Position sizing
- Thread starter Trish
- Start date
We all have to learn to question our beleifs about trading. One common misconception, is that you never add to a loser. This is a fallacy. Adding to a loser and trading out, can and does work very well. A good general rule of thumb is that when you can't take the pain, and you have finally reached your puking point on a trade, double your position and PLACE A STOP ON THE ENTIRE POSITION TO PROTECT YOURSELF.
Good traders to this all the time. Not recommended for those with a weak constitution, fragile health, weak heart, or small trading account.
I stepped out of the chat room to return to 7 pages of a thread-ending with a burger joint.
Much of the jargon is over my head which is fine, I have a lot to learn. All the comments are appreciated. I don't have a system, like many of you write about. I have a check list of rules-unless that is considered a system? Or is a system refer to technology?
Being involved in the market is much less personal to me in my mind and a very welcomed relief compared to my day job. (Artist.) The market has a lot of benefits: just numbers/ no ego, no plagiarism, no searching for work all the time, no feelings of secrecy/no trades are unique to one person......
I paper trade 4, real trade 1, (to not feel some drastic change), and just learning rolling up/down/out. I am not in a trade, most of the time, for more than a week, reach a target and exit. (An old habit now broken of entering too late and exiting too early.)
I also benefited greatly by someone on ET suggesting Dan Sheridan's webcasts on the CBOE, who is good and has a very funny Chicago honesty about him.
Position sizing to me at this point means dividing my small account into 5-7 trades at once, look at technicals, volume,etc. to see whether the stock will continue in my desired direction and try not to make a decision during market hours. That is when I make so many mistakes. My trades are best when I am not hovering over them all day.
Watching the market for a year, seems like good advice I would give to someone new. There are so many facets you just aren't aware of to hinder the prospects of your trade:
'Sell in May and go away.'
'August is always a flat month to trade.'
...and so on.
In and Out Burgers are pretty good.....but the Islands Restaurant chain has the best shakes.
Much of the jargon is over my head which is fine, I have a lot to learn. All the comments are appreciated. I don't have a system, like many of you write about. I have a check list of rules-unless that is considered a system? Or is a system refer to technology?
Being involved in the market is much less personal to me in my mind and a very welcomed relief compared to my day job. (Artist.) The market has a lot of benefits: just numbers/ no ego, no plagiarism, no searching for work all the time, no feelings of secrecy/no trades are unique to one person......
I paper trade 4, real trade 1, (to not feel some drastic change), and just learning rolling up/down/out. I am not in a trade, most of the time, for more than a week, reach a target and exit. (An old habit now broken of entering too late and exiting too early.)
I also benefited greatly by someone on ET suggesting Dan Sheridan's webcasts on the CBOE, who is good and has a very funny Chicago honesty about him.
Position sizing to me at this point means dividing my small account into 5-7 trades at once, look at technicals, volume,etc. to see whether the stock will continue in my desired direction and try not to make a decision during market hours. That is when I make so many mistakes. My trades are best when I am not hovering over them all day.
Watching the market for a year, seems like good advice I would give to someone new. There are so many facets you just aren't aware of to hinder the prospects of your trade:
'Sell in May and go away.'
'August is always a flat month to trade.'
...and so on.
In and Out Burgers are pretty good.....but the Islands Restaurant chain has the best shakes.
Very well...here are your quotes:
"If you are playing a net losers game how can being too conservative ever be a bad thing."
"do you have a money management method that will keep you alive as long as possible in this game"
Here's my take. Successful traders don't believe that trading is a net losers game...that's for college professors and efficient market theorists. My finance professors argued with me for many hours that I couldn't make a living trading the markets. Well...I have been doing it for five years, make a hell of alot of money doing it, and continue to improve and get better. You know what they say...those who can do...those who can't teach...and those who can't teach....teach gym.
Second, 80% of businesses fail within the first 5 years, does that mean that starting a business is a net losers game?
The second fallacy you have is about money management. The purpose of money management is not to keep you alive as long as possible in this game.(You are presupposing that you will eventually fail) The goal of money management is to maximize your earnings given the risk you are willing to accept.
If you don't agree, that's fine....but you have two beliefs about trading that don't support your goal of being successful at trading. Are you achieving the results you want to achieve?
The problem with a forum where people post under aliases...is that you get alot of characters that make up stories. You get alot of characters that make exaggerated claims, and you get alot of guys that have read a few books that try to pass them off as experts, and they are giving out bad advice. I think that to give advice, you should be qualified to give it. If you can't trade profitably, you have no business offering trading advice to others. It's called walking the walk.
As a general rule, I take every poster who is posting under anything other than their real name, with a grain of salt. My rule, my assumption, but I'm ok with it. There are a number of great traders, and even a number of up and comers, but most are hacks. Sad but true.
I obviously hit a nerve, do you think that my observations might have some validity? Do you think that you might have some deeper conflicting beliefs about trading and success? Who doesn't want to be the best in their field, who wouldn't want to be an elite (meaning the best, or certainly one of the best) trader?
I am done...you may have the last word.
You are looking for something that signals the trend is changing.
