Amazing Entries and Accurate Exits
Today wasn’t too bad. I had a decent profit going into the afternoon lunch hour and little by little, i started to bleed it back.
A lesson I learned today was not to come in 20, 30, 40 cents after the easy money momentum and buy more than 100 shares. You missed the move, don’t get in until you see something definitive that can provide a reason to get in, AND a definite area to get out. More times than I should have, I would get 500 shares deep into something and not realize I needed to not be so many shares in, and I don't know where my loss threshold is. I don’t know why, but if a stock is moving up nicely, the second I buy it, guarantee the run is over. I think this happens 9 out of 10 times and has got me in trouble all of last year. I am stricter on my exits, so the losses haven’t been as big, but I need to get rid of this problem for good. If it need be, ill buy 100 shares just to satiate my itch.
Another problem that comes about in this momentum situation is adding out of the money. Sine my entry was pure momo, adding shares in a losing momentum trade can be very hurtful. I have come to the conclusion that I should be okay adding shares if I am getting better prices for a reason I saw.
For example, a stock has been strong all day and it comes up against the eggs (.00) and I believe it will not break the figure. GREAT place to buy shares. So the stock starts to move and I pick up 300 shares or so around .10. Well, the stock wasn’t moving this moment and it comes back to the .00, and STILL holds it. Well this is a good pricing, so even though I am out of the money, I would feel comfortable adding shares here. Now, if .99 prints I have to take all my shares and sell them, and take the loss. the entry was reasonable, and the exit is predetermined. Simply put, my reason is gone, so I am out of the stock.
In cases of momentum, if you don't see why you are in(chasing momentum) you shouldn't add.
For example, the stock trades from the 30s to 40s to 50s, and trying to move to the high. I can buy 100 shares in the 50s, as soon as he starts trading into the 40s and then perhaps makes a move to the high 40s, this is a dangerous place to add. Why? it might be trading up to a new higher range in the high 40s before he slams back into the low 40s and eventually 30s. So now you have shares long in the 50s, and added shares in the 40s to a losing trade. You just doubled your losses. Why? Your reason to get in was soft. You bought a stock because it went higher, and added thinking it would continue going higher. When you assume the stock is going to do something, chances are you are wrong. With hard reasoning, like the example above, the stock is telling you what to do. This is less like Vegas, and more like successful trading.
Chasing momentum is coming to the party late, there will be an easier trade you can sink more shares in and make a better profit EASIER...maybe not today, but definitely tomorrow.
BTW, the goal, I see today from watching my mentor trade, is amazing entries and accurate exits.
A lesson I learned today was not to come in 20, 30, 40 cents after the easy money momentum and buy more than 100 shares. You missed the move, don’t get in until you see something definitive that can provide a reason to get in, AND a definite area to get out. More times than I should have, I would get 500 shares deep into something and not realize I needed to not be so many shares in, and I don't know where my loss threshold is. I don’t know why, but if a stock is moving up nicely, the second I buy it, guarantee the run is over. I think this happens 9 out of 10 times and has got me in trouble all of last year. I am stricter on my exits, so the losses haven’t been as big, but I need to get rid of this problem for good. If it need be, ill buy 100 shares just to satiate my itch.
Another problem that comes about in this momentum situation is adding out of the money. Sine my entry was pure momo, adding shares in a losing momentum trade can be very hurtful. I have come to the conclusion that I should be okay adding shares if I am getting better prices for a reason I saw.
For example, a stock has been strong all day and it comes up against the eggs (.00) and I believe it will not break the figure. GREAT place to buy shares. So the stock starts to move and I pick up 300 shares or so around .10. Well, the stock wasn’t moving this moment and it comes back to the .00, and STILL holds it. Well this is a good pricing, so even though I am out of the money, I would feel comfortable adding shares here. Now, if .99 prints I have to take all my shares and sell them, and take the loss. the entry was reasonable, and the exit is predetermined. Simply put, my reason is gone, so I am out of the stock.
In cases of momentum, if you don't see why you are in(chasing momentum) you shouldn't add.
For example, the stock trades from the 30s to 40s to 50s, and trying to move to the high. I can buy 100 shares in the 50s, as soon as he starts trading into the 40s and then perhaps makes a move to the high 40s, this is a dangerous place to add. Why? it might be trading up to a new higher range in the high 40s before he slams back into the low 40s and eventually 30s. So now you have shares long in the 50s, and added shares in the 40s to a losing trade. You just doubled your losses. Why? Your reason to get in was soft. You bought a stock because it went higher, and added thinking it would continue going higher. When you assume the stock is going to do something, chances are you are wrong. With hard reasoning, like the example above, the stock is telling you what to do. This is less like Vegas, and more like successful trading.
Chasing momentum is coming to the party late, there will be an easier trade you can sink more shares in and make a better profit EASIER...maybe not today, but definitely tomorrow.
BTW, the goal, I see today from watching my mentor trade, is amazing entries and accurate exits.
posted by TraderDave at
1:08 PM
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