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Dear Manning,
I think we are in agreement on determining stops. My rationale for expressing myself
as I did was to describe a methodology using your own systems to tell you where the current optimal
stop level is.Further, your choice of risk management approaches and the success of your system
dictates whether or not your account should be able to handle trading that particular tradable.You will
calculate an absolute number suitable for the current trading period (however long that may be as this
number changes with market volatility) Going forward, your sytems and analysis will tell you what the
number should be and whether it works or not.
Anyway, thanks for the response... Terrence
Manning Stoller wrote:
> Dear Terrence,
> When you say that one should let the market figure out for you the appropriate stop, you are
> restating my point exactly.
> One must determine where the market should not go. Now you have a sensible area to place your stop.
>
> This does not give you an absolute number but does give you a reasonable range so you can determine
> if your account can afford to take the trade.
> I still maintain that a fixed dollar stop or a fixed percentage stop is not a viable way to trade.
>
> Manning Stoller
>
> smart621@xxxxxxxxxxxxx wrote:
>
> > On 05/30/98 01:47:13 you wrote:
> > >
> > >
> > >
> > >-----Original Message-----
> > >From: A.J. Carisse [SMTP:carisse@xxxxxxxxxxx]
> > >Sent: Saturday, May 30, 1998 12:05 AM
> > >To: Omega List
> > >Subject: Re: Trading Advice
> > >
> > >Manning Stoller wrote:
> > >
> > >> Dear Stan,
> > >>
> > >> I'm sure you mean well when you advise to "limit yourself to a specific
> > >dollar
> > >> risk on every trade" but I think that may be one of the worst things to
> > >do.
> > >
> > >Yes and no. There are two sides to this of course - determining the proper
> > >exit
> > >point with a trade, and determining the maximum one wishes to lose. I
> > >agree that
> > >arbitrary stops and targets are ill advised, due to their lack of real
> > >connection
> > >with the play, but one *still* may wish to set a maximum figure that he or
> > >she is
> > >prepared to lose on a single trade. One can then tailor one's trading
> > >style and
> > >selections to suit this, although always keeping in mind that this figure
> > >is a cap,
> > >and should not be the determining factor for exactly when an exit should be
> > >taken.
> > >
> > >That's the key. Learning to tailor your entry points based on how much you
> > >can afford to loose. This is what is referred to as a low risk/high reward
> > >situation. If the market's too far above an obvious point of support, then
> > >it's a high risk/low reward situation, you would have to risk more than you
> > >could afford to loose and you would probably pass on that trade. There are
> > >too many other markets out there with better odds.
> > >
> > >
> > >
> > >This becomes a little less simple with dynamic exit points (i.e..
> > >conditions that
> > >are dependant on ongoing performance). Still, one can easily develop a
> > >good idea
> > >of what can be expected from the particular method that is used.
> > >
> > >Regards,
> > >A.J.
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> >
> > I really have to beg to differ with this dialogue on percentage and specific dollar stops.None
> > of us are smart enuf to figure out the most effective level to place a stop. Thus you should
> > let the market figure it out for you. Besides you have to take into account those professionals
> > in the pits that go fishing for stops to use as energy food for their next market push.My point
> > is there is an appropriate stop level for every tradable based on the characteristics and
> > volatility of that tradable. Thus ,although your account size may dictate a certain level of
> > stop protection, you must determine if the chosen level is suitable to protect you from
> > financial ruin while allowing you to actually still be in the trade when it goes your way.The
> > quintessential works on this subject come from John Sweeney, Technical Editor of TASC. He wrote
> > two books- "Maximum Adverse Excursion" and "Campaign Trading".
> >
> > Terrence Smart
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