With sentiment on nearly everything getting better (“Economies to open up”), (“Remdesivir positive results”), (“Deaths less than models projected”), etc., stocks have received a flood of bidding from people sitting on the sidelines.
Things never work in straight lines. Markets never move continuously up. There will be spouts of fake news now and then to throw some sand in the gears. You’ll hear about (“Second wave”), (“Shutdown to last until December”), (“Food shortages”), etc.
This is all media noise. The paradoxical thing is that even though the media is spewing mostly noise these days, one has to pay attention to it since it gives you a very general barometer as to sentiment – if you assume something to be false, but others believe it is true, the fact that you know others think it is true is in itself a valuable piece of information.
Placing orders is always an inexact science. On the buy side, sometimes it makes sense to pound asks, but in most of the cases it is more efficient to just passively place orders on the bid and let the market come to your own price.
However, I have a phrase which is “better to be lucky than good”, which is to say that sometimes you get a clairvoyant fill on your orders, and sometimes it comes up annoyingly short.
A couple days ago I had a limit order in for a stock, and I missed it out by two cents. This wasn’t a penny stock either. That stock is now up about 13% from where I initially placed the order, so I am kind of steamed about it. Unlucky. It was definitely a case of ‘too much too fast’, and they will regress down, but I very much doubt to the price where I nearly hit my limit order.
You probably are asking, “Why not just hit the ask when it is two pennies to your order?”. I usually don’t set my orders in the middle of the trading day, and if the price I set for this particular security was 5 cents higher, I probably would have gotten filled. That’s just the roll of the dice occurring. That’s trading life – psychologically it is irritating (hence this post) but you have to forget it and move on and deal with the reality the market gives you, not how you wish it to be.
Next chart, the May 2020 VIX futures, where you can see my liquidation on blue triangles:
I liquidated my VIX short orders in the market euphoria, and I say I did pretty well on this one. The last order to cover the short was at 31.50 and the low was 31.45. Needless to say – lucky on the exit. I’m looking to get back into this trade at higher prices.
Investing involves a lot of skill, but in short-term situations as these, sometimes you need a good dose of luck.