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To: upanddown who wrote (87466)	2/17/2001 11:26:37 AM
From: Timelord	Respond to of 95453

John - SATB Your analysis of my first example is true to a certain extent, there are extra commissions involved. And, if you were a perfect trader, simply closing a bad position with a loss would be the prudent thing to do, and you go on with your life. In my NE example, however, and with last years OSX in a "10 foot tall and bulletproof" uptrend, I have assumed much greater risk and left positions open I shouldn't have. The problem with that is obvious if you look at the OSX chart in December. Your buying power disappears, and you amass horrific paper losses. With a neutral position through a SATB, I believe that both your buying power and account balance are unaffected, since you have a flat position. While this does not erase the loss and affects your interest, the psychological impact is immeasurable for a novice trader, and trading is about 90% psychology. You can always avoid the two extra trades to leg out if it becomes apparent that your position isn't going to recover in your lifetime, by simply calling your broker and having them take your position flat at no charge. For someone who has limited experience shorting, and is not trying to protect LTCG, the idea is to erase the psychological stigma of a naked short, and avoid the real dangers. I know Razor suggested "paper" trades, but while a very useful learning tool, you cannot substitute live trading situations with paper. In this case, a position with an acceptable S/T gain can be SATB when you think conditions are favorable, and rather than legging out, you call your broker and go flat, keeping your original gain. In fact, in this case trying to leg out would be the wrong thing to do because it opens a whole can of worms with whatever position you leave open. Anyway, JMHO also. Alex