Depressed at calling the market crash and still losing

[breaktwister]

I am a smalltime private investor with a long/short portfolio trading mostly equities. I carry out my own macro and micro analysis and have been short bias in 2016.

However, I have not traded this week as two of my large shorts got stopped out on Monday morning and thereafter moved hugely in my favour. My stops where set well outside technical resistance levels. Basically after doing my homework and making the right trades I lost 5% of my portfolio instead of making 20% this week. I feel absolutely gutted and have not traded any further this week due to the frustration felt at watching my selected shorts sink with no position on. To make matters worse, I was about to place an even larger short once I realised I had been stopped out but decided to step back and reevaluate rather than chase my loss.

The reason I use stops is because I do not trade fulltime and therefore feel I need the protection at times when I cannot monitor my positions. I don't know if I should set really wide stops or none at all?

Any recommended resources on trading psychology or market timing?

 

[dbphoenix]

I am a smalltime private investor with a long/short portfolio trading mostly equities. I carry out my own macro and micro analysis and have been short bias in 2016.

However, I have not traded this week as two of my large shorts got stopped out on Monday morning and thereafter moved hugely in my favour. My stops where set well outside technical resistance levels. Basically after doing my homework and making the right trades I lost 5% of my portfolio instead of making 20% this week. I feel absolutely gutted and have not traded any further this week due to the frustration felt at watching my selected shorts sink with no position on. To make matters worse, I was about to place an even larger short once I realised I had been stopped out but decided to step back and reevaluate rather than chase my loss.

The reason I use stops is because I do not trade fulltime and therefore feel I need the protection at times when I cannot monitor my positions. I don't know if I should set really wide stops or none at all?

Any recommended resources on trading psychology or market timing?

Yours is not an unusual situation. You say you've had a "short bias" in 2016, and while it's not a good idea to have a bias at all, at least you got your timing right, whether by accident or by design.

However, in any lengthy move downward, at some point buyers will attempt to retard the decline, if not reverse it entirely. Therefore, the longer you wait to enter, the more likely you are to get caught by this sort of recoil. As to stops, the issue is not wide or narrow but where to place them. "Technical resistance" levels may not be of much use as resistance is found at those levels where sellers run out of buyers, and software won't do as good a job of finding these as you would.

And, incidentally, you're right to stop and re-evaluate the situation rather than get involved in revenge trading.

What stocks had you bought?

BTW, what I wrote in December still holds.

Db

 

[breaktwister]

while it's not a good idea to have a bias at all

BTW, what I wrote in December still holds.

Db

Firstly, thanks for the response. This year I have been short-term trading, 1-10 day trades, rather than holding a portfolio of equities, due to the high volatility in the markets.

I'm not sure I follow your point regarding bias. Investing or trading surely always involves some sort of bias; the formulation of a world view, industry view, stock view and then placing a particular trade/s based on these views.

BTW - What did you write in December?

 

[dbphoenix]

Firstly, thanks for the response. This year I have been short-term trading, 1-10 day trades, rather than holding a portfolio of equities, due to the high volatility in the markets.

I'm not sure I follow your point regarding bias. Investing or trading surely always involves some sort of bias; the formulation of a world view, industry view, stock view and then placing a particular trade/s based on these views.

BTW - What did you write in December?

No reason why it should involve a bias. Whether price rises or falls or drifts sideways has nothing to do with what the trader/investor thinks about it. The industry view et al is all in the chart (see this post and the six following).

As to December, all that was discussed in the first two weeks of posts in this thread. In a nutshell, price broke its stride (its trend) on the 2nd and failed to make a higher high on the sixth. This also speaks to bias. Price broke its trend without regard for what the trader thought about it and also ignored the trader when it failed to make higher high, or even match the old one. If the trader had had a "long bias" and held onto it, he'd have lost out on 6-700 points. Many of course did (those who were buying as price was falling).

Db

 

[forker]

Why didn't you jump back in.

 

[NVP]

I am a smalltime private investor with a long/short portfolio trading mostly equities. I carry out my own macro and micro analysis and have been short bias in 2016.

