How to blow up your account
- Thread starter Freeman
- Start date
(jk).Sounds to me like he can still go through quite a bit of antacid.
Now if he put 70% of his capital in these 3 stocks short, that means he could use the other 30% to use as a bit of hedging.
Maybe by hedging, the antacid raft ride might be a little easier to deal with.
As for myself - anytime that I start looking for reasons why I should stay in a losing postion, that means one thing and one thing only.
It's time for me to get out, dust myself off and look for a new opportunity. I don't have very much risk tolerance. I am very stingy with my cash. (maybe that's why I'm still here)
Seldom, do I find myself looking for reasons to stay in a losing postion. I'm so stingy, that I am usually out, long before this can happen. Either the trade goes my way soon, or I get out. I miss opportunities sometimes doing this, but I think that in the long-run I come out on top.
I trade under a "love to take my losses type of mindset". I have developed this over time and experience. The experience of having to look at my P&L and say to myself " a 100$ loss wasn't good enough for me, I had to wait around a hope until it became a 300$ loss, then it was good enough for me to get out" (yes I am a smalltime player) probably known to some as Joebob redneck piker...lol..... but regardless of size, I think the principle is the same.
My point is, that I tell myself to love to take the 100$ loss, don't wait to see if it can become a 300$ loss. I can always get back in the trade if I so desire.
Now if he put 70% of his capital in these 3 stocks short, that means he could use the other 30% to use as a bit of hedging.
Maybe by hedging, the antacid raft ride might be a little easier to deal with.
As for myself - anytime that I start looking for reasons why I should stay in a losing postion, that means one thing and one thing only.
It's time for me to get out, dust myself off and look for a new opportunity. I don't have very much risk tolerance. I am very stingy with my cash. (maybe that's why I'm still here)
Seldom, do I find myself looking for reasons to stay in a losing postion. I'm so stingy, that I am usually out, long before this can happen. Either the trade goes my way soon, or I get out. I miss opportunities sometimes doing this, but I think that in the long-run I come out on top.
I trade under a "love to take my losses type of mindset". I have developed this over time and experience. The experience of having to look at my P&L and say to myself " a 100$ loss wasn't good enough for me, I had to wait around a hope until it became a 300$ loss, then it was good enough for me to get out" (yes I am a smalltime player) probably known to some as Joebob redneck piker...lol..... but regardless of size, I think the principle is the same.
My point is, that I tell myself to love to take the 100$ loss, don't wait to see if it can become a 300$ loss. I can always get back in the trade if I so desire.
I would suggest that perhaps his friend should invest some time and money in studying technical analysis, especially the section on "classic key reversals". That one came with every thing but a blinking neon sign.
Everybody like to TALK about money management, but nobody does anything about it..
Seriously though, trading is more mental than anything. A person can see anything they want in a chart. If he is biased in one direction, which often happens after they take a position and put up the money, they almost enter a delusional state. Or maybe call it a state of denial. They are so biased, that even if God Himself will tell him that the market is going the other way and that he should get out, he continues to dig his heels further into the ground and stands pat. I've met these kind of people before.
As far as money management goes, it obviously doesn't apply to him. His risk exposure is at a maximum. Shorting stocks leaves a loss potential of infinity (mathematically). At least when you buy stocks, there is always a maximum loss (when it goes to zero).
The thing is, he MAY be right. Stocks may go lower, and he will revel in his keen insight (and you will not hear the end of it). But rest assured he made his trading decisions by the seat of his pants, and the ego boost he will get will ultimately cost him his winnings.
Well, that's my sermon for the day.
Seriously though, trading is more mental than anything. A person can see anything they want in a chart. If he is biased in one direction, which often happens after they take a position and put up the money, they almost enter a delusional state. Or maybe call it a state of denial. They are so biased, that even if God Himself will tell him that the market is going the other way and that he should get out, he continues to dig his heels further into the ground and stands pat. I've met these kind of people before.
As far as money management goes, it obviously doesn't apply to him. His risk exposure is at a maximum. Shorting stocks leaves a loss potential of infinity (mathematically). At least when you buy stocks, there is always a maximum loss (when it goes to zero).
The thing is, he MAY be right. Stocks may go lower, and he will revel in his keen insight (and you will not hear the end of it). But rest assured he made his trading decisions by the seat of his pants, and the ego boost he will get will ultimately cost him his winnings.
Well, that's my sermon for the day.
I always place my stop at the point where I know absolutely positively that I am wrong about the trade. Doesn't brother me to take a loss from that kind of stop. (Unless, of course, the stock reverses big right after taking out my stop! 
).
).I get out of a losing trade with a 5% loss. If the trend reversal does happen, just get back in. There are so many opportunities every day. Why stay with a losing position. By being stubborn like this, your friend will eventually lose. The worst thing that can happen is getting a margin call forcing him to cover and witness the market going his way right after that. Tell him to get out now.