October Trading Journals

God bless America, as no amount of words can express my utmost sympathy toward the innocent victims of the attack, my ultimate respect toward the heroic fire fighters and emergency workers, my deepest hatred toward the vicious terrorists. 9-1-1 was a day that none of us will ever forget.

And, no amount of words can describe my disappointment of past month performance, as I was given every opportunity to make it a huge success and somehow, someway, I finished with less profit than August. It just seemed I tried to do too much this month, loaded too much pressure on myself, wanted to catch too many moves.

The shortest distance between two points is not always a straight line, patience is a virtue. Here are the keys to a successful October:

1) Narrow my focus to stocks that follow indexes. My bread and butter game has always been sector trading, and at this time there is no need to find new stocks, I have enough stocks on my watch list and I need to develop a list of go-to stocks that I trade on every sector move.

2) Familiarity brings consistency. September was a .500 month for me, I won 8 games and lost just as many, that can not happen in October, I must put together winning streaks.

3) Keep the size, I have been getting more comfortable with 1000 share positions, about time, unless I go into a major losing streak, I need to just stick to it, NO ONE can make size without trade size.

4) Composure, never ever lose the cool, not even for one game, it is completely unacceptable. Just remember, it can ALWAYS get worse.

5) Keep up the quality research (news/daily) on stocks/sectors I currently trade, but again, stay focused on this group. Start looking at some of Tony Oz's set-up's which I find to be very interesting (helped me to anticipate a oil rally after 3 sell-off's).

http://www.stockjunkie.com/tonyoz/sc9.htm

October hurricane, will the real Hitman show up this month? There is no daily goal nor monthly goal for this month, heaven is the top, hell is the bottom . . . Fourth Quarter starts Monday . . .

September / August

P&L Before Commissions: 7075 / 6730
P&L After Commissions: 945 / 1330
Shooting %: 47.06 / 48.00%
Cents Per Share: 0.036 / 0.041
Volume: 196200 / 164900
W/L: 8-8 / 15-8

 

This October (20th to be exact) will mark my one year anniversary at this firm. From here on I will provide one flash back journal entry each month, from one year ago.

On one hand, it helps A LOT to look back at those journals and see how far I have came, so when I am struggling, I can remind myself that I did improve, that I can only get better.

On the other hand, most of those flash backs will not be pleasant, as I will forever remind myself of the mistakes I made, so I will try my hardest, to not make them again . . .

Flash Back - 10/26/2000

Note: The second week in my career, I thought I was learning a lot, I thought I would escape the learning curve, but little did I know that was the day before my ugly 19 out of 20 games losing streak. I was trading a limit of 100 shares, 2 positions.

Wow, what a roller coaster trading session . . . One of the most educational sessions yet. I finally gave up on charts, the 3 minute 5/15 SMA chart is still very useful to see the general trend but the 1 minute stochastic chart is not very good for NYSE trading (at least not the slow boring stocks I am working with). Once you join a firm and every senior trader around you is tape primary chart secondary, it pretty much grows on you.

I finally got comfortable and understood senior trader languages, and the senior trader sitting next to me is EXTREMELY vocal, I get to hear his voices on hot plays and I pull them up on my own screen. As much as I hate to say this I used some of them. However, I am trying to do everything I can to please him (like morning coffee etc.) so I can learn as much from him as possible. He doesn't seem to be the most intelligent guy in the world but he is making an average of 75K every month YTD, and he is only doing better and better. I would like to emulate a quite Asian guy sitting next to him who was a newbie before, learned from him and now eat his lunch at trading games.

20 minutes into the game, I was up $150, then, in the heat of the battle, I mistyped symbols and didn't realize it until 10 minutes later . . . disaster, handed the market right back what I took from it, ended the day up $6, could have been so much more, but I am glad to at least be even for the day with 3 trades with incorrect symbols, I'm not sure what happened, I know I am a very very accurate typist.

I am convinced that at top level a Nasdaq trader will beat a NYSE trader. However, I am also 100% convinced that NYSE and those "boring" stocks are the best places to start day trading. Most of my winning trades came from Insurance, Drug and Utility stocks, plain amazing.

Also, with super large capitals, I'm not sure if a Nasdaq trader can beat a NYSE trader due to the lack of volatility in NYSE which allows a trader to go extreme in sizes. Despite of our new Nasdaq team, and the fact I still want to play on that team once I become profitable day trading, our top trader still trades NYSE.

His legend started, his sixth month into the game. He started here with a little bit trading experience (can't be much more than what I have) late in 1997, took 4 months to get into profitability. Then in January 1998, his first profitable month, he made 400K. He never looked back from there. This year so far he made 2.7 million YTD, beat out his nearest competitor by more than half a million! He is the Michael Jordan of this firm, extremely aggressive, plays a pressuring game, and does 80% of his trades on the short side using bullets.

