Successful Trading

Discussion in 'Psychology' started by rs7, Jul 1, 2002.

  1. Lavish

    Lavish

    Lavish not for anything but unless something fell into your lap from the "trading gods" you are risking too much per trade... I suggest you seriously look over your risk management...

    PEACE and good trading,
    Commisso
    ____________________________________________________

    Commiso, I am always willing to learn. Here's the deal. Mom lost approx. 1500 dollars on Lucent. I worked with 3,000 to earn that 1500 back and protect her 3 grand. Here is my main trade. I picked cvu and added their contract value in to their earnings, with the knowledge that they would have some write-offs for disposing of a bad aquisition. Based on a modest ratio of 10, I predicted their value would land between 10 and 13 dollars per share by the end of this year. I bought 1000 shares at 2.05 and traded them again at a sales price of 5.23 and bought again at 4.47 then sold them at 8.12 and bought again at 6.72. They are currently trading at 6.97 but I'm expecting their next rally to reach 9.00 plus. As of right now, the portfolio shows the roi to be 138% and the initial investment is available for trading. (I lost 448.00 on a penny stock tip from a friend that had attended an investment seminar) I am not putting the initial monies "at risk" and plan to only work with the amount in excess of 4500 so that I risk none of her original monies. I am not a "seasoned" investor/trader and warn anyone reading my post to NOT follow me because I really don't know what I'm doing.

    Anyway, Commiso, given this information, would you please relate exactly what you mean by "risking" too much per trade?
    Thanks
     
    #31     Jul 2, 2002
  2. skerbitz

    skerbitz

    rs7 :

    Lots of constructive ideas !!!

    ... thanks for not being just another blowhard

    :cool:
     
    #32     Jul 2, 2002
  3. spectre

    spectre

    It's always a pleasure to read your posts. You are so zen. :)
     
    #33     Jul 2, 2002
  4. Hi rs7 :

    very useful advice and good comments.

    It's interesting to read, that a knowledgeable trader as you seem to be, is more afraid of loosing other peoples money then his own and therefore trades better with other people's money than with his own. I for myself do rather care more for my own funds then for anybody elses money.

    I'd be interested to know, if you can tell us here, without revealing too much of your trading secrets, how this approach ( trade as if you'd trade your mom's money ) actually changed the way you trade.

    Did it change :
    - selection process for stocks to trade
    - number and size of open positions
    - trading longer time-frames ( multi-week rather then intraday )
    - the kind of trading signals you use ( technical, fundamental, proprietary )
    - Management of the trade ( using physical stops etc. )
    - hedge positions via options / futures
    - a mix of all that.

    I mean, how would you describe the difference in your trading style when trading for your own account vs. trading for a 3rd. parties account ?

    Thanks a lot in advance for your much appreciated comments
     
    #34     Jul 2, 2002
  5. Bono

    Bono

    rs7, thrilling as usual :)
    Keep it up pal !
     
    #35     Jul 2, 2002
  6. rs7

    rs7

    Without getting into specifics right here, and some of your points are interesting for me to think about in retrospect, I have to say that the main difference was simply my mentality of accountability.
    I always have traded short term. I did not always trade the same instruments, but this was more a function of what my job was. When I was at the CBOE, I seldom traded stocks. When I did, it was because I was forced to because I was short calls or puts that went into the money. (market makers can do things regarding this that we as individuals cannot....a whole different subject).

    I traded as a firm trader where I could only trade stocks.

    I traded as a money manager and could do anything, but seldom did any "exotic" trading. But even then, I was quite short term. I was not a buy and hold guy.

    I truly believe that what I wrote already addressed your question. It was just the mind-set. I know this is not going to affect all traders the same way. One guy on this thread already pointed out his accountability to himself. I only know from experience that MOST traders do not trade as well when they trade for themselves as they do when they are responsible to others.

    I have heard that at one of the big firms a few years ago (think it was Schonfeld, but not 100% sure), traders were encouraged to put up money and get a higher payout. It turned out to be a disaster, and afterwards, the whole experiment was abandoned.
    The successful traders turned into losing traders when they were trading with their own capital. I am sure there are others here that know the specific details of this better than I, but the mentality seemed to affect the bottom line. Maybe they had fewer rules. Maybe they traded scared. Lots of "maybe's".
    Maybe someone here was at that firm at the time and can tell us what happened and why they think it turned out as it did.
     
    #36     Jul 2, 2002
  7. gnome

    gnome

    You all don't know me, I'm new. Judging the responses to this post, there appear to be many on this board with modest experience (nothing wrong with that, of course). If I can add some words of encouragement, here's my .02.

    I've traded for 20 years, and have had by some eyes "unbelievable results"... literally UNBELIEVABLE. (Fortunately, enough of my past was audited and posted in Barrons and Investors Business Daily, that some know it's true.) In addition to managing for clients, I turned my own personal $200K into $10 Million trading mutual funds from 92-99.

    What I think important...
    1. A smart man learns from his own mistakes. A wise man learns from the mistakes of others.
    2. There are only 2 kinds of traders (investors)... those who don't know and those who don't know they don't know.
    3. NOBODY KNOWS ANYTHING! Not me, not you. Not your guru.
    (market plays, of course).
    4. Always be alert and analytical. The market/environment IS GOING TO CHANGE. All you have to do to get knocked off is keep doing what you've been doing.
    5. It's all probabilities and discipline, so be thoughtful with taking on risk. If you're correct, it SHOULD go your way almost immediately. If not, that's what stops are for.

    You are fortunate to have rs7 on this board.

    gnome... in folklore, the subterranean dwarf who guarded the treasure
     
    #37     Jul 2, 2002
  8. Commisso

    Commisso Guest

    First off Lavish thanks for taking the time to reply...

    Secondly WOW! What a chart and that seems like some great trading you did on this stock.... Please forgive me as I am no longer used to 4 baggers in 3 months! :)

    I assumed that their might be a flaw in your risk and exposure calculations due to an excessive return in such short TF of only two months...

    As long as you are not betting the ranch on each play then I would say that is some great trading :)

    PEACE and good trading,
    Commisso
     
    #38     Jul 2, 2002
  9. DT-waw

    DT-waw

    "The right state of mind" can help you in trading... it's an illusion. Everything comes down to the nature of market, risk, position management and simply luck.
    I think that successful trading is a combination of:

    1) how your trades/strategy/system fit with the nature of markets you trade - you can try to trade with market swings, by using optimization, of course to the past data.

    2) right position management. If you lose 20%, you have to earn 25% in order to go flat. Your task is to minimize that negative effect.

    3) LUCK. You can only optimize your system rules, parameters and position management to past data. Future is unpredictable, uncertain. So, you have to be lucky to some degree, in order to be profitable.

    I can tell myself that i trade with not my own money. OK i trade with my best friend money. So what? Markets are chaotic. This approach won't help me much IMO.
     
    #39     Jul 2, 2002
  10. DT-waw

    DT-waw

    :D go to vegas! you'll lose there also, but at least the food is better. :)
     
    #40     Jul 2, 2002