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 | | From: | -oo0-GoldTrader-0oo- | | Subject: | Pyramids and Stops | | Date: | 19 Jan 2005 10:47:57 -0800 |
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 | >>Hello -oo0 (GoldTrader) 0oo-,
>>I was curious as to whether you mentioned anywhere
>>how you run a closer stop?
>>I thought I read on Elite Trader that stops were not used?
see Stops
http://www.elitetrader.com/vb/showthread.php?threadid=17053&referrerid=16634
Probably someone else's post. Spread Stops are close only (except for
Eurodollars). So, we do not place them in the market. This is not the
same as not having one.
"Well, sir, in four days of successful pyramiding, Roberts' account
showed him a profit of fifteen thousand dollars. Observing that he had
not put in a stop-loss order I spoke to him about it and he told me
that the break hadn't fairly begun and he wasn't going to be shaken out
by any one-point reaction. This was in August. Before the middle of
September he borrowed ten dollars from me for a baby carriage -- his
fourth. He did not stick to his own proved system. That's the trouble
with most of them," and the old fellow shook his head at me."
Jesse Lauriston Livermore
Our research department always gives us stops. Often these become
excellent entry points when seasonals bottom late.
>>Also, is there anything on money management other than
>>1 spread per $1,000?
That is just a suggested starting point for low margined trades.
Obviously riskier trades may require more than a $1,000.00 in margin
alone. There are as many viable formulas, as shades of color in the
sky at sunset. Margin + stop amount, Double margin + stop amount etc.
example, you stated building into winning positions.
>>For example, you stated building into winning positions.
There is no way to make a big score with only one position. Do not put
your complete position on at one price.
"Every point that stock went up meant five hundred dollars I had not
made. The first ten points' advance meant that I would have been able
to pyramid, and instead of five hundred shares I might now be carrying
one thousand shares that would be earning for me one thousand dollars a
point. But I sat tight and instead of listening to my loud-mouthed
hopes or to my clamorous beliefs I heeded only the level voice of my
experience and the counsel of common sense. Once I got a decent stake
together I could afford to take chances. But without a stake, taking
chances, even slight chances, was a luxury utterly beyond my reach.
Six weeks of patience, but in the end, a victory for common sense over
greed and hope!"
Jesse Lauriston Livermore
>>So, I presume like a pyramid.
Stackings OK
see Pyramids
http://www.elitetrader.com/vb/showthread.php?threadid=24519&referrerid=16634
>>Are there specifics as to when to add and how much?
"But in starting a movement it is unwise to take on your full line
unless you are convinced that conditions are exactly right. Remember
that stocks are never too high for you to begin buying or too low to
begin selling. But after the initial transaction, don't make a second
unless the first shows you a profit. Wait and watch. That is where
your tape reading comes into enable you to decide as to the proper time
for beginning. Much depends upon beginning at exactly the right time.
It took me years to realize the importance of this. It also cost me
some hundreds of thousands of dollars."
" I don't mean to be understood as advising persistent pyramiding.
A man can pyramid and make big money that he couldn't make if he
didn't pyramid; of course. But what I meant to say was this: Suppose a
man's line is five hundred shares of stock. I say that he ought not to
buy it all at once; not if he is speculating. If he is merely gambling
the only advice I have to give him is, don't! Suppose he buys his
first hundred, and that promptly shows him a loss. Why should he go to
work and get more stock? He ought to see at once that he is in wrong;
at least temporarily."
Jesse Lauriston Livermore
-oo0(GoldTrader)0oo-
>>Yes, I was thinking bigger positions would be possible. Hence, with
>>lower volatility, margin requirements, and proper
>>trade management, the reward-to-risk ratio should be better.
You have the picture. You will have to apply everything that you have
learned trading outrights to the spread differential.
>>This is how I could see that one would profit more than a Doctor
>>or Lawyer and also with a fraction of the stress involved.
Doctors and Lawyers spend many years learning their trade. There is no
reason to believe that futures are any different. Stress: put on a
dozen diversified spreads and it will be like having patients in
intensive care. I have held and built positions for months, but I
still find a need to take trading breaks.
>>I should have been clearer -- I was referring to
>>long-term trend following outright futures.
>>once I get Ross' book that I will better understand
>>trend following within spreads.
Long-term trend following seasonal spreads, it's probably the same,
with milder drawdowns.
>>As far as Goldberg's book, you say current information is better.
