March Trading Journals

A very very bitter taste in my mouth as I closed the day up two bucks, while Dow went up more than two hundred points. The long side has always been my strength, yet today I completely missed the mark.

Firm's numbers were nowhere near as good as yesterday, so I guess I am not alone in getting caught off guard by this explosive move. This was a statement game for the bulls, as everything except the semiconductors have been grossly overbought, and the sector went up 10% today. I did not have a single semiconductor trade for the entire day.

In the afternoon, it was a question of whether the market will rally or sell-off, given it is a Friday, and the market has been overbought, I did not go long. The financials finally turned around and hit new high's, as the semiconductors made one final leg, I took scalps on trades that could have been huge winners and wasted what was a huge opportunity to make money.

In hindsight, there has been some serious lack of effort on my part (although I took a huge number of shots, tried to go long and long and long and long and long throughout the day), I should have realized, that while the Dow has been somewhat overbought, the Nasdaq diverged from it and was actually a little weak, it has most definitely not been overbought, and sooner or later, the two has to converge. SOX was near the bottom of the trading range and could not join Dow on many rallies past week or so, and I really thought a break down was imminient, as a result, I got the direction dead wrong today, but I really think the bulls made a huge statement today, and I have to revise my overall biase for the market. I completely underestimated the strength of the market and wasted a great day.

29900 shares each way on 15 of 30 shooting, +677 before commissions, +1.81 after, 3 bullets. My biggest winner after commissions was $208, my biggest loser after commissions was $168. Churn galore on a day that redefines buy and hold.

Pre-Market: Calm before the storm, crude price up and I really hate because I know for a fact oils have been way overbought like a lot of other sectors.

9:30: Went bullet DNA on BTK sell-off and covered immediately for a 30 cents profit. OSX sold off and bulleted HP and took a 10 cents hit, throw in bullet cost you have my worst loser of the day. Went long PX/DOX and was shaken out as I read the overall market as gap and trap, PX went up a lot and DOX went up 50 cents before tanking.

9:35: Thought there will be further selling in KM trio and bulleted KMR, covered immediately as soon as I saw KMI/KMP going up. Went long and when KMI/KMP finally broke out of the trading channel I lost patience and sold for a quarter profit, and KMR went up a point from there. Very very bad trade.

9:45: Went long EMR/LXK/SFA/CLS, and could not hold on. EMR I scored 30 cents in and left 1.5 point on the table. LXK was weak and when it finally broke out I sold for 20 cents profit to make up for the losses I had in him earlier, went up another point. SFA I barely made money in. CLS just tanked and I lost 20 cents in that. The problem was again, I read the market as a bull trap, and I was very reluctant to hold. Churned those stocks all day.

10:10: Went long MDC on home builder move and lost 20 cents, out of the stock at the low of the day. Tried some financials but they were choppy in the morning. By now I already missed a chemical rally.

11:00: Spend a lot of energy buying energy stocks and none of them went anywhere. Broke even after commissions. Did get a few tech to go my way and was barely up for the day.

2:00: Went long financials too early, had STT, LM,BSC etc. Had CTX, DHI, SPF on home builder move but in my head there was just a message that keep on saying the market is up too much. By the time the final leg hit it was too late, lone decent trade was half a point in BSC.

3:00: I spend way too much commissions on those energy stocks today, churned APC/EOG/BR and none of them went anywhere.

The bottomline is I wasted a huge opportunity of a day, should have been a great start for the month, but it was lesson well learned.

What is killing traders? Well Dow is trading near the high of the year, while Nasdaq is trading near the low of the year, that is what is making this market choppy, and until we see a convergence, it will be more tough games ahead. Once we do however (and at this point I have to bet that Nasdaq go back up), should get a very very good trading month, and it could start here.

Team Stats:

6 Active Traders
-400 before commissions, 4 of 6 positive before commissions
-2483 after commissions, 2 of 6 positive after commissions
92700 each way on 30 of 65 shooting (46%)

Top 3 Symbols: WAT, DAL, AZO
Bottom 3 Symbols: PKI, MIL, APC
 
Hitman

What's interesting is that approximately 4/5 of your income goes to the house. Probably another 30% goes to taxes. So for every dollar you take out of the market you get to keep .19 cents after commissions and taxes are taken out. The fact that you remain profitable after all of what's taken out with your style of trading merits congratulations even from me.
 
