Tuesday 30 March 2010

Winning, but still feeling like you lost


You're going to need to read Sundays post to understand this one.

That illiquid stock I bought 3x the average daily volume of on Friday traded zippo shares Monday. So my plan of getting the quick reaction was not materialising. I had left a decent size offer and bid (since Friday) in the stock with a spread of 2.8%. The cocky mini market maker put his shares in front of me both sides. I thought: "Whatever" as he only put 25% of my size on each size.

But in the market you often get paid for the risk you take. And Friday I took quite some risk when looking at how much this stock normally trades. Even though that bid and chart pattern signalled some serious buyers slightly below the market level at that time.

Today however the mini market maker and myself got lifted. I had around 40% of my position on the offer with a 2% profit. The next 40% I put at 4% profit and the final 20% at 5.5%. At the moment I have just 5% of my position open. So I've closed at a 3% profit (as good as, all I need to to is hit the bid with my remaining 5% size).

Funny thing is, now of course I'm annoyed that I put 40% at 2% profit instead of scaling it higher up. Then again yesterdays zero turnover prooves that this stock is a gamble regarding when volume will come. Could also be, that my decent offers, in this otherwise pretty much empty order book, attracted buying.

I still enjoy small caps though, cos you are acting in the old fashioned market, with small players, humans, not machines.


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