Monday, January 15, 2007

Seriously though, Entries and Exits

Muddy gets a lot of questions on entry and exit strategies. It's hard for him to answer since there are many different trading goals and risk tolerance thresholds.

My entry (from Muddy) on watch stocks that meet my filters/criteria:

Wait for green, green hold, must open green. Whichever works for you. Personally, I like to see a stock that holds green for the first hour or so in the morning. Unless it is a momo screamer, I would rather wait until around 10:30 or so to buy. Not a hard and fast rule, but in general is what I like since a lot of stocks have a small pop in the morning and you can buy a little cheaper if you wait.

GREEN means above the prior day close. Nothing more, nothing less. Above prior close. Green hold applies to all filters. WAIT FOR GREEN. Sure, you could be wrong, it might NOT hold. But you are trying to put the odds in your favor. You are looking for a reversal in the downward trend or a continuation of an upward trend.

Exits, well same again. Is up to you. I can't tell you when to exit, neither can Muddy or others. If you have a 5-10% profit in a few hours/days, then personally, I don't think you should ask other traders when to exit. YOU decide.

IMO, if you are asking, you probably should bank the profit and move on to the next opportunity. If you don't have a large account, or the experience, then take the sure profit. If you have a large trading account, and are comfortable with the risk, then you probably don't have to ask.

One more thing. For the most part, I use (as Muddy does) market, not limit orders. You have to use limit orders of course with some stocks. If the B/A is tight, why chance not getting filled (if using a limit order) for a penny difference? If the B/A for example is 1.30/1.38 like I saw with MFCO in the afternoon on Friday, then I am not a buyer anyway.


Mike said...

Great post...I use all these pointers everyday, and everyone reading them should as well.

Well done.

Mike (StockMonster)

Elle said...

Thanks Mike,

I read your blog too and am watching SKNN also.

Newsletter stock?
Don't care.
Ugly shoes? (and they are truly awful)
Don't care.

Would care if I were buying for LT hold, but I'm not, so I don't.

May need one more day down. Or not. Looks ready for a pop.