I traded VMW on the Open. Home of the impossible 5 million shares and no liquidity. If anyone is into the whole HFT conspiracy/they are evil dogma replay this tape. Let’s see if we can learn from this rip.
83 was a level from the open. It was a level from the premarket and afterhours trading. There was resistance on the tape here. Consumer confidence hit.
10:00 ECONX January Consumer Confidence 60.6 vs 53.5 Briefing.com consensus
83 held some more. I got shorter. And then 83 was no more. In my head I had stops immediately above. I was thinking 83.03 at worst 83.07 as my outs. I got 83.66. Rip. Frustrated.
But I saw the illiquidity. I chirped about it to the desk. Add the number hitting and that ramps up potential volitility. Add 82.50 is a level onto this VMW short fire and we smell danger.
The crime was not in how illiquid VMW traded but rather the choice to trade it. I couldn’t control my risk. While catching the right side offered some tempting upside we must always first control our risk. I am frustrated at myself for failing to do this.
Mike Bellafiore
Author, One Good Trade
7 Comments on “Frustrated Trader (VMW)”
I had four trades in VMW, all were on the long side trying to get the bounces off support. All red. I never took the profit when I was in the green and the previous support levels never held. I have trouble with tape the moves/jumps around that quickly. I’ll review the tape later and until then VMW is on my no trade list.
no volume at all today even commodities seem to be illiquid…what a frustrating day. caught a quick 20 cents on the shortside in VMW…strange day…
ThanX for sharing Bella. Every trader knows your pain. Just curious but do you guys set hard stops on ur positions? Or do you usually just hit out? Out of habit I manually place max 20c stops on all positions. I’ve been meaning to email Lightspeed and see if there’s a way for them to automatically place a 20c stop. Once set I can adjust if if I need to tighten up.
This is one of them if-then-else posts.
If a winner, post on how amazing the trade was and how come we all didn’t get well.
If a loser, post on how you should have known there was a boogy man in the shadows (in this case some supposed liquidity issue)
Funny, I was going to email about this trade this morning but decided against it figure I would get a “Namby Pamby” like response 😉 I was watching VMW at the open since it was your morning idea. when the spread was jumping around from a penny to 20 cents and not a whole lot going on and it was jumping levels with not chance to enter/exit at levels I would want I decided to pass on it…I was watching it but didnt trade it…I can see how this one would cause the frustration levels to spike
I did not trade VMW, but I want to analyze how I could of traded it differently in a perfect scenario.
I see that 83 was a strong support level after hrs and pre-market, after it was broken at 9:43 this morning, it retested 83, now acting as resistance, which held. This in turn gave VMW an opportunity to re-test 82.25 and make lower lows, however VMW did not make new lows, instead a double bottom at 82.25. (which now would have concerned me a lot, also given the diminished volume). Therefore, I would of put a stop at 83.07 above resistance. Given it’s illiquidity and HFT trolling, IDK how fast 83 – 83.50 was bid up, but I’m sure it couldn’t moved 40c all at once…maybe it did as i’m looking at the tick chart. This would have been a losing trade for me as well if i traded it, however I would set market stop at 07, and prob… with just 1 lot. I believe if VMW broke below 82, i would of added my 2nd lot.
Mr. Bellafiore, could you please go over more of this trade in detail? I believe you have mentioned SMB trains it’s traders not to put in stops, but rather reading the tape and know the levels and use mental hard stops, not to use round levels etc… But I guess like you said before, controlling risk is #1.
VMW was really strange stock yesterday. I was watching its tape at the Open because of SMB’s morning post and did see some seller at 84. I shorted and took fast 1.5 points of profit near 82.50; moreover it seemed to me that some buyer came to the stock so i reversed and took a nice ride to 83.50. Great open.
But the most strange trading was at the 85 level – i reversed few times and the stock took half of my profits from the Open. I haven’t ever seen such order flow. I couldn’t understand it any more, so I stopped trading it.
By the way, thanks for the great book! I even regret, that i read so fast)