Okay, just so we're clear then. You are saying that you are risking 30 points of loss (you shorted at 990) for an 8 point profit? And this is a result of what? Reading Market Wizards? Golly, did I miss a chapter?
This is a result of understanding statistics. Do you believe the probability of raining tomorrow is always 50%?
That will be nice but I do not count on it. The market may gap up again on Monday and I have to stop out. When I put on this position, I was prepared for either outcome.
Ya, it could turn back up on Monday but I like the short side more. The Dow made a good run from 9000 to 9500 but with this big reversal day today we look like were going lower, but we might not say down for long. Same story on the S&P but it was never even able to make new highs. Good Luck
What I mean is I don't change my mind (bias) when the position remains open. I will reevaluate after the close of the position (either target or stop is hit).
20 point range (992-1012) for the day. What a day! It unfolded in the way I least expected. And so many interesting discussions to follow. Not a bad day at all.
8/22/03 Day 5 Bias: down Position: open from 990 on 8/15/03 P/L: -2 points Sell and hold P/L: -2 points No fear, no greed, lots of patience
What's your assessment of the IT trend? Would that trend affect how you might play the news? Why do you see taking out 1015 as causing the market to "punch" another 5 points to 1020? Couldn't the market just as well be "punched" down 5 points after 1015 is hit? You seem to fear stops being triggered at the highs. Don't you think there are a lot of people waiting there to sell too? My point is, given the IT trend and the frenzy over the Intel news, I would think it would be a fear-based decision to close this trade at 1015 without monitoring what the market was doing. When I saw the gap this morning, I was interested in how random trader would respond. Although he's been taking a lot of heat, it seems to me he had a good plan. You said in your reply to my question about going long at 1015 that you would have to monitor the market and see how it was before you could enter. I guess you would object to monitoring the market and seeing how it is before you exit. I would be interested to hear why you treat the two differently.
My assessment of the trend as of this AM was that the trend was up. Does it affect how I play it? Yes. The way I play it is I take profits on a large gap typically. Normally I don't short it against the trend under the circumstances we had this AM. So this AM I came in long some stocks which I liquidated. I did not short the futures at that time since 1) My assessment of the trend at the time was up and 2) the NDX had clearly gapped above all near term resistance 3) the DOW had already broken out and 4) TheSPX was close to a possible break out point. In my mind the only trader who would be short coming into this AM would be a trader who is picking a top. I don't do that. I carry some positions overnight...but only in the direction of the trend. It's amazing how often the surprises are in the direction of the trend...and this AM was no exception. What happens when 1015 is hit? Who knows? The price at any instant can do anything it wants to do. That's a given. But if you've been around a while, surely you've seen some of the vacuums that can occur around prior highs and/or lows as the stops are run. This is what carries the potential to put the price a number of points higher very rapidly. So while you're evaluating, the price is moving, and your losses are adding up. That's the potential. Instead of losing 20 points, you're now down 30. And we don't know if that's the end of it. In terms of how I trade, I do handle my trades differently. When I enter a trade I assess the conditions surrounding the trade. I don't lose money if I don't make that trade. There'll be another trade coming down the pike....there always is. But when I enter the trade one of the assessments I make is what my risk is, and what I think my reward is. When and if that risk level is reached...I'm gone. I don't assess the market at that point. My trade went the wrong direction. Once I'm out, I continue to monitor the market...if I think I should get back in, I do with a new risk level. But never do I hesitate to cut my losses when a trade is working against me. Is it "fear-based" to adhere to your stop? I don't think it is, but you decide. I think people who can't take a loss quickly at a pre-determined level are people who are "fearful" of losing money. Fearful that they may sell/buy at the high or low. Fearful that the market will turn right after they get out. Perhaps not having the confidence in his trading that if an error is made in getting out, that he will re-enter when that becomes clear. Look, I'm not the trading police here. If you think you should monitor your losing trades to see if you should get out...feel free. I get out of my losers quickly. I "monitor" before I get in. I "monitor" while I'm in. But not when my trade reaches my pre-determined stop level. OldTrader