|
PureBytes Links
Trading Reference Links
|
While I am fairly new to daytrading, the premise of setting and sticking to
stop-losses has been confirmed for me time and again (via initial trading
losses which exceeded even my most outlandish nightmares). Alexander Elder,
in his book titled Trading for a Living, lays down a good number of proven
concepts, but among them is the premise that without BOTH a target upside
AND stop-loss level at the time an order is entered it's simply not worth
entering the order. He insists that no trader should be involved in a trade
which risks in excess of 2% of trading capital, which seems like a very
reasonable guideline. Capital preservation is the first order of business,
with profit-making secondary. Also, if trading capital is tied up
indefinitely in a losing trade while the trader waits for a recovery,
profitable opportunities galore sail by, leaving the trader's account to
stagnate (at best).
However I have also come to the realization that every trader must learn
this very painful lesson via tangible losses. I heard the stop-loss rule
from a number of successful daytraders before I began, but after two weeks
of profitable papertrading my self-confidence caused me to disregard the
rule completely. I now require a 100% return with the new conservative
approach I now religiously follow... simply to reach the level where I
started a month ago.
-----Original Message-----
From: Scot Billington <scot.billington@xxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Thursday, October 01, 1998 7:19 AM
Subject: Long term capital
>No stops may work for a decade, but the historically off the
>standard deviation charts move is coming at some point, and if you have no
>exit, you will go broke.
|