DAYTRADING: The Highs and the Woes
[Ed. note: Kramer says he had a good week trading the QQQ's and is off to a beach in the Caribbean with Suzy. "Pick a column and run it" he said to me. I never argue with a trader. They're impossible!]
You don’t get to the top of the day-trading game overnight. It takes years of intense study and a lot of headaches, insomnia and the occasional case of locked-bowels. But I did it, and I’m gonna tell you how you can do it. It involves some pain.
My story starts a few years ago when I told Suzy my Grand Plan; I would quit my day job, the one that paid the mortgage, the orthodontist, the insurance and all the other bills.
Suzy attentively listened to my Grand Plan to stay at home all day and day-trade online. Then she whipped a heavy cast-iron pot at my head. And connected.
“But honey,” I cried, holding my throbbing noggin and ignoring the blood that flowed and ruined my favorite shirt, “Everybody’s doing it; trading at home and getting rich. Don’t you want us to be rich?”
I ducked as another pot whizzed by my ear.
“But sweetheart,” I wailed, “Don’t you want me to be home with you all day?”
Suzy gave me the look; the one she usually saves for the village-idiot, turned and left the kitchen, leaving me reaching for a towel, a handful of aspirin and the determination to begin my new career as a daytrader. “I’ll show her,” I told myself.
I bought a top of the line computer, cost $3,500. I contracted with MSN for three years of internet access, cost $720. I ordered fifteen books that promised me how to become a great daytrader, cost $720. I had everything I needed. I was ready.
Wrong.
After reading and extensively underlining my new books and listening to all the experts on CNBC for a week I knew I was ready.
I got up at 5:00 the next morning, turned on my computer, clicked onto CNBC, listened and took notes.
I waited and watched, because I’d read that patience and discipline were very important characteristics of a good day-trader. Then I heard Maria excitedly announce in a pre-market report from the floor, the actual floor of the N.Y. Stock exchange! that she’d heard from a source that Orbital Sciences was about to be taken over, that “they” were buying Orbital. I knew who “they” were; the insiders, the people in-the-know.
I did my research, because I’d read that it’s very important to do your own research. I learned that Orbital Sciences was losing money, a lot of money, had a negative ROE and paid no dividend. Mmm, this didn’t look so good. But darn, they were about to be bought out! That was enough for me, because I’d read that it was very important for a day-trader to be decisive.
I saw that ORB, the symbol for Orbital Sciences, had closed the day before at $33. I couldn’t wait for the market to open.
I clicked onto my on-line broker and entered an order to buy 1,000 shares of ORB “at the market.” My first trade. I was a little nervous.
ORB opened two points higher! On huge volume. It was gonna happen, I could feel it.
My fill came back at $35. A steal. From my reading I knew it was very important not to be greedy. So I’d sell when ORB hit $39. I did the math; let’s see, 1,000 shares at four points was $4,000, in a day!
ORB moved up smartly to $36 in the first five minutes of trading. I was already up $1,000. Soon it was $37 and was ahead a cool $2,000.
Suzy walked in, caught me rubbing my hands together as I was jumping up and down. I’d read that it was very important to be calm, keep your emotions under tight control. I sat down. I wanted to tell Suzy how much money I was making, but when she gave me the look, I turned back to my computer.
ORB was now $36. No problem, just a little profit-taking. I’d read that it was very important to know that profit-taking was normal.
Then ORB dropped to $35, the price I’d paid for it. Two minutes later is was $34, then $33. Mmm.
By 10:00 ORB was sinking faster than the Titanic after it kissed the iceberg. I saw ORB at 32, then 31.50, and then 31.
Don’t panic I told myself. I’d read that it was very important not to panic. So I wiped my sweaty palms on my trading shirt, took three TUMS, four aspirin and hit myself on the head with a heavy pot. It felt good.
Wrapping a towel around my head so the blood wouldn’t ruin my trading shirt, I told myself not to panic, to get a grip on myself. I’d read that it was very important to talk to yourself.
I checked ORB. It was 29 ½. Where was Maria? Maybe I should buy another 1,000 shares here. I’d read that good traders often “bought the dip.” ORB had certainly dipped. I bought another 1,000 shares and got it at $29. This cut my average price in half to $32. Smart move I told myself.
Suzy walked in. Saw the bloody towel wrapped around my head. “Bumped my head.” I lied.
“Doing any trading?” she asked.
“A little, just dabbling, getting my feet wet.” I lied some more.
“How’s it going?” Suzy asked.
“Great. I’m trading like a pro. Gonna be a great day, you’ll see.” I said.
“Mmm” she said, giving me the look and walking out.
I checked ORB. It was still $29. The insiders must be buying more.
I checked CNBC. Maria was on the floor talking. DELL, she informed us, was being upgraded from a strong buy to a very strong buy. INTC, she said, was being upgraded from a buy to a market outperform. She was excited about AMZN, YHOO and PCLN. But not a word about my ORB.
Ten minutes later I dumped my ORB at 25. I’d read that it was very important to sell a stock that was not performing. I wasn’t panicking. But as I wiped the sweat from my forehead and reached for my Prozac I made the wise decision to put my money to work elsewhere. But where? I remembered Maria’s excitement about AMZN, YHOO and PCLN. She seemed most excited, breathless even, when talking about PCLN. I put it all into PCLN at $150.
I knew that it’s not wise to switch horses in the middle of the stream. But the horse I was on, ORB, was drowning! By switching into PCLN I’d make it all back, and a lot more.
Piece-a-cake.
Lee Kramer
Copyright 4/10/98 |
