A Look at a Stock Trader's Day

[Tams 20]

if you are trading a pharma... or bio-tech...

 

especially the junior companies,

that's the same as a penny gold mine stock that has not started production yet ... LOL ... (ie. no mine yet)

 

I won't hold anything during the time leading up to a FDA announcement.

it's gambling, not trading.

 

 

 

if you are trading the likes of MSFT... well, I don't think there's much to worry about.

[sevensa 10]

No. YOu seriously believe I expect to know exactly how much a stock can trade against me when halted? All I asked was CAN it reopen 5%, 10%, or 20% against me? That is what I, and anyone with common sense, which you obviusly lack, should know before they risk their money on day trading stocks.

 

Yet the only replies I got so far from you is, don't risk your money on stocks if you're not comfortable with the risk. I'm trying to figure out the risk. How much CAN a halted stock reopen against me?

 

It is in bold now to help. But obiously you are just a troll and don't know the answer, so don't waist peoples time with your stupid replies. And thales clearly either doesn't know is avoiding the question.

 

In your first sentence you say:

" YOu seriously believe I expect to know exactly how much a stock can trade against me when halted?"

and then you proceed to ask (even bold it):

"How much CAN a halted stock reopen against me?"

 

You are answering your first question yourself in bold. This is exactly what you are asking.

 

How about taking a moment to reflect about what you really are asking. And I mean, really think. I know you are itching right now to just bang out another insult on your keyboard and start with the name calling again, but take a moment and think about it. Just because you don't like an answer in a reply, doesn't mean it is stupid. If you pay more attention to what people are telling you and less effort to insult people, you actually might learn something.

 

I think trading stocks is obviously too risky for you and best to be avoided. Coming to think of it, some maniacs might fly a plane into a building again, closing the exchanges for several days, so futures trading is probably too risky as well. You might resort to FX trading but could end up with another Refco, so FX is out also. As you can see, there are just too many risks with trading, so it is probably best to burry your money in several locations in fire, water and rust proof containers and avoid trading at all cost. For that matter, crossing a street too. You never know when some driver will ignore the stop sign. And don't even get me started on shark attacks...

 

PS: Aren't you the guy who offered to provide some free psychological advice a while back in another thread? Maybe time to take yourself up on the offer and figure out what the real issue is...

[AbeSmith 10]

In your first sentence you say:

" YOu seriously believe I expect to know exactly how much a stock can trade against me when halted?"

and then you proceed to ask (even bold it):

"How much CAN a halted stock reopen against me?"

 

You are answering your first question yourself in bold. This is exactly what you are asking.

 

How about taking a moment to reflect about what you really are asking. And I mean, really think. I know you are itching right now to just bang out another insult on your keyboard and start with the name calling again, but take a moment and think about it. Just because you don't like an answer in a reply, doesn't mean it is stupid. If you pay more attention to what people are telling you and less effort to insult people, you actually might learn something.

 

I think trading stocks is obviously too risky for you and best to be avoided. Coming to think of it, some maniacs might fly a plane into a building again, closing the exchanges for several days, so futures trading is probably too risky as well. You might resort to FX trading but could end up with another Refco, so FX is out also. As you can see, there are just too many risks with trading, so it is probably best to burry your money in several locations in fire, water and rust proof containers and avoid trading at all cost. For that matter, crossing a street too. You never know when some driver will ignore the stop sign. And don't even get me started on shark attacks...

 

PS: Aren't you the guy who offered to provide some free psychological advice a while back in another thread? Maybe time to take yourself up on the offer and figure out what the real issue is...

 

Please, spare me your jokes. I don't need a whole paragraph of jokes and criticizm. I told you already, I'm not asking EXACTLY how much a stock will move against me. I just want to get an idea of how much CAN a stock move against me. And what is the likelyhood of that? What possible scenarios are there? If you don't believe that then there is nothing more to discuss. But please, don't waste my time and other readers' time by responding with jokes. When you don't know the answer it is best to be quiet and wait for someone with knowledge to be kind enough to respond. Believe it or not some people actually are reading the threads for information and don't want their time wasted with nonsense.

[thalestrader 14]

You can't hedge a stock if the news that caused it to halt is stock specific. Then you are stuck with a day trading position on a halted stock, the stock reopens against your position, and you had no way to hedge against it. What if that stock reopens 5% against your day trading position that is designed to take less than 1% loss? Your stop loss will get filled at that 5% level because it gapped up against you, not at the .3% where you placed your stop loss. Could it reopen 10 or 20% or more against you?

