Some random observations from today:
-What happened today is what I thought was the likely scenario in mid January when I wrote this Fear & Greed Day Trader: How to trade in a wild, pile driving market.
Obviously I paid attention and saw the incessant march upwards instead so I traded it the way of least resistance. But I felt it was going to turn out bad for the longs when the music stopped. Today it did.
- Human brain beats algorithm. I touched on the subject here Fear & Greed Day Trader: Probabilities vs. expectations I had to chuckle to myself when I picked the bottom to cover my shorts. It was so obvious. The really interesting part happened moments later on the upswing. The spreads indicated the machines did not know what to do. Sell or buy, buy or sell? They were totally lost like a lost young kid at a crowded circus. I almost felt pity for them. Almost. I laughed instead. Consecutive multi dollar spreads on the buy and sell sides on a typically .01 - .05 spread stocks like TNA or AAPL shouted out to me the super brain PHDs that designed the algorithms can’t think out past what happens if this and this and this and this and this and this and this and this and this happens. A clear thinking human being can because we have the ability to adapt. I'll keep that one tucked away in my memory bank. Score one for flesh and blood.
- In mid January I also updated my computer to the latest, fastest processor and loads of RAM and any other trick to make me fast and reliable as possible on my end. As I witnessed in the fall of ‘08 there is a lot of information to process in a short amount of time. I was loaded up, sitting pretty and observing during the crash today so I didn’t need to do or have a problem selling. I was looking for the cue to cover instead. Buy orders were filled EZ. Every morning I also synchronize my computer clock to the official government clock so as to have no delays.
-I wonder if some trades will be broken by the exchanges.
- Wouldn’t a 2000 point down or up day be something to trade tomorrow? Nothing is impossible.
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13 comments:
Hi Scott. Well done yesterday. After all the blathering on CNBC from various speaking heads, I have seen a few of the pro-traders exclaim how the HFC traders are a cancer on the system, in all likelihood after making gobs of money. You have shown how a skilled trader can make money in any market, whether populated with the computer based approach (reputed to represent about 55-60% of all trades now) versus the more human approach. as a trader, I think more volatility would benefit you over less, given the events of yesterday. I have my own opinion about the value of these "off the books" trading activities but I'll set it aside for now.
Do you have an opinion? Just curious where you come down on this fairness & greater good argument versus maximum personal gain.
funny, they wanna cancel some stock trades,
hope they leave the futs untouched
are you able to read through the chop? i can't figure out up from down. i've been listening to melnick over at t3live scalp aapl back and forth as the q's tick up or down. it is unreal. and up until today i thought i had a great computer, 3G RAM, 2.4 MHZ intel core 2 duo. it did fine yesterday, but this action is putting it stress on it. usually cpu usage bounces from 40%-60%, today it is bouncing between 60%-90%. what a day.
BCT- I do much better when the volatility is higher. In a slow and plodding market I'll lay back a lot more as I am not good under those conditions.
Is black box trading good? I don't think so. You just witnessed what happens when machines are out of control. Was bailing out the banks and running the markets up good? No. The law of natural selection can only be temporarily circumvented. After that the shit will hit the fan in a much nastier way.
Fairness and greater good? For most I think trading is a cut throat business and they'd sell their own mother for a wooden nickel.
How much money do you need? How fat and bloated can you get? I can't be sure but I bet I was the minority
posting some worthwhile charities to donate some of the new found loot to. People are different and that's what makes the world go around. I just like to do my own thing and be at peace with myself.
NASDAQ canceled sell orders on FAZ for retail brokers. The only way to exit FAZ yesterday after 2:30pm was in the AH. That's the final nail in a suspect product's coffin for me.
Look closely at each picture. This tells me HFT is here to stay:
http://wallstreetandtech.com/photos/NYSE-Datacenter/
lol a 2000 point day. Oh man. If I'm too scared to trade that and not jump in I may as well quit!
I envy you Scott, because you're one of the few people who has studied, practiced, and been CONSISTENTLY SUCCESSFUL trading what has become the wild west in the history of our stock market. I think you have THE BEST approach. No risk of exposure over night, ability to find the best bang for your buck stocks on the day, and rock solid risk management.
