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Strategies & Market Trends : The Market Taught Me That......
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To: Alex Abuin ?+!=$$$ who wrote (31)11/6/1997 9:39:00 AM
From: Tom Trader   of 151
 
>>I find all this talk about preservation of capital quite interesting. Traders put their capital into stocks/options, whatever. The more capital you put in, the more you can win/lose. By definition, if you sell when your investment goes down to "preserve your capital", you've lost capital, full stop<<

Implicit in investing/trading is that one is taking on some level of risk--the key to being able to last long enough to play another day, is money management--as important as good entry and exit on trades but usually not given the appropriate attention.

>>I think what we all mean by preservation of capital is:

A) Get out of this position before I lose ANY MORE capital
B) Hope my other plays will make up for this LOSS of capital<<

I agree---but back to money management -- if one has $10K of risk capital and one chooses to use the entire amount on one options trade, one may end up with a great winner but on the other hand if one is wrong one could be out of the game.

>>Sometimes I like to think of the stockmarket as a big casino, the difference being investors have the same edge that the house has in a real casino<<

I guess that I don't see the market as a casino--and I don't see my trades as "gambling". I trade everything from stocks, options to futures and although the latter two are generally viewed as very high risk, I feel that if one does not go over-board on the leverage that these instruments offer and one uses proper money management and disciplines in entering and exiting trades, it is entirely possible to be successful--and I am not the equivalent of the pit-boss in when I trade.

Good trading
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