A Most Pleasant Surprise
I have learned through working with several of the contributors here at
TradingMarkets and in my own trading, that surprises usually happen in the
direction of the trend. For you Landry fans, think of the Big Blue Arrow.
7-9-2002
11:57:33
Accredo Health (ACDO)
is moving higher off its low of four days ago. The stock has fallen nearly
40% from its May high, following a similar path of many healthcare issues. ACDO
is now up 1.31 to 44.34 and carries a
3-month relative strength rank of 8 with a downtrending ADX of 42 from
TradingMarkets.com.
On Wednesday, the stock triggers out of the setup and closes in
the bottom portion of its range.
When one gets a move of a couple of points or more, the
temptation is always there (even for the most experienced traders) to take the
quick profit. However, here is where money management plays a big role in
maximizing the potential of a trade. Since the initial risk in this example was
around 1 point, selling half your shares when your profit met the initial risk,
then moving your stop to break even, would have ensured a small profit, barring
any overnight surprise that gapped the stock up on the open. This also puts you
in the position of profiting on the remainder of the position on any further
moves down.
The stock gapped down on the open and sold off. You would likely
be stopped out Thursday, as it has reversed, but you would have caught the
biggest portion of the move. Will it always play out this favorable? Of course
not. This method will not always be this successful, but in the long run, you
will most likely come out ahead.
Until tomorrow,