Wot next? number 2: trade management

[Splitlink]

Hi Jon,

Good threads - i'll venture an opinion then - looks like a silly trade to get into in the first place, but a good warning sign given by the following days candle to get out. And if that wasn't taken, just get out anyway.

Go on then, tell me it's going to plummet now

SQ

Well, mine was sillier. Never mind, I'm stopped out and sleeping well.....

Split

 

[barjon]

Well, mine was sillier. Never mind, I'm stopped out and sleeping well.....

Split

...and making hay on the ftse from what i read

good trading

jon

 

[barjon]

My reasoning was specific to the first chart you showed. I didn't like what had gone before...me, I would have gone short top 15% of range with stop even higher beyond a fade trade with a limit for half bottom of range and an exit on a fade of the b/o you took.
Your chart however was a fait accompli and on that basis I thought the trade against the position shown on your chart were actually setting me up to go short had I not already been in so why would I exit ?
My points about "panic reactions" were made because I bet money most newbies have done one ,or both of the actions I suggested rather than just looking at the price action. It's an emotional reaction for them and perhaps not just them.....LOL

chump

Yes, I hope you didn't think I was faulting your reasoning because that's not the case. The only quibble I would have is that watching the price action relies on the ability to interpret it correctly, an ability not necessarily present in many newer traders (and some of us more experienced one's too ).

good trading

jon

 

[chump]

No Jon not at all and apologies if I sounded as though I was giving a sermon.It wasn't intended that way.
I understand what you are saying about interpretation ,but I don't think interpretation is strictly the problem for a lot of people...they can look and see...they can wait and see...BUT can they do those things when they are getting their emotions involved ? All the evidence of sites like TW2 says NO...LOL ....if you have your tactics logically cohesive...all thought out prior to a trade then the last place to start rethinking them is when you are in the trade....typically that's brought about by fear ...the emotions are in control.
I have certainly not had 100% agreement with Socrates over the years ,BUT one thing I will say for him where we agree completely is in my words ,not his, the mindset determines the winners from the losers. I have seen this either poohpoohed , or made into a lesser issue by many posters and yet when you read through all the journals and stuff a blindman can see that it is the central problem that stands in the way of most of them progressing...even guys who seem to have been trading for years are still dealing with it. Setups are not that hard to find ,tactics are not rocket science ...BUT execution therin lies the difficulty.
I bring this up ,because Trade Management is right where we are going to see this all of this displayed.

 

[barjon]

No Jon not at all and apologies if I sounded as though I was giving a sermon.It wasn't intended that way.
I understand what you are saying about interpretation ,but I don't think interpretation is strictly the problem for a lot of people...they can look and see...they can wait and see...BUT can they do those things when they are getting their emotions involved ? All the evidence of sites like TW2 says NO...LOL ....if you have your tactics logically cohesive...all thought out prior to a trade then the last place to start rethinking them is when you are in the trade....typically that's brought about by fear ...the emotions are in control.
I have certainly not had 100% agreement with Socrates over the years ,BUT one thing I will say for him where we agree completely is in my words ,not his, the mindset determines the winners from the losers. I have seen this either poohpoohed , or made into a lesser issue by many posters and yet when you read through all the journals and stuff a blindman can see that it is the central problem that stands in the way of most of them progressing...even guys who seem to have been trading for years are still dealing with it. Setups are not that hard to find ,tactics are not rocket science ...BUT execution therin lies the difficulty.
I bring this up ,because Trade Management is right where we are going to see this all of this displayed.

Chump

Absolutely!!

Maybe emotions exaggerate interpretation. For example, when I haven't had a trade for a bit I get impatient to trade and will enter at the "it looks as if it might" stage, rather than the "it is" stage. Similarly when I get anxious about protecting profit.

good trading

jon

 

[TheBramble]

Jon, it sounds as though you may be suffering from an affliction that many Traders experience at some point in their career: Premature Execution.

Next time you feel it coming on, just relax, breathe slowly and deeply and think of something totally unrelated to your position. I don’t want to get into all that stuff about stops, pullbacks and breaking-out on volume (sure its been done before), but you know where I’m headed.

