Monday, March 23, 2009

Trader Thoughts

I have scanned thru several popular bloggers sites and i still see tons of newbees still eager to bottom fish FAZ and SKF. I don't blame them (as long as they use stops and bail)but i am seeing them trying to rationalize their losses and sticking to their positions. That's a dangerous game imo.
I had a trader interview with Tim Bourquin today and i think Tim was very curious about why i have reduced my trading size by half or quarter after the huge winnings i had in 2008. He said "you'd think that i thought you would really be very aggressive and really be going for it now after these huge winnings?". Hopefully i got my point across by telling him that 2008 was my kind of market with a huge payouts to the bearish momo trader(that's me!). I also told him that the reason why i have reduced activity and size this year is because in the past, my biggest winning streaks have immediately been followed by my biggest losing streaks WHEN I USED THE SAME STYLE AND TECHNIQUES as i did during the winning phase. The Payout and Payback cycle which every trader goes thru. I am trying to avoid the payback cycle.
I realized that since 2009 opened up, momo bearish trades are NOT as visible and easy to play as in 2008. I am wathcing really good traders give back most of their 2008 winnings because they are caught in their old ways that made them $$$$. These are very experienced traders who made millions last year mind you.

my cents. hope it helps.

7 comments:

Anonymous said...

Stewie,
I was one of those newbees today. A little before 3:30 I picked up FAZ at 24 thinking it was already down 11 bucks so it can't go much lower in the next 30 minutes. WRONG! I was down 20% by the close. Luckily it was a very small position. But I should have stuck to your rule about getting out if the trade isn't working right away. Lesson learned for today. Hope to take your trading course soon. Gotta get rid of the 9 to 5 first. Love the website. Keep up the great work!

Mr.G

Stewie said...

Mr G. When ever i put on trades and i cut them loose within 10-15 min. some people question my patience BUT i know better. I have seen 100s of thousands of winning and losing trades. The BIG winners ALL look the same, they all work and start to produce $$ within a few minutes and they give you the chance to place your stop at breakeven very quickly. losing trades, start to lose $$ right away, you place the order and right away, you are thinking "oh oh, what did i do?" as you watch the price drop more, you don't feel confident in it as soon as the order goes thru and you know you need to get out but your willingness to be right wants to give the trade a chance and next thing you know you are watching and 'praying' it'll get to breakeven or even a small loss to get out but that doesn't usually happen? does it? what you did that was good, was that you started with a small position.

Blue said...

Stewie, you are 100% correct. The market this year is no where near the same as the last half of last year. I too have cut down my trading to 1 or 2 trades a day for 250 shares. This market has been very diff. to day trade. I believe they are propping it up for quarter end. I noticed that I trade poorly in that quiet month before the next round of earnings. So I cut back. Right now we don't have any real news, just government interventions of all kinds. All of those got bought and dropped last year. It's just a matter of time.

I agree with you 100% about bad trades struggling right from the click vs good trades working right away. It is so true. Some of my best trades were just good timing and nothing more. Some of my worst trades were based on really good setups that struggled to work.

p.s. Proshares distribution tonight. Didn't see any shorts on the list. I figured SKF would hit new all time lows before it gets some buying again. I've been taking stabs at it every day for tiny profits watching it go down, and down, and down. This market will kill anyone with a preconceived notion about what seems "cheap".

Stewie said...

blue: your input tonight is that of a true market veteran.

fizzy said...

a lesson well learned worth repeating today.

gracias gentlemen.

Seymour said...

"This market will kill anyone with a preconceived notion about what seems "cheap"."


Well put Blue. I have in the last week dropped FAZ/SKF completely, setups that were working out very well for me the several weeks before were just NOT delivering. Stewie's approach is excellent as it shows the need of skilled traders to be able to do an about turn at a moment's notice and totally change strategy or risk appetite/sizing.

I too was waiting for thos BIG moves on the FAZ,and had created a belief that they were about to happen any moment(for the past 2 weeks!) - more like I emotionally 'hoped' they would happen and carry me of on a nice $10/$20 run!

I am now focussing on straight stocks again, and in doing so am not opening myself up for the potenially massive gains on some ETF moves, but am also not going to have to continue sitting around going through being stopped out all over the place! No need for me to be greedy here. Not only is it a waste of good capital, it's demoralising.

I am coming to realise how to spot my own greed when it pops up, and put it in its place,a s it's a real killer.

Can't wait to get hold of your new interview Stewie, sure it's gonna be full of some real good trading insight!

Seymour

Blue said...

Seymour, you also have to understand the weekly daily context of what you're trading against in the market. Last week was quadruple witching week. That means the market is going to be awfully controlled by the market makers. Price will get driven to all stops and reverse course..constantly.

I think we end March near the highs to make it look like a better first quarter than it was. Hell the markets are up nearly 25% in 12 days now. They just erased all of February's decline. In comes the new SEC fee hike and possibly the uptick rule:
http://www.reuters.com/article/ousiv/idUSTRE52M5Z420090323

What happens when they prop up the indexes and hold them there by eliminating volume (which already sucks) and eliminating a lot of shorting? Try trading that now. Say goodbye to volatility, say goodbye to momentum, say goodbye to human trading. Just a sluggish mire of low appreciating stocks. That's my guess anyhow. At least until people figure out how to defeat it.

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