Opportunity cost

[JumpOff]

I'm afraid I'm getting lost here. Could you relate this to the original question? Or perhaps Clyde could amplify? The suggestions I made were general because the question was general. But the thread's about Clyde.

Great idea to have clylbw tell us more. I understood her to mean that her current position had stats that were not as attractive as a setup she saw developing in another instrument..
JO

 

[JumpOff]

Him ?

Er.. Sorry about that. I was thinking that clylbw was female, but when db referred to this thread as as "clyde's thread" I tripped up. I will edit my post. My apologies!
JO

 

[dbphoenix]

Er.. Sorry about that. I was thinking that clylbw was female, but when db referred to this thread as as "clyde's thread" I tripped up. I will edit my post. My apologies!
JO

My mix-up. Female. Though she may not want me to give her real name.

 

[sulong]

"Greener grass syndrome" and "opportunity cost".
Every entry has added element of risk associated with it, beyond that of simple price.
When a small account exits a perfectly good trade just to try and capitalise on a "potential" opportunity elsewhere, they doing more harm to their discipline, confidence, focus and hard work from their analysis, than what is healthy.

At some point we all need to put our emotional trading health in front of our greed.

 

[ducati998]

If I did so, I would violate my trading plan, because my plan does not indicate an exit or closure of my current position. Besides, I would not know if there would be a big move coming later in instrument A.

Taken from page1, and the original question.

Everyone seems to pay lip service to dicipline. Everyone moans about the difficulty of the psychological aspect of trading ad nauseum.

Here is your classic example.
'I WOULD VIOLATE MY TRADING PLAN'
So the answer is simple, and must be executed, otherwise you are on a very slippery slope. The erosion of dicipline starts with innocuous little shortcuts, and ends in ****ing disaster. You see this trade out, and what you have learned, apply to a new set of rules for the future.
You stay with your plan. You exit when your plan dictates. Tough. Thats trading.

The trade that I am currently running CPE, going everywhere and nowhere, ..........stick with it until you are either stopped out, or exit for your profit as dictated by your plan.

cheers d998

 

[JumpOff]

I want to be clear that I am not suggesting that clylbw change her plan in the middle of a trade. I am pleased that she asked the question and started this thread, because I have been curious about it for a long time. Some opportunities are clearly better than others, so there is a need to address this issue in the trading plan.

JO

 

[frugi]

Trading one instrument only with a few setups that exclusively suit different conditions is one way to surmount the problem, but doesn't properly answer your question clylbw, I admit.

 

[SOCRATES]

I agree with John Doe. He is the only one to have pinned the fact that the instrument is not motoring, and if it is not motoring, there is no degree of certainty it will fulfil expectations, which you call a target.

The most prudent action is to take the small profit, however small first, this is taking the treasure ashore, before a big unexpected wave swamps it and carries it off.

Then, free of it, another opportunity, a better one, can be seized.

Simply put, there is no point in hanging about and hoping, as it is a most unprofessional way of going about things.

 

[dbphoenix]

Trading one instrument only with a few setups that exclusively suit different conditions is one way to surmount the problem, but doesn't properly answer your question clylbw, I admit.

This sort of thing comes up fairly often, and amounts to wanting to know how to go about doing what shouldn't be done. So those who know better are faced with a choice between becoming enablers or counseling steadfast adherence to the plan, if there is one, which helps to account for the number of posts that are generated by this type of question.

If the question were to be "what do I do next time?", I suspect there would be considerably more agreement on the answers.

 

[ducati998]

Socrates,
As usual clueless.

I agree with John Doe. He is the only one to have pinned the fact that the instrument is not motoring, and if it is not motoring, there is no degree of certainty it will fulfil expectations, which you call a target.

And there is no certainty that it will not.
And if T/A has any validity, then the trade was put on with a tested probability of success,to violate the trading plan at this point indicates that there is no "probability" associated with the entry, so to place another trade elsewhere really starts to look like complete guesswork.

The most prudent action is to take the small profit, however small first, this is taking the treasure ashore, before a big unexpected wave swamps it and carries it off.

And what happened to that old maxim that traders love to trot out..............let profits run, cut your losses..........currently the trade is open as it hasn't been stopped out for a loss, and may or may not be showing some paper profit, so, let your profit run, cut your position if it shows you a loss. This is important as, if your EXPECTANCY is X%, then ( unless 100% ) you will require your winnings to outperform your losses. Taking small profits, may well push you into a net loss.

