Trader in a PATHMAVYUH

[TFL]

Say,
In 60 Min Flow we are long on a particular day with a SAR.
Suppose in the next day me got some health issues, unable to wakeup from the bed and hospitalised.

Suddenly in the last hours of trade we hit SAR and everyone reversed except me.
There starts running my losses higher and higher...
suppose market started falling heavenly on the coming days...
Every one in 60 MF will be in huge profit...
But my trading account is accumulating heavy losses day by day.
-------------

An imaginary situation but...it can happen any time even during trades, for a FULL TIME TRADER this can be an end of his trading career if these where the January falling days...

As a FULL TIME TRADER don't we need some protection from this kind of a situation?
Don't we need to see it seriously?
Can a full time trader avoid such a deadly situation?

Is there a way to insure a tader from this?
I welcome all of your comments, solutions to tackle this situation.

Not seeing it simple...
Haribird.

 

[raosrinivas]

no matter how good a strategy is, if all participants use the strategy, there will be more losers than gainers using the strategy, it is a simple mathematical truth.

 

[orderflow13]

Say,
In 60 Min Flow we are long on a particular day with a SAR.
Suppose in the next day me got some health issues, unable to wakeup from the bed and hospitalised.

Suddenly in the last hours of trade we hit SAR and everyone reversed except me.
There starts running my losses higher and higher...
suppose market started falling heavenly on the coming days...
Every one in 60 MF will be in huge profit...
But my trading account is accumulating heavy losses day by day.
-------------

An imaginary situation but...it can happen any time even during trades, for a FULL TIME TRADER this can be an end of his trading career if these where the January falling days...

As a FULL TIME TRADER don't we need some protection from this kind of a situation?
Don't we need to see it seriously?
Can a full time trader avoid such a deadly situation?

Is there a way to insure a tader from this?
I welcome all of your comments, solutions to tackle this situation.

Not seeing it simple...
Haribird.

Hari u made a valid point, n why illness hari ? u took ur long position home n natural calamity happen such as earthquake etc ( good things also may happen, but we speaking about risk)then ?
There is a term ' black swan effect ' i explained in my thread random thoughts on ta , ...in short words.. theory suggest ( 2007 book black swan effect' by naseem taleeb ) anything can happen any time, 11 sep attack, 1929 crash etc all r black swan effects.. the world is very random, what we believe can turn out false, we used 2 believe all swans were white but after invention of Australia/Nz we found black swans!!
in nut shell if we trading positional nifty or stocks ( n especially if we r in a leverage trade such as derivatives) then we better hedge our risk by options or gold or other hedge tool etc....
now subject has come, i must mention my one friend ( he dont post here ) is quite successful ( thats what he says i never checked yet as i dont trade 60 flow)trading 60 min flow by taking two opposite position ( one buy n one short and both positions as per flow ), one drawback is his profits on straight forward rallies are bit less than regular guys but he is more comfortable with this, i think thats the key.Comfort level, by experience we all get that comfort key, few will write options, few will buy, few will short gold etc.... its very subjective n personal but important nevertheless.
Hope this helps rather than confuse some one. ( now a days its very prime concern )

 

[uasish]

It practically happened with me few yrs back.As in those yrs i was trading only 1-2 lots in Nifty Fut i was some how saved.Around evening i fell ill & at midnight hospitalized in semi concious state.
After 2 days when i was concious 1st thing i did was took my wife's cell to call my RM at Indiabulls to cut my position at Mkt & lost some money.
Thats why i never carry even today normal positions but always light & build it again by 10.15 am.

 

[TFL]

Hari u made a valid point, n why illness hari ? u took ur long position home n natural calamity happen such as earthquake etc ( good things also may happen, but we speaking about risk)then ?
There is a term ' black swan effect ' i explained in my thread random thoughts on ta , ...in short words.. theory suggest ( 2007 book black swan effect' by naseem taleeb ) anything can happen any time, 11 sep attack, 1929 crash etc all r black swan effects.. the world is very random, what we believe can turn out false, we used 2 believe all swans were white but after invention of Australia/Nz we found black swans!!
in nut shell if we trading positional nifty or stocks ( n especially if we r in a leverage trade such as derivatives) then we better hedge our risk by options or gold or other hedge tool etc....
now subject has come, i must mention my one friend ( he dont post here ) is quite successful ( thats what he says i never checked yet as i dont trade 60 flow)trading 60 min flow by taking two opposite position ( one buy n one short and both positions as per flow ), one drawback is his profits on straight forward rallies are bit less than regular guys but he is more comfortable with this, i think thats the key.Comfort level, by experience we all get that comfort key, few will write options, few will buy, few will short gold etc.... its very subjective n personal but important nevertheless.
Hope this helps rather than confuse some one. ( now a days its very prime concern )

