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augieboo

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augieboo

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Sunday, 06/22/2003 5:16:30 PM

Sunday, June 22, 2003 5:16:30 PM

Post# of 241
Osprey posted the following:
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Posted by: osprey
In reply to: Zeev Hed who wrote msg# 122274 Date:6/22/2003 11:21:16 AM
#msg-1130365

Trader wipeouts as Paul and Zeev are discussing, is an eerie subject as I've seen the same thing many, many times since the bubble broke. A huge number of people aren't ever coming back to this market because they can't, they lost it all. I know one guy who bet his house literally on nufo a high flying com laser company that went from the 60's to single digits, one old guy who lost a million USD (all he had), one guy who lost 2 million out of 3 million, there is more but you get the picture. I've come to believe the hard way that capital preservation and limiting risk are more important than maximizing gains. Some of my rules FWIW

1. Risk no more than 1% of your portfolio in a trade. In practice sometimes I'll go up to 4%.

2. Never average down, average up.

3. Stop losses of course. I use mental because every time I use a real, the MM's fish for them.

4. Never let a profit turn into a loss.

5. When you go into a trade long or short (plan A), always have a plan B, exit strategy.

6. Lose your opinions not your money (thanks LG). There is more but you get the picture.

One of the three disciplines a trader needs IMO, is emotional control to follow the rules. I don't always do it myself and occasionally have a blowup, none that big lately. I consider myself as liking a challenge and a serious amateur, mostly swing and position trade and actually make most of my money on LTBH (not LTB&hold forever). But I've been up every year since the crash, although not a lot. Just my perspectives and style but watching people get burnt to the ground was a sobering lesson. Good and careful trading.

===========================================================
Zeev replied:
===========================================================

Posted by: Zeev Hed
In reply to: osprey who wrote msg# 122283 Date:6/22/2003 12:34:20 PM
Post #of 122308

My rules don't differ much than yours, except that my typical trading (or longer term) position is 2% rather than 1%. The reason is quite simple, if I go 100% into equity, at 1% I'll need to have 100 different stocks, too much to monitor and also requires a screen of about 200/300 stocks to chose from (right now my screen is typically 100/150 stocks plus few special groups like Dow stocks and SOX, some are duplicated in both).

I will double up and sometimes even triple if I think a company has a great potential. Sometimes, I will let a position grow above 2% (like the bu$$ which is now at around 8% and sometimes during the day it could jump to 12%, but very rarely stay that way overnight), but that is because it has grown so much on me in the last five months or so.... Eventually, it will come back to its norm, but as long as it is strong, I don't mind a somewhat higher concentration in strong stocks....

Zeev

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Osprey answered:
============================================================

Posted by: osprey
In reply to: Zeev Hed who wrote msg# 122291 Date: 6/22/2003 12:53:57 PM
Post #

Zeev, we are not so far apart. I will open a position at 1-4% and average up if it seems justified. My main account is mostly LTBH (gasp, horrors, laughter >G<, not Hold Forever) and I will hold investment grade as long as the trend and reasons I bought are intact. In practice some of my better choices, amgn, wash mutual, mogn have grown to a rather high percentage of my account. I like to hold 10-20 stocks, enough for diversification but not enough to dilute gains by ending up averaging to like the market.

Like many people, I have several accounts, one investment and one for trading. I actually make more money in the investment account but the trading account is for fun, learning and forces me to focus and pay attention to the market. Some of the discussions about trading styles I see is silly. There are as many styles as there are traders and whatever works for someone works. Avoiding the obvious errors is just common sense which is of course, not always common. Good luck and careful trading.







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