Dear Member:
Happy New Year!
Here's to a successful trading year coming in 2005. I hope you had a safe and happy holiday with family and friends.
I closed the 2004 year by selling my INTC position and taking the loss for tax reasons at this time. It was a bitter pill to swallow, but it needed to be done for me personally at this time. I had thought it would rise above the $26 dollar level by now, but it just couldn't gain any ground in this time period. Is there any thing to learn from this loss? Yes, a stop loss would have prevented such a large loss and many traders use them to avoid this specific type of situation. If you had sold some call options while holding the position you could have also limited your loss. Did you know that almost all IRA accounts allow covered call writing? Covered call writing (selling options against the stock in your portfolio) is a way to reduce your basis on stocks you are holding. Perfect for IRAs because you don't have to pay taxes on the option premiums every year in these deferred tax accounts.
As many of you know it is not my strategy to use a stop loss and I will not change that. It has hurt me more than helped in the past. Secondly, no trader is perfect. If you trade enough you will have losses, therefore, you must manage your money appropriately to hedge against these loss situations.
Looking back in 2004 at all the trades I closed (not opened), I count 46 closed trades for winners on the main table, 4 more winners on $15 and Under Table, and the one loss. For a total of 50 winners (plus we "averaged down" on 9 of these 50 winners) and one loss (which was also "averaged down"). All in all, this made for a profitable year.
Let's have a great year together,
Anthony
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