A sorely neglected aspect on the blogsphere has been order entry. I’ll go through what I do as far as day trading goes and you can take whatever applies to your situation.
Check out the picture of my market maker box. There is information on price, spread, volume, high, low in the top box. Below that is a horizontal multi coloured bar that displays bid ask spread and quantity. It moves right or left depending on the spread/volume. To the right there is a ticker that shows price and volume of the ongoing trades.
Bid/ask price levels are shown in 5 tiers with different colours in the middle of the box.
Below that is where the order are input. Symbol, volume, type of order, stop price, route.
Volume is set at 1000 shares and spins up in 100 share increments when I click on it. Order type is set on market. If I click on any bid ask tier, that price appears as my order price and also changes the default market type order to a limit order.
Route is set to ARCA for NYSE and the ETFs stocks and NSDQ for Nasdaq stocks. Buy, Cancel, Sell, Short buttons are colour coded.
Now when the time is right to place an order it’s always a balancing act as to whether go market or limit order. If I have time I will go limit. If I sense things are about to move fast or are jumping around I will put in a market order. In these days of .01 spreads it is easy just to do market orders all day long. Sure it costs more in fees than limit but I am not left chasing a higher price and missing my opportunity. The penny saved is not worth the dollars lost or the emotional turmoil you can be left with seeing your opportunity fly away from you. I believe when the time is right it is best to act- the momentum will do work for you.
Another important detail is to not screw up your order types. If you have ever put a buy order in when you really wanted to put a short order in you’ll know what I mean. I was trading RIMM a few years ago getting ready to sell the long and go short. I mistakenly bought another chunk of it in a pile driving market. Believe me, the next few moments were exciting, discovering what went wrong and then trying to sell a bunch of stock when the price was going in the toilet.
Order entry is one of those sublime things that is very important yet stays on the fringes of trading. Learning how to do it takes time and the experience of recognizing past mistakes.
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5 comments:
Good post. Order entry is something many traders don't talk about on their blogs, but it's an important part of the game.
Scott,
Thanks you for your comment on my blog earlier. I am grateful that you took the time to comment as I know from reading your blog that you are a busy guy. I'm not a bit surprised that you took the time, however, because the effort it takes to maintain a blog like FNG is testament to your committment to others through teaching. I respect those who take the time to give of themselves with no promise of something in return.
You were on track with your comments that I should stop trading, clear my head, and let things settle a bit. I did make two trades in my live account this morning at the open to prove to myself that I was not fearful of the markets then promptly switched to my paper-trading account where I'll stay for a while. I did not post the paper-trades to my blog. In the post prior to the one you commented on, I outlined my goal of never adding to a losing trade again and I made a pledge to my wife not to. I take that very seriously as I do not break my promises to others. Today, I paper-traded with a focus on momentum and strictly enforced my stops. I did have some trouble with getting my stops triggered quickly enough but that was because of the speed of FAS. I did pretty well later after getting the feel of it; stop-losses were more in line with where they should be.
Part of the problem Scott is that I don't have a fully developed trading plan. I have a few entry triggers which have produced relatively decent results but my trading is not refined in a way that will allow me to "read the tape." I also have no clue on proper exits and I readily admit it as a weakness. I regularly leave much profit on the table because I have no idea where I should get out and want to at least bank some gains.
I don't need to trade for a living but I must say that like many other people I could use a few extra bucks. :-) I have taken an inordinate amount of time away from my business in pursuit of trading the markets. Quite frankly, I have never been challenged in quite this way at anything I've ever attempted. It really is the hardest thing I've ever set out to do. And, It consumes me, in a positive way. I really dislike my business of 19 years and frankly, trading is my escape from it, as I see it. I've done the math and see that I am about the same age as you were when you started so it's possible that you understand about the need for a career change! I look forward to reading the book you recommended. I'll mix it in with my study of your old blog posts this weekend. I'm up to your September 2008 right now. I pretty much study every chart to get the best feel I can for what an experienced trader sees when he/she clicks the mouse and then I compare your old charts to a variety of the current day's charts to match the patterns, etc. I must say, with my paper-trading today, I at times really felt like I was "one" with the market. But other times, it seemed like I was just looking at movement on a screen. No worries though. It will come...
Oh, by the way. When I do achieve success at trading, I intend to carry on the tradition of free blogging to the extent that anyone cares about what I put up on the site. My way of "paying it forward."
Thanks again. I won't mind if you choose not to publish this. It mainly is a personal thanks for taking the time to lend me some assistance with your comment.
-Jason, BCT
Scott, just stumbled upon your site tonight, and have been reading every post so far. I'm a fairly new trader, and was wondering if you think momentum trading would work for someone who has to follow the PDT rule?
-Chris
BCT,
I'm happy that you are taking a step back to reflect on recent events.
Trading is not a nice way to really find out what kind of person you are. Money and losing can bring emotions to the surface that you either didn't know were there or choose not to acknowledge.
Concentration like you experienced today is the way forward. It will allow you to learn from the mistakes and plot a new course for your trading activities. A new way includes getting a solid plan for entering and exiting trades. Don't try and wing it thinking you'll be OK. You need to know what your exit plan is before you enter a trade.
Ya, last September trading started to get very exciting. I don't know how many parallels you'll be able to draw compared to recent market action. I wonder if we'll ever see action like that again in our lifetimes.
Chris,
I think that the less you money you have available the tougher it will be. That said, if you follow the momo within the PDT rules some profitable trades will still result. In my view momo trading high probability set ups is a good start.
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