Thank you alex for the reply,

"NOT MEANT TO PROTECT A TRADE FROM AN OPPOSITE ACTION IN MARKET"

I really meant of the very personal situation like medical emergencies...
And I am not discussing about natural calamities or such things which we still can act at some extend in the next morning itself or so, ie. we can limit the losses by acting upon.
-->
Here we are focusing of the inability of a trader who cannot monitor his trades for a long time due to some medical emergencies...and the market is still here working from each morning...
Also I am not talking about hedging with options or reverse trading like said. Even hedging with options can be a failure if the unmonitored period extends to above 15 or more day...
<--
Hope somebody can bring up an idea...like auto pilot modes(i think such things are available in foreign markets) or so...

Haribird.

 

[TFL]

It practically happened with me few yrs back.As in those yrs i was trading only 1-2 lots in Nifty Fut i was some how saved.Around evening i fell ill & at midnight hospitalized in semi concious state.
After 2 days when i was concious 1st thing i did was took my wife's cell to call my RM at Indiabulls to cut my position at Mkt & lost some money.
Thats why i never carry even today normal positions but always light & build it again by 10.15 am.

Uasish sir,

Thank you for share the exact incident from your life here.
If you couldn't be able to come to normal state for 5 to 10 days and you where trading in higher no. of lots the whole drama will be changing and you may probably end up in an extreme condition of loosing your whole trading capital funded in account. Good luck you didn't went to such a situation.

As getting into a full time trader soon...after my studies, I am seriously thinking for a solution for such happenings as I am not ready to take such a dangerous risk.

You have learnt from the incident and is self protected by not holding anything overnight. But these kind of medical emergencies can occur even while trading...
So, we need to find a solution in consideration of that too...or even it can change our whole life style.

I am thinking...how it can be protected...

Welcoming all you ideas and supports,
Haribird

 

[columbus]

Just make it a habit to close the positions by 3.30.Sometimes I extend
a trade by maximum by a day,but not beyond that.

By closing a position ,certainly you miss a fortune due to gap-up/gap-down
openings.I got befitted by them many times.I lost because of them also.If you
take cumulative profit/gain ,then I lost on more occasions than gained.So
nowadays I will close my positions by 3.30.

 

[TFL]

Just make it a habit to close the positions by 3.30.Sometimes I extend
a trade by maximum by a day,but not beyond that.

By closing a position ,certainly you miss a fortune due to gap-up/gap-down
openings.I got befitted by them many times.I lost because of them also.If you
take cumulative profit/gain ,then I lost on more occasions than gained.So
nowadays I will close my positions by 3.30.

Thank you columbus for your view,

I am looking for something by sticking in the trade itself...
Post here your random ideas...

I still wait after some days we can go find a possible solution and tweak it.

Haribird.

 

[AW10]

Great point.. Hari. Thanks for starting this thread.

This brings out the point of running our trading as business and doing enough of contingency planning. As a full time trader, we are our own boss, and run our own 1 man business. So we got to have solid business plan. Either we have it a separate buss plan or make it part of our trading plan, it is individuals choice. IMO,
scope of trading plan does not end with entry/exit/stoploss/position size rule. It has to address many more points about the business.
Lets us say if we are opening a restaurant, then won't we place fire extinguisher, buy some sort of insurance, make a system where business can still run when the chef or a particular person has not come to the work.
Its same in trading business as well. If we put some thought then we can come out with many contingencies. And once we know them, then we can find the solution as well.. Probably one of the mitigating action will be do learn Hedging the account / position. Hedging comes up with its own cost (i.e. slightly less profit on winning position because other position is going to loose).. but the cost worth paying for running smooth business..

Some of the other contingencies that I can think of are
- non availabilty of data feed /internet connection / problem with broker / we placing wrong order (buy instead of sell, wrong quantity etc)/ brokers software system executing wrong order (i have seen many software patch releases and know the probability of this happening) / PC crashed / natural calamity in our area or at Mumbai or at Brokers office location/ War, terrorism etc/ Unforeseen global event / etc etc..

