Originally Posted by lewdog:
I didn't have the energy to expand on this yesterday but my buy orders for breakouts are different than most people, as most write limit buy orders.
For possible breakout stocks that I listed, I am looking to buy in at a price ABOVE it's current market value. I do not purchase unless the stock confirms continued movement upward. So I write Buy stop market orders, meaning the stock has to go above my stop market order before I buy shares. This ones I posted this week are all pretty close to their breakout price, but many times shares are $1-2 away from a breakout price so they must continue decent upward momentum before I'll buy.
Once purchased, I monitor the stock for continued appropriate movement. Sometimes after purchasing a stock on breakout it will squat quickly, this isn't a good sign. Sometimes when I see this I sell the stock within the first few hours after purchasing or days after purchasing because it didn't confirm that the breakout up was real.
With swing trading you are generally looking for 3-10% gains within days to weeks. The stocks previous volatility will determine if it falls on the low or high side of that range. One of my rules is once a stock reaches 10% gains I sell at least 50% of my position. If the chart shows that a bullish pattern may continue, I let the remaining 25-50% of the position run but raise my stop loss to at least break even (limit your chance of losing trades!)
Hope that helps.
I like this approach a lot. At first glance I thought it seemed way too safe and concentrated too much on safety and risk aversion. But after digesting it, it's the perfect blend of risk/safety. Your risk lies in missing out on potential gains in the SP, but the safety blanket is watching the trends to see if the momentum is real. I'll try and see how to implement that, hopefully later on this week.
If anything, I think a 10% stop loss is something I'll have to think real real hard about ever using again. [Reply]
Originally Posted by rydogg58:
I like this approach a lot. At first glance I thought it seemed way too safe and concentrated too much on safety and risk aversion. But after digesting it, it's the perfect blend of risk/safety. Your risk lies in missing out on potential gains in the SP, but the safety blanket is watching the trends to see if the momentum is real. I'll try and see how to implement that, hopefully later on this week.
If anything, I think a 10% stop loss is something I'll have to think real real hard about ever using again.
Originally Posted by rydogg58:
I like this approach a lot. At first glance I thought it seemed way too safe and concentrated too much on safety and risk aversion. But after digesting it, it's the perfect blend of risk/safety. Your risk lies in missing out on potential gains in the SP, but the safety blanket is watching the trends to see if the momentum is real. I'll try and see how to implement that, hopefully later on this week.
If anything, I think a 10% stop loss is something I'll have to think real real hard about ever using again.
It is more safe because managing your capital losses is defined. Besides, how can you invest if your is money tied up for long durations in losing positions?! Trying to perfectly time buying the lows and selling at the highs is a pipedream. Trade successfully in the middle percentage of stock moves and you can make great gains AND decrease downside risk since you aren't holding a long time. Most stocks surge for a few days to a few weeks at a time. Find those, make money and get out.
Gaining with individual stocks is about capital risk management. That HAS to be the first priority. Because trying to beat the market with just buying and holding will rarely beat the index anyway and comes with WAY more risk (all it takes is one stock tanking to drag you below the index). More than 90% of individual stock investors don't beat the market average over time. It's because they have no strategy to maintain the capital they've gained on winning trades and to understand how they're "winning." If you make a bunch of money this year but then convince yourself some hot stocks are the next winning ticket, so you shift your money without a stop loss plan, your money could literally vanish or be tied up for years trying to get back to even. All those gains this year were for nothing if your new stocks don't return!
I've laid out my technical rules in this thread before but this also helps with identify sector rotation similar to what we just had with money flowing out of the Nasdaq. If you are reviewing charts for a certain pattern and breakout, only stocks on upward momentum will hit you radar. So when those growth stocks everyone was high on in February started selling off, those stocks will start to be removed from my charting software as they no longer meet my momentum criteria. In place, other stocks/sectors start rising to the surface, in this case it was value based companies that started meeting my criteria for breakout.
If you follow the charts as a trader, instead of guessing (this stock sold off, it looks like a buy now!), your rules will identify the momentum swing to other sectors.
I do not believe in averaging down unless it's a long term position in a company with good fundamentals that I plan to hold over a long duration. Don't confuse investing and trading. And yes, I do both. [Reply]
Originally Posted by lewdog:
Earnings are SO hit or miss. You may see a stock trend higher on the rumor of a great earnings report. The earnings report hits, and it's great, but the stock tanks on institutional selling based on run-up to earnings. Or the stock trends higher during the day earnings are released, followed by a massive selloff after hours. It's definitely not consistent.
Yeah I've been burned a few times holding calls through earnings. The reason I like AMD a lot this time though is they ran up to $100 temporarily after reporting earnings in January but were just unlucky that their earnings came on the same day the Gamestop saga began, and they dipped back down with the rest of the market in response but didn't recover with everything else. I think there's a lot of room for them to actually respond positively this time to good earnings, plus I think they will have very bullish guidance.
I think guidance plays the biggest role in the wtf responses to earnings. A lot of the times when I've seen sell-offs on good earnings, it's cause their guidance is too conservative. [Reply]
Progressive exposure means I don’t initiate any more positions until I see how these play out. Market has been choppy so you don’t move from all cash to all in. [Reply]
