Steven Cohen: "This is not a perfect game [...] youâre going to be wrong a lot"
- Thread starter aradiel
- Start date
Unfortunately, a lot of this trading "skill" of SAC, Cramer, Rocker, et al, is just inside info. These guys aren't any smarter than the average trader, just a hell of a lot richer:
"On January 13, 2003 Fontana sent his boss, Steven A. Cohen himself, a summary of his planned activities for the week, which included:
Tuesday 1/14: Morgan Keegan expected to launch on Fairfax with sell rating - we will be covering into this."
"On January 13, 2003 Fontana sent his boss, Steven A. Cohen himself, a summary of his planned activities for the week, which included:
Tuesday 1/14: Morgan Keegan expected to launch on Fairfax with sell rating - we will be covering into this."
Personally, I feel the 3 Wizards books are required reading (along with Reminscences & a few others). The number of valuable lessons contained within the assorted interviews is probably higher than anywhere else. Showing new traders the breadth of potential opportunities alone is easily worth the cost of the books. The other thing I've noticed with these and other worthwhile trading books is - as your trading progresses along the continuum, rereading the books allows a trader to see new lessons that were missed the first (or 2nd or 3rd) time around because they weren't yet at a stage where the concept could be grasped.Quote from ChkitOut:
So who wants to post the entire interview for those of us who don't have the book?
On the other end of the spectrum from Cohen in terms of winning percentage is Mark Weinstein (1st Wizards book - pg 321). At the time of the interview, he had 3 losing days in 2 years - 17 losing trades - 9 because his quote machine was down.
R
Yes, I would have to agree with that 100%. Capital preservation always is goal #1.
I'll clarify my earlier post by saying that I do exit all trades eventually. No stop doesn't mean I ride a position to zero. If the reason I entered the trade is no longer valid, then I get out. If it's a day trade and the market is closing, I get out. If I am taking so much pain I want to puke all over my keyboard, I get out.
If the strategy is designed to have open ended risk like this, especially if it averages into losers, then it makes sense to size your trades appropriately and diversify over as many positions as possible. I'd be wiping vomit off my desk long before I blew 2% of my equity on a single position.
So I guess you could say I have a maximum pain stop. I was referring to the notion that a pre-defined exit price is necessary to trade profitably.
True. I for one dont use hard stops for position trading but I will use a 'fundamental'/'news' stop, sometimes a 'pain' stop as well. If the analysis says something is not supposed to go down more than 20% in a year and it reaches 21%, I get out completly because I have been proven wrong so original thesis might very well be wrong
Energy stocks in 2008 were the classic, I was bullish on them but once they blew through all kinds of supports it made not sense to hold since the same analysis that made me bullish on them was the one that said there would be no significant correction
Ah ok, I got ya.
Can I ask, if you ultimately do have an "uncle point", why not define that price in advance of placing the trade? Even if you exit 98% of your positions way before your worst-case stop is hit, the 2% of other times it could save your ass. Discretion is not 100% reliable, especially when under the pressure of a large loss or chaotic market environment.
Basically if you are not going to ride a stock down 50% under any circumstances, then you have a de facto stop at a 50% pullback (or higher). Might as well make it a defined, real stop (either mental or in the market), rather than a vague one.
In the back of my head, I have a roughly defined uncle point, but a lot of factors will go into pin pointing it at the moment I have to pull the trigger and start exiting.
With enough trades under your belt the relatively few situations that really make you squirm in your chair are easily identifiable. If I've executed 500 trades of a certain strategy and 5% of the time take heat of $2,000 and 1% of the time $10,000, then when my pl starts creeping into that "oh crap" range then I have to accept that even if the trade set up is still valid, I've got to start lightening up and hope to simply reduce the losses. Capital preservation trumps everything else.
I don't want to rigidly determine a cut off point because I still want to consider the market circumstances surrounding the situation. However my tolerance and time horizon to allow discretion gets exponentially smaller.
For a newer trader though, I would recommend hard stops 100% of the time. No one has seen or anticipated every situation and you need a lot of experience to know when things are just too out of hand to continue.
With enough trades under your belt the relatively few situations that really make you squirm in your chair are easily identifiable. If I've executed 500 trades of a certain strategy and 5% of the time take heat of $2,000 and 1% of the time $10,000, then when my pl starts creeping into that "oh crap" range then I have to accept that even if the trade set up is still valid, I've got to start lightening up and hope to simply reduce the losses. Capital preservation trumps everything else.
I don't want to rigidly determine a cut off point because I still want to consider the market circumstances surrounding the situation. However my tolerance and time horizon to allow discretion gets exponentially smaller.
For a newer trader though, I would recommend hard stops 100% of the time. No one has seen or anticipated every situation and you need a lot of experience to know when things are just too out of hand to continue.
Quote from ChkitOut:
So who wants to post the entire interview for those of us who don't have the book?
http://www.pdf-search-engine.com/the-new-market-wizards-pdf.html
Not sure who you are referring to here on ET but it's impossible in the real world of trading. It is possible though in the hypothetical world of play money trading where an unlimited bankroll allows you to continuously average down on your losers. One blogger who has a legion of Kool-Aid drinking devotees comes to mind there.