The $50 Dollar Scalp (That went really, really wrong)
Price had been bouncing between 1023 and 1024 for the last hour. It was 1:15 eastern time and I knew the pit traders in Chicago were gone to lunch, I was bored so why not make a few $50 scalps and then go fishing. Nothing like grabbing a few hundred bucks real quick and then taking the rest of the day off and go cat-fishing.
Ok, here we go, short 2 contracts at 1024, exit at 1023.5. That would be $50 X 3 trades = $150 and I’m done. I should be on the lake by 3:30. Life is good.
“Order has been filled” my trading platform tells me.. wow, that was quick. Now, hit my exit baby and let’s bank some profit. I’m really not concerned or even concentrating on the trade but I am thinking about a 20 plus pound catfish that I’m gonna fight with shortly. I’ll just use a mental stop since this is nothing but a quick scalp.
Oh shit ! No wonder I got filled so quick, price just popped up to 1025. Humm, wonder what caused that ? Anyway, it’ll drop back in a second and I’m only down -$100. While I’m waiting on this thing to drop I’ll look at some photos I made at the lake previously.
I’m trying to look at these pictures of the lake but I can’t quit looking at my chart and trading DOM because price has started moving up and it shouldn’t be doing that, especially right now because the pit traders are gone to lunch and price never moves between 12 and 2 or 2:30. It always just goes sideways in a one or two point range. What the heck.. it’s at 1026.25 now and I’m down -$225. I should just flatten right here and take a small loss and be done with it. Wait a minute, here it comes back down.. 1025.75, 1025.25, 1025, c’mon baby, come to Daddy. Just one more point and I’ll be back to break even. There it is ! 1024 and I’m back to $0.00. Whew, that was a little unsettling. I thought it was gonna take off on me for a minute there. Ok, 2 more ticks down and I’ll have my 1/2 point profit. Yeah baby, 1023.5 just got hit. Now fill me and I’m outta here.
Now let me explain something to you about futures. It’s a bitch to get filled sometimes when you use limit orders, which I do.. So, if your exit price gets hit, you’re not gonna get filled immediately. When you place a limit order on the ES you get in line with all the other orders waiting to be filled. Think of it as standing in a long line to get a ticket to a popular ride at Disney World. So anyway, my exit has been hit at 1023.5 and I’m now talking to the computer; “C’mon now, fill me and let’s do this again. I ain’t got all day, there’s a big ole catfish waitin’ on me at Salem Lake.”
Well, price must have set on top of my exit for 5 minutes and still didn’t fill me. Dammit, this part of futures trading drives me crazy. I’m really gonna be pissed if this thing moves against me after my exit was hit but not filled. But then again, even if it does I remember what Tommy from New York had showed me one time. If price moves against you, you wait til it moves 4 or 5 points and you just add more contracts to bring your average cost down. This way you get out earlier and actually make more money so either way I’m OK.Â And there it goes back up. 1024, 1025, 1026, what the heck is going on here. I tell ya what, I’m gonna add 2 more contracts here so when it does come back down I can get out sooner and with more profit. OK,Â short 2 more contracts at 1026, order filled and now my average price is 1025 and I have 4 contracts short.Â So this means I’ll have a profit as soon as it gets below 1025 now. Cool ! Now I see how adding contracts brings your average price down and let’s you get out quicker and with more profit; this is too easy ! The time is 2:05 eastern.
Looking out my home office window I can see it’s such a nice day, nice and sunny with a little breeze, just perfect for an afternoon on the lake. And I just know I’m gonna hook a big ole catfish today, man life is so good 🙂
Hey, what the heck is going on here. Price is up to 1029. Are my dang charts screwed up or what. My trading platform also say 1029. And I’m down -$800. How in the heck am I down -$800 dollars ? Something ain’t right here. Oh heck, I added some contracts, I forgot about that. So if price moves against me then my losses will add up quicker. I hadn’t really thought about that because price was supposed to come down, not up. Oh well, if I have to I’ll just add more contracts if it goes up much more. I’ve seen Tommy add and add contracts if price moved against him and it always worked out eventually.
I’m sitting here watching this DOM and price just keeps moving up. 1030, 32, 34 now it’s at 1035. What the heck is going on ! Holy freakin’ cow, my platform says -$2000. Ok, ok, just calm down, take a deep breath and think.
I can add contracts now and that will bring my average price to, uhh, shit, I’m not really sure but what the heck. Short 4 more contracts at 1035. “Order has been filled” the stupid computer says. OK, let’s see here.. I’m short 8 contracts and my average price is, shit, I don’t know really but my loss is still -$2000. How the heck can that be, I just added 4 more contracts. Well, it doesn’t really matter now because price has moved up so much it has to come down now and I’m gonna ring the register big time ! I just noticed my hands are shaking and I’m sweating.
Ok, let’s see what time it is.. woah !! It’s 3:55 eastern. The dang market closes at 4:00. No wait, the futures market closes at 4:15 so I’ve got time. C’mon you son of a bitch, drop ! I just now realize I’m literally cursing a computer. And price is still moving up. 1037, 38.50, 39, 41.25, DANG, we are at 1043 ! Oh heck no, this can’t be right. My platform is reading -$5200. Oh dear God, please help me get out of this mess and I’ll never try this again !
Then something strange happens. A bunch of lights start flashing on my trading platform and my loss is now back to $0.00. Cool !! I’m not sure what happened but price must have came back down and I got out even. Maybe my platform or charts just froze or something. Who cares.. I’m just thankful to be back to break even and I’ll never try that crap again. Oh wow, that was perfect timing too. It’s 4:15 and now I can go fishing. I need to sit here and catch my breath first though, man that was scary !
“POSITION LIQUIDATED. MARGIN CALL NOTICE“Â I see this pop up in my e mail notification window. Huh ? “Your position was closed at 16:15 EST due to a lack of.. please submit.. by 5 PM February 21st” .. what the heck is this? Well, I’ll tell ya what the heck it was. To hold an ES futures contract past 4:15 eastern time, you must have $5625.00 per contract in your account or your position gets closed by the broker at 4:15 when the market closes. In fact, I had lost FIVE THOUSAND, TWO HUNDRED DOLLARS and now my broker had given me until the following day to deposit several more thousand of dollars into my account.
How did I let this happen ? Number one, GREED and STUPIDITY and the refusal to take a small -$100 loss way back at 1025 and be done with it. I thought I was smarter than the market. I thought I could be cute and do some quick scalpingÂ for a few hundred dollars and go fishing the rest of the day. And I thought I could do all this without a stop loss order because the market always moves a certain way during lunch time. I guess I thought wrong didn’t I ?