However, I have not traded this week as two of my large shorts got stopped out on Monday morning and thereafter moved hugely in my favour. My stops where set well outside technical resistance levels. Basically after doing my homework and making the right trades I lost 5% of my portfolio instead of making 20% this week. I feel absolutely gutted and have not traded any further this week due to the frustration felt at watching my selected shorts sink with no position on. To make matters worse, I was about to place an even larger short once I realised I had been stopped out but decided to step back and reevaluate rather than chase my loss.

The reason I use stops is because I do not trade fulltime and therefore feel I need the protection at times when I cannot monitor my positions. I don't know if I should set really wide stops or none at all?

Any recommended resources on trading psychology or market timing?

You need stops dude ....do not remove them

You are also losing money as a novice trader ....that's normal....we all do ......it's part of the apprenticeship

Keep the faith and knuckle down to learning the business of trading

Good luck:smart:
N

 

[purple_turtle]

Have had it happen to me too many times and have also started using fairly wide stops - but only risking 2% at a time. Obviously, I have to buy a lot less shares, but being stopped out (especially on a spike) and then see the shares carry on in the intended direction is just too painful to watch.

Happened on Friday on a share I have had small but steady gains for around 8 days. Spike hits my stop, lost half my gains, and then the share was back to it's previous high by the end of the day. Was not happy. Should I have just bought in? Obviously, but very hard to buy (and pay commission again) on a share you've just been stopped out and to get in you need to pay more than your stopped out price. Grrrr

 

[zaysev36]

Have had it happen to me too many times and have also started using fairly wide stops - but only risking 2% at a time. Obviously, I have to buy a lot less shares, but being stopped out (especially on a spike) and then see the shares carry on in the intended direction is just too painful to watch.

Happened on Friday on a share I have had small but steady gains for around 8 days. Spike hits my stop, lost half my gains, and then the share was back to it's previous high by the end of the day. Was not happy. Should I have just bought in? Obviously, but very hard to buy (and pay commission again) on a share you've just been stopped out and to get in you need to pay more than your stopped out price. Grrrr

Yep, that's the risk of tight, or not so, stops. But I believe you'd agree that percentage of losses in such occasion is much smaller than the one from not having stops at all. Still, even the tightest stops not always protect you from sudden price fluctuatuion.

 

[dbphoenix]

Have had it happen to me too many times and have also started using fairly wide stops - but only risking 2% at a time. Obviously, I have to buy a lot less shares, but being stopped out (especially on a spike) and then see the shares carry on in the intended direction is just too painful to watch.

Happened on Friday on a share I have had small but steady gains for around 8 days. Spike hits my stop, lost half my gains, and then the share was back to it's previous high by the end of the day. Was not happy. Should I have just bought in? Obviously, but very hard to buy (and pay commission again) on a share you've just been stopped out and to get in you need to pay more than your stopped out price. Grrrr

Better to modify your trading plan or choose some other instrument than widen your stops. The latter is the wrong lesson.

Db

 

[mpups]

I am a smalltime private investor with a long/short portfolio trading mostly equities. I carry out my own macro and micro analysis and have been short bias in 2016.

However, I have not traded this week as two of my large shorts got stopped out on Monday morning and thereafter moved hugely in my favour. My stops where set well outside technical resistance levels. Basically after doing my homework and making the right trades I lost 5% of my portfolio instead of making 20% this week. I feel absolutely gutted and have not traded any further this week due to the frustration felt at watching my selected shorts sink with no position on. To make matters worse, I was about to place an even larger short once I realised I had been stopped out but decided to step back and reevaluate rather than chase my loss.

The reason I use stops is because I do not trade fulltime and therefore feel I need the protection at times when I cannot monitor my positions. I don't know if I should set really wide stops or none at all?

Any recommended resources on trading psychology or market timing?

hi breaktwister

i found this old thread of yours!

In response to to this i would say that having a long/short portfolio doesn't necessarily need stops in the usual sense because, as you know, you are betting on relative outperformance while being market neutral etc.

If you are worried about one of your positions going too far too fast in the wrong direction then maybe its the risk of those individual positions which needs review and maybe you are/were getting confused about this approach.

eg if you are long an individual stock (& short something else) and a bad-news-drop of say 15% would crush you, then perhaps the position needs to be reconsidered rather than worrying about "where do i put my stop?".

just food for though, i dont think there is a right or wrong about this there are many many ways of going long/short, and different circumstances, its up to you.

Anyway, maybe its a stop loss on the relative P/L which you desire..