I’d rather be wrong once, than wrong twice. And that kind of sums up my thoughts about getting long Friday. I’ll explain more about what I mean by that a little later. But first, I want to talk about this spreadsheet.
This sheet is similar to one that I use to analyze my long or short positions. The equity represented is not the equity represented in my account, although the relationship between the positions, sizes, and stops is accurate. The point is to understand how a percent-risk method operates. These positions were purchased using 1% risk and a 1.25ATR(10) stop. That means for each position, $500 is being risked, and the stock will be allowed to move .25 more than its average daily range before it stops out.
Looking at the Cost column shows that the more volatile issues, such as Dollar Tree, Inc. [[DLTR]] and Bucyrus International, Inc. [[BUCY]] , were purchased in smaller amounts. As DLTR moved over 4% against me, a smaller position helped to mitigate the pain. The most important thing I see is that 4 of 5 positions still have a ways to fall before they will stop out. It makes sense to let them trade for another day.
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Trying to guess the direction of the markets can be a foolish pastime. I started some long trades Friday, after believing Thursday’s action was bullish. I was guessing that the bullishness would follow-through. And I was wrong. So what am I going to do? Nothing at this point.
If I override my stops, or close the positions out, then I am guessing again that the markets will continue down. That could compound my first error doubly, if I am wrong.
All of the charts of the stocks I bought are still bullish. My stops are set (see spreadsheet). If every position stops out (5*.5%), I am out 2.5% of total equity, as I am only risking .5% of total equity on each position (the spreadsheet shows a risk of 1%). It makes sense to give these positions some time, and not make another emotional trade.
The other alternative to re-adjusting the longs is to hedge. And that is exactly I want to do by taking the latest Big Bamboo System pick. My hedge position will be about half the size of my long positions. As the system pick is a diETF, it does not need to be as large as the combined long positions.
Shed, why do you feel like getting long Fri was wrong? Did you buy the top, only to have it fall out on you?
I think the last few days have been very bullish. The intraday rallies, in the face of terrible news, seems to speak volumes.
I bought the close, feeling fine about it.
Options X week. Another wild ride!
Boomer, I’m still bullish. What I was wrong about was expecting follow-through, the next day.
I did not buy the top. I bought the gap down and was thankfully given lower prices than Thursday’s close on all but one of the positions.
I know you’ve shared your spreadsheets before. Do you mind sharing this one as well? Thanks!
Chop your cock off.
Fly, I operate on a different time frame than you. At this point, it probably makes more sense to just prepare for the chopping, like with alcohol swabs and iodine. If the chopping is needed, it will be revealed, likely by Monday’s close.
Wood,
Why hedge when all the positions would do is cancel each other? Why not just go long or short and let the stops take care of the risk if you cannot watch your positions intra-day?
Rum, good question.
The answer is that while they may cancel each other out initially, it is also possible that both will close in the money.
The Big Bamboo trade should be very very quick– probably less than 5 days. The longs are there to catch more than one swing, and to be added to, if appropriate, so they have a longer time frame.
At this point, it probably makes more sense to just prepare for the chopping, like with alcohol swabs and iodine.
Whattaya, some kinda masochist?
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APOL trying to BTFO above 70.00