Hey kid... Trade or Fade?

Discussion in 'Psychology' started by Bolimomo, May 6, 2010.

  1. I remember reading a book where the author recalled some moments when he was first on the futures trading floor, other seasoned traders around him shouted at him at times of volatile markets:

    HEY KID! Trade or fade? TRADE OR FADE?????

    The ability to stay collected and evaluate the situation, and think on your feet in volatile situations... very hard to attain.

    Started at around 2:42pm EDT... I had been watching AAPL and the S&P futures. My gosh... S&P from -40 to -50... to -60... -70... -80... -90...

    Should I buy some? Should I buy some???

    S&P futures -100! Around 1057!

    AAPL dropped $40 from 243 to 203 in less than 5 minutes!

    I thought "My gosh... the world has come to an end!".

    Not willing to take big risks... People are irrational...

    But... I gotta just try it. Buy 1000 shares AAPL at 201.00. See what happens. Filled - the moment I entered my order. Okay. Try this... Sell 1000 shares of AAPL at 205.00 (4 dollars higher)... FILLED! RIGHT the moment I entered my order!

    Scalped AAPL for $4.00 in 9 seconds. I never had a trade like this... until today.

    But imagine those who bought from 235 all the way down to 200... Well... the pain didn't last long... in another 5 minutes, S&P went from -100 back to -60, -50 or so. AAPL back to above 240.

    Where do you find a book teaching you how to handle moment like *THIS*?


    P.S.: Not sure if Nasdaq would bust my trade. AAPL did not fall over 60%. I hope I can keep it.
  2. Retief


    There's more than just two choices of (1) trade or (2) fade. There's a third choice of stay on the sidelines until you know it's safe to get into the pool.
  3. I think that in that book, what the author described other people saying "fade".... means to go away. So, it's to trade it or not trade it.

    Anyway... the psychological question was: should I take the risk. Risk... but potential big reward... And the window of opportunity opens up only by a few minutes... sometimes seconds...
  4. Good for you, I sold and bought at wrong price and time, swallow the lost and move on(if i can kick myself, i would.).
  5. Good profit, but it could have easily went the other way, broke $200 and pounded down to $185,I don't think you can properly risk manage that trade unless it was more of a long term valuation aka long term trade.

    What was interesting was you bought @ 201, but was the bid @ $205 the moment you bought right after?
    That spread must have been huge if it was like that
  6. There was this book by Lewis Borsellino where he described how he bid at the low during open after crash and sold immediately few ticks higher netting him few millions.

    Then he went to restroom and gathered what happened and almost puked as he would have lost everything had the trade didn't go his way.

    Interesting moments for sure.

  7. NoDoji


    One of my trading roomies bought at $200 and sold at $218, I think it was just 16 seconds later.
  8. Pit Bull by Marty Schwartz good read.
  9. Thanks for all your kind words. My broker's communication came. My AAPL trade stands. That has been the quickest profit I have ever made.

    Yes it could have dropped another 10, 20, 30 dollars. I can stand the damage if it comes to that. But my past experiences told me that most of the times these down spikes will bounce back up. When they do, they do huge. The tricky part is where to catch this falling knife. (Anybody remember the Emulex EMLX hoax causing a spike down sell in 2000 or something?)

    If it is an isolated individual stock melting down, I wouldn't want to touch it. But it was a market-wise event... and AAPL went along with it. That gave me the confidence that I want to bet on a bounce. I really wanted to buy some ES futures at 1050... but didn't go that far.

    I like the markets being volatile. But just not spikey like that. Hard to make money consistently.
  10. Thanks!

    Yeah that was a good read.
    #10     May 7, 2010