Tom Baldwin said he legs out of a loss to try to get a more favorable price. Paul Tudor Jones does the exact opposite and gets right out of a bad trade. Who's more correct?
They both are. There is no "correct" way, IMO. Hey, this is my 1,400th post in 5 years. Happy anniversary to me.
Congrats. Baldwin and Tudor traded two vastly different styles. Baldwin added to losers and then tried to scale out as the market came back his way. He traded at member commissions (on the floor they were pennies) and as a local he could trade against order flow. Tudor is a swing trader with precise levels. He's in or he's out. Not to take a cheap shot at Tommy who's a great trader and who's style is more akin to mine but one of those two has much more money than the other. Perhaps taking those hard losses has something to do with it.
uptik2000 and Pabst are right: Both are correct. I do both DEPENDING on market conditions (and the trade that was put on) (different style) Sherlock
Me speaking as volente " loss? whats a loss. I buy the bottom and sell the top" For us real people, I usually call a spade a spade and punch out, forget it and go to the next.
Not sure who's right, but the WRONG way to do it is to enter the trade, planning to dump the whole thing when your loss target is reached, but then only leg out a part of it. You're violating your trading plan and that is always the wrong way, unfortunately I see way too many traders doing that. Sounds like both these guys have a plan that works for them and that's what counts. Find which one works best for you. Personally I like Frank Grimes idea, but haven't quite found THAT strategy yet :
=========== Tom-B/Schwager= excellant, excellant,excellant trade read; more risky Toms slower way, but trading proper size, his point is helpful , because many fast moves are fake moves.
When you trade the huge numbers of contracts that Tom Baldwin did in the pit it can be very hard in fast markets to just dump several hundred or even several thousand contracts immediately without getting killed. Everybody would know your'e in trouble and stick it to you. Also, he has the intestinal fortitude to sweat out several more ticks and wait for some sort of correction to bail more gracefully and end up not losing as much. The vast majority of us can't stomach the pain and therefore blow out the trade quickly. It depends on how much fear and pain you can tolerate as to how you exit a loser when trading size. Each trader has a different psychological makeup and needs to tailor his exit strategies to what he can handle emotionally. So in that sense, I think both answers are right.