Yes, you will see that clearly from my Internet posts. It's just
like the exchanges or big traders. We hire a professional research
department. If we can adapt our trading to the time spans that they
specialize in its a go.
http://www.elitetrader.com/vb/showthread.php?threadid=17096&referrerid=16634
>>His track record -- I think for 2003 -- looked spotty. But, I
>>do not recall if that was for spread trades.
Suppose you had started in the summer, instead of winter. Starting Jan
1st is purely arbitrary. This was with one contract only. Tharp will
have us building up winning positions and running a closer stop
http://www.mrci.com/melissa/hypos03.pdf
>>It may have been just seasonal trades.
Currencies can be pretty mean. I find calendars get better results.
>>Do you create and proprietary spreads
No, Jerry gives us plenty of choices. You cannot believe the amount of
research that goes into those charts.
>>do these books provide insight into how to conduct that research?
The methodology comes from Jake B.
>>I suppose I can answer that myself upon reading them, but
>>I am interested in your approach.
Over the course of a year there will be plenty of winners. But really
you just need one or two that behave well enough to build a big
position to overshadow the rest of the year.
>>And so I am clear, as you suggesting
>>one calendar spread per $1,000 to get started?
Starting out, figure if you have $3000.00 unused equity you can put on
three low margin calendar spreads when they present themselves.
>>Well, my interest level is high. I always follow through.
>>I did not realize Ed Seykota traded spreads.
>>And I appreciate the offer to ask questions I should get
>>the Ross book in the next day or two.
>>Do you have an opinion on Advanced Commodity Trading by
>>Harold Goldberg?
I own the book. It's dated. The seasonal charts we use now are much
Easier to use. If you ever find it cheap in a used bookstore
or Goodwill, grab it.
>>I found his book on Amazon but have not ordered (yet). He has
>>a concept called the "twin lines." And, I tried to search for
>>information on Goldberg as I am always skeptical of non-traders
>>As Seykota said,
>>"Good traders trade and good newsletter writers write newsletters."
>>Finally, I did see Ross reference return on margin on his web
>>site. But, I also found a paper he wrote that gave some examples
>>where spreads essentially returned the same number of points as
>>outright futures trades and actually more points when you factor
>>in that some spreads were winners when the futures were a loser.
Outrights are riskier with greater volatility. SM/SM often has profits
on both sides. So think about it. You have less margin than one
outright, then score on both sides.
>>Therefore, this leads me to think that if positon-sizing
>>is done correctly, the reward-to-risk ratio of
>>spread trading may be better than trend following
Spread trading IS Trend following!! We are trading the trend of the
difference between both sides of the spread. Trendlines, divergence,
parabolic etc.
>>as a return on capital as well.
Return on Capital depends on the amount of capital over margin you
maintain. Return on margin eliminates that variable.
>>Currently, I trade outright futures.
Done that. You may find that you can hold bigger positions for longer
times hedged by spreading. All traders spread. You either spread
against cash or something that you think is weaker than cash. If the
exchanges have evidence to prove the relationship is less risky to
them, they will require fewer margins.
>>But, I was also more interested in more subtle relationships.
>>Is there anything available beyond the seasonal trades or
>>the more obvious information out there that can
>>improve reward-to-risk relationships?
Spreads, seasonal spreads. The main thing about risk reward ratios
is where to run your trailing stop. If it is to close you will miss
opportunities. If it is to far, drawdowns may be scary. Tharp goes it
this in detail.
I suggest start trading, low margin calendar spreads with about
$1,000.00 margin for each spread.
See
http://www.elitetrader.com/vb/showthread.php?threadid=23994&referrerid=16634
>> It seems to me on the surface that this may be possible
>>even beyond outright futures trades.
Many start with "outright futures," and come back trading
spreads. If you look at it from gain on margin, seasonal futures
spreads are hard to beat.
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| | From: | Fitzroy | | Subject: | Re: Pyramids and Stops | | Date: | Thu, 20 Jan 2005 10:15:20 GMT |
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| "-oo0-GoldTrader-0oo-" wrote in message
news:1106160477.324591.29320@z14g2000cwz.googlegroups.com...
> >>Hello -oo0 (GoldTrader) 0oo-,
>
> drawdowns may be scary.
Is 'drawdowns' the same word which was previously known as 'losses' ?
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| | From: | -oo0-GoldTrader-0oo- | | Subject: | Re: Drawdowns | | Date: | 23 Jan 2005 20:29:16 -0800 |
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| Unrealized,
i.e. losses that did not occur yet, but would if they liquidated now.
Fitzroy wrote:
> > drawdowns may be scary.
>
>
>
> Is 'drawdowns' the same word which was previously known as 'losses' ?
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