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TinGull

Shakeouts

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Wanted to start a thread on shakeouts. What do you do when a position is going against you, but you still feel on a technical level, not emotional, that the position should stabilize?

 

Do you cover your position and take the loss? Or do you hold your technical view and consider yourself a "strong holder" and maybe add to the position?

 

I'm interested to hear what goes through your mind as you see money flow out of your account on something that on a technical level should be stabilizing soon.

 

As you could probably imagine, I'm talking about a position I'm currently in. My position is still safe for about 25 SPX points and expires next week. We're currently in a major congestion area and levels *should* stabilize in here and provide a bounce enough for volatility to drop, give me my premium back, and then I can close out the position early next week. Looking at S/R, this position should be safe, and I do have a way out (not a profitable one...but not a full loss one either) I just hate that feeling of the shakeout, ya know?

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Wanted to start a thread on shakeouts. What do you do when a position is going against you, but you still feel on a technical level, not emotional, that the position should stabilize?

 

Do you cover your position and take the loss?

No, not unless you have an exit rule prior to your stop loss

 

Or do you hold your technical view and consider yourself a "strong holder" and maybe add to the position?

Hold on to your techinical view, because that is your proven edge.

NEVER add to a losing postion. The trade has told that you are on the wrong side of the order flow.

Feeling as if you are a strong holder is an emotional attachment to THIS trade not your trading system. The result of this trade does not define you as a person or a trader. Failing to follow a systematic way of entering and exiting the market defines one as a consistent losing trade. Note I did not mention anything about being profitable, just systematic.

 

I'm interested to hear what goes through your mind as you see money flow out of your account on something that on a technical level should be stabilizing soon.

I'm annoyed, but I accept it as the cost of testing my hypothesis.

I just hate that feeling of the shakeout, ya know?

I know, but you are not being shook out, the market does not know who you are, you are just on the wrong side of the order flow at this time and price.

As am I.

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Nice ranj. My technical levels for adjusting this trade haven't been hit yet, and now the market is starting to stabilize, so things are good. Been in this position for a while and still have the same technical views on it. Just not as "perfect" as I'd like it to be, ya know? ;) But, nothing ever is I guess...just keep doing what I do and let the odds play themselves out. Volatilities are still showing fabulous odds for this position working out even in these times of increasing vol. 65% chance of expiring worthless next week...heck, I used to go for a 65% chance 40 days from expiry, and that worked for me. Just been a while since I'd been back in the options game and gotta work that rust outta the system.

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I am very strict with my universal stop system... no questions... that gives me psicological freedom... If I started to put relativity to my stop system I would be already on a mental institution... and then it whent my way... lol, thats this bussiness, it can be hard at times, but having loyalty to a rule is the path to freedom... no hard feelings, bussiness still at the end treats me ok... my two cents Tin.. cheers The Chimp.

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Absolutely, walter. I just want to make it clear that I do have an adjustment process in place if price were to reach my pre-determined levels...I'm not flying by the seat of my pants. Just wanted to make that clear. Price came 15 points from my level and then BAM!! Reversed course and finished nearly unchanged on the day. Pretty amazing action today.

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Tin, what ranj said sounds good to me ..... but can I throw a spanner in the works?

 

This has been said before on this forum, but what do you think of the idea that the price must move to prove your position right in order for you to stay in the position. So its not enough to hold a position because it hasn't hit your stop, it must move in your favour in order to be held?

 

So the stop is a worst case scenario, the idea is to move the stop in your favour ASAP.

 

I know this is not an answer, its another question, and apologies for that. And I don't have the answer.

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So the stop is a worst case scenario, the idea is to move the stop in your favour ASAP.

 

Two ideas in that one sentence.

 

If your stop is a 'worse case scenario', as many stops initially start out as, then it's just that - a get me out of here price. That's a possible trading rule.

 

Another possible trading rule is to trail the stop in some fashion - aggressively or not.

 

Two completely different topics in my opinion. Neither is superior to the other as it depends on you and your trading methodology.

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From a technical perspective, if I think my analysis in terms of short term direction stands correct I will first see where is the absolute stop level that will tell me I am wrong. If the risk is within my risk tolerance level, I will add to my position and scale out a portion at my first entry point. This allows a break even trade to become a gainer.

 

Obviously if I am stopped twice, it will hurt. But I have turned potentially losing trades into winners alot more often than the times both positions go against me. The principle for me is timing. If my timing was off but I sense my initial market direction is right, I will add. If the position goes against me and I sense a shift in market sentiment, I will take the loss and move on.

 

I tend to use extremely tight stops so a little heat is something I can take.

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Tin, what ranj said sounds good to me ..... but can I throw a spanner in the works?

 

This has been said before on this forum, but what do you think of the idea that the price must move to prove your position right in order for you to stay in the position. So its not enough to hold a position because it hasn't hit your stop, it must move in your favour in order to be held?

 

So the stop is a worst case scenario, the idea is to move the stop in your favour ASAP.

 

I know this is not an answer, its another question, and apologies for that. And I don't have the answer.

agreed

 

The purpose of a stop is to get you out of a trade, because you did not have the chance, or the ability, to recognize a change in the orderflow. I find that I tend to fiddle around to much with my positions if I watch them, ie over think them.

 

Tin I am glad that things have improved in you trades.

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