If you’re working with someone else, it can help to have them to talk to you during this process to take your mind off things. Unfortunately, based on my unerring ability to accurately assess an individual’s personal situation from their posts, it would appear that many on this site carry out this activity by themselves.

 

[chump]

Tony,
I work by myself all the time. Don't ever want to talk to someone else about what I am doing financially...works for me. However , with trading what also works for me is to be running 4 to 6 trades simultaneously so I not particularly fixated on any one at any given moment. If you have three heading in the right direction and one against you it seems possible to be a bit more relaxed about dealing with it. I am not saying doing something silly with it..I am saying being a bit more relaxed is more enabling in just attending to the data and less to the emotional aspects of such a situation.

Jon,
We all do the mind bit at some point. Back in the 90's I did my last tranche of buying of wee terrace first time buying property stock...At the time I wasn't paying more than
20k a pop...but later ,can't remember the exact year...the props had more than doubled plus I'd had great yields and indeed still had great yields comparative to cash...AND YET...I stuck a few up for sale at 40k + mark....emotional profit taking as none of the fundamentals said it was right to do...fortunately I changed my mind...apologised to the agent and took them off the market....sold them over the last 3 years as the fundamentals said sell Just making the point that the emotional stuff gets to us all at some point if we are not careful.

 

[TheBramble]

I suppose what I was really trying to get at Chump was that from a personal perspective, I always like to make sure my entry criteria is fully satisfied before I pull the trigger myself.

 

[barjon]

...................Jon, it sounds as though you may be suffering from an affliction that many Traders experience at some point in their career: Premature Execution................

.

tony,

fortunately i don't suffer too much - in my advancing years "premature" in anything would be nice :cheesy:

good trading

jon

 

[TheBramble]

Tony,
I work by myself all the time. Don't ever want to talk to someone else about what I am doing financially...works for me. However , with trading what also works for me is to be running 4 to 6 trades simultaneously so I not particularly fixated on any one at any given moment. If you have three heading in the right direction and one against you it seems possible to be a bit more relaxed about dealing with it. I am not saying doing something silly with it..I am saying being a bit more relaxed is more enabling in just attending to the data and less to the emotional aspects of such a situation.

That may be so borderline I missed it the first time...or it may be exactly what it says on the tin...or it could be I'm reading too much into it...I'm going to stop now because it's beginning to hurt....

 

[chump]

"I'm going to stop now because it's beginning to hurt...."...and I'm not going to help by stripping out the multiple entendres !

 

[Splitlink]

...and making hay on the ftse from what i read

good trading

jon

Er, Ok, but it could be a lot better, it really could. There's, still, a lot to learn!

Split

 

[StupendousTrader]

With respect ST, that's not it at all.

If I have correctly interpreted what you’re saying, the decision on whether to stay in a ‘bad’ trade is governed by the percentage of your trading capital at risk?

If so, that’s wrong – just plain wrong. Your percentage capital at risk should never by more than a small percentage (less than 1% typically for most traders who have been in the game long enough) - and ends up being roughly the same size on any given trade.

The rightness or wrongness of the trade is determined by your initial R:R, your initial stop, trailing stop and current price, volume and time development and proximity to target. You’re either still in a trade or out of a trade. There’s never any sense staying in a ‘bad’ trade.

I fully support your previous comments on getting out and re-entering if you get a better position to re-enter from- that makes a lot of sense. Particularly on this instrument at this time.

Chump, your comments about adapting to the situation could be misleading for newbies. I say that as that’s what most newbie traders actually do. They get in on the wrong foot, then find all manner of ‘justification’ for staying on the hope it’ll turn around. OK, I agree with you the stock looks weak for the reasons you suggest (dunno about the gaps though), but to suggest these factors are sufficient motivation for staying in a bad ‘un may not be the best advice to have given a less experienced trader. And the stop hasn’t been hit, true, but the stop Jon mentions is not set, he ‘has it in mind to exit at the best price available following a close above the congestion zone’ which is pretty flaky I think you’d agree? I think Jon was deliberately setting us up with a newbie type trade and wanted to test our mettle.

