Momentum Daytrading - Tricks of the Trade Message Board

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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade

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To: Ken Wolff who wrote (1918)	4/17/1999 7:52:00 AM
From: Reloader	Read Replies (2) of 2120

Ken, you just described my prime method of losing money in a trade. I often suffer from the cognitive disorder that causes me to think "If XYZ drops 1/4 I MUST sell it. XYZ then gaps down 3/8 or 1/2, and I hold it, because the loss is greater than my stop! XYZ continues to plummet 1 point and falling - and I hold. When it gets down 5 or 10 points, it's too big a loss to take so I hold. Meanwhile I'm thinking "why didn't I sell it at -1/2? I could always buy it back at the bottom if it's such a good stock" The "stupid me" emotion sets in and I'm depressed the rest of the day/week/month - until such time as I finally decide to take the spanking and get out of the trade. My trading advisor - who doesn't trade - said "If a 1/4 point loss is reason to bail, why is it that a loss GREATER than that is reason to stay?" What words of wisdom!! If only I could remember them at the proper time! I think that my basic problem in this situation is my perception of what the market SHOULD do vs what it IS DOING. I often go in in the morning expecting a stock to do great things and buy accordingly only to find, once more, that I am 180 degrees off from reality. My stubborness to accept what is happening and the resulting indecision has led to my greatest losses. Add to that the difficulty of getting out of a fast-mover when it's really tanking and you have my recipe for disaster in my trading account. I've found that most of the time the stock has bottomed at the point I get out (on those occasions that I attempt to follow my rule about not holding a loser), and the stock then proceeds to retrace nearly as rapidly as it fell - and I sit there stunned, afraid to get back in because I've just made a bad trade and I don't want to make another. Of course, after this happens I come up with a new strategy - I won't get out of a tanking stock - I'll hold for the bounce. Only it doesn't. This is a tough business. It seems relatively simple in theory, but putting those rules (sell when you're losing) into effect is much harder to do than those who haven't experienced it can imagine. Dave Chaney

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