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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Jill who wrote (17622)	11/18/2000 11:59:03 AM
From: Jill	Read Replies (2) \| Respond to of 65232

Some nice tidbits from my incredible class yesterday. Thank God I can upload the entire transcript including charts as half of it went completely over my head. 1) Always remember the words of Eckhardt: ispeculator.com "What really matters is the long-run distributions of outcomes from your trading techniques, systems, and procedures. But, psychologically, what seems of paramount importance is whether the positions that you have right now are going to work. Current positions seem to be crucial beyond any statistical justification. It's quite tempting to bend your rules to make your current trades work, assuming that the favorability of your long-term statistics will take care of future profitability. Two of the cardinal sins of trading - giving losses too much rope and taking profits prematurely - are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance." THE TRADE AT HAND DOES NOT MATTER, SO LONG AS YOU DON'T LET IT BE THE ONE TO PUT YOU OUT OF BUSINESS. 2) We saw in class yesterday that she is more than willing to get stopped out of a trade, and feels no urgency to trade. She never enters a trade with reward:risk less than 2 to 1, and places tight stops. If her trade was correct the market will move quickly in that direction. I fnot, she doesn't want to be in it anyway. Yes, she trades futures but this applies to stocks to: we've all caught the momentum going up, and now we have bought dips and been fried going down. We were wrong the second time because the market is either a short bear or the 2nd leg of a bear as lurqer had suggested last month. By placing stops we lose NONE of our momentum plays in a bullmarket, and we protect our capital in a bear. She does not invest during volatile choppy trendless markets. She says you can scalp there, but be careful and know its only a scalp. That's something some of us have been trying to do here, like myself, or Venkie. It works most of the time but it's gone way south on a few occasions simply out of my own sloppy trading. Meanwhile, I have now seen my JDSU long shares go from 150 at their high to around 60 at their low. This is reminiscent of QCOM for me. Do I wished I'd placed stops? Yes. I'm not looking ten years out. JDSU may be profitable for me as my entry point wasgood, but still, lots of my paper profits have evaporated. At one point there was an uptick on the chart, and she was stopped out of a short sell. She said some people would have viewed that uptick as what is known as a "higher low"--a signal to go long. I asked why she doesn't. She said, I do, but I like the 2B kind...you know, the ones where they puke first. No one has to puke here. I'm very picky...and note it's not exactly going up. We need to have trapping and puking in order to do real reversals, IMGO. Just don't put stops above old highs and under old lows. People do it all the time because they think they're going to catch a "breakout". Anyway, I think most of you in this room are much more keen to make trades when compared to me. So my only advice is this: it doesn't matter if you see a cup or handle or a triangle or whatever, of if you flipped a coin. The only thing you really need to know is this: where are you going to get out if you're wrong? How are you going to protect your capital? That's the only thing you need an answer for, because your next trade is insignificant in terms of being right or wrong. It will only be significant if you let it put you out of business. People typically ask me a lot of questions like if this is xyz or if that is xyz, but in the end, it is how you take the losses that determine whether you can make money in the long run. Eckhardt: "Many systematic traders spend the majority of their time searching for good places to initiate. It just seems to be part of human nature to focus on the most hopeful point of the trading cycle. Our research indicated that liquidations are vastly more important than initiations. If you initiate purely randomly, you do surprisingly well with a good liquidation criterion. In contrast, random liquidations will kill the best system. At ETC we expend a lot of our research effort on liquidations." streetstories.com The market always has another day and another opportunity. I look at myself, even this week in spite of her class, and I see my emotions getting the better of the above rules. It's my job to do better.