Well, I can handle that question since I was short six positions on Jan 3rd, in total disrespect of the massively oversold market:)
First of all, tried to cover in Realtick -- ARCA, ISLD, REDI etc all not operational. After alerting members to COVER IMMEDIATELY!!! (this was in a prior gig, moderating another room), I instinctively went into an online account and took the opposing positions (long) to get myself delta-neutral -- losing money in one account while making it in the other. I still dropped about 40 points that day which took nearly a month to recover. It's a good thing I wasn't up getting a cup of coffee or the damage could have been worse.
So - the lesson is: 1) when you get major news like that - GET OUT of your positions IMMEDIATELY, any way you can. I know of one guy trading $40M (he averages $20-30M a year in profits) who was down $8M that morning at one point - according to a very good source of ours, he covered, got flat and traded his way back to end the day up +1M. Especially when an explosive surprise move is driven by solid/confirmed news, it is no good to wait around, you have to just ACT.
The way I look at it is, it's just part of the game... once in a while you're going to get WHACKED if you're constantly exposing yourself to risk. So the answer in addition to the above is:
2. Control position sizes per our $-mgmt guidelines (the topic of an upcoming free mini-seminar).
3. Control the # of positions ( " ). We provide our member-traders with specific quantitative guidelines for #1 & 2, which are derived from the massive body of previously published, public-domain knowledge/trading wisdom on this topic.
4. ESPECIALLY when trading more than 2-3 positions, you should ALWAYS have some kind of standing (resting) stop in place - whether it be exchange-held, brokerage-held, or machine-held.
5. Always be aware of your "$'s at risk" in whatever positions you have open... we define that as (#shares * distance to stop).
Regarding the last point (our "$ at risk" concept). So, say you're short 2,000 JNPR risking 0.35 and long 3,000 AOL with the stop 0.75 away from the current price. Then you have, in theory (ignoring slippage, which can be substantial) (2,000*0.35)+(3,000*.75)=$2,950 at risk in the market on those two positions. With the kind of slippage you would get from something like a sudden national crisis, or a surprise Fed cut then you should double or triple that number as a worse-case. If that number could seriously hurt you, then you're either tooo large, or in too many positions.
re: your second question, we just slacked a bit (I was in Hawaii for two weeks; not sure about Deron's excuse:) but we're going to start posting them right after the close as often as possible, as we did today.
Hope that helps - and good trading!,
Steve |
