You’ve Got A Profit!, Now What?

  • July 2, 2004
  • Dave Landry

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 home run. 

Let’s take a look at Valero Energy
(
VLO |
Quote |
Chart |
News |
PowerRating), mentioned recently. Notice that it has rallied nicely
since then.  When this occurs, make sure you take partial profits and trail
a stop higher on the remaining shares.

Other energy stocks such as EOG and  BR have also done
well since mentioned.  Make sure you are applying proper money management
on these stocks too.

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 Friday, the Nasdaq sold off hard but found its low in early trading.
It bounced and then traded sideways for the remainder of the day. 

The S&P traded back-and-forth after an initial sell
off. This action keeps
it stuck in a trading range. 

So what do we do?  Do nothing unless there is
something to do. The indices are stuck in a trading range. Therefore, as a
momentum trader, there really isn’t much to do. About the only thing worth
considering are issues that can trade independently of indices. Stocks that fit
the bill here include defense and commodity related (e.g. metals & mining
and energy). However, use a little caution in the energies since they are
becoming overbought. 

As far as setups, Quanex Corp.
(
NX |
Quote |
Chart |
News |
PowerRating), in the strong steel
& iron sub-sector,  looks like it has the potential to resume its
uptrend out of a Trend Knockout (a.k.a. TKO– as usual, email me if you need
rules). 

Have a safe and happy 4th of July! 

And to those outside of this great country, happy Sunday!

Best of luck with your trading on Tuesday!

Dave Landry

dave@davelandry.com

P.S. Reminder: Protective stops on every trade!

P.P.S. My new 20-hour course is now shipping.
Click here to learn
more, or to order.. 

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