Can’t Decide Whether To Take A Profit Or Let It Ride? Why Not Do Both?
Smoke ’em If You Got ’em
As I’ve mentioned in the past: money management–the use of protective stops, trailing stops, and profit taking–is crucial to your long-term success as a trader. A simple money management system is to take at least half of your profits when they are equal to or exceed your initial risk. You then move you protective stop on your remaining shares to breakeven. This way, barring overnight gaps, you have a “free” position that has the potential to turn into a homerun (through the use of trailing stops).
Let’s follow up on Quicksilver Resources
(
KWK |
Quote |
Chart |
News |
PowerRating), mentioned recently. Notice
that the stock has rallied over 2-points since first mentioned. For a stock of
this price and volatility, this is a good area to look to take partial profits
and bump your stop up to breakeven (the same as the entry) on the remaining shares (see primer mentioned
below for more on this).
As mentioned recently, if you’re new to momentum-based swing trading and would like more information on the basics such as trend, entries, and money management, email me and I’ll be happy to send you the primer section from my second book.
On Thursday, the Nasdaq opened firmer but soon found
its high and began to sell off. However, it found its low by mid-day and then
chopped its way higher for the remainder of the day.
The S&P was also choppy but much stronger.
So what do we do? Technology continues to lag
the market. And, I still don’t think we can have a bull market without
technology. Therefore, continue to wait for upside follow through in the indices
before looking to play the long side (in areas outside of energies). On the short side,
since the market has been getting choppy and since there are few meaningful
setups, continue to manage existing positions vs. initiating new ones.
No setups tonight, trail your stops higher and look to take
profits in the energies.
Best of luck with your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.