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If you google “market timing”, a lot of people will tell you it is useless to time the market.  I can not agree with that kind of statement.  In my opinion, timing is the most important element in trading.  Of course, timing is just another phrase for your technical skills. That is why I think you can short anything that moves if your timing is right.  It is the same for going long. Let me use STEC as an example.

In our almighty hindsight, we know that STEC has been a strong stock recently. Very few stocks can run like that, which is shooting up with no corrections.  There are close to 20k stocks out there and your chance to hit one like that is what?  You could close your eyes and chase it. You might make some money by sheer luck.  Or you could get slaughtered by the recent drop.  Or you could wait for a correction and then buy it.  I prefer the latter strategy.   Of course that is not my favorite.   My favorite is to short it intra day.  The stronger a stock is, the more I like to short it intra day. The first “strategy” is stupidity because it is gambling.  Any betting without a clearly defined edge is gambling.   The second is speculation or betting with an edge, which is “follow the trend”.  The third is also speculation because I am 100% sure that STEC (any stock that has moved up so much) will come down at one point.  So for me, timing the drop in STEC is all it mattes.   Let’s take a look at  its beautiful drop today.    

Click on the image to have a better view

Today’s drop was caused by its secondary offering of 9 million shares.  The public obviously did not like it.  Having said all this, I did not short it.  You must ask why.  After all, I was hell bent to short the living fish out of it a few days ago.  I do not know why it is “fish”.  Perhaps it is healthier than meat?  Anyway, the reason is that I was afraid of being whipsawed since my numerous past attempts to short STEC did not result in any tangible profits.   If I had tired to short it today, I could have been more likely to catch a good move (2-4%) since there were 3 big moves today.   I caught some small fish today though, which somewhat alleviated my pain of not catching STEC.

It was another flat day, during which whipsaws were all over the place.  I have never had problems cutting losers. My ability to ride winners is improving too.  But whipsaw is another huge issue I need to overcome.

I woke up this morning as usual and the first thing I did was to check the Futures market, which pointed lower.  Therefore, I was a bit biased toward the bear side.  Next, I looked at my watch list and found most of the energy stocks were red.   So the energy sector was on my hit list.  Due to my limited firepower, I need to concentrate all my resources on the weakest/strongest sector. Do not waste any energy looking at stocks like MSFT, WMT that move like a 90 year old turtle.   I think some turtles can live for a few hundreds years.  Anyway, you get the idea.

So I kept hitting WLT and HES.  By noon, I was down 200+ due to the crazy whipsaws.  It was the same in the afternoon.  Due to a string of losers in the AM, I was happy to break even by the close. But I did not recover the losses. It is normally my siesta time from 12 to 2. In today’s case, I missed a good move in HES during that time. I would have broken even if the move had occurred after 2. See the chart below

Click the chart to have a better view

The market today would have ended further down without AAPL.  The bulls should use some caution at this point since the market has seen quite a big run in the past few days.

I woke up this morning around 8:30 as usual, quickly packed lunch for my husband and sent him on the way to work.  At about 9, I sat down in front of my trading desk  and started to check if the stocks I picked last night were all shortable today. Most of them were.  Here was the list: PWRD BG X HES WLT CNX VMW FISV CNQ TJX and PCX.

I knew it was going to be another tough day for the bears since APPL’s earnings sent the stock higher, which held up the big market.   The first short trade was PCX.   The entry was good and the exit was not bad.  A good entry/exit is an entry/exit you make according to your plan.  It is not about catching a top or a bottom, which is a fool’s game.  See the picture below.  I actually had a 2% move on paper. But I was shooting for a 5% move.  Therefore it did not materialize.  I exited the postion almost flat.

Click on the image to have a better view

I tried to short STEC 5 times today.  The results were not so bad considering the super strong general market, which helped a lot to hold up STEC. STEC itself was weak.  A lot of other stocks went up 2-3 times as much as the general market.

As stated last night in STEC: Do we have a short here? I was shooting for a 3% move.   That was my plan.   I followed my plan like the Bible.  If you were tracking my trades today, you know that the first short moved down 1.5% right after the entry, the second moved down 2% right after the entry too.  These 2 entries were impeccable since they moved immediately after I opened them.  If we add them up, it would be a combined 3.5% profit and mission was accomplished.  I wish trading was that easy.LOL! I actually made 0 dollars out of those 2 trades.  I did not take profits in those 2 trades because my plan did not allow me to do that.  We all know what happens to traders with discipline issues. 

