Hi Gary Korn; Regarding that TLAB/CIEN arbitrage. I was on a Nas level-2 workstation when they halted those two, and when they unhalted them an hour or two later. Never have i seen such a mess... No one in the office was in them at the time, but we knew that a lot of our brother daytraders had to have been toasted on that one.|
As far as trading goes, I try to limit my risk on any given trade to 2% or less of my total equity. I find that this gives me a lot more huevos for the somewhat dangerous trades. But the TLAB move, in particular, was so big that no one would have thought in advance that they were risking that much on a TLAB long. For my intraday scalps, I assume that I can get out with a loss no larger than one point. If it's a more violent stock, like AMZN, I restrict my size to a very very small number of shares.
If we can just avoid the devil of looking for the trade that will put us into retirement, maybe we can make a living doing this. But the mathematics says that the guys who put too much equity on single trades eventually wind up broke. There's a great mathematical treatment of the problem in the book, "The Mathematics of Money Management."