 

That's why I asked thales if he knew how badly a halted stock can open against your position. Probably he doesn't know or is not saying for some reason.

 

Hi Abe,

 

I thought I had answered your question in the post I will quote here:

 

The scenario you suggest could indeed happen - you could be short a stock that is halted and re-opens higher, or you could be long a stock that is halted and re-opens lower ...

I have had two stocks halted on me over the years, and in each case I was on the right side of the market. In each case, the news pending that caused trading in these stocks to be temporarily suspended was likely already known by some of the larger institutions - hence these stocks were already being bought or sold heavily prior to being halted.

 

I thought your question was "Can a stock be halted and then re-open against your position?" I answered that affirmatively. This, of course, is the risk you take when you trade equities, which, as you smartly point out in your response concerning hedging, is company specific, and not a general market risk. And I agree with you that it is not possible truly to hedge an equity position through other stocks, etf's, futures, etc.

 

You can hedge through options. Of course, that hedging ability would not be available to you under the day trading scenario you described because if the stock is halted, so too will trading in the derivitives based upon the underlying. So, I agree with you concerning the ability to hedge a stock position. However, I thanked sevensa because I thought his statement concerning this risk was spot on.

 

Whether you are taking a long or short equity position as a day trade, a swing trade, or for a longer term pull, you are open to the risk of which you speak. No one can tell you how much a stock can gap against you. If you are long, your total risk is limited to your cost basis for the long stock position. If you are short, you risk is, theoretically, infinite. So, your real concern is:

 

Could it reopen 10 or 20% or more against you?

 

That's why I asked thales if he knew how badly a halted stock can open against your position. Probably he doesn't know or is not saying for some reason.

 

the answer is an absolute yes. In another post I stated that I have had two instances where I was in a day trade when a stock was halted and did not re-open until the next day. In both cases the stocks opened in my favor. In the first case, I was long a stock at $46 that was halted when trading at $48 and re-opened the next day at $58. In the other instance, I was short a stock at $118 that was halted at $115. It re-opened the next morning in the $40's! Again, when you are long a stock you risk is limited to your cost basis, regardless of whether the trade is a day trade, swing trade, or long term pull. If you are short, the stock can go against you a theoretically infinite amount. I didn't spell this out specifically because I didn't realize that this is what you were asking, not because I do not know the risk involved in trading stocks.

 

So yeah, ofcourse I'm not comfortable with trading stocks if I don't know this important information, which thales failed to answer, and you are not helping to answer, but instead giving me ultimatums that I should not trade stocks if I'm not comfortable with the risk. Well that's what I'm trying to find out. And I wonder why thales thanked your stupid ultimatum reply to me? Very fishy of thales.

 

Abe, I hope I have now answered to your satisfaction.

 

Again, to reiterate, I agree with sevensa in that if you are not comfortable with the risk, then do not trade stocks. That is not an ultimatum, it is simply a fact based upon a sentiment shared by traders throughout history including, but by no means limited to such legends as Livermore, Wyckoff, Neill, Rhea, Baruch, Darvas, and O'Neill. So, while I did not agree with sevensa's suggestions regarding the possibility of successfully hedging a stock position in a day trade situation, I do agree wholeheartedly with the accompanying statement concerning risk - and that, in my opinion was worth a thank you.

 

While I would like to keep this post positive, I would like to say that your finding my thanking of Sevensa's post fishy has everything to do with your lack of satisfaction with the responses to your concerns and nothing to do with my motives, as you seemingly imply. In other words, your statement was uncalled for and you were not right in making such a statement.

 

Again, I thought I had answered your questions adequately in my previous responses. If you still feel something is lacking, simply ask.

 

Best Wishes,

 

Thales

[thalestrader 14]

One reason people trade ETFs is to protect against company specific bad news. So they buy the whole sector incase the specific stock has some bad news. If youre trading that stock and it gets halted, the ETF will not be a good hedge.

 

I am in absolute agreement with this statement.

 

 

 

But with index futures they indexes follow eachother very closely. If one index is down you can either buy the etf, or a similar index. That's a much better hedge than buying the sector of a stock that got halted on stock specific news.

 

I would add here that you are really only guarded against a technological failure at an exchange. A year or two ago I had a trade on in the YM and the ecbot went down. I was short, and the market started to rally. I bout the ES and when the YM resumed trading I was closed at a loss substantially greater than my intial stop loss would have allowed. However, due to my ability to take an opposite position in the ES, my profits there off set most, though not all of my loss on the YM.

