Satuki @ Home

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.

I was talking about flipping to the long side last night on the mailing list because I really like to practice my mental flexibility.   Let me explain what mental flexibility is.  When you are in a bullish mode, you tend to keep buying even if the market is trending lower.  Naturally, most of your trades will die. After some real hard work, you might learn how to stay on the sideline in a situation like this.  This is already a huge step for most traders.  In other words, you never go long in a bear market.  That requires you to have a very strong will power to sit out the bear market, which a lot of traders/investors just can not because they always want to catch that elusive bottom. If you have passed that, here comes the final stage.

It is that you can long a stock now, close it and immediately flip to the short side if there are signals to do so.  In other words, you try your best to capture movements in both directions.  Both you and I know how hard it is.  It is our trader psychology.  It is just that hard to switch between being bullish and being bearish in such a short period of time.  We might get slapped by both sides.

As for today’s trading, I shorted CS and SPG.   It was a trending market and very hard for me to go long on anything.  As someone said last night, trade what you see, not what you think.  This is a very important rule. Please recite it every day so it becomes a reflex. Trading will become some kind of reflex once you have placed thousands of good trades every year.  I am referring to day trading here.

The SPG was not a very good trade, which reminded me of this post Chicken Little Says “Good Entry+Bad Exit” = Bad Trade!.  Nowadays, I watch a stock for a while and make a plan on the fly.   I took this trade near the market close.  My profit target was only 1.5% since the market already went down a lot.   It actually hit my target (50.69). But I hesitated. I was hoping for a bit more.  It quickly reversed before I even had time to react.  That is the price I pay for not sticking to my plan. The only thing comforting me is that the entry was perfect. See the chart below.

Click on the picture to have a better view

It is a felony not to short WYNN today considering its recent run-up.   I shorted 3 stocks out of 4 I mentioned on the mailing list last night.  They were WYNN, FSLR, MHK, and ROK.  

WYNN was the worst offender.  So I naturally targeted this one.  Nevertheless, I missed the first and second big drops and only caught a small one in the end.  WYNN gave us so many opportunities to short into today and it was truly very hard not to make any money shorting it. When the signals were there in the morning, I lacked a strong conviction. I knew I needed to act but… No buts…  I just chickened out. If the first one was forgivable, then the second one was absolutely not. I need to take some notes about these 2 missed opportunities.

As for ROK, It was a loser but a good trade since I lost a tiny bit in that position.   It was the same with the AAPL short trade.  I should have flipped to the long side of AAPL right after I closed my short position. I really thought about it.  I am still wondering now why I did not pull the trigger.  Where is my mental flexibility?   I had 100% short positions today and that was not too normal.   Shorts and longs should be even in a choppy market.  I also took 2 short positions in MHK.  Both were small winners.   Here is my portfolio in which I post my day trades real time.

Market has moved up so much.  The only question I asked myself this morning was how far it would continue like that.   Without seeing too much possibility of a further rally, I decided to short something again.  Well I think that was just an excuse for my bias toward shorting.  Right now there is too much bubble in the market.  I always try my best to contribute my part to reducing the size of the bubble. As a result, the market rewarded me for my selfless and endless contribution to the overall health of the market.

So what stocks should I short?   I kept asking myself this morning.   While I was looking for a target, PCX jumped out. It basically screamed at me.    “Me Me Me, pick me” screamed she.  I then asked her why?  She gave me 2 reasons

1. I went up over 150% in the last week.  It is just crazy that people pushed me up so high in such a short period of time.
2. I am no different than my brothers and sisters like MEE, WLT and others.  Why am I the only one up when they are down so much?

I pondered over it and thought what she said indeed made sense.  Then I asked her what I should pay attention to when I take a short position in it since I normally do not trade low priced stocks like that. She said

1. Keep your position size small due to the wide spread
2. Hold onto it when it moves

That is exactly what I did.   Because I kept my position size small, I could afford a wide stop loss.   Because I kept my position small, I held onto it for an 8% winner.  My position size was ridiculously small (less than 5000 dollars).  But it worked out perfectly just because of that.

