Are these errors pulling a 1-8-7 on your portfolio?

By leroyg | Published: July 1, 2009

Technically Speaking, Market Analysis and Theory posts some great bullets for trading…

Portfolio Killers

What intrinsic errors (long or short) destroy us?

  • Tips. Doesn’t matter whether it comes from a “name brand” or your next door neighbor. There’s a difference between a tip and inside information. I’m not interested in going to jail (a la Martha Stewart). How many great traders traded on tips? None. How many on inside information? We’ll never know.
  • Averaging down. Stuff that is going down is failing for a reason. Maybe ’stuff’ isn’t the correct operative word.
  • Watching options time premium go to zero. More people make money selling options than buying them. Options are terrific for risk control and volatility trading, but I’m especially leery of being short naked options.
  • Trading against breadth. Today the breadth is strong and it’s the first day of the month. Getting short here isn’t stupid, it’s suicide.
  • Having excessively big position size. What would happen if you got “Madoffed” by any one of your positions? Think Madoff can get life insurance?
  • Getting into, or out of positions for no reason. It always boils down to holding winners and blowing out losers.

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