I trade 1 ES

[OldTrader]

Quote from random trader:



You made some good points but missed one important factor: leverage. I agree that your comments apply to someone who is overleveraged and cannot survive a severe adverse move. Think LTCM. However, if LTCM were leveraged 1:20 instead of 1:200, there would not be any story about it. Greed kills.

Did you notice my experiment is called the "no fear, no greed" experiment?

I am underleveraged (overall, not in this account) and if you read my previous messages, you know I can take a 100 point (ES) move if I want to. I can survive another 1987; I even survived from NAZ 5000 to NAZ 1500.

For others reading, do not follow my style if you are not underleveraged. Peace.

The larger point is not whether you can "take" a 100 point move against you. The point is whether you can take a 100 point move, and then come back with your 8 point profits at a time. The question really is whether this "style" makes any sense at all.

And clearly, because of the leverage, if the 100 points makes no difference to your overall well-being, then it's equally clear that a puny 8 point profit makes no difference either.

You seem to be giving clear instruction though on how to trade without "fear or greed". Just trade in a position so small relative to your total assets that it makes no difference at all. It's when you start to ponder making money that your "style" becomes somewhat foggy.

I have no problem with taking a position and sitting there. Some very successful traders do exactly that. However, these traders don't leap out with an 8 point profit. If you're going to take the risk, do it for a large reward. Otherwise, who are we kidding here? Either way, picking tops is a tough business.

OldTrader

 

[random trader]

Quote from OldTrader:



The larger point is not whether you can "take" a 100 point move against you. The point is whether you can take a 100 point move, and then come back with your 8 point profits at a time. The question really is whether this "style" makes any sense at all.

And clearly, because of the leverage, if the 100 points makes no difference to your overall well-being, then it's equally clear that a puny 8 point profit makes no difference either.

You seem to be giving clear instruction though on how to trade without "fear or greed". Just trade in a position so small relative to your total assets that it makes no difference at all. It's when you start to ponder making money that your "style" becomes somewhat foggy.

I have no problem with taking a position and sitting there. Some very successful traders do exactly that. However, these traders don't leap out with an 8 point profit. If you're going to take the risk, do it for a large reward. Otherwise, who are we kidding here? Either way, picking tops is a tough business.

OldTrader

Somehow it's very difficult to make myself understood. My 8 point target is associated with the current 20 point stop. If I use a 100 point stop, the target will be adjusted accordingly. This has been said in previous messages.

In the book "Market Wizards", one trader said "your every position should be so small that it looks ridiculous". See, I wasn't lying when I said I read a lot of books. Maybe not 5,000 yet, but some day.

 

[OldTrader]

Quote from random trader:



Somehow it's very difficult to make myself understood. My 8 point target is associated with the current 20 point stop. If I use a 100 point stop, the target will be adjusted accordingly. This has been said in previous messages.

In the book "Market Wizards", one trader said "your every position should be so small that it looks ridiculous". See, I wasn't lying when I said I read a lot of books. Maybe not 5,000 yet, but some day.

We definitely don't seem to be communicating. You say you won't cover on a "spike". So the bottom line is that IF it "spikes", breaks out, and continues, you have not covered with a 20 point stop. You say you can take 100 points, even 200 points (20% move such as 1987). So it doesn't sound to me like you're working necessarily with a 20 point stop at all, especially if the move comes on news or whatever you happen to define as a spike.

Let's say for instance that we blow through the 1015 area on some type of "news". Now we're suddenly trading at 1025. Given that "news" was involved (it always is), do you cover? Or do you wait? And if you wait, where is your stop? 1050? 1100?

I don't have a problem with a small position. That was not my point. My point is that you seem to justify very lax discipline because the position is small. I don't recall Market Wizards suggesting this....do you?

OldTrader

 

[random trader]

Quote from OldTrader:



We definitely don't seem to be communicating. You say you won't cover on a "spike". So the bottom line is that IF it "spikes", breaks out, and continues, you have not covered with a 20 point stop. You say you can take 100 points, even 200 points (20% move such as 1987). So it doesn't sound to me like you're working necessarily with a 20 point stop at all, especially if the move comes on news or whatever you happen to define as a spike.
OldTrader

We are definitely not communicating. My stops are soft. I shoot for an average of 20 point stop, but it may actually be 15 as well as 25 points. If today's initial jump to 1010 was followed by a drift-up all day, I would have stopped somewhere in the 1010 area. It may be at 1008 or 1013. I may lose an additional few points but I stick to my rule not to be stopped on spikes.

 

[random trader]

Quote from OldTrader:


Let's say for instance that we blow through the 1015 area on some type of "news". Now we're suddenly trading at 1025. Given that "news" was involved (it always is), do you cover? Or do you wait? And if you wait, where is your stop? 1050? 1100?
OldTrader

Where is the market before the blow through to 1015? If it's already at 1010 without news, I would have stopped. Are you suggesting a spike follows another spike without any time in between? I have never seen anything like that.

 

[gotta_trade]

Quote from random trader:



Where is the market before the blow through to 1015? If it's already at 1010 without news, I would have stopped. Are you suggesting a spike follows another spike without any time in between? I have never seen anything like that.

Well...for your sake, I hope you never do.

 

[random trader]

Quote from OldTrader:


I don't have a problem with a small position. That was not my point. My point is that you seem to justify very lax discipline because the position is small. I don't recall Market Wizards suggesting this....do you?
OldTrader

Your system can have some freedom. Discipline means you have to follow your system, not your system cannot have any freedom. One trader in "Market Wizards" summarized this point up nicely.

 

[random trader]

Quote from gotta_trade:



Well...for your sake, I hope you never do.

That's why I have double insurance. First I have a 20 point soft stop. Second, I apply adequate leverage that I will not be wiped out in any event. Undertrade, always undertrade. ("Market Widzards" again)

Even if you have a hard stop, you are not safe from 100 point gaps if you are overleveraged.

Please share how you handle a 100 point gap if it happens.

 

[OldTrader]

Quote from random trader:



Where is the market before the blow through to 1015? If it's already at 1010 without news, I would have stopped. Are you suggesting a spike follows another spike without any time in between? I have never seen anything like that.

Let's say the market opens at 1012, just as it did today. You ignore this because it's "spike". Now we head up (instead of down), and take the highs out at 1015, triggering stops resting just above the highs. This punchs it a quick 5 more points to 1020.

This all happens in the first 30-60 minutes. You've never seen a day like this? What do you do now? As I understand it you can't cover because the move is a "news spike".

OldTrader

 

[random trader]

Quote from OldTrader:



Let's say the market opens at 1012, just as it did today. You ignore this because it's "spike". Now we head up (instead of down), and take the highs out at 1015, triggering stops resting just above the highs. This punchs it a quick 5 more points to 1020.

This all happens in the first 30-60 minutes. You've never seen a day like this? What do you do now? As I understand it you can't cover because the move is a "news spike".

OldTrader

I will wait for the "news" to blow over. I will not cover DURING the news spike, but I didn't say I will not cover AFTER the news spike. If the market happens to stand at 1020 when a few hours have passed and I believe the news effect has gone, I will cover at 1020. The point is I will not cover in the first 30-60 minutes when the news is still in play. Clear now?

And who can raise his hand and say he knows a system that no matter what happens (e.g. 100 point gap), his positions will ALWAYS be safe? I feel I am challenged to come up with a bullet-proof system. The truth is I don't know one and probably neither do you.