34 replies to this topic

[OEXCHAOS]

If you're not leveraged and you're properly diversified a hard stop isn't necessary. I usually don't use them for portfolio work. I take losses vs. gains, look at the charts and clean house when I want to add something. It works pretty well. Mark

[arbman]

The worst outcome I can think for dcengr is the gold tops in its regular 27-28 month interval (it is at 24th month right now) and this would mean around YG=1140 or so. The stocks would also make an inflationary rally in this case. But no matter how dice and slice it, the gold should go over 1000 before topping and it is likely to overshoot than touch and implode...

Edited by arbman, 05 March 2008 - 08:58 PM.

[IndexTrader]

If you're not leveraged and you're properly diversified a hard stop isn't necessary. I usually don't use them for portfolio work. I take losses vs. gains, look at the charts and clean house when I want to add something. It works pretty well.

Mark

Like I said, I don't know anyone who doesn't use stops except people on this board. I just didn't figure you were one of them. Or for that matter that you would support it....even if you did use some "IF's".

For what it's worth, I've seen some traders lose everything...literally. No stop was ALWAYS the reason.

IT

Edited by IndexTrader, 05 March 2008 - 09:44 PM.

[dcengr]

When you're using a relative trade, stops don't matter as much to individual issues as much as the entire trade account itself. For instance, my account balance has been relatively same for the last few days, despite gold going up. Why? Because so have stocks. This strategy is a pairing where my stop is based on account value decreasing below acceptable limit, not based on one asset going above a certain price. Therefore as long as my account increases over time, there's no need to put a hard stop in either asset. If my account decreases to some level I won't accept, both trades go off the table. Part of the trade is based on relative strength and money flow on stretched sectors. And its also a function of asset allocation %. Right now, I'm 3x more long in stocks than short gold. But I can change that allocation as I see fit to cater to changing conditions. And again, if my account goes down certain %, I may kill both trades. If my account appreciation hits certain %, I may kill both trades.

[skyymaster]

If you're not leveraged and you're properly diversified a hard stop isn't necessary. I usually don't use them for portfolio work. I take losses vs. gains, look at the charts and clean house when I want to add something. It works pretty well.

Mark

Like I said, I don't know anyone who doesn't use stops except people on this board. I just didn't figure you were one of them. Or for that matter that you would support it....even if you did use some "IF's".

For what it's worth, I've seen some traders lose everything...literally. No stop was ALWAYS the reason.

IT

IT, I would agree, Risk management is very important. Those that do not manage it either through stops or hedges have "I am Right" Market is Wrong syndrom. I been there done that. I have blown thousands because I did not have stop. It was stupid for me to think I was RIGHT. It does not matter if your RIGHT. MARKET is ALWAYS RIGHT. There is only one side of the market and that is the RIGHT Side. Now, many are good traders here and have good track records from what I can feel and see. However, there is NO DOUBT in my MIND that those that show respect for Money Management will survive the longest. I have learned not to question stops. Just DO IT, as NIKE says.

[dcengr]

Commodities are just the latest fad. Speculative money. Once something else will start moving funds will dump commodities and buy something else.

US dollar is possibly trying to make a bottom.


Something interesting emerged on the horizon today... Government bailout of the mortgage market. If government will start buying bad mortgages then the pressure will be off the Fed to cut rates. That will boost the dollar. That will also boost the stocks and cause the sector rotation.

Thats something the government should've done all along. Buy the bad loans from banks to reliquify them and don't dick around with the interest rates.
Looks like finaly they are coming to that decision.

According to CNBC the bill may be introduced in congress next week. Don't underestimate how positive that will be for the market. You heard it here first

What they will do is put it into SS funds Your future SS payments will be on the backs of mortgages! Why not? Everyone else was doing it (ie using their homes for retirement funds).

[NAV]

If you're not leveraged and you're properly diversified a hard stop isn't necessary. I usually don't use them for portfolio work. I take losses vs. gains, look at the charts and clean house when I want to add something. It works pretty well.

Mark

Mark,

Correct me if i am wrong. Diversification is all about spreading risk and not containing risk. Otherwise all we had to do was diversify and sleep like a baby. I don't know of any trader who doesn't have a clue about exit points - hard or soft. Playing without stops, is playing "Macho" with the market. When the need to emerge sucessful out of a trade overwhelms the pain of drawdowns, you see traders dissapear from the board when the position goes against them and resurface and perform flips when it goes in their favor. Hardly a prudent trading practice.

To put it gently, this is communism, if not outright robbery of the people's tax dollars...

I would not want to see these bad loans from stealing from the children's school education, health care, projects needed for the next generations because a bunch of dummies bought the homes at the top TO FLIP FOR A PROFIT as if the bankers did know about it. The prices must correct so that these are cleaned from the system and there is better opportunity for growth instead of accepting these loosing propositions...

Amen

Edited by NAV, 05 March 2008 - 10:27 PM.

[SemiBizz]

Here let's see if we can get him to say it... Mark, do you recommend that traders NOT have a stop???

Edited by SemiBizz, 05 March 2008 - 10:36 PM.

[Caduceus]

If I lost everything in a diversified portfolio with no leverage, it wouldn't be because I didn't have a stop.

Edited by Caduceus, 06 March 2008 - 01:12 AM.

[OEXCHAOS]

If you're not leveraged and you're properly diversified a hard stop isn't necessary. I usually don't use them for portfolio work. I take losses vs. gains, look at the charts and clean house when I want to add something. It works pretty well.

Mark

Like I said, I don't know anyone who doesn't use stops except people on this board. I just didn't figure you were one of them. Or for that matter that you would support it....even if you did use some "IF's".

For what it's worth, I've seen some traders lose everything...literally. No stop was ALWAYS the reason.

IT

It's got to go to zero for you to lose everything and if you're properly diversified, EVERYTHING has got to go to zero. I would suspect that one who was properly diversified and held everything from 2000 probably didn't get hurt too badly, provided they weren't levered.

With options, I often don't see the value of a hard stop, save to make a market maker money at your expense. The trick with options is to trade deep in the money (if you're using a stop) or keep the position small enough to take a total loss and not have it matter too much. Or to trade spreads which won't work with a stop very well at all.

Now, with regard to futures or really any highly leveraged trading position, my hard and fast rule is to ALWAYS enter a stop. ALWAYS. If you don't yet know where exactly to put one, just put an emergency one in some distance away from your entry. Do it immediately.

That's because your exposure is huge and those markets can move fast. Assuming you can watch them all the time, and you don't freeze when things move big, you still have to worry about your broker or your internet or your phone going down. Ask Teaparty about that (see his blog).

So, basically, the concept of a stop is key and imperative in certain contexts, but not so much in others.

Mark