Quote from Maverick74:
I think that's a copout for saying I refuse to admit that I'm wrong. I see no reason why any man of average intelligence or higher would sit in a losing position for months or years because he is "committed"?
Let me ask you something, would you stay in a bad marriage for years and years and years because you were committed? I'm sorry, I just don't think anyone is stupid enough to risk blowing out their account for something so stupid.
I'll give you some good advice and I'm not trying to be a jackass here. I have talked to a lot of guys about this and I've always suggested to them that if you can't trade, you should give your money to a manager that believes in the same idea or theme that you do and let him do it. This way you will never get stopped out, you never have to watch your position and at the end of the day, he will probably trade it better then you anyway and won't be held to the same emotions you might be. This could be a mutual fund, RIA, hedge fund, CTA, whatever. You will have far better success then you having to look at your account every day while your position is going against you and probably will end up with a margin call at the inflection point.
Maverick74, you could be an extreme scalper, day trader or even multi-day swing trader, in which case I can understand your aversion towards anything other than the charts. In fact, I never watch the news when trading in these time frames. The point I was trying to make is that, I believe position trades, where you want to ride a trend for as long as possible, can benefit from a bias or commitment to that trade idea.
Committed or not I, of course, trade with stops. So there is no question of âstaying in a bad marriage for years and yearsâ. (BTW, do you know of any marriage that has succeeded without some degree of commitment?)
When you enter on a trade idea, as opposed to just a chart pattern, there will be differences in how you manage the trade as many of the sacred rules of trading get bent. For example, your initial stop loss point will likely be wider than normal, you will probably be willing to see a profitable position become a losing position, and you will be willing to hold through deep pullbacks---all provided your trade idea is still valid. The stop loss point has to be purely mechanical, but the profitable exit may be purely technical or discretionary depending on the particular trade.
All this, of course, is the theory. Whether or not one can pull it off, is another matter altogether. I just happen to think that being committed to a trade idea makes it a little easier to get on and ride a trend. In this regard, I find Palatineâs reply refreshingly honest and humble where he says,
âActually I trade very systematically according to strict rules with regards to entry and trailing the stop. But admittedly I observed the market carefully and was very close to getting stopped out in both instances. I had to battle with myself for not doing anything prematureâ.