Hi TheBramble:

I was responding to the following quote from the chump:

" Originally Posted by chump View Post
Jon,
I stand by what I have said. Entry on what is a price range (for me) was not good and the best exit was missed BUT adapting to this at this point your stop has not been hit."

My point is this. Since the Trader's stop had not been hit as stated by Chump, and the Trader's loss is miniscule compared to his equity, he could as well wait it out and see if the market changes direction before hitting his stop. If, on the other hand, his loss is already significant vis-a-vis his equity, he should immediately get out.

If you read my write-ups earlier on this Thread, I stated categorically that this was a bad trade right from start and the Trader should have got out immediately and taken his loss, rather than going through the emotional ups and downs.

I hope this clarifies my point.

 

[TheBramble]

Hi TheBramble:

I was responding to the following quote from the chump:

" Originally Posted by chump View Post
Jon,
I stand by what I have said. Entry on what is a price range (for me) was not good and the best exit was missed BUT adapting to this at this point your stop has not been hit."

My point is this. Since the Trader's stop had not been hit as stated by Chump, and the Trader's loss is miniscule compared to his equity, he could as well wait it out and see if the market changes direction before hitting his stop. If, on the other hand, his loss is already significant vis-a-vis his equity, he should immediately get out.

If you read my write-ups earlier on this Thread, I stated categorically that this was a bad trade right from start and the Trader should have got out immediately and taken his loss, rather than going through the emotional ups and downs.

I hope this clarifies my point.

Not really.

Your stop should always represent a miniscule percentage of your total trading capital. That was my point.

If his stop represented a more than miniscule percentage the trade was doomed from the start. Your risk is determined by your initial stop and trading capital. That's what drives it.

What you seem to be suggesting (and I acknowledge you're with all of us on identifying the entry as a bad one) is that current price in relation to entry and stop is a variable, dependent upon relative pain. It shouldn't ever be that way.

 

[chump]

I think there's a little confusion here. ST, I think,correct me if I am wrong, was basically saying if someone has only X capital and they have 50% of it tied up in the trade then they can't really afford to hang about waiting for a trade to come good they need to be out and into another trade. If that's it then he's not really talking about the risk established on the capital in the trade per se and I take his point although it had nothing to do with the trade facts as provided for this trade situation.
Each to theirown ,but I wouldn't dream of tying up more than 12.5% of my equity capital in just one trade.

 

[StupendousTrader]

I think there's a little confusion here. ST, I think,correct me if I am wrong, was basically saying if someone has only X capital and they have 50% of it tied up in the trade then they can't really afford to hang about waiting for a trade to come good they need to be out and into another trade. If that's it then he's not really talking about the risk established on the capital in the trade per se and I take his point although it had nothing to do with the trade facts as provided for this trade situation.
Each to theirown ,but I wouldn't dream of tying up more than 12.5% of my equity capital in just one trade.

Hi Chump:

Thanks for making my point very explicit. I need say no more.

 

[TheBramble]

OK. I understand. You were talking about capital (margined or otherwise) 'tied-up' rather than capital 'at risk'. Good point. This is what Time Stops are for.

Thanks for jumping in chump, apologies for my misunderstanding ST.

 

[StupendousTrader]

OK. I understand. You were talking about capital (margined or otherwise) 'tied-up' rather than capital 'at risk'. Good point. This is what Time Stops are for.

Thanks for jumping in chump, apologies for my misunderstanding ST.

Hi TheBramble:

No harm done. We are all here to learn from each other with politeness and humility. The best and most profitable Traders I know of are humble, silent and very polite. These are Traders who move hundreds of millions of dollars. They know that ultimately nothing matters in this world. Trading is a very serious and dangerous business but it should be done light-heartedly because ultimately, it doesn't matter. Incidentally, you make more money when you trade for fun and I trade for fun.

Let's keep having hearty and friendly discussions that are beneficial to each and everyone of us.

My regards.