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Strategies & Market Trends : Classic TA Workplace
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To: patron_anejo_por_favor who wrote (50859)8/21/2002 10:39:19 AM
From: AllansAlias  Read Replies (3) of 209892
 
This is my third installment of the posts about being caught short: The Annals of Fear and Greed

The decision that you were wrong has to happen when price is rising. Let's say that you decided only two days ago (geeze!) that you were wrong about being short. All strung-out on fear, you tell yourself you will get out if the market gives you a chance.

Eventually, the market complies and we get some down. You line up your covers but don't pull the trigger; you feel indecisive. This is the first warning: your greed has welled-up just enough to battle your fear. Anyway, the market drops just a little more and you begin to see breakdowns. The bear in you is now getting a little excited and you begin to hope that this "silly rally" is over.

Now you're completely screwed. The greed has whipped-ass on your fear and you hold those Sep puts.

Of course, all of this has to be balanced with keeping a steady hand and not getting forced into a bad decision by emotion. Getting out on the first shallow dip might be the wrong decision. Still, getting out on the first scary dip is less likely to be a bad decision. Sure, the market could roll to the basement, but it's a low odds play for Sep puts.

The essential lesson imho is that the decision to cover, once made, is difficult to execute. The problem being, that the eviornment in which you arrive at the decision is so different than the environment in which you must execute the decision.

I am a student like everyone else, so take this with the humility with which is it offered.
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