Stock Traders Blog

From the past few weeks of trading I had concluded in a previous post that live was much better on the long side. So I reminded myself from time to time to avoid taking the short side. I thought about taking the short side in pre-market this morning when I noticed future was down so much but I was hold back because of past experience. In retrospect if I went short at pre-market and went long in after-market then what a great day it was going to be.

Anyway I bought Bank of America and I bought 2,000 shares at average $12.50. I not only bought Bank of America but also added more Patriot Coal (PCX) also at $6.12. My average on PCX is now $6.90. I am buying the dip. In fact I am all in already and on a small margin. I changed from the short mind to a long mind and the market changed from bullish to bearish. The result was of course I lose big. At today’s close I lost almost $2,500 today. My account balance stood at $27,107.79 which was 10% down from my initial capital.

I bought Bank of America because I was betting there would be a run up after the prefer to common share conversion. I am surprised to see someone post my link about the conversion on yahoo message board

http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_B/threadview?m=tm&bn=1903&tid=1042741&mid=1042741&tof=11&frt=2.

I still think my entry point at $12.50 can make me some money in a couple of days because I believe the conversion price will be above $12.50. But I feel a bit shaky after seeing the market tanked like this today.

I am not sure if I should put today’s trading in the lesson learned category but I put it there any way. I don’t know what kind of lesson I have learned today. Probably I act too early again in the trading day. At least I put it there so that it would remind me what I was thinking when I losing big on my trades.

I covered my 2000 shares of shorted Bank of America yesterday at $13.30 only to realize it dropped half a dollar more today. Half a dollar a share is translated into $1,000 lost. That means if I still keep the 2000 shares shorted BAC I would recoup almost all my lost. As I mentioned in my previous post my average price on the shorted position was $12.50. If you read my previous post I almost increased 2000 shares of shorted position on BAC when it was at $13.20. If I did that the average price would be at $12.75 and I would able to recoup all my lost today. The only thing is that I have to hold the shorted position for four days. If I increased my shorted position the day before yesterday on BAC at $13.70 which was the closing price that day (I had thought about that). My average would be $13.10 and I could make a very nice profit today.

I know there are too many IFs. Every time when I looked back at my lost I became a very sophisticated programmer making a lot of complex IF statements. I think this run up on BAC and the last one I experienced on Wells Fargo tell us something in common. If a stock runs up too fast and out paces its peers by 15% percent or more not because of fundamental changes and not because of the sentiment of the whole sector then it is doom to retreat. Of course to someone who shorted at $13.70 the day before yesterday there was a lot of luck for them because no one can predict the NY Empire Manufacturing Index drop so much yesterday.

So much so for retrospection. I made some profit today and became a holder of Bank America again at a much higher price. As you know I bought it at $12.06 last week only to sold it too fast. I bought 1000 shares of Bank of America closing to end of the market at $12.76. I made a lot of trades today. I brought MGM in pre-market and sold it for a small profit. I sold my Western Refining position for a small profit. I bought BAC at $12.99 and sold it at $13.10 before I bought it again at closing. At the end My account was up $309.78. The value of put position I am holding drop a bit. Excluding that the trades I did today net more than $400 profit. I expect I will eventually collect all the proceed from selling the puts. If I don’t trade for the rest of the week my account should still be up $400 by the end of the week and I should get back above my initial capital level which is $30,000.

Hopefully the data is good tomorrow and I can make some profit on BAC. BAC’s trading range this week will determine the common share price Bank of America uses to convert its prefer shares. I believe there will be great opportunity to make profit. I believe it is very likely that BAC’s price will trade above the conversion price right after it is announced (June 23rd) and before the final conversion deadline which is June 24th.So I will watch out and keep an estimate of the conversion price. I believe the investment banks will Jag up BAC price large enough to attract prefer share holder to tender their shares for conversion after the conversion price announcement.

