I shorted nflx on 12/27/2016 by simply buying a minuscule position of 3 puts strike 95 mar 17 for 1.26 each total value of about 400 bucks which represents less than .2% of my portfolio, the trade was a pure gamble in my opinion, even though ive been trading 10 years now i still consider it a gamble cuz it was UNSTANDRIZED. what i mean by that is the very same thing that shaped my trading and caused a paradigm shift the last 2 of the 10 years ive been trading, and that is i shorted nflx simply on it hitting the resistance of 126 approx....this is the 4th time nflx hits this price zone except that the 3 previous times it failed and went back down to 90 dollars approx,,, the point iam trying to get at that iam a firm believe in now is that I CHERRY PICKED this trade, what i mean by that i that i picked to trade nflx this time and picked NOT TO trade it the previous time which in itself i believe is disastrous,,, cuz u either end up picking the loser trades out of the majority (within one instrument) or not trade it at all..... simply back testing and analyzing nflx, if someone traded this same trade repeatedly and systematically,y (play every hand, short every time its at 125) then overall the results are winners, but the fact we pick and choose when to trade and when to trade is wrong in my opinion,,, the best approach or at least the one that worked for me in my last two years,,, is i either trade every hand and every signal (regardless of the system being used) or i dont trade the instrument at all,,, so either trade every signal in nflx or dont trade it at all,, even if the trade is profitable i still believe this is a bad trade cuz it strays away from applying the same standard and playing every hand,,, summarizing this is my blackjack analogy,,, ur put on a table dealing black jack and say bet is always the same (standrized) and i guarantee u it wins 7 out of 10 hands then ur guaranteed to win OVERALL, but where could it get fucked up??? is if u decide to NOT play every hand and cherry pick when u bet and when u dont bet,,, which is gonna fuck up the odds and could possibly make u a loser instead a winner on what was supposed to be a winning odds alreaady,, cuz if u decide to side step a hand dealt your chances are 70% ur gonna miss a winner since the table is guaranteed 7 out of 10 hands to be winners,,, thus my opinion in trading is you must play everyhand MUST PLAY EVERY HAND,,, this goes counter intuitive to overtrading and cash as position yet its worked for me in the past 2 years considerably well at least so far,,,, any thoughts, opinions,,, what am i missing if anything here??? does this apply to systematic traders like me only??? or is this universal?? how does this conflict or agree with those who trade discretionary? even if ur making money couldnt it be that ur missing out on even higher amounts??? truly appreciated,,
First, in trading, you never can know the true odds, only an estimate. Second, the odds aren't always at some fixed percent. Third, look to maximize payoff, not just probability. payoff = probability*(reward/risk)
Two thoughts: ** buying puts is not shorting stock. You are *long* a right. You are not *short* a responsibility. (That would be, per your example, selling the NFLX calls...) ** NEVER ever ever force a trade. Trading should be as easy and as *boring* as walking down the street, picking up "found" change. "S.O.H." (sitting on one's hands) is one of the most important things to learn. (Not as important as overall position management, but damn close.)
guys, first and foremost thank you for the response yes i agree everything here, odds can change and are not fixed,,, but the key thing iam trying to discover here is that whenever i trade an instrument with a certain style whether some strategy or method or whatever i find myself picking the wrong times, although the strategy or method worked MOST OF THE TIME,, and iam finding myself restricting and sticking to few instruments,, another example is crude since 2014 for example, which is what turned my trading around,,, i had a system with buy and sell signals, i started in nov 2014 EXCEPT that i only took the long signals from my system and ignored all the SHORTS saying, its too low any ways, of course we all know what happened to crude, as far as me i got crushed and capitulated right near the bottom of 28 and some change, after the smoke settled (with me) i did the math and i realized that have i played EVERY HAND i wouldve overall came out a winner and not loser by CHERRY PICKING THE ODDS, ever since, i trade other instruments now and iam always IN either long or short but never flat,, yes times its whipsaw and costly on commission but overall its made me good money in 2016 and was the turn around for my career, the question lies has evolved where this is simply the style i gravitate towards or is this something more universal that i just learned? now when ever i look at any other instruments outside the ones i already trade, even if i notice and say have extreme confidence in its direction I DONT trade it, because in my head i say, whats one trade gonna do, and the odds are probably low that out of so many signals i capture the right one assuming i been trading that instruments, thus i dont trade any thing new,,, if i do i trade it fully and its added to the system for full backtesting and trading, meaning i will always be long in it or short
You should automate it, gets rid of cherry picking and you nail every trade. We never know which will do well or lose, you have to take every signal.
thats what i thought, or at least thats whats worked for me so far, backtest the system, follow the system
Rufus Mrehin, Correct, if you have an idea, backtest it for X amount of trades. But, there is soo many different variables, so keep it simple and pick a few options. Or record every trade you take and the "what if, I had this.." scenario.
There is truth there. One never knows if a trade will give an opportunity to be a winner or not. How do you define "cherry picking"? When you think about it, your reason for entry is a "cherry pick".