Today was another good day with close to 6% return. I
entered RUSS at $11.85 pre-market and sold it at $12.54 this afternoon. One of the main reason for RUSS surging was oil tanking. USO has been in roller-coaster mode from yesterday to today.
I spent some time on StockTwits.com today on the RUSS
channel, and while watching the twits I noticed that many trader don’t really
know when to sell.
They do their analysis to find an entry point and then they
either guess an exit price or they get a fixation on a specific price. Hey,
maybe this works for some traders, I don’t know, but it’s not an optimal
strategy in my opinion. The truth, that a lot of traders try to prove wrong, is
that nobody can predict how high it will go.
Does that mean there is no way to control your profit and
exit price? No! The way to do it is to simply increase your “take profit”
orders as the price increases. Take my RUSS trade of today as an example.
I didn’t exit at $12.54 by guessing. When RUSS was at
$12.20, I set a take profit at $12.10, when it was $12.30 I set a take profit
at $12.20, etc. When it was $12.65 I set a take profit at $12.55, and it got
executed selling my position at $12.54.
Was that a good result? Yes, it was very close to the top
actually. RUSS went down after this tipping point.
Do you already use this strategy or another one? Share with
our readers! Don’t be shy.
Excellent article Alex. My way of exit is very similar. If I feel the stock is "topping" I will often times sell 1/2 of my shares an put a stop in at a specified price to lock in gains in case it drops and then I can comfortably see if it goes any higher. If it drops to my stop I'm happy and if it goes higher I'm happy as well.
ReplyDeleteExcellent! I like your strategy Peter. However, I would ask you that question: How do you define "If I feel the stock is "topping""? Is it based on a gut feeling, or on some live analysis?
ReplyDeleteI look at price action in conjunction with RSI and stochastics...
ReplyDelete