Tai,
this is very interesting question that leads to the next one: when trader deals with exception, how to recognize it on as early stages as possible. how to trade it (if at all).
I think most of seasoned traders will say: stay away. And this is correct, IMHO. Let's look at recent exceptions, IMAA and GRIN. Those who tried to short it on early stages of the run, were not feeling comfortable to say at least. Those who held long positions too long or took them too late, got burned even worse. Experienced traders applying proper risk control most likely played those stocks on early stages (if at all) and by no means stayed in for major run. Late stages of those run-ups provided quite risky opportunities for some scalps from obvious bottoms, although shorting of course was the name of the game after stocks settled down and gravity finally took over. I have to add, going long on such momos requires very developed intuitive feel for the movement, more than TA or tape reading. Besides, the way these things move makes trading rather fast trigger contest. SOES was practically useless on IMAA, GRIN is not SOESable. SNet on hysterical movement - good luck... ECNs are ECNS - great if they are presented at the price you want and if you are fast enough.
All in all, risk is really big on exceptions (that's what exceptions are for <g>).
Vadym |
