Here’s a simple way to manage your positions
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
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888-484-8220 ext. 1.
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 Allegheny Technologies
(
ATI |
Quote |
Chart |
News |
PowerRating), mentioned in my 04/11/06
column. Here is the chart I published then.
Following the rules outlined in my swing trading primer (email me if you need
a copy), notice the stock triggers an entry and subsequently rallies to hit the
profit target. At this point partial profits could (and should) have been taken.
The stock is then trailed higher. This ways, barring overnight gaps, you
have the potential for a homerun on the remaining shares. I’ll discuss this one
further in Wednesday’s interactive presentation (see below for details).
On Tuesday, the Nasdaq opened strong but quickly began to trade
sideways. It rallied late in the morning, dipped ahead of the Fed minutes, but
then turned back up and rallied for the rest of the day. This action has it
closing well.
Ditto for the Ps.
So what do we do? I wish I knew. Since I don’t: On
the long side, wait to see if the market can break out to new highs and stick
before looking to buy. If you took commodity related trades (e.g. ATI), look to
“scale and trail” since those issues are becoming extended. On the
short side, avoid new positions unless the market turns right back down. .
No setups tonight. Tuesday’s action really mucks up the charts.
Wednesdays With Dave
It’s that time again. On Wednesday 04/18/06 at 11:00 AM EST, I will be hosting my weekly interactive lesson.
I plan on covering crazy market and sector conditions, money management, and
some other stuff. Once that’s done,
I’ll will then 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.