Trade musings
I started this blog to be honest and so this section is to share my thoughts about HOW I should trade the stocks I have. The danger in sharing this sort of stuff is that it sounds like you have no idea what you are doing. Well.... there are days! Take FTK for instance!
There are three big questons.
1. What should my stop loss be?
The stocks are very volatile (they go up and down in price a lot) and so it is important to give them room to move. I checked through some of analysis (back tests etc) and I have found that if the draw down is more that 8% within the first 4 four week than often the stock doesn't perform well at the end of those four weeks (Assuming I would leave it that long).
BUT often these stocks do experience a drop in price in the first few days (that can be scary to ride out) which then turns into a very nice profit. So when to sell? That is the question.
Should I sell at 8% and possibly mis out on a big move?
Should I sell at 10% because 10% because anything after that is not good.
Should I keep and hope?
Even as I write that last one I can't believe I am contemplating doing something so stupid!
2. When to take a profit?
I find that the majority of these stocks reach 5% within 10 days of trading. But then they often go on to make more. The answer to this one is simple. Build in a trailing stop loss after 5% (which locks in profits) and then keep a close eye on the charts.
3. Do I leave them all for 3 weeks (15 trading days)?
According to my back testing thee stocks often get into double figures by the time they reach 15 days. One stock got to 90%! I like the idea of buying and keeping although patience is the key.
I am leaning towards just leaving with a 10% stop loss. Give the stock room and believe in the system. If The stock hits 10% before 15 days... sell.
Let's see how it goes!
