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May 5, 2008


Shorting Starbucks, Missing Big Bucks

One of the Box’s better ideas in early April was a short in SBUX (see spreadsheet here).

The problem is that following the ABC Stop Method would have gotten you out seven days before SBUX blew up — true, at a profit, but a much smaller profit than could have been had.

In future, I’m offering the ideas but won’t track them. I simply suggest managing all open positions in one of three ways:

  • Plan A: Move the initial protective stop to breakeven when price closes beyond one times initial risk; begin trailing stop when price closes beyond two times initial risk.
  • Plan B: Move the initial protective stop to breakeven when price closes beyond one times initial risk; begin trailing stop when price closes within the Target Zone.
  • Plan C: Stay with the initial protective stop until price closes within the Target Zone, and then begin trailing.

I’ve been thinking of calling the newsletter, in honor of this new habit of not tracking anything, “The Unaccountable Trader.”


Click to enlarge (SBUX, Daily chart)


This entry was posted on Monday, May 5th, 2008 at 5:06 pm (utc+8) and is filed under The_Box.

7 Responses to “Shorting Starbucks, Missing Big Bucks”

  1. Born2Code said:
    May 6th, 2008 at 1:27 am

    you should rename it in honor of Born2Code. For he is the one that kept harping on trading alongside the major trend and he is the one that pointed out the “randomness” of the stop mechanism :)

  2. pete said:
    May 6th, 2008 at 2:38 am

    ut oh- let the optimization tail chasing begin

  3. C. Maoxian said:
    May 6th, 2008 at 6:11 am

    @Born2: I prefer “The Unaccountable” because its double meaning appeals to me. :) If anyone can create a stop that is “smarter” than Plans A, B or C, I’d love to see it.

    @pete: I’m not interested in optimizing anything — the point is folks are on their own when it comes to managing the positions.

  4. pat said:
    May 6th, 2008 at 7:50 am

    To clarify my understanding, is plan A the original ABC stop?

  5. C. Maoxian said:
    May 6th, 2008 at 7:59 am

    pat: Yes.

  6. pat said:
    May 7th, 2008 at 10:30 am

    How did the trades perform so far, assuming exits were taken according to plan A?

  7. C. Maoxian said:
    May 7th, 2008 at 11:18 am

    pat: Do you mean since I started following the Box last December? I haven’t tabulated the numbers yet, but plan to once I stop tracking the ideas in June and get some time to add everything up. April was a lousy month and probably will result in a low single digit negative R.

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