After being away from the market for a while and not really sure where I wanted to re enter, I signed up for every free service available and still get all their emails everyday. I just got one from Barcharts (and keep in mind I never actually read them, as a matter of fact, it is an annoyance to have to delete them each day) but this one caught my eye. Apparently some trader has noticed that every time he gets stopped out, he could have done better if he had just hung on. I haven't read the email (it's already been deleted) but the only thing I can surmise from it is, the big move is coming.
many of us have done well averaging down, as a matter of fact, Martingale is starting to look like a genious.
I filed as unemployed in 2011, trying to file as a trader wasn't worth it to write off the $500 laptop I bought, yes I have no W2, just dividends, INT and cap gains, and now forex which is still up in the air as to what it actually is. I took the 60/40 split, and as it so happens overpaid my estimated taxes (due to some bad decisions and a legal wash sale in the stock market) and got my refund, no questions asked (so far.)
but getting back to opies point, if they are talking about just riding it out with no stops, and that is what you have been doing, that should give you pause for concern. Especially if you are averging down.
like when I got laughed off the board for advocating increasing size during a drawdown if you've been trading with no stops and martingaling, you've been doing pretty damn well If they are starting to advocate it on barcharts, maybe it's really time to reduce size or give up the whole idea altogether
Stops are grossly misunderstood. Most traders think if you have a 4 point target and a 2 point loss your risk/reward is 2:1. Nothing could be farther from the truth. In a random environment how could one know which will occur first or even if the 4 point move will occur at all. And then there's the frequency of which way the market will go. Also, since you have a 2 point stop, relative to a 4 point target isn't it easy to realize the 2 point stop will get hit more frequently than the 4 point target? It comes down to relative proximity so a 4 pt target with a 2 pt stop absolutely does not offer you a risk/reward of 2:1.