was out of the office.

From the looks of things, it looked like I missed some action in the afternoon, but with the way things have been going for me lately, I would probably have still lost money.

There were no missed trades (my day was too short to find any missed trades), no failed setups (the KR trades are filed under "Bad Trades"), no good trades and two bad trades.

Frankly, I'm too disgusted to post up charts on KR...I really felt that that first trade on KR was well executed and I was willing to be patient with that one...I guess the trading Gods had other plans for me....

I think I seriously need a break from trading and to get my mind off trading for a while.

Tomorrow I'll take the day off and I'll continue to take days off until I feel comfortable about stepping back on the trading floor. Whether I come back to trade on Thursday or next week, only time will tell...all I know is that I need to get as far away from trading for now....


Missed Trades
(trades that I was watching, but missed because either I was too slow and couldn't get shares or my attention was focused elsewhere)

  • None


Failed Setups
(trades I took that I thought had a good setup, but failed and either I got out at break-even or a loser)

  • None - both KR trades are under "Bad Trades"

Good Trades
(trades in which I make $200 or more)

  • None

Bad Trades
(trades in which I lose $150 or more)

  • 10:20:41AM - Kroger (KR) had just broken it's intra-day high and I waited for a bit of a confirmation of the break before I went long 1000 shares (100 shares @ $26.49, 900 shares @ $26.50). For whatever reason, I felt completely comfortable with this position, but then a wicked chop took me out as follows: 10-cent loser (100 shares), 11-cent loser (100 shares), 12-cent loser (200 shares), 13-cent loser (600 shares) ($193 loser before fees ; Long 100 shares @ $26.49, Long 900 shares @ $26.50 ; Out: 10:29:04AM)

  • 10:47:48AM - Kroger (KR) continued it's way up and I was still somewhat steaming mad from getting out on it earlier so I tried going long at $26.85, but only got 100 shares and when it broke the $27.00 level, I went long another 900 shares....well the $27.00 level was practically the high of the day and I'd end up getting out as follows: 15-cent loser (400 shares), 18-cent loser (200 shares), 21-cent loser (100 shares), 22-cent loser (300 shares) ($183 loser before fees ; Long 100 shares @ $26.85, Long 900 shares @ $27.00 ; Out: Did not record)

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29 Comments:

  • JC, I have had the exact same problem as you. The day the dow dropped 500 points I had my best day. Since then I haven't had a winning day. I'm sure it will get better just have to wait this out.

    By Blogger Bubs, at March 14, 2007 12:04 a.m.  

  • good to take a rest.

    By Anonymous mark, at March 14, 2007 12:05 a.m.  

  • In all sincerity...here is a tip that may change your luck...Have you heard of CMAA (Conductive market Anomaly analyzation) ... Too long a name to mean anything,check out....www.eztradepro.com

    By Anonymous Anonymous, at March 14, 2007 12:11 a.m.  

  • CMAA is useless for prop trading if you know what's prop trading.

    By Anonymous blabla, at March 14, 2007 12:28 a.m.  

  • JC,

    Sometimes the it's not the program that's causing problems, but the ole wetware, if you know what I mean. The squishy computer in your skull doesn't seem to be processing quite right. The program may be fine, but implementation isn't working.

    These last two weeks (since the plunge) that has been me to a 't'. The markets are certainly a lot different than they were two weeks ago and it has been hitting people hard.

    Sounds like your idea of stepping back and protecting the old meat processor is a good one. Me, I tried to avoid trading unless something screamed at me, and even then I dropped size to 1/5th of what I used to trade. If a brief break isn't working, toss 100-lots around for a while till you can trade like a Zen master. First rule of trading is to protect your assets; only then do you worry about making profits. Maybe it's just time for a defensive week.

    Wish I was out in Toronto so I could buy you a beer & commiserate. Take 'er easy, JC.

    By Blogger Tyro, at March 14, 2007 12:46 a.m.  

  • Hey JC, I'm starting a new game (if you can call it that). You are welcome to join in if interested in a change. Good luck man.

    By Anonymous JJ, at March 14, 2007 4:13 a.m.  

