Some Rules to Trade by..
Why am I in this trade at all? Here are answers that are good answers:
* I am exploiting this short term -rally (i.e. GNSS has been down and looks to have bottomed, either this rally is because of the general market or because GNSS is finally on the way up) I'll enter this trade because the Upper Bollinger Band was penetrated, MACD has crossed the signal line on its way up and the On Balance Volume is way up, confirming the breakout.
* I am trading momentum (EPAY and VERT were so good on Wednesday. They closed in strength let me hold for a possible gap up in the morning and through this strong uptrend)
* I am trading the long-term trend and this is the best entry point (i.e. I was waiting for a stock to finally finish consolidating after 7 weeks of basing and I think this MACD 8/17/9 Weekly breakout looks like it)
* A major news event will probably cause a rally. I am trading that rally (i.e. MU beat estimates very nicely. I am holding it in anticipation of the stock rising with the news)
* I am trading a double top point & figure breakout (POS has had a double top breakout at 70 and I decide to hold as this is a signficant breakout level.. result POS goes straight up to 83)
These are very bad answers
* I am really angry, its about time I made a winning trade. That last trade left me utterly frustrated
* Eveyone else is making money except me
* That recommendation I saw on Silicon Investor promised the stock would double by next week, I should take it.
* If I wait much longer the stock will fly without me
* I really need some money, losing on those YHOO options really put me in the hole
* This has to be a bottom, how much more can this stock tank?
* Yippee, now I have a lot of margin, What are we buying?
* Wow this stock is cut in half, let me get on, its worth more than this
* I just inherited some money I should be in the market with the rest of the traders
* This stock is number one on her list it has to be the best, let me get in quickly before I lose out.
Ask your yourself I am in the trade because... if you answer is from the second group you are in trouble.. it should be from the first group.
STOP LOSSES and RISK MANAGEMENT
When I saw MU.. right at the get go, I saw it was losing ground. A stock that has just had an earnings surprise has a very distinct pattern.. it goes up in the morning and not down. Never will a stock that starts down after an earnings report make its way back up again. I sold MU right in the first 15 minutes of trading because the chart trendline was going the wrong way. I didn't stop to analyze I got out.
The reverse was the case with MWD and AMES.. AMES was looking very strong on the chart and MWD, which I had expected to get the morning gap up had a full day of buyers and was in the green the entire day. CHTT and DRI, although not spectacular were both having more than their usual volume and trending UP rather than down.
You have to know the signs of a stock that is turning south and act upon it. EPAY today was also rather clear and VERT was just like MWD kept the momentum up the entire day. VRSN was very pretty as it was somewhat of a late bloomer with some early hesitation but never a downturn.
Once you can trade without emotion and analyze rather than agonize over a trade you made a step in the right direction. |
