Now You Don’t Need To Miss Good Trades Because Of Limit Orders…Here’s Why
When a stock is setting
up for a trade, depending on what you are expecting out of the trade
don’t miss out on opportunities due to a limit order. If you have a solid strategy
giving a buy or sell signal and you have probability on your side, be aware of
the action going on around the level you are watching. You are probably not
alone–especially if you are using signals generated by a system.
In my market-making days my head would sometimes
spin when a service would put out a trade recommendation on one of my stocks
intraday only to find out afterwards what the reason for the flurry of activity
was. Putting a limit order on a swing trade may save you a little on the
execution but don’t get too attached to a limit if you aren’t getting filled.
On the flip side, by not getting filled you have gained some valuable
information as well. Use that information and get more aggressive because odds
are you are on the right side of the market. More often than not you will get in
the losing trades and miss many of the winning trades using limits around
important levels. Just buy it or sell it. Buy what you can’t buy and sell what
you can’t sell.
This might sound a little crazy at first, but
it’s a very important concept. When your analysis is correct and you are
expecting a nice move, the odds are you aren’t alone. Many traders are keeping
an eye on the same charts looking for the same patterns to develop and if you
have been successful in locating a significant level or large order in the
marketplace, get on board. Don’t kid yourself into thinking you are the only one
waiting for a nice entry on a pullback in a chart looking like CNVR recently.
My guess is the few trades you end up missing will have a higher opportunity
cost than the savings on the others. Buying and selling something is not the
same as “trying†to buy or sell something. I find the idea of buying what you
can’t buy and selling what you can’t sell also helpful in managing existing
positions. If you have a position you still believe in but maybe the timing is a
little off, sell it to buy it back cheaper or vice versa for a short. Roll the
position. This was a big part of my game plan in my previous life on the sell
side. When sitting with a stale position, shuffle the deck a little bit by
moving the stock around to see if you can reestablish at a better price. This
works well at the big trading desks as it keeps the trader in the flow of the
sock.
So remember, Buy ’em if you can’t buy ’em and sell ’em if you can’t sell ’em! It
helps.
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.