Better entries, more discriminative trades, and a broader read of the stock

Seems like keeping to these three really worked for me today. I have to say I missed a lot, only because I didn’t want to sit in the stock out of the money, just incase it got away from me. But I see now that being more picky in where to sink shares makes a HUGE difference. Really, I only need one or two good trades in this market to make a great payday.

Some stocks in the morning I was in the money 40 cents and I watched it come against me and go negative, to take a minor loss, only to see it push the high later in the day. I think not getting the general read of the stock is what kicked me out, but at the same time I don’t want to have the market turn against me and change the sentiment taking losses with it.

I was on the right side of the market today, and there was a generally good trend which made my day easier than others. I will stick to this same strategy tomorrow and see if the day tries to rough me up.

I flattened out a lot of my swing trading positions hoping to se a market pull down of a couple percentage points and then look for reentry.

VERY light volume, KILLER to one's PnL

The volume today was EXTREMLY light. I couldn’t find a reason why, but I noticed it within the second hour of trading that today probably wasn’t the day to get heavy shares....so...why did i? Well I guess I got stuck in my normal mode of trading and just forgot about my overall judgment of the market. Sometimes the best trade is the one you don’t put in. If me being able to read how the market was trading wasn’t good enough, having 10 losing trades in a row should have turned me off to the day. If it wasn’t for late day news in SHW that sent it thru its low i would have had a MAJOR losing day, instead I closed even for the day.

On days like today, I need to only trade the BEST and most probable trades that I can read. If I had traded this day that way, I would have had a couple of heavy share trades in the morning, 4 or 5 100 share trades in the afternoon, and the one SHW late in the day. I would have walked away with a good profit if I traded properly.

It seems my biggest problem now, so my boss points out, is that I micromanage my trades. The stock is near its low, so I short shares.....it ticks up and I figure the weakness is over. Now wait, maybe my exit is wrong, but my entry was likely wrong too. The question is, is the stock GENERALLY weak or strong. If I am able to read the broad attitude of the stock for this day and the open to the stock for that day coincides with this, I need to take some profit off the table and let a lot of the shares just ride, and I can baby-sit it thru the day. This seems to be the way to trade consistently profitable. It is less stressful because you are in the money a good amount, and worst comes to worst you lose your profit.... which you didn’t have when you sat down anyway.

Now, entries are important because even though I may read the stock properly, I can’t lose what I came into the day with. Capital management is very important, meaning if my timing is off, I may need to reexamine the situation. Some people say entry price is not too important, but I would say if you get a poor entry, you are already at a losing disadvantage to read the stock properly. You will be bias toward your side, leaning toward signs of your chosen direction.

Here is an example: You long YUM at 50.00, the stock trades to 49.85 because you bought at the high end of range. The market starts to pull it down to 49.75. you tell yourself, "well the stock is still strong, when the market swings up, YUM will come up too." Well if the market pulls down, or your entry was simply incorrect, you are getting out of the stock at 49.65 for a major loss. Now, if your entry was 49.75 and your read was wrong, getting out at 49.65 isn’t as hurtful to your bottom line.

On another note, I brought up the issue of commissions to my boss. Why are our commissions .01 when other companies are paying .003? Well sure, I got the answer I expected, we pay more because we are offered more, better leverage, mentorship premium, and such. But the overall answer which will stick with me is "if you are worried about commissions, it means you are trading like shit." I can’t say this is wrong. It really makes me think. Last month I traded 500,000 shares, the company made $5,000, I walked away with nothing. My boss tells me I should have made $15,000 if that is the case.

Better entries, more discriminative trades, and a broader read of the stock are what I plan to improve. If I can master this, ill be on the way to better trading.

BTW, i was in another MAJOR wreck this week. I was the passenger of my friend’s car getting totaled. My right mouse clicking hand is ok, and I can still see my screen, meaning I can still keep trading. I am still 100% determined.

~TraderDave

Getting more comfortable

Today wasn't too bad. I held stocks in the money longer, which some turned out more profitable, and other turned out less profitable, however i realize this is the right way to trade, and least stressful. I wad doing real well until I started to 'wrestle' with BRL, going long, then shorting, then going long again, all three for losses. This is something I need to work on. When I do not know what is going on in a stock i need to just let it go to a point where the odds of what I expect to happen are better and more determinable.

If I didn't fall for that amateur mistake, I woulda had a very good day. I will work on this again tomorrow.

Light days, means heavy losses.