I have come to the conclusion that you cant have it both ways. If you are a scalper, as I am, most of the time you are going to miss the big moves. Its a mind set. I guess there are some who can do both and I envy them. I almost always do poorly on a trend day but they are few and far between so it works out.
 
Hitman,

I liked your second enrty (today) better than the first, in that it gave me a much better view of the financial context, efforts and ultimate results of a prorietary trader. Grist for the mill, as I'm trying to decide whether I want to become one too. We've talked about which pro trading firm to join, but here I'm reminded to focus on the fundamental question in the first place.

Of course, I congratulate you for being profitable - that's much better than most traders (as I'm led to believe.) The P&L results for January and February are nothing to sneer at.

However, I still see those percentages and ratios as quite puzzling, even scary, and my eagerness to go pro diminishes.

Just as an example of where I'm coming from, here's my day today (I daytrade [frantically] the s&p and the nasdaq eminis, and, at the end of the day, I was every bit as tired as you appear to have been.)

S&P: average gain 1.15 points/contract/trade ($57.5/contract/trade), commission ~$5.5/contract/trade (~10%);

Nasdaq: average gain 6.2 points/trade/contract ($124/trade/contract), commission ~$5.5/trade/contract (~5%).

I thought that those percentages were typical in the daytrading arena. When I was daytrading stocks, they were a little worse, but not by that much (always under 20%).

What does that say about pro trading? Am I getting unduly concerned here? What unique benefit is it offering to you, as it is taking away >60% of your gains?

[Btw, after uncle Sam, my daughter and my wife, I was left with nothing today :) ]
 
Hitman:

One of your messages you mentioned that the top trader at your firm this year was a swing trader. Since a swing trader doesn't generate nearly one tenth the commissions that you do how does Worldco justify the risks involved in this type of trading and how many people at your firm would be allowed to hold positions for days, weeks and maybe longer?
 
Hitman wrote:

"February / January

P&L Before Commissions: 13847 / 11994
P&L After Commissions: 4294 / 2923
Shooting %: 47.2% / 46.3%
Cent Per Share: 0.038 / 0.036
Volume Each Way: 361200 / 328000
W/L: 14-6 / 13-9"

Wait, are you saying you commission is 3.8 cents/share?

I don't know much about Worldco or anything, but that seems a bit excessive. My firm charges half a penny + ECN fees which means the total cost can be anywhere for .0075 to 1.5 cents. IB, which is retail though, charges only 1cent/shr.

I'm not trying to bash you or anything(because I do respect your resilience and persistence), but you said repeatedly that Worldco offers the lowest commission for any new trader? 3.8 cents/shr is NOT exactly low comm. especially when you are scalping.

Scalpers on average after acccounting for losses probably only make 4-5cents to and occassional 30-50cents. But those are dwindled away by overtrading and even small losses add up because of commission.

Just wondering...

Good luck. It has been a tough market.

trader99
 
Originally posted by G_Morgan
opps
2.6c/share commish
that's a lot.

3.8 is his gross profit.
More...

Actually Hitman's post said "Volume Each Way" so you would double the shares, bringing the cost per share to about 1.3 cents.
 
I have been trying to take small individual positions but at least 4 at a time to diversify my risk, not to mention trying my best to hold on to them for larger swings, something I can not endure with a full lot. That said, with the 20% deduction in commissions I received, I have definitely got a little too excited and it resulted in some severe overtrading. I started quite a few positions with 1000 shares lately, and got a little nervous and dumped half almost first downtick and that created a lot of churning. It is just part of the game to step up the size. I need to start at least half of my positions with 1000 shares to take it to the next level.

A good friend of mine in San Francisco took a stunning hit yesterday. Natural gas was up and he tried to bottompick KMI, took 2000 shares, tried to sell but accidentally clicked buy, had 4000 shares, tried to dump it all immediately but the stock halted. That 30 minutes or so was the longest 30 minutes in his life, as the stock resumed trading a few points lower, and he held on just a little longer, it went down another point, he sold everything 37.25, another half an hour later, the stock traded at the level before the halt.

