On a continued note: Short term trading contains the requirement of being able to oversee the long term consequences of your repeated actions. Because short term traders tend to be farsighted they let their actions be guided by short term losses or succeses as displayed by their p/l sheets, while they're unable to see the long term consequences of those actions being repeated thousands of times.
Neke, if you want to get rich, write a book about your secret to success now. It's a lot less risky than risking your capital. Given how popular your journal is, I am sure your book will be a success. PA
LMAO you better get the economics of publishing before posting so ridiculous idea. no one gets rich by publishing a book, let alone a shallow book aimed at compulsive gamblers, such as the one you hinted here.
Exactly. The 102K loss was from the options and, contrary to what some have said, was totally avoidable. Because there was no valid reason for a trade of that size to begin with (only the thought that BIDU "was overdone at 449") and one day options allowed no room for error on top of that. Not listening to what the market was saying and compounding the initial mistakes by buying 60 more dying puts and then 200 more only exacerbated the problem. I say none of this in hindsight because I considered BIDU puts based on the same thought that the stock was "overdone" but ultimately passed, thinking it was more of a gamble than a trade. That doesn't mean one should NEVER add to a losing position. There are times when it makes sense IMO... but only when you have a sound reason for your trade in the first place AND you believe your original rationale for the trade is still valid AND your trade is structured so there's time for it to play out AND you're not risking the farm. Neke -- I mean none of this with any disrespect. I'm just surprised you'd make a trade like this and would add that I think it would have been a bad trade even if you'd made money on it.
Yes, he had to short BIDU. As an RTM trader he simply cannot allow a gap-and-go setup like BIDU to remain untraded! Here's where he made too much mistake, freewilly: He averaged into a loser using front month options THE DAY BEFORE EXPIRATION! Have you ever looked at a Theta graph of a front month option as expiration approaches? Did you read Neke's account of the trade and how he struggled to find bids so he could exit the trade? Yes, you can say he should cut loss quicker, but what if BIDU suddenly changed direction right after he cut loss? Believe me, this happens to us often.[/QUOTE] Even if BIDU had reversed direction before Neke threw in the towel, giving him hope, he would've still lost a lot of money because of the exponential increase in time decay as expiration approaches. If you're a mean reversion trader and price suddenly changes direction right after you cut a loss and this happens OFTEN, it means you are either getting into trades too soon, before they've signaled a true reversal, or you're placing stops too far away in the first place, meaning you're really unsure of where price is going but you "feel" price is "too high" or "too low" and you're planning to use leverage and averaging as an "edge". He is actually very disciplined.[/QUOTE] If Neke was very disciplined he wouldn't constantly be trying to correct these major lapses in discipline. I can't say whether NEKE's method will work for the long run. I have a hunch it will. At least his number for now is far better than most traders I know.[/QUOTE] Because Neke is buying premium and not selling it, I doubt he'll ever blow his account. Also he has a job, so he's not risking money he needs to live on and that's why he can afford be a cowboy trader. I'm 99% certain he'll be a profitable trader year after year. BUT I believe Neke can actually achieve his lofty goal one of these years. He has lost $70K+ in a week several times. This means his account and his psyche can handle these kinds of losses. I suggest he watch for momentum stocks to reach extremely overbought/oversold conditions, then put on an option swing trade. As an example SHLD is getting ripe, IMHO. Neke could put on a $30K or $40K position with a 50% stop loss and hold it for reversion to the mean. SHLD has large swings, so risking $15K or $20K he has a strong chance of gaining $50K-$100K or more, depending on which month he plays and how long he's willing to hold.
Why? The reason for BIDU gapping up was still in force... one could argue increasingly so as time went on based on the news flow.
Buying near-expiration options is indeed a flaw in his execution. There's a fundamental flaw in his trading method however that even perfect execution cannot repair. The flaw is that securities are not necessarily mean reversing while a mean reversion strategy will never be able to tell you when they're not. In other words, approaching the markets from a mean reversion paradigm will ensure that the market will always be obscured from your view. After all, if you can't tell when you're wrong, what can you tell? Some suggestions were made to use a form of money management to determine when he's wrong. A stop-loss that's triggered when two percent of his account is lost was suggested for example. This approach aims to plug the holes in his method but isn't able to solve its fundamental flaw. It will simply push the rents backwards by increasing his percentage of unprofitable trades.
Most people here criticizing neke have no idea what it takes to make big money FAST. Sure, you can be conservative and eek out profits steadily but SLOWLY. It is clear that neke wants to make money FAST. In order to do that, you have to have 2 things. 1. An edge. If you have an edge, you will make money. 2. Balls. If you don't bet big, you will have a hard time making big returns. You have to be able to deal with big drawdowns if you want to make high returns. Seems to me that neke has both, and is willing to risk big sums to make big returns. That's how you make big money. Not by overexcessive risk control.