|
PureBytes Links
Trading Reference Links
|
Rvalue,
Your reply was very interesting. For the last year I have been trying
to find a way around the "sudden drop" catastrophe that you speak of
-- and have been using options (straight calls or puts, not synthetic
stock/option combinations) for directional trading. I've found that
buying deep ITM calls/puts are the way to go. Buying OTM options for
directional trading have proved (for me anyway) to be a great way to
lose money. Couple of questions for you:
1) I generally don't hear traders talk about the "sudden drop"
catastrophe. Has this happened to you often? It should be very rare if
you don't hold the stock at earnings time, and if you don't trade
microcap stocks.
2) The synthetic appoach you use -- how long is your typical holding
period? I know folks who use this strategy for downside protection but
they are buy and hold investors. I don't know of any traders who use this.
3) How much of a hit does your bottom line take because of the puts?
--- In equismetastock@xxxxxxxxxxxxxxx, "rvalue1" <rvalue1@xxxx> wrote:
> This was really a great question you asked... Why do Traders Fail?
>
> 1. Dusant cites "fear" as a principal reason - Fear of losing money,
> and "fear" of the signals being wrong, and not pulling the trigger..
> agreed wholehaertedly with Dusant. I have noticed that in my earlier
> days I would miss out on a real winner, then try jumping in on
> signals and finding two three bad trades and then walk away humbled
> and miserable.. the past did not repeat itself immediately anyway.
> 2. This leads to my second point. Most of the lagging systems
> generate 30-50% bad trades unless you qualify them carefully. 40%
> good trades with a 2:1 winnings to loss ratio is a good startegy.
> Interestingly, 30-50% good trades can easily give 4-5 bad trades in a
> row out of 50 trades or more trades, and yet provide a 40% win
> status. I hate repeated failures. Now I realize that too is
> inevitable and part of the probability and statistics of trading.
> 3. Sudden drops have a strong tendency to make your positive energy
> disappear.. - and you lose confidence. Yet if you persisted, often
> the systems continue to apply and make up the return. Many of us do
> not have the nerves left after such a drop and we abandon our system
> on a stock - this is where "Money management" plays a key role in
> making that loss feel less.
> 4. As the market goes, so does many sectors and stocks. I think many
> disregard this truism, and continue to trade when the market is
> turned down or going sideways. They fail.
> 5. Can we really make lots of money constantly searching new
> opportunities, when each stock is new and has unknowns behind them? I
> am migrating to a "synthetic" approach with stocks and options that
> permit me to cautiously make money in an "up" or "down" market,
> focusing on just a few stocks, with somewhat diverse sytems on them.
> I am biased towards mostly lagging systems. In this approach, every
> time I buy a stock, seeing a long direction, I buy put protection.
> That reduces my risk of losing a lot of money should it turn on me
> and also gives me confidence to stick to the process. By following
> only a few liquid stocks, and trading stocks/options for "up"
> and "down" markets - 2 out of 3 , third being sideways, , I see a
> smoother equity curve. Sideways drwas down some money; but the
> drawdowns are limited. Sharp drops are a thing of the past.. and I
> think I can reach my goal of making steady money and not failing due
> to the earlier reasons.
>
> We each have to understand the failure modes and consider evasive
> actions suitable to our personality in order for us to succeed. This
> is not easy to do by any accounts. We say the enemy.. and it was us.
>
> Rvalue1
> --- In equismetastock@xxxxxxxxxxxxxxx, "metastkuser"
> <andysmith_999@xxxx> wrote:
> > Thanks to the folks who replied.
> > This is a really good forum.
> >
> >
> >
> > --- In equismetastock@xxxxxxxxxxxxxxx, "TecloGeo" <teclogeo@xxxx>
> wrote:
> > > 1) A lack of professionalism, self-confidence, self-esteem
> and
> > > discipline. At the opposite end, arrogance that because they read
> a few
> > > books they know everything. Laziness - a feeling that they are
> somehow
> > > "owed" success. Also, over-complication, a lack of perspective,
> too much
> > > back-testing, not enough walk-forward testing/real-time practise.