Lets see if this is correct

Account Balance Change: $309.78

It was a wild ride today with Bank of America. This was the day I felt would definitely come and this was the day I was expecting for when I bought into Bank of America. Unfortunately I missed it and I missed it too hard. If you were following me you know that I brought 1000 shares of Bank of America yesterday at $12.06. I mentioned that I felt the upside momentum of this stock. But I sold it too early this morning at $12.23. After I sold it I quickly jumped into a short position at $12.43 and later increased my short position at $12.58. For the rest of the day I was carrying 2000 shares of shorted BAC and watching my account balance going down when BAC price was skyrocketing

Thoughts About Taking Suggestion:
All kind of wild thoughts came into my mind with the wild ride of Bank of America. I thought I shouldn’t have got up so early. If I gave myself more time to sleep I could end up making a profit and at the same time I could have a better sleep. Too bad I followed Rpena’s suggestion. =) However when I sold my shares too early I thought it was too bad that I didn’t follow Rpena’s suggestion. If I took the suggestion I wouldn’t take the short side today and ended up with a lost.

There were three reasons that I chose to sell for a small profit. First, BAC didn’t react well to the upgrade in pre-market. Its price just went up a little in pre-market and I thought that was it. Second Repena reminded me there was a 30 year Treasury bill auction today and I thought it was not going to be good. Again it was Rpena’s fault. =) Thirdly I felt I should follow my guidelines. Of course I know I shouldn’t blame anyone for the action I decided to take. I felt I wasn’t a mature trader and Rpena is far more experience than me.

Thoughts About Recouping Lost:
My wild thought went on and I found today’s Bank of America was very much like Wells Fargo on the day when I lost $10,000 trading it. That was the day after the government announced the stress test results and Well Fargo announced its secondary offering to raise capital at $22 a share. I increased my short position two times on Wells Fargo on that day causing me a big lost. Today I dare not to increase my short position on BAC for the third time. In fact when Bank of America’s price jump to $13.19 I was about to click the button to insert an order to short 2000 more shares but I didn’t when I thought about the Wells Fargo trade. Later on I regretted I didn’t do it when I saw BAC closed under $13.

My thoughts went on about selling 100 contracts of BAC June 12 Put at 0.22 to recoup my lost today. That was only 100*100*0.22=$2,200 involved. But what if BAC price drop under $12 next week say to $11.50? I could lose more than $5,000. So I sold 20 contracts instead. That helped a little bit.

Thoughts About Lesson Learned:
Now I am pondering whether there are some lessons I learn today? I really don’t know. Because I found the lessons I learned are seemingly more and more contradicted with each other. I thought one lesson I learned out of today could be that I acted too early in the trading session. I should’ve waited to act till the latest market hour. But this was not always valid though. I was thinking about this post, “I Have Got to Treasure Selling Opportunity”, in which I could make money if I acted early.

Another lesson learned could be I got up too early and I should just take it easy and have a good sleep. I am not sure if that was a good lesson. The third lesson I thought about is not to panic and close a lost postion in a hurry and wait at least three trading days before you throw towel. I actually wanted to write about this for a while but not sure if that was a good one. From my past lost experience if I were able to hold the losing position long enough say three days I could at least see an opportunity to close it without lost. I found that was right for my previous two big losts.

1. Trading Out of Discipline and not Knowing How to Stop Caused Big Lost and
2. Wells Fargo Is Over Valued at $25.70

I am not sure if this is going to be right this time. Anyway we will see if BAC can get down to $12.50 in a couple days which was my average.

Another lesson which should be positively right. Life is much better on the long side. This is the third time I lost big on taking a short position and I want o highlight this. I should be very very careful about the entry point when taking a short position

I lost about $400 for the day and am holding USB and BAC puts and 2000 share of shorted BAC at the moment. The lost on shorting BAC is more than $10,00 but off set by the gain on the USB and BAC puts and gain on previous long position on BAC

Account Balance Change: -$405.85

Today the government announced some of the big banks that were allowed to repay Trap. I thought the banks would take that as an event to push their price up another step. But it turned out nothing happen. On the day when the government released the stress test results the market was like a wild horse. Today I feel it was like a turtle. Sometimes the market just behaves very calm and logical. It didn’t make sense the way that the market reacted to stress test results then but it made sense to me the way the market reacted to the government’s announcement today. After all we pretty much know which banks are able to repay TRAP.

