Trader's Thread 01 (May 08 - Dec 08)

[winston]

1) I think, for 1, instead of shorting the put warrant, it is advantageous to long a call warrant, as you can take your time to close the position if the price moves in your favor.
2) What advantages do you have by taking the short positions instead of the long positions?

The conventional thinking, is to buy a call if one wants to go long. However, you are at the mercy of the market maker. The market maker may not give you a good price eventhough the share price or index have moved by a lot.

However, it times of volatility, if one wants to go long, it is better to short a put warrant. This is because the market maker tend to push the put warrant down much more, to weed out the weaker players. Fear is a very strong emotion and the market maker will always use it to his advantageous.

Sometimes, the warrant maker may also not let you get out, by having a wide bid /ask spread. even if things are in your favor..

I would only recommend such strategy to only experienced traders as you need to cover within the day or be covered in 3 days time. Anyway, I'm not sure whether Singapore still allows it.

I have a customer-friendly remisier at Limtan who will be too happy to have you as his client. Just let me know if you need his service.

Thanks Cherry. It's ok. I've been with my broker for a long time and there is no real need for me to move at this point in time..

[winston]

Need to look for this drug tomorrow...

================================================

Drug found helpful in problem gamblers
Wed Jun 4, 2008 3:37pm EDT

NEW YORK (Reuters Health) - In a study of pathological gamblers, the urge to gamble and gambling-related behaviors diminished among those who took naltrexone -- a drug frequently prescribed for the treatment of alcoholism and drug dependence.

Nearly 40 percent of the pathological gamblers who took naltrexone were able to abstain from all gambling for at least 1 month. Similar abstention occurred among just 10.5 percent of those treated with an inactive placebo, Dr. Jon E. Grant of the University of Minnesota in Minneapolis and colleagues report in the Journal of Clinical Psychiatry.

Study subjects included people aged 14 to 59 years old who gambled for 6 to 32 hours each week and met clinical criteria for pathological gambling. A majority of the study group reported symptoms of depression and about one-fifth said they had anxiety disorder, but none currently had bipolar, psychotic, or substance abuse disorders.

The investigators randomly assigned 58 men and women to take 50, 100, or 150 milligrams of naltrexone daily, for up to 18 weeks. Another 19 individuals took a placebo.

As mentioned, subjects who got naltrexone were much more likely to abstain from gambling than those who got placebo. Moreover, low doses of naltrexone were as effective as higher doses.

Those treated with naltrexone, compared with placebo, reported fewer gambling urges and thoughts, and indicated they were better able to resist their urges to gamble. These findings held in analyses of the entire study group, the 49 individuals who completed the study, and in comparisons between men and women.

The investigators conclude that naltrexone is safe and well-tolerated for as long as 4 to 5 months, and helps control symptoms of pathological gambling.

SOURCE: Journal of Clinical Psychiatry, May 2008

[kennynah]

hahaha...

throw the viagras....

[winston]

How to Eliminate the Frustration of Using Stop-Losses
By Jason Alan Jankovsky

Every trader has had the frustrating experience of placing a stop-loss order too close to the market. It really doesn't matter if the stop was to exit a losing trade or a winning trade, the frustration comes from having the stop get executed and then shortly thereafter the market continues to advance in the direction intended when the trade was initiated.

You either have taken a loss that could have been a gain; or cut a profit short. Of all the issues required to develop my trade approach, I probably have spent more actual time on the issue of improving stop placement than anything else. After giving the issue a lot of thought I decided the issue wasn't whether stops should be; after all trading without stops is an accident waiting to happen. It really is an issue of using stops effectively in order to maximize the probabilities inherent in your trading approach/system.

I took a look into the psychology of the stop-losses and I believe that any trader can improve their use of stops simply be being less aggressive with them. Here are the rules I recommend.

1. First of all, you must accept once and for all that stops are not optional. The surest way to suffer a debilitating drawdown in your equity is to trade without stop protection. This includes 'mental stops' in my opinion.

The purpose of a standing stop-loss order does not have to be solely to exit an existing trade; it needs to be considered as part of a well thought out trading approach that includes the understanding that no trader knows it all.

If we are willing to admit to ourselves that we cannot know for certain if any one trade will be a winning trade, then your use of stops is simply an admission of that fact. You, as a serious trader must always have a protective stop working in the market you trade; regardless if you intend that to be an exit order for an open trade you currently have on for today.

At the very least, a resting 'get me out' stop working against your open trade ensures that if, for whatever reason, you miss something before you exit the trade or enter an overnight stop; you are protected. As most traders know, it is the one time we act with enough over-confidence to assume we don't need a stop this one time (or will place that stop at the end of the day) that our market runs away against us dramatically. Always place a stop - you can always adjust it later as the trade progresses.

2. Next, you must think of stops as profit management tools rather than risk control tools. For the most part, if you have developed a sound enough approach to identifying the market's order flow, your trade will work when you are on the right side of the order flow. You could almost say that the initial risk control secured by the first protective stop was immaterial. That stop might as well have never been there. But since you are using solid discipline to protect yourself, once the stop is not needed as a risk control tool as the market goes your way; your stop now becomes a profit management tool.

