For Monday, November 10th, I didn’t really have any watch list prepared. Market was heading high on China stimulus news. Just like the jobs report news convinced me that market should crack, China news convinced me that market will run today and my mind was convinced not to enter any short position.
In the chatroom, folks were talking about AIG. AIG got another bailout by Government on Sunday and it was moving up on huge volume in pre market. I was convinced that AIG will give away these gains once market opens. Well, I was right and AIG got crushed once market opened. And I don’t know what I was thinking but I decided to quick scalp with AIG. Here’s how I did it.
AIG Trade 10th Nov
I should consider myself lucky because AIG kept going down eventually closing at 2.31.
What’s the lesson?
1. I am not going to trade high profile stocks, period. Stocks like AIG, ABK, GM and others are traded by thousands of traders and traders who are much smarter than me and who have deep pockets. For my small account, I am better off shorting small companies. These stocks are very sexy (as in they show lot of movement) and they lure you. Torello has shared these thoughts before and I did not take it seriously.
2. Preparation & Discipline. I need to prepare my watch list the day before, along with my expected entry price, exit price and stop price. I can not be making these decisions once the market is open and alerts are firing off in the chatroom. I really admire Adam who religiously posts his watch list every evening for the next day. [Along these lines, I have thought about doing some more tools which can help ease the process. I will blog about these new tools soon.]
I also need to have a lot of discipline. I have a lot of respect for Steve who has been documenting his journey in the gutter and makes a post after market about his trading day. There are no exceptions. I think I have been making excuses about my day job way too much. I am sure Steve also has a day job and hundreds of other things to take care but he never misses updating his trading journal. Here are my two rules for enforcing discipline.
1. If I don’t have a watch list before market open (8AM) along with my expected entry price, exit price and stop price, I won’t trade that day. No exceptions.
2. If I make a trade on a given day and don’t update my journal the same day, I won’t trade the next day.
Steve, JV, Torello and others, if you see me breaking these rules, please leave a comment and remind me!
Happy Trading,
RJ.
Status as of end of Nov 10th:
Positions traded for Loss: AIG (118$)
4 responses so far ↓
1 YngvaiMalmsteve // Nov 11, 2008 at 7:17 pm
RJ,
One potential issue is that, except for breakout plays, it may be hard to have a pre-set entry price for a stock, as this may be partly dependent on the price action.
Other than breakouts, I usually don’t have pre-planned entry points. However, once I’ve entered, I always have a planned exit and stop point. As soon as I’ve entered, I quickly calculate the stop point based on either a 4% stop loss, or a support level.
I have different watch lists for different types of plays, and I always set them up the night before. I have a “breakout” watch list, a ‘bottom reversal” watch list, and a “short” watch list.
Also, when Laura or Muddy announce the prehits in the morning, I put all of those into my “prehit” watch list. I then quickly go through each one, looking at the “Live News” in TOS to see if it fits my news rules for those plays. If it doesn’t, I take it off the list. If it does fit the rules, I open a chart for this stock, separate it from TOS so it’s in its own window, and then minimize it. I’ll typically have 6-9 of these windows ready to go by the time the market opens. That’s how I’ve gotten good at spotting these prehit buy plays lately…but I just need to execute a bit better on them.
2 RJ // Nov 11, 2008 at 8:19 pm
Steve,
May be I wasn’t clear but when I mentioned those prices, I meant expected prices. Let’s say my expected entry price for ABK is 1.40 for tomorrow, I wouldn’t want to enter at 1.50 because that would be way too off from my entry price. I have few other thoughts about being ready with prices for a particular stock, I will create another blog post about it.
RJ
3 matty84 // Nov 11, 2008 at 10:57 pm
I will hold you to your rules…do the same to me! (well my rules, not yours haha)
I agree with Yngvai, I couldn’t possibly predict entry prices for the next day. The exception might just be a day ranger or stock that moved exceptionally the prior day on a drop and then red to green, in which case the entry would be the previous day’s close. But that’s no guarantee either, just one of innumerable possibilities, so I don’t see the point of planning it.
4 RJ // Nov 12, 2008 at 12:05 am
Thanks Matty. Publish your rules so that I can alert you when you break them!
I think I will have to clarify what I meant by deciding prices by making a post. Anyway, I will have to prepare my watch list for tomorrow if I want to trade.
RJ.
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