> The
> > > pitfalls are many.!
> > >
> > > 2) More theory, less time actually doing. Sounds like you've
> read
> > > enough books to be able to put together a workeable strategy by
> now!
> > >
> > > 3) Over-theorising. Lack of dedicated action.
> > >
> > > 4) There are plenty of experienced traders around here that
> can
> > help
> > > you out with just about any question.
> > >
> > >
> > >
> > > _____
> > >
> > > From: equismetastock@xxxxxxxxxxxxxxx
> > [mailto:equismetastock@xxxxxxxxxxxxxxx]
> > > On Behalf Of metastkuser
> > > Sent: Tuesday, June 14, 2005 5:24 PM
> > > To: equismetastock@xxxxxxxxxxxxxxx
> > > Subject: [EquisMetaStock Group] Why do traders FAIL?
> > >
> > >
> > >
> > > I have a question (unrelated to Metastock) for the experienced
> traders
> > > on this forum.
> > >
> > > I have now read a dozen books on trading -- not the foo-foo books
> that
> > > promise $10M in the next trade, but ones by Tharp (my favorite),
> > > Chande, Le Beau, Stridsman, Elder, Covel, Schwager (and O'Neil,
> > > Link,...) and a couple of Tharp's IITM publications on money
> > > management etc. Will get to Kaufman next. And of course every
> issue of
> > > Roy's MSTT which are simply marvellous.
> > >
> > > I've put a couple of hopefully positive expectancy systems
> together
> > > (discretionary at this point so it's not easy to use the system
> > > tester). The systems have four stages: 1) setup (to identify
> market
> > > trend and stock trend but not entry), 2) entry (looks at timing),
> 3)
> > > exit and 4) money management. I have spent quite a bit of time on
> 3)
> > > and 4) because I believe they hold the key to being a successful
> > > trader. I use volatility as a significant determinant in all 4
> stages.
> > >
> > > So I've done my homework. The odd thing is that none of this has
> been
> > > difficult to understand -- not just for me but I'm sure for
> anyone who
> > > takes the time and has some patience.... and now I am confused.
> > >
> > > 1) Why do so many traders fail? Have they not read these books?
> > > (Please don't reply that they are undercapitalized and/or they
> have
> > > the wrong psychology for trading).
> > >
> > > 2) What do reading the next 50 books buy me (besides the
> enjoyment of
> > > reading them)? Surely the law of diminshing returns kicks in right
> > > about now.
> > >
> > > 3) At this point, what would the typical causes of failure be?
> > >
> > > 4) This is a Metastock forum. Can someone point me to a more
> > > appropriate forum for this type of discussion (I have not found
> one).
> > >
> > > Thanks!!!
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > > _____
> > >
> > > Yahoo! Groups Links
> > >
> > > * To visit your group on the web, go to:
> > > http://groups.yahoo.com/group/equismetastock/
> > >
> > > * To unsubscribe from this group, send an email to:
> > > equismetastock-unsubscribe@xxxxxxxxxxxxxxx
> > > <mailto:equismetastock-unsubscribe@xxxxxxxxxxxxxxx?
> subject=Unsubscribe>
> > >
> > > * Your use of Yahoo! Groups is subject to the Yahoo!
> > > <http://docs.yahoo.com/info/terms/> Terms of Service.
------------------------ Yahoo! Groups Sponsor --------------------~-->
In low income neighborhoods, 84% do not own computers.
At Network for Good, help bridge the Digital Divide!
http://us.click.yahoo.com/EpW3eD/3MnJAA/cosFAA/BefplB/TM
--------------------------------------------------------------------~->
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/equismetastock/
<*> To unsubscribe from this group, send an email to:
equismetastock-unsubscribe@xxxxxxxxxxxxxxx
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
|