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Al,
No one could of said it better! Everyone, including equity
players, should reread the comments below, print them, read them
before they go to bed, read them when they wake up, and paste
them on the wall next to the computer.
Thanks Al,
Steve Karnish
CCT
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> From: Al Taglavore <altag@xxxxxxxxxxxx>
> To: metastock@xxxxxxxxxxxxx
> Subject: Re: Exit strategies
> Date: Wednesday, September 02, 1998 1:41 AM
>
> John Manasco wrote:
>
> Snip-Snip-Snip
> > So I admit it, I sometimes lose money because of my exit
strategies. A
> > lot more than I would like to admit. So what are some of
your thoughts
> > on exiting a position. I really hope I get a lot of feedback
on this
> > because this is really important to me, and it seems to a
lot of other
> > people too.
> >
> > John Manasco
> ============
> I agree, John. To make money, one should give as much
consideration to
> the exit as the entry. One could do very well entering the
market at
> 8:45 am each day provided he had a good exit system that would
take him
> out if wrong and allow him to keep a large portion of profits
if right.
> Last year I was introduced to the 1/2 of ATR and the 1 1/2 ATR
exit
> strategies...exiting if the market moved 1 1/2 of ATR against
your
> position. More conservative: 1/2 of ATR.
>
> I have found that basing the exit on the ATR gives me a sense
of where I
> am in a move. Studying my market helps also: I have found that
when the
> DMark retraces 20 ticks of a move, the retrace is likly to
continue.
> Also, when I give up 9 ticks on a profitable DMark trade, I
will take
> the profit and, while still on the phone, place an order to
re-enter if
> the price regains the 9 ticks. This one ploy has made a
significant
> increase in what I take out of a trade. Harley made a post
concerning a
> short position on AMAT today. An example of the aforementioned
exit is
> when AMAT traded down to 23, then moved up to 24, take the
profit at 24
> and sell AMAT short again at 22 7/8. If the move continues
against your
> short position, you have your profit. If the move continues in
your
> favor, you only lose a "Potential" 1 1/8 points of profit. If
the move
> does not take out the previous low, you are not in the trade.
You have
> booked your profit. Low risk situation.
>
> One should not have to second guess a trade: the market tells
if you are
> right or wrong AT THIS TIME. One can have the direction
right, but if
> the timing is off, the results are the same: lost money. Do
not take a
> loss home. Never allow a profit to turn into a loss. Never!
> On a TBond trade I will take an eight tick loss on an opening
position,
> and then I am gone. I will have lost money, so I cannot be
right. One
> tick on the Bond is $31.25. Commission on a day trade is
$28.50. I can
> always re-enter the trade at a lower cost than staying with a
losing
> position . On a stock trade, if I am short and price trades
above
> yesterday's low, I am out. I have no way to know if the next
tick will
> be higher or lower, but I do know that in order to go up,
price has to
> trade above yesterday's low. If long, and price does not
violate the
> previous day's low by "n" ticks (your own risk tolerance), I
will stay
> with a profitable trade...as long as price does not trade
below the
> previous day's low. If price trades below the previous day's
low (- "n"
> ticks) I am gone. If price turns back up, I can re-enter above
the
> previous day's high (plus "n" ticks). Exit and
re-entry...certainly as
> important as entry.
>
> How does one develop and maintain this discipline without
allowing
> emotions or feelings to interfere? It really is not
difficult. Be on
> the wrong side of a Bond trade at $31.25 per tick for a full
point.
> Believe you have a feel for the market and get on the wrong
side of a
> govt report day when the bond can and does move 2 points
within 5-6
> minutes. Have a three contract position. Then it goes your
way, and
> instead of making 2 points ($6000) you are out $6000 and you
were really
> right...just off maybe an hour. Very humbling experience.
After one has
> lost lots of dollars, one becomes sensitized. No feelings,
just stop the
> flow of blood early. After one takes some $5000 licks, it
ain't hard to
> take a $1000 loss. Not hard at all. For that loss to get to
$5000, it
> had to pass $1000 first. Been there. Done that.
>
> Realize that while you are agonizing over a losing position,
you not
> only lose on that position, you lose the opportunity to win on
another
> position. Take the early loss and let it be small. Did not
learn this
> from a book. Paid the tuition in cash.
>
> Al Taglavore
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