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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: buckbldr who wrote (80848)	3/3/2007 4:24:03 AM
From: chowder	Respond to of 206085

>>> It is for this reason that I commend the dabum3 T/A strategies which apparently are capable of yielding a reasonable profit, ignoring all the turmoil created by such irrascible players. It is designed to protect the investor against the irrational volatility of these occasionally roiled markets, which seem to ignore any semblance of adherance to the commonly accepted rules of a more orderly market. <<< The strategies I use have come from those who earn their living by trading or investing in the market. Those who earn a living at this game, can't afford to let their ego get in the way of profits. They can't afford to sit on a stock that is underperforming and they can't afford to double down on a stock that is losing them money. Someone who is investing your money might be in a position to hold on to losers, but not one who's living is a direct result of their own efforts. And, certainly not the traders who trade for the major institutions. They are required to show a profit consistently, regardless of market conditions. Show 2 consecutive months of losses and they find themselves taken off the trading desk. Therefore, the strategies I use are mostly used to protect myself from me. I'm allowed to make mistakes, but they are to be corrected immediately, not compounded. Most people spend most of their efforts on when to enter a stock. A lot of effort is spent on the timing of the entry, trying to find the bottom of a declining stock, or looking for an entry on a dip. A lot of lip service is given to the cliche, buy low and sell high. The fact of the matter is, it isn't the entry that determines the success or failure of a trade. It's the position sizing and money management of the trade once one enters into that trade. Position sizing: I can't count the number of times where I have seen someone write that they can't chase a stock once it starts to take off. Those same people will double down on a losing stock though, in an effort to try to get back to even. I have also seen a number of times where people have a winner on their hands but they don't have a large enough position to take maximum advantage of the successful trade. When I take a trade, every trade is the same size in term of dollars invested. I don't start with a small position. Every short term trade is made with 10% of my total portfolio capital. Every long term trade is started with 5% of my total portfolio capital. Since these positions carry some size to it, I must limit my losses in the event I am wrong. Therefore, on short term trades, I allow a 4% to 5% loss and then pull the plug. On long term trades, I cut my losses from 8% to 10%. Not every trade will be successful. Therefore, when I do have a trade that is working out, I will average up on that position. I will compound my success by buying more of what is working for me. I started a position in GT just 7 months ago. It is up 150% for me now. More importantly, I have added positions representing 5% of my total portfolio on 4 more occasions since then, and every trade is profitable for me now. GT now represents 25% of total capital invested. This message shows the amount of gains that have been added on this one trade alone. Message 23336112 Money management: I've covered part of this in my comments above. Limiting the amount of loss I can take on any given trade. The percentage of loss I take may not fit everyone. What will fit though, is the pivot point between cutting your loss or doubling down on a losing position. Often times a loss gets so large, one feels they must hold on now. The key is to cut the loss before it gets to that point, and then wait for another entry. The other part of money management, is knowing when to take some profits off the table. The uranium stocks had been showing some explosive returns of late and I presented a way to take advantage of those windfall profits and not ride them back down. Profits don't count if we don't take them, and those who didn't lock in some of those windfall profits in the U stocks, have given a lot of those gains back. I don't concern myself with short term capital gains. Professional traders focus on taking profits when they are supposed to. When dealing with a some size, it doesn't make sense to ride a stock all of the way down in order to prevent paying taxes. Too many times, holding the position gives back more gains than the tax would have. Knowing When To Lock In Profits: Message 23335959 So again, the strategies I use are to protect myself from compounding mistakes and taking advantage of situations when I'm right. In order to do this properly, I must use the art of position sizing and money management. If I do these two things properly, it doesn't matter what I pay for the stock. The entry is immaterial. It's what you do after the the decision to buy is made that determines success or failure.