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To: AllansAlias who wrote (15786)	9/3/2000 5:45:23 PM
From: UnBelievable	Read Replies (1) of 436258

Allan I agree. What I am still trying to refine is an appropriate trading strategy in the context that low transaction costs and real time data provides. It seems to me that the essence of any trading strategy is cut your losses and let your gains run. In general their seems to be the tendency to continue to hold something when it is moving the wrong way. While the buy and hold investor is the most obvious example of this (Well I expect that given the run up we have had we are going to have a correction but I would never sell my XXXX stock) even as a full time trader I too often find myself holding a trading position that has moved against me. The question I am still grappling with is how quickly to cut. No stock moves in any direction continuously. Furthermore the MM's have adapted to this new trading environment by attempting to limit the buying/selling opportunities during price movements. I don't know if there have been studies done but it seems like a large amount of price movement is on morning gap ups and gap downs. In addition if you look at intraday movement there is minimal volume at interim price points during a period of strong movement. Every trading book says that loss limits are key to trading. But absolute limits, if wrong, can be of no help at all. Are there techniques that you have found that are useful in deciding when to enter or exit a transaction? Do you use predefined absolute limits or have general guidelines in mind once you have entered a trade to decide when to exit? I also wonder if there isn't some operations research type of solution which does not rely on any assumptions about future direction at all. Something like once a stock has moved 1% in a direction, trade the stock in that direction until it reverses by 1%. It would seem that some type of solution along those lines would result in trading profitability. I have not seen any analysis which has attempted to test or develop this type of strategy.

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