StockFetcher Forums · General Discussion · WAIT FOR GREEN<< 1 2 3 >>Post Follow-up
rtucker
318 posts
msg #37066
Ignore rtucker
modified
7/26/2005 4:34:03 AM

d

corsino
259 posts
msg #37070
Ignore corsino
7/26/2005 11:11:09 AM

rtucker
There are lots of money management books and I'm sure some people on this board can name them or quote from them. However,in my opinion,while theories or systems on money management all SOUND good, they are worthless unless YOU can follow them.I believe that whether it's a money management system or a filter, the simpler,the better.
On money management, my thinking is : Preset a percentage loss (say, 5% to 10%)you can tolerate and then BE ABSOLUTELY RUTHLESS in selling. I capitalized some of the words because they are the most important. If you can't do that, all the wonderful books cannot help you.
On filters, again, the simpler the better. We both probably get mailings of systems that supposedly will make you rich. The thicker the envelope, the faster I throw it in the trash without opening it. The same with filters. Find a simple one that YOU can apply.


rtucker
318 posts
msg #37072
Ignore rtucker
modified
7/26/2005 1:24:48 PM

d

corsino
259 posts
msg #37076
Ignore corsino
7/26/2005 5:16:28 PM

rtucker
Don't feel bad about "breaking even". I suspect that there's a lot of traders out there doing worse. Regardless of how "easy" some say it is to make money, the truth is that it is difficult. Us small players are up against professionals, shisters and manipulators, eager to separate us from our money. But with experience,although sometimes expensive, you'll get better at it.


rtucker
318 posts
msg #37081
Ignore rtucker
modified
7/26/2005 7:06:32 PM

d

corsino
259 posts
msg #37082
Ignore corsino
7/26/2005 7:21:29 PM

rtucker
Perhaps I should have written something about the two filters you reproduced. They are respected filters and no doubt people make money using them. I myself have used Wallman's 3-day drop filter on occasion. But there is more to it than just the filter. He specifies criteria such as volume and tails.I use the bottom linear regression line rather than the lower bollinger band, but that is just my preference. I also try a stock with a tail below the BLRL. But when you use a filter based on drops of several days, you have to be very careful and pay close attention. You cannot buy and forget. A temporary "green" can whipsaw you. I'm sure that you can find charts where the stock has dropped for eight or more continuous days.


rtucker
318 posts
msg #37094
Ignore rtucker
modified
7/27/2005 3:51:53 AM

d

TheRumpledOne
6,358 posts
msg #37119
Ignore TheRumpledOne
7/27/2005 8:20:17 PM

All you need to know about MONEY MANAGEMENT...


Optionetics Articles

MARKET INSIGHT: Money Management

http://www.optionetics.com/articles/article_full.asp?idNo=8558

By Jody Osborne, Optionetics.com
6/19/2003 7:30:00 AM


We can find a lot of information about trading in books and on the Web, but most of it details how to pick stocks and what strategies that are available using options. However, one very important aspect of trading is often overlooked and this is money management. I often get the question, “Why did such and such stock move against us when everything was pointing at a good trade?” Trading is not an exact science; if it were, there would not be a market because everyone would know how to win. In sports, a team can often play a great game and still lose. The same thing can occur in trading. We can have all the odds in our favor, yet the stock will move against us.

Despite the fact that many trades will lose money, if we manage our trades appropriately, we can still make nice profits. In fact, we can make money trading even if our winning percentage is below 50 percent. In just a moment, I am going to discuss how this is possible. However, before we go into some money management techniques, we need to realize that we are going to have losing trades. Even the best baseball team doesn’t win every game. In fact, a 60 percent winning percentage is considered great in the sport. This is similar to the options game, where a person who wins 60 percent of their trades should come out well ahead of the game.

Too many traders enter a trade without any idea of when they will get out. Not only should we have a profit exit set, but we should also have a loss target set. With some strategies, we might be willing to risk the entire capital used, while others we might have a mental stop loss in place. Regardless of where your targets reside, it is important to have them ahead of entering the trade. This is because emotion will dominate our trading decisions if we don’t have an idea of what to do ahead of time.

Now, just to show that we don’t have to be right every trade, let’s take a look at a table showing the profits made using various winning percentages. There is an old saying that states “Let your profits run and cut your losses short.” It is this basis that gives us the following table.

Winning % Ave Win Tot Win Ave Loss Tot Loss # of Trades Profit

40% $500 $4,000 $250 $3,000 20 $1,000
50% $500 $5,000 $250 $2,500 20 $2,500
60% $500 $6,000 $250 $2,000 20 $4,000

Table 1: Profits Using Various Winning Percentages

Notice that by having a 2-to-1 win to loss ratio, we would have profits even if we only win 40 percent of the time. It is also important that we allocate an equal amount of capital to each trade. Many traders will put large amounts of money into trades they think are the best. However, if this trade doesn’t pan out, it can erase the gains made from other trades.

There are various strategies to manage your trading account, but the key is to have a plan. The idea is to “plan your trade and trade your plan.” This means knowing ahead of time where our exits lay and keeping a good record of the trades we have made in the past. Though we can’t win every time, we can learn to manage our money better so that the losses aren’t a problem for the long-term performance of our trading account.


Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
Visit Jody's Forum




KEEP IT SIMPLE.

MAY ALL YOUR FILLS BE COMPLETE.


corsino
259 posts
msg #37124
Ignore corsino
7/28/2005 1:02:12 AM

rtucker
I don't know how much experience you have in the stock market. Maybe not much.
But don't over-complicate things for yourself. There are dozens of indicators out there, but that doesn't mean you have to use them all. A lot of them are redundant. Some of them are easier to interpret than others. It's better to become proficient in two or three that you like than to be "master of none".
For instance, a lot of traders pay a lot of attention to the width of the Bollinger channel. I pay only casual note to it. A narrow channel to me only means that it's going to get wider, but I cannot predict if the stock is going to rise or fall, either one will widen the channel.So I stick to indicators I have some confidence in. I personally like stochastics and Williams %R.
About "waiting for green". I use it too, but I also note the stock's volume that morning, and what the market is doing.
You say that experienced traders may have a 70% winning percentage. Many may claim they do, and a few may. I don't know. You can't believe most of what you read. Anybody can claim anything. Sure,they can have a good stretch and win 9 out of 10. But they don't mention when they have a losing streak.

Just keep plugging.


rtucker
318 posts
msg #37137
Ignore rtucker
modified
7/28/2005 6:55:39 PM

d

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