posted
I know exactly what you mean, because I've had it happen many times, not to mention "head fakes". Then I got a Platform which shows these things about to happen, so I just wait until the stock establishes a definite direction on my platform, and then I go in. Now, no more whipsaw or headfakes.
posted
Funny... your comment about selling at your original buy price and then buying when it comes back up to your buy price... I never thought about it, but that's a very simple yet effective strategy. I've been frustrated because I have several times caught a run near the top, only to ride it down waaaayyyyy below my original buy price. For now on, maybe it'd be better to set my stop automatically at my original buy price.
Thanks for the good posts... what is a head fake? Is it the same as a whipsaw?
-------------------- Life is like a roll of toilet paper. The closer it gets to the end, the faster it goes.
posted
Warped Mind, I do agree that if you forsee for any reason your stock will drop then get out even before your stop loss. Why wait for the inevitable loss in that case. However it wouldnt work to always sell a stock whenever it goes below your buy price exept in certain circumstances which ill explain.
If you always sell a stock whenever it goes below your buy price you will be stoped out of 90 percent of your trades since usually there is at least a little fluctuation. Plus since you trade pennies even if you sell at your buy price you still have to cover the spread. Even if the spread is only 3 percent, after getting stoped out of lets say 5 trades in a row since your stop was to close you would loose 15 percent. Now your next trade would have to make around 20 percent to make up for your loss. And of course most pennies have more than a 3 percent spread. Plus paying 10 dollars in commision fees for every trade. 50 dollars.
I use a few stop loss stratigies. One is using support and resistance. If a stock trades in a range of 10 to 11 dollars for a while and then breaks out of that s/r to lets say 11.50 I may buy around 11.50. A lot of times when this happens the old resistance becaumes the new support and the new resistance may becaume lets say 12.50. If the stock happens to break 11 then the odds are more against me then for me so ill sell since the valididity of that support was violated. The stock has a good probability of going back down to 10 at this point.
Another thing I look for is round numbers. Stocks like round numbers like .20 or .30. Buyers I guess are afraid to pay 20 dollars for a 19 dollar stock. That round number often makes people think they are paying more as strange as that sounds. Here are two examples that ive traded. A while back ago I bought vrso for .27 and it went up to .37 and a day or so later to .31. I got scared and sold for a small profit. A week or so later the stock made it all the way to .60 cents. I should have held on since it had strong support at .30(round number) but I hadnt yet learned that. More recently I bought UPDA I think around .34 and right after I bought it it started to slide down to around .30 but I voilated my normal stop loss rule and held on. The next day it was around .38 and after a short time was all the way up to around .80 although I sold it way before that ever happend. Of course it is possible for a stock to drop to .29 and then rocket to 1 dollar. Every rule in the stock market is violated but these are just things to keep in mind.
The only time I use my buy price as my stop loss is when I buy off news on the open of the market. Actually I use the market opening price as my stop. The reason is because Ive looked at historical quotes and found that almost no runners go below there open price. At least not if the run is to start at the begining of the trading session based off the news that I thought would make it run. Look at ten or so stocks that went up 20 percent or more and you may not find any that went below there open. If you buy at the open in this case and your stock starts turning down than that means you were probably wrong and get out.
Posts: 205 | From: ca | Registered: Aug 2005
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posted
I still say stop-loss is the best way to go... when you dont use them you are just using fear and greed to make your judgements... and constant buying and selling based on those two makes commissions to your broker eat at your bottom line...
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
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