I’m up late on a Saturday night, prepping myself for next week. The news is flashing fast, just like AC-130 gunships over Libya. I think it’s time to discuss losses and how to take them.
Are you ready?
Just do it.
It would be easy and naive for me to simply say “do not buy what I buy.” The reality is, many of you look up to me, for my divine powers, and often follow my trades. Now, if you get MOTR boated or VXX’d, I feel really bad about that, even more so than my own personal losses. That’s who I am. Money is just something that I use to buy shit. It doesn’t define me, which is why I fucking own it. The point I am trying to get across is to stop holding onto losing positions. I can’t condone building long term positions in this wacky world. I cannot promise you anything but death and national debt. So, when you are buying stocks, three conditions must be met for proper risk management.
1. Never build it bigger than 20%
2. Evaluate whether you should cut the loss at -5%.
3. Strongly consider selling all at -10%.
Notice how I didn’t tell you to sell at -10%? Only idiots do that. The market gets hot and cold and coils back and forth for all sorts of oddball reasons. You can’t apply one set of rules for all markets. Again, only idiots do that.
With regards to earnings: at heart, I am a fundy guy. Even though I shit on it, technical analysis is effective. There I said it. I’ve seen Chess, RC, Wood and Scott nail one technical call after another. But, the majority of “technicians” are monkeys, using the religion of technical analysis as a crutch to avoid reading 8k’s. Personally, I believe the future and the present of investing lies within algorithmic trading. Again, there are A LOT of hucksters out there who claim to have the holy grail, when in reality they have shit.
I designed The PPT to tell users what it nails and what it doesn’t do very well. Yes, I advertise its flaws, a cardinal sin for all internet bucket shop hucksters. In other words, there is full transparency as to the accuracy of the algorithm, per stock, per ETF. So if the algo is telling you to sell a stock with 95% success rate over 15 tries, you’re gonna listen. On the other hand, if the hit rate is just 20%, you will know about that and take it with a grain of salt. NOTHING is fool proof and no one has unlocked the secrets to human emotion coexisting with the ebb and flow of capital. The smartest guys in the room have tried and failed. They failed because of hubris.
I have my own money and do not rely on this website to finance my eccentric projects.
Who am I and why should you give a fuck?
I’m no one. I’m the guy behind you on the Dunkin’ donuts line. I am a guy with an edge and a gift at making money in the stock market, doing so professionally for over 14 years. That’s all.
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1st
FIG
Ass sphincter say what?
Fuck off
Very nice! I like the sincerity,
Thanks Fly. Newly minted follower. Stumbled here because the people I looked up to for investing kept retweeting your stuff. Been reading your blog since around February. You’re a good writer.
Thanks again, Fly for sharing your thoughts with us. I am out of words to describe how lucky I feel to have stumbled upon this website in my early days of drifting in the financial ocean. For some of us you are the life raft, the others learn from you how to swim on their own and how to handle Krakens and tsunamis of different sorts. I am personally very grateful for that.
And you know what, I consider the VXX summer trade as “L’instruction des Grands”. Not because of the VXX itself, but because I will always remember how you took horrible losses, re-assessed the market conditions, changed the thesis, and prevailed. That was so awesome to witness in real time. No school would ever give me that learning.
Now, this was a sentimental rant because I feel so good starting my Sunday with this enjoyable morning reading. I’ll get into my normal sharky mood on Monday. For those who still wonder who The Fly is and why you should give a fuck, go seek alpha and zerohedge yourselves in the process. But remember, all are not hunters that blow the horn!
Thithis is great. I admire ibc and its bloggers, I also have a tough time getting old fkrs to read it because you cociane gorilla clown raping fuckign fuckerers use profanity. Its so bizzare that this makes a dif to people when the goal is to make nickels, but…
That’s why people fail. Because if I say nothing smart or unique or even interesting, but dress well, use good body language, and smile while dog and ponying my ass off, old guys think I am cool.
I get drunk and cuss and hit on some ladies and wear a bedazzled cap and sweat pants to a jazz club, and even if I loudly spoke the slution to unified field theory, old guys won’t listen. I think 47.5 years is generous and 39:3 is closer.
No country for old men
I am stealing that: cocaine gorilla clown raped.
Perfect!
Thanks, Fly, for a very useful post, especially for new traders.
Checklist, this age thing is dumb. I know Fly started it, but even brilliant people have an occasional dumb idea. If Einstein’s son went into trading, or if the next Fly level trader were posting ideas on this web site, would you want to ban that person because he was too young, or stop paying attention to him because he became too old? Maybe someone’s race or gender would seem to be a factor too?
I know we all would like life to be simpler, because it can sometimes get overwhelming. But to claim that everyone of a certain age acts the same is fucktarded. If this age thing were true, U could just forget about Fly, after finding out his age, & then go & take your investment info & algorithms from any random full retard person who happened to be the same age as Fly is.