  • Well my bad luck started in late January... I just couldn't make a good trade (even trades where I actually made money were not "good" trades, purely luck).

    I've taken time off, 3 separate times and I'm feeling better about everything. I certainly haven't missed much in the past 6 weeks of hardly trading. I was cash on the 500 drop day.

    I've now started trading in 100 share lots (way down from my usual) and its so much easier to manage. I've gone back to basics and so far so good.

    I can't do this forever because when I do have gains they are small and I live off this, but my losses are very small too. I'm regaining confidence and when I am back I'm hoping the market will have stablilzed some.

    I had people tell me for weeks to trade smaller lots but I thought I didn't "need" too. Ha! Its really helped.

    Best, pixie

    By Anonymous pixie, at March 14, 2007 6:16 a.m.  

  • j.c.

    You're right about changing too many things at once. I'm a programmer and I completely understand your analogy.

    You need to be careful about conf calls. I got burned a couple of times by them. Now I always check if the conf call has passed before I trade a stock.

    I once shorted a stock which cleanly broke down after earnings. Then suddenly, it spiked up. It went more than $1 against me. After the conf call, it came down and I got out break-even. Soon, it went $1 in my favor.

    By Blogger wincity, at March 14, 2007 6:55 a.m.  

  • JC, we're in a different market now than we were in 3 weeks ago. Everything was orderly back in February until the 500 point day. The VIX has exploded and there is a lot of volatility. I know that scalping is scalping, but that is still effected by volatility. The 500 point day was a shock event. It changed not only the direction of the market, but also the nice orderliness that we had for about 6 months.

    By Anonymous Anonymous, at March 14, 2007 7:59 a.m.  

  • You said "From the looks of things, it looked like I missed some action in the afternoon, but with the way things have been going for me lately, I would probably have still lost money."

    JC, you need to rebuild your confidence. I find the most effective way is to step back... look at the forest...do less of whats not working...trade smaller share lots...have green days...build confidence and start to believe again...you have done it in the past, now you have to adapt to changing market conditions. BELIEVE it and build that CONFIDENCE one step at a time.

    Best,
    M

    By Anonymous Anonymous, at March 14, 2007 8:41 a.m.  

  • J.C. This is what my trainer tells guys in our office when they struggle after changing their trading strategy: Expecting immediate positive results is unrealistic. Changing your strategy is like a shortstop being thrown into leftfield (Alfonso Soriano example). You kind of know what it's like because you're a baseball player, but you still need to practice your ass off to become a good outfielder. If you are really trying to change your strategy you shouldn't concentrate on the losses, but try to get out there as much as possible and figure out what works and doesn't work: Just a different perspective, take it for what it's worth...

    By Blogger Edwin, at March 14, 2007 8:52 a.m.  

  • I have to agree with Anon's comment regarding it's a diff' lady now.

    What is the best strategy for this new dynamics ? any ideas?

    Thnks

    Abe

    By Anonymous Anonymous, at March 14, 2007 2:51 p.m.  

  • Hang in there amigo. I think it could be wise to take a break and center yourself. As others have commented, the change in the market dynamic requires evolution, but it takes time. Coming back from a break may yield fresh perspective. All the best.

    By Anonymous Caravaggio, at March 14, 2007 9:57 p.m.  

  • Not to suggest that I'm a successful trader--- I'm not--- but for what it's worth it does occur to me that one thing that you should be doing is asking whether or not the time value of the information that you had that caused you to enter a position has expired or not, and whether or not there is any additional information to sustain the position.

    So, if you're a really short-term daytrader who goes on indications that reverse or go away after a few minutes, then the only reason to remain in the market would be if it's going your way. This is a logical reason for having a stop.

    In today's commentary you talk about holding on after a stock had reversed against you. My question is, at that point what was the reason to keep the position? Did your reason for getting in have that much time value to it?

    Possibly you have interday reasons for believing that the stock should go a certain way and you're only using intraday indications to find an entry point. That would make some sense.

    It seems that there needs to be some sort of canonized, if not quantitative, system for giving proper weights to interday indications and to intraday indications.

