in the old days, they did exactly that. If you had a good client, and he got underwater in some beans, you could go the boss and ask him if he wants you to make the margin call. And many times he would just say, "No, we'll cover it."Quote from Soon2Bgreat:
Smith & Wollensky used to accept Citi shares, maybe short IBM long Citi?
I guess we can agree it'd be pretty awesome if brokers calculated margin based on the "it's not a loser until you get out" model.
I'm New
- Thread starter cit13
- Start date
You revealed a recognition of some very key issues here:
1. Without your plan in front of you, your mind will indeed play tricks based on simple human nature related to fear and ego.
2. You're mixing time frames, entering for a swing, but managing like a day trader (maybe even as a scalper where you move stops to break even after a small favorable move).
When you combine these two factors it's a recipe for disaster. You'll be choking off your profits, letting the losing trades make a full run, and you're at serious risk of letting a small loss become a larger one by using more distant time frames to validate a thesis that's been proven incorrect in the time upon which you based your initial trade.
It sounds as if you have a plan, but need to follow it strictly, or perhaps hone it a bit more so you're comfortable with it. Or maybe you need some coaching on cultivating a trader's mindset (definitely read Trading in the Zone).
Losing trades are normal in any profitable trading plan. They're similar to the labor costs and/or cost of goods in any business. In short term trading, you purchase many shipments of inventory and there will be defective or spoiled inventory along the way. You quickly discard the bad inventory and move on, knowing from your trading business plan that more of the inventory will be high quality than poor quality and you'll be able to turn it over for a profit more often than not.
The only factor you left out is whether or not you're choosing ideal levels and methods for entry. This is technical knowledge that can be learned from any decent trading book or web site.
Can you share a few of your trade entries (date/price) so we can see if there might be improvement in that respect?
P.S. When buying options for directional plays, you can use the movement of the underlying stock to set conditional orders for your option trades.
One more thing: I've been trading the same core plan for more than two years, but I still have the sheet with my setups and rules on it right here in front of me and I review it every morning because of the tendency of my mind to start thinking while trading, which leads to trading what you think instead of what you see.
I think my entries are pretty good.
This is how I normally enter a trade.
I first see what the overall market is doing by doing a technical analysis of the SPY. If the market is bullish then I look for stocks in bullish sector. If the market is bearish then I look for stocks in bearish sector.
I use Finviz.com to find trades.
In my technically analysis I look at certain things such as candle stick patterns, highs and lows, momentum, support, resistance and moving averages. I need to add volume to the list.
Trade Example:
The only winning trade I have had so far is with
SE: Spectra Energy Corp.
I was taught to enter trades by setting a stop limit order in the forecasted direction but I just buy right in with a regular limit order if my technical analysis looks good.
SE Mar 13 29.00 Put
Quantity: 1
Commissions: $5 + $5 = $10
In: 10/31 @ $1.55
Out: 11/6 @ $1.75
Profit: $10
Stops:
10/31 @ 1.15 Initial Risk $50
11/01 @ 1.60
11/02 @ 1.55 I was up about $70 here
11/05 @ 1.80
11/06 @ 1.85 Executed at $1.75
So looking at this I can see a few of my mistakes:
1. My quantity is way too low hard to beat the commission and manage risk with initial stop. (?)
- - - - - Not sure if I am right about this because if I played my cards right on this one I would have made +$100.
2. Risking too much...
3. Tightened the stop too fast.
4. No exit strategy.
What I need to do Next
1. Go back to Paper Trading for now.
2. Write down my trading strategy in full.
- - - - Entry, Risk Mananagement and Profit Taking
3. Have a plan for each trade.
4. Trade
There are options tools out there that roughly predict the option price based off of stock price correct?
That will be an easy add-on to my work sheet.
Thanks again everyone.
This is how I normally enter a trade.
I first see what the overall market is doing by doing a technical analysis of the SPY. If the market is bullish then I look for stocks in bullish sector. If the market is bearish then I look for stocks in bearish sector.
I use Finviz.com to find trades.
In my technically analysis I look at certain things such as candle stick patterns, highs and lows, momentum, support, resistance and moving averages. I need to add volume to the list.
Trade Example:
The only winning trade I have had so far is with
SE: Spectra Energy Corp.
I was taught to enter trades by setting a stop limit order in the forecasted direction but I just buy right in with a regular limit order if my technical analysis looks good.