It’s not the age. It’s the personality traits, skills, knowledge, hard work studying the markets & individual stocks fundamentally and/or technically.
Fly is punk.
And methinks we will lose soon… bottom of channel, meet spy
I am extremely grateful for your insight and have been paying attention to you, i.e. IBC for 2 months. Currently, my resources are as limited as my knowledge. However, as a follower I am confident that will change. Thank you.
Btw: there is a reason why I curse.
More on that in the next post. I rarely curse
In real life and never, ever at home
Yes! I knew it!
Is it because frequent cursing in real life just makes one sound like a hillbilly truckdriver? While cursing in writing adds that extra that zing to grab a readers attention?
It works. Well done sir.
Archbishop Fly?
Punk.
Youre awesome!
“I’m no one. I’m the guy behind you on the Dunkin’ donuts line.”
So, in addition to coffee and donuts, Dunkin Donuts is now serving humble pie. Who knew? Fly, right or wrong, you are always fun to read. You are also one of the few stock bloggers who has enough testicularity to disclose your losers.
Two really good books worth reading,.
Against the gods. By Peter L. Bernstein
A random walk down wall street., By Burton G. Malkiel
These books among many talk about Tech analysis and the randomness of markets. Also studied in depth is the history of math prodogies since the begining of time trying to beat the game of chance, studying and developing ratio’s and statistical theorys. why is this important? Build your knowlege and understanding of markets from the ground up. Besides its all interesting stuff.
More good ideas on books go to Bobbrinker.com and look on the left side bar for recommended reading.. GREAT selection.
Ive been with this site since mid 1998 and a PPT sub since Dec, I joined only because what the FLY says rings true. Beyond the FLY there are a host of other PPT’ers worth paying attention too. And deberts post good links to company white pages.
Mr Magoo!
Thanks.
Been nice to see IBC grow from that little orange shitbox to this high end webslot.
I’ll bet that PayPal account is starting to look pretty good.
BTW..that IBC News feed on twitter is a winner….you nailed the AT&T merger for whatever that’s worth.
Your winning ideas have more than offset the losing ones that I’ve implemented. And win or lose, I always learn something from you about the market and various strategies in there. My style is different than yours, but I never cease to learn on this website and I appreciate it. Even when buying BORN or FAZ (a couple years ago).
mars,
nice work of the uranium. are you still holding alot?
good advice above from Fly.
I’ve learned much here.
of course I am disregarding it for now. the question is, will I get out in time? tbd
to laugh to oneself: to chuckle while posting.
Not a lot. I sold most of it and pushed it back to cash (a.k.a. Silver stocks). I believe odds are 50/50 of very bad nuclear news coming out of Japan which will make the sector drop again sometime in the next couple weeks. If it happens, and uranium stocks drop again, I’ll jump in again. If not, I’m still very comfortable with Silver and can always put a little more back into uranium in a month or two without being on the wrong side of major movements. Forum Uranium is one I plan to hold some of through drill results in summer. That said, uranium fundamentals looked good before Japan’s little incident. They look even better now, and it will make money if you hold it long enough. The contrarian within me would say to keep your money parked there if you have the will power to leave it alone. The swing trade junky within says take some profits (to silver stocks) and wait for the next sector upset.
Japan VERY bad. Uranium-235
Plutonium-239 Karmically unwholesome…horrific
http://www.amazon.com/Deadly-Deceit-Low-level-Radiation-High-level/dp/0941423352
I t appears that U caused the earthquake as well…
“Uranium was apparently formed in super novae about 6.6 billion years ago, a decay product of elements with higher atomic weight, which may have once been present on Earth or elsewhere in the universe. It occurs in most rocks in concentrations of 2 to 4 parts per million, and in much lower concentrations in seawater. Its radioactive decay provides the main source of heat inside the Earth, causing convection and continental drift.”
Unbelievable but true
http://www.mysanantonio.com/news/article/Huge-jump-in-radiation-inside-Japan-nuclear-plant-1309011.php
great people attract other great people.the way i like it,the no bullshit way of doin it. the ensemble here is second to NONE with the best maestro on the net.
I’m afraid to ask but the following are stocks that I am currently holding with each having no more than 5% allocation. Of these which ones would you absolutely toss? Please, don’t say all of them!
AGU
AXL
BZ
C
CNQ
CSCO
EGO
EXK
KGC
KNDI
MOS
MOTR
MSFT
POT
PWER
SOL
Thanks!
kinross likely won’t do much for a few years.
C
On the first bounce…CSCO
I forgot! I also own WNR!
Good post Flyseph.
My favorite post evr
fly? are you a fly that goes from one piece of shit to another?
herb, is that you?
