Registered User
Joined: 4/5/2005
Posts: 45
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What is a practical way of selling a loosing position?
For example, at the time of purchase I decided to sell when price closes below $21.92 and today it did.
Should I send a sell order to sell at tomorrows open?
Or should I watch the market tomorrow and make a decision during the day?
Or send a stop loss order after purchasing the stock?
In this case intraday low can trigger the order, so I do not use this method.
Please share how you handle this situation.
From my personal experience I found that when I watch the market and need to make a selling decision during the day I often do not honor my previously established stops.
Thanks,
mmlmedv
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 Gold Customer
Joined: 11/11/2006
Posts: 359
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mmlmedv: What is your stock ticker?
Mammon
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Registered User
Joined: 4/5/2005
Posts: 45
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Mammon, it is a general question, aimed to improve my selling loosers.
All books just tell you to sell, but do not specify exactly how and when.
Thanks,
mmlmedv
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Gold Customer
Joined: 11/11/2006
Posts: 359
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mmlmedv: often the trickiest part of trading. General rules are; sell when a support is broken. Could be a trend line, the next level of support. Some use a % loss, say 5% below purchase price.
Certainly no lower than 10%.
A moving average could be a base, below which you sell. For instance, if a 20ema is broken, sell.
The ADX indicator folks will sell when the DMI+ breaks below the DMI-. Then the Extreme Point Rule would apply. That is, the low of the day when the DMI+ goes below the DMI- is used as a bottom. When this bottom is broken, it is a confirmation of a sell signal. This will often keep you from being whip-sawed by indicators crossing back and forth on a daily basis, implying a base, or consolidating pattern.
Selling often a tricky thing and it depends so much on the individual trader and his trading methods.
Consider ticker "CE". Draw a trendline at the bottom of the chart from about 12/06 to now. A prudent thing would be to sell when the price broke below this trendline on 7/20 or 7/21/07 on high volume. Notice also that this was supported by MACK-H crossing below its "0", RSI breaking below "50", and DMI+ crossing below DMI-, with confirmation on 21st.
These are all popular exit signals.
Hope this helps. Others will respond, I'm sure.....
A lot depends on your length of holding and your tolerance of pain.
Don't you ever change your stop..
Mammon
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Gold Customer
Joined: 11/11/2006
Posts: 359
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The above does not directly answer your question, however.
In my mind, since you still hold the stock and it has hit its sell point, if it moves lower tomorrow, sell.
I may wait till the first half-hour churning is over.....
Mammon
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Registered User
Joined: 12/21/2004
Posts: 902
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Agree with Mammon. I would set a stop-loss at a point below the open price tomorrow. How close depends on your tolerance for how much below your 21.92 you're willing to accept as an ultimate loss.
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Registered User
Joined: 11/5/2005
Posts: 180
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I always use a 7% stop loss after I make a purchase and forget about it. Sometimes I'm taken out and the stock then goes up, called a shakeout, but on average this has caused me to either make money because I picked the correct time to enter the position or it saved me money because I wasn't sitting on the fence wondering if I should sell tomorrow, or the next day, or the next day...
Be clear when you want to enter and where you want to exit before you even buy the stock, thats my approach and has worked for me.
If the stock moves up then I move my stop limit up accordingly.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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I submiit my stops at the same time as my entry orders and I don't mess with them unless it is to move them up. make shure you are using a stop loss apropriate to your trading style and stick to it.
I've had allot of cases where a whick or tail just barely tagged my order and then rallied the other direction... that sucks. But i've had more cases where price hit my stop and kept on cruising. I'd say find a system ofr evaluating aprice at which you have no interest in holding the stock below that point. I use suport and resistance of some form... it may be intra day... but there is a logic to my decision. In a momentum trade I may decide that intra day suport formed at 20.20 as a trend line under a price congestion area or something.... so I set the stop at $19.95 to give it a little margine...
