. . . . . .REMOVING YOUR POSITIONS: . . . . . .
As a stock rises, your confidence that it will continue rising falls. Place your sells according to the disparity between the two.
Position Trade:
I generally place about 3 equal limit sells at strategic places along the path of an upward climbing stock. . .the first is set at a place I am relatively certain the stock will achieve. . .it generally gets my original investment out. . more or less. . .
The next is at a point when momentum hits and daytraders and short sellers push the volume way beyond the point of accumulation levels. . .exiting the second third here removes all risk from the play.
The final sell is sometimes split into smaller portions depending on how high the stock continues on momentum, the news or events and instinct. This is an important dynamic to getting out high. Where will it be in two weeks? Get out way above that when you get the chance, and you will generally be quite happy with your trade.
The question here is:
How high will it rise beyond where you think it will settle. Place your sell according to the disparity between the two.
Then we walk away and don't look back. . .the trade is over.
LONG-TERM stock/Position Trade:
I will wait much longer to get my initial 1/3rd position sell out. . .sometimes to a triple or more, leaving 2/3rds worth of FREE shares. . .then will hold thru the turbulance of daytraders until I get a better picture of where it might go and how much it might get bid up beyond where I think it "should" be selling.
The last third, I will probably just hold long and free on a long-term stock. . . by doing so, I am holding free shares, which removed all risk.
Then I would consider "making a NEW investment" once the stock settled into a trading range. . . but that purchase would now be based on all new data. . .just as if I had never traded it before. And that is a very important consideration. Trades should never be subjective.
If you keep losing on the same stock, stop trading it. If you find yourself deep in a hole, stop digging.
EXAMPLE:
TUNE is in that questionable zone now. . .I rode it from under 5 to over 50. It is settling in the low 40's, but I still believe it will get shorted back to the 20's over the next two months, so at this time it does not make a good investment to me. . .
I removed all in the final third trade, because the stock has a long history of dropping on short-selling. Last May I lost quite a bit of money on TUNE when it fell quickly from about 9 to about 5 when my back was turned. . . OK, I was in Maui.
The important thing to remember:
If a stock has had a hard run , FORGET you have ever traded the stock. Once it establishes a clear trading range, re-evaluate right alongside every other stock before re-investing. . . you may find that at this new level, it is just not a good investment and is an even worse trade. Be happy with your profits.
Happy trading all. . .
Rande Is
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<c> Copyright 1999 Rande Is |