    Hey, one of these days I'm going to manage to do things that way.

    By Blogger moc, at March 14, 2007 10:12 p.m.  

  • Hang in there man! I enjoy your blog too much and hope your back in the game soon.
    Jas

    By Anonymous Anonymous, at March 14, 2007 10:14 p.m.  

  • Yup, you need to rest now. Take your time. don't even try to blog. Just leave trading for a while.

    You will come back strong.

    Gav.

    By Anonymous Gav, at March 14, 2007 11:33 p.m.  

  • prop trading firm's business model is going to die.

    By Anonymous Goldman, at March 15, 2007 11:31 a.m.  

  • why do you think so goldman ?

    By Anonymous Anonymous, at March 15, 2007 12:24 p.m.  

  • JC,

    We are in a very different market because the trend has not been established yet. It causes choppy price actions and sudden reversals as the institutional side doesn't want to commit the money yet and the bargain hunters are not yet showing up in droves.

    Have fun and when you come back, the market will be much easier to read.

    --MC

    By Blogger mc, at March 15, 2007 4:40 p.m.  

  • You must keep trading, Peter Beck is only making like 65% on you. Just keep churning. Don't think of going anywhere else where the software would be better and payout is better, that would be stupid, you must stay stuck in your piker ways and believe that you won't be able to make money somewhere else.

    By Anonymous Tom, at March 15, 2007 5:02 p.m.  

  • no teasing tom :) peter is laughing...65% what the hell!

    By Anonymous Anonymous, at March 15, 2007 6:13 p.m.  

  • JC,
    I'm confident you'll figure something out, whatever that something is.
    Good luck man, I wish you the best.

    By Anonymous Ugly, at March 15, 2007 11:52 p.m.  

  • with hybrid mechanism established, the market tends to be more erratic and fast moving; with more programmed trading involved, the fluctuation appears to have more killing power to prop traders. think about how easy a prop trader could be killed: just a few cents more noise could well kick out tons of scalpers...

    By Anonymous swingfeast, at March 16, 2007 9:01 a.m.  

  • tom,

    You're too mean to kick someone who's already down. Why don't you just tell him what place you think is better?

    By Blogger wincity, at March 16, 2007 12:10 p.m.  

  • winicty he lives in Toronto, there is about 4-5 other companies, they are easy to find. They all offer better software, better payout, higher exececution fees but with the higher payout you are making more regardless. Better software makes a huge difference specially in these fast markets.

    By Anonymous Tom, at March 16, 2007 1:56 p.m.  

  • JC,

    Wonder if you got back in the game for Friday. If not, I don't think you missed much.

    As for your bad trades, I don't think they were too bad. You recognize you're wrong and you get out. That's the key. Minimizing losers is the hardest part of trading. The winners come when you minimize your losers.

    Enjoy the weekend.

    -DT

    By Blogger Dinosaur Trader, at March 16, 2007 6:54 p.m.  

  • You overanlyze too much. It's finnaly caught up with you. Stop this blog and analyzing because nothing will come out of it. At least nothing good for you. And get back to trading without bloging and anyalyzing so much and in few weeks update us on the progress.

    By Anonymous Anonymous, at March 17, 2007 11:44 a.m.  

  • overanalyzing? never enough. you did learn something in your reflection. you will succeed in trading as long as this blog alive.

    By Anonymous sap, at March 18, 2007 8:20 a.m.  

  • Thanks to all for all the comments. I haven't checked or updated this blog in a few days so I apologize for not responding to all the comments, both good and bad.

    It was definitely refreshing to not think about the markets the last few days, but I think I'm ready to tackle it again.

    And sometimes I do need those negative comments to help me see the light so I'm not going to complain about them (in fact, sometimes I ought to thank them).

    Anyways, I hope you all understand the nature of my brief leave of absence and the reasons I just needed to step back just so that I could clearly see what I was doing.

    I hope you all had a great weekend and I just want to wish all of you a great week of trading!

    By Blogger J.C., at March 18, 2007 1:12 p.m.  

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