As a desk we have transitioned into focusing on Trades2Hold due to different market conditions. Scalping has diminished. C trades deemphasized. We wait for our best set ups and execute. But then Obama entered the arena looking for a fight with the Banks. Things got ugly. And as traders we need to adjust again.
Back in the Fall of 08 we banged in and out of the Banks whenever there was the slightest hint to do so. Perhaps SPY got weaker. Boom we hit the bids on a few bank stocks. A three point downmove then followed often in a GS for example. Perhaps IYF got weaker. Bamm we hit the bids on a few bank stocks. Stocks touched new intraday lows and whop we smacked a few bank stocks. It was sloppy, trade as much as you could, hit the bids for any reason trading. And that is how it should have been during these unique market conditions.
The last two days, and the day after the Dubai mess, were similar days. Out the window went our new sophisticated approach of more research, important levels, and Trades2Hold. And back came hit the bids when the market showed any sort of weakness in the Bank stocks. Whack JPM, oops it didn’t go down so cover. It didn’t go up so now reshort and hold, with a stop much higher. Whack that GS. Now that is what I am talking about as GS crumbles to new lows. Let me try some of that MS.
This type of trading can be tiring. It is often frustrating as your win rate will be low. It can seem as if you are trading like a bunch of monkeys. There is very little intellectual stimulation to it. There will be tons of tickets. Many losing trades. But guess what? There will also be the opportunity for outsized gains.
For days like yesterday and today it is double the volume and triple the P&L. Because you never know when the banks or other market leaders like AAPL and AMZN will just drop like a falling knife. That is why you keep getting short, when the market shows newfound tremendous weakness. You may catch that next precipitous drop. And the risk of missing one of those moves is greater than a little extra in transaction costs.
Let me be clear, banging in and out of stocks is not the system to be used on 98 percent of all trading days. As intraday traders we make trading decisions based upon intraday fundamentals, technical analysis, and reading the tape. But there are those days when the intraday fundamentals call for all day trading, never leave your desk, no lunch, leave it all on the trading desk trading. When the government announces it wants to regulate the banks this is one of those days.
Best of luck with your trading!
16 Comments on “Banging In and Out of Stocks”
whats your stop on jpm (1 cent?/5 cents?) if you’re short and it doesnt go down if you are banging in and out?
whats your stop on jpm (1 cent?/5 cents?) if you’re short and it doesnt go down if you are banging in and out?
Eric,
You have two options: a) short and cover if the stock does not go down quickly- momentum trade or b) get short and hold until the downtrend is broken or something substantially different manifests in your stock.
Thxs for following us.
Mike
Eric,
You have two options: a) short and cover if the stock does not go down quickly- momentum trade or b) get short and hold until the downtrend is broken or something substantially different manifests in your stock.
Thxs for following us.
Mike
your blog has helped me shorten the prop trading learning curve. thanks mike.
your blog has helped me shorten the prop trading learning curve. thanks mike.
your blog has helped me shorten the prop trading learning curve. thanks mike.
mike,
are there cues that give you confidence to whack bids on a day like this?
i picked up on some things–strong volume, broad-based mkt weakness, continuation of the breakdown from the 113-115 SPY trading range the day before–but i tend to hesitate b/c we’re in a sustained 9-10 month up move where for the most part, dips have been buying opportunities.
i made decent money shorting today, but feel like i left a fair amount on the table b/c of this hesitation/lack of confidence/disbelief in potential follow through.
probably thinking too much…
mike,
are there cues that give you confidence to whack bids on a day like this?
i picked up on some things–strong volume, broad-based mkt weakness, continuation of the breakdown from the 113-115 SPY trading range the day before–but i tend to hesitate b/c we’re in a sustained 9-10 month up move where for the most part, dips have been buying opportunities.
i made decent money shorting today, but feel like i left a fair amount on the table b/c of this hesitation/lack of confidence/disbelief in potential follow through.
