Discipline will rule the day!
Robert,
Many of suggestions and advice I try to provide regarding trading, trading strategies, market operations, etc. are geared toward the novice trader as well as the more experienced. Quite simply, the position I hold as head trader at my firm, gives me a base of experience that most "online", "non-broker/dealer" don't have. Not for lack of skill but for lack of exposure. After all, dealing with 100+ trades each day for clients and a handful for my own accounts, dealing with the nasdaq terminal the superdot terms, dealing with other professionals on Wall Street, trading against them on the electronic systems or by phone based systems, I run into things that many on these threads will never experience.
I have never tried to state that any one particular method or strategy is always correct. I would never be so bold since it quite simply is not how the markets work. The markets never do what you think they will do.
What I can say, from my experience, is that no trader, novice or experienced, will prosper long-term without discipline, true and hard committment to trading strategies. Rock-hard disciplines means you sell a stock every so often just before it goes on a 12 point tear and means you miss gap openings the next day. What it also meansis you don't end up with an ORCL, a VVUS, a Centennial Technology, etc. stocks that get absolutely crushed, stocks that if you had a reasonable holding you would be ok, but if you had a large, concentraded holding in, such as traders must have to prosper on relatively smaller moves, you could be out of business.
As a business person in a retail business, you would never load up your store, 400% in debt with one particular product, LET ALONE ONE THAT HADN't BEEN SELLING WELL, IN A BAD MARKET.
By taking stocks home, day traders lose their ability to control their investments. They CANNOT manage risks by taking home holdings. Yes, they could buy puts or short a competitor, etc. but they are still unreasonably exposed on a leveraged position.
The guy's name is slipping me right now, but it was all over Barrons. The hedge fund trader who went 150% into the market the day BEFORE the 550 crash, was scurrying when the market was down 200 the next day at the home, liquidating, and was out of business as the market rallied up 220 at the end of the day. He gambled , his risked it all and he lost....as a professional, trying to make a career of this, you don't risk it all. That's flat-out reckless. You take a disciplined approach. You say that I would be wlling to accepts profits of only xx dollars to know that I won't get put out of business the next day.
You know how hard it is to get the 1/4s, 3/8s and 1/2 . Its defeating to work that hard for those numbers to get smacked around 10 or 15 points on a disaster.
Don, on occassion has made refernce to the fact that I predominantly don't trade my own account. he is entirely correct. for the most part, trades for my own account are less than 5% of the trades that I probably execute each year. Anyone who knows me or my firm knows that we don't make market, don't act as principal and treat client's trades as though they were our own. It is a unique approach in the current marketplace. yet, the concepts don't change.
Many, many times, I have had trades go against me and I have wanted to "take a shot" and double down. Investments, long term stuff, sometmes goes against you and you want to do the same. You know you shouldn't. The books say you shouldn't. The 100% ideal trader, wouldn't, so do you be swayed by emotions. Do the right, the ideal thing every single time and you will prevail.. You won't hit any homeruns, and hitting the singles will be pretty boring, but you will prosper.
How could you prudently invest 400% of your money (the money in the trading account) into two stocks which have been acting poorly in a bad market which you feel is geting worse? The answer is...because Don lacked discpline with this trade or he is simply a wild trader. No new trader, nor any experienced trader should use this in their model.
Regards,
steve@yamner.com
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