There was another very good short target AMSC this morning, which I talked about it a few times on Twitter. See the picture below.  AMSC could have made a killer short too.  But it was not shortable with TradeStation. 

After that trade in the morning, I decided to call it a day, have a nap and watch 2 DVDs in a row in the afternoon.   Would you give up this kind of life style for anything else?

The market moved higher relentlessly and totally disappointed the bears, including me.  I have also been waiting for some kind of signals for a short term correction. No luck so far.  Therefore I have not had any swing trades lately.  Can you believe our beloved FAZ is almost a penny stock?

S&P has erased all the losses for 2009 and it actually has a tiny gain. The news behind today’s rally is from the housing sector.   And of course short squeeze also helped pushing the market higher.

80% of the trades I took today were shorts.  I shorted AAPL once and flipped to the long side right after I closed it.  If you followed my portfolio in which I post my day trades real time, you knew it.  This kind of flexibility is essential.  Of course, you will have to be careful not to get slapped by both sides.

The trades I took in RIMM and AAPL today were scalp trades.  I have no fixed targets for this type of trades.  Once they move in my direction, I will never allow them to retrace.    The first short I took in CYOU had a bad entry.  The second was fine. Since it was not a scalp trade I waited a little bit before I took profit.   CYOU was one of the stocks I mentioned on my mailing list yesterday.

I do not know about you. I just like to short stocks.  I did very well in 2007 scalping the market   ,averaging 40-50 round trip trades per day.   Most of year 2007 saw a bull market.  However, half of my profits were from the short trades.  As far as I know, we do not have to pay interests for short positions as long as they are day trades. 

I think that a scalping system is like a BB gun. BB guns are known for its accuracy and rapid firing due to its small caliber.  Nevertheless you can shoot only flies with a BB gun for the same reason. Do not look down on the effects of a super accurate BB gun though. If your marksmanship is good, flies will pile up in front of you in no time.  Swing trading is like a canon, very powerful yet less accurate.   My marksmanship has deteriorated a lot since 2008.  I had greased and put away my BB in a very secret place until a few weeks ago.  Now,I have taken it out and re-greased it. It is still shiny as new. What it needs is a good shooter.

As ususal, I was looking for a short position today.  And I found shld (Sears Holdings Corporation), which would have made a good short position if only I could short it.  I also had a few other candidates. But Shld would have worked out the best.  I left out one task this morning.  That is to check with Tradestation what stocks are shortable.   I remember I checked with TS last night and I saw that SHLD was shortable and It was not today though.  Either my eyes lied to me or TS pulled shld off the list this morning.  The shortable list changes every day. 

Speaking of the shortable list, Tradstation has a staggering 8000 stocks that are shortable every day.  We have around 17000 stocks listed on the US market.  Some brokers are jokes when it comes to shorting.  You need to check with your broker if it even publishes a shortable list every day.  TradeStation,ThinkorSwim and Interactive Brokers all do.

Day 4 Of the automated trading experiment

The computer sent in a buy order right after the market open.  SRS churned all day long.  And it was stopped in the afternoon.  So we have 2 losers in a row now.  See the chart below.

Click on the image to have a better view

A BB Gun works best used in a choppy enviroement.

The market moved higher today  led by the technology sector.  Technology heavy weights such as RIMM, APPL and MSFT all moved higher significantly.  Due to their mega-market caps, a 3-5% move is huge.  One reason that the market moved up today is that people were betting that Google would give good numbers.  Google’s numbers are out.  The market’s reaction is kind of tepid as we can see from the price action after the market hours.

It was another boring day for me. I am kind of flat after 2 trades.  I went long on FAZ and shorted GS as you can see from my portfolio.  I was on the wrong side of the fence today. But I managed to stay flat, which is very important. My monthly goal is that I have 3-4 solid trades a month and the others cancel each other.  Therefore, a good number of my trades will either be closed without hitting their targets or at a small loss.

