A Catastrophe Plan

Discussion in 'Trading' started by Trader5287, May 24, 2002.

  1. It's been drilled into my head to always have a trade plan for all contingencies. I happen to use mental stops and I also have a plan and targets for positive daytrades and longer holds. Most of us have dealt with sudden bad news, trading halts, power outages, computer seizures, etc. - but what about something broadbased and horrible such as the attack on our country that places our markets and our accounts in terrible peril?

    What are traders thoughts on this? Would you attempt to "trade" your way out of it to minimize the damage if possible say when the markets or your position(s) reopened for trading or just what would you do?

    Thank you.

  2. gold futures and gold stocks?
  3. ctrader


    only trade the short side?
  4. I only hold options over night not stocks which really limits my risk. If the market opened low with a huge gap after an event similar to 9/11 I think buyers might step in a little quicker than they did last Sept. The markets proved that they can handle some pretty bad shit. Looking back, I wish I would have done a lot more shopping. I was not long any stocks at all so it wasn't panic I was experiencing but I was still in shock watching the sea of red on my screens. I was just too stunned to do much buying. It has usually proven best to hold long positions for a while into huge gap downs but every situation is different. Its easy to sit here and try to predict what the smartest plan is but if the market is falling apart in front of your eyes its a whole different thing. I have only been caught in one bad gap down and it wasn't pretty. (Stellent ) I haven't held over night since. Being flat = better nights sleep. :)
  5. I'm assuming you're referring to a terrorist attack - I can't imagine there'd be a country stupid enough to attack the US on its own soil.
    The American people have proven their resilience in the face of adversity time and time again. In comparison to 9/11 - which shattered the illusion of peaceful brotherhood on earth - a terrorist attack this time around wouldn't catch anyone off-guard, so a repeat of the "carnage" when the markets reopened last year would be unlikely.
    I think only a nuclear attack could depress spirits any further. Given reaction to 911, I can only assume an escalation of Doubleya's "war on terror". States accused of sponsoring terrorism, watch out. Something the market of today could easily take in its stride.

  6. Rigel


    Go neutral till I see the bottom, then load up.
  7. alain


    have some gold bars under your bed... some diamonds... and you are protected for the worst case. Well, financially....
  8. Bono


    I would square and get out of the market at the very first second. You can control trading decisions, but unfortunately, you can't control world events :)
  10. Oops. Wrong button before.

    On 9/17/01, I was overall about 30% short. Leaving out retirement accounts which are all long, I was over 50% short. I had spent four days in a very active internet discussion about trading on the open which dealt with everything from absorbing the opening hit to the long positions, buying to be a patriot, the morality of selling short, whether puts which we had would really protect the hit to underlying long stock, etc.

    About all I came up with in advance was that I would sell portions of the long positions on rebounds. Anyway, I decided for other reasons not to trade that day or even look at the TV. What I did see when I went over some charts later on my holdings is that the strategy would have worked with the liquid tech stocks, that for mysterious reasons the puts didn't soar anywhere near as much as I thought they would and I got killed on some illiquid mostly small caps that I had.

    The only other thing I can think of us is that the mental stops aren't enough because I can't watch every trade every minute of the day. Say there is a blast in Kashmir during the day during my lunch, where would I want a physical stop, I wonder? One of the suggestions made to me was to study the exchange rules on curbs and halts, etc. because before you can judge what a market might do you have to know that there will be an open market.
    #10     May 25, 2002