A Look back at 6 Months of Trading

I know that I haven't really talked about this much. No one seems to visit my blog anyways, so I've been posting things a bit more vigourously on Facebook, where I know at least some of my friends will be looking. Anyways, my trading has been progressing slowly. But make no mistake, I am getting better. As of right now, I'm $97 away from my profit target of $2000 this month. With four trading days left, it seems almost certain that I will make it.

When I started out, I was trying to scalp penny profits on Lucent Technologies and Nortel. This was back in June and July. Back then I had to stave off exhaustion on a daily basis because I was getting much less than 7-8 hours of sleep a night and I had to walk forty minutes down Burnaby Mountain every morning to catch the bus to get to work. It was tough because it was midsummer and those stocks are not very interesting. I've come to realise that not very interesting is actually a virtue though and my biggest regret from then was not taking a bit more risk and trying to trade a bit more size.

By the end of July I had moved on to EWJ, which is the iShares ETF for Japan. Things were pretty good for me then. At the end of July, I was doing a 300-500 share default, but not making much money. In August I moved that default trade size up progressively and managed to take home my first paycheque - a meagre US$305.97. I said things were good, by that I meant that I finally felt I was getting somewhere. I was doing between 1000 and 2000 shares on every trade. Furthermore, I was getting magical fills on EWJ using Bloomberg and AMEX without having to wait in the Island or Arca queues and the outlook was good for that to continue.

Then September came around and my whole system was upset. The first week went pretty well, then the order size on EWJ just got excessive. It got much harder to read whether the bid or offer was a better bet. Fills were fewer and further between. I tried trading more shares, usually around 2000-3000 shares to compensate. I still made money in September but it was clear by the middle of the month that I needed to find a new way to make money. I tried experimenting with the index futures, but I never really got far with my strategy and I abandoned it. I figured out how I could arbitrage them, but the opportunities seemed too few and far between to exploit regularly since the far futures contract orders are moved around by algorithm. I tried trading EMC and Nortel a bit, but I just couldn't get into the groove for either. By the end of September, I believed that I had found the stock I was looking for: UMC aka United Microelectronics Corporation.

At the time I was looking for a stock that was cheap (the SEC fees really add up on expensive stocks), relatively stable and did respectable volume. October went pretty well even though I had more losing days than I had had in the previous two months. I moved up my trading size as time when on and by the end of the month, I was trading 3000-4500 shares per trade and moving around 1% of the stock's volume every day. I made a new personal monthly profit record and the outlook was still pretty good even though my financial situation seemed to be deteriorating.

This month, I continued trading UMC, but in the the middle of the month, I managed to locate an algorithmic buyer on another stock: Gateway. After fumbling with it the first two tries, I managed to post some solid profits on the stock by feeding the buying algorithm. This was a skill I had developed from my time trading UMC. For three or four trading days, Gateway was in the top fifty stocks for volume on the ATS (Alternative Trading system) I used to trade the stock. As of right now, I'm back to trading UMC, which has acted rather peculiarly as of late. The algorithmic buyer on Gateway is gone and I haven't really noticed too much program trading on UMC either. So now, I'm back to the drawing board in a sense. Four days of trading Gateway combined with system problems dulled my instincts for UMC. I need to get back into the groove.

I'm really looking forward to the $2000 graduation target. When two of the traders who started the same time as me graduated I got a bit envious. It seemed to me that they had figured it out: how to make good money in the market. Other traders started copying their methods. My style seemed diametrically opposed to theirs. They were pretty clearly momentum traders while I am just a spread trader. Still, their profits fluctuate a lot and they take more risk than me. In the meantime, so far this month I've only posted one losing day. It was a pretty bad blow out that cost $400, but it taught me that I need to be more careful off the open and pull orders when trouble seems to be knocking at the door.

R