Poor FAZ has almost become a penny stock. It was over 100 in March.  Relaxing of the mark to market accounting method killed our beloved FAZ. Now the crooks at those banks can write whatever value they think their rotting assets are worth.  You and I are not going to fight them because we will not win.  Instead, we will join them to take the path of the least resistance. SRS has bee experiencing the death spiral too.  We will have to face a possible reality that they might never return to half of what they used to be. These fallen soldiers deserve a proper burial.  They might be resurrected in the future and rumble on the Wall Street again. But for now, may they rest in peace.

I will be day trading them only

I took only one trade in SRS today, which is an inverse ETF that corresponds to twice (200%) the inverse of the daily performance of the Dow Jones U.S. Real Estate Index.   In other words, I shorted the market by going long on SRS today.

Reflecting back on the trades I took yesterday, I think I was a bit slow to cut the losers , which resulted in a big loss of 1300.  Nevertheless, the trade I took today was impeccable as you can see from my portfolio.  I thought about buying only 300 shares of SRS today because I talked about my position size being too big yesterday on the mailing list.  But I changed my mind and bought 650 shares.  This was still a bit smaller than what I had yesterday since SRS is a double leveraged ETF unlike the triple leveraged FAZ.   The reason I bought 650 shares is because I should be somewhat consistent in my position size.  And I normally increase my position size slightly when I have a few losers in a row.  Some people might frown upon this strategy.  I wrote another post the other day to explain why this makes sense.

Here is the chart.  You can also see the timeline on http://www.stocktwits.com/u/trader_mom

Here are a few good things about this trade

1: I did not try to catch the bottom.
2: I did not second guess myself.
3: I used the same position size as I did yesterday.
4: I held onto it until the market close as I did yesterday.

All these are attributed to a well prepared trading plan.  So I do not second guess myself or panic over the unexpected.  SRS can stop me out a few times.  But when it moves, I will have to make sure I am on it.  That is one of my missions.  The other is that I will try my best to reduce the number of times that SRS (any stock) shakes me out before it moves

BTW, I chose SRS over FAZ today just because I prefer high priced stocks.  I hope you did well today.

The market was very choppy today and I took a beating(-1300).  I took 3 trades that were 1 small winner(bidu) and 2 big losers(SRS and FAZ).   You can see the trades in my portfolio.
 

I guess this had something to do with  the Somali pirates that were shot dead by the Navy snipers.  What were these pirates thinking?  They had a horrible set-up(asking the massive warship to tow them) with a horrible risk/reward ratio of 3:1. How did they come up with this kind of set-up? This question bugged me all day long and totally distracted me. These Damn Pirates!  However, I still had a tiny winner and they were all losers.  So I beat them by a very small margin today.

Here are the 2 big losers. 2 pictures are worth 2 thousand words.

Tell me whether I have beaten the pirates…….

As I said on Twitter and in this post last night, I would focus on shorting MGM and RIMM today. I did short RIMM. But it would be much nicer if I could have shorted MGM(-19%) since it had a much bigger move than RIMM. Bigger moves are relatively easy to catch. But I could not borrow any shares of MGM to short from TradeStation, which is not known for lending penny stocks. I normally do not trade penny stocks. But MGM is very liquid. I believe that ThinkorSwim and Interactive Brokers are really good for shorting penny stocks.

Anyway, If we pull out the 5 min charts of both MGM and RIMM, it is not hard to see that MGM was a much easier play. It did not gap down too much and had a very big dead cat bounce immediately. It also had 2 break-downs subsequently.   1, 2, 3 were all good short entries.  I hope some of you out there caught some of the moves.

Here is the chart 

If you followed me on Twitter, you knew that I shorted RIMM and went long on SRS today.  Those 2 were winners. I left 2 dollars on the table for the SRS trade. But I am already content with the profit (1000) on SRS.  Check out the timeline of my 2 trades today on StockTwits, whose timestamps is in sync with the US Stock market.  I did publish my thoughts last night on Twitter albeit brief.  I was going to send the message to the people on the mailing list.  But I was distracted by something else. I am sorry about that. There will be many more opportunities like this though.

Sign up for my mailing list if you are intersted.   It is totally free.

