| woodmai |
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Gold User, Member, Platinum User, TeleChart
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| Wednesday, April 6, 2005 |
| Saturday, October 6, 2007 7:47:30 PM |
9
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QUOTE (HaveNoCents) Now I need figure out why I would go against a successful trading strategy and do this. What's worse is if it turns out to be successful did I now open myself up to an undiciplined trading style? Shame on me!!!
Your dilemma points to the fact that trading psychology is far more important that a trading system. You have competing goals from competing parts: Part 1 wants to short JCP and Part 2 wants to follow your system. The path out of your problem is to cover your short and then develop a system that will allow you to short JCP. Once this is done then both parts will work together to achieve the success that you desire.
Good Luck, Dave W.
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QUOTE (diceman) It should be said as a reminder that volatility (ATR) and
position sizing are not linked. They are two seperate items.
Position sizing can be used with any stop method were you know your stop price ahead of time.
Lets say from the numbers above you can withstand $500
risk. You want to buy a stock at 30.15 and you plan to use a 7 percent fixed stop.
30.15 X .93 = 28.04 risk = 30.15-28.04 = 2.11
500/2.11 = 234 shares
Most things Ive read recommend a 2% position risk but,
I would recommend new traders goes as low as possible
1% or .5%
New traders should try to learn and keep it as cheap as possible.
Good Luck
This description of how to properly size a position is excellent and all traders should have it printed and posted next to their computers. I would like to add some simple nuances to this description. I use the following terminology that will provide a new trader with useful distinctions. In my trading I use the terms trade risk and portfolio risk. The trade risk is the difference between the entry and the stop loss. In this example the trade risk is 2.11 per share or 7% of the entry price. The risk of this trade on the trader's portfolio is $500.00 or 2% of the trader's $25,000 account. Thus the $500 represents the portfolio risk. Through proper position sizing, even the riskiest trade will have a limited and known risk on a trader's portfolio.
I love the Worden's both Don and Pete. There technical prowess is incredible and their product is awesome. But they could do their subsribers a bigger and better service by explaining PS/MM and by adding it to their educational offerings. In the long run this would increase the Worden's business as it would be less likely that their subscribers would blow up and lose all their trading capital ending their need for Telechart.
Best Wishes, Dave W.
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QUOTE (diceman) I believe a starting trader should put the most emphasis on being correct about his or her trades. Being able to deal with the emotions involved. Having the discipline to follow your trading rules. Learning about technical indicators. Finding the type of buy setups and stops that suit your personality and finding a trading timeframe that suits you.
It is my experience that it is better to do the opposite of what you suggest. In other words, I suggest that any trader (beginning or otherwise) put more emphasis on PS/MM than on when to enter or exit a position. The reason for this emphasis on PS/MM is that staying in the game for the long term is more important than any single trade. Proper PS/MM allows a trader to reach this goal. The market will take care of the trader (ie give them profits) but this can't occur if you are not in the game.
Another positive aspect of PS/MM is that it takes the stress out of finding that perfect entry or exit. I used to teach technical analysis and trading at Golden Gate University in SF. I found that my student's trading improved markedly by changing the emphasis from entries and exits to PS/MM. By emphasising proper PS/MM they suddenly realized that making a mistake with an entry or an exit had far less impact on there portfolio. This change allowed the students to relax. As a result, their entries and exits actually improved. I find it comforting to know that even if I total botch my analysis (which I sometimes do) that a trade will only result in a 1% or 2% loss in my portfolio. By doing this a beginning trader may actually become an experienced long term trader.
Best of Luck.
Dave W.
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I like this one. It has been setting up a nice base. OBV has continued to climb during this base building period. Also, the volume off of the recent low is a sign of accumulation. Set a stop below the recent low and a minimum price target of 95. This is would give a reward/risk ratio of nearly 3 ot 1.
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