In my personal opinion, along with the collective opinion of many professionals I have studied, I don't feel that setting exit strategies by profit level is the best way to go about things. You say that your exit strategy is based off of a profit level of X%. The market doesn't care about how much YOU are making in a trade. Similar to your stop loss, set at a loss of 1%. Again, the market doesn't care when you lost X%. Instead of setting targets like this, maybe you could find a way to set targets/stops based off of your original hypothesis on the stock. For ex. I am buying at 3.10 because I have determined that blah blah blah will bring the price to 3.25 within the next months because of blah blah, also, my stop price will be set at 3.02 because at that point, I accept that I am simply wrong in my original idea.
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I'm kind of doing just that. For IAG, it just works out that 1 percent is about all I would want to give up in the hopes of a bounce. It's in the 4 dollars per share range so 1 percent is only about 4 cents a share.
My stop loss is proportionately larger with SEAS, which is currently around 19 a share. Since I fully expect it to make a good and profitable recovery in the reasonably near future, I'm actually willing to accept a larger drop in value (bottoming) without jumping out of it. I have more confidence in SEAS giving me 10 percent than I do in IAG giving me 10 percent.
So I guess you could say that my stop loss is more generous if I have greater expectations out of the stock.
I have no idea how wise that decision is as of yet.
Remember, I'm still quite new to this so my strategies and decisions are likely to be subject to many upcoming
changes as I find what works for me and what works against me.
I'm in IAG overnight, at least. It will be interesting to see how it goes tomorrow. I have observed that it generally
moves a fair amount between one day and the next.
This is a good time for me to ask a question, one that any person reading may answer if he chooses:
Are the bulk of your trades intended to be executed within a single day, or on a time scale of days, weeks,
I had originally planned "day trades only" but that strategy is already being revised. I've been in SEAS for several
days and may be in it for weeks or months to come yet.
Why 1 percent? An arbitrary figure like that will yield arbitrary results, much like flipping a coin to enter a trade - there is no edge.
You need a very clear reason for entering the trade at the price you did, you need a clear exit and a clear stop, both determined prior to the entry and calculated based on price action -- not a static figure like '1%' or '10 ticks' etc.
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I don't actually have a set entry point. I don't think I can COMMAND a stock to drop ten points so that I can buy into it.
My entry point consists of me looking at current prices, recent price history, and deciding for myself if I think that the
stock will move upwards by a sufficient amount, and quickly enough, to be worth my effort.
This does not mean that I am always successful in my judgements.
I'm not sure I really understand the comment about picking your entry point. All I understand there is the simple
principle of buying low and selling high.
There are stocks that I would believe will drop to a lower value and create a good point of entry, but I can't really
name any that I've found yet that are so consistent in their behavior that I'd bother to mention them by name.
Last edited by Carrerain4; August 18th, 2014 at 08:08 PM.
The majority of my trades are swing trades based on price action on a daily chart.
I read somewhere that swing trading was too slow for the day traders and too fast for the institutions.
If I have a day trade itís because I guessed wrong about the direction the market would move and my stop got hit.
I trade off the daily charts because I have all evening to set up my trades. I place orders, usually stop limit orders with an attached bracket order for my exits, before the market opens. I then have the rest of the day to do what ever I want.
It is hard to find the Truth when you start your search with a preconceived notion of what the Truth will be.
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Funny story: My brokerage made an "error" when setting up one of my accounts. It was to fix a problem I had in
configuring that account when I changed it over to a brokerage account.
I ended up with two money market accounts and my money in the wrong one. When they went to fix it,
rather than transfer 7747 dollars into the correct account, somebody fat-fingered their way into making a
SHORT SELL in a mutual fund in the amount of 7747 shares!
I can't short sell off this account. Not approved for margin.
So this morning my indicated balance is about -236,000 dollars!