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Walt, do you use any kind of a volatility cut off in your futures trading
systems? Seems like most of the work in the literature has been on entries
from breakouts of narrow range and low volatility periods and very little
about cessation of trading during highly volatility periods. Victor N. was
selling puts and buying calls into a highly volatile day with VIX between
27.05 and 40.04. I suspect it was the 13 points between 27 and 40 that
took him down. Not only did the choice of direction turn out wrong, but
VIX increased to 55.48 on Tuesday.
Don't you think as a futures trader that there are times such as this when
you should stand aside? VN's trade appears to me to be not that of a
seasoned speculator but that of a gambler. We can all surmise what the
better trade would have been now that we know the outcome. But even in the
thick of the battle with the outcome unkown it would seem that a seasoned
speculator would have chosen a different trade, especially with options.
BobR
At 08:12 AM 10/31/97 -0500, Walt Downs wrote:
>nwinski wrote:
>>
>> Eric wrote:
>> >
>> > >
>> > > Russ,
>> > > Your excellent research confirms my own anecdotal observations.
>> >
>> > Well Norm, I don't know how excellent and thorough this research really
>> > was, but I have to take exception to a few things you say.
>> >
>> > Those
>> > > who confine themselves to day trading put an aritificial limit on
>> > > themselves that only serves to limit winning trades. You should
>> > > be a daytrader for your losing trades and let your winners ride as long
>> > > as necessary.
>> >
>> > I think your trading style should fit your personality and risk
>> > tolerance. Not all of us can be home run hitters. Some are very
>> > comfortable hitting singles on a more consistent basis, even though we
>> > might not get the headlines.
>> >
>> > Also, it is my observation that the more you trade the
>> > > less likely you are to make money. This is true for two reasons. 1)
>> > > Transaction cost will significantly erode any profits. 2) Trading
>> > > represents risk, the more you trade the more risk you are taking.
>> >
>> > Is this really true. I think the longer you have market exposure , the
>> > more risk. That means a daytrader will have less risk than a buy and
>> > hold. That would also be borne out by the normal rule of more risk more
>> > reward. I don't think you can have your cake and eat it too by saying
>> > buy and hold is always more profitable AND less risky. If so, more of
>> > us would be in the group REALBUYANDHOLDERS instead of REALTRADERS.
>> > True, daytrading may not maximize profits in a strong trending market,
>> > but how about a market like stocks in 1994. Buy and hold makes nothing,
>> > daytrading makes money (maybe).
>> >
>> > > With an increase rate of trading your risk reward drops and your
>> > > transaction cost go up.
>> >
>> > Absolutely, transaction costs go up, that is one of the trade offs for
>> > less market exposure.
>> >
>> > But, don't try to tell any of this to the
>> > > daytrading junkies who are seeking the latest holly grail trading
system
>> > > so they can get their daily fix of excitement in S&Ps. Afterall, 95% of
>> > > those trading are not in it for the profits, but rather for excitement,
>> > > the lifestyle (talk markets with my buddies), or to vent some
>> > > reoccurring neurosis, or some combination of the above.
>> >
>> > Come on, why so much derision in these statements? Isn't this a little
>> > overboard? After all we short term guys provide liquidity when you need
>> > it.
>
>Eric and Norman,
>
>Both of you guys have valid points.
>
>I use BOTH trading styles, letting the market dictate how I trade.:)
>
>It's all about "maximum profit vs. minimum risk" .
>
>If the market is trending strongly, or trading at extremes
>a longer term approach provides
>less risk and more profits.
>
>If the market is exceedingly choppy, the Intra-day and Short-term
>techniques provide better RR ratios.
>
>All depends on what the MARKET is doing.
>
>I never concern myself with STYLE. I only ask myself, "What's the risk
>and WHERE'S THE MONEY"....... :).
>
>Walt Downs
>CIS Trading
>
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