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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: Warpfactor who wrote (17952)	12/2/2002 4:08:52 PM
From: kodiak_bull	Read Replies (1) \| Respond to of 23153

Warp: I may not have been clear, but I think I was clearer than you assumed: << <<What if it has simply followed this rally up like every other stock and will collapse with all the rest?>> Is this statement not presumptuous? We do not know that a collapse is coming any time soon.>> Er, yes, of course. Which is why it wasn't a statement, but rather a question, beginning with "What if" and ending with that familiar punctuation mark: ? I gave you the best technique I know of for maximizing gains on a breakout (references: IBD, Murphy, Morris, Drokes, et al.) which is to maximize gains. Selling half at some predetermined point doesn't really make any sense at all to me. Why half at 90? Why not half at a double (then all your shares are "free"??)? Why not half at a 12% gain over where you bought? Nonsensical, all of it. Why? Because you are dealing with the market, and the market neither knows nor cares where you bought your shares. It's not out to "get you" when you buy at 70 and it sinks to 60, and it's not waiting to ambush you when you buy at 70 and it rises to 90. These "sell 1/2 at a double" or other techniques are, imho, simple minded mechanical rules which are not very helpful and less than profit maximizing. (Whereas a rolling stop, set at 95% or 94% or 90% while mechanical, is an intelligent rule because it accomodates a market.) Best example I know of (which might be presumptuous but who cares?): In 1999 I bought PTEN at $4 and it dropped below $3, then again at $4. When it doubled, SOB declared he had sold at $8 since "all the easy money had been made." Well it went to $36 and I can tell you that each and every dollar from $9 to $35 was even easier and much sweeter than the one which had preceded it. So you own ROOM at 70, for example. Set your stop, for all of it, at 95% of today's close, which looks to be about 74.80, so the stop is 71.09. As I said, you can do this in real stops or mentally, but set it. You can only adjust a stop up, never down. Now, the stock rises steadily to 87 and you set your stop at 82.65. It trades down the next day to 83.17 and then continues on its merry way. You keep following it. It may go to 110, it may sell off. Why anyone would want to sell half at 90 is beyond me, first, because it may never get there and second, because it may go merrily beyond. When I said there is no technical way of predetermining a $90 sell price I was just being honest--what is it about $90 except its "round number"-ness that you like? Obviously if you think $90 will be resistance (and why else sell?), then you want to sell at 89.73 or so, but that's another matter. Kb

To: Warpfactor who wrote (17952)	12/2/2002 6:30:41 PM
From: RWS	Read Replies (1) \| Respond to of 23153

Warp, Since you mentioned "other" opinions here's one more. The long term uptrend of ROOM can be defined by an Andrew's pitchfork that starts at the low of 3/24/00 and bisects the line connecting the 7/27/01 high and the 9/21/01 low on a weekly semilog chart. This line also bisects the line connecting the 3/22/02 high and the 7/26/02 low. The middle or main tine of the fork sits at about $65.00. If you draw this line on a chart you can see that the price has touched and bounced off this line, then crossed down and then crossed over in this sequence twice. If the sequence is followed the price should touch and bounce off the line and then make a new high. The upper tine of this fork intersects the middle tine of a secondary fork using the 9/21/01 low as the anchor and the 3/22/02 high and 7/26/02 low at somewhere between $90 and $100. I can't get more precise because of my chart. The secondary fork defines the lower limit of the current uptrend as currently around $56.00. Below $56 a downtrend is confirmed. But I would suspect this rally if the main tine support at $65 does not hold. (Forks allow brief excursions under line.) Given those limits defined by Andrews I would next look at studies done that show winning trades seldom have a maximum adverse excursion (MAE) of more than 3 times the 10 day average true range (ATR). I like to use a stop 2.5 times the 13 day average true range. The average true range can be considered the volatility or noise occurring within the trend. ROOM appears to be in a trend, so a stop of 2.5 times the 13day ATR should keep one in the trend. Today's 13day ATR is $2.27 so this would give a stop of $74.96-5.86 = $69.28. Since it's your money I'm playing with, I would set a stop on half the position at $69.28 and the other half at $61.50, which is 1.5x ATR under the main uptrending fork ($65). The first time the price bounced off this fork it went about $1.00 or 0.6x the then ATR of $1.67 under it before turning back up. On a trending stock with a breakout, profits should be preserved with stops, not by selling a partial position, as this only guarantees that you won't make maximum profit on the trade. I don't think percentage stops are good because they don't account for the volatility of the particular stock. On this kind of trade its also good to size the position based on the percent portfolio loss that hitting the stop will incur. This allows you to add to the position safely if desired. RWS

