Lost $1600 in one day trading OZL

brty · 6 September 2008

Hi,

Despite all the negatives about the $1.65 level portrayed, that could have been a good point to buy, with a stoploss.

Granted that if the stoploss went off, then there was too be a large slippage, 9-10% ,then if the trading plan was enacted it was the correct trade to take.

However if this was the trading plan, then only a small % of the capital base should be employed as the chance of a "high" slippage into stoploss is great.

If there was no overall plan other than to buy something that looks like it is meeting support, then err buyer beware.

brty

PS this almost set off a buy in my short term trade system yesterday, and if the stoploss had gone off, so be it.

Greg71 · 6 September 2008

It will be most annoying if the doji becomes an island reversal on Monday.

Well done by taking the loss. It's a tax deduction anyway.

BentRod · 6 September 2008

Well done by taking the loss.

I agree.

If OZL opens @ 1.30 on Monday would you still think you were a donk for selling or would you suddenly be 'real smart' then?

Pat · 6 September 2008

OZL is a dog!!! At least until my 'bad luck' mate sells. LOL!!!

Get that Dan?

OK2 · 6 September 2008

Was anyone able to calculate his brokerage fees??? You guys should be working for the ATO.

Trembling Hand · 6 September 2008

brty said:
Hi,

Despite all the negatives about the $1.65 level portrayed, that could have been a good point to buy, with a stoploss.

Yep Brty I hear you but if you want to play Russian Roulette you should do it with a water pistol not a single barrel shot gun.

That is a tiny % of capital.

Nyden · 6 September 2008

BentRod said:
I agree.

If OZL opens @ 1.30 on Monday would you still think you were a donk for selling or would you suddenly be 'real smart' then?

If copper continues its current trend; definite possibility imo. Perhaps not on Monday, but in the future.

In all truth master I think you did the right thing; but I'm somewhat biased - being that I'm currently an uber-bear on commodities (aka the Aussie market )

blogs · 6 September 2008

BentRod said:
You won't last long risking 5% per trade.

I doubt TH would be 'for' risking 5%.

I personally have picked 5% becasue its an amount Im comfortable with loosing on a trade, I feel anything less than 5% is to small becasue many of the stocks I look at continually trade within 5% range in the space of just a few hours and you can get forced to sell for no good reason.

Why what % do others use?

Trembling Hand · 6 September 2008

blogs said:
I personally have picked 5% becasue its an amount Im comfortable with loosing on a trade, I feel anything less than 5% is to small becasue many of the stocks I look at continually trade within 5% range in the space of just a few hours and you can get forced to sell for no good reason.

You have this mixed up hopefully?? We are talking about max stop risk to account capital NOT share movement. You surely aren't risking 5% of your capital per trade??

blogs said:
Why what % do others use?

Most consider 2% as a max. But then again it seems most are actually comfortable with 1% or 0.5%. Me even less than that.

professor_frink · 6 September 2008

blogs said:
I personally have picked 5% becasue its an amount Im comfortable with loosing on a trade, I feel anything less than 5% is to small becasue many of the stocks I look at continually trade within 5% range in the space of just a few hours and you can get forced to sell for no good reason.

Why what % do others use?

5% doesn't refer to using a stop loss 5% away from the purchase price blogs.

Instead of typing it out, here's a post nizar made awhile back on this subject -

https://www.aussiestockforums.com/forums/showpost.php?p=209034&postcount=6

nizar said:
Fixed Fractional position sizing

Lets say for the example you have a capital base of $10,000
and you wish to trade a $1 stock with the lot.
You dont wish to risk more than 5% of your capital on the trade.
So maximum risk is $500.

You like the stock and think that a 5c stop would be best.
So $500/. 05c = 10000 so you CAN buy 10000 with a 5c stop no problem.

Lets say you think its going to fly so you only have a 2c stop.
so $500/.02c = 25000 so you could maintain the same $500 risk and invest in $25000 of shares had you the capital.

OK lets say you wish to use a wider stop can you still buy 10000 shares?
So $500/.20 = 2500 obviously no you cant you must buy 2500 ONLY to maintain the same 5% risk with a 20c stop.

So same maths applies to any position you take.

$15300 capital, 5% risk how many shares can I buy of a stock trading at $1.92c with an 18c stop?

$ at risk = 15300 x .05% = $765.
765/.18c = 4250 shares 4250 x $1.92 = $8160 so you can ONLY buy 4250 shares at an 18 cent risk to maintain the same 5% risk to capital.

Ill go further and talk about Reward to Risk or the R/R ratio.

If you buy and then sell the $1.92 stock for a 54 cent profit you have returned on that trade a 3:1 R/R ratio.
This is calculated by 54c (the profit)/18c (The risk) = 3 so 3 times the risk has been returned.
So if you win 2 out of 3 trades with this sort of R/R ratio then your doing well.

Also in terms of books Mike Lally's I havent read it.
I have read one by Ryan Jones (Trading Game) and it does cover the topic of risk rather well. Search on this site there is a link to an e-book posted by RichKid ages ago.

Hope that helps.

skyQuake · 6 September 2008

You dont have to risk 5% of your entire Capital on a trade. Trading at 5% on any position unless you have a really good expectancy is long term bankruptcy.

You could simply put say 20% of your capital in the trade and still put in a 5% stop loss, and thus only risking 1% of your capital.

See attached pic. If your expectancy is say 55%, theres a 58% chance that you'll have 5 losing trades in a row. Can you or your capital handle that?

Just something to think about re position sizing. Remember a 25% loss needs a 33% gain to break even.

blogs · 6 September 2008

Trembling Hand said:
You have this mixed up hopefully?? We are talking about max stop risk to account capital NOT share movement. You surely aren't risking 5% of your capital per trade??

Most consider 2% as a max. But then again it seems most are actually comfortable with 1% or 0.5%. Me even less than that.

Ahhhh now I getchya!! Thanks, and also to the guys who posted after you-good stuff

Seneca60BC · 6 September 2008

You think thats a big loss? Try $20,000! I lost - yes may make you feel all all that better.

Cheers

GreatPig · 6 September 2008

Absolute dollar amounts of wins and losses are meaningless without knowing the capital base. For someone using $50K, a $20K loss would be devastating, but for someone with $10m in the market it's only 0.2%.

For Warren Buffet, it probably wouldn't even cover brokerage on one position.

GP

korrupt_1 · 10 September 2008

You don't feel so stupid now do you? OZL down to $1.35...

fordxbt · 10 September 2008

what a ****in` dog

Seneca60BC · 10 September 2008

yea thats about 20% of my capital - sorry forgot to mention

mattyhammer · 10 September 2008

GreatPig said:
Absolute dollar amounts of wins and losses are meaningless without knowing the capital base. For someone using $50K, a $20K loss would be devastatingGP

Ha, that's me!!! Yes it is devastating. All those terms you "experienced" guys use like noob, joob, newbie, etc. Thats me too!! No I'm not laughing in a psychopathic kind of way, just don't know what else to do. I put in $3.5k on OZL at $3.57. Figured it was always gonna come back....???? Why am I doing this to myself. BHP is doing the same bloody thing...I'd do better at Jupiters.

Trembling Hand · 10 September 2008

Seneca60BC said:
yea thats about 20% of my capital - sorry forgot to mention

Two words will take you out the door of the casino into the world of a trader.........

POSITION SIZING.

Please do yourself a favour become an expert in it before you take another step.

skyQuake · 10 September 2008

Hope that was total loss for year, otherwise its just plain stupid

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