There’s only one thing to focus on
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
selling books,
>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
If you would like a free trial to Dave’s Nightly Swing Trading Alerts Report
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).Â
The “protective stop” (and initial profit target) are based on the
price and volatility of the stock. Higher priced and/or higher volatility stocks
require a looser stop. This is explained in more detail in my Primer on swing
trading. Email me if you would like a free copy.Â
Now, let’s take a look a Neurocrine Biosciences
(
NBIX |
Quote |
Chart |
News |
PowerRating), a stock
mentioned in my trading service and also in last week’s interactive
presentation (see below for more details). Considering the above, a 3-point
initial profit target/protective stop was used. Notice the stock triggers an
entry and then rallies to hit the initial profit target. Partial profits could (and should) have been taken and the stop was then moved to breakeven and trailed on a
3-point basis–so far, so good.Â
I’ll follow up on the above in more detail during my weekly interactive
presentation on Wednesday (11/23/05) at 11:00 A.M. Eastern. Email me if you need
instructions on how to join (the same each week). Admission is free but limited
by the software.Â
On Tuesday, the Nasdaq started off soft but soon began to rally. It
traded sideways throughout mid-day and then resumed its rally late in the
day.Â
Ditto for the Ps.Â
So what do we do? I remain impressed with the performance in the
indices. The fact that they continue to make new highs is a positive. Notice the
nice blue arrows above. My only complaint is that we need a pullback before we
will start seeing new setups. Therefore, manage existing longs for now. Once the
market begins to pull back, begin looking to establish new positions.Â
No setups tonight (Tuesday). We should see a plethora of setups on the next
pullback.
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.