Stop losses, limits and such:
Do you (and you too, Jim Roof and DPPL) try to ALWAYS put in a limit order when you establish a position.
Not necessarily. If I feel the price is reasonable, I sometimes buy at market. But these are usually at market open. I try to buy at a limit price which I estimate will be the day's low with a cushion of 1/4 or 1/8 depending on the price. In other words, no matter what price I buy at, it is determined before the market open
Selling is similar with a target on estimated days high. However, on momentum stocks, if there is a large upward gap, I simply sell at open. Here my decisions are affected by the open price.
Do you ALWAYS put in a stop loss as well? On options as well as long and short positions?
For shorts, a stop loss is a good idea. A mental stop is ok if you are going to be around during trading hours. For longs, if you are buying a stock that has gone up considerably and you are speculating some more upward movement, a stop loss is recommended.
Stop losses dont seem to work well with options.
Any coping suggestions
For short term trades, have a target and place limit sell/buys. I stay away from the market during trading hours since I have to go to school. May not be true for you. Also, like ddpl said, one must have a strategy before entering the market. If you make decisions on real time market events, note that the action might be valid only for a few minutes or hours. On the other hand, if you make a decision before the market, it would be valid for at least one day - usually. Dont ever go to the market thinking "I'll see what will happen and then decide what to do." This approach is usually expensive except for well seasoned professional day traders. One has to be able to judge the market well and react fast if this approach is to be profitable.
Cadaver |
