Don’t get comfortable…
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
selling books,
>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
If you would like a free trial to Dave’s Nightly Swing Trading Alerts Report
Smoke ’em If You Got ’em
As I’ve mentioned in
the past: Money and position management– waiting for entries (triggers), 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 our
old friend Diamond Offshore
(
DO |
Quote |
Chart |
News |
PowerRating),
mentioned recently. Following the rules outlined in my swing trading primer
(email me if you need a copy), you see that the stock triggers an entry and then
drops nicely–tacking on over 3 points today (Tuesday).
Partial profits (at least half) could (and should) have been taken at this
juncture. The protective stop is then moved to breakeven and then trailed lower.
On Tuesday, the Nasdaq rallied in early trading but found its
high by mid-day and then generally worked its way lower for the remainder of the
day.
The S&P put in a similar performance.
So what do we do?
The market has sold off nicely out of its
recent textbook style pullback into resistance. And so far, it appears to be resuming its
downtrend. The June lows look like the next target here. Therefore, continue to focus on
the short side but honor your stops since the market seldom does anything in a
“textbook” manner.
As far as setups, Petroleo Brasileiro
(
PBR |
Quote |
Chart |
News |
PowerRating),
in the weak energy-drilling and exploration sub-sector, looks poised to
resume its downtrend out of a pullback.
Wednesday’s With Dave
It’s that time again. On Wednesday 06/21/06 at 11:00 AM EST, I will be hosting my weekly interactive lesson.
There’s a lot going on again this week. I plan on covering market and sector
action, recently mentioned stocks, sectors, money/position
management, psychology, etc…. I’ll also take your questions on
individual issues or trading in general. As usual, admission is free (and I give money back guarantees if not completely satisfied!).
However, the space is limited by the software. Email me if you need instructions on how to join (the same each
week) or if you would like the archives for the prior year (covering topics such as money & position management, scanning, picking the best setups, sectors, longer-term trend following and a plethora of other stuff).
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.