The set of indicators I use for catching the reversals in the market, I'm not willing to share.
Here's a couple of things you can look at. First you can look for CTOD reversals. Price cycles like anything else, and most stocks tend to reverse late in the day, if only for a short term trade. For day trading, you are looking for a clean up of the seller or buyer. A large odd size print can be telling. A gap with a large odd size print is telling. Stochcastics are useful for indicating trend, not as a trigger, but for determining trend. Divergences are also useful and you know when to stop out.
This should give you some ideas.
No disrespect man, but I've seen several guys (including one big-timer on this board) puke it back, and I mean hard!
So I don't go where most pros fear to trade, but as always, thank you for sharing your information on an anonymous board.
Sincerely,
JJ
P.S. Back to main topic of the thread. Since she has the ability to "roll her position" and doesn't have to deal with many of the potential problems of the intra-day trader, Trish shouldn't have to worry about this one over much.
Taking a big loss is part of the game, especially if you are trading at peak levels, trying to take your trading to the next level. A good friend of mine just took a rather large loss...50k or so. Recently, I had a loss of 18k on a trade. What did we do, realized that it was just a bad trade, and went on to hit new equity highs by the end of the month.
One thing to remember is that while the loss is large, we had it to give back. It was accumlated profits that got whacked, and that knowing that, realizing that, and having that is a tremendous advantage.
Quote from mschey:
Very well...here are your quotes:
"If you are playing a net losers game how can being too conservative ever be a bad thing."
"do you have a money management method that will keep you alive as long as possible in this game"
Here's my take. Successful traders don't believe that trading is a net losers game...that's for college professors and efficient market theorists. My finance professors argued with me for many hours that I couldn't make a living trading the markets. Well...I have been doing it for five years, make a hell of alot of money doing it, and continue to improve and get better. You know what they say...those who can do...those who can't teach...and those who can't teach....teach gym.
Second, 80% of businesses fail within the first 5 years, does that mean that starting a business is a net losers game?
The second fallacy you have is about money management. The purpose of money management is not to keep you alive as long as possible in this game.(You are presupposing that you will eventually fail) The goal of money management is to maximize your earnings given the risk you are willing to accept.
If you don't agree, that's fine....but you have two beliefs about trading that don't support your goal of being successful at trading. Are you achieving the results you want to achieve?
Who knows, you may be the best trader on the board but at some point in time you will lose big with this philosophy. My personal wealth has come partially from trading, and 80% from owning my own business.
Yes 80% of all businesses do fail in the first 5 years. Why? Normally because at some point they become under-capitalized due to poor money management, hit an economic downturn, and then cannot recover. Being successful for five years is not a guarantee of future success. It just means that you beat the odds for five years. Trading as a business is no different. One day your edge will be gone and without proper money management you will not survive until that new edge is developed. Trading on margin is a way to increase wealth quickly, but it also has the same negative effect.
I handle every financial part of my life EXACTLY as LondonUSTrader. You prepare for the worst, and hope your preparation sees you through the tough times, because tough times ARE A CERTAINTY WHILE SUCCESS IS NOT!!!!
So while I admire your confidence and balls, I can only tell you that success is fleeting.
Didn't he claim that he has been profitable for 5 years? That is more than many of us can claim.
Yes he did, but 5 years is not a career.
We grew our business from 0 to 22 million in sales during the first 6 years. It was done with an initial risk of 50,000 in capital and bank loans which eventually reached 1.5 million. We did not change our lifestyle and we continued to plow all of our profits back into the business.
The economy turned sour (sept 11th 2001) for 3 solid years which would be equivalent to a loss of trading edge. Our 4 million dollars of inventory was now worth 2 million due to market forces. The bank turned sour on us as well (margin call), and we were forced to take out the bank with our own personal funds. My partner and I decided to continue the business for one more quarter. If we couldn't turn it around after three years we would close it down.
We managed to turn it around and we are right back where we were before the 3 year disaster, but this time we have NO DEBT. With no debt (no margin) we can now go through more tough times with much less effect on our business.
So the bottom line is you can optimize all you want,but if you are using borrowed money to achieve your wealth you better not be living on ALL of your profits or one day you won't be making a living doing what you are doing. That goes for any type of business, trading included.
We grew our business from 0 to 22 million in sales during the first 6 years. It was done with an initial risk of 50,000 in capital and bank loans which eventually reached 1.5 million. We did not change our lifestyle and we continued to plow all of our profits back into the business.
The economy turned sour (sept 11th 2001) for 3 solid years which would be equivalent to a loss of trading edge. Our 4 million dollars of inventory was now worth 2 million due to market forces. The bank turned sour on us as well (margin call), and we were forced to take out the bank with our own personal funds. My partner and I decided to continue the business for one more quarter. If we couldn't turn it around after three years we would close it down.
We managed to turn it around and we are right back where we were before the 3 year disaster, but this time we have NO DEBT. With no debt (no margin) we can now go through more tough times with much less effect on our business.
So the bottom line is you can optimize all you want,but if you are using borrowed money to achieve your wealth you better not be living on ALL of your profits or one day you won't be making a living doing what you are doing. That goes for any type of business, trading included.