Satuki @ Home

I think you was no chiken out is was just part of you plan
don’t forget to stick to it.
don’t be greedy.

geedeal, I am sorry to say I did not follow my plan, which was never move my stop loss until it hit my 6%-7% target. It was just all my fault.

How do you balance between not exiting the trade and being greedy, and letting your winners run?

I find it’s a really really fine line between them for me.

If your target is 6-7%, where is your stop loss usually? I know you mentioned your usual percentage but I can’t seem to track it down.

Very good question Mike, You are right about it. The line is very fine. Here is how I cope with it. I hope it might help you and others

First and foremost, I never ever try to catch tops/bottoms, which is totally a suckers game. Let’s say your time frame is 20-30 days. You need to figure out the average peek performance of your selected stocks. Let’s say they are 35%. Then use that as your fixed exit target. You should let the winners run when your stocks climbed/dropped 10 20 even 30%. You do not intervene until they hit their target(35%). That is “let your winners run”. After a stock of yours hits 35%, you do not care if it will keep going up/down, you close it. That is no greed.

@jp, Normally it is 2%-3%. However it still depends on the size of my positions. The smaller my position size is , the wider my stop loss , and vice verse.

I pose this question a little shell-shocked after being humbled by the market yesterday. I preface my question with some background. I started actively trading in late November and at the same time started to follow this marvelous blog. One lesson I immediately learned (or thought I learned) from the blog entries here is how vital it is to protect one’s capital via a strict risk management strategy.

For my first 10 trades, 9 produced gains. Tuesday my portfolio was up 42.6% since November 24th. Then I went long with BAC. I had a 4% gain in 3 minutes, and was planning on bailing once it reached 5%. I did not bother placing my usual stop limit (typically 2% of whatever amount with which I enter the position). By the end of the trading day I was down some 20%. Things only got worse on Thursday, and by Friday I was pretty much on my knees. I kept thinking “This is the largest bank in the free world. It can’t possibly go into receivership.” Etc. Nonetheless, the downward spiral continued and by the time I exited the position, my 42% gains vaporized, and my portfolio was diminished by $43.4%.

So, I submit this long post hoping others may learn from my poor judgment.

Now, my question: When you’re deep in a losing position that you entered with the intention of exiting after a modest gain, is there any point to holding on until the security rebounds?

Thanks, Satuki, and keep up the good work!

David, my answer to your question is that I can not be so deep in a losing position nowadays. But It happened to me when I just started trading. I lost 50% on one short position back in 2005. It is normal. So do not beat on yourself. Key is if you have learned anything. If you have, this is a good lesson. This is part of the tuition everyone has to pay. I believe you are still OK. Some people will just never recover from one single death trade. I think this post is a very good reminder http://www.momdaytrader.com/blog/2009/01/09/cut-losers-tumors/

“Key is if you have learned anything.” that is a good one, thanks

Another day that manifests the headline of this thread. Put in a stop loss that was too strict (given how volatile FAZ was today). Lost $175 on paper but opportunity cost was was roughly $500.

Well, I was in the same situation. I cut my losers too late and therefore now I have limited money to trade. You really have to learn it – once something went the way you didn’t want it to go – SELL! On the other hand I had some FAZ bought at 42 and sold it with the loss just watching it skyrocketing to 85 in less than a week. Sometimes you might be wrong on your discipline as well, but it all depends how much money can you afford to loose, am I right?
By the way Satuki – great website.

Hello all!, Satuki, thank you so much for making all of this info available! It gives me hope that i could do the same one day! :)

I do have several questions which i hope you or anyone here can answer:

1. what broker do you use?

2. what are the chances of fulfilling an order exactly when you say “GO”, and at the price you seek? have you found that to be a problem? I mean, if you are watching candlesticks, shouldn’t u be able to jump in/out in time?? as soon as you see a pattern change? i don’t know, maybe i am simplifying it! i have not finished my candle training! :)

3. do you guys only trade in the US eqty’s mkt? anybody here does forex? Can you give some advice on that?

4. what are the tax implications of these short term capital gains? do you guys fill it out quarterly, yearly? how does that work? How much do you get taxed?

Thank you!!
Sahm…

Sahm, let me see if I can answer all your questions.
1. I use Tradestation. I heard that Interactive Broker is very good
2. I use makert orders. There is slippage. But I trade very liquid stocks so slippage is not bad. In addition, I do not scalp so a little bit slippage is fine.
3. Most people here trade stocks.
4. I file taxes anually. In the US, I think it depends on your tax brackets. It is different for people. It might range from 20 to 35%.

Thanks so much for your answers! I have been looking at IB and have tested their app. seems v. nice. they provide real time prices and claim to have excellent track record on filling orders…

I look fwd to learning from you and anything else i can find on the web! i think i will start in the us eqtys mkt, but must admit forex looks very attractive… we shall see where this takes me! :)

Kind Regards!
Sahm.

Satuki, i did compare prices and seems like tradestation has more affordable trades since they have a flat rate schedule.

One other question, how come you do not scalp? is it not permissible in the equities mkt? I know it’s frown upon in forex… does anyone here scalp… according to what i hear there is tons of money to be made there…

I am dying to get into this…. but i feel i need to read much more b/4 i put my savings on fire! :)

Thanks! :)

It’s not a good plan to tatically choose your stops. Allways using 2 or 3% or some value like “100$ loss) is not smart.
When setting up stops one should incorporate the volatility of the security. By placing a stop loss at some distance from the buy you allow the stock to “breather”. Many will realise that. What many dont realise is that some securities just breath more heavily than others.
Google for stop loss and volatility and you will find some very nice resources.

FAS and FAZ are leveraged 3x securities, waaay more volatile than normal stock.It is mapped to trail another security .. (the russel?) .. a trick might be to calculate your stop based on that security and map it onto fas/faz.

Those numbers are static. As volatility increases those static numbers will grow into a problem rather than being a safety. In such cases it is better to just keep a percentage related to volatility.

But if one really wants safety, then one should not play these lottery tickets FAZ and FAS. THey are highly speculative and can easily blow up your account in a matter of weeks. On the otherhand when one understands the major resistances on the SPY then FAZ and FAS can be an ATM.

If you want a hedged play then you could also look into SRS, it is a short index related to real estate. It is much safer since that sector wont be getting any bailout anytime soon (if ever). The financials are very risky atm. Upcoming week will be very volatile due to a great number of events and patterns in the charts.