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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Leland Charon who wrote (4494)	9/29/1999 4:42:00 PM
From: Dave O.	Read Replies (1) \| Respond to of 18137

< I don't have any concrete rules as to when to sell a winning position. > Leland, I have two thoughts. Personally when I enter a trade I have a profit objective. When it hits that target I get ready to sell. If it shows more upside momentum (on a long) I'll wait a bit. But I sure don't want to be trying to offer it out when the momentum slows and there aren't any more buyers. I've learned not to let money left on the table bother me anymore. I'll never buy at the low and sell at the high but if I can exploit the range of the high-low, whether long or short, I've found one can do okay. Dave

To: Leland Charon who wrote (4494)	9/29/1999 6:27:00 PM
From: Eric P	Read Replies (2) \| Respond to of 18137

Selling on Strength Leland, I agree with Dave on the idea of profit objectives as the preferred means to exit positions. Even when my ideal profit objective begins to seem unachievable, I will lower my expectations to still sell the stock on strength at a lower price. I find that this works MUCH better for me than the usage of a trailing stop. Let me give you a current example on how this works for me. Near the close this past Monday, I purchased 2200 shares of MCRL at a price of 43, based on a nice looking daily chart and the expectation for a rise over the next few days. Unfortunately, the trade immediately went against me by opening yesterday at a price below 42 1/2. My mental stop loss point was in the 40 1/2 to 41 1/2 range, so I didn't fret about exiting the trade immediately. However, the poor opening didn't cheer my spirits, either. Anyway, my goal was to sell the stock on strength, into a rally, and net a nice little profit. Fortunately, the stock cooperated with a mid-day rally. I was able to sell 500 shares at 44 1/4 and another 700 shares at 44 3/4. The stock continued to rally before peaking at 46 1/4! I didn't get the maximum possible price, but who cares! I did accomplish the goal of lightening up my position and selling on strength. Unfortunately, the stock then declined all afternoon and closed yesterday at 43 1/4. => Wow, now I'm glad I sold over half my position at an average price of 44 1/2, on strength. I must admit that I tried to sell that last 1000 shares all afternoon yesterday from 45 3/4 all of the way down to 44 1/2, but was unable to get any rally to sell into. Today the stock again opened lower at 43, but I stuck with my plan... Sell on Strength. Early in the day, I placed an ISLD order to sell my remaining position at 45 11/16, a price just below the previous days high. Note that the stock was only trading at ~43, but you never know when a quick rally will drive your stock up, and I don't like to be left high and dry with my stock in hand when the rally is over. Once again, we got a nice mid-day rally and I was able to sell the remaining 1000 shares at MY PRICE of 45 11/16. Please note that the stock kept advancing and peaked at 46. I didn't sell at the day's high, but that never concerns me. Note that the stock drifted lower this afternoon before closing down at 43 3/4, well below my average selling price. If I used the trailing stop approach, I would have likely been stopped out on weakness at somewhere between 42 1/2 and 44. This may have resulted in a small loss or a small profit. By selling on strength, I sold at an average price of 45 1/16, and netted well over $4k on the trade. Also note that the stock closed yesterday at 43 1/4 versus my average selling price yesterday of 44 1/2. The stock closed today at 43 3/4 versus my selling price today of 45 11/16. It doesn't always work out this well, but I like this approach. To summarize, Selling on Strength offers a number of advantages over trailing stops: 1) By posting an offer price, you will always win the spread. 2) You will never have liquidity problems, as the market is coming to you. With a trailing stop, you will often face the problem of selling 1000+ shares and only see 100 shares available at the bid. 3) By letting the market come to you, You are playing the market. The market is not playing you. In other words, you are trading on your terms, and you are in control. For me, it helps reduce the emotional aspects and stress of trading. 4) If the stock typically swings a bit higher/lower in price, you will always sell your stock near the high of a swing, while a trailing stop approach will more likely sell your stock near the low of a swing. Please note that stop orders do have a place for many/most traders. They are best used (IMO) to set a rigid stop loss limit to ensure that a bad trade does not become an 'investment'. As a trader becomes more 'seasoned', stop orders become less and less important. An experienced trader might want to 'work' his exit order on losing trades and sell at a better price (on average) than a stop order would accomplish. Good luck, -Eric

To: Leland Charon who wrote (4494)	9/29/1999 6:32:00 PM
From: Dan Clark	Respond to of 18137

Leland, One trade management tactic to consider is to take part of the money off of the table when you are riding a profitable position and you think that there is more profit available. 1. If you have reached a target profit point (profit $, profit %, or expected support/resistance point) liquidate one-half of your position. This reduces the "pain and stress" because you put some profit in your pocket. Makes it easier to look at the remaining half from a more emotion-free perspective. 2. Then let the rest ride for some additional profit. Depending on market condition, stock's trade rate, ADX and other factors, you may want to maintain or to relax your trailing stop. For instance, if the market is going gang busters and the stock seems like it has more upside potential, you might want to relax the stop from say 1/4 point to 1/2 or 1 point. This gives the stock more wiggle room. If the market is weak and the stock's volume/trade rate is slowing a bit, you might want to maintain the trailing stop and just let the market drop you out naturally. Hope this helps. Regards, Dan.