More On Management
Throw away all the fancy indicators, stochastics, oscillators and feng shui,
and what is the one thing that is going to determine whether a trader will be
successful or not? MONEY MANAGEMENT. Sorry for the screaming, but I cannot
stress it enough. A person can be 90% correct in picking trades and still lose
money if he or she does not keep losses small and protect profitable positions.
04-26-2002
13:42:13
Take-Two Interactive (TTWO)
is tracing out a pullback from its recent high. TTWO is currently trading
down 0.05 to 22.92 and is holding a
3-month relative strength rank of 91 from TradingMarkets.com.
Let’s approach a potential swing trade in TTWO. On the close of
April 26 the high was 23.79, and the low 22.36. If you are going to enter out of
the pullback on the next trading day if the stock gets above 23.79, and place
your initial protective stop at the low of 22.36, you are risking approximately
1 1/2 points on the trade.
Entry would have occurred the following day (the 29th) but it
reverses, although would not have stopped you out. Today the stock rallies, and
gains more than 1 1/4 points from the entry price. At this point, if you don’t
sell half your shares for a profit (as the profit is not quite equal to the 1
1/2 point risk), the least you should do is move your stop up to break even (at
the level of the entry price) and make sure that the profit you have on paper
does not turn into a loss. If you manage trades in this manner, you will be doing the
things that make professional traders successful at what they do. Two things to
always remember: Always trade with stops, and don’t let a winner turn into a
loser.
Until tomorrow,
Duke