My Favorite Indicator
Sticking With A Winner
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 Cymer
(
CYMI |
Quote |
Chart |
News |
PowerRating). When we last left off, we were discussing the fact that it has moved nicely lower (see column archives). Partial profits could (and should) have been taken and the stop was then moved to breakeven. Further, the stop was then trailed on a two-point basis.
Since the stock (so far) has continued to move in our favor, we continue to
trail the stop lower on the remaining shares.
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 Thursday, the Nasdaq worked its way lower in aÂ
wide-and-loose fashion. This action has it at fresh lows for the year.Â
The S&P put in a similar performance.Â
So what do we do? I think the charts speak
for themselves.
As far as setups, Gen Probe
(
GPRO |
Quote |
Chart |
News |
PowerRating), mentioned
Wednesday, still looks poised to
resume its downtrend out of a pullback. Use caution though, since this one can
be volatile.
Â
Email Of The (Recent) Day
While catching up on emails, I came across this one:
(from 08/01/04).
I found your article on Cymer and downtrends of Nasdaq and S&P on the yahoo finance homepage. Since they had placed it there as “sage advice” I thought I’d read it. What a joke. The charts don’t fit the time span that you mention and the Cymer chart looks pretty much like the general market. I hope you don’t get paid to do that. A two year old could give better “sage advice”.
Hmmm,
looks like the age on detecting trends has decreased dramatically. If you have a
specific 2-year old in mind, have him/her send me a resume too.
Best of luck with your trading on Friday!
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.
*Once again, for those waiting for a reply, I
hope to catch up soon. Also, some request from Hotmail accounts are getting
bounced–try again with another account if it did not come through (FYI, Yahoo!
accounts seem work very well with attachments).
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