SE Mar 13 29.00 Put
Quantity: 1
Commissions: $5 + $5 = $10
In: 10/31 @ $1.55
Out: 11/6 @ $1.75
Profit: $10
Stops:
10/31 @ 1.15 Initial Risk $50
11/01 @ 1.60
11/02 @ 1.55 I was up about $70 here
11/05 @ 1.80
11/06 @ 1.85 Executed at $1.75
So looking at this I can see a few of my mistakes:
1. My quantity is way too low hard to beat the commission and manage risk with initial stop. (?)
- - - - - Not sure if I am right about this because if I played my cards right on this one I would have made +$100.
2. Risking too much...
3. Tightened the stop too fast.
4. No exit strategy.
What I need to do Next
1. Go back to Paper Trading for now.
2. Write down my trading strategy in full.
- - - - Entry, Risk Mananagement and Profit Taking
3. Have a plan for each trade.
4. Trade
There are options tools out there that roughly predict the option price based off of stock price correct?
That will be an easy add-on to my work sheet.
Thanks again everyone.
If you enter like this regularly, and based on the trade you posted, I agree you are doing the right things. Keep it simple. Highs, lows, support and resistance, that's all I use.
If you connect the highs for SE after your entry, you'll have your downtrend line. You'd expect price to pullback to that line, possibly overshoot it a wee bit, but you don't want to see any serious buying volume hold price above that line.
You should copy the trend line and move it across the last swing low on 10/24. This is a profit target zone if trading individual price swings, or maybe a scale-out zone if trading multiple contracts.
SE complied nicely with the technical picture, pulling back to that trend line and then offering a gap open and solid drop with no reason to move stops or take profit.
On 11/12 price finally touches the parallel channel line again at which point you either realize your anticipated profit target or hold for more trending move.
I think once you tighten up your plan, you'll be able to hold for the decent profits.
No reason to trail a stop for $10 on a favorable trade with an initial risk of $50.
All the best!
Thanks NoDoji!
I agree I like to keep it simple there is so much information out there it is impossible to process it all etc. etc.
Lol
Drawing those simple lines of support, resistance, high and lows match up quite nicely... so simple I just need to do it. This is all stuff that I knew!
I need to print out each trade I do am manually draw those lines.
I am going to write down my trading plan and strictly stick to it.
I'm going to save up some more money and go back to paper trading till have a proven track record. It was good to do this month of real trading to get a good kick in the ass and get some hard knocks learning with out losing too much.
Thanks again so much!
I agree I like to keep it simple there is so much information out there it is impossible to process it all etc. etc.
Lol
Drawing those simple lines of support, resistance, high and lows match up quite nicely... so simple I just need to do it. This is all stuff that I knew!
I need to print out each trade I do am manually draw those lines.
I am going to write down my trading plan and strictly stick to it.
I'm going to save up some more money and go back to paper trading till have a proven track record. It was good to do this month of real trading to get a good kick in the ass and get some hard knocks learning with out losing too much.
Thanks again so much!
I looked at the chart for SE and I think a lot of traders would've been faked out by that rally that stopped you out, so don't feel too badly.
If you are undercapitalized you might want to look at cheap weekly options to swing trade. The weekly FB 24 calls are only 40 cents last price. If underlying keeps running up another week, you are only risking $40 to maybe make $100-300. I would not use a stop unless I couldn't watch the market live/ semi-live. Probably for options a 50% stop is right, IMO. Having stops too close will continually stop you out.
Using a 60 minute chart can help you in swing trading.
Avoid getting day trader status if you have less than $25,000. The brokerage will lock up your funds for 3 months, I think. Having stops too close can get you those 4 day trades in 5 trading days.
It takes years and years to get good at trading. If you love it, you won't give up permanently. You will make it.
If you are undercapitalized you might want to look at cheap weekly options to swing trade. The weekly FB 24 calls are only 40 cents last price. If underlying keeps running up another week, you are only risking $40 to maybe make $100-300. I would not use a stop unless I couldn't watch the market live/ semi-live. Probably for options a 50% stop is right, IMO. Having stops too close will continually stop you out.
Using a 60 minute chart can help you in swing trading.
Avoid getting day trader status if you have less than $25,000. The brokerage will lock up your funds for 3 months, I think. Having stops too close can get you those 4 day trades in 5 trading days.
It takes years and years to get good at trading. If you love it, you won't give up permanently. You will make it.
There's nothing wrong with paper trading while you figure out who to not listen to. Remember, any failed mug, as well as unscrupulous sales people can post advice on the internets.