Mark,
Thanks for the excellent post.. may I add to that?
How does a trader end up in a large (relative to account value) losing position?? Without breaking a few rules like proper TA, entries, trading in the direction of the market trend, using stops.. etc., really hard barring an Oct. '87 type meltdown. And you know what I think is the number one cause some of these rules are violated?? OPINIONS!! The stronger opinion gets, the weaker the objectivity. I know some that bought online brokers in December anticipating good earnings and believing they could only rise. I have sometimes considered tossing my "favorites" list as, when technically unweeded, exposes me to errors.
Finally, I have to politely disagree on the size adjustment as account value grows. If an account worth 100k used in 5ths (my comfort level) grows to, say a mil., I would move to more liquid markets instead of increasing the number of markets, afterall, a 5th is a 5th is a 5th. Granted, I will eventually run out of markets, at which point I would likely bank the excess. I see TA as a tool to reduce loss as well as allow concentration in positions. This is how I've traded for a while and may make another trader quite uncomfortable. Maybe I trade this way because I am just not sharp enough to handle more than 5 positions at once...
Would make a neat experiment.. take 10k, do TA, pick 5 stocks, after proper entries set 3 to 5% stop losses and plan on selling each on it's first declining day after 3pm. I may try it someday and track the results for a year...
Rashid |
