Would you lose 10-30% of your money

[jack hershey]

Quote from stock_trad3r:

on a position if you were certain that you would make money on it later? I know that a lot of traders here are SUPER aggresive about cutting losses. Some people don't let a single loss amount to more than .5% of the enitre account.

But without taking big paper losses, doesnt that limit your upside because you're constantly getting stopped out? Or your're selling too soon instead of rising the trend for fear of losign money?

Why not establish a longer term postion and ride it out? If you think the dow should be at 12500, wait for that target. Let the puts expire. Why sell so soon and so readily?

It seems so many traders have a morbid fear of losing money.

Some day you may wish to set up a spread sheet and compare how trading period and trading profits compare in various stock buy and hold position trading opportunities.

I settled on trading the natural cycle of high beta stocks. The optimum for this is 2 1/2 days for the period and over 10% profit per turn. This equates to 100 turns a year and you can compound it if you wish.

I understand that you have ways of predicting a gain if you go through a draw down of 10 to 30% first. For me I just do the trades coming out of the troughs and only hold for the run up of 10 to 30 during the long half cycle of the natural cycle.

You can use the attached chart to do the trades I mention and use it with 3 beta high quality stocks.

 

[jack hershey]

here is a snagit at 7:53 Tucson time which shows two lists. they are both sorted by unusual volume.

The short one is the stocks trading and the long one is the 3 beta universe.

the snagit appears in the camtasia and it's illustrated transcript entitled: Putting the Pieces Together. there are about 30 snagits that show the stream of capital making money through the day. The trades are annotated in the text.

 

[stock_trad3r]

Quote from lindq:


Aside from the fact that it is just a stupid strategy in every respect, consider the lost opportunities of the capital that you have tied up in a losing position...or positions...however many they may be.

The entire point of trading is to maximize the use of your capital. If you want to "buy and hope", which is precisely what you're suggesting, then a more appropriate site for you would be www.motleyfool.com

Even well known, successful long-term investors subscribe to the policy of putting hard stops in place and sticking to them.

You can't time the market. I don't need stops. If is it revealed there is something fundamentally wrong with the business I would sell at a loss. But I have yet to have that happen to any of my picks.

 

[nonlinear5]

Quote from stock_trad3r:

You can't time the market.

Well, that depends on who the "timer" is. The poster right above (jack hershey) just claimed to make 10% every 2.5 days. Compounded over 1 year, that turns $1000 into about $14 million.

And if you are willing to put $100,000 on the line, you'd be looking at about $1.37 billion in one year. Not bad, eh?

 

[lindq]

Quote from stock_trad3r:

But I have yet to have that happen to any of my picks.

The most famous last words in the financial industry.

 

[jack hershey]

This is the universe (alphabetically listed) at open.

 

[Wrongside]

Try that with Crude, It'll get back to 65 bucks.

 

[sprstpd]

Quote from stock_trad3r:

I told my mom to buy RIMM days before it peaked last year at 137. Soon after she began losing money, but I insisted she hold because RIMM would go up due it its strong fundamentals and there is no point in trying to time the swings. Although RIMM fell from 137 to a low of 80 it is now trading at 141, and is beating the market by almost 15 percentage points.

Opportunity cost.

Nice job though - willing to take $57 points of heat for a $4 gain!

 

[50_Bip]

Yeah real good setup there - $14.25 risk for every dollar you earned.

Quote from sprstpd:

Opportunity cost.

Nice job though - willing to take $57 points of heat for a $4 gain!

 

[Palatine]

Quote from stock_trad3r:

The stock market rewards people who are willing to accept short term loss for long term reward.

Investors and traders alike need strong conviction and patience. An experienced trader expects something to happen and plans his trade upfront accordingly. If the market confirms this expectation he takes the trade! These trades are well-planned and because of that the trader does not need to worry about smaller swings against his position. All he does is sit back and let his stop and limit orders work for him. (Here we need stops because trades are rarely based on fundamentals but price action).

The investor on the other hand bases his investment decisions on fundamentals and thorough research on a company. The so-called "due diligence." This allows him to sit out adverse price movements with conviction, similar to stock_trad3r's example of RIMM. Stops are unnecessary because the investor has an understanding of the company, not of its stock price.

Both the trader and investor, however, will fail due to lack of plan in the long run. They get scared quickly and exit at a small loss/profit because they don't know (or in the rush of action forgot) why they entered the trade. The OP's post was a little abstract but offers quite a bit of truth.