The trading plan may need revamping, but you do not close a trade to place another trade.
You close the trade, and re-think your trading plan. You most certainly do not revamp trading plans in open trades.

Simply put, there is no point in hanging about and hoping, as it is a most unprofessional way of going about things.

No, he is following his trading plan.
That is the PROFESSIONAL way of doing things. That you would advise the ignoring of that trading plan really calls into question whether you have ever actually traded outside of that ridiculous entity...............the STAR CHAMBER........some sad B Film was it not?

cheers d998

 

[clylbw]

Many thanks for all your help via replies and PMs, which has reminded me of the points I overlooked.

Though I would very much prefer to leave my gender and name out of this, please.

 

[SOCRATES]

Socrates,
As usual clueless.



And there is no certainty that it will not.
And if T/A has any validity, then the trade was put on with a tested probability of success,to violate the trading plan at this point indicates that there is no "probability" associated with the entry, so to place another trade elsewhere really starts to look like complete guesswork.



And what happened to that old maxim that traders love to trot out..............let profits run, cut your losses..........currently the trade is open as it hasn't been stopped out for a loss, and may or may not be showing some paper profit, so, let your profit run, cut your position if it shows you a loss. This is important as, if your EXPECTANCY is X%, then ( unless 100% ) you will require your winnings to outperform your losses. Taking small profits, may well push you into a net loss.

The trading plan may need revamping, but you do not close a trade to place another trade.
You close the trade, and re-think your trading plan. You most certainly do not revamp trading plans in open trades.



No, he is following his trading plan.
That is the PROFESSIONAL way of doing things. That you would advise the ignoring of that trading plan really calls into question whether you have ever actually traded outside of that ridiculous entity...............the STAR CHAMBER........some sad B Film was it not?

cheers d998

Listen ducatti, I am not here to argue endlessly with you.

I have said what ought to be said, and that's it.

 

[frugi]

And there is no certainty that it will not.
And if T/A has any validity, then the trade was put on with a tested probability of success,to violate the trading plan at this point indicates that there is no "probability" associated with the entry, so to place another trade elsewhere really starts to look like complete guesswork.

I think you are being a little harsh on Soc. Although the trade may be initiated because conditions at that particular time indicate a highly probable chance of success, that is not to say that while in the trade conditions can unexpectedly change, resulting in the initial criteria for entry being soundly negated, or at least diminished. A different outcome may now be more likely than the one expected at entry. If this occurs it is often more prudent to exit the trade than stick rigidly to the "plan", regardless of current p/l, expectancy etc. There is, after all, always another wave.

The skill of course lies in being able to read the market correctly as it unfolds, by use of real time analysis that penetrates far beyond the obvious limitations of textbook TA. It's what Mr Charts calls "micro analysis", I believe. Most of us are unable to do this because it is bloody difficult, but I have every certainty that there are those that can do it with a high degree of consistency, and they're the ones keeping quiet and taking our money, or at least reducing our profits.

 

[SOCRATES]

I think you are being a little harsh on Soc. Although the trade may be initiated because conditions at that particular time indicate a highly probable chance of success, that is not to say that while in the trade conditions can unexpectedly change, resulting in the initial criteria for entry being soundly negated, or at least diminished. A different outcome may now be more likely than the one expected at entry. If this occurs it is often more prudent to exit the trade than stick rigidly to the "plan", regardless of current p/l, expectancy etc. There is, after all, always another wave.

The skill of course lies in being able to read the market correctly as it unfolds, by use of real time analysis that penetrates far beyond the obvious limitations of textbook TA. It's what Mr Charts calls "micro analysis", I believe. Most of us are unable to do this because it is bloody difficult, but I have every certainty that there are those that can do it with a high degree of consistency, and they're the ones keeping quiet and taking our money, or at least reducing our profits.

Precisely !

 

[dbphoenix]

Although the trade may be initiated because conditions at that particular time indicate a highly probable chance of success, that is not to say that while in the trade conditions can unexpectedly change, resulting in the initial criteria for entry being soundly negated, or at least diminished. A different outcome may now be more likely than the one expected at entry. If this occurs it is often more prudent to exit the trade than stick rigidly to the "plan", regardless of current p/l, expectancy etc. There is, after all, always another wave.

The skill of course lies in being able to read the market correctly as it unfolds, by use of real time analysis that penetrates far beyond the obvious limitations of textbook TA. It's what Mr Charts calls "micro analysis", I believe. Most of us are unable to do this because it is bloody difficult, but I have every certainty that there are those that can do it with a high degree of consistency, and they're the ones keeping quiet and taking our money, or at least reducing our profits.

