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Registered User
Joined: 1/8/2005
Posts: 10
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In street smart chart reading vol 2, a basic point is made about stop-losses, however I have tried this approach in the past using IBD's 8% criteria as has out stock club. But more often than we like we found that we are stopped out of a stock only to see it rebound. The most incredible case was a position we took in rambus last year. The stock tanked one day by more than 20% and we were stopped out well below our price, only to see it rebound by huge amount the same day. All of this either in the pre-market or very early in the trading session.
So where does the community fall regarding the use of puts or stops?
thanks for your help
gmaier
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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The trainers cannot give settings, interpretation or investment advice. I will move this topic to Stock and Market Talk forum where other traders are more likely to see it and comment.
-Bruce
Personal Criteria Formulas
TC2000 Support Articles
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Registered User
Joined: 10/26/2005
Posts: 238
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I play swings and breakouts, EX: I bought KKD last week on a breakout @ 10.65 STOP @ 10.19. next day moved stop to break even Now KKD is @ 11.24 my stop is @ 10.95 to protect half my profit. AB
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Remember that the IBD 8% criteria comes under specific
buy conditions. The concept is your entry should have a
high probability of success.
On a "normal" stock buy volatility can take out a fixed 8%
stop.
I did a count of stocks that had a daily trading range over
10% in the past year.
Indexes like the DOW and SP500 were OK. However smaller
cap indexes had at least a 100 more volatile stocks.
Averaging more than one 10% day per month.
(rambus was one of the high ones)
So the quality/capitalization/price range of an issue will
also come into play.
Thanks
diceman
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Registered User
Joined: 4/18/2005
Posts: 4,090
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I think a hard fixed % dosent work well. I personaly dont use any percentages in trading becasue they don't uniformly apply. The only percentage I use is figureing my risk to capital base for an entry.
Consider using suport of some sort, prior price action, a moving average, trendline or something. But to take a position and say "X%" is my stop loss dosent make sense to me because stocks will have varying volitility (as diceman mentioned above), sometimes within the same stock.
then if you got a particularily badly timed entry you have a cleared idea where it will be suported at or might even realize the setup is a fake as you are calculating it for its gains.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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QUOTE (diceman) Remember that the IBD 8% criteria comes under specific
buy conditions. The concept is your entry should have a
high probability of success.
Correct diceman. IBD's mantra is to only buy as a stock is breaking out of a sound base of a minimum 5 weeks in length for a flat base, 7 weeks for cup/handle or W-double bottom base. If price extends more than 5% above above the breakout point, it's a no go, instead wait/hope for minor pullback. IBD states that its testing of the best performing stocks of the past 50 years rarely fall more than 8% below the breakout buy point of a stock emerging from a sound base, so that's where they get their 8% figure. Note that IBD does not have the 8% stop loss advice set in stone; they advocate cutting losses tighter in certain situations, i.e. significant or sudden turn for the worse in the markets, etc.
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Registered User
Joined: 1/29/2005
Posts: 104
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Nine years ago I used MACD, TSV, MS, RSI and other indicators to help me determine entry and exit points. I had some luck with this, but was not comfortable with the results.
I had used candlesticks previously, but didn't fully understand their power. Last year, while searching for sites that would help me discover stocks to purchase, I found candlestickforum.com. This site teaches about candlesticks and has free weekly chat rooms where you can learn firsthand what stocks are moving,what candlestick patterns have formed and how to find them yourself. This is the only website I refer new investors to.
For reference, I have Greg Morris's "Candlestick Charting Explained" and Stephen Bigalow's "High Profit Candlestick Patterns".
Now I only use candlesticks and Worden's TC2000 to determine entries, exits and stocks to play. The other indicators confirm what the candlesticks tell me. (No, it's not like reading tea leaves...) It doesn't matter whether you're doing day trading or holding for longer periods (weeks or months even), the candlesticks are just as valid.
Good trading!
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Registered User
Joined: 3/21/2006
Posts: 4,308
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I am also an avid Candlestick user, I have read back to some older threads, where on this topic most of the trading veterans do not give any merit to there use. I was rather shocked by that..
I could not trade without them. To me they reflect the emotional mind set of the trading day Bull vs Bears, like a tug of war and who was the victor. analogous to sheet music, they tell a story and give clues to there next destination...
There are many web sites and good reads on their mechanics and inturpretation, I suggest that you study their applications and look at how they play out in the chart patterns before dispelling or dicarding their use..
(IMO)
Apsll...
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Registered User
Joined: 3/21/2006
Posts: 4,308
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I forgot to mention that for short term trades I rely more on Candlesticks than the use of stops for my exits.
For a long term play I rely on several diferent types of stops, but never based on a percentage scale. Like Scottnlena I use percentages to calculate risk vs reward.
Apsll...
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Stop limit or Option? I think the answer should be as clear as water. Take the time to read about derivatives, and I think you will easily figure this one out. By the way, against what some people think - you can exercise an option the next day after you buy it, and get back most or all of your investment (less commission of course)back.
Still, the same as you insure your home or car, you should insure your investment.
good luck
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