How do you get out when you see "fat tail"?

Discussion in 'Risk Management' started by turkeyneck, Mar 4, 2008.

  1. Say some really bad news just hit the newswire (e.g. accounting fraud) and you find yourself knee deep in red on a position (down 50% in mins), how do you get out when you see a "fat tail" like this? Do you just sell to the market and get out at all cost or wait till the dust settles (e.g. before close) and hope to get out at a more favorable price?
  2. There is always hope, hope and at least 2 double downs.
  3. Wait for the first 50% retracement.
  4. cold


    Hey OP

    why would you trade something that can do that

    go for futures or FX and have stops you , you ......some sort of new guy
  5. Kap


    wait until you feel your face get really hot, then slap yourself with a cold wet fish across both cheeks ! works for me :p
  6. That's a good reason to stop trading stocks and start trading futures
  7. 1st rule of trading... have a trading plan and strict rules

    2nd rule... obey them or stop trading

    3rd rule... enter with a stop

    4th rule... if you get smarter than your plan and rules, eventually you'll get wiped out

    You are asking questions that belong to the 4th rule group. You are asking questions about a style of intraday trading that is not in your plan and rules.

    Guess what's going to happen?
  8. Fat tails are ubiquitous...they occur much more often that the normal distribution would suggest. You always always sell more into the abyss. Works every time.

    John Werriweather
    Victor Niederhoffer.

    And if that doesn't work just re-organize. You obviously didn't go to business school.

  9. m22au


    You call the Federal Reserve, and explain the situation. Then they act as lender of last resort and bail you out, using JP Morgan Chase as an intermediary. Finally, they take $29 billion of your toxic waste onto their balance sheet as part of a longer-term solution.

  10. Chriz


    When you see a fat tail like this its too late already. You should ask yourself what you should do in order to protect you against a 50% loss.
    #10     Apr 4, 2008