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If you would have used an option to limit your risk you wouldn't have missed the
move, just given up a little of the profit. This way you missed the move and
took a loss. Ira
Tin Mervin Yeung wrote:
> Hi, RTs,
>
> I remember that in April, 1996, I went long wheat. I got in too late: i.e.
> in the middle of the move. In order to protect myself, I placed a stop just
> in case. It did fall--It gapped open on the next day. I stopped out at
> 518, the lowest point in the whole correction. My broker tried his best to
> persuade me to get back in. I didn't. Wheat went on to move to above 700.
> I was devastated.
>
> Mervin
>
> Barcia, Nick wrote:
>
> > The stops won't always help you. You can easily trade right through the
> > stops, and if you are lucky, you can get filled at not too painful
> > levels if the markets move fast against you. We all know how currencies
> > trade. With synthetics, you may need multiple stops for the legs and
> > you could get filled on pieces, rather than the whole position.
> >
> > Also, if you are trading such that your reaction is to try to tighten
> > the stops too much, you should probably get out.
> >
> > Nick
> >
> > > -----Original Message-----
> > > From: TOM142@xxxxxxx [SMTP:TOM142@xxxxxxx]
> > > Sent: Thursday, October 01, 1998 10:49 AM
> > > To: RealTraders Discussion Group
> > > Subject: Re: Long term capital
> > >
> > > Scot,
> > >
> > > You are basically right, the only problem is if you trade synthetic
> > > derivatives, instruments they made up themselves, there is no stop and
> > > quite
> > > probably no exit as there is no liquidity and just nobody to take the
> > > other
> > > side. I think, this was their main problem, they created such
> > > complicated
> > > investments which such incredible leverage that nobody else understood
> > > what
> > > they were doing. And if you have no controls who can truly supervise
> > > your
> > > operations, this is a sure way for disaster too. As for Niederhofer,
> > > that was
> > > another story and exactly the way you described it.
> > >
> > > Thomas
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