Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Cormac who wrote (5193)	11/4/1999 3:14:00 PM
From: Solon	Respond to of 18137

Hi Cormac, I'm busy with something so can only respond briefly to your thoughtful post. In regards to the idea of selling ones position before rebuying at a lower price, I don't think there are any simplistic answers. Considerations include: commission costs of selling (perhaps several positions before the final buy takes), the spread between consecutive buys in either scenario, the expectation re: risk/reward, and so forth. Personally, I always enter a sell immediately after getting filled. I also enter a new buy at a level somewhat lower than I think will get hit (but surprisingly does sometimes), and for a larger quantity--and likewise if that should get filled. Obviously, the company must have solid fundamentals to justify this type of averaging down. I would rather take a small profit quickly than expand my risk regardless of fundamentals.

To: Cormac who wrote (5193)	11/4/1999 4:19:00 PM
From: Dave O.	Read Replies (1) \| Respond to of 18137

< but if I focus on the amount of money on the table I am fettered by the emotional baggage that comes with having a cash register in the mind. > Cormac, I guess I do have a cash register in my mind, after all $$$ is required to pay the bills. My objective in each trade is a certain amount of profit. And when that objective is hit I usually exit as I've achieved my goal. For example, today I shorted MERQ at 94 1/16 and it hit my target at 92 1/2. I was in the trade maybe 20 minutes. If I'd held all day I could have covered at 88. Although one could say I left some money on the table I was happy with what I made. I also don't stay glued to the screen all day. If/when I hit my daily goal I'm off to enjoy the day. Dave

To: Cormac who wrote (5193)	11/4/1999 5:55:00 PM
From: TraderAlan	Read Replies (1) \| Respond to of 18137

Cormac, I always trade pure point loss rather than dollar loss. But you also have to consider "ease of exit". Some stocks are much more likely to swing sharply against you, forcing greater slippage while others can be entered and exited most time with ease. An example of an easy entry/exit is WCOM while a slippier one is QCOM. I don't trade QCOM precisely because I can't limit risk to the tolerance of my trading system. Alan

To: Cormac who wrote (5193)	11/5/1999 6:35:00 PM
From: dpl	Read Replies (1) \| Respond to of 18137

>My risk is the amount of money I allow myself to lose, not the amount of money I am using ...the amount of money is just a tool to trade with.< I agree with you on this.I like to take it another step. The amount of money put into a trade should be proportional to how good the trade is.How high the probability that the trade will work. In this way the trades that tend to go against you over time will be smaller than those that go in your favor. You are losing less money when you are wrong even with the same amount of points. "If you average down I am to assume that you have made a conscious decision (thru your respective analysis) that the stock will again climb and test level of resistance...you add to an already existing position - increasing your share size with an expectation of reversal...you believe as Dan Duchardt so aptly stated you can make a case for increased probability of a reversal, and a more dramatic reversal, the farther a stock moves away from what might be called, for want of a better term a "natural level". " Some think that averaging down/up is bad trading. Others think the opposite.To me it depends on WHY you are doing it and the term. The shorter term it is the safer it is. In some of my trades I do average down/up but only as part of a strategy. >If this was your true commitment would not a better strategy be to close your initial position of 500 shares at a small stop/loss, buy 1000 shares at your next level, if no reversal exit with a small stop/loss, buy 1500 shares at your next level, and so on. This would minimize your losses if no reversal occurs, and maximize your profit if a reversal does occur. Am I just being terribly naive or am I showing my ignorance? Or is there a contingent of traders that average down because they fail to be able to accept their initial loss?< My problem with this is that stocks don't act perfectly in the real world. For instance...a stock goes to 40 and you buy it. The next buy point is 37. If it goes lower after you buy it were do you sell?There is nothing that says if the stock breaks 40 it HAS to go to 37. It might go to 39 and then rocket to the moon.To me a trader can use stops or something else like averaging down. The two don't mix. David