Re: Discipline and Not taking them Home....
Let me preface this with the fact that ALL of my long term holdings are getting hammered, that my long term portfolio, which because of my aggressive growth allocation, is down 10% or so in the past few weeks...ouch...such is long term investing, where tech is 50% of my holding.....but.....
It appears that Don has broken discipline and made a mistake that day traders should not do. Don, you stated that you are not a position trader as you were no good at it. You also stated that you trade in an account of $50k and buy 1000 shares of stock, one or two max per day. I believe you have clearly stated that you are a day trader and do so via. intuition without any strict routine. I had also thought that you didn't take stocks home, so I am wondering why you did it this time?
Currently, I beleive by your posts, you bought two days ago I believe, RMBS and AMAT. So you own about $80,000 of stock (1000x31) and (1000x49) in two issues, that must have cost you about 89ish or more since these stocks have got crushed the past two days. You are leverage about 40%. 89-50K principal = 49 debit. You are almost fully leveraged in the account.
The net effect of leveraging the account, and taking stocks home and letting losses get away is that the 8000 or so you are out is about 16% of the account. By leveraging you, have crushed the account, down 16% in two days.
As well, you have also tied your hands from trading other stocks. You had opportunity costs yesterday. You were pretty much out of buying power, so not only were your 'long' positions down, you also missed the great, great rally from -140ish to -70.
Day traders are trading for 1/8s, 1/4, 3/8s etc. and can afford to leverage the account as long as they keep the losses tiny. They cannot do this by taking stocks home as it is out of their control during those 15 hours. You don't shoot to make 15% inone day, you can't afford to lose it either. Your upside stops have to equal your downside stops as well.
I believe what happens is that when a position moves away and the trader lacks discipline, they take the stocks home, or don't sell them when they should. Traders start thinking they can beat the overall market, that they can guess what tommorrow will bring, when their true skills, those that have made them successful, lie in guess the direction of a stock for the next 2 to 120 minutes.
By your own accord, you stated that you were no good at position trading, that your skills lied in day trading. I would call it nothing other than imprudent to be almost fully leveraged in an account, trying to trade a style you by your own admittance have no luck with. When you gamble with someone else's money, you had better control your losses or you can quickly beout of the game.
You could be out another 10% today or up 10% today. Are you willing to take that kind of risk? Traders are professionals, not gamblers. You want to be a gambler, go to the casino, red or black, immeidate gratification. You want to be a long term trader, you need discipline.
Don, you made great efforts to point out to participants on your thread how successful your 'intuition' style of tradinghas been. In fact, although I disagreed with it, I beleive some were beneficially influenced by it. It has its merits. I am simply pointing out the downside to such investing. I am already anticipating your response and the shots you are going to take. Perhaps we can keep it focused on facts and the topics here, nothing personal.
The market will be real gross this morning. The hard drives that Ihave been buying recentlyhave all been getting crushed and will probably continue to do so today. Thank g-d I didnt own the QNTM. Why? Because they have debt. I do own WDC which I am down about 25% on quickly and will probably be down another 10 today. Such is longer term investing. You cant pickthe bottom, just never commit too much at any one time and pick good companies, better management and profit potentiality.
Regards,
Steve@yamner.com |