Bullets (aka Married Puts), what a powerful weapon for senior traders. Today on more than one occassion I spotted the same plays as the guy sitting next to me, while I can not short the stock because there is no uptick (or 1/16 room above BID for me to slip the short in), he shorted the hell out of those plays and made some very nice gains.

But today his best trade was a whopping 15000 shares short then long in GLW, he captured 6 points on each side of the trade, for a devastating gain of 180K on that stock alone! Let's just say the senior trader sitting next to me look at him the way I look at those senior traders.

That said, today I only made 19 trades, spend a lot more time thinking rather than trading. Learned the hard way that scalping for 1/16's and 1/8's is a loser's game. Yes, there are times when pro traders nail a 1/8 when the window of opportunity is closing, but I learned today and after yesterday's Time and Sales lecture.

One of my "favorite" type of trades is after I already have a ticket on a stock, I would scalp it over and over for 1/8 and 1/16 gains. I would look for a large BID and a large ASK. Say a stock has a BID of 200 (20000 shares) at 40 a ASK of 200 (20000 shares) at 40 3/8, I would try to slip in a order to buy at 40 1/16, and if it gets filled I would try to sell at 40 5/16, of course nothing goes as planned in 90% of the cases this type of trades will nail me a 1/16 or 1/8. There are many many variations of this play but this is the "core", and it has been the core of my game.

Here is why this is a horrible type of play. A stationary large BID or ASK block is there to be lifted (as in a specialist mind game) or knocked out (filled by an institutional order). The maximum gain is often a 1/8, the maximum loss in the case of a "pulling the carpet from underneath you" can be very damaging, adding in the commissions, it is a loser's game. I would have 8 winning trades and 2 losing trades, get a $50 gross and pay $40 in commissions. Also, playing for the spread is impossible when you trade large blocks, which is what I hope to do later in my career.

A key amatuer mistake that I made over and over again is that I jump into stationary BID and ASK's. As a day trader, you can't afford to sit in a stationary stock much, you have to jump onto moving trains. As our senior trader puts it, only jump in when:

A) The BID/ASK is VERY large, at least 10000 shares for NYSE mid-cap stocks (ones I am working with), as a rule of thumb the best ones are blocks at 10% or more of the current volume.

B) Look for aggressive buyers and sellers, not passive blocks that just stays there. For example, say there is a BID of 500 at 40, ASK of 20 at 40 1/8, when ASK gets knocked out by buyers and become say 40 1/4, you want to see the BID gets lifted, to 40 1/8, that tells you the buyer is aggressive. However, there are tough to deal with specialists who play a load of mind games, avoid like plague if you see large BID/ASK gets lifted and reinserted for no apparent reasons.

C) Hardest thing to do when day trading (for me), patience. Once you are in a profitable position (losing positions are very easy to cut in most cases), you have to wait for a substantial profit before locking it up. I can't tell you how many times I only took a 1/8 out of a 1/2 or even 1 point movement over the past 5 sessions. It is absolutely critical that we cut losses short and let winners run. Today, I didn't worry about ticket cost just traded stock after stock and I had a much better gain per stock. Avoid scalps, look for meaty moves. This means real time filters and a large watch list which I will build. Even stocks that don't have much daily range can be very good movers. FCS today gave me a nefty 1/2 point.

D) In NYSE, head fakes are a lot fewer than Nasdaq. Look for odd number blocks, for example a ASK of 368 will be very likely 36800 shares for sell but a ASK of 200 may be a lot more than 20000 shares, the specialist just chooses to print 20000 shares.

Still, today was not profitable, but extremely educational, I need to be more consistent. Another thing, I need to develop more confidence in my market orders, pro day traders use market orders almost exclusively, yet I feel so uncomfortable using it (always using limit orders trying to get 1/16 out of a trade). I need to use it and not worry about the fill, because if I am worried about a 1/16 I shouldn't be in the trade. The trade should have a lot more upside than downside before entry.

I also need to keep my head cool in the heat of battle, many times I lost track of futures and lost track of other opportunities as I watched the tape with baited breath. I'm also going to keep my number of trades down, quality over quantity, 29 trades means half of those trades were 1/16 and 1/8 scalping attempts, not a very good formula to winning. Precision is the key when day trading, three bad symbol entries cost me $150 today. The key is to be able to do everything FAST and ACCURATE, one of the many challenges of day trading.

I am going to track a new statistic, average gain/loss (gross) per share, this tells me if I am looking for meaty momentum gains (good idea) or 1/8 scalps (bad idea). My winners must be bigger than my losers, this is MUCH more important than shooting a high percentage. Today I shoot a miserable 37%, yet my gross was way up and my net would have been way up without those bad trades. One winner will easily erase more than a few losers/draws.

