|
PureBytes Links
Trading Reference Links
|
Hi Pompatis
----------
> From: POMPATIS@xxxxxxx
> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Subject: Fut:POP's rule #1
> Date: Sunday, August 09, 1998 5:34 AM
>
> Greetings all:
>
> This post is directed to those of you who are familiar with Phantoms
>rules.
>
>
> 1) Do you think that Phantom is implying that a position should be
>closed the instant that the mkt crosses the entry point? If so this
>would eliminate many potential winners, increase the number
>of losers, but it would preserve those wonderful trades that are
>instantly profitable.
RB: This formulation idea implies that a trader can pick either
buy close to the exact low or sell close to an exact high of the time
of entry. For me this is unrealistic. Sure sometimes it happens but to
expect it to will lead to huge and unnecessary pressures on the
average trader.
> Or: do you think that he is
> simply saying that within an individual trading approach, a strong
>emphasis should be put on getting out as soon as one doubts
>the correctness of the trade?
RB: I'd put it another way as that formulation starts from the premise
that a trade is correct. POP on the other hand assumes the trade is
incorrect and looks to the mkt to confirm that the trade is right. This is
a subtle but important difference.
So I'd say that "before we take a trade, we primarily need to have some
idea of what the trade must do for us to remain in it and only secondly
what the mkt looks like for us to exit the trade immediately".
>This might preserve some good trades but is still likely to cut out
> many potential winners. Also, is takes alot of fortitude to be wrong
>alot, even if the lossses are small.
RB: There are a number of assumptions here that need to be addressed.
Firstly the fact a trade is cut early does not mean we will miss a
potential winner. If the mkt sets up, we can always re-enter.
Secondly cutting a trade if it does not perform, does not necessarily
result in a loss. It can and often results in a profit.
The comment appears to envisage a series of consecutive losses but
this is not an necessary result of POP #1.
It's also important to understand the process of how we come to
apply POP 1. POP1 is for the experienced discretionary trader. We need
to have experience so as to build a reality orientated model of
expectations. Without this model, POP 1 won't work. For a newbie,
he's better off with a straight stop until the model builds up.
> 2) A related matter:
>
> How do you gents feel about "never let a winning trade turn into a
>loser"? On its face this statement appears to be very good advise.
(snip)
RB: Very early in my trading I found this maxim vague and difficult to
apply. So I adopted the Rule of 3 and traded those mkts with volatility
that
allowed its application. I have posted Rule of 3 in this forum on a number
of previous occasions.
> 3) Related to #2. Suppose one does move the stop loss to a point of
>"break even" and the trade goes well. If it is a good move the market
will move
> through the next support/resistance (possibly faltering a little at these
> points); what about moving the stop again to below/above the next sup/res
(snip)
See Rule of 3 above.
regards
ray
R Barros
101/25 Market Street
Sydney NSW 2000
Australia
Voice: 61 2 92673470
Fax: 61 2 92673478
E-Mail: rbarros@xxxxxxxxxxxxxxxxxx
|