I told him that it was a fluke, that he did the right thing to get out, that it was almost a miracle that he entered the wrong order AND the stock got halted right after. We traded in New York together before he left for our SF branch, and he was down as much as 20K before turning it around dollar by dollar. I remember him taking a 5K loss just 2 months into the game. I remember him wasting the next 3 months over some stupid mechanical day trading system. I remember him turning positive, scoring 4K in a single game, only to lose 10K the very next game. Yet every time he got knocked down, he came back, kept on fighting. In the end he went profitable and even got his own team (2 other traders). He could have quit long ago, as he has an Ivy League degree and can easily find some other job. He loves the game as much as anyone I have ever seen, as he has the strongest will of anyone I know, I mean, he deserves every dollar he makes.

Yet this hurts like hell. He was up about as much as I was, entering yesterday's game, maybe a little more. Boom. Hopefully he will recover from it. Very tough market to make that kind of money back anytime soon, considering the psychological damage dealt.

Yannis:

I am not sure how many trades do you take a day, but I personally don't think it is possible to maintain a high profit to commission ratio if you take as many trades as I do (I traded 30 stocks today, no less than 200 individual trades). Definitely not 10 to 1, not even 5 to 1. There is nobody at Worldco telling you that you must take a huge number of trades. If you make five trades, pay $50 in commissions and take home $500, be my guest. Unlike Bright, we don't tax you with desk fees.

The more trades you take, the smoother your equity curve. Yes, you pay more commissions, who cares, for me, if I take 2 trades and be up $100 on the day, or take 10 trades and be up $101 on the day, I will take 10 trades. I only care about my net P&L, the only reason I keep track of my P&L before commissions is because I need to have that to negotiate for better rates as time passes.

Yes, I would like to be more efficient, but you have to play defense too. Churning is part of the defense. Say I am up $500 today and lose $500 tommorrow, I probably put up at least $700 on the gross P&L and nothing on the net P&L. Because on the days I am down I will always be trading all day long, in and out, in and out, in and out trying to cut into that loss, and I will probably be quicker to get out of stuff as I definitely want to be super tight with defense when I am down. It results in a lot of fees and a lot of commissions, but as I said, I have no choice. I am not the type to stop when I am down, I have to be doing something. Even if I am down say a grand or two, I will be plugging away with 200-300 shares, not to make back the losses but try to get a few decent trades, a little confidence back for the next game.

I have seen people who made seven digits last year, be flat versus the market, but down $2500 after commissions. With the large amount of bullets they put up, they are usually down $500 to start the game. It is business expense. You have to trade size to make size, and churning is inevitable.

I mean, the shorter the time frame, the lower the risk, the more commission you will pay. Last year at this time, I was up 15K, and Jan 2001 was my first profitable month ever, so far this year, I am up $7200. When I am putting up this kind of numbers, it is not efficiency I am worried about, it is survival.

Shortee:

***One of your messages you mentioned that the top trader at your firm this year was a swing trader.***

Not anymore, the guy took some enormous hits lately, I mean swing traders are essentially, in swings. When they are in sync with the market, they will put up the biggest numbers, and when they are out of sync, they will still put up the biggest numbers but on the other side :-)

Let's just say he has been bearish all week, not pretty :-)

***Since a swing trader doesn't generate nearly one tenth the commissions that you do***

Not true, this guy does 10K per position, multiple positions, and during the day when he decides to pare in and out, it is quite a bit of commissions. Besides, you always want experienced people on the floor, so others can learn and benefit.

***How does Worldco justify the risks involved in this type of trading***

Quite a bit of capital of his own on the line, but as I said, when he was out of money, he dipped hard into firm capital then turned it around. The reason our firm sticked with him was because he put up a very large amount of his own capital, and had a proven track record.

***and how many people at your firm would be allowed to hold positions for days, weeks and maybe longer?***

If you have capital in your account, you can do whatever you want to, for most people, you will get a call from risk everyday if you are down firm capital on overnight positions. Almost all the big traders do overnights every now and then but very few use it as a main source of income (more like the guy traded 5K position during the day and holds 500-1000 overnight or something like that).

The guy I mentioned sometimes holds 5K OMC overnight, so now you understand the level he is playing at :-)
 
You forgot about bullet costs, I do on average 2 a day.

I post my one way volume instead of roundtrip volume.

Being a team leader, I just got my commission lowered to 0.8 cent per share, which my current volume do not quite warrant.
 
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