To: Warpfactor who wrote (17952)	12/3/2002 6:56:24 AM
From: chowder	Read Replies (2) \| Respond to of 23153

Warp, I was saving my biggest mistake of the year for our annual posting on January 1st, when we usually share what worked and didn't work, and what what we learned from the previous year's trading. I'll forgo that and share my biggest mistake now. I've had three trades this year that netted me in excess of 100% gains, in less than three months. DDS, PVN and PGO. In all cases, I sold a good portion of my holdings, locking in profits, and held some cost free basis shares. This was a mistake. Although it took some six months for PVN to get back where it was, the other two haven't. Therefore, my initial gains aren't as huge. I allowed the fear of missing additional gains keep me in the trade and those stocks have pulled back. If I were to do it over again, I would have sold those positions completely and said to hell with any additional profits that came along. I would have waited to re-enter those positions when the indicators lined up the way they are supposed to. Selling partial positions worked in the boom market of the tech rage, but they certainly don't work in a bear market or one that trades sideways. The best lesson I have learned this year is to set modest goals and protect profits. The objective is to "trade well," not "trade perfect." To trade well is to take what the market is willing to give. If it's a mere 6-8% profit and then the reversal sign comes, then so be it. If it's a 3-4% loss, it may not have been a profitable trade but it was traded well. Capital preservation should be vital. My portfolio is up nearly 40% for the year. Others will probably do better, but my gains were made with about 50% of my portfolio in cash all year. I was never on margin. I minimized my risk exposure. And more importantly, my results have been consistent all year. I didn't have the roller coaster ride of years past where I got off to a good start, gave it back over the summer and sweated it out into the close of the year. I've traded less and didn't have the stress of years past. I did this by setting modest goals, looking for an initial 8-12% profit on a trade. When it came, I would re-evaluate. If the stock looked like it had more upside, I would stay with it. This didn't happen often though due to the amount of whipsawing action we saw all year. A 50% profit is too much to ask initially, in my opinion. You eat an elephant one bite at a time. I'd look to establish a range of short term objectives. As each is achieved, re-evaluate and go from there. The short term objectives need to be established to the down side as well. Once I enter a trade, I assume I was wrong and set my point of exiting. When looking at the daily charts, we often forget they are good for 2-3 days only. Too often we make longer term decisions on short term information. Anyone looking at GE? It looks like a short candidate to me, at least for a day or two. stockcharts.com[h,a]daclyiay[pb200!b50!b10!f][vc60][iut!Lh14,3!La5,17,9]&pref=G dabum

To: Warpfactor who wrote (17952)	12/3/2002 12:51:33 PM
From: augieboo	Read Replies (4) \| Respond to of 23153

Warp, a few weeks ago, I asked LG about how to figure Risk/Reward prior to a trade. (He doesn't use any mechanical set of price targets, but a more comprehensive analysis.) I saved his answers, (along with a chart he posted to illustrate it), on my "augieboo's junkpile" thread on iHub. Anybody interested in managing Risk/Reward should take a long look. It's not simple, but LG has been at this a LONG time, and has made a BUNDLE, so it's worth studying his methods carefully, even if you don't want to or can't implement them fully yourself. Here's the link: investorshub.com NOTE: The chart in this post is BIG because LG uses two 19" monitors at once when looking at an individual issue. In other words, the puppy is twice as wide as a 19" monitor!