There was nothing special about the other 3 shorts.  They were not as good as the first 2 since they wiggled, wobbled and squirmed for quite a long time after I opened them.  You can see the timestamps of all my trades here. Please note they might be 30-45 seconds off since I need to set up my stop losses first, post them on my website and then on Stocktwits.

It was a very strong market today.  It should be slightly easier to trade on the long side.  Why slightly easier?  It was because the market gapped up way too much.  If you pull out the 5 min charts of a lot of stocks that went up today, you can easily see that most of them had one good move in the morning and stayed flat in the afternoon.  So trading really is an art.

Once again, do not forget to control your risk at all cost. Your trading is as good as your risk control. 

I hope you did well today.

STEC has moved from 5 to 27 within 3 months.  I did not find too much information on why It had a late day rally on 7/13. Form the chart below, we can tell that the long up shadow today shows that the bulls are a bit long in the tooth.  There is no such a thing as “a never fallen stock”.   It is a strong stock in the long term.  But it might be a bit of tired after such a run. You know what most of the longs with profitable positions are thinking now.  They probably ask themselves one hundred times a day if they should lock in their profits.  Any weakness in STEC will kick them out, which will cause a decent drop for us to profit from.

See the charts below( click to enlarge).

Daily

5-Min

I will watch this stock tomorrow closely.  My stretgey is to wait for weakness and jump in on a break-down.  It will be a day trade though.   So my target will be a 3% move.   Nothing is for sure in trading.  Always remember to control your risk.

Are you interested in STEC?   If you are, how would you play it?

The market moved higher today, which I sort of expected since it was somewhat oversold.  That is why I stopped trading(shorting) in the afternoon. When the market rips higher and higher like that, we should stop shorting.   Yes, trend does not matter that much for day trading.   But you need to wait for some signs of weakness at least.

The first 2 shorts were OK.  But the 3rd one (CNW) was very contrived since I took that trade when the market was still moving higher.    That is I did not wait for signs of weakness.  Considering I have been day trading full time for so long, I should not make this type of low level (stupid) mistakes.   LOL @ myself…I do, and still will in the future.

Of course, what I did well today is that I stopped trading (shorting) in the afternoon.  Like I said on Twitter, this month will be all shorts.   I would love to go long on a strong day and go short on a weak day.   But reality is that it is extremely hard to flip flop like that.  You might get slapped hard by both sides.

Look at the 5 min SPY chart below.  It was just too hard for the bears.  But the least we could do was to avoid a market like this.

I hope you did well today.

My trading has been crawling like a snail ,slowly but surely.  I am not worried about the loss/gain at the end of each day.  If I make 1000 today and do not know how I made it, I will not be happy at all since I will give the money back very soon.   I must know why. Therefore, I try to focus on executions only,  which is quite hard to do.  If your executions are right, money will come.   Today’s trading is a perfect example.

I took 27 trades today.  Most of them died silently.   There were a few good ones such as POT and OI. But I botched them up.  I did not hold onto them.  I realized that and tried to hold onto my long in X in the afternoon.  But X did not move much.  You can see all the trades in my portfolio, in which I post my trades in real time.

Here are the 5 min charts for POT and OI.   My timing/entries could NOT be better.  Yet I let them slip through my fingers.  I shorted 350 shares of OI @ 29.22. It moved all the way down to 28.25 without any pause.   I shorted POT first @ 112.14 and then @ 111.75.  It moved all the way down to 106.87.  If I had caught half of the moves in OI and POT, I would have been up 1000.  So 27 trades in total, all I needed was these 2 guys.  Yet they slipped away.   It is sad.  But there are opportunities like those every day.   What is better than trading?  It is certainly not your day job.

 
Click on the image to have a better view

Here is why I shorted POT and OI at those levels.

I did not short either of them during the first drop. So I watched how they behaved. A strong stock normally would not tank so much 60 minutes into the session. These 2 guys were relatively weak. So the action was to short. Then I looked for a short entry. My entries were right after the first bounce-back. It is similar to buying dips in a uptrend. The reason they slipped away was because I did not have the conviction.