Incedentaly I also look for likely resistance or areas where price is possibly going to stall and calculate the difference in the distance. If I dont' stand to gain twice what I would loose if my stop were hit I skip the trade. You gotta be realistic here.
but the point is place a stop based on some logic... a percentage, a moving average ... something and stick to it. Most of my biggest losses were cler cases of "over holding" and then "holding and hoping". What gets dangerous is when you start thinking that XYZ stock is bound to rally soon becasue it's so over sold, so you buy more. No it dosen't...and people have lost their life savings thinking like that.
If you are wrong on a call get out as quickly as possible... with in your trading parameters.
hope that helps.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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mmlmedv
I think you have already answered your own
question.
"I found that when I watch the market and need to make a selling decision during the day I often do not honor my previously established stops."
--------------------------------------------------------
Since you are having trouble following your
discipline. You should probably sell at the
open the next day. (with no analysis)
You should also probably place stops
early in the trade and only raise them
as you have profit. Should the trade fail
the stock will hit the stop on its own.
Thanks
diceman
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Registered User
Joined: 4/5/2005
Posts: 45
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Thank you all for replying to my question.
It looks like the majority places the stop loss orders after opening a trade and just do not care about intraday low triggering the order.
I should probably stick to this method as well, even though I make trading decisions based on the closing price and not the lows.
And only after I feel my discipline is better I can afford to use mental stops and sell at the next day open or intraday.
Thanks again,
mmlmedv
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Gold Customer
Joined: 10/7/2004
Posts: 264
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You say: "For example, at the time of purchase I decided to sell when price closes below $21.92 and today it did."
Therefore, if you follow your plan, sell either at the close today or at tomorrow's open.
What you really are looking for is a stop on close order -- ie; sell if closing price is below your stop price. That way you can submit your stop on close order at the time of purchase, and go about your other business. Not sure which brokers offer these orders. Good luck.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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Most brokers offer Stop losses unless you are at one of the big retail outfits that prefers to do the work for their clients... and even then i'm shure most of them do.
Most of us are active traders and so transaction cost is an issue... I persoanly think $7.00 for a stock trade is to much especially when I have to own the stock to submit a stop loss and i cant submit a mutually canceling target limit order.
I only know of two brokerages that allow a person to submit a buy order and attach sell orders before submiting the buy order so that upon entry execution the sell orders become live instantly... That is Interactive Brokers and Tradestation. MB trading may offer that as well. to me i'd rather submit it allat once and then be able to go about my business and know that my plan is in place and will be worked (software glitches, or mis calculations aside). I have no interest in being at the zoo or at the lake and get an alert on my PDA and have to remember that I want to submit a stop loss for "X" amount. My stops are generaly very specific, I don,t usually round them one way or the other.
many times I've been saved by this in the case of a whip saw... where price either gaps up or runs up in the morning tags my buy order and then makes a beeline for my sell order. generally speaking if the sell order werent live the moment I got filled I'd have lost more money. I used to run a sign shop before moving out here. I can just see stopping an install or turning off the table saw in the middle of a cut to submit a stop loss. NOPE ! Not for me.
this way I can If I choose submit my orders in the morning or in a good market the night before and go fishing and not wory about it.. or of to work or what ever. I've even left very short term trades open while I went on vacation ... the buy order was in place... an emergency exit was in place and a target price was in place. Three things can happen then... I'm not filled becasue price didn't hit my order. I took an acceptable loss becasue I was wrong but I had a stop in place Or I come home to an extra chunck of change in my account becasue I was right and most likely under estimated the magnitude of the move ..but for making money and not being home to do it it's ok.
That isn't possible with most main stream brokers.
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Registered User
Joined: 3/1/2005
Posts: 34
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Hi mmlmedv
I recommend:
1. When you have a paper loss and plan to sell an issue set a sell stop at a price that controls your future loss to an amount you can tolerate.
2. Use trailing sell stops to protect paper gains.
3. Set sell stops on your purchases when you buy a long position to control unexpected losses.
However, there is another method.
Consider if it is an investment grade company you want to own.
1. Buy a companion Put on your loosing loss position.
2. If the stock price continues down the put profit can add to your long position to neutralize your loss on the companion long position.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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Unless it goes up at the point you buy the put.. then you've leveraged your loss.
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