If the thread is going to take this direction, then I'll suggest that all of this should be anticipated in the plan. If one's plan consists of yes/no, on/off, black/white, then, yes, it's probably better to just exit and take the other trade, which is just as likely to disappoint as not.

Reading the market correctly as it unfolds is fine as far as it goes, but anticipating a variety of contingencies enables one to make snap decisions without any dithering. I suppose one could call it a skill, but it's more accurately simple preparation.

 

[dbphoenix]

. . . that is not to say that while in the trade conditions can unexpectedly change, resulting in the initial criteria for entry being soundly negated, or at least diminished. A different outcome may now be more likely than the one expected at entry.

Rather than add to my previous post, I'll add here instead that the criteria for entry are not negated simply because price doesn't do what's expected. The rules for entry and the rules for management are separate issues since there is no way of knowing exactly what will happen once the entry is triggered. If the trade doesn't go quite as expected, that doesn't mean that exit is appropriate. Some trades take longer to ripen than others. This doesn't mean that one should stay in a trade regardless. But it also doesn't justify exiting out of boredom.

If one's management rules call for an exit, then take the exit. If they don't, then one is deciding not to follow the plan simply because something somewhere else looks better. This is not sound practice. If one has no management rules, then that of course should be addressed.

 

[ducati998]

Rather than add to my previous post, I'll add here instead that the criteria for entry are not negated simply because price doesn't do what's expected. The rules for entry and the rules for management are separate issues since there is no way of knowing exactly what will happen once the entry is triggered. If the trade doesn't go quite as expected, that doesn't mean that exit is appropriate. Some trades take longer to ripen than others. This doesn't mean that one should stay in a trade regardless. But it also doesn't justify exiting out of boredom.

If one's management rules call for an exit, then take the exit. If they don't, then one is deciding not to follow the plan simply because something somewhere else looks better. This is not sound practice. If one has no management rules, then that of course should be addressed

Exactly so. The trading plan delineates every contingency that you can think of, that may threaten your capital. If, your capital is threatened by something that you hadn't thought of, and it's not in your plan...........exit with the loss and re-think your plan.

Exiting as you are bored, think you see a better opportunity elsewhere etc is a breach of dicipline, and the slippery slope to losing your capital.

The skill of course lies in being able to read the market correctly as it unfolds, by use of real time analysis that penetrates far beyond the obvious limitations of textbook TA. It's what Mr Charts calls "micro analysis", I believe. Most of us are unable to do this because it is bloody difficult, but I have every certainty that there are those that can do it with a high degree of consistency, and they're the ones keeping quiet and taking our money, or at least reducing our profits

Two points.
1......If you are purely a "DAYTRADER" then thats fine as far as it goes. However, there are other forms of trading outside the exceedingly high failure rate of daytrading.

2....."micro-analysis", or as defined by Mr Charts, a combination of Level2 & Time & Sales.
Level2 is a scalping tool first and foremost. It does you little if any good for catching bigger moves, unless you dispense with it for a different exit technique.

How can I justify that assertion?
1.....Unless you hold overnight, only very rarely will you have stocks exceed 2% intra-day, that will normally be on news, and the MM have already moved the price prior to retail traders getting in on the open or pre-market

2....Only very rarely will a stock trend intra-day in one direction without ANY pullbacks.
As soon as a pullback is on the cards, Level2 starts showing the changes in orders, if you are trading by Level2, this is an exit.

3.....For scalpers, this is fine, they only want "sure" money, and they will execute 100's possibly 1000's of trades a day, and make good money. Of course you stay in front of the screen all day

4.....When you are scalping, your winners in $$ terms will not exceed your losers by a great amount, so accurate entries are a prerequisite.

5.....If you look at the trade examples posted by Mr Charts, you see a great number that go something like,.......profit $0.34, $0.26, $0.67..........losses, $0.13, $0.04, $0.19
For the scalpers, that is the way it goes, tight stops, fast exits, lots of trades, living on fags,caffeine and whatever.

Level2, for non-daytraders is a complete waste of time.
It provides you with nothing, it is the noise taken to the n'th degree, and serves no purpose.
Needless to say, MM know that there is a population of daytraders trying to beat them at their own GAME..........and they will sucker most of you most of the time.....why?

Because they see their own order flow, and will share their order flow with other MM for their order flow, think they don't?.....Think again.
MM don't lose money.
If they do, they aren't MM for very long.

cheers d998