Down 7% to 8% from entry point = immediate sell?

Discussion in 'Trading' started by a529612, Nov 20, 2007.

  1. plyka


    If you buy a stock at the right time, it should NEVER fall below your buy price. Take a look at HL as a recent example --I actually purchased this stock. Just to clarify, I believe that we have started a major bear market ---so I am ONLY buying gold/silver stocks as I believe they are counter-cyclical. Anyway, I actually didn't buy this stock at the RIGHT time ---before I could do anything it was up to $10.75 on major volume (3rd hour of trade on Nov. 6th). The correct "pivot point" was $10.25.

    Now, this stock will NEVER trade under $10.25 again --if it does, its not a good hold.

    Again, I'm long --if HL breaks under $10.50 I'm a seller --thats a $.25 loss for me. This is what I like to do ---a power stock will not show you a loss at any point if purchased correctly. I didn't buy this one correctly, I bought it at $10.75 ---even then, it should never show me a loss.

    Thus, the IBD 8% rule is a GREAT RULE --PLEASE DO YOURSELF SOME GOOD AND FOLLOW IT! However, for the experienced trader, 8% is the absolute maximum limit. It should never get that high ---most of the time, after the first day a 2% or even a break even stop is the correct way to go.
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    #11     Nov 22, 2007
  2. This looks like a nice setup, however, your rules remind me precisely why IBD's comments sound so subjective --

    then you say your stop is 10.5, a .25 cent loss. That's only a 2.3% loss. Is it 8% or 2.3%, or sometimes 2.3 unless it goes below that, and then 8%?

    Here's a similar example I found awhile back. You buy jaso as it breaks out on high vol, but miss pivot and buy at 23, not bad. Using your 1st rule, you say if it drops 2.3% you are out. On the chart you got stopped out 3 times. It went even lower to 21.36, had you followed the 8% stop rule you would have just avoided getting stopped out at 7.13%. It's easy to see what happened to jaso afterward.

    In this case the correct thing to do following his rules was set the original entry stop at 8% -- no other deviations.

    But, there's plenty of other examples where you would have got stopped at 8%.
    Just musing on how a lot of IBD rules are subjective in that way.. sometimes... normally.. never should.
    most of the time...

    what are objective ways to define this?

    #12     Nov 22, 2007
  3. Good arguments from both sides, gentlemen. Several schools of thought apply to both. I think for me personally it boils down to what my objective is and what time frame encompasses that goal. I structured several accounts for different time tables and goals. Each had embedded rules----It was that simple.

    Staying with a position UNTIL a clear reversal signal is given.
    Obviously intraday scalping of ES may be an exception.

    Meanwhile, IBD of course is a business and must have rules and flexibility to maintain their customer base. The good news for us is stops being hit present great opportunities. Trading and investing.
    #13     Nov 22, 2007