Quote from Spectre2007:
over the years you realize that being stubborn is the thing that can kill many trading careers. I've seen it happen in very experienced traders, where the market just keeps moving through their positions. All it takes is a momentary psychological fatigue point.
any system you adopt has to have a inherent R:R, risk:reward, I like the moving average systems since it keeps me on the right side of the current direction. The drawback is that a gap up or gap down of multiple points can lead to significant chop losses.
there is a trick to mitigate this, its geometric quantity progression as the session progresses. If your trading 1, the next progression with 2,4,8,16,32,64...etc. Meaning as the session progresses, the last decision will tend to be the confirming move. This reduces the cost of chop, and when a breakout occurs you will be weighted more on the breakout.
everyday should have a loss limit, meaning if you hit that loss limit for the day, you stop trading. No hopes and dreams.
So a active hedge, if I'm long a basket of stocks, and don't intend to liquidate for a few weeks. One can adopt a active hedge system. The active hedge system, tries to protect against a countertrend in the position. But at the same time while doing it, there is a cost basis associated with it. To recoup the cost basis, a trend position on the hedge is taken also. So the equity exposure represents a long term swing position, while the futures represents a short term intraday system. This short term intraday system can be traded on its own, but it only works during volatile times, since the cost basis of chop will be less then the trend basis. Once the market is out of the woods, the active hedge system can be stopped. And the swing position can be left alone, and sold into premium build up.
The premise of all this is that volatility leads to downward movement and less volatility leads to upward drift in equities. And some have noticed, less volume leads to upward drift. Sorry for the confusion, and I violated my rule of posting quantities. Its not good form to do such things on public boards. I don't win every trade, and I have multiple loosers. But my W:L is average is higher then most. At times I get cocky and let positions run against me, with a mental stop, and this can be quite dangerous. A small loss can turn into a very exceptional large loss.
Chris
