Forum Archive Index - October 2003

[Robin Benson <rob@hammerheadmedia.co.uk>]

It seems to me that some people have successful TA systems and they make money on a sustainable basis, but given what appears to be significant demand for TA trading-system "products" (seminars, books, tip newsletters, secrets and strategies, etc.) that there are a large number of people out there losing money (some more than others) because they have problems with their system. One such problem commonly might be difficulty cutting their losses and letting their profits run ...

One point of difference I have seen in some cases between FA and TA people is their perception of risk -- verybody has a reaction to risk, whether they are conscious of it or not.

It may be that a TA trader has a system that, over time, makes her a limited but solid return. Her system minimises her risk and locks in small profits, month in, month out. To her, the notion of buying a faceless equity and watching it drop 10-15% is a nightmare scenario, partly because it has only been considered on fundamentals, and negative 10-15%, when she is used to stop-losses of say 0.5-3% is doomsday material.

An FA trader (investor?) might watch the same equity hit their target price for entry, based on their FA criteria, and make her move. It may not exactly be good news that her investment drops sharply by 10-15%, but she is not troubled by this as she is investing for the long-term and she thinks that the fundamentals are right enough to give her this confidence.

The FA trader might think that the TA trader is impatient and needs to do a little bit of homework before cutting and running. The TA trader could consider the FA trader to be reckless, blind to all the signs that scream "get out". At a point in time, from an objective perspective, either could have a point. Over time, the emphasis falls back on systems, and so the mist closes in again.

The key to understanding these disparities, I suspect, lies in the difference between the people. Their assumptions, perceptions, beliefs, and lives.

It's an anywhere road for anybody anyhow. - Jack Kerouac.

Robin

On 13 Oct 2003, tennyson@caverock.net.nz responded to Woody :

> If you are trading trends you are saved by your stop loss if the trend 
> goes against you.    But if you trade too often around small rises that in 
> itself can have a negative affect on your returns.     
>
> How do you get the balance right so that your stop losses are not so 
> aggressive that they strip the best profits from your trading?