Friday, February 23, 2007

Sometimes We All Need A Little Luck



I do a lot of day trading and today I let a big one get away. As most of you know I like to trade based on relative strength. Today the strongest group in the morning were the utilities and the strongest stock in that group was TXU, so based on my style of trading I bought TXU today.

The stock never went against me and I had well over a dollar profit going into the close. One minute before the close I had to make a decision. Do I want to keep the stock over the weekend or do I just want to exit the trade and get flat. I was just seconds away from the market closing when I happend to glance at the above daily chart and saw the large move TXU had for the past 2 days so I exited the trade. My original intentions were to hold TXU because the UTY index had a breakout today after pulling back for about 5 days.

After the close I grabbed a snack and sat down at my computer to work on my blog when I noticed that there was news on TXU. Here is the headline that I read.
"Private-buyout firms Kohlberg Kravis Roberts & Co. and Texas Pacific Group were in advanced talks Friday to buy utility TXU Corp. in one of the largest private-equity deals ever, according to a person close to the situation."

When I read the above headline I almost choked because I knew that TXU was going to be up sharply. Sure enough the stock was up 11 dollars in after hours trading!!! I honestly felt like throwing my computer out the window.

It's just amazing how I changed my game plan just seconds before the close and missed a really big trade. Sometimes it helps to be a little lucky but I just didn't have any of that today. I guess in the long run luck will work for and against us. I also think if we follow a sound methodology, luck will seem to come our way more often than not. Ok..I'm done crying...:-)

10 comments:

h. lovil said...

That's tough Kevin. I did that with RIMM once. It was even worse. I had 1000 shares that sold after hours because the chart looked wobbly. I made $125 gain.

The company announced a settlement of a patent suit 20 minutes later and ran up $12 a share!

Took me a lot of time and whiskey to forget that one.

Banker said...

Kevin,

You make your own luck in life! Remember it was only one trade and there will be plenty more. I would bet next time you will not miss it.

timshatz said...

Kevin,
Great blog. Ready your site at least a couple of times a week. Definitely a worthwhile investment of my time. Thanks for posting.

Can you suggest a book that covers the technical ins and outs of investing based on charting? I am very impressed with your work and would like to explore supporting my decisions with technical tools.

Thanks in advance.

Kevin said...

John Murphy's book is very good. "Technical Analysis of the financial markets" This book will show you most of the popular methods that are available and how to use them. I consider this book the bible for technical analysis.

Blain said...

Kevin,

In the end you can't beat yourself up over it man. If anything you should be proud of yourself for showing discipline for the trade. We all know the trader who trades without rules and discipline is eventually going to get burned.

What would you be saying if they announced they were under SEC investigation and the stock tanked? We both know you can't control random news like that, and for the reasons above there is no way you can beat yourself up. Have a great weekend.

-StockTrading101

Sanil said...

The philosophical view of this is that one cannot expect only one event to change without changing other related events in the universe i.e. if you had held TXU (first event),the buyout might have never happened (econd event). Hence, Kevin selling TXU + TXU buyout was the only possible event in the universe.

Kevin said...

That's an interesting philosophical view, but do you really think the first event ( Kevin selling TXU) had an influence on the second event ( TXU buyout)?

The second event was going to happen regardless of what my actions may have been.

The point of my post was just to show you how a single thought just seconds before the close can have a major impact on someone's P/L.

I guess the market is no differnt than life. You can have a thought to go to the grocery store at 5:00 but before you leave the house, you decide to take a glass of water. Drinking the water causes you to leave the house at 5:02 instead of 5:00. On your way to the store you almost get hit by a speeding car. Had you not gone back to drink the water, you never would have encountered that car.

The car was going to be there anyway. The big philosophical question is..What causes a person to have a last minute thought which can impact a person's life?

Sanil said...

Kevin,
Maybe these thoughts and events are predetermined and there is no otherway for things to happen. Anyways, just my view. Something I use to console myself when things don't go my way :-)

Glen said...

Kevin, you've just provided more evidence why buy and hold (or infrequent trading) is vastly superior to short-term trading for the great majority of investors: events that affect markets generally occur between market closes and opens. And most of those events are positive, or at least the postive events outweigh the negative, because the direction of economies is upward (growth is in our genes). Bummer for you though, too bad, I could write a book about such events.

timshatz said...

Thanks Kevin. Picking up some books on various subjects right now. Your suggestion is one of them.

On the philosophical analysis that is going on, I think the TXU sale you had and the buyout are seperate independent events. The relevence is only that they involved TXU. Same as saying someone comming in the front door of a castle is directly responsible for someone going out the back door of the castle (assuming neither person knows of the other's existence).

Once a decision is made, all other decisions can not be made. By making the decision, you negate the possibility of other decisions.

In short, don't worry about it.

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