HARD TO BORROW?

I have been trading for about six years. I just now have been able to short stocks, and don’t understand a couple of things. Sometimes when I try to sell short by placing the order at the bid price, I get an error message that says “Hard to borrow” or “Contact order desk.” It is my understanding there are no longer short-sale rules, something like uptick rules. Why would I care about something being “hard to borrow”? What does that even mean? Thank you for your years of giving advice at Stocks & Commodities, I really appreciate it.
— gatortrader

Thanks for the kind words! First, for decades we had the uptick rule to consider when selling shares we don’t already own (selling short). This means that we must sell the stock at the offer, or at the last price increase versus hitting bids, thus risking running the stock price down.

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SOURCE OF DATA

Hi Don, I have seen many traders who post the Nyse close imbalances in US dollars just after they have been released. Do you have any idea where they are getting this information? There must be a website out there posting them in real time. Thanks. —TradingNerd

Actually, the market-on-close imbalances are published daily at 3:45 Nyse time in number of shares, not US dollars. You can, of course, get a program to convert the shares to Usd if you like. We get our numbers from our trading platform, RediPlus (Goldman Sachs), but you can also access them from news services like Dow Jones or Reuters. Hope this helps.

Originally published in the September 2011 issue of
Technical Analysis of Stocks & Commodities magazine. 
All rights reserved. © Copyright 2011, Technical Analysis, Inc.

SCALING OUT OF POSITIONS

I have been following a conversation on a message board on the topic of scaling out. The originator of the post is making a statement about trading psychology and has posted many scenarios trying to prove or disprove a theory about this behavior. For example:

Original poster:

• Four ES contracts 50% win ratio all in/all out versus
• Four ES contracts 50% win ratio scaling out at half target
• Nine-point target three-point initial stop-loss

First example with 20 trades:

• 10 winners for 9 x (four contracts) = 360 points ($18,000)
• 10 losers for 3 x (four contracts) = 120 points (-$6,000)
• Net profit $12,000

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LATEST IN LEGAL AND REGULATORY NEWS

There are several new events happening in our trading world, and I have received many questions about them. I have addressed a few in one of our webinars (see www.stocktrading.com for upcoming events), and thought I would share with my readers here atStocks & Commodities.

1. How will the new rules like Dodd-Frank and the Foreign Account Tax Compliance Act (Fatca) affect Bright Trading?

As far as the Dodd-Frank and Fatca are concerned, since we are a broker-dealer and exchange member, this will all be pretty transparent with no direct effect to our traders. I strongly suggest that each of you who are involved in trading check with your specific brokerage to see if this has some impact on your own trading going forward.

2. Are the new B-D trade review rules, required for direct-access traders, going to affect your firm, or more specifically, your traders?

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