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Strategies & Market Trends : Trading For A Living -- Ignore unavailable to you. Want to Upgrade?

To: Rick Slemmer who wrote (861)	7/11/1998 2:25:00 PM
From: Char	Read Replies (1) \| Respond to of 1729

Thanks Rick. It sounds like good advice but it's going to take me awhile before I'll feel confident enough to trade 5,000-10,000 shares of a stock. Until I'm sure I can make money at this I'll probably stick with 1000 max. I think most of my losses would have been prevented if I wasn't trying to limit my losses to 1/4 point. When I looked at the 3 minute chart of DELL it seemed that the average three minute candlestick had a range of over one point yet the stock was in a definite uptrend at the time with higher lows and higher highs. I don't see how anyone could hold their losses to 1/4 point and still trade this stock yet I tried. So much for hindsight. Dave

To: Rick Slemmer who wrote (861)	7/11/1998 4:52:00 PM
From: _aj	Respond to of 1729

A few notes on limiting losses. It is definitely frustrating when you see that most of your losses would have rebounded at some point. But you have to ask yourself....what will you do at day's end if the stock doesn't bounce back and you are down $2 (or with yhoo, maybe $20). Does it then become a position trade? What if it heads down again tomorrow? Hold for the eventual rebound? What do you use for capital while you are waiting days (weeks) for a stock to bounce back. The last time I did something like that the stock was OAKT. I was trading with 1 intraday to 2-3 day horizon. Well, OAKT was down a little the day I bought it around 17. It was at the low end of its recent trading range. So I held. That night they warned and the next day I was down $5 instead of 3/4. What did I do? I held for the rebound. You know what happened over the next couple weeks? The tech stocks all dove lower. OAKT went below $6. $6!! I was down 65% on a stupid short term trade where I was looking for a dollar or so. For the record, I continued to hold and did manage to get out around $10. Still, I had been up $22,000 in the previous month and I gave it all back on one stupid, stubborn trade. AND I tied up lots of capital for a couple months. This is the stupidest thing I have done trading, but I learned more from that than anything else. My point is this. You do not need to have tight stop losses if your strategy dictates otherwise. But you MUST consider the downside at some level. You will let it range down $1 intraday? Fine, but what will you do if it goes below $1. $3? You have to acknowledge the possibility of a major move against you. Consider WDC. I was trading the stock when it was around 19-20, but I did not hold overnight. Had you been in at 19 and waited for a rebound you would be down huge weeks later. Never allow yourself to take a five-figure loss on one bad trade. Also, consider the fact that no one maintains 1/8 or 1/4 hard stop losses on stocks like yhoo....it's just not possible. On less volatile stocks, an experienced trader who bails down 1/6 is instantly ready to re-enter. He is trading transaction costs, etc. for insurance.