Schaeffer's Trading Floor Blog

Worth a Read

by 6/20/2005 10:16 AM
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Early I made reference to post-expiration related noise...If that comment piqued your interest, make sure you check out what Chris Johnson had to say about historical volatility around expiration in his Investor's Edge report ...

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At the Open

by 6/20/2005 10:00 AM
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Equities have had a chance to settle and here is what I see...

As indicated by pre-open futures, there was a downward bias at the open but so far those losses on the broad market indices are minor...Internet, semis and brokers, however, are showing moderate weakness...oil and gold related groups (along with biotech) are continuing the recent strength...

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EBAY Chatter

by 6/20/2005 9:22 AM
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I have been scanning through the headlines and it appears that eBay (EBAY) is getting some attention...though not the kind it is used to. Today's focus is on eBay's PayPal service, which may be getting some competition from Google (GOOG). Shares of EBAY are indicated down a point (two percent) in pre-open action.

I wanted to note this because EBAY has been popular in the press recently with a couple of cover stories and this article which I discussed last week...

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I wanted to quickly touch on the pre-open action of the S&P futures...


Chart Courtesy of Thomson/ILX

As you can see, action appears rather light and very choppy. The S&Ps currently sit nearly five and a half points below fair value. While this does point to a lower open, it will be interesting to watch the first half hour to see if this just post-expiration related noise...


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In response to my post last week, Gary says - "Nick, I just wanted to thank you again for your reply last Wednesday (15th). I was truly frustrated because all of my trades except one stopped out even though every indicator I looked at seemed to say it was going to be a bullish day. As a result of this bullishness, I was somewhat aggressive and took a larger than usual number of longs that morning. Well, thank God for stops. The next day (June 16) the market and I went at it again, only this time things went my way. Not only did I recoup my losses from Wednesday, I had a nice net gain. This illustrates how quickly the market can turn on you, one way or another, and how you MUST have a system and stick to it (stops are an absolute requirement!).

As an ex-engineer, I don't like accepting ideas like "sometimes things happen and you will never no why." Hence, I really wanted to understand why the market rolled over like it did on Wednesday after such a bullish start. Understanding always leads to better trading, so I spent all night looking at economic numbers for the day and studying the charts for early signs of the rollover. I have to say that spending time like this dissecting my trades after the fact has been the single best way that I have learned. I still have a lot to learn, but my trading is getting better and better all the time and as soon as I reach a certain critical stage in my capital, I should be able to make a very nice living just trading. Thanks again for your help and for assisting me in my continuing education. You and Schaeffer's are great resources for traders like me."

My response - I truly appreciate the kind words and I wanted to share this with everyone to illustrate an important point I have learned over the years. When I posted my reply to Gary's original question I knew I wasn't answering the direct question he asked - the "why". However, over the years I have learned that many times the way to solve frustration is merely working through it and talking it out.

During the pullback after the tech bubble, I can't even begin to count the numbers of weeknights and weekends that a fellow trader and I spent talking about losing trades. It got so bad that his wife had a standing rule that we weren't allowed to discuss trading at social gatherings because it was never a short discussion. After the initial venting we would turn our attention to "post-morteming" the losers and then to strategy about what to do next. Inevitably, the end result was that I was re-energized and excited to once again face the challenges of trading. In addition to these talks, I always had the support of my colleagues on the trading floor and the guidance from Bernie himself.

I want to re-visit this discussion later today but for now I want to go check in on the pre-open action...

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