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I admit that for those great traders that have direct lines to the floor and
even their own personal in the pit this approach might work if using the
right risk/reward etc. etc. Unfortunately, in recent years I have learned
that at least a percent of great traders were/are great liars.
My trading evolved over a series of stop placement ideas. The last time I
used stops I bought 2 copper options. I thought; I will put my stop way, way
out of the range beyond any reasonable move. The very next day copper spikes
way, way out of it's range taking my stops out exactly to the tick and then
proceeds to drop quietly back into the range. Now I know that a number of
you will say that that was by chance and 2 options weren't worth going after
etc. I don't believe it, sorry.
It really doesn't matter in a way because even if you take a proven record
like Richard Denise you have evidence that options are cheap insurance. He
said that he made most of his winnings on a small percent of his trades. If
this is so and we know that he is/was a great trader, I think that his costs
of doing business on that greater percent would have been as much or more
than the cost of using options. Don't misunderstand I have no idea how he
traded just that his costs would have made using options viable. Options
weren't even around back then I think.
That is what I found out myself. I noticed that my losses were as great as
the costs to buy options or more, so I decided to test my idea. I had a
trade on in gold, I was long and I said I will try this option strategy so I
bought a couple of near the money puts. Well, gold went down (surprise) and
I sold my long contract for a small loss. But I held my puts and in short, I
made a good profit on those puts covering my loss and a good deal more. If I
had used stops I'd have had another bad hit and for even more because my
stop would have been way out there. For my level of trading that was good
enough for me. My lemon became lemonaid.
It takes a little work to learn how to buy and use options but I'd be broke
now if it wasn't for that.
Brent
-----Original Message-----
From: Stewart Taylor <staylor@xxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Friday, May 07, 1999 3:52 AM
Subject: Re: Stops/Michael
>
>I view stops being hit as a price of doing business. I never ever ever
>trade without a physical stop placed in the market. In fact, the first
>thing I consider when deciding on a trade is where to place the stop. If a
>reasonably secure stop is too far away, then I don't do the trade. You can
>do what you will, and this is just my opinion (based on being a long term
>survivor) but trading without a physical stop in the market (an option stop
>satisfies this criteria but opens up several new problems for the short
>term trader) is not a survival behavior.
>
>Again, I know there are lots of ways to skin the trading cat.... but I
>would rather walk the streets naked than have a position of any kind
>without a resting stop in place behind a physical price barrier.
>
>One last point, over the years I have met a lot of great traders. Almost
>without exception the ones I know that have had long term success have
>worked trades from the risk side back and use stops religiously.
>
>
>At 03:26 PM 5/6/99 -0600, gary bodnar wrote:
>>Hi all
>>
>>My gambler friend once wrote something about the stops..."It is like
leaving
>>your wallet on a street in New York City. You can be sure it will be
gone."
>>Prefer to use mental stops...
>>
>>Gary
>>
>>
>>
>>Earl Adamy wrote:
>>
>>> There are cases where stops are run in spite of good placement (had it
>>> happen yesterday on short in crude). Generally, however there is a
message
>>> when a well placed stop is run and that message is that the trader was
>wrong
>>> about the market. The act of placing the stop in the market is a
commitment
>>> by the trader that he/she will acknowledge the mistake.
>>>
>>> Earl
>>>
>>> ----- Original Message -----
>>> From: BrentinUtahsDixie <brente@xxxxxxxxxxxx>
>>> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>>> Sent: Thursday, May 06, 1999 11:20 AM
>>> Subject: Re: Stops/Michael
>>>
>>> > My rule is to never trade naked. Funny how many nudist traders there
are.
>>> Ok
>>> > for you that don't understand, when you have only a short or long
>position
>>> > you are considered naked (if you always trade naked you are a "nudist
>>> > trader"). So my rule is to always use options for trade protection and
>>> never
>>> > use only stops. Usage of stops is very peasant for the stop runners,
they
>>> > will get you about 89% of the time in my experience. So learn how to
make
>>> > lemonade out of your lemons if you want to be a really good trader.
>>> >
>>> > Brent
>>> > -----Original Message-----
>>> > From: Michael <comdytrd@xxxxxxxxxxxxx>
>>> > To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>>> > Date: Thursday, May 06, 1999 10:49 AM
>>> > Subject: Re: I refere to earl adamy "june bonds " message
>>> >
>>> >
>>> > >Bottom line...NEVER trade without a stop ... If you don't know where
>you
>>> > >are going to exit a trade, then you have no risk/reward parameters in
>>> mind
>>> > >and you have a poor trade and a potential disaster...
>>> > >
>>> > >Learned this the hard way
>>> > >
>>> > >Michael
>>> > >
>>> > >
>>> >
>>
>>
>Stewart Taylor
>Taylor Fixed Income Outlook
>Voice: 501-219-9774
>Fax: 501-228-0963
>E-Mail: staylor@xxxxxxx
>Web Site: http://www.cei.net/~staylor/
>
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