|
PureBytes Links
Trading Reference Links
|
My way of avoiding this is to diversify. I learned this from "Trade
your way to Financial Freedom" by Van K. Tharp - Chapter 12.
Example:
$100,000 account equity.
Invest in 20 - $5000 positions. This is position sizing.
For Risk Management - use the following:
1% loss in the PORTFOLIO
Or $1000 loss in a given position
Or 20% loss per position
is the maximum catastrophic loss sell point. 90+% of my sells are
generated by my technical indicators.
It can be shown that this system will avoid most of the problems that
you are worried about.
I only trade from a list of ~100 stocks that have strong fundamentals,
then EXPLORE that list using my technical indicators, looking for
buy/sell signals - and trade long only.
During market drawdowns I only sell my longs when the indicators tell
me to, plus I hedge with short stock index futures YM, ES, ER2 at the
rate of 1 future per $50,000 of portfolio value.
Cheers,
Ed Hoopes
--- In equismetastock@xxxxxxxxxxxxxxx, "metastkuser"
<andysmith_999@xxxx> wrote:
> I understand from time to time, a position will take a huge loss.
>
> Perhaps something happens after-hours and the stock opens 15% lower,
> well below the stop. One way to avoid this is to not hold over
> earnings. But a plunge can still happen for reasons unrelated to
> earnings.
>
> I have found very little in the money management literature on this
> subject, so can a few of the experienced traders please provide some
> guidance:
>
> 1) How often has this kind of catastrophic loss happened to you?
>
> 2) Are there cost-effective and practical ways to protect against it?
> (eg. buying put protection for long stock that is held for a few days
> is not practical).
>
> 3) How have such losses affected the long term return of your
portfolio?
>
> 4) When these catastrophic losses happen, is it isolated to one
> position or does it affect all your open positions?
>
> 5) What were the psychological effects?
>
> 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
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
|