I know this is -ive area /risk management that we are discussing here..and I sincerely hope and pray that we don't see them .. but as mentioned by Alex, random events are possible And how can we forget Murphy's laws..

Probably, we know in our mind that how are we going to handle them. But the moment we bring them to our trading plan, it boost the confidence that we are well prepared for contingencies as well. Many traders don't download this data to the trading plan and get panicked thinking about them.

My approach to mitigate the risk that you have mentioned will be
1) Size of my Trading account... no more then x% of my total networth. So even if the account is blown, I can still live and survive. and come back to market again.
2) Position size, one position is never so big that the worst case scenario will blow my trading acct. There is good concept of calculating "Risk of Ruin" while evaluating a strategy and drafting the money mgmt rules.
3) In my End of day schedule – include part to measure risk per open trade, as well as the risk for whole account.
4) Use options to buy insurance. There are option strategies possible where
you can buy insurance without paying anything from your pocket..(in some cases even get a credit while buying the insurance). Ofcourse, there is lot to be learned before using them.
4) Develop multiple streams of income – business diversification

Hope this thread brings out some more ideas about addressing one of the most neglected part of trading.

Happy Trading.

 

[TFL]

Great point.. Hari. Thanks for starting this thread.

This brings out the point of running our trading as business and doing enough of contingency planning. As a full time trader, we are our own boss, and run our own 1 man business. So we got to have solid business plan. Either we have it a separate buss plan or make it part of our trading plan, it is individuals choice. IMO,
scope of trading plan does not end with entry/exit/stoploss/position size rule. It has to address many more points about the business.
Lets us say if we are opening a restaurant, then won't we place fire extinguisher, buy some sort of insurance, make a system where business can still run when the chef or a particular person has not come to the work.
Its same in trading business as well. If we put some thought then we can come out with many contingencies. And once we know them, then we can find the solution as well.. Probably one of the mitigating action will be do learn Hedging the account / position. Hedging comes up with its own cost (i.e. slightly less profit on winning position because other position is going to loose).. but the cost worth paying for running smooth business..

Some of the other contingencies that I can think of are
- non availabilty of data feed /internet connection / problem with broker / we placing wrong order (buy instead of sell, wrong quantity etc)/ brokers software system executing wrong order (i have seen many software patch releases and know the probability of this happening) / PC crashed / natural calamity in our area or at Mumbai or at Brokers office location/ War, terrorism etc/ Unforeseen global event / etc etc..

I know this is -ive area /risk management that we are discussing here..and I sincerely hope and pray that we don't see them .. but as mentioned by Alex, random events are possible And how can we forget Murphy's laws..

Probably, we know in our mind that how are we going to handle them. But the moment we bring them to our trading plan, it boost the confidence that we are well prepared for contingencies as well. Many traders don't download this data to the trading plan and get panicked thinking about them.

My approach to mitigate the risk that you have mentioned will be
1) Size of my Trading account... no more then x% of my total networth. So even if the account is blown, I can still live and survive. and come back to market again.
2) Position size, one position is never so big that the worst case scenario will blow my trading acct. There is good concept of calculating "Risk of Ruin" while evaluating a strategy and drafting the money mgmt rules.
3) In my End of day schedule – include part to measure risk per open trade, as well as the risk for whole account.
4) Use options to buy insurance. There are option strategies possible where
you can buy insurance without paying anything from your pocket..(in some cases even get a credit while buying the insurance). Ofcourse, there is lot to be learned before using them.
4) Develop multiple streams of income – business diversification

Hope this thread brings out some more ideas about addressing one of the most neglected part of trading.

Happy Trading.

AW10,

The point you posted is making me thinking wild more and more...minding is surfing for different solutions. I think I need a lot of time to digest and analyse the below text. Thanks for making me busy...post more...when u have time.

My approach to mitigate the risk that you have mentioned will be
1) Size of my Trading account... no more then x% of my total networth. So even if the account is blown, I can still live and survive. and come back to market again.
2) Position size, one position is never so big that the worst case scenario will blow my trading acct. There is good concept of calculating "Risk of Ruin" while evaluating a strategy and drafting the money mgmt rules.
3) In my End of day schedule – include part to measure risk per open trade, as well as the risk for whole account.
4) Use options to buy insurance. There are option strategies possible where
you can buy insurance without paying anything from your pocket..(in some cases even get a credit while buying the insurance). Ofcourse, there is lot to be learned before using them.
4) Develop multiple streams of income – business diversification

Haribird.