don't forget that today is a full moon... I had been anticipating some kind of large move...! Seriously, I have my calendar circled with all full moons... Wonder how many others key into full moon weeks/days. It definitely exacerbates the moves in both directions, particularly when they fall on or near Fridays! And if you believe in astrology (I took a year course with some traders several years ago) they will tell you that a full moon "fires" several days prior and susbsequent. That means influences things often wildly, not just on the full moon day. Have a good weekend! ICe
I see so many horrible trades where alot of money is lost... all using the double down theory. Well try the other way. Try getting into a position and as it reaches a new level, double up (only in the money) , as soon as your PL goes from positive to negative, get out. Theoretically 9out of 10 days you will be churnin like hell and will lose a little bit of money. Then on the one day when the stock you trade finishes at the high you make a good profit that will make you net positive over your other losing 6 days. I saw a trader who would always double down when it went AGAINST him. He would make money 9 out of 10 days. I was always like wow he can really trade... but on the tenth day when the stock plummets and never comes back to the original price, he loses alot, and more than all the 9 profitable days... hence come up with a strategy that did oppostie of what he did.
This is a good thread and many good points were mentioned. Overall I would go with iceman. I do not see enough reward to be taking the risk that trade-ya1 is taking. Just how much do you expect the S&P to drop? If you are hoping for a crash, well thats very doubtful.
Looking at the Daily chart, I'd say we have up-room to go, but on the hourly, we're running out of steam. -Fast
Quote from Prox: "Now that everyone is bullish again, it's time for a large gap down open. Just watch." You mean the kind of gap down that attracts huge institutional buying and takes the S&P's back to the old highs? Yeah, I think you are right!
I don't put much credence in trying to trade based on full or new moons but bartenders and cops who are friends have often told me that they hate to work nights when there is a full moon. They say there is more trouble on those nights and people seem weirder. It could just be that it is brighter out so more people are out and about. Or.... Maybe there really are strange events related to the full moon!!!! Aroooohhhhhhhhhh, anyone seen any werewolves lately?
The enormous difference is in the "approach" and begins before the trade has even begun. As an example we can take the recent action in the S&P. Suppose you were flat during the entire slide from 1155 to 1120, but thought that there was a good chance that this move may prove to be the start of a meaningful change in trend and could possibly perpetuate much more selling in the weeks to come. Obviously you missed the most opportune time to initiate a short position, which would have been up at the highs, but this dosent mean that you have to sit on the sidelines for the whole move and play passive observer. So you now have a "bearish-stance" on the markets, but need a good spot to enter into a short position. You know that selling into weakness, especialy when the prevailing trend is up, would not be the best way to initiate the position, so you decide to wait for a retracement of the initial swing and enter against strength in the hopes that the selling will re-assert itself in the near future. But now you have another dilema -- you don't want to shoot your load to quickly and have to endure too much heat if there is a deeper retracement than you had assumed when you put out your position. So you decide that the best way to compensate for this possibility would be to break the position you want into 3-4 "lots". Fib ratios can work extremely well for this, you can simply set-up a grid off the 1155-1120 swing and plan to enter at the 38.2, 50 and 61.8 levels. If you are a shrewd trader you will have a "puke-spot" already in place and know exactly what your absolute risk is before you invest even 1$ in your "idea". So you plan to enter at each of the 38.2, 50 and 61.8 levels and puke all three should the market rise above the 78.6 level. This is scaling into a position and like I said in my initial post there is an enormous difference between doing this and say putting out a short at the 38.2 and then adding additional risk on a whim in an attempt to lower your cost-basis. The difference is simply in the approach. With all that said -- I also don't think there is anything wrong with a disciplined trader "adding to a loser" provided he knows his absolute risk and has a definate puke spot that he will adhere to no matter what. Over the years I have found that with the exception of a few maxims most in the trading game are for the most part hollow. Virtuoso "Matters of great concern should be handled lightly... Matters of small concern should be handled greatly..." ~Hagakure~
Any trade that is not buying at new highs or selling at new lows is adding to a loser. Remember your portfolio is marked to market with every tick, so the moment the market ticks off a high (if you are long) or ticks up from a low (if short), you are taking losses. The whole "adding to a loser" and "adding to a winner" philosophy makes trading decisions to some degree dependent upon entry price. But entry price is UTTERLY IRRELEVANT to the risk/reward the market is presently offering you. According to your completely illogical and irrational theory, someone could be long the S&P from 1152 and they should have been selling out (cutting their losses) on friday, whilst someone else could have been long from Thursday and they should be buying (adding to winners). Therefore your pet theory recommends that someone should buy and someone else should sell at exactly the same price - which is completely contradictory and inconsistent. Either buying here has a positive expectation and acceptable risk/reward or it does not. If it is positive, then selling would have a negative expectation, and would be completely the wrong decision. Yet your system would recommend that some people should sell, just because their original entry was poorly timed. I therefore conclude that "add to winners" and "cut losers" is self-contradictory bunk. The correct approach is "put on a position when there is a positive expectation and acceptable risk/reward. At all other times, have no position"