 

However, if, for example, the markets were to close due to some unforseen event, then your supposed safety is removed, as you will have no avenue open on which to hedge.

 

Also, you should be aware of liquidity risk. When the yankees pitcher flew his plane into a building in Manhattan a few years ago, the ES dropped a large number of points, visible only on a tick chart where there were large gaps between trades at prices. There was no liquidity on the way down. Again, you would not have been able to prevent a larger than planned for loss because all the futures had simlar sudden intrday gaps.

 

Risk is everywhere. You can accept it, guard against it, and manage it as best you can. But the only way to eliminate risk and insure yourself completly against a loss due to the outlier event is not to participate at all.

 

Best Wishes,

 

Thales

[thalestrader 14]

All I asked was CAN it reopen 5%, 10%, or 20% against me? That is what I, and anyone with common sense, which you obviusly lack, should know before they risk their money on day trading stocks ... I'm trying to figure out the risk. How much CAN a halted stock reopen against me?

 

The risk is the same whther you are day trading on taking a long term position:

 

Long Stock Positions: The risk is your entire cost basis. If you buy 100 shares of a $20 stock, you could lose the whole $2000 if the stock is halted, the company declares bankruptcy, and the level of insolvency is such as to wipe the shareholders out completely.

 

Short Stock Position: You risk is, at least theoretically, infinite. If you are short 100 shares of a $20 stock, and the stock is halted to announce that it has just been bought out for an all cash deal at $300/share, then you must cover your short position at $30000. If the company announces a cure for AIDS, and it opens at $2000/share, then the cost to cover your short is $200,000. There is no limit to how much higher a stock can re-open at other than what a willing an able buyer agrees t pay a willing seller.

 

Best Wishes,

 

Thales

Edited May 17, 2009 by thalestrader
spelling

[brownsfan019 17]

Nonsense. One reason people trade ETFs is to protect against company specific bad news. So they buy the whole sector incase the specific stock has some bad news. If youre trading that stock and it gets halted, the ETF will not be a good hedge.

 

But with index futures they indexes follow eachother very closely. If one index is down you can either buy the etf, or a similar index. That's a much better hedge than buying the sector of a stock that got halted on stock specific news.

 

Since you already have the answers Abe, don't bother coming here looking for advice.

 

You OBVIOUSLY know the answer YOU want, yet you want to continue the banter here.

 

Either trade stocks or don't. The choice is yours.

 

This thread turned into a trainwreck real quick. I wonder if a mod can take Abe's 'discussion' and turn into it's own thread b/c we had a nice thread going here.

[AbeSmith 10]

Thanks Thales for the very detailed response. My apologies if I offended you in any way, and sorry for making false conclusions about your intentions.

[AbeSmith 10]

Since you already have the answers Abe, don't bother coming here looking for advice.

 

You OBVIOUSLY know the answer YOU want, yet you want to continue the banter here.

 

Either trade stocks or don't. The choice is yours.

 

This thread turned into a trainwreck real quick. I wonder if a mod can take Abe's 'discussion' and turn into it's own thread b/c we had a nice thread going here.

 

I was just correcting you Brownsfan, that's all. You said buy/sell a sector to hedge a stock, which I dissagree with. The whole point is you can't hedge a halted stock by buying the sector when it is halted on stock specific news, especially if it is not a heavily weighted stock. I Don't mean any disrespect to stock traders, or you. Not saying stocks suck, or stock traders are suckers. So, please do not take offense. Just correcting you, that's all. I didn't think you would take it personally.

 

Didn't you used to trade stocks, and have been a trader for quite some time? Frankly I'm surprised you would lack such basic knowledge about the stock market.

[thalestrader 14]

Thanks Thales for the very detailed response. My apologies if I offended you in any way, and sorry for making false conclusions about your intentions.

 

 

No problem!

 

I wish you the best in your trading,

 

Thales

[brownsfan019 17]

I was just correcting you Brownsfan, that's all. You said buy/sell a sector to hedge a stock, which I dissagree with. The whole point is you can't hedge a halted stock by buying the sector when it is halted on stock specific news, especially if it is not a heavily weighted stock. I Don't mean any disrespect to stock traders, or you. Not saying stocks suck, or stock traders are suckers. So, please do not take offense. Just correcting you, that's all. I didn't think you would take it personally.

 

Didn't you used to trade stocks, and have been a trader for quite some time? Frankly I'm surprised you would lack such basic knowledge about the stock market.

 

:rofl:

 

That's good stuff Abe.

