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Originally Posted by DJay23
More great advice.
I was greedy with CCIV and was left holding the bag. Having just jumped in it was a big chunk of my portfolio and now I'm in the red. Obviously I should have sold. When I should have sold is what I didn't understand.
If I'm reading what you're saying right, I should have set my own number (10%?) and sold then? I know 10% is a nice return on long term investments, did you use that number because it is generally considered good for short term too?
Thanks again.
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Just posting because I hope it helps someone.
There's plenty of ways to trade but these rules relate to technical analysis and Mark Minervini's principles. Rule #1, risk management and protect downside risk on all positions.
The key to trading is finding stocks on momentum, getting gains and getting out. This only works with defined rules. This is actually LESS risky then buy a stock on speculation and holding it long term like many people do.
10% profit is just an example, it really depends on how the stock is moving. But I generally sell 50% of my position if it gets to 10% profit. I may then leave the remaining 50% of the position to run, but move my stop loss up to break even. This way I cannot have a losing trade. If the stock continues to move up, I sell another 25% of the original position and continue to assess the stop loss placement. In last week's market, the goal was to get in and out of stocks quicker (3-6%) and run tighter stop losses because trades were having less success with all the volatility.
Tracking your trading data is necessary to determine your success. I put all my trades on a spreadsheet and track various stats (I'll post below). I got stopped out quickly on 4 positions last week and for 5-6% losses on all. That was not well played. Since I know my trading success was limited last week, I will only scale back into trading instead of trying to find all new positions to fill even though my account is currently 60% cash. So I may look to enter 1 or at most 2 positions to start this week, but I will not be finding 4-5 more entries until I see my success to start March. With all my stop losses last week, I am sitting 60% cash in my trading account (I had started the week only 10% cash).
The success of trading is determined by technical analysis, not fundamentals. It is based solely off reading charts. I look for breakouts, cup and handles and bottom reversals for entry. Stop losses are determined by recent lows or the 20/50 day moving averages. It really depends on how much the stock appears to be moving.
Here's where my January Trading ended up and what I track in my spreadsheet. I wasn't even able to meet 50% success in my trades (Batting average) but because my win/loss ratio was very good, my total account value increased 10% in January anyway. If more people understood this simple math, they wouldn't be hanging onto stocks like CCIV and GME for weeks/months at a time. By using technical analysis, I can ALWAYS find more setups I like and enter other trades. By following rules, I don't have the downside risk of seeing my capital disappearing and possibly never coming back with an individual stock.
January Totals (25 total trades closed in the month)
Average Wins 15%- Average days held 17.2
Average Losses 6.33%- Average days held 12.4
Batting average (success of trades) .454
Largest win 37.87%
Largest loss 9.99%
I pay for a stock screener called TC2000. It's $30 a month but saves me hours of time compared to researching charts on my own.
I can enter these conditions into the stock screener and they help locate breakout stocks to find charts for entry. These are the conditions I enter into my screener.
1. Current stock price is above the 50 day, 150, and 200 day moving average
2. 50 day moving average is above both the 150 and 200 MA
3. 150 MA is above the 200 MA
4. The 200 MA is trending up for at least 1 month
5. Volume - Greater than 100,000 2 bars ago
6. Stock price $5 or higher
This will provide me with over 1000 charts currently since this bull market is so extended. To narrow this down further to about 300 charts I will add percentage change in revenue last quarter to 20% or greater. I can also sort by stocks with RSI near 70 or higher.