More On How To Manage A Winning Trade
Smoke ’em If You Got ’em
Once again, 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 home run.
As promised, let’s take a look at Mercury Interactive
(
MERQ |
Quote |
Chart |
News |
PowerRating) (mentioned recently as a potential
short). Notice that it has moved nicely lower since triggering last week. When blessed with a quick move in your favor, make sure you take partial profits and trail a stop
lower on the remaining shares.
Once again, 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 Monday, the Nasdaq opened firmer but soon found its high
and began to sell off. It found its low around mid-day and generally worked its
way higher throughout most of the afternoon. Finally, it drifted lower going
into the close.
The action has it finding support near its May lows.
The S&P put in a somewhat similar performance.
It remains below its 200-day moving average (the blue line below).
So what do we do? There’s nothing new say
(see recent commentaries if you get bored). Most sectors and stocks remain in
downtrends but like the market itself, they too are oversold. Therefore, I’d
prefer to wait for a bounce (i.e. pullback) before considering any new shorts.
No setups tonight. I’ll continued follow up soon on stocks mentioned
recently such as BR, EOG, VLO (longs) and MERQ, AMZN (shorts) soon.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
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more, or to order..