The Morning Report for Wednesday, May 23, 2012

June 15, 2012 6:42:05

The biggest fallacy in day trading is that success breeds success.  Preparation and good situational awareness breeds success.  Never trade yesterday’s stocks, today.

So, we knocked it out of the park Tuesday.  We called JPM long out of the gate in the morning, caught amazing trades on PCX as rumors of bankruptcy then a line of credit rocked the stock through multiple halts and went short SAP off the news wire on announcements of its intent to acquire ARBA.  Had you been in our trading room, you would have received the calls early, unlike my Facebook friends, but there were plenty of profits to go around.   Now that I have rung the register and taken a bow, the time for celebration is over.  Turn the page onto a new day filled with a whole new set of parameters.

The state of the world is “on edge.”  Asian markets and European Futures are trading sharply lower into the early hours of Wednesday.  All eyes are on the summit in Brussels to see what fate Europe has in store.  Greece cannot elect a government and the Dutch right-wing politician, Geert Wilders, who aims to turn a September 12 parliamentary election into a referendum on the euro and EU membership, filed a lawsuit on Tuesday aimed at postponing the Netherland's ratification of Europe's permanent bailout fund until after the poll.  Someone ought to tell these guys to get some Belgian chocolates after the summit breaks. 

My geopolitical tirade aside, the dollar is getting stronger.  Commodity prices will continue to see pressure if the dollar remains strong.  Considering 20% of the S&P is based on energy, a strong dollar does not bode well for a strong market in the absence of economic growth.

Our eyes will be on DELL after they reported another disappointing quarter.  Other notables are PETM and PCX.  How can I forget Facebook?  Looks like it will be available to short and, given the bad press, there could be good opportunity to beat the stock down further.  No mercy!

Log into our virtual trading floor @  password = smart


You should consider the following points before engaging in a day-trading strategy. For purposes of this notice, a “day-trading strategy” means an overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities.

Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses.

You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.

Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with other professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading.

You should be familiar with a securities firm’s business practices, including the operation of the firm’s order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures.

Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily trading fees that you pay on your trades will add to your losses or significantly reduce your earnings.

When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day-trading strategy also may lead to extraordinary loses, because you may have to purchase a stock at a very high price in order to cover a short position.

There are special risks associated with uncovered option writing that expose the investor to potentially significant losses. The writer of an uncovered call may incur large losses if the value of the underlying security exceeds the exercise price; and the writer of an uncovered put may incur large losses if the value of the underlying security declines below the exercise price. Uncovered option writing is not suitable for everyone. The strategy is only for the knowledgeable investor who understands the risks, has the financial capacity and willingness to incur potentially substantial losses, and has sufficient liquid assets to meet applicable margin requirements.

Proprietary traders may be required to make initial capital contributions to registered broker dealers. There is no guarantee that the trader will be successful and these capital contributions may be lost.

Proprietary traders are not customarily paid any salaried compensation. Instead, traders are entitled to distributions based upon profits from their trading – pursuant to their Class C interests in the firm.