Risk Management for Swing Trading Stocks?

[short&naked]

Quote from Rabbitone:



If one time events or opening gaps scare you away from swing trading it means your strategy is not working long term or you may not make it as a trader. [/B]

It's not a matter of fear, but of RM.
Those one time events can blow up trading accounts. You know that right? So far you have been lucky, but from what you have written I doubt that you have a pro take on RM.

Your strategy has partly been based on luck. This is not enough for me. It works until it doesn't work.

 

[Rabbitone]

Quote from short&naked:

It's not a matter of fear, but of RM.
Those one time events can blow up trading accounts. You know that right? So far you have been lucky, but from what you have written I doubt that you have a pro take on RM.

Your strategy has partly been based on luck. This is not enough for me. It works until it doesn't work.

Ten years of trading luck. You are out of your f—king mind.

I have traded with a detailed “Exit Plan” for 6 years to take care of the one time events you mention. I have specific methods to take on any cataclysmic event during automated trading. I pull the plug all the time. I no longer get hosed by the markets. I was talking about events the first 4 years of my automated trading.


The terminology in this thread is extremely poor. You mixed up concepts in RM.

Bad concept one: Using stops as an example of handling trade management. Stops are NOT a trade management concept. They are for handling NORMAL trading not huge gaps.

Bad concept two: Telling traders they cannot swing trade because no stops can handle big events. That is why traders build an exit plan. The exit plan can handle “one” time events that are outside the scope of NORMAL trading.

 

[andrasnm]

It is simple, use a 1:4 or better risk reward. Each unit risked should gain 4 units. This however takes balls, and many fuck it up. The problem if you risk a dollar for a trade, when right you must have the balls to hold on for a 4 profit. Otherwise do not use this. There are no silver bullets. (or we all be rich

Quote from short&naked:

I find that single stocks can provide great trends even when the general market isn't trending at all. However, the short open hours can create huge gaps at open and make risk management with stops almost impossible.

Is there any way to limit one's exposure (like in options) without incurring time risk (theta burn)?

 

[intradaybill]

Quote from short&naked:

I see a problem though with stops and single stops that no solution could solve, which is that you run the risk of a black swan even (bad news about the CEO, etc.) pushing the stock down so fast that you cannot find enough buyers to unload it.

Problem is you will never know if or when this will happen.

There is a short, naked, sweet and clear answer to this. Take small non-systemic risks and diversify.

 

[black diamond]

I don't swing trade, but is there a reason you couldn't use collars?

 

[mikea59]

Quote from short&naked:

I find that single stocks can provide great trends even when the general market isn't trending at all. However, the short open hours can create huge gaps at open and make risk management with stops almost impossible.

Is there any way to limit one's exposure (like in options) without incurring time risk (theta burn)?

Buy puts for protection on long stock positions. A hard stop can get you taken out in a nano-second. Options have a little more staying power, so-to-speak. Strike price can be tested multiple times without you getting called out. Not a perfect solution, just another "option" (... see how I did that...)