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Strategies & Market Trends : You buy a stock. It goes down, now what?
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To: Bald Eagle who wrote (67)7/10/1998 9:38:00 PM
From: Wayners  Read Replies (1) of 112
 
Mr. Owl, What I've done when I've totally got myself in trouble is write the calls and take that money to buy protective puts. I also like to use stop limit orders or stop orders and placing them below important trendlines or support levels. I also make sure and this is probably the most important, to make sure I only buy into a stock using buy stop limit orders and placing those orders above key support levels or trendlines. That makes sure that I'm buying into momentum to begin with so I can place an initial stop above my entry price. That is always my goal. At that point I have a free ride. I'm also not ashamed to take profits and leave money on the table. I also only buy stuff on a strong uptrend with significant volume and investor interest. If it looks like my buy stop limit order is going to get hit on lackluster volume, I'll cancel it. I'll also cancel it if it looks like the stock is going to consolidate more. The best place to put these buy stop limit orders is above pinched bollinger bands areas just out of reach of false rallies. If the big rally does occur you get in. The mental stop does not work because of the tremendous slippage in price you get trying to put in the order--usually a market order whereas you could have easily gotten in lower with a limit price. Hope this helps somebody. Nice thread Mr. Owl.
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