Time to get Trading Rules into Place

[KGTrader4]

You do not have to go short. Instead, you can trade inverse ETFs like SQQQ for instance. It goes up when QQQ goes down. SQQQ looks headed up although, it had a huge pullback of late. The advantage to shorting stocks (using put options) is you can make monies both ways----so more trading opportunities.

i understand that. I’ve used QID (QQQ X 2 inverse) for very short term inverse and I’ve used PSQ for longer holds (no leverage so no drift from compounding)

 

[Overnight]

I think your math is off. say I have 100k capital committed to trading. I invest $10,000 in a stock with a max loss of 8%. My loss is reached and I lose 800. If I do that 7 times, I lose $5600, or 5.6% of my capital.
Also, 8% is an absolute max, I generally don’t let a trade get anywhere near that loss level before cutting bait.

still feeling my way around.

That's not how math works. If you lose 8% of your initial deposit on the first day, you do not lose 8% of 10K every day. This is why people on the other side of the equation do not understand how compounding works.

 

[tomkat22]

That's not how math works. If you lose 8% of your initial deposit on the first day, you do not lose 8% of 10K every day. This is why people on the other side of the equation do not understand how compounding works.

I think he means losing 8% on 7 different stocks,7 different positions.I could be wrong though.

 

[KGTrader4]

That's not how math works. If you lose 8% of your initial deposit on the first day, you do not lose 8% of 10K every day. This is why people on the other side of the equation do not understand how compounding works.

use my example to explain that. I used my example to point out that smallfil was misunderstanding the 8% factor

 

[KGTrader4]

I think he means losing 8% on 7 different stocks,7 different positions.I could be wrong though.

correct

 

[smallfil]

I think he means losing 8% on 7 different stocks,7 different positions.I could be wrong though.

That is right. I do mean losing 8% on 7 different stocks, 7 different positions. Take this current stockmarket, if it suddenly, say drops 50%, you could easily lose 8% x 7 = 56%. Of course, you could lose more on some positions and lose less on other positions. It is also, possible, you could lose more than 56%. Stop losses will not protect you when a stock gaps down. It becomes a market order executed at the next available price.

 

[KGTrader4]

That is right. I do mean losing 8% on 7 different stocks, 7 different positions. Take this current stockmarket, if it suddenly, say drops 50%, you could easily lose 8% x 7 = 56%. Of course, you could lose more on some positions and lose less on other positions. It is also, possible, you could lose more than 56%. Stop losses will not protect you when a stock gaps down. It becomes a market order executed at the next available price.

You are assuming my that the entire amount is invested across the 8 stocks. And you make a good point. But that won’t happen, in this kind of market I’ll always have a lot of cash and a few positions on at most, at any time. I don’t intend to trade as much as I hsve been, for now

 

[SunTrader]

Thanks for your thoughts.
I do think there is more to come, not sure about a crash. But if the market went down 50% FROM HERE, at 25% invested, I could handle it, .....

Another example of .... not a trader. And not semantics either.

Traders use stops.

 

[smallfil]

You are assuming my that the entire amount is invested across the 8 stocks. And you make a good point. But that won’t happen, in this kind of market I’ll always have a lot of cash and a few positions on at most, at any time. I don’t intend to trade as much as I hsve been, for now

No, that was the example of the other poster. I was merely, pointing out that if you risk 8% x 7 stocks (assuming you have 7 trades), you are risking 56% of your account total. He said it was okay to risk 8% and take more positions. I think that is very bad advice. They have already done the math part of the risk of ruin and that is not to risk more than 2% per trade. Again, it is the math experts who have done the study not me. I am merely sharing valuable information with you and others.

 

[KGTrader4]

No, that was the example of the other poster. I was merely, pointing out that if you risk 8% x 7 stocks (assuming you have 7 trades), you are risking 56% of your account total. He said it was okay to risk 8% and take more positions. I think that is very bad advice. They have already done the math part of the risk of ruin and that is not to risk more than 2% per trade. Again, it is the math experts who have done the study not me. I am merely sharing valuable information with you and others.

Got it, thanks.