I find your style insightful and entertaining and you crack me up a lot.
I admire your WNR, yet I don’t go that way; but more admire your honesty with trades that don’t work out.
zzz
Wow. Thanks for writing this.
One of your best posts this year. You are simply the best writer among the traders and the best trader among the writers. It is a privilege to read your stuff.
You pays your money and take your chances. If you’re going to talk about losses on OPEN, I immediately think of your call on FTK. I just wish I’d kept it longer! You add a comic relief on some pretty stressful days. Thanks
I second that. Your FTK call and my resistance to sell has made my a very happy man. Cheers Fly.
I understand if a stock is acting poorly
It is your responsibility to make the decision
to sell that sucker at a percentage loss that
can be recovered.. Allocating to much capital
Into any one position is risky and somewhat stupid.
how about a recommended reading list fly? wherinlyiththeholygrail?
Totally love this idea. Maybe needs its own tab with ratings on various books/economic diatribes. See what people liked and why, and what floats to the top.
My guesstimate is Fly is 37.
Although really, having a time machine makes it irrelevant.
His approach is futuristic, his style classic and communication current (I don’t want to say “down with the kids” because a. it makes it sound like a kiddy fiddler accusation and b. only really old people use that term).
I really enjoy the stories and insights. And the phrases used by traders to describe situations.
“This markets going up and down like Monica on Clinton” etc
Markets can remain irrational longer than you can remain solvent – Keynes
Q. Is stock xxx going to reach target y?
A. Sure mate, it’s a Sally Gunnell (ugly, but it’ll get there in the end).
Managed to pull an OJ on that stock (got away with it).
Potatoes wear Jackets, Gentlemen wear coats.
You’re off, but not by much.
++++++++++++
I am 34.
You were a professional broker at 20? Unusual.
intern then pro
I’ve followed you into trades for some nice profits but I’m also holding some real losers that I first considered buying after visiting here. I take full responsibility. I don’t follow you blindly. My most vexing trader flaw is that I’m stubborn and I’ll hold those losers for way too long and I often average down. I’ll strongly consider your advice here.
Just in case Fly doesn’t have time to respond, here is what most successful traders do.
NEVER AVERAGE DOWN unless you have a substantial history of that working for you– and maybe not even then. My Gawd, what if you had averaged down on banks in 2008? You would be selling pencils on the corner. On the average, if your trade is going the wrong way you should be out of it.
Set some kind of stop loss, or some signal of it falling below some moving average or whatever– some point at which you will get out of each trade you ever make, if it is going the wrong way. Successful traders usually have a plan of entry, a plan of exit if things go right, & a plan of exit if things go wrong.
Good books:
Trading for a Living by Alexander Elder
Trading in the Zone by Mark Douglas
Trade Your Way to Financial Freedom by Van K. Tharp
Thanks. I’ve read that Tharp one and agree with you.
Thanks Frog.
I’m a bit stop-shy since so often I’ve been stopped out of a stock which then bounces to huge gains. Guess I need to refine my stop setting. I’ll read the books you recommend.
Averaging down has made me a bunch of coin. It is scary, but profitable when done correctly. I only average down on thesis stocks / fundamental plays. I never average down on a stock that was bought purely on technical matters.
Fly thanks for giving us a backstage pass to the
to what really goes on in the market…
Anyone who followed my lead last week, and bought KOG, was happy on Friday. Unless things change big time, over night, I’m betting big on EUO. The euro is just too toppy.
brilliant. great post – thank you.
For the Zombie’s sake, I’ve composed a Sunday night post that will provide direction, provided you drink from the golden cup!
______________
So much of all of this is Algobot driven. F/X, Commodities, Bonds, Stocks all just bouncing off each other in one Global Game Field. One day I hope to be as good as Fly…Scott…etc…until then, I just will just go follow my global copper market, supply is at stupid levels and maybe just maybe one day it may roll. Tonight Oz is breaking thru resistance of 1.2500 so even with Shanghai Futures has Copper down…I will probably will have to deal with materials in rally mode again on Monday, drats…stupid bubble.
lol, I even get numbers wrong..1.0250…I really should proof read.
Until you are able to shed your blinders and see both sides of the market you will never come close to Fly, Scott, etc.
dear fly i enjoy your posts a lot, i have a question though, i set up an account for my son. i was wondering is that too early for him since he is only 14 yrs old?
I was trading at 10
Younger does not mean better. How many years of tuition money did you give up before you turn black?
Personally, I think 17-18 is a good time for him to get his feet wet. He needs to be able to read some 8-Ks first. That doesnt happen until he hits 17-18. Of course, if you want him to be a tech idiot savant, you can start him at any age.
Best post ever up there Mr. Fly. Now, what have you done with the real Fly, the braggart who insults his readers?