2011: Rebuilding My Battered Account
- Thread starter neke
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I may have a case of selective memory here, but it seems that a majority of your disaster trades have been front month options within the last 3 days of expiration. If you pick the direction right, you might make some profit, but if you have to average down, the theta's gonna kill you every time.
The options in and of themselves are not the problem. What I say won't be popular. What's popular isn't right, and what's right isn't popular at times.
The mistake in this instance as in numerous others is the indiscriminate use of leverage. There is a clear lack of ability, and or discipline in proper position sizing to minmize risk while accomplishing objective.
Please don't anyone espouse to me that in order for Neke to accomplish his goals, it requires this abusive and excessive risk. It is attainable with much less risk per position, adding to winning trades, and most importantly some serious introspection.
Neke, I've followed these journals from day one. Whether you are willing to admit it, or are able to realize it, you are getting the results you want in your trading. For those of you that may disbelieve, a good starting point is to read if you havn't two interviews in Market Wizards and New market Wizards.The first with a rather silent legend, Ed Seykota, and second with William Eckhardt. If you happen to have read these, then reread them again, and again. There is a wealth of knowledge there, no pun intended.
Lastly, I'll pose these questions to anyone to answer: were you to be managing capital, and your last couple years were looking like this compared to your goals, defined objectives to meet those goals, and your benchmark, what would you do now objectively? Were you to have placed funds with a manager whose performance had declined to this level, while still being risk inclined instead of averse, what would be your best and most prudent course of action?
Have a nice weekend!
The mistake in this instance as in numerous others is the indiscriminate use of leverage. There is a clear lack of ability, and or discipline in proper position sizing to minmize risk while accomplishing objective.
Please don't anyone espouse to me that in order for Neke to accomplish his goals, it requires this abusive and excessive risk. It is attainable with much less risk per position, adding to winning trades, and most importantly some serious introspection.
Neke, I've followed these journals from day one. Whether you are willing to admit it, or are able to realize it, you are getting the results you want in your trading. For those of you that may disbelieve, a good starting point is to read if you havn't two interviews in Market Wizards and New market Wizards.The first with a rather silent legend, Ed Seykota, and second with William Eckhardt. If you happen to have read these, then reread them again, and again. There is a wealth of knowledge there, no pun intended.
Lastly, I'll pose these questions to anyone to answer: were you to be managing capital, and your last couple years were looking like this compared to your goals, defined objectives to meet those goals, and your benchmark, what would you do now objectively? Were you to have placed funds with a manager whose performance had declined to this level, while still being risk inclined instead of averse, what would be your best and most prudent course of action?
Have a nice weekend!
Neke I'm truly sorry for your loss- but I must be candid--this was an absolute recipe for failure.
You took a position betting on price to decline in an area on the chart that clearly showed significant demand! This was an extremely low probability, high risk trade... with little profit potential. The chart tells you this Neke. The highest probability, lowest risk, highest reward trade on a gap down into a demand level is LONG!
Neke-to preserve what remains of your account-- it is IMPERATIVE you learn basic technical analysis: how to identify demand and supply on chart.... what are strong levels and what aren't (because there are absolutely key differences on which levels represent even higher demand or higher supply-- and therefore increase your probabilities even further).
Had you already done this... what would your account look like today? Worst case-- there are plenty of losses you could've at a bare minimum avoided simply by passing on your
"gut feel" trades... Best case--you could've taken the opposite side of the "gut feel" trades which represented the lower risk higher prob and significantly added value to your account.
Best of luck to you.
Personally I think you are going to be better off taking this cash and constructing a diversified/hedged portfolio, and maybe take a small amount (e.g <10-20% of portfolio) for higher risk trading.
Aim to make 1% per week and take it slow and steady. I know that sounds really boring but I think you're more likely to be profitable that way compared to this gluttonous approach to trading.
Still, you are more likely to win big or blow up which I suppose does make it more exciting...
Aim to make 1% per week and take it slow and steady. I know that sounds really boring but I think you're more likely to be profitable that way compared to this gluttonous approach to trading.
Still, you are more likely to win big or blow up which I suppose does make it more exciting...
He didn't buy calls, he bought DITM puts (making him short).
He said he had a plan at first to wait for price to rally to a certain level before beginning his position. The problem is that he jumped the gun because the price run up didn't occur in his time frame. By waiting until price reached the level he planned for, the end result would have been a scratch or a small profit.
And a couple days before expiration you need to be right on direction, there's no room for averaging down, IMHO, even if the strike is DITM. FNSR wasn't far from becoming OTM on the run up.
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