First Official Profit

I made my first official profit on a day-trade today. (I’ve been doing longer-term stuff till now.) RIMM opened on a gap with no significant news. The gap was about .70ATR – not a huge gap, but big enough to be interesting. There was no obvious resistance level above the open, so I was hesitant to jump in right at the open. Instead, I chose to “pay for confirmation” and shorted it at 99.70 about 10 minutes after open. I set my stop at .25ATR, or about 100.50. The trade basically went my way the whole time. My target was to close the gap, about 2.70, but once I had hit a 1R profit, I trailed a stop and got stopped at 98.70 for a 1.4R profit in about an hour.

I didn’t do this trade perfectly. For example, I just now realized that I had not checked the direction of the general market before I placed the trade. I should have checked to see if the S&P futures were against me. It would have been more risky to short into a rising market, but I got lucky. I won’t depend on luck next time.

I also realized this morning that I won’t be day-trading $100 stocks with such a small risk per share. Once I get kicked into gear, I expect to risk between $500-$1500 a trade., but to have done that on this trade this morning would have required purchasing something north of $60,000 worth of shares. That’ll chew up the trading power in a hurry. I guess I am going to have to add some parameters for myself, something like:

  • If the risk-per-share is less than $1.00, then the cost-per-share should be less than [some number I haven’t determined yet].
  • If the cost-per-share is more than [another number I haven’t determined] , then the expected profit-per-share must be greater than [yet another number I haven’t determined].

I don’t anticipate tacking positions greater than $10k at a time, so that all by itself should help me with my selection process.

PTR surprised me. It had gapped up two days in a row, and still did not close the gap. I got stopped out and learned a valuable (and fortunately not too expensive) lesson. Here’s the setup:

I shorted PTR and set my stop-loss at about 1/4 of an ATR above my entry, (about 25 cents). The trade went a little ways in my favor, then turned around and went against me. I watched it HIT my stop-loss point, but no trade was triggered. “WTF?”, I think. Then I check my stop-loss. It was a DOLLAR higher than I had intended. The market was moving fast, and I was doing my best deer-in-the-headlights imitation. The end of the story is that I got stopped at the higher point and had a 5R loss rather than my planned 1R. That’s the bad news. The good news is that I took DR Barton’s suggestion and have been playing very small positions till I get the hang of it, so I only lost about $70, but…

…if I had been position sizing as I intended to, that would have been a $5000 loss. Yikes!

Moral of the story is to make sure I understand my platform defaults. Traders Workspace, which I use, defaults an offsetting trade to a dollar difference. I simply failed to check the actual price I entered. Hopefully I won’t make that mistake again.

I had hoped to trade CROX this morning as it had gapped overnight. I was planning to short it at the open, but it took off in the opposite direction. In fact, it was so fast it awed me. I know I’m new to this game, and perhaps what I saw this morning was just SOP, but I could not believe how fast this price swung. It opened on a gap of about a dollar, immediately rocketed up another buck, came back down about a buck and a half, and went back up above the open, all in the first five minutes. I assume some day I will be confident enough in my decision making and execution skills that I can make money on something like that, but this morning it looked like a rampaging flood that I was not interested in trying to wade through.

Shorted ACH on a gap this morning and got stopped out at 1R. It wasn’t a great trade, but it was the best I saw this morning.

Question: Did any of you guys ever get DR’s “basket of stocks” he promised us?

How did the PTR trade go? I didn’t look like an easy trade, but hope you made money.

As for charting I am still using QuoteTracker. It is free with some ads and a limitation or two, but you can give it a try. It’s like 40/year, so it is a low price while you are starting. I don’t think its the greatest thing ever, but it had a good chunk of features. It will work with IB data (which I think stinks).

Here is a shot showing some of its features on a gap and trap I saw today. I did not trade this stock. I am really trying to look for them, but it is not like shooting fish in barrel like I hoped it would be.

As for scanning, I think might work for what you want, but I am not sure as I haven’t used it. IB has a build in scanner, but it does not allow custom scans as far as I know. Some of the heavy weight platforms (eSignal, Tradestation, RealTick) may have quality charting and scanning combined, but I am not too familiar with them. Let me know if you program some of the scans from class. I will probably get to that at some point, but I am still just trying to get gap and trap/gap and go’s down.

-frank m

Trades Report

I’m shorting PTR this morning. It gapped up Friday and then gapped up again today. It didn’t close Friday’s gap, but by my calculation, it is overextended. I got in at 182.30 and – so far – have watched the price action pivot around that point. I may have been a little too patient getting in, but I’m still learning how to do this.

ATR is $4.00, which is nice. I should be able to pick up a couple of bucks on this one today.

Oh yeah… one more thing before I go

I have been blogging for the last 3 years since I’ve been trying this thing called daytrading. If you want to share my pain you may read all you want. You may find some things you can learn from. My sign-off is Trader X but I’m not the Trader X blog. He is much better than me. Blogspot name is Optionpro67. The link is below if you want to learn from me.

Thomas Quick
Trader X!