 

I don't need your 'corrections' which are actually just your OPINIONS. As you said - you disagree with my statement - but that does not make my statement wrong and yours right. Quite the opposite actually. You obviously don't know how this works or you wouldn't be asking such simple questions.

 

But your opinions make it clear that you really do think you know what you are talking about when myself and others attempted to share w/ you ways to hedge a position.

 

Your opinions come from a very inexperienced hobbyist point of view, but your inflated ego leads you to believe you have this figured out even though you are here asking a basic question. If you actually did have a grasp on this, you wouldn't be asking these questions.

 

So pick a spot and go with it - either you already know how this works (and no need to clutter such a good thread w/ your drivel) OR ask your questions and don't pretend you know what's going on. Can't be both when asking such a basic and simple question that any one that has actually traded knows the answer to.

[brownsfan019 17]

Getting the thread back on track, here's another great post from Thales:

 

Hi Chris,

 

Yes, that would certainly have caught my interest. It is always easier for me to identify opportunites on a chart after the fact, but I have gone ahead anyway and identified three places where I could have been induced to be a buyer. I have marked each of these with an ellipse and numbered them 1-3 respectively.

 

1) I often will buy a higher high than the high of the first five minutes, especially when the look like RHT's open on 5-15.

 

2) I will often buy after the first 5 minute swing high is formed and a higher high is made.

 

3) I will often buy when a pullback to a prior high holds as support (this is the bar where you identify what you annotated as a three bar reversal on your chart).

 

I'd like to think that had this stock been on my radar this past friday that I would have traded it as I outlined here. Of course, hindsight in trading is better than 20/20, and for every decent trade I make in real time I spot 10 after the fact when I go through my charts 600 or so charts at the end of the day.

 

At any rate, it was a good experience for me to take a look at this chart, Chris, and I thank you for sharing it with me.

 

Best Wishes,

 

Thales

 

[fishing 10]

hi Thales

 

i've been trading futures and so i'm familiar with those instruments and know roughly what their daily ranges are. hence i can estimate how far they can go to exit my positions.

 

but for stocks the daily ranges are kind of all over the place. so can you share how you would exit your trades?

 

thanks

[thalestrader 14]

hi Thales

 

i've been trading futures and so i'm familiar with those instruments and know roughly what their daily ranges are. hence i can estimate how far they can go to exit my positions.

 

but for stocks the daily ranges are kind of all over the place. so can you share how you would exit your trades?

 

thanks

 

I had a good morning, so I was going to answer your question, fishing. However, I just saw something I liked on the NDAQ chart and I took a leap. I can't post while in a trade, but I will answer you later.

 

I've attached the chart of the NDAQ - I'm long at 18.31, stop loss is 18.26, and I'm loking to get at least to 18.46, if not 18.58.

 

Best Wishes,

 

Thales

[thalestrader 14]

I just saw something I liked on the NDAQ chart and I took a leap ... I've attached the chart of the NDAQ - I'm long at 18.31, stop loss is 18.26, and I'm loking to get at least to 18.46, if not 18.58.

 

Best Wishes,

 

Thales

 

I'm out at 18.58, for +$0.27

 

NDAQ reached the 18.58 level, and I do not like to trade this close to noon, still less would I want to hold over lunch without a significantl greater profit cushion that 27 pennies.

 

Best Wishes,

 

Thales

[thalestrader 14]

Hi Folks,

 

This is my first day back since before Memorial Day.

 

Three trades so far:

 

Long FDO @ 32.20

Long LM @ 20.42

Long ISRG @ 158.60

 

And I just got long ISRG. I ISRG gave me a lot of time to wait for it, so I was took a snap of the chart to show what I was looking at, as well as an update. It is difficult for me to post while trading but I wanted to try to get some close to real time trades posted to show better what I am seeing when I place my bets.

 

Best Wishes,

 

Thales

Edited June 2, 2009 by thalestrader
ISRG entry price

[thalestrader 14]

Long FDO @ 32.20

Long LM @ 20.42

Long ISRG @ 158.60

 

 

FDO closed @ 32.63 +$0.43

ISRG closed @ 159.02 +$0.42

 

Still long LM from 20.42, current price 21.44, current stop loss 20.94, soon to be moved up to 21.17

[thalestrader 14]

Still long LM from 20.42, current price 21.44, current stop loss 20.94, soon to be moved up to 21.17

 

 

LM is a runner - I can never tell which will run and which will flame out and fizzle.

[brownsfan019 17]

LM is a runner - I can never tell which will run and which will flame out and fizzle.