I wanted to short Bank of America this morning but I wasn’t sure if today was going to be another wild day. I did not dare to do that. Thinking back I should have looked at the volume. If the volume is light then it is not going to be a big day. I wanted to take a long position but I didn’t feel BAC worth that much. After all it was not one of the banks that were able to repay TRAP. It should be categorized as a weaker bank.

In searching or a tradable stock I found Verisign. It was involved in a price fixing law suite and its stock price dropped 20% in a couple days. It seems to me that $19 per share is its support line so I got in at $19.07. I am losing money right now.

Frankly I think the law suite has a lot of merits. Verisign owns network solution Inc which monopoly the domain name registration business. I didn’t understand why the market which was installed with anti-monopoly laws could allow a company like network solution Inc operated as monopoly in the first place. If you have an explanation of any kind I would love to hear it. I had the thought back in the DOT COM era that network solution Inc was a monopoly and would be suited. Basically everyone has to purchase domain name from them. I didn’t expect to wait till that long to see a law suite. That is one of the reasons I want to take a shot a VRSN. After all it down 20% and loss $1 Billion market capitalization already

Account Balance Change: -$79.49

In a previous post that I discussed whether technical analysis worked in stock trading I mentioned that Baidu’s price was going up simply because its price target was raised by Goldman Sachs. Looking at Baidu’s price now it stands at $304. If I brought its shares at that time I should have made good profit buy now. I didn’t buy it because Baidu share was too expensive and I can not follow my guidelines if I trade Baidu’s share and it happened that I was considering whether I was wrong not following guidelines. Because of the hesitation I missed an obvious earning opportunity.

Goldman Sachs was the major underwriter helping Baidu go public five years ago. Its opinion has been a major driving force behind the ups and downs of this stock. Next earning will be big because it is a good chance for the analyst to play a big game. Baidu’s valuation at this level is supper high compare to many other stocks. If Baidu miss analyst expectation it can trigger a streak of downgrades and Baidu’s price could be pushed back to $220 level. If they beat expectation the stock may go up a bit say 10% to around $330 and still analyst other than Goldman Sachs will downgrade it using the excuse of high evaluation. I am thinking may be I should watch out for any shorting opportunity after the next earning report.

There is still a long way to go though.

Stock market is just as life. It is a box of Chocolate you never know what you are going to get. It makes you feel surprising, fulfilling, exciting and happy at some time and makes you feel lost, sad, miserable and angry at another time. Its ups and downs are like the ups and downs in life. The differences are you can experience it all in a few days with the stock market.

Right after I created a “learn from the past” category for my trading. I made another mistake following one of those lessons I learned: Trading Out of Discipline and not Knowing How to Stop Caused Big Lost. Well I didn’t completely follow the lesson though. I still trade out of my discipline but I did KOWN HOW TO STOP and I stopped it too early.

As you know in my previous post I Had a Short Squeeze First Time in My Life I lost on a trade that I should have make money on. CCO is currently trading at $5.18. I shorted it 2000 shares at $5.60 but covered it too early at $5.87. I would have made $800 on that trade if I don’t follow my lesson learned. But I was holding other position and because of that I was a little bit scare.

After a few months of trading my account balance is not going anywhere. It was up to around $43,000 before I started this Blog from around $30,000 in a little more than a month and now it went back to where it was before I start day trading.

What do you think my balance is going to be down the road say half a year or 3 years from now? Going to zero? Going to double, triple? Take a guess here if you like and there may be interesting finding by the time when we look back.

Wonder what is short squeeze? I just had one and made the most laughable mistake in my entire trading life. Yesterday I shorted 2000 shares of (CCO) Clear Channel Outdoor Holdings at $5.62 after it jump 56%. $5.62 was close to yesterday’s height but I covered it this morning close to today’s height at $5.87. What a stupid decision. Now CCO is trading at $5.09. A typical short squeeze.

