What would an experience trader do on a situation like this?

Discussion in 'Strategy Development' started by bearnbull, Oct 5, 2006.

  1. I got in on RIG at $67.99 long on Tuesday Close at 67.72, open at 68.00 on Wednesday--(Still holding)--started going down because of crude oil going down. I got out at 65.63, needless to say, I lost a chunk. Then he started going back up to the 68's. Should I have gotten out sooner?? Held longer and wait for the bounce?? Knowing the turn out--any of the 2 would be a correct answer. What would have an experience trader done given the same scenario??-- Without knowing the end result??

    Thanks
     
  2. If 65.63 was your stop then you did the right thing. If you did not have an exit plan in place prior to putting the trade on you did the wrong thing.
     
  3. Arnie

    Arnie

    You may want to look at hedging when you carry something overnight. You could have hedged your long RIG with a short in DO or OIH. That would give you some protection to market and sector risk.
     
  4. That's correct if your stop was set at $65.63.

    It happens, you got to be able to take a loss here and there.
     
  5. Given that I am a new trader, without much experience, the more experienced traders may be able to comment further.

    I think it is hard to give you a helpful answer based on the information that you've provided. It is critical to exit at predetermined stops, without question. But first, you have to have an overall trading plan with positive expectancy, and the initial determination of where to place your stops is a critical part of the plan.

    So the real question is do you have an overall trading strategy with a positive expectancy including stop placement, and was this a predetermined stop that was part of that trading plan.

    If so, then I believe that it was the right thing to close the position when you did. If not, then the answer is no, because you should not have entered the trade to begin with.

    Hope this is helpful
    phineas
     
  6. What was the reason for entering long on gap down day with price making lower highs and lows the whole day ? You must learn basics first. Experienced trader would never enter long unless there is some support formed and price is moving up.
    It would be very difficult to make a worst trade then this one you have described. Study more before you trade .
     
  7. What is your definition of an up trend or a down trend or a trading range? I look to the 14-bar RSI. The range of the RSI readings will shift due to the influence of the trend. A market in an up trend will tend to have RSI readings that peak above 62 and tend to turn up from above 38. A market in a down trend will tend to have RSI readings that peak below 62 and bottom below 38. A trading range will tend to have RSI readings that crisscross 50 between 38 and 62. The attached chart shows RIG color coded with RSI readings above 50 coloring the bars green and RSI readings below 50 coloring the bars red.

    RIG was in a trading range based on the above RSI description, after being in a down trend. $67.99 is closer to the middle of the trading range than the bottom of the trading range.
     
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  8. And of course today it broke $69.00

    Since you can't see the future( at least most of us can't), in your case you did the right thing.

    Getting past your losses is one of the hardest things to do. Every successful trader must learn to do that.

    The value in losses is learning from them. In my case, I've done a lot of learning lol

    Don-
     
  9. alorainc

    alorainc

    Since a lot (all?) of trading is a game of probabilties, I would say although it is helpful to know how any one trade turns out, it will be MUCH more useful if you take a lot of your trades over a period of time, and see what they ALL do.

    For example, if you look at 100 trades, and find that the majority of the time that you take a loss, within 3 days after, the stock does what you thought it would.

    In this case, you need to start lengthing your time frame, or change your stops...or change your methods in some way to take advantage of this "3 day lag" bias.

    Every single trader in the world has had a situation where they closed a position, only to see it move exactly as they thought. The profitable ones are able to determine a pattern of behavior, and make a change that will be net profitable over the long run.

    You can't win em all...you can only increase your odds.

    I hope this gives some perspective on how to approach the question "did I make the right choice".
     
  10. First of all, before you go outside, you need to check the forecast on tv. Lets see. Hmmmm. All day long they have been saying that oil is going down down down and the traders are selling on any strength. The Saudis are contemplating whether to cut or not. Everyone is hee-hawwing making the price of oil go up and down.

    Ok looks like oil is not going to be a favorable trade and it could spike either up or down. Maybe its time to stop daytrading the oil stocks and move on to something else.

    Lets check the playbook too. The XOI is strongest from mid-Dec to mid-June. Hmmm. Maybe we shouldnt be playing around with energy stocks right now.

    Why not check the SOX index and find a nice little semi company to daytrade? The playbook says that the SOX is strongest from end of Oct to December...
     
    #10     Oct 14, 2006