 

You & me both thales. There are trades where having a fixed profit target is ideal and other times where it's like - shoulda held on for a long time (sometimes all day)...

 

That's my holy grail - if I could figure out when to hold vs. getting out. Which basically comes down to defining when it will be a huge trending move vs. a range-bound market.

[thalestrader 14]

You & me both thales. There are trades where having a fixed profit target is ideal and other times where it's like - shoulda held on for a long time (sometimes all day)...

 

That's my holy grail - if I could figure out when to hold vs. getting out. Which basically comes down to defining when it will be a huge trending move vs. a range-bound market.

 

I do not use fixed targets unless there is a time issue, e.g. I will use a prior high/low as a target for a trade entered late morning where I will not have a significant profit cushion to get the trade through the lunch hours, or an afternoon trade and we are nearing the close.

 

For me, every trade starts out as a scalp. I presume I may be wrong, and if price does not soon confirm that I have decent odds of having bet right, I will take a small loss or small profit to close the trade and then I can re-think it, and either re-enter or move on.

 

If price does confirm that I am probably on the right side of the bet (as it did in each of the three trades I made thus far today), then I assume each trade is a runner, and I will trail my stops as the market develops them naturally. FDO was stopped for a nice profit, and ISRG for a small gain.

 

Right now, the natural stop on LM would be below 21.36. Unitl another natural stop develops above the 20 ema on the 5 minute chart, I am trailing 25 pennies below the 5 minute 20 ema. It is more mechanical than I'd like to be, but it has worked for me in these cases where a stock moves an additional 3% or more following a pullback without a subsequent pullback.

 

Best Wishes,

 

Thales

[thalestrader 14]

Right now, the natural stop on LM would be below 21.36. Until another natural stop develops above the 20 ema on the 5 minute chart, I am trailing 25 pennies below the 5 minute 20 ema.

 

Natural Stop is now 21.98

[thalestrader 14]

Natural Stop is now 21.98

 

 

Limited out at 22.40

[brownsfan019 17]

I think what you've illustrated here and what works on momentum type stock plays is a great way to trade them. And you've proven it works for you.

 

IMO it's not quite as clean in the futures markets. Part of the reason is that I am not entering always at new HOD/LOD or playing markets with huge % gains/losses on the day. I think that's a massive advantage to trading stocks over futures. In futures, I am in the thick of it sometimes (what you might easily see as chop) and getting in and out is advantageous many times.

 

If one were to only enter on new HOD/LOD or momentum type plays on the futures, I think the same idea can hold but the problem there is that the trader might be waiting for days to get a signal like you do daily on stocks.

 

I have to admit - after you've started posting here, I've been watching stocks closer via freestockcharts and there's days where I sit there & think - this is so much easier than trading futures. I've just seen quite a few days where doing what I do now on the big % gainers/losers works like a charm (and what appears to be easier).

 

 

Separate question - do you ever use options on your plays? Just curious what your thoughts are in regards to using options to daytrade.

[thalestrader 14]

I have to admit - after you've started posting here, I've been watching stocks closer via freestockcharts and there's days where I sit there & think - this is so much easier than trading futures. I've just seen quite a few days where doing what I do now on the big % gainers/losers works like a charm (and what appears to be easier).

 

 

Separate question - do you ever use options on your plays? Just curious what your thoughts are in regards to using options to daytrade.

 

I agree that trading a limited number of futures intruments compared to a universe of 500 stocks will present fewer opportunities to trade in the manner that I prefer to trade. But you can trade futures the same way, but as you suggest, patience would be required to wait for these moves to present themselves.

 

I also think day trading stocks is easier than futures. Additionally, day trading stocks is less risky and easier to control one's risk. This is why it baffles me that the feds let folks swing a 40k, 60k, even 80k notional value futures contract with a $500 margin, but then the feds insist that it is too dangerous to let someone buy and sell 100 shares of a 20 dollar stock using even 100% cash unless they put up 25k!

 

I do trade options, but not for daytrading. I trade IBD 100 stocks, and will use options to take positions if a particular stock is optionable. These trades last days, weeks or months. I am usually buying a call option with 3 months.

 

Best Wishes,

 

Thales

[brownsfan019 17]

Yeah, how someone can open an account for $5000 (or lower) and trade futures contractS is beyond me. Yes, plural - multiple contracts. You can get $500 margins and trade TEN ES contracts with 5 grand...

 

 

No clue how that is able to happen yet you need $25k to trade stocks.