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TraderZones
Registered: Mar 2008
Posts: 6707 |
01-16-10 06:49 PM
neke
somehow, regardless of how many times you may have seen it before,
what sticks out on a loss like this is portfolio management problems:
1) where was the overall portfolio disaster stop? There is never a reason to have a daily loss more than a few %. Avoiding losses is more important than making a profit. [this also goes for individual traders]. Most sage advice seems to be that it is best to limit the potential losses on a large account to 1-2%.
2) how would diversifying your positions help? How would diversifying your trading strategies help? Even mixing in lesser performing instruments/strategies has been shown by various research to help reduce longterm volatility/losses in a portfolio.
Other things is to try and be dollar neutral (balance shorts with longs as possible),
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Billybob543
Registered: Feb 2008
Posts: 166 |
01-16-10 06:52 PM
Quote from neke:
Weekly Update for week 1/50 ended 01/16/2010
A disastrous start to the year. Down 99.5K (24%). It all happened on Thursday.
Looking for ways to overcome this inability to accept a loss. Right now, I am putting in place an auto-closure of any position.....
haha..you clowns never learn. The smartest thing I heard someone say last year was that they were quitting trading. Then, it dawned on me that I didn't personally know one single person who made money from retail trading and kept it all. They all eventually gave it back.
I quit trading last year, and that was the best move I ever made in my life. I took the rest of my account and opened up a business that is taking off really really well. Neke, I say take the money you have left and put it in a "real" business. The worst thing that you can do is allow the market to beat you by taking back all the money you stole from it.
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Pension_Admin
Registered: Nov 2006
Posts: 2206 |
01-16-10 06:59 PM
BTW: In hindsight, the BIDU short trade was unavoidable. The problem is not the news. It's general expectation! BIDU was historically a weak GOOG. Traders and hedge funds buy GOOG and short BIDU on a consistent basis. Problem arise when the fundamental relationship changed while everyone was in the wrong side of the market. This caused a huge short squeeze.
If Neke was on the right side (then I am sure a lot of other traders would have been on the right side as well, since they all make their decisions based on the same old stuff--chart), then BIDU wouldn't go up as it did.
The BIDU trade was unavoidable. The only thing that Neke could have done was minimize his loss.
PA
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NoDoji
Registered: May 2008
Posts: 8107 |
01-16-10 07:31 PM
Quote from Pension_Admin:
The BIDU trade was unavoidable. The only thing that Neke could have done was minimize his loss.
PA
The BIDU trade was not unavoidable. You can choose to trade or not trade at any time. You are absolutely right though about the loss minimization because of the nature of the setup:
BIDU gapped up on game-changing news. Not just good news like beating earnings or getting an analyst upgrade, but GAME-CHANGING news. That means whatever channel of support and resistance the stock's been trading in, well, the bar has now been raised to a new level.
BIDU gapped up to its November high, moved around, and settled at that Nov high level at the close on Wednesday. At this point, the path of least resistance so to speak was up.
So you have a stock that's been in a LONG-TERM UPTREND, recently pulled back but did not break the trend yet by making a lower low, now gapped up to its previous resistance level on GAME-CHANGING news. Even if it had gradually climbed back to that previous resistance level over a period of a month or more, trend-followers would be expecting a breakout to a new high. So with this major news on the table, the next day it breaks out, just as it should.
The ONLY way to short this kind of price action when you're a counter-trend trader who's trying to pick a top instead of waiting for confirmation (lower high) is with a TIGHT STOP.
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Pension_Admin
Registered: Nov 2006
Posts: 2206 |
01-16-10 07:44 PM
Quote from NoDoji:
The BIDU trade was not unavoidable. You can choose to trade or not trade at any time. You are absolutely right though about the loss minimization because of the nature of the setup
Yes, in hindsight it is not unavoidable. I agree, but I think it is only avoidable when we have the hindsight knowledge.
Given the news, the situation, the emotions, and the price actions, without having hindsight knowledge, Neke would have enter the same BIDU trade.
I totally agree on the rest of your post.
PA
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