Hello Deadwood,
I love that name. Deadwood SD is a place that my wife and I have gone to twice and thought it was great both times.
I want to thank you for your post and the time / thought you put into it.
I respectfully disagree that "signals" are stupid. I would agree that some are stupid but every trader that I have known or read about uses some form of a signal. If you buy the SPY because over time it has gone up than that is a signal. I have a signal "B series" that has made probably over 300K this year and has a total of perhaps 10K in losses (I don't think its even that high) and was equally profitable in percentage terms last year. Granted the actual trading for it is a small time sample but the results are about as good as anyone could hope for.
I am unsure I totally buy into "knowing what is driving price action". Knowing why a price is moving seems to be secondary to knowing the odds of it continuing or retracing and at what prices/time
#3, can't agree more with you. I think that is spot on
#4 I agree with you totally with SNDK. I should not have traded it. Simple as that. It was a mistake regardless of the financial results. My "reason" did not justify that actual risk of money. Staying with it at any point that it was not profitable was totally wrong and poor trading on my part.
#5 I agree. I don't consider a $15 gain a winner and I while technically untrue I do agree its breakeven. I have had a lot of them lately due to the testing of a new signal that includes a tight stoploss. I want to develop a signal that uses tight stop losses to get in the habit of getting out quickly when things are not going in the correct direction right away. I am unsure if that will improve my results as getting out when a trade is going bad is not as good as not taking a trade in the first place when the trade is not mechanical (in my case) to begin with.
#6, I understand your thoughts and don't totally disagree. I believe that understanding what the buyers and sellers are most likely to do if X Y or Z happens is much more important. Understanding crowd behavior and economic behavior I believe is more important that trying to understand a company. Without having at least a really good understanding of a company or a really good understanding of what can be expected of the price adding to losers is a very bad idea. Even when you do know one or the other (or both) it can be a bad idea.
Thanks again and I wish you the very best. Also please note that while I say I disagree I only disagree to the extent that when I am trading the way I should and by the rules I have I do very well. Its when I stray that I have caused every single loss of importance. Most days I do not entertain the idea of making a trade that is not already a firm fully calculated trade. I do on any given day though get several trade ideas that appear to be winners and what I need to do is move from almost always ignoring them to always ignoring them.
discretionary trading has caused huge amounts of losses, stress, and sleepless nights. Even so I get several trades that I want to make every single day based on discretion. I have moved much further in the last five months to being a better disciplined trader but I have further to go to plug some leaks that I have.
I hope your 2009 was a good year for you and that 2010 is even better.
Respectfully
Robert
Quote from Deadwood:
Bob, I've read your post for sometime with interest because I was right where you are now. I know you don't want to hear it and nothing I say will convince you but my trading changed the day I realized a few simple things.
1. "signals" are stupid and no real traders that I know of making consistent returns use them. Instead they view signal followers as the poster childern of naivety.
2. Trading a stock when you don't understand whats driving the price action almost always ends badly.
3. Trading a stock that isn't acting the way you think it should almost always ends badly.
4. Shorting weakness is always better than shorting strength when it comes to hitting a runner. For example, you don't go into a SNDK until the mo-mo breaks (assuming thats the reason for the run in the first place).
5. You can't make 4 $15 gains and take 7k losses. Frankly, a $15 trade isn't a winner, it's a breakeven. So is a $200 or $300 trade if your taking 7K losses as often as you do.
6. Adding to losers is almost always a bad idea unless you really understand the company.
I wish you the best
