As Web's World Turns

[spikefader]

I'm not home to watch the action. I have to set a limit order for where I think it may go. I don't think 5% is a large stop.
As far as understanding...I'm just an ole southern boy. All I can understand is how to pop the tab on a Miller Lite.

I'm just giving you a hard time dude

You had a plan, traded it, and moved on. So good job!

I was reading elsewhere a post by a trader who is trading the YM (Dow mini futures) and he is missing the essential ingredient that you have Webs; he is consistently moving his stop loss or not even having one; and he keeps having 1K down days and asking for help. Despite the obvious advice he's getting about sticking with his stops and being disciplined, the very next day he goes and does the same thing. Instead of focusing on what price is doing and reacting, he's focussing on hope.

He posted a chart with his entries, and no joke, I was doing either the exact opposite trade he was doing, or I was exiting the trade to take profits just at the moment when he was entering the trade in the same direction as me. He is trading the emotional roller coaster trade, and I know exactly where he is; cuz I was there myself a long time ago

It's what makes a market, and it's what gives me someone to sell to, but it's still sad to read about someone trying to learn how to trade but ignoring the advice and the obvious. Until he changes and limits his losses he is going to blow up. And so back to you Webs, I commend you on your discipline. You get my Spike Award for the day cuz taking losses in a disciplined fashion is one of THE hardest thing to do. More power to ya!

[spikefader]

....thus freeing up your mental energy toward your trades. Hope I helped

LOL


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[spikefader]

Runner and Webs re SIRI here is what I'm doing (my usual methodology): My alert is on for 4.94 (the current reading for a channel long on the daily). Then I'll raise that alert price as the channel moves up each day.

One day my alert will go off. When it does I'll look at the chart, confirm that the daily is still bullish bias, I'll see where price is relative to intraday S2 and consider taking it at a sub-S2 price; or if I don't like the intraday price pattern up to that point, I'll wait and see if there is a nice potential inverted SHS or double bottom.

Note: In order to take a sub-S2 price I would want to see a nice spike down there, as happened with ELN on Friday.



SIRI is a worthy stock to stalk for a long; I put the challenge out to everyone on the MM site to post a chart with a great entry in real time. Best entry wins some hugeness.

Come on people; let's all watch it real time, and even if you're not trading it, post the chart and try for the best entry. Who can get the best entry? You, You, YOU? Webs.........YOU? Runner.........YOU? MM.........YOU? Just all for fun of course. I should have made this comp a new thread!!

[Runner]

Spike that sounds like a plan. Now as far as the other part of my question. If you wanted to get 1000 shares of SIRI long how would you handle the money management side? Would you buy it all at once? Or what you split it with 2 different orders with different prices? How about the exit, would you sell all 1000 at once or hedge some of your gains by pulling some out early? If you did break up the order and lets say 500 per entry would you treat each one as a separate trade?

I know the chart will dictate how you will react to what it is doing. But I think this is a very important question. We all will trade differently, but not much is even mentioned about good money management in relation to r/r..

I hope what I’m trying to convey makes sense!!!!

[Websman]

Runner, I'm looking for 2500 shares of SIRI and will buy it all at the same point. It saves me on commissions.

Spike, I still have a lot to learn about entries. I just have to keep learning. I have noticed that I am trading with less emotion and am having more success than I did last year. Oh yea...Feel free to give me a hard time any time you like. I'll do the same. LOL

[Websman]

TOPT looks like it may be forming the left side of a cup and handle formation. I'll be keeping an eye on it.

[spikefader]

Spike that sounds like a plan. Now as far as the other part of my question. If you wanted to get 1000 shares of SIRI long how would you handle the money management side? Would you buy it all at once? Or what you split it with 2 different orders with different prices? How about the exit, would you sell all 1000 at once or hedge some of your gains by pulling some out early? If you did break up the order and lets say 500 per entry would you treat each one as a separate trade?

I know the chart will dictate how you will react to what it is doing. But I think this is a very important question. We all will trade differently, but not much is even mentioned about good money management in relation to r/r..

I hope what I’m trying to convey makes sense!!!!

Yep, makes sense. And a great subject r/r! You may be right; there isn't enough said regarding r/r and money management when people enter trades. Let's face it, a lot of people don't even like posting their trades for fear of embarrassment and failure, so that probably explains the silence. In my thread I've often mentioned money management and risk reward and the importance of seeing beyond a single trade to the long-term objective of gainers beating losers and allowing your equity curve to grow.

