My Trading Diary

"You spill that drink I'll rip your eyes out."
--A very wise trader

Apparently ripping things off is a common trader theme. (That sounded more innocent in my head). I once had a trader boss who used to say "You trade the Yen instead of the Euro again I'll rip your face off." (Didn't say that to me though.)

I don't know. I love the atmosphere in Professor Simon's ADVIN and ALTIN classes. People say it's intense. I find it thrilling.

When I traded currency, we were not allowed to trade without a trading plan, or a stop loss, or without carrying out a specific daily routine (record the fundamentals, identify support & resistance, check the short & long term charts, watch for economic indicators). Here, in Professor Simon's class, he gives us free reign to trade however we wish, but this time, it's through a simulated trading program.

However, he recommends we keep a trading diary. I'm going to go the daring route and actually reveal my trading diary here: all the victories, all the embarrassments, a documentary of real time greed and fear.. all on the backdrop of a financial crisis.

I started trading a bit late, and I have to admit, a bit randomly. I saw the other traders in the class with all their positions, and I felt the need to keep up, psychologically. I saw oil prices falling and oil companies slammed, so I decided to short a few oilfield services stocks, which tend to lag oil companies a bit. Also, I had been deciding on a Relative Value play on oilfield services stocks for ALTIN, shorting one and simultaneously going long one I thought would outperform the other... so I decided to test my theory for momentum in the ADVIN portfolio.

On Wednesday, I shorted SLB at $63.11 and WFT at $16.71. Then I went long one of the oil companies I knew had good fundamentals, HES, at $63. These were stupid decisions. I had no exit strategy. I also shorted MS hoping to bet against stability of their deal with Mitsubishi.

On Thursday, I started to take the game more seriously. Looking at the news and market movements, I went long on RIMM (the makers of BlackBerry) via their analyst upgrade and expected release of new product. Additionally, since gold was shooting up, I took a long position in a gold stock, AUY, which intially made me money, but ended up being a small loser. Seeing as gold prices weren't behaving normally, I decided to cut my losses on that stock. Sold more of MS on news of Moody's downgrade and class action lawsuit. A little bit of stupidity: HES was losing me tons of money, so I tried to get out at a limit price, hoping the stock will bounce and I'd get off with fewer losses, but the stock never did bounce and my losses continued to surmount. I thought it wise to get out now and admit defeat, but the trading program wouldn't let me out of the stock since I already had a limit order in that was not fulfilled and I didn't know how to cancel it. So I sold HES short. Well...

Thursday night I took profits in RIMM because I didn't feel the market would support it going any higher. The European markets were all down, as were the US markets. Economic data was grim, and bond spreads were increasing. The TED spread was at it's all time high of 432 bps. I looked at SP futures and the VIX index, a measure of volatility, and it was up an outstanding 11% to around 63 that night. So I decided to make a big play, just for fun. I shorted the sh*t out of SP Depository Notes (we are only allowed to trade securities on US stock exchanges). This, I admit, is a risky, leveraged play. I would never do this in real life. But I guess I just wanted a little drama. Don't ever try this at work (but you can try it at home, if you want to lose alot of your own money).

The mistake I made was putting in the order after market close, so Friday, when my position was openned, there had been a HUGE gap in overnight trading that my order was executed at a very low price. And I was short. The notes immediately dipped, then shot up to past 90, pulling me to almost the bottom of the trader list. During US lunch hour, I panicked, watching the market go up and down, little by little, the SPY testing 85, then back up to 86, and good god, up to 88. I took some time off to read a case and when I came back, it was at 84 and pulling down. I had made tons of (fake) money! I would have gotten out of the position there, but there was a rule that we cannot enter and exit a trade on the same day, so since my order was executed this morning, I couldn't get out of it today. I looked at the candlesticks on the short term chart and relaxed. I was confident SPY would pull down again in the coming days if I don't get out now.

The focus of my day

So I decided to close out most of my positions for the weekend to reassess the bahavior of the markets again next week. I took profits on SLB, MS, and WFT. I could not trade HES, because I had made that short sell this morning (so now I have a short and a long) but the good news is, I figured out how to cancel that good-til-canceled order, so I can just exit my position at a (hedged) loss on Monday.