Bank of the Ozarks another issue I bought yesterday is going against me droped another 2.5% after dropping 6% yesterday. But I feel much easier to hold on to a long position so I am going to keep it there. Still think it is a bank that is much healthier than its bigger peers. Let me know if you have different thoughts

Big loss again today dropping $1,150 at the momment. My account balance is falling off the cliff

At market close

Account Balance Change: -$689.99

I listed some of the mistakes I made more than one times here and hope to avoid them in the future. Of course history not always repeat itself and making the same move when the same situation appears in the future may turn out to be correct. Nevertheless these minutes can remind me what major mistakes I have made in the past.

1) Mistakes of trades on WFC and BAC when they did secondary offering.
Don’t Short a stock when it is trading higher then the offering price in after market on the day when the secondary offering price is announced especially when Goldman Sachs is the underwriter. I did this kind of shorting on WFC and BAC and both lost money. In fact I should long in after market and sell next day in pre-market.

2) Mistake of rushing to take a short position at market opening.
Don’t rush to take a short position at market opening even when the price of a stock runs up an unbelievable percentage. I made the mistake more than one times on LINTA, WFC, and BIDU. Seems to me the best time to take a short position is at market close given that you still believe the price up run is too much.

3) Mistake of miss judging the market trend.
If the US market opens higher after the world markets it tends to trend higher during the day given no major bad news.

4) Mistake of rushing to sell and not waiting still earning release day comes close.
Don’t rush to sell depressed issue even you believe earning is not going to be good. At least wait till the day before earning release. I ever held VISN but didn’t wait till release day come close when the price run up began. When earning release day comes close many depressed stock will become the target of price manipulators. Manipulators may identify depressed issues and push up the stock price in hope to mislead the market that good earning has been leak. There may be a good selling point when we hold the depressed stock long enough before earning release even we believe earning is not going to be good

I originally wanted to keep this minutes in a private post because obviously these are specific to my trading experience. You might experience the exact opposite and it could appear totally nonsense to you. But this is a blog and this is what blogging is about. I should still feel good if you have a good laugh reading it. Comments of all kinds are welcome!

I want to add a few lines after I post this yesterday. I found for all the mistake I made if I had hold the issues I lost long enough say two trading days. I could have realize profit on them.

I have know for long that the world financial markets tend to echoing each other and ADR issues have the tendency following its home market performance but I hardly pay attention how much the world market went up yesterday.

I just found out that China and Hong Kong index went up almost 4% yesterday. Japan went up 1.63%. Most Europe market went up 3% yesterday. For Baidu which is a high beta stock usually the percentage it went up or down will be bigger then the index. In fact its change is usually two times of the Nasdaq or its home market.

So I don’t understand why I took a short position this morning when the market was up only 100 point (DIJ). That was 1.3% only. And I don’t understand why I took the short position on Bidu when it was up only $9 which is 3.5%.

First I was wrong on taking short position. Second I was wrong on taking the short position before the market running out of its potential today. Third I was wrong on taking the short position on Bidu and fourth I was wrong on breaking two of my guidelines. I didn’t think twice the probability of a better entry point. I have doubled my initial bet of on a trading day.

What a messy day. Should I take lost right now?

I tend to win small but lost big. Is that a typical day trader’s fate or just me? I can not defy the temptation of the surprise gain. And of course I miss judged the market. The US market opened higher following the world. I thought the market should be trending down during the day because of the GM bankruptcy news. So when BIDU jump $9 at opening I thought it was a good opportunity to short. I took a short position at $272. I was so wrong and when it went up to $279 I increased my short position again but it went up over $287. I lost $2500 currently.

The market hardly pay attention to the GM news. In fact it seems to be celebrating it. It almost wipes out my entire gain for the past month. Just as my trade on Wells Fargo wiped out my two months of gain for about $10,000 before I started this blog I feel history is repeating itself again. I am being punished for not being discipline.

I was not convinced that this would be a bull market so I frequently took the short side. Now I am convinced that life on the long side would be a lot better. Another lesson I learn is that I don’t know how to stop. I should’ve cut my lost when BIDU went above $275 but I didn’t. I really don’t know what to do now. Let me know if you have suggestions and I would love to hear from you.

I am still holding the short position at the end. At market close my account lost $2,119.40

Account Balance Change: -$2,119.40