livingston's class
- Thread starter livingston1
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Hi Livingston,
I have a question about risk management, if you have time.
How do you decide what to risk on a given trade?
Let's say your average holding period on stock XYZ is 5 minutes, for example. Let's further say that the average price range over that 5 minutes is 10 cents.
Do you base your risk on this range, or some multiple of it?
OR (and this would be my guess) do you let the action of the stock, once you're in the position, tell you where and when to get out?
It would seem the latter approach is a lot of what the skill of tape reading is all about, but I may be wrong...
As I think further about this, it would seem risk might be evaluated based upon liquidity (more liquid=bigger potential position), available funds (more money=bigger potential position), volatility over a given time frame (more volatile=larger risk, but larger potential reward), and/or a combination of these factors. I'm probably leaving a lot out, but would love to hear your thoughts on this!
Also, do you ever enter stops when you've entered a position?
If so, are these actual orders, or "mental stops?"
My experience with stops, at least in futures, is that they become Market Orders once the stop price is hit, but that in NO way gaurantees that you'll get filled at your stop price! If there's no order at the stop price, the market just keeps going until it finds one!
Looking forward to your thoughts, and thanks again!
I have a question about risk management, if you have time.
How do you decide what to risk on a given trade?
Let's say your average holding period on stock XYZ is 5 minutes, for example. Let's further say that the average price range over that 5 minutes is 10 cents.
Do you base your risk on this range, or some multiple of it?
OR (and this would be my guess) do you let the action of the stock, once you're in the position, tell you where and when to get out?
It would seem the latter approach is a lot of what the skill of tape reading is all about, but I may be wrong...
As I think further about this, it would seem risk might be evaluated based upon liquidity (more liquid=bigger potential position), available funds (more money=bigger potential position), volatility over a given time frame (more volatile=larger risk, but larger potential reward), and/or a combination of these factors. I'm probably leaving a lot out, but would love to hear your thoughts on this!
Also, do you ever enter stops when you've entered a position?
If so, are these actual orders, or "mental stops?"
My experience with stops, at least in futures, is that they become Market Orders once the stop price is hit, but that in NO way gaurantees that you'll get filled at your stop price! If there's no order at the stop price, the market just keeps going until it finds one!
Looking forward to your thoughts, and thanks again!
Great thread livingston. Seeing that you are the one that trained Steve t and RJV gives the thread serious credibility. I have been participating on the PnL thread and both Steve & RJV are amongst the most consistent traders on there.
Thanks for you insite.
Thanks for you insite.
hi trader56,
The factors you mentioned below are all essential when deciding your risk... there are certain stocks which actually have liquidity but are very volatile, and i choose to take smaller positions, say 2-3k and i tend not to add on, even tho its going in my favor, as i know that when it reverses or squeezes, if im holding a boat load theres no way out without a lot of pain....
Initially when you are starting out, you definetly want to keep very tight risk management...the point is that no one expects you to make money off the bat...but theres no point hemoreging $$$. I'd say if you are scalping, 5 cents is a good general benchmark for trader just starting out... Using size, meaning a big bid or offer as an out is also a good idea. As the trade progreses your out point changes, and you have to adapt to the new order flow...
As far as stops are concerned, i usually use mental stops to get out...in the begining i would recommend using physical stops because you might not have the discipling or speed to get out on time... Stop orders work in the same manner in the equity market, they trigger as a market order when the stop price has reached...at times they can be usefull to get out on time, but that is dependant on the situation...
Firstly,
The factors you mentioned below are all essential when deciding your risk... there are certain stocks which actually have liquidity but are very volatile, and i choose to take smaller positions, say 2-3k and i tend not to add on, even tho its going in my favor, as i know that when it reverses or squeezes, if im holding a boat load theres no way out without a lot of pain....
Initially when you are starting out, you definetly want to keep very tight risk management...the point is that no one expects you to make money off the bat...but theres no point hemoreging $$$. I'd say if you are scalping, 5 cents is a good general benchmark for trader just starting out... Using size, meaning a big bid or offer as an out is also a good idea. As the trade progreses your out point changes, and you have to adapt to the new order flow...
As far as stops are concerned, i usually use mental stops to get out...in the begining i would recommend using physical stops because you might not have the discipling or speed to get out on time... Stop orders work in the same manner in the equity market, they trigger as a market order when the stop price has reached...at times they can be usefull to get out on time, but that is dependant on the situation...
Firstly,
Thank you, Livingston!
As always, a complete, and to-the-point answer!
Actually, I'm rather glad this thread is buried where it is! It's able to fly below the radar, and avoid more of the less-than-constructive input seen on so many threads.
I'm sure I'll think of more to occupy your time LOL!
THanks again,
T56
As always, a complete, and to-the-point answer!
Actually, I'm rather glad this thread is buried where it is! It's able to fly below the radar, and avoid more of the less-than-constructive input seen on so many threads.
I'm sure I'll think of more to occupy your time LOL!
THanks again,
T56
I also would like to chime in with a 'Big Thank you' to Livingston.
Really appreciate those notes and you helping us out. Can you pm me with the meaning of 'SAI' please. Tried searching the internet and came out with "statement of additional information" which I don't think is what you meant
Really appreciate those notes and you helping us out. Can you pm me with the meaning of 'SAI' please. Tried searching the internet and came out with "statement of additional information" which I don't think is what you meant
SAI's are a firm product that Hold Bros offers. Using an SAI allows you to short a non Reg Sho stock without having to wait for an uptick.
Quote from billp:
I also would like to chime in with a 'Big Thank you' to Livingston.
Really appreciate those notes and you helping us out. Can you pm me with the meaning of 'SAI' please. Tried searching the internet and came out with "statement of additional information" which I don't think is what you meant