ra189663

Most people lose money for a combination or reasons, primarily lack of knowledge and lack of discipline. Lack of knowledge: not having a trading program; having one and not knowing what type of market it works best in; not knowing what the loss rate is with the program; not having an alternative program when the market changes; the list goes one and on. Discipline: not sticking with the program; not knwoing how to control losses; not controlling losses if one knows how; greed; fear. Thinking that the process of making money in the market is fairly easy to master (underestimating the whole process and the variables that go into it); lack of preparation (which gets back to lack of knowledge). Lizard brain thinking that there really is a holy grail out there.

A year ago February, Stocks & Commodities had an article on using Value Line composite as the trigger to go long or short the Russel 2000. Back tested from the beginning of R 2000, he averaged something like a 20% return (he was using Martin Zweig's program). Best year was something like 50% return - worst year was about a -3%. So, just using that as an average, one needs to keep in mind that to obtain that overall average a) the program has to work in the future, and b) no money was withdrawn (which may be the most critical point...). Unless and until you have a track record of years (not months), you won't have any statistically relevant numbers to even decide from. Ask anyone who was making money hand over fist during a bull market and then ran headlong into a bear market with a program that wouldn't work then. Add to that the need to pay taxes, even if you are reinvesting everything... and you won't be getting a 20% return. But assuming you have a track record that has validity - meaning you have had good and bad markets you have survived - first before anything you pay your taxes. Then the second rule is you take out what you need (not what you want- what actual needs are), and you reinvest the rest. Don't want to reinvest anything? Ever heard of inflation? Draw down? Enough said. Keep in mind that you may have profits coming in hand over fist at the beginning of the year, and at the end of the year without drawing down anything, and not putting anything away for taxes, you can have less than you started with. Possibly significantly less.

As a suggestion: read Trading for a Living, and Come Into My Trading Room, both by Dr. Alexander Elder. I don't believe he focuses on stochastics, but he does focus on swing trading and I think both may be helpful. Having a tighter stop will cause more losses, but smaller ones. Everything is a trade-off, but with good trades chosen, good position sizing, good stops, and knowing when to exit will hopefully prevent such a large loss of gains. there is a lot to learn. Some of the best learning comes from making mistakes; but it also helps to know why the mistake was a mistake - or there is no learning at all. On the other hand, there is value in learning what has been a mistake for others; at least in can help prevent making unnecessary mistakes. The market has had a number of hiccups since March, 2009, and doesn't seem to want to make a steady bull market out of the chaos. And scan of any number of stocks will show gains since then, but not without some dips here and there, for who knows what reason. Don't give up; I think if you read those two books (and you may want to read them numerous times, as they are loaded with information) and learn from this go-around, you will do well. Rome wasn't built & etc.