They told me NYSE trading is a COMPLETELY different animal than Nasdaq, boy they are right. It will take some time to get used to, without a doubt.

7/19 shooting, 37%, +125 gross, 119 in fees, +6 net, average gross gain per share traded: +1/16.

Don't feel too bad anymore because if the number one trader took 4 months to go into the green, I know I am right on schedule I can tell you right now that despite of the sheer difficulty every new trader face, day trading is deceptively simple, there is really not that much to it when you look back through your trades, yet to do it consistently, precisely, and QUICKLY in the heat of battle, to overcome emotion involved with real money, real time, to put it all together is a herculean task.

I am ready for tommorrow's action. Going to update my watch list tonight.

 

Best of luck next month. It's been almost a year since you started daytrading. When will you start trading Nasdaq stocks?

Fohat

 

quote from Hitman

P&L Before Commissions: 7075 / 6730
P&L After Commissions: 945 / 1330

-----------------------------------------------------

need I say more? Hitman you had some success earlier in the year, it's perfectly natural for you to assume you will get those good days back and keep you working on your strategy.

But I am afraid the good days are gone, the above numbers are statistical proof that you are just a cheap labor for Worldco.

The market has changed, there is much less dumb money left to be taken advantage of, and certain styles NO LONGER work. I think you need to step back and re-evaluate your approach.

No, I don't trade for a living, and my robot's size is the exchange minimum. You certainly know the Chinese saying:

He Who Is In the Game Is Confused;
An Observer Sees Clearer.

 

Hitman is presently paying his tuition. The experience and education he is recieving at WorldCo is invaluable and well worth the price he is paying. It's not just "cheap labor", it's about opportunity and a shot at the big time.

Dozu, you don't trade for a living because you don't know how to. How much money do you think you're losing for not having this expertise? Lots!

I'll bet he would agree he has learned much in the last year. Much more than he would have sitting in his living room squeezing his mouse without a clue.

What do you think Hitman? Is it worth the price you're paying?


Bucky Lee

PS Actually, you could think about it in this way...WorldCo is paying HIM to learn to trade! LOL

 

Fohat:

This was a comment from around the same time last year, I have no plan to trade Nasdaq any time soon.

Dozu:

Every single market, there are winners, and there are losers.

For many people I know, September was a great, great month. Even for myself, it could have been much much better. If you trade size you will pay a lot of commissions, and if you don't make much from it, it is your fault.

Anyone who didn't make size in September has no one to blame except themselve, it was not a choppy summer month, it was a SIZE month.

The problem with my struggle starting second half of August was too many changes, Bollinger Bands, tons of new stocks, daily charts . . .

Time to stick to my tried and true approach, changes are too expensive for traders, small (and I mean, really small) tweaks are needed, not major overhauls.

 

Hey Hitman,

Fellow Worldco trader here. Just stumbled over your journals/posts. Been at the firm for about a year and 3 months now. Just wanted to tell you your journals are definitely insightful.

 

Barely squeezed out a win for the opener, $10 to be exact but it is hard to complain after all 3 of my bullets turned out to be crap off the open. 15800 shares of 6 of 13 shooting, +570 before commissions, +10 after :-(

I am at home as I am writing this journal so the trades may not be precise. This was not a pretty game, but it is better than a down day, and it is what I need to build confidence. PATIENCE. It is one thing to keep pushing myself to trade bigger and work harder, it is another thing to not appreciate an up day, no matter how small. Lately I have just not been in a groove and I need a winning streak badly.

Pre-Market: Light news, nothing signifcant I can remember.

9:30: COF had a decent daily chart so I took some off the open and got out immediately for a 8 cents loss. I thought Drugs and Biotechs were running out of gas, bulleted DNA and AGN, got pretty bad fills off the open and got out of AGN for flat, DNA for a small profit. Took AGE bullet on XBD sell-off and it went down just a quarter point after I sold it, ended up getting my bullet cost, nothing more. Tried AGN short again and lost 30 cents.

10:40: Took SGY on OSX rally, took a nice scalp out of it but didn't expect the full recovery of the index. Took small hits on IRF/MMM long's, tried AGN short. I was down $200 at half time, no big deal, went to gym to break a sweat.

2:00: Afternoon rally, took small positions of PPG/FMC/WLP etc into the close and managed to barely get even, tommorrow is another game.

 

"Dozu you don't trade for a living because you don't know how to"--------Bucky Lee would please tell me and others how you know that Dozu is not capable of trading for a living because he doesn't know how to. You've made the statement so obviously you have some inside info on the subject. Please enlighten us. I enjoy Dozu's posts and think he's very good.