The day after President’s I realize the big money traders may not show up to work for the sole reason that they have so much money the look for reasons not to come in. When there are no major traders to follow, my trading becomes very difficult, and even impossible. I had 12 stocks on my screen today and 5 of them traded in a 10 cent range for the last 5 hours of the day. Of course as soon as the stock moved above the range 5 cents im there buying. Why? Well, i feel on these days since we have such little movement I have to be in early to catch any run at all. At the end of the day I realize not only is there little movement, but most of the time no movement, which usually ends up meaning I sell as it drops out the bottom of the range in fear its moving in the opposite direction.

Here is a chart of RCL which is one of the stocks I churned the most in today. I took three large positions in RCL on the grounds that it was breaking range. Low and behold it was a fireball in my face when it came right back to trade in the range again. What is the lesson learned here? On light days I will try to be more definitive in the movement out of the range, and give up the first few cents as a confirmation of the movement.

Another issue I have noticed I have is when I know I am not up for the day, I start to get heavy at the end of the day in shares to make up for all my loss trades in one BIG positive trade. I think this has worked a couple times, but in the long run it has definitely been a losing strategy for me. Today it was a winning strategy for a moment before the stock crashed off the high. I had 1000 shares of TRI as it moved to the high. Now on a normal day I know TRI can't handle 1000 shares but today I was hoping and praying it would work well for me. I was in the money for about .30 and my greed took over and I sold none before it came back .30 before I was forced to sell to not take a loss. Again, I forgot the trading was light for the day, or I could have gotten away with this move and broken even for the day. Making one mistake of overbuying the stock I got away with, making the second mistake of not selling for a small profit just was a recipe for this losing day.

What an ironic start

I started this blog as a self-support for myself. When I graduated from college with a Business and Philosophy majors, I won the lottery. I landed an equity traders job with a major firm. Truly, there was nothing else I wanted to do...in fact, there is nothing else I knew how to do.

I remember during High School when the internet was still an infant and quote.com introduced real time quotes that weren’t delayed 20 minutes i requested my seat be moved to the sole computer in the class. Id bring up the symbols QCOM and YHOO and watch the site chart in REAL TIME!! this last about 2 class sessions before my English teacher moved me because I was learning more about how a stock trades intraday then the theme and plot of "A Tale of Two Cities."

When I first started the job at the trading firm i was told "this will be the hardest job you ever have." and "you should be profitable in 6 months." I told myself it wouldn’t be the hardest job ever, and I would be profitable in less than 6 months. Well to make a long story short, it ended up being the hardest job ever, and I am now 7 months into this and just treading water. Now don’t get me wrong, I have been to the top of the mountain, I have tasted the finest champagne. In my 4th month i had 10 profitable days in a row, and I believe only 3 down days for the month. I was told by all that I picked up on it quickly and I was doing very well. I passed it off as the fortune of having the right stocks on my screen. I knew what I knew wasn’t what it took to being a consistent, and I was the only one who sat back and recognized I wasn’t a good trader, just a very lucky one. It made it no less painful when I hit my losing streak a month later and I tumbled off the mountain wallet first.

Anyway, I expect really no comments because I come into this with no expectation except I do wish to archive a lot of lessons I learn in the trading day. In a perfect world I would update this after the markets close everyday and review it occasionally to remind myself of lessons I had learned but soon forgot.

Oh. So how did this become an ironic start? Well, im cash strapped. And watching my friend tell me they had a "terrible week at work" bothers me. Why? Because how terrible is the week when you have yet to EVER see a paycheck yet? Atleast you guys got paid. Well this weekend I got into a mondo car wreck. It is going cost well over $2k to get me back on track. This is $2000 I don’t have, and $2000 of income that isn’t coming it. I know I know...a trader shouldn’t expect a regular salary. Some days I make $1000 before my 'normal job' friends wake up.

I’m trying to get use to being a step above homeless while trying not to. All I know is, I gave up too much to come this far, I am determined to make this work. Ill do whatever it takes because I really know nothing else. One thing my X girlfriend taught me (im sure ill write about her in the future) is that I have never NEVER never put my mind on a goal and not succeeded it. A quote I live by “Rise…and raise others with you.” The only true wayt I can contribute to this statement and the others around me is by getting GREAT at what I do. Getting great seems to be taking a lot of time, emotionally draining, and a test on my patience. This really ended up being the hardest job I ever had, no doubt about it that. Would I trade it for anything else? Absolutely never. I feed off difficulty, and this is my year’s Thanksgiving feast.

Lets see how this week goes.