If I can get my head around trading momentum TREND instead of thinking I'm too late and waiting for the reversal; I'll be much more consistent and less gunshy. I think I've spent too much time trading ETF's. Scalp or be scalped.
Scott: What equities did you trade today?
a few days ago i commented i could not tell from your charts when you bought and sold, here's how one blogger does it:
Trades:
+ BOT 2,500 AMEL false Stock 1.579 USD ARCAEDGE 08:51:15 12.50
+ SLD 5,000 LEI false Stock 2.600 USD SMART 09:43:14 25.00
SLD 5,000 LEI false Stock 2.6100 USD SMART 09:43:20 25.00
BOT 5,000 LEI false Stock 2.5200 USD ISLAND 09:44:57 25.00
+ BOT 5,000 LEI false Stock 2.496 USD ISLAND 09:45:54 25.00
BOT 5,000 LEI false Stock 2.3300 USD SMART 12:51:15 25.00
+ SLD 5,000 LEI false Stock 2.360 USD ISLAND 12:51:38 25.00
10:14:05 PDGO B 1.44 1000 ETMM
10:14:05 PDGO B 1.44 1000 ETMM
10:15:35 PDGO S 1.525 1000 NITE
10:17:09 PDGO S 1.34 100 NITE
10:17:14 PDGO S 1.35 900 NITE
Well said Scott.
With all of my complimentary comments I almost feel like I am brown nosing - but that is just my own insecurity coming out. I admire your perspective and think that type of goodness should be applauded and endorsed whenever and wherever it is found. Rock on.
And dude - your blog has been a trading life changing experience for me. Still a long ways to go but I am such a different trader now.
klynn55, green is short, red is buy. the price on the line is where he bought/sold it at. the price in white is where it is trading at at the time of the snapshot. he moves the the red/green line to show where he exited. the price is there as well.
blue-i agree i am always thinking, i am too late, it isn't going to keep going down. or when is the correct time to jump in with the trend? during that day, it was very hard to tell. i didn't trade that pile driving down because it was way to fast and an account wrecker. believe, many people blew there accounts up that day. think, if you bought 1000 AAPL at $240 after it dropped 15 points, then boom, in a matter of minutes it was at $205, 35 points down. you hit out. that is $35000. account demolished. only to watch it come back up. very sad day for many folks.
GTM- I prefer trading the 3x ETFs they offer .01 spreads, huge volume and move a lot up and down during the day. As a trader that's all I look for.
Blue- One only has to look at what happened to FRX a while back or ITMN this week and decide if experiencing events like those are worth holding things overnight. Sure you will have up gaps as well but my philosophy is why be such a hurry to make money. A trader has little to no control over the risk if things really drop. What did ITMN drop like $30. Thats got to hurt. Certainly I'm busy during the day, but I can control the risk and trade my plan on my terms. That's what its all about.
Blake - I traded AAPL, CAM, CLF, VXX.
K55- The first post under the Best of Blog on the right hand side of the right hand side of the page details entries and exits.
JOshua- I might sound like a broken record but the less you think you know where the markets are going and the more you play the probabilities and also let the markets and the stock tell you when to buy, sell, take a profit or a loss, the better off you will be. There is a big distinction between thinking you know, having expectations and merely trading the probability. Once you can see the truth of the market , the truth will set you free.
no, you don't sound like a broken record. you know how to trade in the zone without fear or greed. you want us all to get to that point and i appreciate that.
i know the probability was for it to keep going down but at some point the probability was for the market to come back up. i couldn't tell when that point was. i was watching AAPL trade dollars in a matter of seconds.
i picked up a couple more books about the mental game. part of what i realized, is that "perfect practice makes perfect". when we do the visualizations, that is our chance to practice perfectly. see the perfect setup, react, and trade it. paper trading doesn't allow this because we don't know the outcome. the only way to practice perfectly is in our heads. although i believe esignal has a playback mode where you can review a chart bar by bar as it develops.
the book also talks about the traders chicken and egg dilema, which i experience. i need confidence to win but i need to win to develop that mind set. that is where the visualizations come into play again. i have to rehearse over and over again in my mind so that the i have "repeated experiences of mastery".
Spent the weekend digging into why FAZ and other ETFs have massive hidden risks:
http://www.gamingthemarket.com/financial-armageddon-zombies.html
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