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Strategies & Market Trends : Market Gems-Trading Strong Earnings Growth and Momentum
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To: Jenna who wrote (1220)1/10/2001 12:19:41 PM
From: Jenna  Read Replies (1) of 6445
 
SHOULD YOU REALLY CUT LOSES QUICKLY AT ALL TIMES?

Something I haven't thought about through all this rally. What ever happened with those longs that sold into the gap down? Of course they won't tell you they did but rest assured a lot did. In the first 5 or 10 minutes thinking this was the end of the end many sold their newly acquired long positions. Traders strategy is to wait at least 10 minutes even after a major disaster because usually the worst disasters stabilizes and the most damage is done in the first 5 or 10 minutes. Afterwards as we experienced there is usually some recovery, at least enough so you would be selling at the days lows. The reverse is also true. If you see a tanking market it is not wise to rush in an short... luckily you probably won't even get an uptick to short. However, my exception has usually been on a downgrade I would sell short or buy puts immediately. I did that today in RBAK buying puts and immediatly within 10 minutes I was selling them at a loss but the loss was smaller in a put. In that scenario, yes, it was wise to cut my losses in quickly. The first scenario would not have cropped up because in this volatility I still don't take home longs and only limited puts if anything. My lesson is also learned: Wait for 20 minutes AT ALL TIMES no exceptions. Dust yourself off move quickly into the direction of the prevailing trend and get into the next trade.
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