There are a few good things about today’s’ trading though

1: I was as slippery as an eel too by jumping in and out of my positions rapidly. I was basically dodging bullets from my enemies.
2: I went long on some stocks today. I promised myself to balance my trading a little bit since I shorted stocks way too much.
3: I was flexible enough to flip to the short side right after I closed my longs in X and HANS near the close.

To be able to flip to either side in a heart beat is ultra important for me.  I used to be able to do that.   I need to get that kind of feeling back.  In trading, there is no time to think.  You react by reflex.   You acquire reflex by placing thousands of trades per year.

What a day for the shorts!   Every trade was an uphill battle.  I just kept shorting and shorting.  Nothing really worked out.  Most of them went belly up.  Were there no good shorting opportunities?   Not really.  There were quite a few.  For example, POT and FSLR were good and easy shorts.  Let’s take a look at their 5 min charts(Courtesy of ThinkorSwim).  Click on the images to have a better view.

 POT

FSLR 

As we could see,  they trended lower today.  I believe it is a bit easier to trade trending stocks than choppy ones.  Stocks are choppy when people have too many different opinions about them,which makes stocks hard to predict. Stocks trend when one side is overwhelmingly dominant, which is easier to predict.

MOS was very choppy today.  My entries were not optimal.  As we can see from the chart below, I still could have made money if my entries were at A,B and C which were key reistence.  Everything seems so obvious when you are not trading. Hahah!  Of course,  shorting FSLR and POT would be a little bit easier than MOS.  The question is why I did not short them.  I have not found the answer yet. But I will work hard to find the “why”.

MOS

Good thing today is that I only lost around 150, which is really peanuts considering the size of the positions I took today.  Risk Control is key.

I woke up this morning and looked at a few stocks I selected last night.   The only stock I liked was MOS.  It went up a lot in the past few days, which means it is ripe for a good intra-day short.   I like to short into stocks like that.   It looks like dangerous since most people think it is trading against the trend.   They are right if it is swing trading.  But It should not matter for day trading since all stocks pull back at a certain point.  Key is timing.   Some people do not believe in timing. But I do.

I could have made decent money today.  I shorted into MOS twice today.  One trade was botched up since the entry was not good and it was stopped out.  In fact these 2 short positions were very close in terms of their entries, one being 56.30, the other 56.47.  But due to the increase of the overvall position size, I had to use a narrower stop for the second one.  If I had held onto the second short position a bit long, I would have made a total of 600 along with the other short position.   Then I would have stopped trading for the day.

The CNX trade was a rotten trade.  I took it because I wanted to see if I could make money going long on something.  That thought occurred to me because I short stocks way too often.  It is not well balanced. That is still not a good excuse though.  We take a trade based on signals instead of trying to prove something.

A lot of traders can make a few thousands this week and then lose half of it next week. It is actually a common and tough problem. I have been trying very hard to keep my gains, which certainly takes a toll on my performance.

I have changed to TradeStation’s per-share commissions since I am in a semi-scalping mode now and paying too much with the fixed commissions (6.99 per trade).  Today,I executed 6 round-trip trades and paid 83.88 for the commissions.   If I had the per share commissions, I would have paid only 18 dollars in total.  That is a huge difference. So starting from tomorrow, I will pay 0.01 per share.

Today’s trading was Ok.  But I can use some improvements.   My plan was scalping.  But in hindsight, the exits in my WFC and GS short positions were not optimal.  By optimal, I mean I should at least catch half of a big move.  Nope.  I caught 1/4th at most.   The only thing I can do when I look back at them is to sigh, or shake my head a little bit.   Here is the dilemma. My plan was to scalp them.  And I executed my plan to the letter.   But the results were not too impressive.   If I do not follow my plan, why did I waste time making a plan in the first place?   So I think I did partially OK today by sticking to my plan.  

NILE, RKT, ISRG, PRU were the 4 stocks I mentioned on my mailing list last night.  You perhaps could have made some money shorting PRU and Nile.  I was staring at PRU right after the market open. Yet this guy dropped so fast that I chickened out.  I was going to short into the first dead cat bounce which never really happened.  So I had to let it go. 

Here is today’s chart of PRU.