Post-mortem: Was it wrong to get out at exact low?

Discussion in 'Risk Management' started by turkeyneck, Sep 30, 2008.

  1. Bought Shittygroup at $35 (70% equity back then) last Nov and rode it down to $13 and change. LEH and other banks were blowing up left and right on 9/15. I thought C would go to single digit. I feared blowing up my account and sold C at the exact low at a big loss. A margin call at the background didn't help either. A day later it shot up to $20 with the bailout plan and I felt like a total moron. Was it wrong to get out and preserve capital in this scenario?
  2. How about going back to the beginning and explaining why you would buy any stock without having a clear exit strategy for when things go wrong.

    Once a stock goes N% against you, you are supposed to be disciplined and take the loss. The value of N depends on the individual trader and the individual stock volatility.
  3. Possibly you could have sold portions on the way down or half when you finally did sell.

    I imagine it was pretty upsetting ride down.
  4. These two statements reflect the worst part of your trade. The exit at the low is #3 on the list. #1 is 'rode it down' and #2 is 'margin call'. #3 is irrelevant if you had taken care of #1 and #2.
  5. Yes, the mistake part was riding it down from 35 to 13. After that, everything else just came together naturally. I hope you do better the next time around.
  6. Trading for all of us is an evolution.

    Next time have a written plan of what you will do and how will do it based on XYZ happening. Make sure you factor in the positive and negative scenarios in your planning.

    Then execute them.


    And no what you did wasn't wrong. It was the best you could think of doing at this moment ... at least you're still in the game.

  7. I have been at this a while, and I will promise you that if you try to "ride it out", you will inevitably end up getting out at or very close to the low of the move.

    Why? Human nature. We like to think we are all totally unique, but in reality we are like a herd of animals. We react the same way to the same thing. You didn't just happen to get out at the exact low by bad luck. Your experience was mirrored by thousands of others who had held it through the sell off. Suddenly all of you saw the very real possibility of a total loss and you sold. That's what makes a bottom.
  8. DonKee


    you've already received some pretty good advice.

    something i learned a long time ago:

    if a stock is trading below its 200 day ema and that 200 day ema is moving down, you will on average, lose money by being long that issue.

    take a look at your entry date:

    1) was c above or below its 200 day ema at that time ?

    2) was the 200 day ema moving up or down at that time?

    3) if above and 200 day ema was moving up, what would have been your exit price when it closed below the 200 day ema?

    i would be curious to your p & L using the above simple entry and exit vs the one you employed.
  9. Good advice. Thanks everyone!
  10. SMFTrader


    You really need to keep tight stops, especially in this market. If you consider holding anything overnight and then you run the risk of a gap against you and it happens every single day. You're not the only one who loaded the boat on C but you need to write out a disciplined trading plan.
    #10     Oct 2, 2008