At 10 o’clock today I started scanning the SMB Radar for stocks with promising setups from the Open. WCRX immediately caught my attention. It had had a strong opening drive to the downside and had retraced about 20% from its low. This was a good short candidate. But then I noticed on the tape that buyers had started to support the 21 bid. I called it out to a few traders who sit in my area and we each got long and made a quick 25 cents. I regret the trade and I regret having opened my mouth! 
Here is why. For about a year now I have been spending most of my energy focused on sharing setups with the desk that deal with “big picture” intraday setups. This has been where the easy money has been in the market intraday. We want our traders to be long stocks that bigger picture are set to trend higher intraday and short stocks that bigger picture are set to trend lower intraday. By making this “scalp” trade long I was potentially causing damage to an important trading philosophy that we have spent a great deal of time hammering home.
It doesn’t matter that I explained to the trader next to me that the long was only for a quick scalp. He actually seemed to understand that was the trade I was making and asked me for confirmation. It doesn’t matter that I spent the next ten minutes calling out information about WCRX that supported my belief it was about to start another significant down move. And it doesn’t matter that I sold out of my long and got short in preparation for the move I was expecting through the low of the day (which incidentally I got stopped out of).
I don’t want to give new to intermediate traders an excuse to make stupid trades. By spending one second long a stock that has shown great weakness on the open that is exactly what I did. And when I checked the risk monitor right as I was set to leave the desk this morning 9/10 ten traders had long positions in the stock. I was pretty sure that wouldn’t end well. As I type this blog WCRX is trading at the LOD and multi-year lows. What was I thinking!
12 Comments on “More Harm Than Good”
Ive noticed
Ive noticed I wish I had just taken the day, or even week off instead of trading when I am over tired… It would have been a much more profitable decision.
I don’t know what stock you talking about but WCRX is in uptrend, at multiyear high.
Thanks for this post. I have made a few mistakes down the line after making profitable trades such as the scalp you brought up. I believe it is because I convince myself that the probability is the same the next time I see a similar set up, when I actually shouldnt even be looking for that type of set up to begin with!
I believe this years low is around 15.20 for WCRX, correct me if Im wrong!
Good Trading
I don´t know if its hopefull or despairing that someone with your background and experience still makes mistake; though as I understand it you did not actually lose money on the stock.
But I find it extremely helpfull that you share the good ..and the less good…so thkxs.
i think they paid a special dividend on september 8th which caused a large gap down in the stock price. our charting software didn’t make the adjustment in price going back in time so it appears to be at a yearly low. but when adjusting for the dividend it is not.
but the principle is still the same which is a stock that has an opening drive to the downside and consolidates at the low is set up for a second leg lower.
thx for the comment
see comment above
urtigao,
i don’t think it should be either. the success u will achieve as a trader is solely within your power. whether i make or lose money should have no impact on u.
good luck
‘9/10 ten traders had long positions in the stock’ so, do you have traders on the floor armed with a strong technical tool, such as ‘steve said/made that’? 🙂
thanks steve!
I do not see the problem in teaching your traders how to made a quick contra-trend scalp as long as you explain exactly what the trade is, and make sure they know it is different from one of your trades2hold trades. This scalp is an expansion to their trading playbooks no?
DST,
I think it is incredibly difficult for a novice trader to compartmentalize to the degree necessary to blend scalping with intraday swing positions. This combined with HFTs making scalps more difficult tells me we are correct to not encourage those trades for first year traders.
Steve