My own appreciation of the importance of r/r management is why I've come to love tight stops and look for perfect entries, and when I'm wrong, I'm happy to take my medicine, get out, and try again later. I am a work in progress, and my trading style is constantly changing (for the better hopefully). I used to daytrade stocks and now I only swing them and prefer to daytrade futures ONLY. ( I don't count a quick stop out on what is intended to be a swing stock trade as a daytrade, even though my broker counts it as one. I consider a daytrade to be in and out of a sizeable equity position on an intraday basis only, looking to scalp an intraday move, and never holding it overnight.)

So at this moment in time, the way I prefer to trade stocks is to take a position with one entry; ambush it and get a perfect entry or stop out with a 1% or lower loss. Sometimes I'll risk up to 4% on a single entry stop, but that is very rare. And occasionally I'll do something really dumb and average in to a dropping stock that I feel long term bullish on and get humbled and reminded why I should use tight stops (i.e. recently I had a brain snap and decided to average into FRO and for the past 4 weeks I've regretted that decision). I'm going to allow one more add to that position (a daily or weekly channel long) and then tighten stops. It may bite me, but I'm not overly worried about the financial aspect of it, since I can make up for the loss on that position in a day trading futures. I'm more worried about the actual circumstances leading to me breaking my usual practise of tight stops, and ensuring that I don't do that too often

But back to the r/r and my preferred ridiculously tight stops, some people think the way I trade is nuts; "risking only a 0.8% stop on just about any stock is going to stop you out every time", they may say.

But perfect entries are absolutely possible and I will disagree with the naysayers every time. I think it's fair to say that I've demonstrated on occasion that perfect entries are possible if you're patient. RSAS is a recent one that comes to mind. Short entry here http://www.mrmarketishuge.com/showpo...postcount=2715
and discussion here http://www.mrmarketishuge.com/showpo...postcount=2716
a later target post http://www.mrmarketishuge.com/showpo...postcount=2982
then a retarget here http://www.mrmarketishuge.com/showpo...postcount=3410

and to date I'm holding with 20% profit and have retargeted to 36%......and may retarget again if the circumstances dicatate. Or I may exit early if the circumstances dictate. But for now I'm letting my winner run, which is what I'm supposed to do.

And all this from a short entry where I was risking a 0.8% stop out on the day. The trade started with a r/r of 26.4, and now with my retarget, assuming I leave my stop where it started, the r/r jumps to 46. But I'd be nuts to risk anything now on this trade, so I move stop to break even and just wait it out for the market to tell me what to do. All I can control now is my own reaction to price action relative to my system.

But back to the r/r at the time of my entry, with those kinds of numbers I can afford up to 26 stop outs before my long-term positive equity growth expectancy is threatened. The only things I have to worry about are
1) how it 'feels' to have a lot of stop outs (oh the embarassment of poor % winner performance!);
2) how that feeling affects my actual execution of trades and belief in my system (man, all these stop outs are telling me I'm doing something wrong - maybe I need to widen my stops);
3) how to contain my feelings of joy and glee and greed when I finally post that RSAS 36% profit exit ;
4) and finally, having to work out where to reallocate all my delicious long-term system profits.

So bottom line is with great r/r and excellent money management I can still be wonderfully profitable - even IF I have an appalling % success rate.

And when the market acts wonderfully and gives really great reward for the patience spent looking for those great entries, I might get a perfect entry every say 5 trades or so ........... Now THAT would yield an impressive equity curve projection

Anyway, yet again I've gone on a weekend word ranting bender. I'm doing more of that these days. Maybe I should put a muffler on But I hope it's helpful to someone out there.

Good tradin' all.

Oh, and for people looking for a good r/r calculator, check this out

http://www.jdmx.com/download/riskcalc.exe

at http://www.jdmx.com/product/main.asp
got some other neat shareware progs there too, including a screen capture program that I haven't tried. The riskcalc works fine.

[Runner]

Spike, I certainly don’t think your nuts. Heck small risk large reward. I’m not ashamed with my blunders in the past, in fact I needed them. Another key element I think that might need to be applied to r/r is the overall market conditions. I think in a choppy market one needs to be realistic with targets. Since I’ve tightened my stops and not being so greedy my trading has improved.

Spike, something else I’ve been doing with success is not letting my position turn into the negative column. When I get a lead my first priority is to set stop at break-even. This alone has helped more than anyone would no.. I’ve had many stops set at a fixed percentage only to see it hit my stop and drop even more (SWIR, FRD, HDTV,TASR,AMED,) I’ve also jumped on some of those stocks and got my money back.

Many will argue this, but I view entry as key to success in these rocky times. Now as far the perfect entry you have sure pegged some in my short time on the forum.

