A couple of months ago I was talking about one trade per symbol in your trading system.  It was difficult for me to think that major components of major indexes could be at serious risk when I first began developing trading systems.  It's always hard to look at a GE, a Microsoft or even the largest auto maker in the world, GM as falling 50, 60, 75% or more over the course of just a few months.  I just want to point out that it does happen and is happening now.

One of my trading systems trades the Dow components individually.  It flagged GM, naturally, as a mean reversion candidate.  This happened in May (about the time I wrote the first article) when GM was around $20 per share.  We know how the story goes from there.  GM was trading as little as $9 this week.  That's a hell of a drawdown especially if you were averaging down the whole way.  Not to say that GM won't bounce back, because I don't know, but if you started buying @ 20 and kept adding to the position, you either have nerves of steel or you're sweating bullets.

After I wrote the previous article, I've been giving this a LITTLE more thought.  There are two things that seem to whack your profitability in trading systems.  One, limiting to one trade per symbol and two having stop losses.  However, both of these are vital to your long term viability.  I've discussed using option spreads instead of stop losses before and maybe this is an idea for getting exposure to a couple more trade signals on the same symbol.  Instead of buying more shares, consider buying plain calls or puts (not usually the best choice because IV is probably high and theta will chew you up) or buying an option spread such as a vertical or maybe a butterfly or calendar (if you really have a strong feeling about IV).  Now you can expose yourself to short term movement without the risk of blowout.

I'm going to explore this as my trade signals dictate.  With the market being as rocky as it is, I've had plenty of signals for the same symbol that I've ignored, or more aptly, RightEdge has ignored for me.