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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: Dale Baker who wrote (2430)	1/25/1998 10:35:00 AM
From: cowboyfan	Respond to of 4969

I just posted the same question to Irby on the Final Frontier thread regarding mental stop losses vs. actual..I'm more apt to use actual and favor your opinion.

To: Dale Baker who wrote (2430)	1/25/1998 11:31:00 AM
From: Coyoti	Read Replies (2) \| Respond to of 4969

Greetings Dale...perhaps i left out something regarding stop-losses--mental stop's require ruthless discipline; a Traders most difficult task i believe is to stick to his/her stops...every trader has gone thru what you describe...having a trade go against you, go beyond your stop by an eighth, then a quarter....which is when the devious, hopeful,small voice pops up in your head saying, "surely it will come back"...until it goes enuf against you that you decide you will hold however long it takes to get your money back. This is the ultimate losers headset. If you're sharp, you'll quickly realize the first loss is the easiest. Many times early in the game i kicked myself for not taking the 1/8 or quarter loss instead of the 3/4 or a point loss that comes from "hoping". In this arena, if you insist your way of thinking regarding how a trade should move is right, and the market is wrong, you will get hammered. <<Yes, MM's can reach down and pluck stop-loss orders when they are playing with a stock. Overall, however, I think it's better for neophytes to go out hunting with a good flak jacket on. They also offer protection for traders who can't watch the tape all day, every day.>> I stick to my guns about not putting physical stops in place, unless you put them 12-15% away and use a much tighter mental stop; from what i understand, MM's can jimmy a stocks' price up to about +/- 12% without "just cause" before the SEC starts to keep an eyeball on them for stock manipulation. If you place a tight physical stop, it has been my experience that you will lose it. If you must..put it say 8% away to guard against any sudden moves, and STICK to your mental stop. And if you can't watch the tape, you can't daytrade. We're talking limiting risk...you put on a trade and go out to lunch, you might return to find you just had the most expensive lunch of your life! Position trading is a different story, one i am not familiar with. After my post about tight stops, i sat down and wrote out a spreadsheet program to track various data regarding my trades for the month <#trades, avg. pts per trade, #wins, # losses, avg. wins, avg. losses etc> and discover that out of 46 round trips so far this month, i was only hitting 4 out of 10 trades right. Usually i get 6-7 out of ten when i stick to what i know; however i have an active mind and a penchant for experimentation with live ammo. Something i would not necessarily recommend, however at this stage of the game for me, nothing burns a lesson in like losing real money ;-) So, i've had a few experiments running this month, and the successful one of them happens to be being extra wicked about my stops....out at scratch or -1/8, 1/4 tops. And you know what? At a lousy 4 outta 10, i'm up 30% for the month! I attribute this DIRECTLY to cutting my losses QUICK. And getting level 2 last week, of course ;-) Cut your losses, and let your winners run. You cannot have any success as a daytrader if you ride a stock down. Regards, -Coyoti

To: Dale Baker who wrote (2430)	1/25/1998 12:24:00 PM
From: steve goldman	Respond to of 4969

I'd have to agree with Dale on the stop orders. I think they should be religiously employed for day traders and position traders. Long term investors, though, would have to evaluate drops in stock relative to fundamental changes. But since they are in it for more than a few 1/2s, they have to be willing to withstand a few halves. Regards, steve@yamner.com

To: Dale Baker who wrote (2430)	1/25/1998 1:15:00 PM
From: Carl H. Gotsch	Read Replies (1) \| Respond to of 4969

Dale, <<THEY JUST CAN'T BELIEVE THIS STOCK WHICH HAS DONE SO WELL AND THEY LIKE SO MUCH WON'T BOUNCE BACK REAL SOON.>> Your post mirrors my experience precisely. What makes it all so galling is that the risk management section of every trading book I have ever read places a major emphasis on cutting losses--including ones that were written 50 years ago. But apparently every beginner must learn the lesson anew!! I guess this is because it is not a cognitive issue, but a psychological one--the pain must be felt before the logic of the argument becomes persuasive. I continue to feel the psychological difference between physical stops and mental stops because my broker, Datek, allows stops on NASDAQ stocks but not on NYSE stocks. I "don't mind" being physically stopped out on NASDAQ, but still tend to "hope" with NYSE stocks. As Coyoti has posted, I had better get over that for it is a sure invitation to trouble. Regards, Carl