DONT chase and hold! .......................
Many times, you will watch a stock that is shaping up for a run, but you cant make up your mind about getting in, or you cant fill. At the moment you decide to get in or at the time you finally fill, the stock is much higher than the entry you would had desired.
The heat of the moment took over, and you are in considerably higher than you planned.
But a bad entry is the beginning of losing money. Trading is about discipline to stick to ones plans.
Let´s say you planned to enter at .50, but you got in at .56 - your plan was to ride it to .60 or a bit lower.
Now lets say the stock seems to top out at .58 on bid, with your entry at .50, you will gladly take profits. However, with your entry at .56, you will most likely only cover your commissions, so AFTER getting in the trade, you CHANGE YOUR PLAN and decide to "hold for more"..... now your stock retraces to .52 and you are RED, you become nervous, "average down" or "cut your losses" or "hold thru the dip"??
Now, you are not cool and acting smart as you should in order to survive in the market, you focus on that trade, miss other trades, you get caught up in PSYCHOLOGY. Just an example.
So when you chase, stick to your initial plan, and settle for smaller gains. Chances are that you will sell for a loss on a retrace, which might take a few hours or a few days.
Best thing is to avoid chasing, yet it is not always possible. So if a stock runs past your desired entry level, you have the following options:
- Pass. There WILL be a next trade. Stock exchanges are here for more than 100 years, and they are here to stay.
- Scalp it. You buy much higher than you planned to, so you get out with a small gain after a few upticks. Buy .56 sell .58 for example.
- Wait for a dip. On every run, there is a retrace. You will have the chance to fill close to your desired entry in many cases.
- Go Light and average. If news is stellar, or if you exspect a hard run, get a small starter position. On a retrace, you double or triple your position for a nice average. IF the stock really runs hard and never retaces, you have at least a small position to participate with less risk and much less pressure on you. But those stellar runs dont happen often, dont hope to get one when you need it.
Always re-check your strategy for the trade. Why do you like the stock, whats your target, whats your timeframe, what is the stop loss?
Buying high and hoping for miracles kills.
#board-2412
"We are what we repeatedly do. Excellence, therefore, is not an act, but a habit." - Aristotle
