|
PureBytes Links
Trading Reference Links
|
In a message dated 98-05-12 11:17:17 EDT, you write:
<< Anyway, I am buying 2 S&P contracts with a 10 grand account. (Actually,
I was told I could do this if I day trade only, but I haven't actually
done it yet, so I might not be able to buy 2 contracts with 10 grand).
The common wisdom is that your stops should be 2 percent of your
account. But that makes my stops too tight. Actually, I have been using
about a 1 point stop or 500 dollars with 2 contracts. Now that makes my
stops about 5 percent instead of 2 percent. Now I am still making money,
but I am going against conventional wisdom of a 2 pecent stop. >>
*********************************************
Troy:
Being undercapitalized rarely stops someone from trading but it still may be
the best course. There is another way but it requires discipline and
patience. In fact it will teach you both discipline and patience.
First, reduce your trading from 2 contracts to 1 which will improve your odds
of survival if you hit several losses in a row. Second, look for those trades
where your stop placement would be about 1 point on the S&P. The key here is
not to force a trade even if it is the best setup for your way of trading. If
the trade requires a 2 point stop, do not take the trade. Force the market to
give you what you want (require) or else you do not trade. You set the rules.
It is OK not to trade for part of a day or a full day or even several days
because YOU determine the rules of the game.
There are several flaws to this approach but the biggest is that your method
of trading may not provide any trades with a 1 point stop. If this is the
case, continue to paper trade while refining your methods to accomodate a
tighter stop. Either you will learn to trade with tighter stops or you will
learn that your methods do not work with a stop this tight. You can adjust
your trading accordingly.
Good Luck.
Lynn Green
|