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Pastimes : Learning To Invest Correctly - A Shared Experience
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To: Bill Ulrich who wrote (6)7/24/1998 7:58:00 PM
From: Nazbuster  Read Replies (2) of 253
 
Bill,

I had a similar experience with INVX which had great fundamentals, but made components for the disk drive sector. One of the most difficult lessons for me to learn is when to exit a loser. I'm getting better with my emotions - meaning trying to establish objective criteria rather than go by the fear/elation cycle --, but I really did not have a way to measure when to exit.

I just finished reading a TA book this morning that suggested a simple, but effective strategy: Buy when stocks break out into an uptrend and hold until the trend is broken AND the intermediate (50 day) or long-term (200 day) exponential moving average is broken (depending on how sensitive a signal you want). PERIOD! There are other "sells" as well such as the classic Head-and-Shoulders pattern, but the basic timing is as stated.

I went back to look at ADPT. It broke the 50day average in October touching the 200, and broke the 200 in early December. You might suspect this drop was a "spike" (a false move followed by a reversal in direction), but it was confirmed pretty quickly when the price rose to the 200 day average then turned south again about 5 days later. This would be a clear confirmation to get out. This would have put you out at about $40/share.

Believe me, I'm only a novice just reading about this stuff, but it is such a relief to know there are actually objective ways to make these decisions!!! You can always adjust and fine tune your methods as you learn.
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