Regardless of your personal trading style or timeframe, you will have the market 'inhale' and 'exhale' while the price advances toward your initial profit objective. That ebb and flow in price action is normal and expected. The last thing you want to do is place your stop too close to the market to get 'tagged' during this normal ebb and flow.

Rather than roll a protective stop under the market to lock a profit; consider rolling your stop to a breakeven point and wait for the objective to be reached. If you have truly seen the order flow, and you are positioned fairly well to begin with, the probabilities of the market trading your entry price after an advance in your favor drops over time.

After you have a reasonable lead on the market and you are holding a risk-free trade your only need is to watch for something to change. If nothing is changing continue to let the profit run until your objective is reached. If something changes you simply exit the trade with what you have in it at that point.

If something changes, and you don't see that change fast enough to exit with what you have, your breakeven stop will take you out with no damage to your equity. If you had aggressively rolled the stop up behind the market, and been taken out on a normal ebb and flow of price action, you might be tempted to re-enter the trade at a less than optimal time/price relationship; which increases your risk.

3. Use the next highest time frame from your preferred trading time frame to decide where to place a stop. As my trading style evolved over time and through education, I found that my unique style would be considered a 'swing' trader or a 'position' trader (or a little of both). Since I was willing to enter a position and hold it for more than a week or so, the 'random noise', or ebb and flow of price action, could easily span several days, even though a day trader might see that as several individual opportunities.

In my case, my initial stop needed to be outside the range of this ebb and flow; which was often the weekly high or low. If the trade was working, and I was in it 3-4 weeks, I might roll my stop to protect the trade but I usually would always make it outside the range for the week. After critically examining the results I found that in most cases you should:

Use the next highest time frame or two from his trading time frame to decide where to place a stop, in most cases the stop will be outside of the normal ebb and flow.

In other words, if you are a day trader using the 60 minute chart for your entry signals, a stop outside the range for the last day or so would work fine. Of course, that needs to be in context with your actual tolerance for risk. If you are looking for 30-50 points on something but a risk-control stop outside the range is 100 points; that won't work so well. But in any case, if you are using the next higher time frame to assist you in stop placement you will find you are getting stopped out less often before your trade reaches your profit objective.

4. Benefit from the clear thinking that stop usage brings. I think the a great benefit to always having a stop order working and moving them less aggressively is the peace of mind you have from knowing you are trading in a disciplined manner. Your trade thinking improves when your initial risk is known and protected. Your profit potential improves when you allow the market to behave as it needs to on the way to your objective.

In conclusion, By simply adjusting your use of stops to a less aggressive and more disciplined manner your profit potential is the real main benefit because your losing trades are always going to be there. Using stops less aggressively on your winning trades allows you to hold winners a bit longer. Using stops consistently to begin with limits your equity loss to a more reasonable number until you are holding the winner.

[LenaHuat]

Hi Winston
What abt posting this excellent write-up on "Stop-Loss" on the ChannelnewsAsia forum???
I think there are lots of novice investors there who will benefit immensely from reading your posting.

[winston]

Hi L,

Good Morning! Thanks for the kind suggestion. However, I do not really have much time to go to another forum. But if you do visit that forum, please do feel free to post the above the article there as well.

Have a great day !

Take care,
Winston

[millionairemind]

Hi W,

Regarding stop losses, in addition to physical stop losses, I also have a TIME STOP...

When I enter a position trade say long a certain stock.. it must MOVE within 1 month... either to stop me out or to move higher.

If it is stuck at a trading range.. say +/-5%, I will close out that position after 30days cos' the money could be better used to buy another growth stock or add positions to a trade that is working.

This keeps my money in circulation instead of being stuck at a stock that does nothing.

Cheers,
mm

[kennynah]

sat pre-dinner TOL thoughts:


as short term traders, do you hedge your overnight positions? if you dont, should you be doing so? and if you do, how do you go about hedging your positions?

[winston]

1) as short term traders, do you hedge your overnight positions?

2) if you dont, should you be doing so?

3) and if you do, how do you go about hedging your positions?

Hi k,

1) No, I do not really hedge my overnight positions. However, if I'm losing money, I would normally cut my position before carrying it over to the next day. And I try not to carry a losing position over the weekend.

2) The ideal situation is to have a "long / short " portfolio. However, I'm not able to short stocks due to residency requirements.So I have to rely on Put Warrants, which are not the most efficient instruments.

3) Although, it is inefficient use of capital, I do like to hold a higher % in cash, when I'm not in synch with the market.

Take care,
Winston

[kennynah]

thanks W ...

if Long stock, and if got profits, and facing with a weekend ahead or some earth shaking upcoming news, can

a) Long Put(pay premium n time decay) or Short Call (pay premium but earns time decay)

of cos, if have Long stock position, then choose Short Call lah...

just talking out loud...cos everyone here knows...

generating some topic discussion mah