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Joined: 12/2/2004
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on a single stock. Or the biggest one minute hit in over a year. I made a classic mistake near the open a few minutes ago. I broke one of my rules which is to never buy a stock premarket or at the open around earnings even when the news at first looks great, whether it's announced the previous day after the close, pre market, or shortly after the open. What looks good early can go bad fast as the news is absorbed. I've been watching PWRD for a few days knowing that earning was due this morning. Premarket action had it up a buck or so on early good earnings news but I thought I would be wise and put in an open order for regular session right near Friday's close. It was hit alright and I felt smart for not paying up premarket. But five seconds into regular session it dropped like a rock. I had a half size position and sold that in two pieces at 30.09 and 28.09 within the first few minutes. About a 7% hit lightening fast. The psychology gremlin got me. Maintain thy DISCIPLINE. Thanks for letting me vent.
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Joined: 10/7/2004
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fpetry, sorry about your lose. I will say, you sure like living on the edge.
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QUOTE (Booker) fpetry, sorry about your lose. I will say, you sure like living on the edge.
Thanks for concern:) My purpose in posting it was to share the mistake with maybe some traders new to the game, hopefully alerting to the dangers of trading around earnings. But I don't understand your comment of "...like living on the edge." I certainly don't, that's why I diversify and step into new positions in pieces, keep tight stops.
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I was just being facetious. Thanks for posting
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QUOTE (Booker) I was just being facetious. Thanks for posting
Gotcha, thanks Booker. I've seen some folks post here who were on edge though...can you say "BigBlock":) What happened to him?
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Joined: 6/6/2005
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hey fpetry,
Thanks for posting about your loss. I think you're right, it does help new traders in as much as making them aware of the dangers and pitfalls of trading and reminds the rest of us of good rules to follow. Interestingly, I think you're the one who reminded me not to trade around earnings on GENC. The psychology behind the markets and what prompts us into certain positions sure can be a mystery at times.
I'd like to see more posters putting up misses and why they didn't work. i feel we learn more from our mistakes because they sting.
Regarding diversification, I'm rereading (seems rereading is all I'm doing lately) the first Market Wizards book and there's a great interview with Oneil in it. He offers a very practical guideline for the amound of positions a portfolio should hold based on equity. I'll have to pull out the exact numbers when I get home but it's alot smaller than many may believe.
I think the max is 10 positions with account equity of 100k or greater. Thanks again for your posts and for putting this one up.
David John Hall
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Hi David,
Matter of fact I distincly remembered the post I had made to you about GENC, and it helped spur me to make the post about PWRD and take a little dose of medicine myself. The psychology factor/weakness that never goes away will always be an ongoing hindrance to one's discipline no doubt. But at least I sold out fast, so that part of discipline didn't disappear. Just like you did on the GENC gap down...I know it hurt that day but you should be proud and glad that you did the right thing by selling (I just looked at the GENC chart). What could have happened to both of us is that assume we didn't sell and the stocks took off to the upside, where we would have made money via a mistake. That could end up being the worst outcome over time because it would encourage to do that again in the future to our detriment.
O'Neil's book How to Make Money in Stocks is where he goes into great detail about his entire investing/trading method. In that book he says 6 or 7 stocks max for really high account balances, with about 3 for lower end. But as I've stated before, it's my opinion that his suggestion of a new trader with limited capitol only having 3 positions is moot because online brokerage commissions are so cheap nowadays (some only $1/trade). So a new trader can easily work in 5+ positions in steps and not get eaten up by trade charges.
Cheers, Pete.
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Joined: 12/8/2004
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It is never good to get greedy in the market.
In my opinion If you trade the only way to go is to fully automate your trading.
Rules should be backtested etec etc.
Emotions kill traders more than anything else
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I agree with you mostly Sir Bollinger, thanks. That fully automated trading, I don't know, but it certainly takes discretion out of one's trading. I know that some of the more successful big money managers use full automation, such as former turtle Jerry Parker. But they are managing scores or more of clients and there the full systematic automation shines. But I've also read where a trader managing just his own personal account can do as well or better by actually interjecting discretion alonside a strict risk management method. A really interesting topic you brought up, automated trading. The guy who has studied and written extensively on systematic trading is Turtle writer Michael Covel...on his site he offers some automated/systematic software packages but I haven't investigated to any degree, maybe I will soon.
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"..can you say "BigBlock":) What happened to him?"
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He typically only shows up on "his" days.
(300 points down)
Thanks
diceman
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Joined: 10/7/2004
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fpetry, to expand on why I was facetious, it reminded me of when I tried to trade the ER2 e-mini a few years ago during the Fed interest rates announcement. I had done my home work and I thought I was well prepared. When the announcement came, things happened so fast that I found myself upside down in just a few seconds. I found that I could not react fast enough to such volatility. Needless to say, I left the high-frequency trading to others and went back to my normal speed. I often thought about automating the trades but decided not to. Which brings me to automated trading. It's funny that you should mention that as I have been doing automated trading for a few years now. The Turtle Trading system can be had for the pittance amount of $0. The system is widely published and only needs to be coded into whatever auto trading software you are using. You might be surprised to know that it is not very expensive to buy the software to auto trade as long as you stay away from Michael Covel's site. If you are interested in automated trading, IMO the best author is Howard B. Bandy. He has a book called Quantitative Trading Systems.
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Fpetry, Sory to hear about your loss. Every time I break one of my rules I also regret it. I lost more than I wanted to on BONT because I could not believe that I was wrong in my pick, it defied every indicator and logic that I am acustom to, but it does not matter the markets are what they are and that is that.
You and I will be more vigilant and disciplined going foward.
Apsll.
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QUOTE (diceman)
"..can you say "BigBlock":) What happened to him?"
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He typically only shows up on "his" days.
(300 points down)
LOL, diceman you got right to the crux, no wasted words there.
Apsll, appreciate your feedback, thanks for sharing BONT trade.
Booker, very interesting that you are actually using automated trading. I'll take your advice on avoiding the software on Covel's site. I assume Bandy teaches how to set up an auto system? Thanks for relating your interesting experience trading e-minis.
Pete
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