Honor the Discipline!

Last week, I mentioned I made a QQQQ purchase ("toe in the water"); I also suggested that "since its now almost in the money by a half point, I’ll move my stop loss to breakeven. I’ll average up if we rally, and hold the position until it starts misbehaving."

As it moved higher, I also moved the stop loss with it. When it broke
$38 today to the downside, I was stopped out for a very modest gain.

If you bought something for a trade on Thursday’s plummet, you may be
getting close to breakeven on it (depending upon what you purchased).
Your discipline should be to never let a winner turn into a loser, and
never let a Trade become an Investment. You can always repurchase
something back if it starts behaving better later.

For now, if you took something in for a quickie, and it ain’t working
out, you should be thinking in terms of capital preservation, not the
next turnaround or bounce.

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  1. crack commented on Jun 12

    Even though I don’t trade, nor really invest, I found this post enlightening. Following this discpline prevents the sunk cost fallacy from seeping in.

  2. emd commented on Jun 12

    good advice. something we all need to be reminded of at one time or another. this is one tough market.

    any predictions for the inflation reports this week?

  3. ~ Nona commented on Jun 12

    Thank you for the insight and wisdom. I was on the verge of turning a trade into an (ahem) investment.

  4. Mark commented on Jun 12

    Lookin pretty ugly out there again today.

    I’ve had a few “investments” before myself.

  5. tjofpa commented on Jun 12

    Bought some “paper over rock” during Thurs panic.
    MER 70s; dumped em Fri at noon when I saw XOM
    starting to tank again.
    Waded in on some NVDA calls late day today.
    After dropping from 31 to 21 it was downgraded today.
    Penguins always have such great Mrkt Timing.

    Did I see “War Stocks” get hammered today because of
    amendments proposed to limit permanent bases in IRAQ?

  6. Tom Womack commented on Jun 12

    It’s probably not the kind of question I should ask, but I’d be interested to know how you’re managing to make trades at this frequency and on fluctuations this small without losing everything in commission.

    Are there broking services with negligible per-deal commissions, or are you dealing in tens of thousands of dollars at a time?

    [I spent a while using a Wealth Management Service as a brokerage, which is a singularly stupid way to lose money at 2% commission + $100 per trade; sold the lot 5/18 and am keeping it in the bank, wishing for interest rates to rise :)]

  7. jkw commented on Jun 12

    With no volume requirements there are brokers that charge as low as $.005/share. If you trade frequently enough, you can almost certainly negotiate a better price than that; I’ve never tried but I would be surprised if brokerages wouldn’t negotiate commissions to keep multi-million dollar accounts with high turnover. At half a cent per share, you make money if you can sell for more than 1 cent higher than you bought. At that price level, market movements are far more significant than commissions.

  8. DaveF commented on Jun 12

    Scottrade charges $7 a trade. if you have the $million, give it to Barry and go to the beach and drink slushy adult drinks in the sun and sand.

  9. whipsaw commented on Jun 12

    Scottrade charges the $7 per trade, plus $1.25 per option contract which is what I thought prompted the question about how you could make any money trading options if they only barely went into the money? I would have the same question but assume that a big hitter like Barry gets a sweet deal from somewhere unlike us peasants who are just trying to Stick It To The Man on the side.

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