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Stuck in a short position. What to do?


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Stuck in a short position. What to do?

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  #1 (permalink)
Enschede/Netherlands
 
 
Posts: 6 since Jun 2020
Thanks: 28 given, 18 received

Dear traders,

I need some advice.
I got stuck in a short position and am over 2200 points in a loss on the mini-dax (entry around 10600).

I know, always use a SL. But forgot to change my SL order to GTC, and from there things got worse.

I know, cut your losses. Economy and stock prices are not balanced, so I would expect a good drop. ECB (and FED) seem not to let this happen.

I can hold on longer, but what if dax goes to 18000 or something?
Or, I could get another short at some moment, to average the entry price, but if the dax would continue to go up, my trading account would not be sufficient.

Nobody knows where price is going, but I hope you could give me some direction.
Thanks

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  #2 (permalink)
Kent / UK
 
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I dont have a view on the direction of Dax, but would say if the original reasoning for being in the trade or if your SL should have been triggered then risk management says you should be out. Also the fact you are asking the question means you are doubting the validity of the trade which is another reason to get out.

Q back to you... why are you hesitating to exit?

Good luck

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  #3 (permalink)
Enschede/Netherlands
 
 
Posts: 6 since Jun 2020
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Thanks. I'm still in the trade, because I'm afraid that the price will drop (like in Feb?). And as long as I don't close the trade, there is still hope of not losing or at least losing less.
I know, hope and fear, emotion driven...

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  #4 (permalink)
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Big Mike's Avatar
 
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I'll try to avoid the whole "you should have..." side.

Do you want to be in the market?

If you had no position on, what would you do?


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  #5 (permalink)
Enschede/Netherlands
 
 
Posts: 6 since Jun 2020
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Thank you.


Big Mike View Post
Do you want to be in the market?

I'm in way above the risk I had foreseen (100 points). I only want to be in the market to avoid booking this 11k EUR loss, but I also didn't set a new SL yet. Seeing the current trend going up, I rather be not in the market, I guess.



Big Mike View Post
If you had no position on, what would you do?

I would see it day by day. And I probably would trade in the direction of the trend...

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  #6 (permalink)
Netherlands
 
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I think it's very difficult to tell someone else what to do or give advice on what to do.

This is just my personal view! You'll have to make your own decisions (and due diligence). I hope you'll find some direction in my comments below.

1. You might consider closing your position and take your loss. When the market turns you can always go back in. Or maybe you'll find an entry to go long with the trend (with a tight stop)? When out of the market you are in a better position to see things more clearly. My experience is that in your eagerness to make up for the loss (like averaging down) things might only get worse. So maybe better to learn a lesson here and move on?

2. Maybe you can buy a call option to offset your short position? This will cost you some but you cap your losses in case of further upside movement and still keep your position. Of course there is the time decay and the fact the option will expire. I am not sure this is wise. You 'll need to check it out yourself.

3. I don't know how much experience you have and maybe this is a one time error but perhaps it's better to trade the CFDs?

Just some ideas. I hope you will find some help in this.

-Michel

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  #7 (permalink)
Legendary Market Wizard
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Hey @Stuck

Also avoiding all the pejorative, as that is not helpful now.

This opinion I give as a possible work out trade, but I must say that I have no idea about your sophistication or your time/ability to manage a trade during the day.

One thing you might consider is hedging up the short position with an equal delta long position. You never said, only implied that you are short DAX, 2200 points against. What ids the Think or Swim symbol for that and I'll draw you a risk chart.

But the idea is to take an equal delta long position. You are essentially stopped out at that level. I would "job" the workout using options, selling high volatility puts or buying low volatility calls. Then as the market moved I could take off the gaining leg and book some profits. This can be managed in a similar way to reversion trade, where your specific zero line is established when you get neutral.

This allows you to chip away booking little advancements against the losing position. Of course you can screw that up, but at least that is the framework for a workout of the bad position.

Keep in mind that futures and options have expiration dates. When you roll you may have to book the loss anyway.

Happy to clarify if necessary.

All the best.

-Dan

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  #8 (permalink)
Enschede/Netherlands
 
 
Posts: 6 since Jun 2020
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Mich62 View Post
1. You might consider closing your position and take your loss. When the market turns you can always go back in. Or maybe you'll find an entry to go long with the trend (with a tight stop)? When out of the market you are in a better position to see things more clearly. My experience is that in your eager to make up for the loss (like averaging down) things might only get worse. So maybe better to learn a lesson here and move on?

Thanks Mich62, I have no experience with options on the DAX (only on stocks). It probably works a bit the same, but I don't want to give it a try in this situation.
I made some good profits with DAX and mini-DAX, so I'll stick with it, but 'maybe' I should just stick to my rules. I hope I learned a lesson here

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  #9 (permalink)
Enschede/Netherlands
 
 
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wldman View Post
This opinion I give as a possible work out trade, but I must say that I have no idea about your sophistication or your time/ability to manage a trade during the day.

Thanks Dan, I'm fulltime trading, or busy with it, and on my to do list was checking out the hedging of positions. I don't want to give it a try in this situation...


So, I can only come to the conclusion that I better close the trade, get over it, wait for the next opportunity, long or short, and STICK TO THE RULES arghhh

Thanks all, for your input!! It helped me

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  #10 (permalink)
Langley
 
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Stuck View Post
Thanks Dan, I'm fulltime trading, or busy with it, and on my to do list was checking out the hedging of positions. I don't want to give it a try in this situation...


So, I can only come to the conclusion that I better close the trade, get over it, wait for the next opportunity, long or short, and STICK TO THE RULES arghhh

Thanks all, for your input!! It helped me

I got myself in this situation today as well! And I don't even know how. Had my orders in place. Woke up late this morning to see 1 lot on with no orders in market! My heart sunk!!! Total disappointment.

So Im short one contract in the (mirco SP) so no big deal but still but massive point loss. Tried to average my short. Took a loss on that one as well. And shorted higher again. Looking like I'm just gonna get killed trying to manage it as market grinds (forever) higher?

Was it a mistake? Probably. But who knows. If I pull out of course that be the top so... always hard to say except we shouldn't get ourselves into these positions in the first place!!!

The market is just TOO irrational to make sense of it so just "trade what you see" is my big next lesson to work on.

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June 17, 2020


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