I highlighted what I thought would be the relevant range for AIG today in our morning meeting (34-36). My reasoning was that AIG needed an inside day prior to making its next large move. I was interested in getting long close to the bottom of the range and short close to the top. The market opened and AIG quickly popped above the 36 level. The bids dropped out to 35.60 before the offers were sprayed above 36 a second time. When the bid did not hold above 36 I got short. Good trade. I maintained the short position all the way to 34 and shorted into each up move and covered some stock each time it made a lower low.
At 2:12pm AIG quickly popped from 33.50 to 34. I shorted. Normally, this would be considered a good trade. Earlier, AIG had dropped below the 34 support level and failed to rally above it three times. But this is AIG and there was a huge spike in volume. I ended up paying the price. I lost the money I had made from being short from 36 to 33.50 in about 90 seconds. Then I lost some more in the wicked above below that occurred at the 36 level for the next half hour.
Eventually AIG did as I expected erasing almost the entire move from 34 to 36. But by that time the damage was already done and I was no longer trading having breached my daily loss limit. In retrospect it was silly to even think about getting short AIG so far away from 36 in the middle of a very strong up move.
BTW, If it fails again tomorrow between 36 and 36.50 I’ll get short 🙂
17 Comments on “A Silly Trade”
AIG is a real hard stock to trade, you never now when a huge spike will come on enormous volume so you cant say that’s a bad trade. You knew from the begiining that it was a hard trade and maybe th only wrong was not covering fast when you saw the enormous vol kicking in the name.i got long the name at 33.48 1 min before the pop.i didnt expect such move it was news relates and i was lucky. Trading AIG for me is worth only when real volume kicks in else it will kill you.Both long and short.
Xaazar
AIG is a real hard stock to trade, you never now when a huge spike will come on enormous volume so you cant say that’s a bad trade. You knew from the begiining that it was a hard trade and maybe th only wrong was not covering fast when you saw the enormous vol kicking in the name.i got long the name at 33.48 1 min before the pop.i didnt expect such move it was news relates and i was lucky. Trading AIG for me is worth only when real volume kicks in else it will kill you.Both long and short.
Xaazar
Thanks for the article Steve. Very informative.
I see the importance SMB places on getting in at important price levels. This has worked for me also. But I have also been run over. Do you have any tips re any signs that may occur that tell you to not jump in front of the trade despite it being a very important level. Do you place your stops prior to entering? I ask because a few times I didn’t have the 2 secs I need to place the stop and took a much bigger loss than I planned. But for some reason, I don’t like to place the stop first, probably because I am focussing on the entry and I hate getting wicked-out.
Thanks for the article Steve. Very informative.
I see the importance SMB places on getting in at important price levels. This has worked for me also. But I have also been run over. Do you have any tips re any signs that may occur that tell you to not jump in front of the trade despite it being a very important level. Do you place your stops prior to entering? I ask because a few times I didn’t have the 2 secs I need to place the stop and took a much bigger loss than I planned. But for some reason, I don’t like to place the stop first, probably because I am focussing on the entry and I hate getting wicked-out.
I have the exact same problems with algos. To combat their control of stock prices, I short into pops. It works to a certain degree yet the times it is a genuine up move, I get completely smoked.
I thought shorting pops is the new way to combat algos but I am seriously having second thoughts. Thoughts?
I have the exact same problems with algos. To combat their control of stock prices, I short into pops. It works to a certain degree yet the times it is a genuine up move, I get completely smoked.
I thought shorting pops is the new way to combat algos but I am seriously having second thoughts. Thoughts?
AIG is completely nuts. If you aren’t familiar with it, it will pile-drive you with an airliner. It lures you in to make a few dimes, which are SO easy because of the beautiful volatility and unlimited liquidity… and then it rips your face off as it runs three points in three seconds.
Everything about AIG’s price action wants to make me trade it. When I trade it, IF I don’t get steamrolled by random spikes, I make the easiest money ever. But as soon as I’m flat, I thank my lucky stars and swear on my life that I will never be so stupid again. It’s been two months since I’ve traded AIG, and I hope I never trade it again. It’s either a money machine or a bankruptcy machine. You can trade it. It’s so beautiful. But you have to trade bearing in mind that the price might be three points away on the next candle.
It’s a trader’s dream. But you have to be 100% fluent on the keyboard to get out if volume perks up.
AIG is completely nuts. If you aren’t familiar with it, it will pile-drive you with an airliner. It lures you in to make a few dimes, which are SO easy because of the beautiful volatility and unlimited liquidity… and then it rips your face off as it runs three points in three seconds.
Everything about AIG’s price action wants to make me trade it. When I trade it, IF I don’t get steamrolled by random spikes, I make the easiest money ever. But as soon as I’m flat, I thank my lucky stars and swear on my life that I will never be so stupid again. It’s been two months since I’ve traded AIG, and I hope I never trade it again. It’s either a money machine or a bankruptcy machine. You can trade it. It’s so beautiful. But you have to trade bearing in mind that the price might be three points away on the next candle.
It’s a trader’s dream. But you have to be 100% fluent on the keyboard to get out if volume perks up.
are your keystrokes faster than a algo box
are your keystrokes faster than a algo box
AIG is volatility perfection. Your stops can be in the market to protect yourself from algos. Some traders do very well trading AIG. I am not one of them, but I tip my hats to those who can ride this horse. Cheers –
AIG is volatility perfection. Your stops can be in the market to protect yourself from algos. Some traders do very well trading AIG. I am not one of them, but I tip my hats to those who can ride this horse. Cheers –
tao,
it depends on how important the price level is. usually i will initiate a very small position based on price but then add once their is confirmation from the tape that the level will hold.
steve
eric,
there are a bunch of different ways to combat algos. still the best way is to find the most in play stocks each day that have such overwhelming order flow the algos get run over.
i also at times will fade quick moves to combat the algos but usually these are quick scalp type plays.
steve
jacky,
i’m sure my keystrokes are much faster than the algos. the algos take at least 10 miliseconds to react to a new quote. my keystroke rate is no more than 5 milliseconds 🙂
steve
Steve you are quick!
I have tried to fade them yet I have the GS short squeeze effect in alot of stocks and it really hurts my pnl. I have tried to stay away from this play
Side note. My personal experience with NASDAQ stocks are that algos completely own them even with good order flow during the day. NYSE seems alot more clean.
HOG today was a complete dream stock.
Steve you are quick!
I have tried to fade them yet I have the GS short squeeze effect in alot of stocks and it really hurts my pnl. I have tried to stay away from this play
Side note. My personal experience with NASDAQ stocks are that algos completely own them even with good order flow during the day. NYSE seems alot more clean.
HOG today was a complete dream stock.