You don't know if you are right. THat's why I use stops. I have 5500 twp that I bought at around 13.2 avg today. Who knows if this is bottom, just a dumb guess on my part really. The point is that I'll have a stop tomorrow at 12.8 or probably a bit higher than that cause I'll know right away if I'm wrong. So, I'm risking about a quarter point on a trade that I think I can exit at 15 if right. It's risk reward, I can get just one in 5 and still be very profitable. By the way, that's about my average. I usually get between 20 and 35% right, but that's good enough when my risk reward is 1:6. BTW: My ratio has yet to confirm on this trade, but it's getting pretty close.
I sold all my twp today at around 14.8 avg for about a little more than 2 pts avg on that position. As you can see, it did continue lower, but once my ratio kicked in and said to buy, I took more lower. I am all out now. Dont forget that lower prices are not a bad thing, it just means more value in the stock, which is a good reason to buy more. I never get why people buy stocks that are goign up.... but that's a different story.....
Praetorian: You entered on the 23rd and told us you would have a stop at about 12.8 in place for the 24th. It actually got down to 12.24 on the 24th, but instead of being stopped out you tell us you bought some more and later exited with a profit. There is something missing from this explanation. You project a risk/reward ratio based on having a close stop, but then you either don't set your stop or pull it, which blows your R/R calculation to pieces. Doesn't seem very disciplined to me. What am I missing?
When I speak of a position, I actually consider it to be multiple positions. I had my core position which was 3k shares. That position was gonna get carried to zero if necessary. It was based on tape reading, and mainly the ratio being so close to completing a buy signal. The other position I put on intraday that day as it started to rise. I bailed on that position for about a half point loss or about 1k in losses. I then reentered it at 12.4-12.6 as the ratio confirmed finally, and the tape felt stronger. That's the way that I'm capable of eliminating some of the risk in a stock that is very illiquid. It's impossible to move all 5k shares when it is dropping fast. There just aren't bids. But I can sell 2k or so without too much pain. I find that now that I am using this ratio, I am more capable of determining if I'm right or not. If I know I'm close, there's no reason to bail on all. But I'll bail on some to make my average at a lower basis. I hope this kinda explains it.
Praetorian, "Most of it was based on tape reading"........Are you using a ratio of buys to sells off of the tape?...if so how are you doing that?...I have been looking for some software that would graphically measure the heartbeat of the tapes flow....you know...when there is a surge of buying on the ticker...it streams by faster with more "green" buys and when there is selling "red" numbers are flashing by...but there is also the speed at which this happens or a rate...sometimes slow...sometimes fast when there is heavy buying or selling pressure...are you aware of software that gives you a graphical representation of this ratio/surge/time?
It has nothing to really do with software. Once the ratio confirms the move, I look for the most opportune time to buy, and I just buy. I was watching the tape to see what the specialist was doing. It seemed like he was buying. The first day I bought I bought cause it looked to bottom, but I didn't hvae confirmation from the ratio. As I get more confident in the ratio and using it in real time, I think I'm going to rely on it much more to time my buys as It seems to often be more accurate than my tape reading abilities sometimes. The second day, after I had sold my addons, I only bought once the ratio said to buy. I don't know how I can really explain it cause I don't want to give any details of the ratio honestly. However, if you want to join us in the room on monday, i'm glad to go over trades in real time.