Occasionally I will make lots of money from speculative issues offering a great R:R setup. Recently, I've done that with ASTI: http://bp2.blogger.com/_znF9pQ5oe98/R3XhlMVjh6I/AAAAAAAAAB4/kcewrnJWf5U/s1600-h/ASTI.PNG In November the stock saw a -42% decline while many other solars were being hit -15% in one day. I sold on 50-dma breakdown. Now.. what I'm debating about with myself is whether it was worth holding my initial buy through that decline. Any other less volatile stock would've had its technical pattern obliterated, but even with the -%42 decline ASTI still had the potential to form a double base, which it did. Since I want to optimize my performance for the next speculative issue, what are some suggestions to manage risk? How much profit should I protect? So far I've come up with the idea of protecting %50 of profits after a +%30 run from a breakout. However, I'm still unsure of the effectiveness. In ASTI it definitely would not have worked. Any ideas for such trades?
Always protect your profits. Successfuly holding through a 42% downturn will only make you hold through an even worse downturn the next time, and you might not be as lucky.
There are so many different approaches to risk management. I would start by taking into account how &, more importantly, when you generate your trading ideas. In theory, there is nothing wrong with using a 50 day MA to help guage the direction of momentum. However, what we dont know is where you entered. If you entered sometime in September below $10, then I think your exit was as sound as it was profitable. If you entered somewhere closer to or above $20, then just using the 50 day is too risky in my opinion. You may want to consider experimenting with a second stop, such as the trailing stop you mentioned. There is no magic %, it is going to depend on the types of ideas that you generate. I suggest trying a variety of stops which should be back tested ongoing against actual trades you've taken. best of luck
You might clarify the phrase "optimize my performance". It may mean: 1) Avoid holding assets that are growing. 2) Avoid feelings associated with losing. 3) Avoid feelings associated with winning. http://finance.google.com/finance?q=asti shows Ascent Solar Technologies, Inc. stock symbol ASTI revenue, assets and equity increasing. Bill Gates is the richest person in the world because he held on.