How to turn winning trades into even bigger winning trades
As traders we have winners and
we have losers. When you have a loss stick to your money management disciplines
and exit accordingly. On the other hand when things are going your way it
sometimes helps your P&L to get creative. When price starts going your way it is
always a good idea to take something off the table by making a sale but don’t be
against paying higher prices to replace some of those shares. Of course the flip
side also holds true for shorts. The market makers are most likely doing the
same.
As a market maker, on occasion
after making some nice sales on a long position I would go out and test the
offerings to see how right my position was. If the stock moves even higher do it
again. The stock may be ready to really rip. It was a way of turning an ok
profit into a much bigger one when the odds are in your favor. Why just give
away your position at inferior prices. If it’s really easy to sell stock, don’t
always do it. Make some sales and test offerings to force the buyers into
paying higher prices.
On 9/9
(
CPST |
Quote |
Chart |
News |
PowerRating) was exhibiting
strength as it traded above the range of the previous 6 days.
Who knew at the time it was
going to have such a big day while making profitable sales early in the day.
Replacing a portion of those shares at higher prices would have gone right to
the bottom line by stretching out some extra profits.
As a proprietary trader or day
trader you may not have the resources to play this game but you can repurchase
shares at higher prices if you choose while sticking to your money management
rules as far as taking money off the table. Some buyers will step up their
buying at the sight of a buy order in the marketplace. Placing a limit order to
repurchase a percentage of your sale may provide information on how aggressive
buyers are.
Of course there are many
variable surrounding each trade so don’t apply this on every trade but when it
looks right this strategy can help add to your profitability.
Ken Levey
Kenneth Levey is head of Trading For Connors
Capital LLC. Mr. Levey has more than 21 years of professional trading experience
having previously been Vice President of Trading and a Market Maker for Spear,
Leeds & Kellogg/ Goldman Sachs in New York.
Ken is a 1984 graduate of the University of
Miami where he received his degree in Business Administration majoring in
Finance.