Here’s How To Manage A Position During Poor Market Conditons
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 Intuitive Surgical
(
ISRG |
Quote |
Chart |
News |
PowerRating). When we
left off on
Tuesday, I was discussing the fact that I prefer to
stay with a position vs. micromanaging and exiting early. Notice today that in
spite of poor market conditions, the stock gaps above the profit target (which was
the entry plus 2-points for a stock of this price/volatility, see notes about
primer below). Partial profits (half) could (and should) have been taken and the
stop was then moved up to breakeven. Notice that the stock soon reversed and
subsequently gave back nearly all the day’s gains. Take partial profits when
offered, especially during poor market conditions.
One again, 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 Wednesday, the Nasdaq opened lower and sold off hard.
Then, after some mid-day consolidating, it resumed its sell off. This action has
it closing poorly.
The S&P also sold off hard.
This action puts it back below its 200-day moving average.
Resistance remains around the 1130 level.
So what do we do? Make no bones about it,
Wednesday was ugly. It fact, it pains me to look at the Dow. However, the other
indices haven’t come unglued. To those familiar with my patterns, the Nasdaq has
a Double Top Knockout look to it. This is a bullish pattern if it can
trade above today’s high. In the sectors, most still remain constructive, and so
far, only appear to be pulling back. Therefore, continue to focus on the long
side but wait for entries in light of Wednesday’s sell off.
As far as setups, First Marblehead
(
FMD |
Quote |
Chart |
News |
PowerRating) looks like it
has the potential to resume its persistent uptrend out of a pullback. Wait for
an entry though, since it, like the overall market, sold off on Wednesday.
Best of luck with your trading on Thursday!
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.