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

Tuesday, April 03, 2007

The Wrong Entry For The Wrong Exit

Gross: -$435.00
Net: -$446.91
Trades: 27

Stocks Traded Today (net profit/loss):
Chico's FAS Inc. (CHS): +$30.48
Countrywide Financial Corporation (CFC): -$6.87
Continental Airlines Inc. (CAL): -$56.77
KB Home (KBH): -$82.01
America Movil S.A.B de C.V. (AMX): -$82.96
Freeport-McMoRan Copper & Gold Inc. (FCX): -$248.75

Wow! Look at that!

Every trade today ended with a loss, save for one! Unbelievable! I seem to be really good at doing that lately!

And even though I was long just before that big move up at around 10AM, I still managed to lose money! Talk about going with the flow!

Hehehe - just joshing with you all!

After reviewing the trading day, I noticed that almost all of my positions were showing me a profit initially...but then I held onto them and sometimes even watched them see-saw from profitable to losing trade to profitable again...only to get out for a loser.

This seems to be the theme lately, where I hold onto profitable positions longer than I normally would, only to see it turn into a loser.

The only form of consistency I've had lately was back during the 2nd last week of March in which I traded conservatively AND I noted that all I was doing was getting in and out fast....as soon as a position looked like it was turning back, I'd book my profits.

This past weekend, Brett Steenbarger had a great article I had linked to entitled "Why Trader's Sabotage Themselves" and upon re-visiting this article, I think it would accurately describe what's been going on with me lately.

I usually make trading decisions based on what I know and what has worked in the past and while those trading decisions are very good at capturing small moves in the markets, they may not be well suited for longer-term trading.

Take today as an example...I watched the various stocks, I saw something, I took action, saw a profit initially (usually 5, 6, or 7 cents), but opted to wait to capture more of a move only to see it turn into a loser.

I think Dr. Steenbarger's article really hit home as I re-read it again today.

I've been basing my entries for what I'd consider a good very short-term scalp, but I've been planning my exits as though it were going to be a long-term trade (Trader-X, Dummy, PinoyTrader type exits).

While my entries may be good in capturing 5 or 10-cents (actually, it really depends on the stock), they may not be good in trying to capture 50 or more cents.

And today was a clear example of that - in essence, I was using the wrong exit strategy given the entry strategy I was using....or you could say I was using the wrong entry strategy for the exit strategy.

As a result, these two pieces just didn't want to come together and work together properly.

It also doesn't help that I'm not very good at holding onto losers...in other words I don't like them and would prefer to quickly get out rather than temporarily holding onto them and giving a trade time to work itself out.

And today after every losing trade, I'd go into the next one, expanding my stop, only to see it get hit again and thus on the next trade, I'd widen my stops even more.

Anyways, FCX really had it's way with me today, mainly because I was a little upset that it really didn't do anything during that nice big move upwards we had around 10AM (I happen to be long just before the move)...I got out for a loser and since it seemed like it didn't want to go up, I went short....I got out of my short for a loser because it didn't seem to want to go down, and I went long again (only to lose again!).

Keep in mind I'm still developing some things with these new kinds of stocks I'm trading and I'll be adding some more rules and things to look for tonight so that hopefully I'll be putting on less trades, but higher quality.

Though I'm not too happy about today's results, I'm just glad I came away with something from the loss....

Good Trades
(trades in which I make $200 or more)
  • None

Bad Trades
(trades in which I lose $150 or more)
  • None

Labels:

8 Comments:

  • It really sounds like your personality suits scalping, and that is ok. Go back to scalping and start making some money again. It you want to try holding longer term you can do that at the same time, just use much smaller size. I am a scalper (I call my self a dime trader), and will ocassionally go for a dummy set up but never more than one hundred shares - it put the order in along with a stop and exit and forget about it. I will do that one or twice a day and it makes me feel like I will catch the big moves - do I no but it really doesn't matter as I break even over time with those trades and I feed my family with the scalps.

    By Anonymous Anonymous, at April 03, 2007 7:32 PM  

  • Hang in there, it will work itself out; especially if you are learning from the losses. Excellent posts this year!

    By Anonymous Chris, at April 03, 2007 10:09 PM  

  • It seems like you have patience when you are up, and don't have patience when they are down and book the loss. I think you can break through this, but right now it's mostly how you see it mentally.

    I've been reading your blog for a while and notice your inconsistencies. Take for example: you say the markets would whip-saw, it goes up, it does down. When it is up you wanted to wait and capture the bigger move, but when it's down you book the loss immediately.

    You are mixing different trading strategies and that's killing you -- if you are a scalper you should book that profit. If you use a longer-term strategy, you need to stop your scalping mentality to book the loss when it's down and let it work itself back.

    Best of luck.

    By Anonymous Anonymous, at April 03, 2007 10:43 PM  

  • J.C.,

    I'm a rookie trader, mostly long term trend following, but I'm working on developing day trade techniques.

    So take my advice for what its worth, not much, but if you want to go for the 25 cent, 50 cent, or larger trades, then never, ever, ever move your stops. As soon as your order is filled, place your stop and never touch it, ever.

    I've been relying a lot on Marlyn at Filtering Wall Street, for day trade setups. You might want to stop by his place and read some of his posts. I have learned a lot from him and if I ever become a consistently profitable day trader, it will be due to his teaching.

    Good luck.

    By Blogger Dogwood, at April 04, 2007 12:45 AM  

  • One more thing, if the longer trades don't fit your personality, then don't force it because it won't work.

    Trade in a way that feels right and works for you. There is nothing wrong with being a profitable scalper!

    By Blogger Dogwood, at April 04, 2007 12:48 AM  

  • Hi JC. I don't know if what 'anonymous' said about mixing strategies is exactly what you are doing, but I've done this before and it can lead to death by a thousand cuts (eg: entering on a medium-term view, but managing the trade with a short term-view can produce a very sour risk-reward ratio).

    Also, given the random nature of the market, I believe a lot of traders may be beating themselves up unnecessarily when they have a run of losing trades. To help avoid this problem, it may help to create a kind of behavioural scoring system or road map of some kind, and to score yourself at the end of each day or week. I find this helps because it works to separate the process and performance of the individual from the result.

    PS - I've been scanning a few end of month round-ups from several trading bloggers, and it looks like March was a rough month all round.

    By Anonymous Caravaggio, at April 04, 2007 7:35 AM  

  • I notice that you stick to bigger names. Do you have any interest in small capitalization names? Maybe you have mentioned the reasons before. If so, point where to read it.

    By Blogger pleadership, at April 04, 2007 1:15 PM  

  • Hey folks,

    Thanks everyone for their comments...for the last little while I really haven't been responding to them (I've turned off comment email notification....my inbox has been flooded with so much spam, I just wanted to reduce the amount of email I get). And thanks to all for their support through this rough time....

    Pleadership,
    I usually stick to stocks that trade 1,000,000 or more shares during the trading day because I usually don't like trading stocks that have a big spread and because I usually like to trade stocks in which I can get in and out fast. I have started trading some more of the smaller names that may trade 500,000 or so shares per day and I'm starting to get used to them. We'll see if I can get more comfortable trading those kinds of stocks, but until then, I'll continue to trade those 1 million+ stocks...

    By Blogger J.C., at April 04, 2007 6:24 PM  

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