probably thinking too much…
mike,
are there cues that give you confidence to whack bids on a day like this?
i picked up on some things–strong volume, broad-based mkt weakness, continuation of the breakdown from the 113-115 SPY trading range the day before–but i tend to hesitate b/c we’re in a sustained 9-10 month up move where for the most part, dips have been buying opportunities.
i made decent money shorting today, but feel like i left a fair amount on the table b/c of this hesitation/lack of confidence/disbelief in potential follow through.
probably thinking too much…
I dont think I agree with the idea of “banging in and out of stocks.” as traders, should you have signals that clue you in on when to be in a trade? doesnt it make more sense to stick to the system but recognize that perhaps what used to be a .50 cent move could now be a 1.50 move?
banging in and out of stocks and writing a lot of tickets is expensive. done at the wrong times, a trader could find himself down net $ very quickly or give away net p&l from the open just as fast.
question – on days like friday when there is the opportunity for triple the p&l, are you increasing the risk you allow your traders to take on by 3x? perhaps its not in buying power or tier size, but are their stop outs increased 3x to give them the opportunity to make 3x the money?
I dont think I agree with the idea of “banging in and out of stocks.” as traders, should you have signals that clue you in on when to be in a trade? doesnt it make more sense to stick to the system but recognize that perhaps what used to be a .50 cent move could now be a 1.50 move?
banging in and out of stocks and writing a lot of tickets is expensive. done at the wrong times, a trader could find himself down net $ very quickly or give away net p&l from the open just as fast.
question – on days like friday when there is the opportunity for triple the p&l, are you increasing the risk you allow your traders to take on by 3x? perhaps its not in buying power or tier size, but are their stop outs increased 3x to give them the opportunity to make 3x the money?
I dont think I agree with the idea of “banging in and out of stocks.” as traders, should you have signals that clue you in on when to be in a trade? doesnt it make more sense to stick to the system but recognize that perhaps what used to be a .50 cent move could now be a 1.50 move?
banging in and out of stocks and writing a lot of tickets is expensive. done at the wrong times, a trader could find himself down net $ very quickly or give away net p&l from the open just as fast.
question – on days like friday when there is the opportunity for triple the p&l, are you increasing the risk you allow your traders to take on by 3x? perhaps its not in buying power or tier size, but are their stop outs increased 3x to give them the opportunity to make 3x the money?
Matt D,
We make trading decisions intraday based upon intraday funamentals, technical analysis and reading the tape. When there is such a bold announcement by the government our intraday fundamentals gain in importance. When the government decides to pick a fight with the Banks the market generally shoots first and asks questions later. In this case they would sell off the banks and wait for clarity before building new positions in the Banks. Also we can use our indicators to confirm our bias. SPY below a previous day low on high volume is a tell. Finally we can watch the tape in bank leaders. GS dropping out early on the open is a tell that the market may sell off the banks.
Mike
Matt D,
We make trading decisions intraday based upon intraday funamentals, technical analysis and reading the tape. When there is such a bold announcement by the government our intraday fundamentals gain in importance. When the government decides to pick a fight with the Banks the market generally shoots first and asks questions later. In this case they would sell off the banks and wait for clarity before building new positions in the Banks. Also we can use our indicators to confirm our bias. SPY below a previous day low on high volume is a tell. Finally we can watch the tape in bank leaders. GS dropping out early on the open is a tell that the market may sell off the banks.
Mike
Matt D,
We make trading decisions intraday based upon intraday funamentals, technical analysis and reading the tape. When there is such a bold announcement by the government our intraday fundamentals gain in importance. When the government decides to pick a fight with the Banks the market generally shoots first and asks questions later. In this case they would sell off the banks and wait for clarity before building new positions in the Banks. Also we can use our indicators to confirm our bias. SPY below a previous day low on high volume is a tell. Finally we can watch the tape in bank leaders. GS dropping out early on the open is a tell that the market may sell off the banks.
Mike