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<DIV><FONT size=2>Not a nice story! Unfortunately, traders and investors must
protect themselves from those insiders who use privileged position and
information to take advantage of the outsiders. I no longer trade stocks,
however I used stops religiously when doing so and stuck with highly liquid
stocks with large float and strong average daily volume. As a futures trader, I
carefully watch what and where I trade and only trade those markets where I feel
comfortable placing stops. Verifying liquidity is part of the due diligence for
every trader and investor. Unfortunately, 40 years ago, stocks were still
somewhat in disfavor (carry over from the '29 crash) and I suspect even the most
heavily traded stocks of the 50's would be considered to be thinly traded by
today's standards.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>Earl</FONT></DIV>
<DIV> </DIV>
<DIV>----- Original Message ----- </DIV>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B>
mwricci
</DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A
href="mailto:Realtraders@xxxxxxxxxxxx";
title=Realtraders@xxxxxxxxxxxx>Realtraders@xxxxxxxxxxxx</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Saturday, June 26, 1999 12:22
PM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Re Stops: A story</DIV>
<DIV><BR></DIV>
<DIV><FONT color=#000000 size=2>Forty years ago, after working seven days a
week and twelve hours a day, I had amassed a fortune of some $55,000. I took a
little nite course at the local highschool on how to invest in stocks. After
the course, which covered the subject real well, considering the times, I
found a stock in the paper that appealed to me. I called the "Customers Man",
who was employed by a well known brokerage house and had given the course. I
set up my account and placed my first
order. </FONT></DIV>
<DIV><FONT color=#000000 size=2> The stock I mentioned was
called Coastal State Gas and was listed in the NYSE for $11/share. I bought
5000 shares. My former teacher then said "Doctor, would you like to put in a
Protective Stop? It will help you get used to them." I thought this was a good
idea and so placed a sell stop at $7.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT><FONT color=#000000
size=2> The next day, I was called and told that I had been
stopped out at my stop of $7. </FONT></DIV>
<DIV><FONT color=#000000 size=2>I had just lost $22.000. The following day it
was back up to $11. The following week it was trading at $17.</FONT></DIV>
<DIV><FONT color=#000000 size=2> What happened? My poor
broker couldn't understand it, I couldn't understand it, but I sure know
now.</FONT></DIV>
<DIV><FONT color=#000000 size=2> The Specialist, whose job
it is to keep an orderly market (and owns the Yachts), saw my protective
sell order on 5000S at $7 in his Book, brought the price down to $7, and
bought my 5000 shares for $7 for his private account. He knew something
was going on and took advantage of a brain-washed sucker. He committed legal
grand larceny, and I was out a total of $52,000! </FONT></DIV>
<DIV><FONT color=#000000 size=2> Do I use stops? For
futures, sure; for stocks, never again! </FONT></DIV>
<DIV><FONT color=#000000 size=2> Beware!</FONT></DIV>
<DIV><FONT color=#000000
size=2>
MWR</FONT></DIV></BLOCKQUOTE></BODY></HTML>
</x-html>From ???@??? Sat Jun 26 19:52:05 1999
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From: "Tom Alexander" <gta3@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxx>, "Stewart Taylor" <staylor@xxxxxxx>
Subject: Re: Stops
Date: Sat, 26 Jun 1999 20:25:52 -0400
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Take heed, all. There is a lot of very useful stuff on this list and some
people that genuinely want to help. On the other hand there a far too many
people that really have NO CLUE what they are talking about. My opinion on
the immediate topic of discussion - Mr. Taylor knows, Mr. Elkyn doesn't.
I can echo similar situations as Stewart Taylor has described.
Regards,
Tom Alexander
----------
From: Stewart Taylor <staylor@xxxxxxx>
To: realtraders@xxxxxxxxxxxx
Subject: Stops
Date: Saturday, June 26, 1999 9:43 AM
Why have I gotten a little upset over this thread:
I have seen traders, good guys and girls that managed to get behind the 8
ball, ultimately commit criminal acts (embezzlement and fraud)that
effectively ended both their professional and family life in order to cover
up losses long enough to hopefully recoup.
In two cases I have seen professional traders put successful, tenable
business under with their losses. The result, over 120 people unemployed,
some of them long term employees with 20 years or more service.
I had a good friend take his own life. He was an institutional trader, had
many years of experience in trading and doing risk management. He let one
position take him out. He got bigger than the market, refused to stop out,
started hiding trades, diverting funds and hiding confirms and less than 3
months later a wonderful guy was dead.
You have to understand that a whole new set of emotions develop when you
get a bad one going. Decisions that should be easy can become extremely
difficult. Your thinking process can become very erratic. You can
completely lose touch with trading reality. It is a frightening thing to
witness. It is funny (in a sick way) to see how much a person caught in a
really bad trade can change years of successful behaviors almost overnight.
Anyway, most of these situations begin when an account begins to take
unreasonable risk. In almost every case, the trade began as a single trade
that spiraled out of control.
Keep in mind, these are not accounts that churned themselves or were
horrible traders. Each person involved was a market professional with years
of professional trading under his belt. There is something about finding
oneself in an unexpectedly bad position that can render the most even
handed trader frozen in the head lites.
So do I get a bit heated when I see someone advocating what for most people
is very dangerous? Yeah, yeah I do. Avoiding problems and managing the
bad tail is a big deal.
Stewart.
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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