A Lesson in Liquidity & Execution

I have to share this with you. If you've been paying attention to my current position updates you knew that I entered a short position on SVN on Monday. You may have also noticed Trader Charlie's question about volume on his comment and read my response to his comment (check out the comments on: Re: Mark I like your BLOG! - Trade Seeker Question...). Good, I'm glad you're paying attention.

Aside the scant volume SVN sees, I followed my trading rules. I got stopped out today and bought back the short sale (sold for $6.73 on 10/9) for $6.708. You must be wondering why I'm excited about getting a mere 0.18% gain (after Cost of Trade). Take a look at this single-day 2-minute interval chart on SVN for today:

The black line is where my stop was located at $6.70 (3 cents better than break-even). And, yes I could have been justified in lowering my stop a couple more pennies based on this intraday chart and bailed once it violated the previous high after all that consolidation/no movement. I actually put some limit orders in to scale out of the position yesterday and today, but I was a little too optimistic and set the price too low to execute. There's a ton of what-ifs. I chose to set my stop at $6.70 and was waiting until I saw today's closing price to adjust from there. Anyway, let's move on...

Notice the volume, it is appalling. I did say I may live to regret this trade because of the thin volume. Given the complete lack of volume when the stock crossed the black line (my stop) I was convinced my order would be filled for a loss and I'd be buying back the stock at the blue line for ~$6.80. However, when I pulled up my Interactive Brokers account, I could see that IB filled my order for an average price of $6.708 (it executed across 3 exchanges, one at $6.70, and two at $6.71) which turned what I was certain was a loss into a gain.

Once again, I'm asking myself: What have I learned? ... Liquidity is good, learn to love it and don't be sucked in my a low volume stock just because it has a few higher-volume days under it's belt. Turn up the volume! The other thing I learned is that Interactive Brokers has terrific execution. Any questions?

Stoked About Upcoming Mentoring

Monday & Tuesday of next week will be spent in Las Vegas with my father and TMTT Mentor Jordan Stokes. I'm going to be sitting down with a professional trader, during market hours and let me tell you, I'm getting very excited about it! I'll blog about the experience, so be sure to check back next week. In the meantime check out Coaching Call Week 15; it's new! It's quite a read (so much for my new short-post policy) and is only back-dated for timeline consistency.

Here's the quick list of my current open positions:
Shorts:
SVN - opened on 10/9 for $6.73; unrealized gain: +2.6%
CRDN - opened on 10/10 for $41.75; unrealized gain: +0.7%
MO - opened on 10/10 for $77.97; unrealized gain: -1.1%
The Altria (MO) trade is a bit experimental and one I'm playing with only for paper trade study. This isn't one that I'd enter with my live account quite yet. Some justification seems in order, no? Well I was interpreting an Island reversal pattern with a bit of a head-and-shoulders thrown in. My read of reversal patterns isn't really strong yet, so I'm using this trade as a study, hence why I'd only do this with my paper trading account until I have reasonable results over the long-term for similar plays. The good news is that I did nail the initial direction and just didn't see enough of a gain to adjust my stop and lock in the profits from yesterday's decline. I'm not out of this trade yet, though I did scale out half of my position as a way to reduce the possible loss. Tomorrow will tell if today's gains can be erased and I can possibly see some profit. These aggressive bulls need to rest sometime!

Longs:
ALL - opened on 10/11 for $62.52; unrealized gain: -0.35%
JNJ - opened on 10/11 for $65.09; unrealized gain: 0%

Bulls Poor In Money

Buried in my last posting was "... I'm not underestimating the bulls optimism as they've been pushing the market up ..." And how! Although I'm a bit perplexed I'm not going to argue with this trend. I am going to use my money wisely. With the markets sitting pretty at retail pricing, I'm more interested in stocks that I can sell short for retail and then buy back at wholesale. Fortunately, my diligence in maintaining my watchlist is serving me well and I have several down trending stocks that are setting up nicely. I'm sitting on the sidelines and am waiting for them to show signs of weakness for me to profit from their decline as the markets finally find a point to pullback and see some profit taking. With the markets putting in narrow-range candles that are showing some resistance, today could be that changing of the guard and we can reasonably expect some profit-taking at least.

Currently I have 2 open positions: long on MET and short on SVN.

I'm known for monstrously long postings. I'm thinking about changing that up a little in order to bring you more frequent content. Now that classes and coaching calls are nearly complete, with only one more scheduled coaching call this Wednesday, I'll be posting mostly about my experience in the rough-and-tumble markets. I'll do what I can to keep it entertaining, even if only for you to find amusement in my folly.

... and yes, the title of this posting is a pun, I hope you don't mind ;-)