|
The contents on this page are a small sample of StockTradersHQ's member resources (FREE Trial!)
1.
Our staff of professional technical traders analyze 1,000's of potential stocks every day to provide you with a list of stock picks with the greatest potential for explosive gains.
2. These stockpicks are traded with our real-time portfolio. Email alerts are sent for every entry and exit. Through the member-only website, you will have our support every step of the way.
3. Our subscription service provides all the resources, stock picks and tools an investor needs to make very profitable, consistent trades while maximizing gains and minimizing losses.
SEE OUR TOP PICKS FOR 2006...
|
|
Monday, July 18, 2005
Market Recap
The 7 day winning streak for the NASDAQ ended today with a 12 point loss. CitiGroup disappointed the street with their earnings report out this morning before the bell which weighed on the DOW. As a result of this pressure, the DOW lost 66 points today. The S&P lost 3 points to make the day red across the board. Despite this down day in the markets, some of our bulletin stocks had a very good day. Powerhouse KOSP gained another $1.65 today and made another 52 week high. Other big gainers today were IPII up 24%, VPHM up 19%, GERN up 26% and DSTI up 16%.
Part1: Effective Stop Loss Placement
Many of you have asked the question, "When do I sell?" This is probably the one factor in trading that can make or break a trade. If you do not know when to pull the trigger on the sell side, you can either miss out on a huge profit, or even worse you can take a big hit on a losing trade. This week we will attempt to cover this subject in depth with a series of commentaries on the topic. Tonight, part 1 covers some general ideas concerning selling a position.
Setting Targets
One of the most common misconceptions concerning selling is setting a target price. "I am going to sell this stock when it hits $25.00". We have gone over this topic before in a commentary entitled “Target Practice”. If you set a target price, you will end up losing one way or another. One of two things may happen: 1.)You will either never see the target price reached and will end up with a loss as the stock reverses on you before ever reaching the projected target, or 2.) The target price will be reached, take you out, and then proceed on to $40.00 or $50.00 and beyond. Unfortunately, this is one of the hardest lessons to learn and it is perpetuated on a daily basis by some ranting loud mouth with a national television audience with statements like, “It has got 3 more smackers and then you ring the register”. It is ridiculous to try and predict where a stock may be headed. Nobody knows where they will go, it is best to just play the chart and ride the stock up until the trend reverses. In other words, “dance until the music stops”.
Stop VS Limit
Let the chart be your guide on when to sell. Selling should not be something you have to think about in most circumstances. If you use the chart appropriately, you will have a stop loss point already set up. If the stock takes a turn for the worse, you are protected. Professionals use stop losses on every single one of their trades. The guy on TV says he does not use stop orders. He suggests limit orders only. This is bad advice, in my opinion. Why would I want to use a limit order to sell a stock? This only limits my gain. If you sell a stock at the limit, you are selling on the way up and there is no reason to sell a stock on the rise. By doing this, you have just taken yourself out of a stock with upside momentum and you are limiting your gains, hence the “limit” order.
If you buy a stock with a limit order, you are buying a stock that is falling in price. I rarely use this method. I prefer to buy a stock that is bouncing off support and going up rather then trying to pick a bottom with a limit order. If you are wrong, your limit order will fill and the stock will keep falling right through the limit. When I use limit orders, I use them at support areas only. And I want to be around when it fills so that I can place a stop just under in case I am wrong. Stop orders are the best way to go. They protect you on the downside and if you use a stop order to buy a stock, you are buying a stock that is rising. I want to buy stocks going up, not down. A stop loss allows you to stay in a trade for as long as possible without the risk of not having one at all. You are taking some of the risk out of the trade by protecting your profits or minimizing your losses with a stop loss. We use levels of support, such as the 9, 20 and 33 day EMA (exponential moving average) to identify areas where a stop loss could be placed.
Set it but Do Not Forget it
You set it... but you do not forget it. You need to be at least somewhat active with your stop losses because charts change on a daily basis. You do not want to have a stop loss set too close if a stock is declining on low volume. You could get taken out before a major upside move. You also do not want to leave a stop loss aging. If a stock decides to take a nasty plunge, you could give back most if not all of your gains if you did not adjust your stop upward to protect your profit. It would be a shame to forget to move your stop order up as the trade advanced in your favor.
The Gap Down
Now for the harsh side to selling. There are times when there is little you can do to prevent a loss. A stock gaps down on you and even the best placed stop loss will do you no good. If you sell, you are out of the trade. You must take the loss and move away from the trade without emotion and without looking back. Gaps happen. We have been caught in them before and I know we will be caught by a few in the future. If you trade for a living or invest for the long haul, it cannot be helped.
You can decide to hold your position. Sometimes this can actually turn a losing trade into a break even situation or, if you are really lucky, into a profit. The keys here are time and your position. If you have made a common trader's mistake and "loaded the boat", you may find yourself in a situation where you cannot hold. But, if you have taken a 5% position in a stock and you feel comfortable in holding, it is okay to do so. The question that you have to ask yourself is whether or not you can put the money tied up in this losing stock into a better situation. If you know that you can, your decision has been made for you. If the markets simply are not offering the right opportunities at that time, and the chart does not show an absolute melt down of your position, holding for at least a dead cat bounce is always an option.
Part 2 Tomorrow
When to sell a position is the hardest part of trading. We could not cover this subject in just one commentary, therefore this commentary on “When to Sell” will be conducted in three or four parts. There really is not a holy grail of selling but in part two of this commentary tomorrow, we will examine whether to “lock in the profit or let it run.” In part three of this commentary, two nights from now, we will attempt to explain some specific strategies for selling both your winning and losing trades and touch on five different strategies for mechanical stops that will take the emotion out of your trades. We hope you enjoy the series on when to sell as requested through feedback from some of our members
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts that we have annotated for each stock listed in the past.
For New Members
For all of the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical that you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings, you can either use the link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
Stockcharts Listing
Please vote for us once a day at stockcharts.com.
http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting.
|
|
|
|
|
|
|
