Excellent post, Manxx! Yes, I only meant properties bought as primary residence, not for investment by funds etc. Yes, I agree with everything you say, and indeed there are cyclic drawdowns and then there are broken cycle drawdowns with no possibility of reversion: the housing market is more cyclical, generally, than currencies, but it is not to say that correctly timing the housing market or the currency market is the only way to profit: exiting is the big question, at times, and that includes how to handle losses.
Timescales, as you say, are not made the same for all traders: if you put funds in a bank, you may tie them in for five, ten, or more years, yet traders often do not think about positions in this way. Your bank could go down, just like your broker…or lose your money…Look at what happened to Bob… Yet we trust brokers less and want to whip away any gains quickly ‘just in case’…
It goes back to the question of personal goala. .for the most part, stop losses are a good way to handle trading.
Negative equity can be moderated by interest rate imbalance, that is positive swap, which is just one example where you are earning interest while in a drawdown… Not all drawdowns require additional funds for maintenance…
I think you are completely right here. The point with this whole discussion comes down to having a clear idea of what one is trying to achieve and what are the goals and timescales involved. A long term investment of one’s own funds is an entirely different ball game to leveraged speculative trading off a 15m chart! There is no sense in letting a position aimed at a 15 pip profit run into a long-term loss bearer. Whether one actually applies a specific, automatic stop-loss or just weighs up the situation if the price reverses into a pre-defined zone is a matter of personal choice, but the principle still remains that there should be a recognised zone/level where, if reached, one reconsiders the validity of the trade. And if that validity is no longer present then there is no justification for continuing the position simply on the hope that one day it must surely “come right”. On the other hand, a long term investment in shares should not be closed just because one day the price slides a bit!
Both long term and short term positions, and both own cash or leverage, should always be based on a plan - they will just be very different types of plans!
This is actually quite interesting at the moment. There are certain trends and cycles that have been around for so long that we assume they will [I]always [/I]continue. But sometimes even these trends can change. For example, in this country, there is a distinct structural change taking place in our housing markets and prices.
Many young people are shunning the idea of always moving to bigger and better houses. Instead they are looking for very compact housing with no wasted space inside and which are extremely energy-efficient and environmentally friendly. In this year’s housing exhibition they exhibited detached properties with only 30 m2 of space and houses wihch retain and recycle all their energy. The impact on prices is that in some extreme cases the “value curve” is becoming totally inverted with new compact flats costing more than older 3/4 bedroom detached houses. Nothing these days is certain any more!
I am not sure I understand what you are saying here. What is “positive swap” in negative equity?..or are you only referring to positive carry with positions in forex and not housing?
Great reply, manxx…particularly the detail about housing developments!
Yes, I was referring to positive swap in a ‘carry’ or ‘reverse carry’ trade…
You, Lexy, Turbo, Eddie and I should really get together once and have a good chat about trading, face to face… I bet it would be fun… I love the quality and respect of our exchanges …
Maybe when you get to 5,000 posts, they’ll allow you to store 51 messages instead of 50. Now there’s an idea: make the private message storage capacity proportional to the number of posts? (No, that might just encourage fatuous posting, I suppose. Probably not as easy as it looks, running a forum?).
BMB - Bobs[/B][B] Magic Boxes. C’mon bro - get with the program
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[B]Actually, Manxx knows something exciting about my work and the direction it heading. But how does that relate to this thread and the use stoploss?
I read through the thread, normal bull from the fisherman, good reason he got banned. The normal verbal diarrhea from the repeat offenders. Yes, we know the use of a SL is a good thing. And, of course, the regulars who seem frustrated almost because of the need to repeatedly answer the same old same old because newbies don’t know how to use the search button.
IMO, it comes down to our reason for being in the market in the first place. Are we speculating for growth or investing for return and asset protection? Generally, the underlying presumption on this forum is we are speculating for growth. Use of a stop loss is critical for this style, not for any of the normal reasons but to simply free up equity. Money locked up in a losing trade is money you can’t trade with, simple as that.
But the markets aren’t there for us to speculate on, they serve a much bigger purpose. If you have the funds to be lucky enough to be investing for return then I reckon you’re better off handing your money over to the pros and going for a game of golf instead thus eliminating the need for you to use stop losses.
what do you mean? …