Obviously there's a chance I got stopped out at the lows, but that is true any time you exit a trade where you were wrong. The right thing to do when the market proves you wrong is to get flat, then reassess based on the new information, and decide what is the right way to position yourself going forward. It's also wise to reduce position size when you were wrong, as it's a sign you misjudged the market environment. As for what now - I suspect that either we crash hard today, or that was a bear trap, it put in the low, and we rebound and close flat or green and then rally the rest of the week. I don't see us just chopping around all day/week. The way to play that kind of either/or scenario is to trade any breakouts in either direction, starting small with a stop, and then pyramiding up to bigger size with wider trailing stops as the breakout is confirmed. That approach will win big if a huge move occurs, and lose somewhat if it's a choppy day. Any time you made a bet and were totally wrong, you should not just stop yourself out, but also seriously consider reversing your position. If my initial view was totally wrong, and the market is going to crash today, it should break to new lows in the next hour or two, and then keep going down until true panic hits. So, I have placed a small short position (current price 1151 ES) with a two-stage stop at 1170 and 1180, and will pyramid it on the way down if 1145, 1140 breaks and a crash appears to be on.
I size my positions based on how far away my stops are. If I have a 50 point stop, and want to risk (for example) 2% of account equity, then I'll take a 40% net long position, and lose 2% if the stop gets hit. Only way I lose more is if there's a gap beyond my stop. That's pretty basic risk management, where does 'unlimited bankroll' come into it?
I follow solving algebraically, as I too went to grammar school. My comment related to your ability to take large loss after loss.
Well I dropped 2% on the initial trade, the second short was - as stated - the initial tranche of a potential pyramid i.e. not much risk taken at first. That's a bit different to large loss after large loss.
Wait, you lost like 40 pts being long and now you went short? With your profit target being your former long stop level? If we puke really really hard toward the close I will consider getting long ES at around 1100... will hold it overnight... stop would be around 1085. The government can get creative to protect stock prices (probably via inflation). Gold stocks today... NEM lol
hey nothing wrong with being wrong. he made a call, it didn't work, he got out. what's the problem? he's usually right by the way.
I've seen studies showing that using stops to play bounces in equity indexes actually hinder performance. The correct way is to stay long till the quant analysis shows a big edge is not there anymore(usually due a bounce but could be just stabilization) The stop tends to take out just when the edges are the largest
I don't recall you stating an allocation prior to the stop. I like it though. My 50-handle losses are always 1-2% as well.