If one trades a lot or plays the swings I feel tight stops just makes for good money management. Spike I played SIRI Friday and took a One Cent hit. Lo This trade did not go the way I thought, but it was a d/t.

Sounds like with RSAS it will be all or nothing! I will step up my stops and trail the swings. Sure this may mean I get stopped but I view nothing wrong with that as long as you have a profit.

Now back to my example of 1000 shares of SIRI. I view one could split it up and go 500 at target entry and let it prove itself and buy the second round on a dip or p/b. In this case I’d use the first 500 as my hedge against the 2nd batch (assuming one gets a lead). Or one could even drop down the amount of shares even more, depending on current conditions. I guess there are about 1,000 ways to skin a cat, but if one wants to stay in the game I think they better figure out how to use money management and r/r. Now if one risks 7% and gains 3% your system is faulty and over time your account may erode. Not saying 7% is a bad risk. Most I’ll risk on swings is 5% in the rocky times my risk drops to 1%. With fewer shares and less reward, D/T’s are never 1% and more around .5-.8 but like Spike has mentioned let your Runners run and trade your plan.

All I’m trying to do here is open a discussion about this topic, because we all know how this impacts our hard earned cash..

[skiracer]

I agree that any plan, almost any plan, is better than no plan. I have my own which over time gets adjusted according to how the markets are playing out at the present time. I think that you have to be flexible and nimble with what your strategys are because no one strategy works all the time for every market condition. If you are going to be in the markets regardless of the direction they are trending whether it be up or down then adjusting to those changing conditions with whatever strategys work for you should be your game plan. Only you know what suits your plan best and what your tolerances are. The problem is that most retail people doing this haven't got a plan an haven't given it any thought on developing one.

Since all of us surely have different and varying amounts of capital to use an invest those tolerances are going to vary proportionally. A 1% risk factor to one person might seem unrealistic to another whose tolerances are higher for whatever reasons. I think the key factor in risk vs reward with any trade, aside from what percent you set or use as your exit point, isn't the tolerance or % you use as an exit if the trade doesn't go the way you want it to go but the edge you create for yourself by finding the exact or precise point of entry for that stock in it's cycle plus your target vs the amount you lose if you must exit.

Cutting your losing trades short will save you money and you'll last much longer by honoring a precise exit strategy but I feel that keeping to tight a rein or stop can harm you more than you realize by exiting trades or getting stopped out early an then seeing the trade reverse and go on to reach your initial long or short target. But that is up to each individual.

My own feelings are that it is much more important to find the good setups that are ready to make a move in one direction or another and then make the trade with the best entry point, target, and stop in place. I don't like to give back my gains so at a specific point I'll put a stop in place to lock in those gains or sell off some portion of the position to protect capital an let the remainder run out with a trailing stop.

I don't agree with Spike's tight stops because I feel that you really should give a trade more room to breath but definitely not more than 7% down without exiting the position. On the other hand his exhausting research and technical analysis put him on top of his setups and limit his risk in that way so it's not like he's throwing darts randomly. He's picking the trades with the edge on his side but that takes alot of time and work finding the right ones.

In my own opinion the best risk vs reward is the edge you create for yourself by finding the great setups where the reward and chance for a gain is going to be much bigger than the risk of loss. Then setting stops becomes more of a personal thing involving your personal tolerances for loss rather than the edge you create in finding the setups. Risk vs reward is more of having or making the odds of gain of any trade you make more in your favor than not and giving yourself the much needed edge to come out on the winning side.

[skiracer]

The specific setup enchances the chances of
creating the edge or r/r in your favor.

[Websman]

After 2 weeks I was finally able to logon to IBD Forums and read your thread...Thanks a lot for not mentioning my site...Geez!!!...I even offered to pay you a dollar...LOL

ahhh, but I did mention your site Grasshopper. I mentioned your site along with Mr Market's site and Poorman's site.

Now, send me my dollar.

[Websman]

Good news! For SIRI shorts that is. This article should help bring SIRI back down to where we need it.

http://www.thestreet.com/_yahoo/tech/scottmoritz/10224195.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

[Websman]

Good news! For SIRI shorts that is. This article should help bring SIRI back down to where we need it.

http://www.thestreet.com/_yahoo/tech...FREE&cm_ite=NA

Yup...It's working great. The bashing continues to knock the price down.

http://www.fool.com/news/commentary/2005/commentary05051905.htm?source=eptyholnk303100&logvisit=y&npu=y

Keep up the good work boys! I need a bargain.

[Websman]

I'm off to Orlando tomorrow for a few days at Disney. I should buy their stock. I've spent enough money there.
I'll be back on Tuesday.

[IIC]

Have a GOOFY time Webs...IIC