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Rob Barnes wrote:
> In addition to the prior posts I'd add that the precision of stops is
> VERY dependent on what type of trading access speed you have, average
> time horizon, real-time or dealyed data, liquidity of the tradeable and
> leverage.
>
> A trader with real-time quotes, direct access and highly leveraged,
> trading something reasonably liquid can have very tight stops in mind
> but not entered in the market. If the individual is very disciplined and
> never leaves the quote system when he/she has a position this will work
> fine.
>
> If your a longer term player who has end-of-day or delayed quotes,
> you'll have to leave more room and enter your stops. Leverage will also
> have to be reduced drastically.
>
> Liquidity plays a big role in whether or not to enter a stop. Obviously
> a stop on 5000 shares of IBM is safer than the same size on a stock that
> averages total volume of 50,000 shares a day.- the air pockets are much
> larger. If you have a relatively large position on a stock(relative to
> daily volume) you could enter a small size stock as a marker. i.e. 10000
> share pos. enter a stop of 1000 shares. You will be alerted by the
> report and have also tested the market.
>
> Rob:)
>
> TRaffertu@xxxxxxx wrote:
> >
> > Darrell Zang wrote:
> >
> > "From all I read, it's said that scrupulous money management is absolutley
> > necessary to be a successful trader. Things like, never trade with out
> > protection stops, etc. It is also said that you shouldn't risk more than 5%
> > of your portfolio to make any trade.
> >
> > HOWEVER, when I try to follow this advice and place my stops within 5%, some
> > jerk on the floor goes after my trade and stops me out!! I've done a trade
> > at 2:00 and been stopped out at 2:01. That hurts!!
> >
> > I've tried on close stops, but that doesn't offer much protection if your
> > moved against strongly.
> >
> > My, question.....How does one keep in the market and still practice money
> > management?
> > How to keep from being stopped out???"
> >
> > Money management is a combination of stops and the amount of capital
> > at risk. For example if your trading account was $30,000 you could trade
> > with 10% ($3000) and use a 50% stop to produce the desired 5%. As you have
> > found out if you risk all your capital and use a tight 5% stop, you get
> > forced out of the trade very quickley (the guy on the floor is not a jerk,
> > just someone who understands trading better). If on the other hand, if you
> > only risk 5% of your capital ($1500) without a stop, you would not have a
> > large enough position to be profitable. You can adjust the numbers based on
> > the size of your trading account, the volitility of the market you trade and
> > your tollerance for risk, but remember "truth lies in compromize".
> >
> > Good luck and good trading,
> > Ray Raffurty
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