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.