BTW, when I publish my day trades in real time, I always update Tiwtter first, then my portfolio.

Tomorrow I will focus on these 2 stocks, MGM and RIMM. These 2 stocks shot up too fast and too much. They are due for a serious reaction.   What I mean by a serious reaction is a 4-5% drop or even more.  They are definitely good for day trading.  I will not swing short them though, especially RIMM since it has been very strong lately.  I might go swing long on FAZ again tomorrow if it shows signs of strength.

Click on the pictures to have a better view

MGM has a long upper shadow with huge volume on its daily chart, which is a tpyical sign of weakness.

RIMM has not showed any signs of weakness yet.  I will be patient.

The market had a strong rally in the AM and gave back half of the gains in the end. There was no apparent news that drove the market down near the market close.

Today’s strongest sector was Financials. The whole sector was once up 6% and finished at up 3% Technology and basic materials followed as you can see from the pictures below. I think the worst news have already been digested by the market. Gigantic drops should be rare. The market is going to chop, which is the trend followers’ worst nightmare. For short term traders like you and me, we can take advantage of it. My swing trading is designed for choppy moves. The flip side, of course, is that I can never catch big fish that could give you returns in excess of 50% or even more. But that is OK. Small fish add up.

Click the pictures to have a better view

As I indicated in my mailing list last night, I was going to go long for day trading. I took a long trade in ERX, a triple leveraged Oil ETF. I did not make much money from this trade. But here are a few things I can list about this trade

1: The entry was good.
2: The exit was OK.
3: Picked the wrong sector

I closed the trade because I found I picked the wrong sector. As you can see from the sector summary chart above, energy was very weak. I am still holding my GS and AMG short positions in my portfolio (http://www.momdaytrader.com/Portf/getPortf.html?showPortf). If you have been following my trades, you know that I was up good on these 2 positions on paper yesterday. But now I am negative on GS and all gains in AMG are gone. That is why the tag-line of my website is “Paper profits are not real and paper losses are!” I hope you did well today.

Perhaps a lot of us already know how important it is to let our winners run.  However, scalping is totally the opposite of that idiom.  And it works for day traders.

Almost every stock can move a few percentage points every day. The stock market consolidates 60-70% of the time, during which most stocks chop around.  Choppy moves are the biggest enemy of the traders who like to ride winners. However, scalpers love choppy moves since they try to capture very small moves only. For example, it is very easy for AAPL or BIDU to move up/down 1% during any time frame.   A good scalper might capture a 0.5% move within a few minutes and then repeat it over and over again. Not only are smaller moves easy to capture, but they are a lot more frequent than bigger moves as well.  For example, AAPL might chop around 5-6 times a day and each chop moves 1-2%.  But it might have only one big move of 3-4% during the whole day.  Small profits add up very quickly.

A good scalping trade is profitable right after your entry.  So you will be closing your position in the next few minutes.   This kind of rapid firing makes your trading stake less exposed to risk. This also solves one problem for some people who can never hold onto winners

There are 2 hurdles in scalping though.  One is the accuracy of your day trading rifle assuming your marksmanship is a constant.  The other is that it is a bit of exhausting since you might need to aim and shoot more than 20 times a day.

As for me, I used to be a scalper (strictly day trader) before 2008. I did pretty well back then.  I averaged 6k-7k per month in profits for 7 moths in a row in 2007 running a 50k account.  And it started to go down hill from Jan 2008. I lost 10k in that month alone and stopped scalping immediately after that.  That quick and solid damage control really saved me.  

One single best thing about scalping is that you can trade any stock you want since all of them have multiple small moves of 1-2% every day.  Now I am determined to pick up scalping for day trading again. I will need to look at my previous trades again to see why I made those good solid scalping trades and why I failed in Jan 2008. 

See the daily charts of my glorious days of scalping  DRYS, RIMM, FSLR and VMW.  Of cousre, there were many other more stocks I day traded.    Each dot is a trade I took back in 2007.

Click on them to have a better view

VMW

DRYS

 FSLR

 RIMM

Of course my swing trading is all about “let winners run”.  I hope you are all doing well.