Skip to main content

Trading strategy - setting stop loss and trade horizon

One of the key factor in successful trade is the set the stop loss at the right place. Selling off too early is often the cause of my losing trade and at the end I sit and wait to see the stock move up much higher that it was and could has resulted in reasonable profit.

I sold off Ascendas India Trust at 0.68. I was getting impatient over this counter. Within the next 3 trading sessions, it went up to 0.71.

Healthway was sold at 0.10 and it closed at 0.105 on 17th July.

Parkway was sold off at 1.69 on 17th July during intra-day and it turn out that it was closed at 1.71. Now the counter looks a little bullish. Again, the same mistake as the above 2 counters.

Looking back at my records, I could have made a lot more money if not for selling off too early. I was able to pick the right stock but often too early in the stage. But if I has set my stop loss a little lower, those trades would not have been prematurely sold off.

Another issue is the trading horizon. I seems to be very impatient and ignore the movements of the overall market. One thing I need to know is that some counters takes time to move. I must give them more time as long as they did not hit the stop loss point. I must allow 10-12 weeks if possible before I decide to give up. This means that I need more trading capital and take higher risk (setting more aggressive stop loss points).

Comments

Popular posts from this blog

Spanish Debt Issues

There is a lot of talk about Spanish sovereign debts recently. I came across a research paper which I think is very useful for me and wish to share it here. This is taken from www.fundsupermart.com, an online fund broker where you can purchase funds form various fund managers. This portal provides some research and comparisons and it is essentially a self service portal. From the chart provided, we can see that there is a problem for Spain to service their debts for the next 4-5 years if the debts are not re-structured. With this kind of risk, no sane investors would want to risk their money to buy Spanish bonds. They can only turn to European central bank for bail out. The blue arrow is a fictitious line I draw assuming re-structuring is going to happen. Essentially, they have to move the payment of capitals into next 5-20 years to be affordable. In addition to that, they can't make additional loans. This is just taking a very simplistic view of the situation. To have that hap...

How Serious Is Sub-Prime Home Loan Issue?

As a long term investor, you do not need to flee the market unless you are near to the retirement age (meaning, you are no longer "long term" in your investment). For many long term investor, they would say that the fundamental is unchanged. So, their stock valuation should not change. However, we must not be complacent about it. Fundamental do change when the market condition changes. That is the fact. How your stock will be affected depends on a few factors. The number one factor is whether the stock that you purchase is directly involved in the sub-prime loans. If they are, then the fundamentals of that company is changed immediately. The profit will be affected directly. So, if you are holding banking stocks, you may suffer loses. That amount will depend on what level of involvement your banking stock participates. However, if you are holding stocks of MacDonalds or Coca-cola, the impact to your stock will be minimal. You may see immediate price down but the prices will c...

Patience is important

Recently, I had missed out the opportunities to make a few thousand dollars due to impatience. In each of the 4 cases, I sold out just before the break out because the counters refused to move while I was holding over a week. That cost me to missed out over $6,000 of profits. I noticed that I had unfounded fear of tying down my capital and not being able to fully utilizing my capital for additional gains. However, the true fact is that I have 75% of my capital sititng there and waiting. So, there is no compelling reasons to sell my existing positions since they had not breached the stop loss point. This is an important lesson to learn. Be patient and committed. Trade with more conviction then trying to hit-and-run. Quote Eckhardt did not want the Turtles to worry about linear decreases in their accounts. The slightest exponential curve from a big trend would eventually surpass the steepest linear curve they saw while losing. Discipline, money management, and patience were the only way...