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TomB and/or Roz wrote:
> One of my trader buddies said spread it off- so I sold a dec
> against my sept. About an hour later the market
> rallied but I had locked in my loss right near the
> bottom.
Tom:
I assume you were answering the question someone posed about hedging.
My personal feeling is always to just grin and tak the loss [or
grimace and take the loss]. In your first example, of course, you had
had enough and the only opportunity for you to limit your loss from
that point forward was to use a spread.
I think so many traders find their way to bad habits by trying to do
the right thing and then find that they have cut their loss at the
low. But I think in your example of the T-Bills, you did the right
thing. You reacted to a behaviour the Fed had never exhibited before.
You got tagged for a much larger loss than you bargained for and even
though in hindsight you hedged near the bottom, you managed your loss
as soon as you could. It would be unfortunate if this example had led
you to 'learn' to hold losses longer.
There was a saying I used to use quite often in the market place [I
trade in my home office now and so I try to avoid talking to myself
too much]: If you didn't like that price, wait until you see the next
one. I always find that when a position gets out of where I expected
it to go and I haven't got a resting stop in the market, as soon as I
feel like the prices can't get worse, they do. So when possible, have
stops there. Period. That wouldn't have helped you in your original
example. But in most cases, it would.
As for sprading off a position because it is at a loss, I feel losing
positions are a drag on your thought processes. When a position has
gone far enough that I want to limit my losses, I will always take a
loss, id possible, indstead of spreading off the risk. Then my mind is
clear of that losing trade and I can get a clear, fresh look at the
markets. And with spreads, somehow getting into a calendar position or
futures/options position I haven't planned on being in doesn't sit
right. Even a spread is an exposure.
Tim Morge
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