Monday, September 29, 2008

Monday Notes - Market Crash

4:31pm I'll keep today's entry short and sweet. First, I'm fine ... although I'm sure many traders got hammered and obviously millions of investors are hurting bad. I just spoke with my broker who indicated many position traders and newbie daytraders got washed out -- both for obvious reasons.

Here's the quick and dirty recap at this end.

The day started off poorly with Tradestation again freezing at the open (might have something to do with the new version I loaded recently ... that's two days in a row), so I had to switch to ESignal as a backup while at the same time manage a stop when I bought the early excessive TICK reading.

Fortunately, I'd been watching the market since it opened last night and was cautious on the long side in terms of sizing today since ES couldn't pop last night even with news that the bailout deal was imminent. I know ... I traded minimally from the long side and stopped out on buying the last Sunday PM dip toward Friday's support.

As a result, I spent most of the morning nursing a very modest draw as the result of the early stop until all hell broke loose when the Nay vote came in at which point I bought the first spike down (scaling in small beginning in the 1130s ... best price 1117.25!) and then sold on the reflex spike toward 1150 (first sale after the final 1117.25 buy was 1134). I only wish I had greater size on it ... but the market was absolutely frantic and it was all I could do to make sure I was managing risk with size.

Important note: This was NOT averaging down ... rather it was scaling into a partial position and I was managing risk with size and was never fully committed ... heck I wasn't even 33% committed. This is a very important point as traders "averaging down" would have gotten wiped out today. See some of the early September responses to comments. I truly believe years of experience and getting hammered myself led to decent trade management and discipline today.

That sequence brought me back to positive and I simply traded very lightly for the rest of the day with many probing small long positions each time the market fell in case the market decided not to close on its lows ... which obviously it did. The net result was a modest $9K chip gain at this end with one day left before formally closing the quarter.

More importantly, all September's gains remain in tact and available for trading tomorrow and beyond.

I imagine many aren't quite as fortunate and I feel for them.

I may post a follow up to this later tonight -- perhaps in a video.


Anonymous said...

Hi Don:

In an environment like this, your performance today was superb in my opinion. I ended down about $1500 after being up and down all day. I am in for the Pal Talk by the way.


Anonymous said...

Don - Good post & results on a crazy day. You definitely have a lot more control & focus than the majority of people in the business.

I think that on some level, a trader needs to know when market conditions exist which they do NOT understand at all. For me, the past couple weeks have been in that category. Because of this, I have been watching the action very closely, but not trading anything equity related. It's sort of like playing defense for the less experienced trader. I figure its better to wait until I know I have an edge, than to try & chance it to make some money.

Also, the ability to trade at a reduced position size requires adequate capital & someone with a $20k account can't really use size to test out the waters in the e-minis and put on a position based on the results.


Anonymous said...

Looking forward to a video tonight :) And also in for Pal Talk.

Anonymous said...

Don - I'm in for PalTalk too.....Sunday nights or a week nights?

I think good market lounge discussion is preferable to some reality dancing/singing show on the TV with the woman. Although I will say that the one polish woman Edyta's outfit on the dancing show cannot be beat by anything we can possibly chat about. haha


Anonymous said...

Hi, Don:

I've really enjoyed the blog over the last couple of months.

First, well done today in a very rough market. I had a couple of questions, if you have time: do you have a set scale you generally use in fast markets? Is it based on volatility, gut feel, or something else?

Like you, I came into the afternoon with a small draw (mainly trying to play long). Once the news hit though, I completely stepped away, as I get a bit queasy when the bid/offer is gapping around like that.

Congrats on the good day/month/year and keep grinding!

Don Miller said...

Ronin - Not bad at all in my view.

Eric - I was definitely playing defense most of the day. Nothing wrong with sitting out hands you can't read. The trick -- something that I have to work on -- is to be able to flip the switch from defense to offense in a heartbeat, and I could have done better on that yesterday.

Sean - It's probably more "developed instinct" which I realize is an oxymoron. In general, the more unrealistically stretched something becomes -- especially when the market is running on pure emotion, the more I'm interested I am in putting some capital at risk.