Lost 100K in one month, 50% wiped out, start to write journal

We will have a very clear idea of where the banking sector stands next week when earnings start coming in.I don't expect a bounce like we had last quarter with the cooked up numbers we got served.It's easy to make a profit when you get money at near 0 interest and bailout funds.
This quarter investors will be looking at improvements over the last quarter and with defaults and unemployement rising it is hard not to see another leg down - C has been in a rut for a while, they may be the next candidates for a reverse split (hint - go short) JPM, BAC and WFC have too much exposure to mortgages and credit card risk, and we're not doing any better than 3 months ago - they may come up with more nonsense but I think people are starting to realize that those banks are not as healthy as they thought.

I think covering all your positions in the morning may be a decent idea - wait for setups instead - I mean there are decent probability trades outthere right now!

30 day longs in my book:
PNRA - DLTR - CMG - SKF - AZO

30 day shorts
AAPL - WFC - JPM - CME - ICE - AIG - POT

Neutral plays, wait and see:
COH good mover - will it break 24 or break higher
Entry is break of todays range.

Whatever you choose - good luck!!
 
This is a concern. I am currently not shorting under $2. I am shorting stocks with large one week gain and keep for one week and then cover. Short has unlimited risk, currently each stock is 10% portfolio, I am looking at them from time to time ,, if rise too much, i will cover some, never see a stock I short has crazy more than 100% gain overnight so that I cannot cover, which I do not want to see. Do you think this strategy work?


Quote from Tide31:


Rule 2 - Never short a stock under $5; risk-reward is skewed usually.

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Quote from NoDoji:

"Averaging down works really well until it doesn't. Then it REALLY doesn't."

Here is a scenario where averaging down is acceptable because you are planning your max risk in advance (though it's still not wise):

A stock sets up for a long or short, but it's not the highest probability setup (there another support or resistance level that may still be tested). But you are antsy to get into the trade because you might miss the move if you don't.

OK, if you're that impatient and afraid of missing the move, put on half your full position and place your stop just outside that next S/R level. IF it then moves against you and comes close to that next S/R level and you still feel the trade has merit, put on the rest of the position and keep your stop in place for the full position. Once S/R is broken all bets are off; honor your stop and re-evaluate the trade.

This method prevents you from taking a larger loss, and if the trade had gone in your favor right away, you would add the rest of your position to a winner.
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This is the only situation in which I average down. Why do you think this method is unwise? Do you prefer to just wait for a better setup to enter with a full position size?
 
Quote from jj90:
This is a concern. I am currently not shorting under $2. I am shorting stocks with large one week gain and keep for one week and then cover. Short has unlimited risk, currently each stock is 10% portfolio, I am looking at them from time to time ,, if rise too much, i will cover some, never see a stock I short has crazy more than 100% gain overnight so that I cannot cover, which I do not want to see. Do you think this strategy work?
More...

I will just give you comments to specifically address your strategy as you have described it:

I am not opposed to shorting a stock, especially after it has gone up dramatically in a week, as many do pull back after a big run up. But I would only do it after it starts the decline.

I also prefer to trade with the market, so as long as the market is going down too, then shorting is fine, but be ready to cover if the stock or market starts to head back up.

I believe 10% per stock is too much. I would start with a smaller percent and then if you are wrong, you don't have to bail out right away. Instead you can add to your holdings. Example, start with 1% and then add in 1% increments up or down, then take profits in 1% increments.

This is a little difficult if you are a manual trader, but automated software handles this easily. No emotions - just gimme the the money!

I also do not like the idea of just closing positions arbituarily after 5 days. Instead, only trade positions that move (like ATR%(14) > 5), so you only trade stocks that move at least 5% a day. That way you can set your profit goals at 1%-2%. If you are going long and short, you should be taking money / profits off the table every day.

Good luck!

Ed
 
in addition to the
"disciplined trader"= mark douglas.

get this one

http://www.amazon.com/Bulls-Make-Money-Bears-Slaughtered/dp/0735201455

Bulls Make Money, Bears Make Money, Pigs Get Slaughtered: Wall Street Truisms that Stand the Test of Time (Hardcover)
by Anthony M. Gallea


get it used for 7 bucks delivered..

if there is one single thing I can distill for u from the book..

no more than 2-5% of your portfolio in a single stock.. no more than 20% in a single sector...
 
Quote from TraderZones:

I have a feeling this may be Mr. 40 Aliases (Cold/c-kid, Jasonn...). He has a history of shock titles and this looks his M.O.
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Thread def. smells like a wind up.
 
My MRNA trade is an example or a lesson to show the bad thing of average down. I know the rule that do not put all eggs in one basket, so adding MRNA from 10K to 60K, which is 5% to 30% of the portfolio. I stopped out with 30K loss (15%) on a 30% of the portfolio.

I bought MRNA at around $3.5 in the day that news coming out their drug approved which is 100% up from previous day. I just wanted to take another 10%-20% to make $1000 on that $10000 position. Actually not so serious on that trade, it is just one of the trade I made. Though I realized that the news is not so exciting since it is just a re-labeling approval that day, the stock is down at $2.4. I add another $10000 at $2.4, average down, and hope to see it back to $2.8
then I can have less loss on that. I have never seen a stock drop that much and have no bound. This is the stock, no bound at all and drop to $1.9
the next day , announcing a new stock offer to some investor at $2. I add another $10000 at $1.9. If new investor buy at $2, I guess it will go up after that offering and I can break even. This would be like HEB. This stock has no bound at all for a single day, single hour with no any chance to get out. I add $30000 at $1.6 and stopped out all the position at $1.5. This is the bio-stock and I do not know when it will go up again after this wave and do not know how much it will further go down with the book value of $0.2. The loss is 30K.

Whole story about my loss on MRNA. One trade, average down, does not work.


Quote from zigzag:

This is the only situation in which I average down. Why do you think this method is unwise? Do you prefer to just wait for a better setup to enter with a full position size?
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