I think we're talking two separate things. I'm referring to a fill as opposed to determining an entry.
Let's use QUIK as an example. The breakout price was $5.40. If you placed a market stop to buy at $5.41 and it was placed at $5.48, to me, that's no big deal if you are looking at more than a short term trade. It's 1.3% more than you wanted to pay, but well within the normal guidelines of entering a stock that is breaking out.
With what you are presenting, if I'm reading it correctly, is the determining point of entering the trade.
As a rule, I don't chase a stock more than 5% above it's break out point, regardless of the upside potential. The reason I don't, is because I assume every trade will turn around on me and I must have an adequate stop loss. If my stop loss is initially 8% below my ideal entry point, I don't want to add more than 5% to it. It may work out occasionally, but over the long run, it will ruin me. So, 5% is the most I'll chase on a breakout.
That would make $5.67 the most I'd be willing to pay for QUIK.
QUIK showed up in my scans this weekend and I passed on it because price is extended beyond my maximum entry point. If it corrects, I'll look for another entry point, otherwise I pass on it.
Those are my guidelines and I'm not saying others should follow them religiously. Everyone must decide their own comfort level and stick to it.
I define a comfort level as the point where you wouldn't think twice about cutting a trade as opposed to holding it for the long term because it has pulled back too far.
Gotta know those comfort zones!
dabum |
